SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED JUNE 30, 1998 COMMISSION FILE NO. 0-3415
STV GROUP, INCORPORATED
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1698231
(State or other jurisdiction of (I.R.S. Employer Identification)
incorporation or organization)
205 West Welsh Drive, Douglassville, Pennsylvania 19518
(Address of principal executive offices) (Zip Code)
(610) 385-8200
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $1.00 par value
(Title of class)
As of June 30, 1998, there were 3,790,318 shares of common stock of the
registrant outstanding.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve 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
<PAGE>
TABLE OF CONTENTS
Page
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS.....................1
Part I: FINANCIAL INFORMATION
Item 1. Financial Statements......................................2
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation........................6
Part II: OTHER INFORMATION
Item 1. Legal Proceedings.........................................8
Item 2. Changes in Securities.....................................8
Item 3. Defaults Upon Senior Securities...........................8
Item 4. Submission of Matters to a Vote of Security Holders.......8
Item 5. Other Information.........................................8
Item 6. Exhibits and Reports on Form 8-K..........................8
SIGNATURES ..........................................................9
<PAGE>
5
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
Certain oral statements made by management from time to time and certain
statements contained herein, including certain statements in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" such
as statements regarding the Company's ability to meet its liquidity needs and
control costs, certain statements in Notes to Condensed Consolidated Financial
Statements, and other statements contained herein regarding matters which are
not historical facts are forward looking statements (as such term is defined in
the Securities Act of 1933) and because such statements involve risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forward looking statements. Factors that could cause actual
results to differ materially include, but are not limited to those discussed
below:
1. The Company's ability to secure the capital and the related cost of such
capital necessary to fund its future growth through.
2. The Company's continued ability to operate in a heavily regulated
government environment. The Company's government contracts are subject to
termination, reduction or modification as a result of changes in the
government's requirements or budgetary restrictions. In addition,
government contracts are subject to termination at the conveniences of the
government. Under certain circumstances, the government can also suspend or
debar individuals or firms from obtaining future contracts with the
government.
3. The level of competition in the Company's industry, including companies
with significantly larger operations and resources than the Company.
4. The Company's ability to identify and win suitable projects and to consummate
or complete any such projects.
5. The Company's ability to perform design/build projects which may include
the responsibility of ensuring the actual construction of a project for a
guaranteed price.
These and other factors have been discussed in more detail in the Company's
Annual Report on Form 10-K for the fiscal year ended September 30, 1997.
1
<PAGE>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
STV GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
UNAUDITED
<TABLE>
<CAPTION>
June 30, 1998 September 30, 1997
<S> <C> <C>
ASSETS
Current Assets
Cash and Equivalents $1,222,000 $1,153,000
Accounts Receivable 23,196,000 20,154,000
Costs and Estimated Profits of Uncompleted
Contracts in Excess of Related Billings 14,080,000 15,077,000
Prepaid Income Taxes 503,000 503,000
Other Current Assets 918,000 1,223,000
------- ---------
Total Current Assets 39,919,000 38,110,000
Property and Equipment 7,759,000 7,466,000
Less Accumulated Depreciation 6,397,000 6,127,000
--------- ---------
Net Property and Equipment 1,362,000 1,339,000
Deferred Income Taxes 1,660,000 1,660,000
Other Assets 761,000 716,000
------- -------
TOTAL $43,702,000 $41,825,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes and Accounts Payable $7,531,000 $16,567,000
Accrued Wages and Expenses 10,307,000 7,851,000
Billings on Uncompleted Contracts in Excess of
Related Costs 11,052,000 4,386,000
---------- ---------
Total Current Liabilities 28,890,000 28,804,000
Long-Term Debt 2,051,000 1,819,000
Stockholders' Equity
Preferred Stock 0 0
Common Stock 2,020,000 1,921,000
Capital Surplus 3,329,000 3,003,000
Retained Earnings 8,183,000 6,674,000
--------- ---------
Total 13,532,000 11,598,000
Less: Treasury Stock 771,000 271,000
Loans Receivable from Officers 0 125,000
- -------
Total Stockholders' Equity 12,761,000 11,202,000
TOTAL $43,702,000 $41,825,000
=========== ===========
</TABLE>
2
<PAGE>
STV GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
NINE MONTHS ENDED
June 30
1998 1997
<S> <C> <C>
Operating Activities
Net Income $1,509,000 $569,000
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and Amortization 512,000 609,000
Changes in Operating assets and liabilities
Accounts Receivable (3,042,000) 916,000
Costs of uncompleted contracts in
excess of billings and prepaid expenses 1,302,000 (1,991,000)
Accounts Payable and accrued expenses 2,642,000 269,000
Billing in excess of related costs 6,666,000 435,000
Current Income Taxes 1,051,000 (87,000)
--------- -------
Net Cash provided by operating activities $10,640,000 $720,000
Investing Activities
Purchase of Property and Equipment (461,000) (680,000)
Purchase of Software (203,000) (91,000)
Decrease (Increase) in other assets 51,000 121,000
------ -------
Net Cash provided (used) by investing activities ($613,000) ($650,000)
Financing Activities
Proceeds from issuance of common stock 84,000 0
Proceeds from line of credit and long term
borrowings 55,261,000 69,210,000
Principal payments on line of credit and long
term borrowings (65,303,000) (68,948,000)
----------- -----------
Net Cash (used) provided by financing
activities ($9,958,000) $262,000
Increase (decrease) in cash and equivalents 69,000 332,000
Cash and equivalents at beginning of year 1,153,000 28,000
--------- ------
Cash and equivalents at end of period $1,222,000 $360,000
========== ========
</TABLE>
3
<PAGE>
STV GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
June 30 June 30
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Revenue
Total Revenue $25,550,000 $24,637,000 $75,682,000 $69,684,000
Less Subcontract and Procurement Costs 5,510,000 6,524,000 16,688,000 15,267,000
--------- --------- ---------- ----------
Operating Revenue $20,040,000 $18,113,000 $58,994,000 $54,417,000
Costs and Expenses
Costs of Services and Sales 17,296,000 15,994,000 51,118,000 48,307,000
General and Administrative 1,535,000 1,324,000 4,557,000 3,923,000
Interest Expense 59,000 350,000 418,000 1,035,000
Interest Income (31,000) (19,000) (64,000) (38,000)
------- ------- ------- -------
Total Costs and Expenses 18,859,000 17,649,000 56,029,000 53,227,000
Income Before Income Taxes 1,181,000 464,000 2,965,000 1,190,000
Income Taxes 579,000 236,000 1,456,000 621,000
------- ------- --------- -------
Net Income $602,000 $228,000 $1,509,000 $569,000
======== ======== ========== ========
Net Income per share: $0.15 $0.06 $0.38 $0.15
Weighted Average Number
of Shares Outstanding 4,102,795 3,805,702 3,943,723 3,802,938
</TABLE>
Note: A 2 for 1 split was effected April 13, 1998, for shareholders of record as
of March 31, 1998. Prior period net income per share and weighted average
number of shares outstanding have been adjusted to reflect this split.
4
<PAGE>
Notes to Consolidated Condensed Financial Statement
June 30, 1998
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have been
prepared in accordance with the instruction to Form 10-Q and therefore do not
include all information and footnotes necessary for a fair presentation of
financial position, results of operations, and cash flows in conformity with
generally accepted accounting principles.
It should be understood that the foregoing interim results are not necessarily
indicative of the results of operations for the full fiscal year ending
September 30, 1998 due in part to increased reliance on estimates at interim
dates.
2. EARNINGS PER SHARE
SFAS No. 128, "Earnings per Share," has been adopted by the Company. SFAS 128
replaces primary earnings per share (EPS) with basic EPS and fully diluted EPS
with diluted EPS. Basic EPS is computed by dividing net income by the weighted
average number of shares of common stock outstanding during the period. Diluted
EPS recognizes the potential dilutive effects of the future exercise of common
stock options.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Basic earnings per share $0.16 $0.06 $0.41 $0.16
Shares outstanding 3,774,740 3,642,492 3,691,946 3,642,492
Diluted earnings per share $0.15 $0.06 $0.38 $0.15
Shares outstanding 4,102,795 3,805,702 3,943,723 3,802,938
</TABLE>
A 2-for-1 split was effected April 13, 1998, for shareholders of record as of
March 31, 1998. This split is reflected in the above basic earnings per share
and weighted average number of shares outstanding.
5
<PAGE>
Item 2. Management Discussion and Analysis of Financial Condition and Results
of Operation
Results of Operations
Total revenues for the quarter ended June 30, 1998 (third quarter fiscal 1998)
increased 3.7% as compared to the third quarter of fiscal 1997 and decreased
1.7% as compared to the previous quarter. Operating revenues (total revenues
excluding pass-through costs) increased 10.6% as compared to the third quarter
of fiscal 1997 and increased 1.2% as compared to the previous quarter.
Pass-through costs, expressed as a percentage of total revenues, decreased to
21.6% as compared to 26.5% in the third quarter of fiscal 1997 and decreased
from 23.9% in the previous quarter. Pass-through costs will vary depending on
the need for specialty subconsultants and governmental subcontract requirements.
Cost of services, expressed as a percentage of operating revenues, decreased to
86.3% for the third quarter of fiscal 1998 from 88.3% in the third quarter of
fiscal 1997 and decreased from 87.0% in the previous quarter. The decrease in
the percentage from the third quarter of fiscal 1997 was due mainly to the
increase in operating revenues noted above. The costs of services remained
comparable to the previous quarter.
General and administrative expense, expressed as a percentage of operating
revenue, is 7.7% in the third quarter of fiscal 1998 and is comparable to 7.3%
recorded in the third quarter of fiscal 1997 and 7.5% in the previous quarter.
Interest, expressed as a percentage of operating revenues, decreased to .1% for
the third quarter of fiscal 1998 from 1.8% in the third quarter of fiscal 1997
and decreased slightly from .4% in the previous quarter. This decrease is due to
the virtual elimination in bank borrowings as a result of continued improvement
in cash receipts and interest earned from surplus cash.
6
<PAGE>
Income tax expense for the third quarter of fiscal 1998 was 49.0% of pre-tax
income compared to 50.9% in the third quarter of fiscal 1997 and 50.5% in the
previous quarter. The decrease is due to slightly higher non-deductible expenses
being lower as a percentage of a considerably higher third quarter pre-tax
income.
Earnings per common share, calculated using the Treasury Stock Method, for the
third quarter of fiscal 1998 were 15 cents based on 4,102,795 shares outstanding
versus 6 cents for the third quarter of fiscal 1997 based on 3,805,702 shares
outstanding. A 2 for 1 stock split was effective April 13, 1998 for stockholders
of record as of March 31, 1998. Prior period net income per share and weighted
average number of shares outstanding have been adjusted to reflect this split.
Financial Condition and Liquidity
Working capital increased to $11,029,000 from $10,719,000 in the previous
quarter. Capital resources available to the Company include an existing line of
credit for working capital. The current limit is a maximum of $15.5 million
based on accounts receivable and work-in-progress of which approximately $13.3
million is currently available. The Company recently completed negotiations and
entered into an agreement with its bank which has reduced its borrowing rate to
the bank's base rate. The Agreement also reduces the amount charged by the bank
for Letters of Credit. The Company believes that it and the lender will maintain
a line of credit adequate to meet the current and future financial needs of the
Company. The Company is planning to continue its program of purchasing
computer-assisted design and drafting equipment and has purchased a new project
management and accounting system.
The Company has been notified by NASDAQ that it does not meet the new listing
requirements for the National Market System promulgated by NASDAQ in 1998. The
Company has appealed that decision and is awaiting the outcome of that appeal.
In the event the Company is unsuccessful in its appeal, it will be delisted by
NASDAQ National Market System. In that case, it would apply for listing on the
NASDAQ small cap market.
The Company's backlog is approximately $150 million.
7
<PAGE>
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The following is filed as an exhibit to Part I of this
Form 10Q:
Exhibit 10.37 - Amendment To Loan Documents
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K for the quarter ended
June 30, 1998.
8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STV GROUP, INCORPORATED
(Registrant)
August 14, 1998 By: /s/ Michael Haratunian
- ------------------- ----------------------
Date Michael Haratunian
Chairman, Chief Executive Officer
August 14, 1998 By: /s/ Peter W. Knipe
- ------------------- ----------------------
Date Peter W. Knipe
Secretary/Treasurer
9
AMENDMENT TO LOAN DOCUMENTS
Amendment made as of June 30, 1998 by and among STV GROUP, INC., a
Pennsylvania corporation ("STV") and STV's consolidated subsidiaries (the
"Subsidiaries"), as follows: STV INCORPORATED, a New York corporation, STV
ARCHITECTS, INC., a Pennsylvania corporation, STV ENVIRONMENTAL, INC., a
Pennsylvania corporation, STV INTERNATIONAL, INC., a Pennsylvania corporation,
STV SURVEYING, INC., a Delaware corporation, and STV CONSTRUCTION SERVICES, a
Pennsylvania corporation (collectively referred to as the "Borrowers" and
individually as "Borrower"), and FIRST UNION NATIONAL BANK, successor by merger
to CORESTATES BANK, N.A., successor by merger to FIRST PENNSYLVANIA BANK N.A.
("Bank") to amend and modify the existing Loan Agreement ("Loan Agreement") and
the Security Agreement, each dated February 28, 1986 and each as heretofore
amended together with all related agreements issued pursuant thereto
(collectively, the "Loan Documents").
The Borrowers and the Bank have agreed to reduce the maximum available
amount of the Line of Credit from $16,500,000 to $15,500,000, to reduce the
interest rate on the Line of Credit to Prime Rate and to make certain other
changes to the Loan Documents.
NOW, THEREFORE, under the laws of the Commonwealth of Pennsylvania, the
Borrowers, jointly and severally, and the Bank, each intending to be legally
bound hereby and for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, agree as follows:
1. Definitions. This Amendment constitutes the Eighth Amendment to the
Loan Agreement and is intended to amend the Loan Documents as of the date
hereof. All terms used herein as defined terms, but not defined herein, shall
have the meanings ascribed to them in the Loan Documents.
2. Amendments to Line of Credit. The parties agree that:
(a) Section 1.1(a) of the Loan Agreement is hereby amended to
read in its entirety as follows:
"Subject to the terms and conditions hereof and in
the absence one or more unwaived events of default under this Agreement
and/or a pending demand by the Bank for payment under the Demand Note,
the Bank agrees to lend and relend to Borrowers from time to time such
sum or sums of money as may be requested by the Borrowers and as the
Bank, in it sole discretion, may approve, which shall not exceed in
aggregate principal amount at any one time outstanding Fifteen Million
Five Hundred Thousand Dollars ($15,500,000) (the "Line of Credit"). The
Line of Credit shall be evidenced by the Eighth Amended and Restated
Demand Note (the "Eighth Amended and Restated Demand Note") in the form
attached hereto."
<PAGE>
(b) All references in the Loan Documents to "Demand Note"
shall henceforth be deemed to refer to the Eighth Amended and Restated Demand
Note, the form of which is attached hereto as Exhibit "A".
(c) The first sentence of Section 1.1(b) of the Loan Agreement
is hereby amended to read in its entirety as follows:
"Subject to the terms and conditions hereof and of a
certain Standby Letter of Credit and Security Agreement
executed by all of the Borrowers under even date herewith (the
"L/C Agreement"), Bank hereby agrees, in its sole option to
issue standby letters of credit upon the request of the
Borrowers and for their account, provided that at no time
shall Bank issue letters of credit aggregating in face amount
in excess of $3,000,000 (the "L/C Sublimit"), and at no time
may the aggregate loans under the Eighth Amended and Restated
Demand Note and letters of credit under the L/C Sublimit
exceed $15,500,000."
(d) The First sentence of Section 3 of the Loan Agreement is
hereby amended to read in its entirety as follows:
"Interest shall accrue on the unpaid principal
balance from time to time outstanding under the Eighth Amended
and Restated Demand Note at an interest rate per annum equal
to the Bank's prime commercial rate of interest (which is not
necessarily the lowest rate charged by the Bank) in effect
from time to time, with changes in said rate to be effective
immediately ("Prime Rate"), based on a 360 day year for the
actual days elapsed.
3. Existing Security. Borrowers hereby agree and confirm that all
obligations of the Borrowers under the Loan Documents remain in full force and
effect and, together with this Amendment, are and continue to be secured by the
liens and security interests set forth in the Loan Documents. Without limiting
the generality of the foregoing, the Borrowers agree and confirm that the
security interests granted and set forth in Section 2.1 of the Loan Agreement
and in the Security Agreement apply with respect to each of the Borrowers
hereunder and remain in full force and effect and, in furtherance thereof, each
of the Borrowers hereby grants to the Bank a lien upon and security interest in
the property and assets of the Borrowers described in Section 2.1 of the Loan
Agreement and in the Security Agreement.
4. Representations and Warranties. STV and each of the other Borrowers
hereby represent and warrant to the Bank:
(a) that all representations and warranties made by each of
them in the Loan Documents remain true and correct on and of this date, as if
newly made on and as of this date, and no event of default, or event which with
the lapse of time or giving of notice, or both, would be an event of default has
occurred and is continuing under the Loan Documents;
-2-
<PAGE>
(b) that no person or entity has any lien, security interest,
mortgage, pledge, charge or encumbrance on any of the assets, real or personal,
tangible or intangible, of STV or any other Borrower, except for the liens
heretofore granted to the Bank or except as to those liens which have been
agreed to by the Bank in writing;
(c) that the Subsidiaries identified in the first paragraph of
this Amendment are all of the subsidiaries of STV and that each of such
Borrowers is a corporation duly organized, validly existing and in good standing
under the laws of its state of incorporation (as set forth on Exhibit "B"
attached hereto), is duly qualified as a foreign corporation and is in good
standing in all other jurisdictions in which the failure to do so could have a
material adverse affect on its financial condition or business operations; each
of the Borrowers has the authority and legal right to take all actions required
of it hereunder, and all such corporate actions have been taken; and no such
action contravenes the provisions of the charter or by-laws of any of the
Borrowers or any note, indenture, contract or agreement to which it is a party
or by which it or any of its property is bound;
(d) that, except as set forth on Exhibit "C", all of the
subsidiaries of STV are Borrowers and are parties to this Amendment and the
Eighth Amended and Restated Demand Note and that such subsidiaries listed on
Exhibit "C" are inactive and do not own any assets in excess of $25,000 in the
aggregate.
(e) the Loan Documents are and remain valid, binding,
enforceable and in full force and effect as of the date hereof, and none of the
Borrowers (or any other party to the Loan Documents) has any defense, setoff,
counterclaim, or challenge against the payment of any of the sums owing under
the terms of the Loan Documents or the enforcement or validity of any of the
terms thereof.
5. Conditions. As conditions precedent to the effectiveness of this
Amendment:
(a) Each of the Borrowers shall have furnished the Bank with
certified copies of resolutions adopted by its Board of Directors authorizing
the execution and delivery of this Amendment and all reasonable and necessary
actions ancillary thereto.
(b) STV shall have paid or reimbursed the Bank for the Bank's
costs and expenses in connection with this Amendment.
6. Further Assurances. Each of the Borrowers hereby agrees to execute
and deliver to Bank such additional agreements and other documentation,
including such UCC-1 and UCC-3 financing statements (and to pay all costs and
expenses of the Bank in connection therewith), as Bank may request from time to
time, to assure the perfection, protection and enforcement of the Bank's rights
under the Loan Documents and hereunder.
7. Effect of Amendment; Continuing Validity. Except as expressly
provided in this Amendment, the Loan Documents shall remain in full force and
effect in accordance with their
-3-
<PAGE>
respective terms. Without limiting the generality of the foregoing, nothing in
this Amendment shall be construed to:
(a) impair the validity, perfection or priority of any lien or
security interest securing the Liabilities;
(b) waive, release or impair any rights, powers or remedies of
the Bank under the Loan Documents;
(c) require the Bank to further modify any provision of the
Loan Documents; or
(d) require the Bank to make any loans or other extensions of
credit to the Borrowers.
In the event of any inconsistency between the terms of this Amendment and the
Loan Documents, this Amendment shall govern. Except as expressly amended hereby,
all terms and conditions of the Loan Documents remain in full force and effect
as written and to that end all such provisions are deemed incorporated herein by
reference. Borrower acknowledges that it has consulted with counsel in
connection with the negotiation and delivery of this Amendment.
IN WITNESS WHEREOF, each of the undersigned has caused this Amendment
to be executed by its duly authorized officers as of the date first above
written.
STV GROUP, INC. STV ENVIRONMENTAL, INC.
By: /s/ Peter W. Knipe By: /s/ Peter W. Knipe
STV ARCHITECTS, INC. STV INCORPORATED
By: /s/ Peter W. Knipe By: /s/ Peter W. Knipe
STV SURVEYING, INC. STV INTERNATIONAL, INC.
By: /s/ Peter W. Knipe By: /s/ Peter W. Knipe
STV CONSTRUCTION SERVICES
By: /s/ Peter W. Knipe
FIRST UNION NATIONAL BANK
By: /s/ Margaret A. Byrne
-4-
<PAGE>
EXHIBIT A
EIGHTH AMENDED AND RESTATED DEMAND NOTE
$15,500,000 Philadelphia, PA
June 30, 1998
FOR VALUE RECEIVED, STV GROUP, INC., a Pennsylvania
corporation, STV INCORPORATED, a New York corporation, STV ARCHITECTS, INC., a
Pennsylvania corporation and STV ENVIRONMENTAL, INC., a Pennsylvania
corporation, STV INTERNATIONAL, INC., a Pennsylvania corporation, STV SURVEYING,
INC., a Delaware corporation, STV CONSTRUCTION SERVICES, a Pennsylvania
corporation (individually a "Borrower" and collectively, "Borrowers"), jointly
and severally promise to pay ON DEMAND, without defalcation, to the order of
FIRST UNION NATIONAL BANK (the "Bank") FIFTEEN MILLION FIVE HUNDRED THOUSAND
DOLLARS ($15,500,000) or such lesser outstanding principal balance as may be
outstanding from time to time hereunder, and to pay interest on the unpaid
principal balance from time to time outstanding hereunder at a fluctuating rate
per annum equal to the Prime Rate (hereinafter defined). "Prime Rate" means that
rate of interest periodically established by the Bank and designated its Prime
Rate (which is not necessarily the lowest rate charged by the Bank), as such
rate may change from time to time with changes therein effective immediately.
All interest accruing hereunder shall be payable monthly in arrears upon the
first business day of each calendar month or upon demand; all such interest
shall be computed on the basis of actual days elapsed and a year of 360 days.
Any amount payable hereunder which is not paid when due shall
bear interest from the day when due until paid in full, at a fluctuating
interest rate per annum equal at all times to the Prime Rate plus three percent
(3%); all such interest shall be payable on demand. Notwithstanding any other
provision of the Loan Agreement, interest paid or becoming due hereunder shall
in no event be in an amount or computed at a rate which is prohibited by
applicable statute. Both principal and interest are payable in lawful money of
the United States of America in same day funds to the Bank at its principal
office in Philadelphia, Pennsylvania, or at such other place as the Bank may
designate.
Payment of this Note shall not be subject to any counterclaim,
set-off, recoupment or defense of any kind by or in the right of the Borrowers,
and the Borrowers hereby expressly and irrevocably waive any right such Borrower
may now or at any time in the future have to bring or assert any such
counterclaim set-off, recoupment or defense. It is the intention of the
Borrowers and the holder thereof that this Note shall be paid absolutely
according to its terms and that the Borrowers shall pursue any claims such
Borrowers may have by independent action.
<PAGE>
The Borrowers agree to pay, and to hold the holder hereof
harmless from and against, all liabilities for expenses arising in connection
with the enforcement by the holder of its rights under this Note and the Loan
Agreement.
This Eighth Amendment and Restated Demand Note is the Demand
Note referred to in, and is entitled to the benefits of, the Loan Agreement
dated February 28, 1986, as amended thorough the date hereof by amendments no. 1
through no. 8 (as so amended, the "Loan Agreement") by and among the Borrowers
and the Bank, and the Security Agreement dated February 28, 1986, as amended (as
so amended, the "Security Agreement") by and among the Borrowers and the Bank,
and is entitled to the benefits of the security interest granted to the Bank
therein and the guaranties thereunder.
This Eighth Amended and Restated Demand Note has been issued
by the Borrowers to amend and restate the prior amended and restated demand
notes, and all amounts outstanding or accrued under said prior notes shall be
outstanding and accrued under this Eighth Amended and Restated Demand Note, and
this Eighth Amended and Restated Demand Note is not a novation but shall be
deemed to be one and the same instrument as said prior notes except as expressly
amended under the Loan Agreement.
-2-
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this
Eighth Amended and Restated Demand Note by their respective duly authorized
officers.
STV GROUP, INC. STV INCORPORATED
By: /s/ Peter W. Knipe By: /s/ Peter W. Knipe
Attest: /s/ Anna Marie Boore Attest: /s/ Anna Marie Boore
(Corporate Seal) (Corporate Seal)
STV ARCHITECTS, INC. STV ENVIRONMENTAL, INC.
By: /s/ Peter W. Knipe By: /s/ Peter W. Knipe
Attest: /s/ Anna Marie Boore Attest: /s/ Anna Marie Boore
(Corporate Seal) (Corporate Seal)
STV SURVEYING, INC. STV INTERNATIONAL, INC.
By: /s/ Peter W. Knipe By: /s/ Peter W. Knipe
Attest: /s/ Anna Marie Boore Attest: /s/ Anna Marie Boore
(Corporate Seal) (Corporate Seal)
STV CONSTRUCTION SERVICES
By: /s/ Peter W. Knipe
Attest: /s/ Anna Marie Boore
(Corporate Seal)
-3-
<PAGE>
EXHIBIT B
BORROWERS AND STATES OF INCORPORATION
STV Group, Inc........................................a Pennsylvania corporation
STV Incorporated..........................................a New York corporation
STV Architects, Inc...................................a Pennsylvania corporation
STV Environmental, Inc................................a Pennsylvania corporation
STV International, Inc................................a Pennsylvania corporation
STV Surveying, Inc........................................a Delaware corporation
STV Construction Services.............................a Pennsylvania corporation
<PAGE>
EXHIBIT C
SUBSIDIARIES NOT BORROWERS
STV Engineering, Inc..........................................a Ohio corporation
STV Construction, Inc.................................a Pennsylvania corporation
STV/WAI, Inc..........................................a Pennsylvania corporation
STV Michael Lynn Associates, Inc..........................a New York corporation
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
TRANSMITTING STV GROUP'S FISCAL 1998 THIRD QUARTER 10Q.
</LEGEND>
<CIK> 0000095045
<NAME> STV GROUP, INC
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,222,000
<SECURITIES> 29,000
<RECEIVABLES> 23,495,000
<ALLOWANCES> 300,000
<INVENTORY> 14,080,000
<CURRENT-ASSETS> 39,919,000
<PP&E> 7,759,000
<DEPRECIATION> 6,397,000
<TOTAL-ASSETS> 43,702,000
<CURRENT-LIABILITIES> 28,890,000
<BONDS> 0
0
0
<COMMON> 2,020,000
<OTHER-SE> 10,741,000
<TOTAL-LIABILITY-AND-EQUITY> 43,702,000
<SALES> 75,682,000
<TOTAL-REVENUES> 75,682,000
<CGS> 51,118,000
<TOTAL-COSTS> 55,675,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 418,000
<INCOME-PRETAX> 2,965,000
<INCOME-TAX> 1,456,000
<INCOME-CONTINUING> 1,509,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,509,000
<EPS-PRIMARY> 0.41
<EPS-DILUTED> 0.38
</TABLE>
