<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 December 31, 1998
-----------------------------------------
[ ] 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 (440) 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 January 29,1999
- ------------------------------------- ------------------------------------
Common Shares, no par value 11,889,765 Shares
Page 1 of 17
<PAGE> 2
ESSEF CORPORATION
FORM 10-Q
FOR QUARTER ENDED DECEMBER 31, 1998
INDEX
<TABLE>
<CAPTION>
Sequential
Page No.
-----------
<S> <C>
Part I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
December 31, 1998 and September 30, 1998.................... 3
Condensed Consolidated Statements of Income -
Three Months Ended December 31, 1998 and 1997............... 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended December 31, 1998 and 1997............... 5
Notes to Condensed Consolidated Financial Statements................ 6-10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.............. 11-14
Part II - Other Information
Item 1. Legal Proceedings......................................... 15
Item 2. Changes in Securities..................................... 15
Item 4. Submission of Matters to a Vote of Security
Holders................................................. 15
Item 6. Exhibits and Reports on Form 8-K......................... 16
</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>
December 31, September 30,
1998 1998
--------- -------------
<S> <C> <C>
ASSETS (unaudited) (audited)
Current Assets
Cash and cash equivalents ....................... $ 2,403 $ 1,137
Accounts receivable, net ........................ 50,553 44,545
Inventories, net ................................ 52,069 50,163
Prepayments and other ........................... 4,567 3,069
--------- ---------
Total current assets ......................... 109,592 98,914
Property, plant and equipment, net .................. 78,912 79,076
Goodwill, net ....................................... 74,793 74,444
Deferred income taxes ............................... 4,318 4,391
Other ............................................... 7,729 10,098
--------- ---------
$ 275,344 $ 266,923
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term borrowings ........................... $ 5,471 $ 3,853
Current maturities of long-term debt ............ 686 859
Accounts payable ................................ 17,741 23,871
Accrued expenses ................................ 23,702 33,301
Accrued income taxes ............................ 3,018 3,685
--------- ---------
Total current liabilities .................... 50,618 65,569
Long-Term Debt ...................................... 135,483 112,622
Other Long-Term Liabilities ......................... 6,978 5,054
Shareholders' Equity
Preferred shares no par value,
authorized 1,000,000 shares, none issued ..... -- --
Common shares no par value,
authorized 40,000,000 shares, issued
12,491,504 and 12,165,680 shares, respectively 51,943 50,570
Treasury shares at cost, 602,127
and 503,927 shares, respectively ............. (9,637) (7,962)
Retained earnings ................................ 39,636 40,888
Accumulated other comprehensive income,
Foreign currency translation ............. 323 182
--------- ---------
Total shareholders' equity ................... 82,265 83,678
--------- ---------
$ 275,344 $ 266,923
========= =========
</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
December 31,
--------------------------
1998 1997
-------- --------
<S> <C> <C>
Net sales ................................... $ 93,621 $ 79,618
Cost of sales ............................... 70,611 61,487
-------- --------
Gross profit ....................... 23,010 18,131
Operating expenses .......................... 22,803 16,397
-------- --------
Income from operations ................. 207 1,734
Interest and other expense .................. 2,133 1,608
-------- --------
(Loss)/Income before
income taxes .................... (1,926) 126
(Benefit)from /provision for
income taxes ....................... (674) 44
-------- --------
Net (loss)/income .................. $ (1,252) $ 82
======== ========
Earnings per share:
Basic .............................. $ (.11) $ .01
Diluted ............................ $ (.11) $ .01
Average shares outstanding:
Basic .............................. 11,866 11,651
Diluted ............................ 11,866 13,317
</TABLE>
See notes to condensed consolidated financial statements.
Page 4 of 17
<PAGE> 5
ESSEF CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
----------------------
1998 1997
-------- --------
<S> <C> <C>
Cash Flows from Operating Activities
Net (loss)/income .............................. $ (1,252) $ 82
Adjustments to reconcile net income to net
cash used for operating activities
Depreciation and amortization ........ 3,604 2,842
Deferred taxes ....................... 74 (314)
Other ................................ 297 896
Change in operating assets and liabilities
Accounts receivable ....................... (6,053) (2,568)
Inventories ............................... (1,920) (3,372)
Prepayments and other ..................... (1,183) (562)
Accounts payable .......................... (6,121) 3,770
Accrued expenses .......................... (7,180) (11,347)
Accrued income taxes ...................... (667) (1,617)
-------- --------
Net cash used for operating activities (20,401) (12,190)
-------- --------
Cash Flows For Investing Activities
Additions to property, plant and equipment ..... (2,849) (4,701)
Proceeds on sale of land and buildings ......... 1,157 --
Business acquisitions .......................... (412) (583)
-------- --------
Net cash provided by/(used for)
investing activities ............... (2,104) (5,284)
-------- --------
Cash Flows from Financing Activities
Proceeds from long-term debt ................... 22,688 17,878
Increase/(Decrease) in short-term borrowings ... 1,618 (1,720)
Treasury stock acquired ........................ (1,675) --
Proceeds from exercise of stock options ........ 1,140 76
-------- --------
Net cash provided by financing activities . 23,771 16,234
-------- --------
Net change in cash and cash equivalents .............. 1,266 (1,240)
Cash and Cash Equivalents
Beginning of period ................................ 1,137 1,668
-------- --------
End of period ...................................... $ 2,403 $ 428
======== ========
Supplemental Cash Flow Information
Interest paid ............................. $ 2,085 $ 1,393
======== ========
Income taxes paid ......................... $ -- $ 1,928
======== ========
</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 December 31,
1998, and the results of their operations and their cash flows for
the three month periods ended December 31, 1998 and 1997.
These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and the notes
thereto included in the Company's 1998 Annual Report to Shareholders,
sections of which are incorporated into the Company's Form 10-K filed
for the fiscal year ended September 30, 1998. The results of
operations for the three month period ended December 31, 1998 may not
necessarily be indicative of the operating results for the full year.
(2) RECLASSIFICATIONS
Certain reclassifications have been made to prior year amounts in
order to be consistent with the presentation for the current year.
(3) EARNINGS PER SHARE
Earnings per share is computed in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings Per Share". Basic
earnings per share is computed by dividing net income by the weighted
average number of common shares outstanding during the period.
Diluted earnings per share is based on the combined weighted average
number of shares outstanding which include the assumed exercise or
conversion of options. In computing diluted earnings per share, the
Company has utilized the treasury stock method. In accordance with
SFAS no. 128, as the first quarter of fiscal 1999 resulted in a net
loss per share, the calculation of diluted earnings per share (shown
below) does not include the effect of the assumed exercise of
outstanding options as its effect would be anti-dilutive. Including
the effect of the assumed exercise of outstanding options would
result in a loss per share of $.09. Since the full year is expected
to have positive earnings diluted earnings per share for the year
will include the dilutive effect from stock options.
The computation of weighted average common and common equivalent
shares used in the calculation of basic and diluted earnings per
share is as follows:
Page 6 of 17
<PAGE> 7
<TABLE>
<CAPTION>
(Dollars in thousands, except per share data)
Three Months Ended
December 31,
-----------------------
1998 1997
-------- --------
<S> <C> <C>
Numerator
Net (loss)/income available to
common shareholders $ (1,252) $ 82
======== ========
Denominator
Weighted average common
shares outstanding 11,866 11,651
Dilutive effect of stock options -- 1,666
-------- --------
Denominator for net income
per share, diluted 11,866 13,317
======== ========
Net (loss)/income per share
Basic $ (.11) $ .01
======== ========
Diluted $ (.11) $ .01
======== ========
</TABLE>
(4) INVENTORIES
<TABLE>
<CAPTION>
Inventories are valued as follows:
(Dollars in thousands) December 31, September 30,
1998 1998
-------- --------
<S> <C> <C>
FIFO COST
Raw materials ......................... $ 20,894 $ 24,543
Work-in-process ....................... 1,952 1,926
Finished goods ........................ 30,375 24,818
-------- --------
53,221 51,287
Excess of FIFO over LIFO cost ....... (1,152) (1,124)
-------- --------
Net Inventories .................. $ 52,069 $ 50,163
======== ========
</TABLE>
(5) SHORT-TERM BORROWINGS
The Company's European subsidiaries have working capital lines of
credit of approximately $12,000,000. At December 31, 1998 and
September 30, 1998, $2,800,000 and $1,595,000, respectively was
outstanding. At December 31, 1998 interest was at rates ranging
from 3.95% to 9.0%. In addition, a note payable on demand of
$2,671,000 and $2,258,000, relating to an acquisition was
outstanding at December 31, 1998 and September 30, 1998,
respectively.
The interest rate on the note is 6%.
Page 7 of 17
<PAGE> 8
(6) LONG-TERM DEBT
The Company through its bank group has an unsecured $185,000,000
multi-currency revolving loan facility ("Credit Facility"). The
Credit Facility matures April 30, 2003 and may be extended in one
year increments with the approval of the bank group. The Credit
Facility includes commitment reductions at specified dates and for
events throughout the term of the loan; however, the commitment
does not reduce below $135,000,000. Interest rates are based on
increments over the LIBOR or foreign currency equivalent rate. A 25
basis point facility fee is payable on the total amount of the
commitment. As of December 31, 1998, interest rates ranged from
5.78% to 6.25%. The Company is in compliance with all of its
covenants under its credit facilities.
In October 1998, the Company entered into an interest rate swap
arrangement with one of the members of its bank group. The swap
arrangement is for a $50,000,000 notional amount for a two-year
term with a bank option for a third year and fixes the Company's
interest rate at 4.445% plus the applicable bank margin based on
the Company's leverage ratio. The effective interest rate on this
portion of debt was 5.195% at December 31, 1998. Additionally, in
May 1997, the Company entered into an interest rate swap
arrangement with another commercial bank for a $30,000,000 notional
amount for a two-year period that effectively fixes the Company's
interest rate at 6.33% plus the applicable bank margin based on the
Company's leverage ratio. The effective interest rate on this
portion of debt was 7.08% at December 31, 1998. The Company does
not use derivatives for trading purposes.
Long-term debt consists of the following:
(In thousands)
<TABLE>
<CAPTION>
December 31, September 30,
1998 1998
(unaudited) (audited)
--------- ---------
<S> <C> <C>
Revolving credit facilities $ 133,867 $ 110,940
Other 2,302 2,541
--------- ---------
136,169 113,481
Less current maturities (686) (859)
--------- ---------
Long-term debt $ 135,483 $ 112,622
========= =========
</TABLE>
(7) COMMON STOCK
Under a stock repurchase program authorized by the Company's Board
of Directors, the Company purchased 98,200 shares of treasury stock
in the three-month period ended December 31, 1998, for $1,675,000.
Page 8 of 17
<PAGE> 9
(8) COMPREHENSIVE INCOME
Effective October 1, 1998, the Company adopted Statement of
Financial Accounting Standard's No. 130 ("SFAS 130") "Reporting
Comprehensive Income" SFAS 130 establishes new standards for
reporting comprehensive income and its components. Comprehensive
income is a measurement of all changes in shareholders' equity
that result from transactions and other economic events other than
transactions with shareholders.
Consolidated statements of comprehensive income are as follows:
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1998 1997
------- -------
(unaudited) (unaudited)
<S> <C> <C>
Net (Loss)/Income $(1,252) $ 82
Other Comprehensive income:
Foreign Currency translation
adjustments 141 323
------- -------
Comprehensive (Loss)/Income $(1,111) $ 405
======= =======
</TABLE>
(9) ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("Board")
issued Statement of Financial Accounting Standard's No. 131 ("SFAS
131") "Disclosures about Segments of an Enterprise and Related
Information." SFAS 131 redefines how operating segments are
determined and requires disclosure of certain financial and
descriptive information about a company's operating segments.
Applying SFAS 131, the Company believes it will continue to have
three reportable segments: Swimming Pool and Spa Equipment, Water
Treatment and Systems Equipment and Swimming Pool Sales and
Installation. The Company will adopt SFAS 131 for its financial
statement disclosures in its annual report for the year ending
September 30, 1999.
(10) SUBSEQUENT EVENTS
On February 4, 1999, the Board of Directors authorized a 10% stock
dividend to be distributed on or about March 10, 1999 to
shareholders of record on February 19, 1999. The consolidated
financial statements have not been restated to reflect the number
of shares outstanding following the dividend.
Page 9 of 17
<PAGE> 10
(11) LITIGATION
There has been no material change to the status of the litigation
referred to in the Company's 1998 Annual Report to Shareholders,
sections of which are incorporated in the Company's Form 10-K filed
for the fiscal year ended September 30, 1998.
Page 10 of 17
<PAGE> 11
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1998 COMPARED WITH
THREE MONTHS ENDED DECEMBER 31, 1997
Net sales in 1998 of $93,621,000 increased 17.6% from 1997 net sales of
$79,618,000 for the first quarter. The increase came principally from the
Swimming Pool and Spa Equipment Segment and the Swimming Pool Sales and
Installation Segment both of which benefited from acquisitions in the latter
part of fiscal 1998. This increase was partially offset by lower sales in the
Water Treatment and Systems Equipment Segment as a result of the sale of one of
it's business units in July, 1998, and continued softness in several of its end
markets which was experienced towards the end of fiscal 1998.
Gross Profit increased from 22.8% to 24.6% of sales for the first quarter. The
increase was attributable to improved results in the Swimming Pool and Spa
Equipment Segment as a result of cost improvements arising from last year's
facility consolidation and from higher sales.
Operating expenses, consisting of engineering and development, selling, and
administrative expenses, as a percentage of sales increased from 20.6% to 24.4%.
The increase was attributable to a combination of increased spending in the
Swimming Pool Sales and Installation Segment for acquisition integration and
lead-generating activities and lower than normal expenses in the first quarter
of fiscal 1998 due to an adjustment in the accrual for incentive based employee
stock options related to a reduction in the number of eligible stock options.
Interest and other expense increased by $525,000 to $2,133,000. The increase was
the result of increased borrowings that were used to finance the acquisitions
completed in fiscal 1998.
The Company's effective tax rate was 35% in both periods.
As a result of the above items, the Company incurred a net loss of $1,252,000,
or $.11 per diluted share in the current quarter, which is a decrease of
$1,334,000 from the net income of $82,000 or $.01 per diluted share reported
last year.
Page 11 of 17
<PAGE> 12
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1998 funded debt was $141,640,000 an increase of $24,306,000
from September 30, 1998. The increase came principally as a result of normal
seasonal working capital requirements which increased working capital by
$25,629,000 from September 30, 1998 to a level of $58,974,000 at December 31,
1998.
Capital expenditures of $2,849,000 for the first quarter decreased $1,852,000
compared to $4,701,000 for the same period last year. The decrease is
attributable to higher than normal capital expenditures in fiscal 1998, related
to the Company's expansion into India and consolidation activities undertaken in
the Swimming Pool and Spa Equipment Segment following the acquisition of General
Aquatics and subsequent closure of the Company's City of Industry plant.
The Company believes that funds available under its revolving credit facility
and funds generated from operations will be sufficient to satisfy its
anticipated operating and capital needs in fiscal 1999.
The Company is involved in various claims and lawsuits incidental to its
business, including product liability claims which are covered by insurance
after certain deductibles. Although the Company believes that's 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. While the ultimate result
of these contingencies cannot be predicted with certainty, management does not
expect these matters to have a material adverse effect on the consolidated
financial position or results of operations of the Company.
YEAR 2000 MATTERS
The Company utilizes computer technologies to varying degrees throughout its
three business segments to effectively carry out its day-to-day operations.
Computer technologies include both information technology in the form of
hardware and software, as well as embedded technology in the Company's
facilities and equipment. Similar to most companies, the Company must determine
whether its systems are capable of recognizing and processing date sensitive
information properly as the year 2000 approaches.
During the past several years as a result of an operational decision to improve
its information systems, most of the significant business units within the Water
Treatment and Systems Equipment Segment and Swimming Pool and Spa Equipment
Segment have implemented enterprise-wide information systems. These information
systems are substantially year 2000 compliant, and therefore the costs to make
them fully compliant are not expected to be material. The Company is currently
in the process of assessing the information systems in the remaining business
units within
Page 12 of 17
<PAGE> 13
these segments for year 2000 compliance. Business units whose information
systems are not year 2000 compliant will either implement the Company's
enterprise-wide information system or make modifications to existing systems. In
addition, these segments are in the process of evaluating the computer
controlled equipment and other systems utilized in the business that use
embedded processors that have the potential to be date sensitive to the year
2000 issue. Costs to replace or modify these information systems and processors
are not expected to exceed $1 million and will be completed by mid-1999. In
addition, the Swimming Pool Sales and Installation Segment in 1997, as part of
an overall modernization and upgrade of its information systems, began preparing
its computer systems and applications for the date change in the year 2000. To
date, this process has involved modifying or replacing certain hardware and
upgrading certain software and has not involved material costs to the Company.
The Company believes that substantially all of the necessary systems and
applications changes will be completed by mid-1999, and that the amount of
additional costs, if any, needed to address the year 2000 issue will be
immaterial. For all of the Company's business segments, the costs of year 2000
issue are being funded through operating cash flow and are not material to the
Company. The Company's segments have also not deferred any significant
information technology projects to address the year 2000 issue.
The Company currently believes it will be able to modify, replace or mitigate
its affected systems in time to avoid any material detrimental impact on its
operations. If the Company determines that it may be unable to modify and
properly test affected systems on a timely basis, the Company intends to develop
appropriate contingency plans for any such mission-critical systems at the time
such determination is made. While the Company is not presently aware of any
significant exposure that its systems will not be properly changed or modified
on a timely basis, there can be no assurances that all year 2000 correction
activities will be completed and properly tested before the year 2000, or that
contingency plans will sufficiently mitigate the risk of a year 2000 readiness
problem. An interruption of the Company's ability to conduct its business due to
a year 2000 issue could have a material adverse effect on the Company.
The Company is in the process of surveying suppliers and customers critical to
its business for the purpose of obtaining assurance regarding their ability to
properly operate their systems in the year 2000. The Company has targeted the
completion of these activities by mid-1999. The Company will develop appropriate
contingency plans in the event that a significant exposure is identified
relative to the dependencies on third-party systems. While the Company is not
presently aware of any such significant exposure, there can be no guarantee that
the systems of third-parties on which the Company relies will be converted in a
timely manner, or that a failure to properly convert by another company would
not have a material adverse effect on the Company.
Page 13 of 17
<PAGE> 14
PRIVATE SECURITIES LITIGATION REFORM ACT
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. Certain information included in this report and
other materials filed with the Securities and Exchange Commission (as well as
information included in oral or other written statements made or to be made by
the Company) contains statements that are forward-looking. Such statements may
relate to plans for future expansion, plant integrations and consolidations,
business development activities, other capital spending, financing or the
effects of regulation and competition. Such information involves important risks
and uncertainties that could significantly affect anticipated results in the
future and, accordingly, such results may differ from those expressed in any
forward-looking statements made by or on behalf of the Company. These risks and
uncertainties include, but are not limited to those relating to: the costs of
integrating acquired businesses; product development activities; dependence on
existing management; global economic and market conditions; the impact of
weather on the pool businesses, and year 2000 issues.
Page 14 of 17
<PAGE> 15
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 1998 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
The Annual Meeting of Shareholders of the Company (the "Annual
Meeting") was held on February 4, 1999. Of the 11,966,827 shares
of Common Stock outstanding and entitled to vote at the Annual
Meeting, 10,863,429 shares were each present in person or by
proxy, each entitled to one vote on each matter to come before
the meeting.
The following matter was submitted to a vote of security holders
of the Company at the Annual Meeting, with the results
indicated:
Proposal to elect 3 directors to hold office until the Annual
Meeting of Shareholders in 2002 and until their respective
successors are duly elected and qualified:
Votes cast FOR the election of Mr. Humphrey: 10,854,237
Votes WITHHELD: 9,192
Votes cast FOR the election of Ms. Jorgenson: 10,854,237
Votes WITHHELD: 9,192
Votes cast FOR the election of Mr. Waldin: 10,854,002
Votes WITHHELD: 9,427
Shares held by brokers and nominees: 9,158,357
Shares held by brokers and nominees not voted: 912,092
Page 15 of 17
<PAGE> 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
13 Independent Public Accountants' Review
Report
15 Independent Public Accountants'
Awareness Letter
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 16 of 17
<PAGE> 17
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)
Thomas B. Waldin
------------------------------------
THOMAS B. WALDIN
President and
Chief Executive Officer
(Principal Executive Officer)
Stuart D. Neidus
STUART D. NEIDUS
Executive Vice President
and Chief Financial Officer
(Principal Accounting Officer)
Date: February 10, 1999
Page 17 of 17
<PAGE> 1
EXHIBIT 13
INDEPENDENT PUBLIC ACCOUNTANTS' REVIEW REPORT
To the Board of Directors and Shareholders of
Essef Corporation
Chardon, Ohio
We have reviewed the accompanying condensed consolidated balance sheet of
Essef Corporation and Subsidiaries (the "Company") as of December 31, 1998,
and the related condensed consolidated statements of income and cash flows
for the three-month periods ended December 31, 1998 and 1997. 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,
1998, 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 13, 1998, 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, 1998 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
January 25, 1999
<PAGE> 1
EXHIBIT 15
INDEPENDENT PUBLIC ACCOUNTANTS' AWARENESS LETTER
February 10, 1999
Essef Corporation and Subsidiaries
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 December 31, 1998 and 1997, as indicated in our report dated January
25, 1999; because we did not do 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 December 31, 1998, 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
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 2,403
<SECURITIES> 0
<RECEIVABLES> 50,553
<ALLOWANCES> 0
<INVENTORY> 52,069
<CURRENT-ASSETS> 109,592
<PP&E> 78,912
<DEPRECIATION> 0
<TOTAL-ASSETS> 275,344
<CURRENT-LIABILITIES> 50,618
<BONDS> 0
0
0
<COMMON> 42,306
<OTHER-SE> 39,959
<TOTAL-LIABILITY-AND-EQUITY> 275,344
<SALES> 93,621
<TOTAL-REVENUES> 93,621
<CGS> 70,611
<TOTAL-COSTS> 93,414
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,133
<INCOME-PRETAX> (1,926)
<INCOME-TAX> (674)
<INCOME-CONTINUING> (1,252)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,252)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> (.11)
</TABLE>
