<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 June 30, 1997
-------------
/ / 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 August 11,1997
- ------------------------------ --------------------------------
Common Shares, no par value 5,290,099 Shares
Page 1 of 17
<PAGE> 2
ESSEF CORPORATION
Form 10-Q
For Quarter Ended June 30, 1997
INDEX
<TABLE>
<CAPTION>
Sequential
Page No.
----------
<S> <C>
Part I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
June 30, 1997 and September 30, 1996........... 3
Condensed Consolidated Statements of Income -
Three Months and Nine Months Ended June 30, 1997
and 1996....................................... 4
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended June 30, 1997 and 1996....... 5
Notes to Condensed Consolidated Financial
Statements..................................... 6-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-11
Part II - Other Information
Item 1. Legal Proceedings............................ 12
Item 2. Changes in Securities........................ 12
Item 4. Submission of Matters to a Vote of Security
Holders...................................... 12
Item 6. Exhibits and Reports on Form 8-K............. 12
</TABLE>
Page 2 of 17
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ESSEF CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30, September 30,
1997 1996
ASSETS (unaudited) (audited)
- ------ ----------- ---------
<S> <C> <C>
Current Assets
Cash and cash equivalents ................. $ 6,933 $ 2,620
Accounts receivable, net .................. 48,827 29,017
Inventories, net .......................... 39,055 19,445
Prepayments and other ..................... 2,749 1,645
--------- ---------
Total current assets ................... 97,564 52,727
Property, plant and equipment, net ........... 59,325 38,297
Real estate held for sale .................... 4,333 4,333
Goodwill and other intangibles, net .......... 54,864 13,402
Other ........................................ 9,097 2,489
$ 225,183 $ 111,248
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current Liabilities
Notes payable ............................. $ 5,599 $ 6,999
Current maturities of long-term debt ...... 647 1,467
Accounts payable .......................... 27,665 12,247
Accrued expenses .......................... 26,871 12,481
Accrued income taxes ...................... 9,107 4,332
--------- ---------
Total current liabilities .............. 69,889 37,526
Long-Term Debt ............................... 90,624 17,512
Deferred Income Taxes ........................ 934 1,890
Other Long-Term Liabilities .................. 1,122 982
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
5,794,026 and 5,786,906 shares,
respectively ........................... 30,536 30,449
503,927 Treasury shares at cost ........ (7,962) (7,962)
Retained earnings ......................... 39,259 29,333
Foreign currency translation adjustment ... 781 1,518
--------- ---------
Total shareholders' equity ......... 62,614 53,338
--------- ---------
$ 225,183 $ 111,248
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
Page 3 of 17
<PAGE> 4
ESSEF CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except
per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
---------------------- ----------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales ....................... $100,427 $ 59,359 $195,750 $149,074
Cost of sales ................... 70,594 41,480 138,744 105,716
-------- -------- -------- --------
Gross profit ................ 29,833 17,879 57,006 43,358
Operating expenses .............. 18,018 10,503 38,288 29,183
-------- -------- -------- --------
Income from operations ...... 11,815 7,376 18,718 14,175
Interest and other expense ...... 1,963 832 3,448 1,991
-------- -------- -------- --------
Income before income taxes ...... 9,852 6,544 15,270 12,184
Provision for income taxes ...... 3,448 2,356 5,344 4,386
-------- -------- -------- --------
Income from continuing operations 6,404 4,188 9,926 7,798
Income from discontinued
operations .................. -- 175 -- 152
-------- -------- -------- --------
Net income .................. $ 6,404 $ 4,363 $ 9,926 $ 7,950
======== ======== ======== ========
Average shares and common share
equivalents outstanding ..... 6,372 6,593 6,329 6,648
Primary Earnings Per Share
Continuing operations....... $ 1.01 $ .64 $ 1.57 $ 1.17
Net income.................. $ 1.01 $ .66 $ 1.57 $ 1.20
</TABLE>
See notes to condensed consolidated financial statements.
Page 4 of 17
<PAGE> 5
ESSEF CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
-----------------------
1997 1996
-------- --------
<S> <C> <C>
Cash Flows from Operating Activities
Net income ..................................... $ 9,926 $ 7,950
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization .................. 4,730 4,635
Other .......................................... 191 (129)
Change in operating assets and liabilities
Accounts receivable ........................... (5,042) (15,125)
Inventories ................................... (3,891) (4,821)
Prepayments and other assets .................. (693) 1,282
Accounts payable .............................. 2,613 8,748
Accrued expenses .............................. (1,475) 795
Accrued and deferred income taxes ............. 3,440 3,129
Other assets, net ............................. (990) (1,262)
-------- --------
Net cash provided by operating activities 8,809 5,202
-------- --------
Cash Flows from Investing Activities
Additions to property, plant and
equipment .................................. (10,073) (4,359)
Business acquisitions .......................... (69,830) (936)
Proceeds from the sale of business unit ......... 5,443 --
-------- --------
Net cash used in investing activities ...... (74,460) (5,295)
-------- --------
Cash Flows from Financing Activities
Net proceeds from long term debt ............... 70,924 (2,346)
Increase (decrease) in notes payable ........... (1,047) 931
Treasury stock acquired ........................ -- (2,184)
Proceeds from exercise of stock options ........ 87 87
-------- --------
Net cash provided by (used in) financing
activities ................................. 69,964 (3,512)
-------- --------
Net increase (decrease)in cash and cash equivalents 4,313 (3,605)
Cash and Cash Equivalents
Beginning of year ................................ 2,620 3,870
-------- --------
End of year ...................................... $ 6,933 $ 265
======== ========
Supplemental Cash Flow Information
Interest paid ................................... $ 2,708 $ 2,087
======== ========
Taxes Paid ...................................... $ 1,705 $ --
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
Page 5 of 17
<PAGE> 6
ESSEF CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) The accompanying unaudited Condensed Consolidated Financial Statements
contain all adjustments (consisting of only normal and recurring
adjustments) which, in the opinion of management, are necessary to present
fairly the consolidated financial position of Essef Corporation and
subsidiaries (the "Company") as of June 30, 1997, and the results of their
operations for the three month and nine month periods ended June 30, 1997
and 1996 and their cash flows for the nine month periods ended June 30,
1997 and 1996.
These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and the notes
thereto included in the Company's 1996 Annual Report to Shareholders,
sections of which are incorporated into the Company's Form 10-K filed for
the fiscal year ended September 30, 1996. The results of operations for the
three month and nine month periods ended June 30, 1997, 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) June 30, September 30,
1997 1996
----------- -------------
(unaudited) (audited)
<S> <C> <C>
FIFO COST
Raw materials ................. $ 18,700 $ 10,023
Work-in-process ............... 3,749 2,266
Finished goods ................ 18,131 8,529
-------- --------
40,580 20,818
Excess of FIFO over LIFO cost (1,525) (1,373)
-------- --------
Net Inventories .......... $ 39,055 $ 19,445
======== ========
</TABLE>
(3) Notes Payable and Long-Term Debt
The Company's European subsidiaries have lines of credit of approximately
$15,000,000 available for working capital of whic h $3,591,000 and $
3,249,000 was outstanding as of June 30, 1 997 and September 30, 1996,
respectively. At June 30, 1997, interest was at rates ranging from 3.50%
to 10.375%. In addition, a demand note payable of $2,008,000 and
$3,750,000 relating to an acquisition was outstanding as of June 30, 1997
and September 30, 1996, respectively, with an effective interest rate of
6.0%.
On May 1, 1997, the Company terminated its existing bank loans and
obtained, through a new bank group, an unsecured $135,000,000
multi-currency revolving loan facility. This loan matures April 30, 2002
and may be extended in one year increments with the approval of the bank
group. The facility includes commitment reductions at specified dates and
for events throughout the term of the loan, however, the loan
Page 6 of 17
<PAGE> 7
facility does not reduce below $100,000,000. Interest rates are based on
increments over the lead bank's base lending or LIBOR (or its foreign
currency equivalent) lending rate. As of June 30, 1997, the interest
rate was 6.8125%.
As of June 30, 1997, the Company was in compliance with all of its
covenants under its credit facilities.
<TABLE>
<CAPTION>
Long-term debt consists of the following:
June 30, September 30,
1997 1996
---------- -------------
(Dollars in thousands) (unaudited) (audited)
<S> <C> <C>
Term loan ............. $ -- $ 6,428
Revolving loan ........ 90,000 12,425
Other ................. 1,271 126
-------- --------
91,271 18,979
Less current maturities (647) (1,467)
-------- --------
Long-term debt ........ $ 90,624 $ 17,512
======== ========
</TABLE>
(4) Hobson Brothers Aluminium Foundry and Mould Works, Inc. Sale
The Company completed its divestiture of its subsidiary Hobson Brothers
Aluminium Foundry and Mould Works, Inc. on January 7, 1997. The subsidiary
has been designated as a discontinued operation in the financial
statements. No material gain or loss was recognized on the sale.
(5) Stock Dividend
On January 23, 1997, the Board of Directors declared a 10% stock dividend
which was distributed on February 28, 1997 to shareholders of record on
February 7, 1997. The condensed consolidated financial statements have been
retroactively restated to reflect the number of shares outstanding
following the dividend.
(6) General Aquatics, Inc. Acquisition
On May 1, 1997, the Company acquired certain assets and assumed certain
liabilities of privately held General Aquatics, Inc. for $68,550,000 and
the assumption of $8,081,000 in working capital debt. General Aquatic s,
with revenues of approximately $166,000,000 for the year ended December 31,
1996, is a major manufacturer of swimming pool equipme nt and accessories
and is the largest swimming pool sales and installation company in the
United States. The acquisition has been accounted for as a purchase, and
thus, the purchase price has been allocated to the assets and liabilities
acquired based on their estimated fair value as of the date of acquisition.
The results of operations have been included in the Company's results since
the date of acquisition, May 1, 1997. The cost in excess of net assets
acquired is being amortized on a straight line basis over forty years.
Page 7 of 17
<PAGE> 8
The following unaudited proforma combined results of operations give
effect to the acquisition as though it was completed at the beginning of
each period shown. The proforma information has been presented for
comparative purposes only and does 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.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30 June 30
(Unaudited) (Unaudited)
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Sales $120,578 $119,402 $284,191 $269,412
Net Income $ 7,129 $ 7,017 $ 7,342 $ 3,536
Earnings per Share $ 1.13 $ 1.06 $ 1.16 $ 0.53
</TABLE>
(7) Subsequent Events
On July 23, 1997, the Company announced it will close its Pac- Fab plant in
the City of Industry, California. The plant closure is expected to result
in an extraordinary charge of approximately $3,500,000($2,300,000 after
tax, or $0.35 per share) in the fourth quarter of fiscal 1997.
On August 7, 1997, the Board of Directors approved a 2-for-1 stock split to
be distributed on September 9, 1997 to shareholders of record on August 22,
1997. The condensed consolidated financial statements have not been
restated to reflect the number of shares outstanding following the split.
(8) Litigation
There has been no material change to the status of the litigation disclosed
in note 14 of the Company's 1996 Annual Report to Shareholders.
(9) New Accounting Pronouncements
In June 1997 the Financial Accounting Standards Board (FASB) issued SFAS
No. 130, "Reporting Comprehensive Income", and SFAS N o. 131 "Disclosures
about Segments of an Enterprise and Related In formation." SFAS No. 130
requires that an enterprise classify items of comprehensive income by their
nature in a financial statement and display the accumulated balance of
other comprehensive income separately from retained earnings and additional
paid-in-capital in the equity section of a statement of financial position.
SFAS No. 131 requires that a public business enterprise report financial
and descriptive information about its reportable operating segments such as
a measure of segment profit or loss, certain specific revenue and expense
items, and segment
Page 8 of 17
<PAGE> 9
assets. The Company will adopt these statements for the Company's report on
Form 10-K for the year ended September 30, 1999. The Company does not
expect that the adoption of these pr onouncements will have a material
effect on the Company's financial position or results of operations.
Page 9 of 17
<PAGE> 10
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 COMPARED WITH
THREE MONTHS ENDED JUNE 30, 1996
Net sales of $100,427,000 increased 69.2% over 1996 net sales of $59,359,000.
Sales growth was 9.4% in the water treatment segment which resulted from
expansion into new markets and new product lines. Swimming pool and spa
equipment segment sales increased by 28.5% which was entirely attributable to
the addition of the equipment businesses acquired as part of the General
Aquatics acquisition on May 1, 1997. The wet and cold spring weather conditions
throughout the U.S., though, resulted in sales declines in the pool equipment
businesses of approximately 4% compared with the same period last year. The pool
sales and installation segment, acquired with General Aquatics, represented
approximately 70% of the total sales growth for the quarter. The Company's
global expansion strategy and improving conditions in Europe resulted in an
increase of 9.1% in sales by the Company's foreign operations over the same
period last year.
Cost of sales increased from 69.9% to 70.3% of net sales for the third quarter
while operating expenses, consisting of engineering and development, selling,
and administrative expenses, as a percentage of sales increased from 17.7% to
17.9% for the third quarter. Both increases were attributable to the different
cost structures of the acquired businesses.
Interest and other expense increased by $1,131,000 over the same period last
year. The increase is attributable to increased borrowings which were used to
finance the acquisition of General Aquatics and increased amortization expense
arising from the acquisition.
The Company's effective tax rate of 35% was lower than the 1996 rate of 36% due
to the impact of foreign taxes.
The above items resulted in net income of $6,404,000 in 1997 up 46.7% compared
to $4,363,000 in 1996, and an increase in earnings per share up 53% from $.66 in
1996 to $1.01 in 1997.
NINE MONTHS ENDED JUNE 30, 1997 COMPARED WITH
NINE MONTHS ENDED JUNE 30, 1996
Net sales for the first nine months of $195,750,000 increased 31.3% over 1996
net sales of $149,074,000. Excluding the effect of the acquisition, net sales
increased 4.3% over the same period last year. This growth is primarily
attributable to the water treatment business due to expansion into new markets
and new product lines, while the swimming pool and spa equipment business is
essentially flat due to the generally poor weather conditions throughout the
U.S.. Sales by the Company's foreign operations increased 3.4% over the same
period last year which represents steady progress in the Company's business
building activities offset in part by a very soft European market.
Page 10 of 17
<PAGE> 11
Cost of sales remained constant at 70.9% of net sales for the nine months.
Operating expenses, consisting of engineering and development, selling, and
administrative expenses, as a percentage of sales, also remained constant at
19.6% for the nine months.
Interest and other expense increased $1,457,000 over the same period last year.
The increase was attributable to increased borrowings which were used to finance
the acquisition of General Aquatics and increased amortization expense arising
from the acquisition.
The Company's effective tax rate of 35% was lower than the 1996 rate of 36% due
to the impact of foreign taxes.
The above items resulted in net income of $9,926,000 in 1997 up 24.9% compared
to $7,950,000 in 1996 and an increase in earnings per share up 30.8% from $1.20
in 1996 to $1.57 in 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital of $27,675,000 at June 30, 1997 compared to
$15,201,000 at September 30, 1996, and the ratio of current assets to current
liabilities decreased slightly to 1.40 to 1.00 from 1.41 to 1.00. Of the
increase in working capital $6,400,000 is attributable to the acquisition of
General Aquatics with the balance due to changes in accounts receivable,
inventory and accounts payable which reflect normal seasonal working capital
changes.
Capital expenditures for fiscal 1997 totaled $10,073,000 compared to $4,658,000
for the same period last year, and were funded from cash flows from operations.
The increase in capital expenditures relates primarily to construction of a
manufacturing plant in Goa, India as part of the Company's global expansion
strategy and expansion of a plant in Chardon, Ohio, to increase capacity.
The Company is involved in various claims and lawsuits incidental to its
business, including product liability claims which are covered by insurance.
Although the Company believes that its reserves are adequate, a significant
increase in the aggregate amount of claims could have an adverse effect on the
deductible level or upon the Company's ability to obtain product liability
coverage for certain product lines. Management is addresses the matter in
various ways and is reasonably confident, but cannot guarantee, that the
situation will be managed with no material adverse impact on the Company.
On May 1, 1997, the Company terminated its existing bank loans and obtained,
through a new bank group, an unsecured $135,000,000 multi-currency revolving
loan facility. The proceeds from the new loan were used to repay the existing
loans and to finance the acquisition of General Aquatics. The new loan matures
April 30, 2002 and may be extended in one year increments with the approval of
the bank group. The facility includes commitment reductions at specified dates
and for events throughout the term of the loan, however, the commitment does not
reduce below $100,000,000. The Company believes it has adequate sources of funds
to meet its needs.
Page 11 of 17
<PAGE> 12
Part II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There has been no material change to the status of the legal
proceedings referred to in the 1996 Form 10-K during the period
covered by this report.
ITEM 2. CHANGES IN SECURITIES
No change.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF THE SECURITY HOLDERS
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 Computation of Per Share Earnings
13 Independent Public Accountants'
Review Report
15 Independent Public Accountants'
Awareness Letter
27 Financial Data Schedule
(b) Form 8-K
The following reports filed on Form 8-K are incorporated by
reference.
Filed 5/15/97
-------------
Asset Purchase Agreement among GM Acquisition Corp., General
Aquatics Corporation, General Aquatics, Inc., Anthony and Sylvan
Pools, Inc., KDI American Products, Inc. and KDI Paragon, Inc.
dated as of March 24, 1997.
Filed 7/15/97
-------------
First amendment to 8-K filing dated May 15, 1997. Amendment
required to include financial statements and proforma financial
information required pursuant to Item 7 of this report which were
omitted from the original report.
Page 12 of 17
<PAGE> 13
Essef Corporation
Form 10Q
For the Quarter Ended June 30, 1997
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>
11 Computation of Per Share Earnings 15
13 Independent Public Accountants' Review
Report 16
15 Independent Public Accountants' Awareness
Letter 17
27 Financial Data Schedule
</TABLE>
Page 13 of 17
<PAGE> 14
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/ Stuart D. Neidus
--------------------------------------
Stuart D. Neidus
Executive Vice President
and Chief Financial Officer
(Principal Accounting Officer)
Date: August 14, 1997
Page 14 of 17
<PAGE> 1
EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS
The computation of primary earnings per share, (restated where appropriate to
give effect to the 10% stock dividend distributed February 28, 1997) is as
follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30
------------------ ------------------
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Weighted average shares
outstanding 5,286 5,631 5,265 5,677
Add equivalent shares for
stock options (a) 1,086 962 1,064 971
------ ------ ------ ------
Average shares outstanding
for computation of primary
earnings per share 6,372 6,593 6,329 6,648
====== ====== ====== ======
Income from continuing $6,404 $4,188 $9,926 $7,798
operations ====== ======= ====== ======
Net Income $6,404 $4,363 $9,926 $7,950
====== ======= ====== ======
PRIMARY EARNINGS PER COMMON SHARE:
From continuing operations $ 1.01 $ .64 $ 1.57 $ 1.17
====== ====== ====== ======
Net Income $ 1.01 $ .66 $ 1.57 $ 1.20
====== ====== ====== ======
</TABLE>
(a) Computed under the "Treasury Stock Method" using the average market price
for the respective period.
Page 15 of 17
<PAGE> 1
EXHIBIT 13
INDEPENDENT PUBLIC ACCOUNTANTS' REVIEW REPORT
To the Board of Directors of
Essef Corporation
Chardon, Ohio
We have reviewed the accompanying condensed consolidated balance sheet of Essef
Corporation and Subsidiaries (the "Company) as of June 30, 1997, and the related
condensed consolidated statements of income for the three-month and nine-month
periods ended June 30, 1997 and 1996 and the related condensed consolidated
statements of cash flows for the nine-month periods ended June 30, 1997 and
1996. These financial statements are the responsibility of the Company's
management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to such condensed consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of the Company as of September 30,
1996, and the related consolidated statements of income, shareholders' equity,
and cash flows for the year then ended (not presented herein) and in our report
dated November 19, 1996, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in
the accompanying condensed consolidated balance sheet as of September 30, 1996
is fairly stated, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
Deloitte & Touche LLP
Cleveland, Ohio
July 24, 1997
Page 16 of 17
<PAGE> 1
EXHIBIT 15
INDEPENDENT PUBLIC ACCOUNTANTS' AWARENESS LETTER
August 14, 1997
To the Board of Directors
of Essef Corporation
220 Park Drive
Chardon, Ohio
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim financial
information of Essef Corporation and Subsidiaries for the periods ended June 30,
1997 and 1996, as indicated in our report dated July 24, 1997; because we did
not perform an audit, we expressed no opinion on that information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended June 30, 1997, is
incorporated by reference in Registration Statement No. 33-17758 on Form S-8.
We also are aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
DELOITTE & TOUCHE LLP
Cleveland, Ohio
Page 17 of 17
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 6,933
<SECURITIES> 0
<RECEIVABLES> 48,827
<ALLOWANCES> 0
<INVENTORY> 39,055
<CURRENT-ASSETS> 97,564
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 225,183
<CURRENT-LIABILITIES> 69,889
<BONDS> 0
<COMMON> 0
30,536
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 225,183
<SALES> 100,427
<TOTAL-REVENUES> 100,427
<CGS> 70,594
<TOTAL-COSTS> 88,612
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,963
<INCOME-PRETAX> 9,852
<INCOME-TAX> 3,448
<INCOME-CONTINUING> 6,404
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,404
<EPS-PRIMARY> 1.01
<EPS-DILUTED> 1.01
</TABLE>
