UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
X EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
_____ EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 0-3108
TRION, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 25-0922753
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 760, 101 McNeill Road, Sanford, North Carolina 27331-0760
(Address of principal executive offices) (Zip Code)
Not Applicable
(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 and Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of August 11, 1997.
7,005,097 shares of Common Stock, par value $.50
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Part I
<TABLE>
Item 1. Financial Statements
TRION, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
<CAPTION>
Six Months Three Months
Ended March 31 Ended June 30
1997 1996 1997 1996
(Restated) (Restated)
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . $31,329 $33,791 $17,757 $16,922
Cost and expenses:
Cost of products sold . . . . 21,123 22,583 11,948 11,175
Selling, administration
and engineering expenses . . 8,683 8,651 4,573 4,396
Interest . . . . . . . . . . . 475 410 251 206
Amortization . . . . . . . . . 172 172 86 86
Other expense (income), net. . (33) (60) - (39)
30,420 31,756 16,858 15,824
Income before income taxes . . . 909 2,035 899 1,098
Income tax expense . . . . . . . 402 759 398 396
Net income for the period . . . . $ 507 $ 1,276 $ 501 $ 702
Net income per common share . . . $ 0.07 $ 0.18 $ 0.07 $ 0.10
Cash dividends declared
per common share. . . . . . . $ .04 $ .04 $ 0.02 $ 0.02
See notes to consolidated condensed financial statements
</TABLE>
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<TABLE>
TRION, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
<CAPTION>
ASSETS
June 30 December 31
1997* 1996
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . $ 1,955 $ 2,073
Trade accounts receivable, less allowance
for doubtful accounts (1997 - $429,000 and
1996 - $448,000) . . . . . . . . . . . . . . 11,638 11,650
Inventories . . . . . . . . . . . . . . . . . 10,045 9,329
Prepaid expenses and other current assets . . 899 882
Deferred current income taxes . . . . . . . . 94 94
Total current assets . . . . . . . . . . . 24,631 24,028
PROPERTY, PLANT AND EQUIPMENT
Land . . . . . . . . . . . . . . . . . . . . . 78 78
Building . . . . . . . . . . . . . . . . . . . 5,446 5,467
Machinery and equipment . . . . . . . . . . . 19,155 16,928
Allowance for depreciation . . . . . . . . . . (14,066) (13,250)
10,613 9,223
OTHER ASSETS
Goodwill less accumulated amortization:
($659,000 in 1997 and $487,000 in 1996) . . 6,221 6,393
Deferred income taxes . . . . . . . . . . . . 338 338
Other non-current assets . . . . . . . . . . . 759 814
7,318 7,545
$42,562 $40,796
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accruals . . . . . . . . $ 7,889 $ 7,182
Current portion of long-term debt . . . . . . 3,664 2,664
Total current liabilities . . . . . . . . . 11,553 9,846
LONG-TERM DEBT . . . . . . . . . . . . . . . . . 9,855 9,908
21,408 19,754
SHAREHOLDERS' EQUITY
Common stock, par value $0.50 a share:
Authorized 20,000,000 shares
Issued and outstanding:
1997 - 7,005,097 and
1996 - 6,997,519 . . . . . . . . . . . . 3,503 3,499
Additional paid-in capital . . . . . . . . . . 1,049 1,017
Retained earnings . . . . . . . . . . . . . . 16,420 16,193
Foreign currency translation . . . . . . . . . 182 333
21,154 21,042
$42,562 $40,796
See notes to consolidated condensed financial statements
* Unaudited
</TABLE>
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<TABLE>
TRION, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<CAPTION>
Six Months
Ended June 30
1997 1996
(Restated)
<S> <C> <C>
OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . $ 507 $ 1,276
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation . . . . . . . . . . . . . . . . . 840 784
Amortization . . . . . . . . . . . . . . . . . 172 172
Deferred income taxes . . . . . . . . . . . . . - (59)
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . 12 208
Inventory and prepaid expenses . . . . . . . (678) (1,466)
Accounts payable and accrued expenses . . . 707 (116)
Gain on disposal of equipment . . . . . . . . . - (3)
Foreign currency transaction loss . . . . . . . (45) (38)
Net cash provided (used) by
operating activities . . . . . . . . . . . 1,515 758
INVESTING ACTIVITIES
Purchases of property, plant and equipment . . . . . (2,239) (1,696)
Proceeds from disposal of equipment . . . . . . . . - 3
Net cash used by investing activities . . . (2,239) (1,693)
FINANCING ACTIVITIES
Net proceeds from master credit facility . . . . . . 2,200 1,000
Principal payments on long-term debt . . . . . . . . (1,253) (56)
Stock issued . . . . . . . . . . . . . . . . . . . . 36 99
Cash dividends paid . . . . . . . . . . . . . . . . (280) (258)
Net cash provided (used) by
financing activities . . . . . . . . . . . 703 785
Effect of foreign exchange rate changes on cash . . . . (97) 59
Increase (decrease) in cash . . . . . . . . . . . . . . (118) (91)
Cash and cash equivalents at beginning of period . . . 2,073 497
Cash and cash equivalents at end of period . . . . . . $ 1,955 $ 406
See notes to consolidated condensed financial statements
</TABLE>
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<PAGE>
TRION, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
June 30, 1997
Note A - Basis of presentation
The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with the instructions to Form 10-Q and therefore
do not include all information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting only of normal recurring accruals)
considered necessary for a fair presentation have been reflected in the
reported financial information. For further information, refer to the
consolidated financial statements and footnotes included in the Registrant's
annual report on Form 10-K for the year ended December 31, 1996.
Certain amounts in the consolidated condensed financial statements for the
period ended June 30, 1996 have been reclassified to conform with the
presentations and classifications consistent with the unaudited consolidated
condensed financial statements for the six month period ended June 30, 1997.
On August 30, 1996, the Company issued 500,000 shares of common stock at a par
value of $0.50 per share in exchange for 100% of the common stock outstanding
of Herrmidifier Company, Inc. ("Herrmidifier"). The purchase price, as
determined by the Stock Purchase Agreement dated July 31, 1996, totaled
approximately $2,952,000. The transaction was accounted for under the pooling
of interests method of accounting. All prior period financial statements and
financial information have been restated to reflect the combination.
It is a standard and accepted practice used by the Company in the preparation
of the financial statements in conformity with generally accepted accounting
principles that estimates and assumptions are used by management that affect
the amounts reported in the financial statements. Actual results could differ
from those estimates.
Note B - Net Income per Share of Common Stock
The pro forma weighted average shares outstanding for the period ended June
30, 1996 gives effect to the issuance of 500,000 shares of the Company's
common stock as the purchase price of Herrmidifier. These shares are included
in the computation of pro forma weighted average shares outstanding as if they
had been issued as of January 1, 1996.
Net income per share of common stock is computed by dividing net income by the
weighted average number of shares of common stock outstanding during the
periods. The average number of common shares outstanding for the six month
period ended June 30 was 7,000,743 in 1997 and 6,968,845 in 1996, and
7,003,391 and 6,975,240 for the three month periods ended June 30, 1997 and
1996. Outstanding stock options are not considered in computing earnings per
share as the effect would not be material.
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings per Share ("FASB 128"), which is required to be adopted on
December 31, 1997. Under the new requirements for calculating primary earnings
per share, the dilutive effect of stock options will be excluded. The impact
of adopting FASB 128 is not expected to be material.
Note C - Inventories
The Registrant does not maintain an integrated dollar perpetual inventory
system. During the interim periods, inventories are charged with actual costs
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<PAGE>
incurred and relieved at products standard costs. Such standards are updated
at least annually. Based upon the components of inventory at the preceding
physical inventory date and charges to and relief of inventories during the
interim period, the components of inventory are estimated as follows (in
thousands):
June 30 December 31
1997 1996
Raw materials . . . . . . . . . . . . . $ 5,020 $ 4,939
Work-in-process and finished goods. . . 5,025 4,390
$10,045 $ 9,329
Cost of domestic raw materials inventory is determined by the last-in, first-
out method. No provision has been made during the interim period to reflect
changes in last-in, first-out values since the preceding December 31.
Management believes that such provision, if any, would not be significant.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion and analysis incorporates the performance of
Herrmidifier. The acquisition was accounted for as a pooling of interests,
whereby the current and prior period statements of financial condition and
results of operations are included. Accordingly, the prior periods presented
and discussed have been restated.
Results of Operations
<TABLE>
SEGMENT DATA
(Unaudited)
(In thousands)
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
1997 1996* 1997 1996*
(Restated) (Restated)
<S> <C> <C> <C> <C>
Net sales to unaffiliated customers:
North American Operations:
Engineered Products . . . . . . $21,972 $26,167 $11,648 $13,365
Consumer Products . . . . . . . 6,764 4,866 4,735 2,155
European Operations . . . . . . . 2,593 2,758 1,374 1,402
31,329 33,791 17,757 16,922
Income (loss) from operations:
North American Operations:
Engineered Products . . . . . . 2,421 3,289 1,542 1,846
Consumer Products . . . . . . . 262 161 262 (35)
European Operations . . . . . . . (139) 22 9 51
2,544 3,472 1,813 1,862
General Corporate:
Other income . . . . . . . . . . 33 60 - 39
Interest (U.S.) . . . . . . . . . (475) (410) (251) (206)
Other expense . . . . . . . . . . (1,193) (1,087) (663) (597)
(1,635) (1,437) (914) (764)
Income before income taxes . . . . . $ 909 $ 2,035 $ 899 $ 1,098
Certain amounts in 1996 have been reclassified to conform to 1997
classifications.
</TABLE>
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<PAGE>
Consolidated net sales for the quarter ended June 30, 1997 were $17,757,000
compared to $16,922,000 from the same period a year ago, a 5 percent increase
from 1996. This increase was attributable to the higher level of revenues
generated by the Company's North America operation, primarily in the consumer
product line due to shipments of the Company's newly introduced appliance
products, and was offset by lower performance in the Company's subsidiary
Envirco Corporation ("Envirco") during the second quarter of 1997 as compared
to the same period in 1996. The reduction at Envirco was due to a decrease in
capital spending by the semiconductor and microelectronics industry, a primary
market served by Envirco, during the comparative periods. However, as noted
last quarter the Company has continued to see an upturn in the trend of orders
in this area. Sales in the Company's European Operations segment during the
second quarter were on par with the comparable period last year.
Net sales for the six months ended June 30, 1997 were $31,329,000 as compared
to $33,791,000 for the same period the year before, a decline of 7 percent.
The primary reason for this decline was the aforementioned decrease in capital
spending by the semiconductor and microelectronics industry. The year to date
performance of the Consumer Products segment increased by 39 percent due to
the new appliance product line introduction. Net sales in the European
Operations segment were 6 percent lower during the first six months of the
year due to lower sales in the eastern European region.
The Company's backlog of unshipped customer orders was $8,033,000 at June 30,
1997, a 16 percent increase over December 31, 1996 year-end backlog of
$6,912,000, reflecting a significant increase in orders for the Company's
specialized product line equipment. Backlog of unshipped customer orders at
June 30, 1996 was $8,599,000. The 7 percent reduction from the prior year was
due primarily to a lower level of orders from the semiconductor and
microelectronics industry.
On a consolidated basis, the cost of products sold as a percentage of sales
for the quarter and six months ended June 30, 1997 were 67.3 percent and 67.4
percent, respectively, as compared to 66.0 percent and 66.8 percent,
respectively, a year ago. These increases were primarily due to higher net
sales in the Consumer Products segment which traditionally has a higher cost
of products sold percentage than the Company's other segments as well as start
up costs related to the introduction of the new appliance product line. In
addition, the Company has incurred costs related to the operational
improvements; which include manufacturing process changes and the relocation
of production lines into the Company's Sanford facility. The Company has not
incurred any significant price increases for raw materials as compared to
those experienced a year ago. Consolidated gross profit for the second
quarter ended June 30, 1997 was $5,809,000 as compared to $5,747,000 in the
1996 period, the difference being primarily attributable to the higher sales
volume offset by the higher cost of products sold percentage due to product
mix. Consolidated gross profit for the six months ended June 30, 1997 was
$10,206,000 as compared to $11,208,000 for the same period in 1996. This
decrease was due to lower net sales for the period and the aforementioned
product mix, start up costs and operational improvements.
Consolidated selling, administration and engineering expenses as a percentage
of net sales decreased to 25.8 percent during the second quarter ended June
30, 1997, as compared to 26.0 percent in 1996. Consolidated selling,
administration and engineering expenses as a percentage of net sales for the
current six months period were 27.7 percent as compared to 25.6 percent a year
ago. The primary cause for the increase was the lower net sales volume.
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<PAGE>
Interest expense during the second quarter and first six months of 1997 was
$251,000 and $475,000, respectively, as compared to $206,000 and $410,000 the
year before due to additional borrowings needed to fund new products and
process improvements.
Income taxes for the second quarter and first six months of 1997 were $398,000
and $402,000, respectively, as compared to $396,000 and $759,000,
respectively, in 1996. Income taxes as a percentage of income before income
taxes reflects the lower performance in the Company's European Operations
segment for the comparable periods whose income would otherwise be offset by
operating loss carryforwards.
Consolidated net income for the second quarter and six months ended June 30,
1997 was $501,000 and $507,000, respectively, as compared to $702,000 and
$1,276,000, respectively, reported a year ago. The differences are primarily
attributable to a combination of: changes in net sales volumes; higher cost of
products sold as a percentage of net sales; and the higher rate of income
taxes - as described above.
The resulting earnings per share reported for the second quarter and first six
months of 1997 were $0.07 for both periods, as compared to $0.10 and $0.18
recorded in 1996, respectively.
Liquidity and Sources of Capital
The financial condition of the Company remains strong with the current ratio
at 2.1:1. Working capital decreased to $13,078,000 from the $14,182,000 at
1996 year-end. This change is primarily the result of the Company's continued
investment in tooling and capital equipment necessary to bring new products to
market and improve and streamline production processes. Long-term debt is 46.6
percent of equity and total shareholders' equity is $21,154,000. The Company
recently amended its existing credit agreement to incorporate grid pricing for
the interest rates charged on borrowings. Originally, the Company borrowed
funds at the London Interbank Offering Rate ("LIBOR") of interest plus 1.3
percent. Under the revised terms, the Company shall borrow monies at LIBOR
plus 1.0 percent to 1.75 percent - depending upon specified performance
criteria. The current rate being charged is 1.75 percent over LIBOR, or
approximately 7.6% per annum.
Management believes working capital and current credit arrangements will be
adequate to meet its operating and capital requirements during the foreseeable
future.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
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<PAGE>
PART II
Item 4. Submission of Matters to a Vote of Security Holders
(a) The annual meeting of shareholders of the Registrant was held on
April 15, 1997.
(b) Directors elected at the meeting were Grant R. Meyers and
Samuel J. Wornom III. Other Continuing directors are
Hugh E. Carr, Joseph W. Deering, Seddon Goode, Jr.,
James E. Heins, F. Trent Hill, Jr., and Steven L. Schneider.
(c) The only substantive matter voted upon at the meeting was the
election of two directors for a term of three years. All
nominees for directors as listed in the proxy statement were
elected with the following vote:
Nominees For Withheld
Grant R. Meyers 5,693,767 90,554
Samuel J. Wornom III 5,693,368 90,953
Item 6(b). Exhibits
The following exhibits are filed herewith:
4.1 Amendment to $18,000,000 Credit Agreement dated September 8, 1995
27 Financial Data Schedule
Item 6(b). Report on Form 8-K
There were no reports on Form 8-K filed by the Registrant during the period
covered by this report.
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.
TRION, INC.
(Registrant)
Date: August 13, 1997 /s/ Steven L. Schneider
Steven L. Schneider
President and Chief
Executive Officer
Date: August 13, 1997 /s/ Calvin J. Monsma
Calvin J. Monsma
Vice President and
Chief Financial Officer
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FOURTH AMENDMENT AGREEMENT
THIS FOURTH AMENDMENT AGREEMENT (this "Amendment") dated
effective as of August 13, 1997 among TRION, INC. (the
"Borrower"), WACHOVIA BANK, N.A. (f/k/a/ "WACHOVIA BANK OF
GEORGIA, N.A."), as Agent (the "Agent") and WACHOVIA BANK, N.A.
(f/k/a/ "WACHOVIA BANK OF NORTH CAROLINA, N.A.") and FIRST UNION
NATIONAL BANK OF NORTH CAROLINA as lenders (the "Lenders");
W I T N E S S E T H:
WHEREAS, the Borrower, the Agent and the Lenders executed
and delivered that certain Credit Agreement, dated September 8,
1995 (as amended by that certain First Amendment to Credit
Agreement dated June 14, 1996, that certain Second Amendment to
Credit Agreement dated March 10, 1997, and that certain Third
Amendment to Credit Agreement dated May 9, 1997, and as the same
may be otherwise amended from time to time, the "Credit
Agreement"); and
WHEREAS, the Borrower has requested and the Agent and the
Lenders have agreed to certain amendments to the Credit Agreement,
subject to the terms and conditions hereof;
NOW, THEREFORE, for and in consideration of the above
premises and other good and valuable consideration, the receipt
and sufficiency of which hereby is acknowledged by the parties
hereto, the Borrower, the Agent and the Lenders hereby covenant
and agree as follows:
1. Definitions. Unless otherwise specifically defined
herein, each term used herein which is defined in the Credit
Agreement shall have the meaning assigned to such term in the
Credit Agreement, as amended.
2. Amendments to Credit Agreement. (a) The following new
definitions are hereby added to Section 1.01 of the Credit
Agreement in alphabetical order:
"Performance Pricing Determination Date" has the
meaning set forth in Section 2.06(a).
"Fixed Charge Coverage Ratio" means, for any
period, the ratio of Borrower's EBILT to Consolidated
Fixed Charges as calculated in Section 5.19 of the
Credit Agreement.
(b) Section 2.06(a) of the Credit Agreement is hereby
amended in its entirety as set forth below:
SECTION 2.06. Interest Rates. (a) "Applicable Margin"
means (i) for the period commencing on the execution date of
this Amendment to and including the first Performance Pricing
Determination Date, (y) for any Base Rate Loan, 0%, and (z)
for any Euro-Dollar Loan, 1.45%; and (ii) from and after the
first Performance Pricing Determination Date, (x) for any
Base Rate Loan, 0.00% and (y) for each Euro-Dollar Loan, the
percentage determined on each Performance Pricing
Determination Date by reference to the table set forth below
as to such type of Loan and the Fixed Charge Coverage Ratio
for the quarterly or annual period ending immediately prior
to such Performance Pricing Determination Date.
Fixed Charge Applicable Margin
Coverage Ratio
greater than or equal to 4.25 to 1.0 1.00%
less than 4.25 to 1.0 but
greater than or equal to 3.25 to 1.0 1.25%
less than 3.25 to 1.0 but
greater than or equal to 2.25 to 1.0 1.50%
less than 2.25 to 1.0 1.75%
In determining interest for purposes of this Section
2.06 and fees for purposes of Section 2.07, the Borrower and
the Banks shall refer to the Borrower's most recent
consolidated quarterly and annual (as the case may be)
financial statements delivered pursuant to Section 5.01(a) or
(b), as the case may be. If such financial statements
require a change in interest pursuant to this Section 2.06 or
fees pursuant to Section 2.07, the Borrower shall deliver to
the Agent, along with such financial statements, a notice to
that effect, which notice shall set forth in reasonable
detail the calculations supporting the required change. The
"Performance Pricing Determination Date" is the date which is
the last date on which such financial statements are
permitted to be delivered pursuant to Section 5.01(a) or (b),
as applicable. Any such required change in interest and fees
shall become effective on such Performance pricing
Determination Date, and shall be in effect until the next
Performance Pricing Determination Date, provided that: (i)
for Fixed Rate Loans, changes in interest shall only be
effective for Interest Periods commencing on or after the
Performance Pricing Determination Date; and (ii) no fees or
interest shall be decreased pursuant to this Section 2.06 or
Section 2.07 if a Default is in existence on the Performance
Pricing Determination Date.
(c) section 2.07(a) of the Credit Agreement is hereby amended
in its entirety as set forth below:
SECTION 2.07. Fees. (a) The Borrower shall pay to the
Agent, for the ratable account of each Bank, a commitment
fee, calculated in the manner provided in the last paragraph
of Section 2.06(a) (ii), on the average daily amount of such
Bank's Unused Commitment, at a rate per annum from and after
the last Performance Pricing Determination Date, at a rate
per annum equal to: (i) for the period commencing on the
execution date of this Amendment to and including the first
Performance Pricing Determination Date, 0.20%; and (ii) from
and after the first Performance Pricing Determination Date,
the percentage determined on each Performance Pricing
Determination Date by reference to the table set forth below
and the Fixed Charge Coverage Ratio for the quarterly or
annual period ending immediately prior to such Performance
Pricing Determination Date:
Fixed Charge Commitment Fee
Coverage Ratio
greater than or equal to 4.25 to 1.0 0.15%
less than 4.25 to 1.0 but
greater than or equal to 3.25 to 1.0 0.20%
less than 3.25 to 1.0 but
greater than or equal to 2.25 to 1.0 0.25%
less than 2.25 to 1.0 0.30%
Such commitment fees shall accrue from and including the
execution date of this Amendment to but excluding the
Termination Date and shall be payable on each March 31, June
30, September 30 and December 31 and on the Termination Date.
(d) Section 5.19 of the Credit Agreement is hereby amended in
its entirety as set forth below:
SECTION 5.19. Fixed Charges Coverage. At the end of
the Fiscal Quarter ending June 30, 1997, the ratio of EBILT
to Consolidated Fixed Charges for the Fiscal Quarter just
ended and the immediately preceding 3 Fiscal Quarters shall
be greater than 1.75 to 1.0; at the end of the Fiscal Quarter
ending September 30, 1997, the ratio of EBILT to Consolidated
Fixed Charges for the Fiscal Quarter just ended and the
immediately preceding 3 Fiscal Quarters shall be greater than
2.00 to 1.0; at the end of the Fiscal Quarter ending December
31, 1997, the ratio of EBILT to Consolidated Fixed Charges
for the Fiscal Quarter just ended and the immediately
preceding 3 Fiscal Quarters shall be greater than 2.25 to
1.0; at the end of each Fiscal Quarter thereafter, the ratio
of EBILT to Consolidated Fixed Charges for the Fiscal Quarter
just ended and the immediately preceding 3 Fiscal Quarters
shall be greater than 2.75 to 1.0. Provided, however, and
solely for the Fiscal Quarter ending on September 30, 1996
and solely for the purposes of this Section 5.19, the amount
of $914,000 (resulting from transaction charges incurred in
connection with the Borrower's acquisition of Herrmidifier
Company, Inc. and inventory reductions of the Borrower) will
be added to EBILT for such Fiscal Quarter.
(e) Section 5.21 of the Credit Agreement is hereby amended in
its entirety as set forth below:
SECTION 5.21. Ratio of Consolidated Funded Debt to
Consolidated Cash Flow. At the end of the Fiscal Quarter
ending June 30, 1997, the ratio of Consolidated Funded Debt
to Consolidated Cash flow for the Fiscal Quarter just ended
will not exceed 5.00 to 1.0; at the end of the Fiscal
Quarter ending September 30, 1997, the ratio of Consolidated
Funded Debt to Consolidated Cash Flow for the Fiscal Quarter
just ended will not exceed 4.75 to 1.0; at the end of the
Fiscal Quarter ending December 31, 1997, the ratio of
Consolidated Funded Debt to Consolidated Cash Flow for the
Fiscal Quarter just ended will not exceed 4.50 to 1.0;
thereafter the ratio of Consolidated Funded Debt to
Consolidated Cash Flow for the Fiscal Quarter just ended will
not exceed 4.25 to 1.0. Provided, however, and solely for
the Fiscal Quarter ending on September 30, 1996 and solely
for the purposes of this Section 5.21, the amount of $630,000
(resulting from transaction charges incurred in connection
with the Borrower's acquisition of Herrmidifier Company,
Inc., after taxes, and inventory reductions of the Borrower)
will be added to Consolidated Cash flow for such Fiscal
Quarter.
4. Amendment Fee. In consideration for the execution of
this Amendment, Borrower agrees to pay a one-time, fully-earned
and non-refundable amendment fee equal to $9,000 to be shared
ratably among the Banks.
5. Ratification. The Borrower hereby restates ratifies and
reaffirms each and every term, covenant and condition set forth in
the Credit Agreement and the other Loan Documents effective as of
the date hereof.
6. Counterparts. This Amendment may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall
be deemed to be an original and all of which counterparts, taken
together, shall constitute but one and the same instrument.
7. Section References. Section titles and references used
in this Amendment shall be without substantive meaning or content
of any kind whatsoever and are not a part of the agreements among
the parties hereto evidenced hereby.
8. No Additional Default. To induce the Agent and the
Lenders to enter into this Amendment and to continue to make
advances pursuant to Sections 2.01 and 2.02 of the Credit
Agreement, the Borrower hereby acknowledges and agrees that, as of
the date hereof, there exists (i) no additional Default or Event
of Default except as set forth above in this Amendment and (ii) no
right of offset, defense, counterclaim, claim or objection in
favor of the Borrower arising out of or with respect to any of the
Loans or other obligations of the Borrower owed to the Lenders
under the Credit Agreement.
9. Further Assurances. The Borrower agrees to take such
further actions as the Agent shall reasonably request in
connection herewith to evidence the provisions herein contained to
the Borrower.
10. Governing Law. This Amendment shall be governed by and
construed and interpreted in accordance with, the laws of the
State of North Carolina.
11. Conditions Precedent. This Amendment shall become
effective only upon the execution and delivery of a duly executed
counterpart of this Amendment by each of the parties hereto. The
Agent and the Banks have waived the condition of execution and
delivery to the Agent of secretary certificates pertaining to the
Borrower and the Guarantors certifying as to the authorization
and/or ratification of the execution and delivery of this
Amendment, provided that the Borrower and Guarantors shall deliver
such duly executed secretary certificates to the Agent by no later
than August 29, 1997.
IN WITNESS WHEREOF, the Borrower, the Agent and each of the
Lenders has caused this Amendment to be duly executed, under seal,
by its duly authorized officer as of the day and year first above
written.
TRION, INC.
as Borrower (SEAL)
WACHOVIA BANK, N.A.,
as Agent (SEAL)
WACHOVIA BANK, N.A.,
as Lender (SEAL)
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, as Lender
(SEAL)
CONSENT AND REAFFIRMATION OF GUARANTORS
Each of the undersigned (i) acknowledges receipt of the
foregoing Amendment, (ii) consents to the execution and delivery
of the Amendment by the parties thereto and (iii) reaffirms all of
its obligations and covenants under the Guaranty Agreement dated
as of September 8, 1995 executed by it or to which it has become a
party, and agrees that none of such obligations and covenants
shall be affected by the execution and delivery of the Amendment.
This Consent and Reaffirmation may be executed in any number of
counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall
be deemed to be an original and all of which counterparts, taken
together, shall constitute but one and the same instrument.
ENVIRCO CORPORATION (SEAL)
HERRMIDIFIER COMPANY, INC. (SEAL)
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
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0
0
<COMMON> 3,503,000
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