-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TM+HRZRh/4YnyhVhMf5jIeSnBiogHdaT6fjLM0kDFQVCpvCpLi5DgB8TbeO/y0MA aRZr4/JyNU+UboBEUC6c6w== 0000950152-01-503871.txt : 20010815 0000950152-01-503871.hdr.sgml : 20010815 ACCESSION NUMBER: 0000950152-01-503871 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANTHONY & SYLVAN POOLS CORP CENTRAL INDEX KEY: 0001067606 STANDARD INDUSTRIAL CLASSIFICATION: CONSTRUCTION SPECIAL TRADE CONTRACTORS [1700] IRS NUMBER: 311522456 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-26991 FILM NUMBER: 1708300 BUSINESS ADDRESS: STREET 1: 6690 BETA DRIVE CITY: MAYFIELD VILLAGE STATE: OH ZIP: 44143 BUSINESS PHONE: 2162857946 MAIL ADDRESS: STREET 1: 220 PARK DRIVE CITY: CHARDON STATE: OH ZIP: 44024 10-Q 1 l89537ae10-q.txt ANTHONY & SYLVAN POOLS CORPORATION 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q - --------- [X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT Of 1934 For the quarterly period ended June 30, 2001 --------------------------------- [ ] 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 000-26991 ------------------------------------------------------- Anthony & Sylvan Pools Corporation - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Ohio 31-1522456 - ------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 6690 Beta Drive, Mayfield Village, Ohio 44143 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (440) 720-3301 ------------------ - -------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No N/A --- --- --- Indicate the number of shares outstanding of each of the issuer's classes of common shares, as of the latest practicable date. Class Outstanding at August 7, 2001 - ------------------------------------ --------------------------------------- Common Shares, no par value 4,194,941 Shares 1 2 ANTHONY & SYLVAN POOLS CORPORATION AND SUBSIDIARIES FORM 10-Q FOR QUARTER ENDED JUNE 30, 2001 INDEX Sequential Page No. ---------- Part I - Financial Information Item 1. Financial Statements Condensed Consolidated Balance Sheets - June 30, 2001 and December 31, 2000................... 3 Unaudited Condensed Consolidated Statements of Income -Three Months and Six Months Ended June 30, 2001 and 2000........................... 4 Unaudited Condensed Consolidated Statements of Cash Flows - Six Months Ended June 30, 2001 and 2000............................ 5 Notes to Unaudited Condensed Consolidated Financial Statements. 6-8 Independent Accountants' Report............................. 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........... 10-13 Part II - Other Information Item 1. Legal Proceedings................................... 14 Item 2. Changes in Securities............................... 14 Item 4. Submission of Matters to a Vote of Security Holders............................................. 14 Item 6. Exhibits and Reports on Form 8-K.................... 14 2 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ANTHONY & SYLVAN POOLS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
June 30, December 31 2001 2000 -------- ----------- ASSETS (unaudited) (audited) - ------ Current Assets: Cash and cash equivalents ...................... $ 8,475 $ 422 Contract receivables, net ...................... 8,373 11,592 Inventories, net ............................... 5,777 5,219 Prepayments and other .......................... 1,454 1,542 Deferred income taxes .......................... 1,914 1,914 -------- -------- Total current assets ...................... 25,993 20,689 Property, Plant and Equipment, net ................... 9,533 8,674 Goodwill, net ........................................ 26,645 27,003 Deferred income taxes ................................ 939 939 Other ................................................ 2,987 2,837 -------- -------- $ 66,097 $ 60,142 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Current Liabilities: Current maturities of long-term debt ........... $ 30 $ 62 Accounts payable ............................... 9,824 6,323 Accrued expenses ............................... 17,688 12,379 Accrued income taxes ........................... 219 505 -------- -------- Total current liabilities ................. 27,761 19,269 Long-term Debt ....................................... - 1,250 Deferred Income Tax Liabilities ...................... 945 945 Other Long-term Liabilities .......................... 2,287 2,254 Commitments and Contingencies ........................ - - Shareholders' Equity: Serial preferred shares no par value, 1,000,000 shares authorized, none issued ............................. - - Common shares no par value, 29,000,000 shares authorized, 4,236,233 shares issued and outstanding at June 30, 2001 and 4,478,224 issued and outstanding at December 31, 2000 ..... 36,996 36,261 Treasury share equivalents, 876,870 shares at June 30, 2001 and December 31, 2000, respectively ....... (5,546) (5,546) Retained earnings .............................. 3,654 5,709 -------- -------- Total shareholders' equity ................ 35,104 36,424 -------- -------- $ 66,097 $ 60,142 ======== ========
See notes to unaudited condensed consolidated financial statements. 3 4 ANTHONY & SYLVAN POOLS CORPORATION AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000 (In thousands, except share data)
Three Months Ended Six Months Ended June 30, June 30, 2001 2000 2001 2000 ------ ------- -------- ------ Net sales.................... $ 68,685 $ 67,199 $ 94,774 $ 97,590 Cost of sales................ 47,072 46,719 68,170 70,657 ------- ------- ------- ------- Gross profit............... 21,613 20,480 26,604 26,933 Operating expenses(a)........ 15,091 14,780 25,213 24,543 ------- ------- ------- ------- Income from operations..... 6,522 5,700 1,391 2,390 Interest and other .......... (7) 21 139 217 ------- ------- ------- -------- Income before income taxes. 6,529 5,679 1,252 2,173 Provision for income taxes... 2,345 2,373 244 1,079 ------ ------- ------- ------ Net income(b).............. $ 4,184 $ 3,306 $ 1,008 $ 1,094 ======== ======== ======== ======= Earnings per share: Basic $0.99 $0.92 $.24 $.31 ======= ======= ======= ====== Diluted $0.96 $0.79 $.23 $.26 ======= ======= ======= ====== Average shares outstanding: Basic 4,236 3,589 4,229 3,543 ======= ======= ======= ======= Diluted 4,350 4,199 4,342 4,153 ======= ======= ======= =======
(a) For operating expenses for the three-month period ended June 30, there is no non-cash deferred compensation for the current year and $641 in expense for the prior year. For the six months ended June 30, there is a non-cash deferred compensation credit of $575 for the current year and an expense of $755 for last year. (b) For net income for the three-month period ended June 30, there is no after-tax impact for non-cash deferred compensation for the current year and $612 in after-tax expense for the prior year. For the six months ended June 30, there is an after-tax non-cash deferred compensation credit of $575 for the current year and an after-tax expense of $721 for last year. See notes to unaudited condensed consolidated financial statements. 4 5 ANTHONY & SYLVAN POOLS CORPORATION AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000 (Dollars in thousands)
Six Months Ended June 30, 2001 2000 -------- -------- Cash Flows from Operating Activities: Net income ........................................ $ 1,008 $ 1,094 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ................ 1,686 1,377 Non-cash deferred compensation ............... (575) 755 Deferred income taxes ........................ - 259 Other ........................................ 7 32 Changes in operating assets and liabilities net of assets acquired: Contract receivables ......................... 3,219 928 Inventories .................................. (558) (1,739) Prepayments and other ........................ 88 90 Accounts payable ............................. 3,501 3,916 Accrued expenses and other ................... 5,023 5,404 -------- -------- Net cash provided by operating activities. 13,399 12,116 -------- -------- Cash Flows from Investing Activities: Additions to property, plant and equipment ........ (2,197) (1,235) Other ............................................. (117) (187) -------- -------- Net cash used in investing activities .... (2,314) (1,422) -------- -------- Cash Flows from Financing Activities: Repayment of long term debt ....................... (1,282) (4,587) Proceeds on exercise of stock options ............. - 20 Proceeds on issuance of shares .................... 250 570 Purchase of treasury shares ....................... (2,000) - -------- -------- Net cash used in financing activities ..... (3,032) (3,997) -------- -------- Net increase in cash and cash equivalents ............... 8,053 6,697 Cash and Cash Equivalents: Beginning of period ................................... 422 533 -------- -------- End of period ......................................... $ 8,475 $ 7,230 ======== ======== Supplemental Cash Flow Information: Interest paid ................................ $ 147 $ 217 ======== ======== Income taxes paid ............................ $ 530 $ 93 ======== ========
See notes to unaudited condensed consolidated financial statements. 5 6 ANTHONY & SYLVAN POOLS CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (1) BASIS OF PRESENTATION Anthony & Sylvan Pools Corporation and Subsidiaries (the "Company") is among the largest residential in-ground concrete pool sales and installation businesses in the United States and operates in one business segment. (2) INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The accompanying condensed consolidated balance sheet as of June 30, 2001 and statements of income and cash flows for the three-month and six-month periods ended June 30, 2001 and 2000 are unaudited. In the opinion of management, these interim unaudited condensed consolidated financial statements have been prepared on the same basis as the audited financial statements for the year ended December 31, 2000 and include all adjustments, consisting of only normal and recurring adjustments, necessary for the fair presentation of the interim period. The disclosures in the notes related to these interim unaudited condensed consolidated financial statements are also unaudited. The unaudited condensed consolidated statements of income for the three-month and six-month period ended June 30, 2001 are not necessarily indicative of the results to be expected for the full year. Financial statements should be read in conjunction with the audited financial statements included in the annual report on Form 10-K. (3) EARNINGS PER SHARE Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding. Diluted earnings per share are based on the combined weighted average number of common shares outstanding including the assumed exercise or conversion of options. The treasury stock method is used in computing diluted earnings per share. The calculations are as follows (in thousands except per share data): THREE-MONTHS ENDED SIX-MONTHS ENDED JUNE 30, JUNE 30, 2001 2000 2001 2000 ------ ------ ------ ------ (UNAUDITED) (UNAUDITED) Numerator Net income available to common shareholders $4,184 $3,306 $1,008 $1,094 ====== ====== ====== ====== Denominator Weighted average common shares outstanding 4,236 3,589 4,229 3,543 Dilutive effect of stock options 114 610 113 610 ------ ------ ------ ------ Denominator for net Income per diluted share 4,350 4,199 4,342 4,153 ====== ====== ====== ====== 6 7 Earnings per share: Basic $ 0.99 $ 0.92 $ .24 $ .31 ====== ====== ====== ====== Diluted $ 0.96 $ 0.79 $ .23 $ .26 ====== ====== ====== ====== (4) CAPITAL STOCK On May 4, 2001, the Board of Directors authorized a 10% stock dividend to be distributed on or about May 30, 2001 to shareholders of record on May 16, 2001. The unaudited condensed consolidated financial statements have been retroactively restated to reflect the number of shares outstanding following the dividend. (5) DEBT On August 10, 1999, the Company entered into a $35 million revolving credit facility ("Credit Facility") with a group of banks. The Credit Facility, secured by the assets of the Company, matures August 10, 2002 and may be extended in one-year increments with the approval of the bank group. The Company's borrowing capacity and interest rates under the Credit Facility are based on its profitability and leverage. Interest is charged at increments over either Prime or Libor rates. In addition a 37.5 basis points commitment fee is payable on the total amount of the unused commitment. As of June 30, 2001, there were no outstanding borrowings under the Credit Facility and the available borrowings were $20.1 million. The Company is in compliance with all of its debt covenants under the Credit Facility. (6) AMENDMENT TO THE LONG-TERM INCENTIVE PLAN FOR EMPLOYEES AND DIRECTORS The Company amended its Long-Term Incentive Plan (the "Plan") effective April 1, 2001 to eliminate features that required variable accounting treatment. As a result of the amendment, the Company no longer accounts for any portion of the Plan as a variable plan. (7) LITIGATION Certain claims, suits and complaints arising in the ordinary course of business have been filed or are pending against the Company. In the opinion of management, the results of all such matters will not have a material adverse effect on the Company's financial position, results of operations or liquidity. (8) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities," establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging 7 8 activities. The Company adopted the statement effective January 1, 2001. The adoption of SFAS No. 133 did not have a significant impact on the financial position or results of operations of the Company because the Company does not have derivative instruments. In July 2001, the FASB issued Statement No. 142, Goodwill and Other Intangible Assets, which will require that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of Statement No. 142. The Company is required to adopt the provisions of Statement No. 142 effective January 1, 2002. At June 30, 2001, the Company has unamortized goodwill in the amount of $26,645 which will be subject to the transition provisions of Statement No. 142. Amortization expense related to goodwill was $368 and $365 for the six-month periods ended June 30, 2001 and 2000, respectively. Because of the extensive effort needed to comply with adopting statement No. 142, it is not practicable to reasonably estimate the impact of adopting this statement on the Company's financial statements at the date of this report, including whether it will be required to recognize any transitional impairment losses as the cumulative effect of a change in accounting principle. 8 9 INDEPENDENT ACCOUNTANTS' REPORT To the Board of Directors and Shareholders of Anthony & Sylvan Pools Corporation and subsidiaries We have reviewed the accompanying condensed consolidated balance sheet of Anthony & Sylvan Pools Corporation and subsidiaries (the "Company") as of June 30, 2001, and the related condensed consolidated statements of operations and cash flows for the three-month and six-month periods ended June 30, 2001. These condensed consolidated financial statements are the responsibility of the Company's management. We conducted our review 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 review, we are not aware of any material modifications that should be made to the accompanying condensed consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America. The financial statements for the year ended December 31, 2000, were audited by other accountants and they expressed an unqualified opinion on them in their report dated March 28, 2001, but they have not performed any auditing procedures since that date. KPMG LLP July 26, 2001 9 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 2001 COMPARED WITH THREE MONTHS ENDED JUNE 30, 2000 Net sales of $68.7 million for the three-months ended June 30, 2001 increased 2.2% from $67.2 million for the same period in 2000. The increase was primarily attributable to increases in average selling prices compared with a year earlier, offsetting a decline in unit production as a result of weaker demand patterns that started at the beginning of the year. Gross profit increased $1.1 million to $21.6 million in 2001 from $20.5 million in 2000, partly as a result of the increase in net sales. Gross profit, as a percentage of sales for the three months increased from 30.5% of net sales to 31.5% as a result of increases in average selling prices and cost reductions arising from cost control initiatives. Operating expenses, consisting of selling and administrative expenses, increased by $0.3 million to $15.1 million in 2001 from $14.8 million in 2000. As a percentage of sales, operating expenses were constant at 22.0% in both 2001 and 2000. Operating expenses in 2000 include $0.6 million of non-cash deferred compensation expense related to the Company's long-term incentive plan. The plan was amended effective April 1, 2001 and as a result, no deferred compensation expense was recorded in the second quarter of 2001. The effective tax rate decreased from 41.8% in 2000 to 35.9% in 2001 as a result of the decrease in non-cash deferred compensation, which is not included for tax purposes. As a result of the above items, net income for the three month period increased from $3.3 million in 2000 to $4.2 million in 2001. Net income per diluted share increased $0.17 per share to $0.96 in 2001. On a pro-forma basis, excluding the impact of non-cash deferred compensation, net income and earnings per share for the three-month period ended June 30, 2001 are the same as the reported income and earnings per share, with net income rising 6.8% over last year's pro-forma net income of $3.9 million, and diluted earnings per share increasing 3.2% over pro-forma diluted earnings per share of $0.93 for the same period last year. SIX MONTHS ENDED JUNE 30, 2000 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1999 Net sales of $94.8 million for the six-months ended June 30, 2001 decreased 2.9% from $97.6 million for the same period in fiscal 2000. The decrease was primarily attributable to a decrease in unit production partially offset by increases in average selling prices. Gross profit decreased $0.3 million to $26.6 million in 2001 from $26.9 million in 2000 as a result of the decrease in net sales. Gross profit as a percentage of sales for the six months increased from 27.6% of net sales to 28.1% as a result of increases in average selling prices and cost reductions arising from cost control initiatives. Operating expenses, consisting of selling and administrative expenses increased 10 11 $0.7 million to $25.2 million in 2001 from $24.5 million in 2000. As a percentage of sales, operating expenses increased from 25.1% in 2000 to 26.6% in 2001. The percentage of sales increase was attributable to a combination of the reduction in sales and higher administrative expenses related to improvements in the Company's infrastructure and operating methods. Operating expenses in 2000 include $0.8 million of non-cash deferred compensation expense related to the Company's long-term incentive plan compared with a credit of $0.6 million in 2001. The effective tax rate decreased from 49.7% in 2000 to 19.5% in 2001, primarily as a result of the decrease in non-cash deferred compensation related to the Company's long-term incentive plan. This item is not included for tax purposes. As a result of the above net income for the six month period decreased $0.1 million to $1.0 million in 2001. Net income per diluted share, decreased $0.03 per share to $0.23. On a pro-forma basis, excluding the impact of non-cash deferred compensation, pro-forma net income of $0.4 million, or $0.10 per share for the six months ended June 30, 2001, compares with pro-forma net income of $1.8 million, or $0.44 per share, for the same period last year. LIQUIDITY AND CAPITAL RESOURCES Cash flow from operating activities was $13.4 million for the six months ended June 30, 2001 compared with $12.1 million in 2000. The increase was primarily attributable to the collection of contract receivables. Cash used in investing activities increased from $1.4 million in the prior year to $2.3 million in the current year primarily as a result of the Company's investment in computers and related software. The excess of cash from operating activities over cash used in investing activities of $11.1 million was used to acquire $2.0 million of treasury shares under the Company's share buyback program, repay long-term debt of $1.3 million and increase cash balances. On August 10, 1999, the Company entered into a $35 million revolving credit facility ("Credit Facility") with a group of banks. The Credit Facility, secured by the assets of the Company, matures August 10, 2002 and may be extended in one-year increments with the approval of the bank group. The Company's borrowing capacity and interest rates under the Credit Facility are based on its profitability and leverage. Interest is charged at increments over either Prime or Libor rates. In addition, a 37.5 basis points commitment fee is payable on the total amount of the unused commitment. As of June 30, 2001, there were no outstanding borrowings under the Credit Facility and the available borrowings were $20.1 million. The Company is in compliance with all of its debt covenants under the Credit Facility. The Company believes that existing cash and cash equivalents, internally generated funds and funds available under its line of credit will be sufficient to meet its needs. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The Company is exposed to various market risks, including changes in pricing of equipment, materials and contract labor, and interest rates. Market risk is the potential loss arising from adverse changes in market rates and prices, such as commodity prices and interest rates. The Company does not enter into financial 11 12 instruments to manage and reduce the impact of some of these risks. Further, the Company does not enter into derivatives or other financial instruments for trading or speculative purposes. The Company is exposed to cash flow risk arising out of changes in interest rates with respect to its long-term debt. Information with respect to the Company's principal cash flows and weighted average interest rate calculations on long-term debt at June 30, 2001 is included in the Unaudited Condensed Consolidated Financial Statements. The Company's financial results have been impacted by fluctuations in its stock price, as a portion of the Company's Long-Term Incentive Plan was treated as a variable versus a fixed stock option award plan. The plan was amended in April 2001, resulting in the Company no longer accounting for any portion of the plan as a variable plan. CYCLICALITY AND SEASONALITY The Company believes that the swimming pool leisure industry is strongly influenced by general economic conditions and tends to experience periods of decline during economic downturns. Since the majority of the Company's swimming pool installation purchases are financed, pool sales are particularly sensitive to interest rate fluctuations and the availability of credit. A sustained period of high interest rates could result in declining sales, which could have a material adverse effect on The Company's financial condition and results of operations. Historically, approximately 70% of the Company's revenues have been generated in the second and third quarters of the year, the peak season for swimming pool installation and use. Conversely, the Company typically incurs net losses during the first and fourth quarters of the year. Unseasonably cold weather or extraordinary amounts of rainfall during the peak sales season can significantly reduce pool purchases. In addition, unseasonably early or late warming trends can increase or decrease the length of the swimming pool season, significantly affecting sales and operating profit. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities," establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. The Company adopted the statement effective January 1, 2001. The adoption of SFAS No. 133 did not have a significant impact on the financial position or results of operations of the Company because the Company does not have derivative instruments. In July 2001, the FASB issued Statement No. 142, Goodwill and Other Intangible Assets, which will require that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of Statement No. 142. The Company is required to adopt the provisions of Statement No. 142 effective January 1, 2002. At June 30, 2001, the Company has unamortized goodwill in the amount of $26,645 which will be subject to the transition provisions of Statement No. 142. Amortization expense related to goodwill was $368 and $365 for the six-month periods ended June 30, 2001 and 2000, respectively. Because of the extensive 12 13 effort needed to comply with adopting Statement No. 142, it is not practicable to reasonably estimate the impact of adopting this statement on the Company's financial statements at the date of this report, including whether it will be required to recognize any transitional impairment losses as the cumulative effect of a change in accounting principle. 13 14 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS No change ITEM 2. CHANGES IN SECURITIES No change ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF THE SECURITY HOLDERS None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 10.1 Amendment No. 1 dated as of December 20, 1999 to the Credit Agreement dated as of July 8, 1999 among Anthony and Sylvan Pools Corporation and the Lending Institutions - National City Bank, Huntington National Bank and Firstar Bank, N.A. 10.2 Amendment No. 2 dated as of May 4, 2001 to the Credit Agreement dated as of July 8, 1999 among Anthony and Sylvan Pools Corporation and the Lending Institutions - National City Bank, Huntington National Bank and Firstar Bank, N.A. (b) Reports on Form 8-K The following reports on Form 8-K were filed with the Securities and Exchange Commission during the quarter ended June 30, 2001: Item 4. Change in Registrant's Certifying Accountant dated June 8, 2001. 14 15 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Anthony & Sylvan Pools Corporation (Registrant) Stuart D. Neidus ---------------------------------------- STUART D. NEIDUS Chairman and Chief Executive Officer (Principal Executive Officer) William J. Evanson ----------------------------------------- WILLIAM J. EVANSON Executive Vice President and Chief Financial Officer (Principal Accounting Officer) Date: August 13, 2001 15 EX-10.1 3 l89537aex10-1.txt EXHIBIT 10.1 1 Exhibit 10.1 AMENDMENT NO. 1 TO CREDIT AGREEMENT THIS AMENDMENT NO. 1 TO CREDIT AGREEMENT, dated as of December 20, 1999 ("THIS AMENDMENT"), among: (i) ANTHONY & SYLVAN POOLS CORPORATION, an Ohio corporation (herein, together with its successors and assigns, the "BORROWER"); (ii) the financial institutions listed on the signature pages hereof (the "LENDERS"); and (iii) NATIONAL CITY BANK, a national banking association, as a Lender, the Letter of Credit Issuer, the Collateral Agent and the Administrative Agent: PRELIMINARY STATEMENTS: (1) The Borrower, the Lenders named therein, the Letter of Credit Issuer, the Collateral Agent and the Administrative Agent entered into the Credit Agreement, dated as of July 8, 1999 (the "CREDIT AGREEMENT"; with the terms defined therein, or the definitions of which are incorporated therein, being used herein as so defined). (2) The parties hereto desire to modify certain of the provisions of the Credit Agreement, all as more fully set forth below. NOW, THEREFORE, the parties hereby agree as follows: 1. AMENDMENTS, ETC. 1.1. PERMITTED GUARANTEES. Section 9.5(e) of the Credit Agreement is amended by add ing a clause thereto with respect to certain guarantees, with the result that section 9.5(e) of the Credit Agreement, as so amended, reads in its entirety as follows: (e) loans and advances to employees for business-related travel expenses, moving expenses, costs of replacement homes, business machines or supplies, automobiles and other similar expenses, in each case incurred in the ordinary course of business, shall be permitted; and guarantees by the Borrower of loans incurred by employees of the Borrower, in an aggregate principal amount not in excess of $3,000,000, to finance the acquisition by such employees of shares of common stock of the Borrower, shall also be permitted; 1.2. LIMITATION ON AVAILABILITY. A new sentence is added at the end of section 2.1 of the Credit Agreement, reading in its entirety as follows: Notwithstanding anything to the contrary contained in this Agreement, the Borrower will not at any time permit the Unutilized Total Commitment to be less than the aggregate amount of the guarantees, if any, outstanding at such time under section 9.5(e). 1.3. PERMITTED STOCK REPURCHASES. A new clause (d) is added to section 9.6 of the Credit Agreement, with the result that section 9.6 of the Credit Agreement reads in its entirety as follows: 9.6. DIVIDENDS AND OTHER RESTRICTED PAYMENTS. The Borrower will not, and will not permit any of its Subsidiaries to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, EXCEPT: 2 (a) the Borrower may declare and pay or make dividends or other distributions with respect to any class of its capital stock which are payable solely in additional shares of its common stock (or warrants, options or other rights to acquire additional shares of its common stock); (b) any Subsidiary of the Borrower may declare and pay or make dividends or distributions ratably with respect to its capital stock; (c) the Borrower may make Restricted Payments pursuant to and in accordance with its existing stock option, stock purchase and other benefit plans of general application to management or other employees of the Borrower and its Subsidiaries; and (d) the Borrower may repurchase shares of its common stock, PROVIDED (i) no Event of Default is in existence at the time of any such repurchase, or would result therefrom, (ii) the cumulative aggregate consideration paid by the Borrower for all such repurchases during the period from June 30, 1999 through December 31, 1999 does not exceed $7,200,000, and (iii) the cumulative aggregate consideration paid by the Borrower for all such repurchases after December 31, 1999 does not exceed $2,000,000. 2. REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants to the Lenders and the Administrative Agent as follows: (a) AUTHORIZATION, VALIDITY AND BINDING EFFECT. This Amendment has been duly authorized by all necessary corporate action on the part of the Borrower, has been duly executed and delivered by a duly authorized officer or officers of the Borrower, and constitutes the valid and binding agreement of the Borrower, enforceable against the Borrower in accordance with its terms. (b) REPRESENTATIONS AND WARRANTIES TRUE AND CORRECT. The representations and warranties of the Borrower contained in the Credit Agreement, as amended hereby, are true and correct on and as of the date hereof as though made on and as of the date hereof, except to the extent that such representations and warranties expressly relate to a specified date, in which case such representations and warranties are hereby reaffirmed as true and correct when made. (c) NO EVENT OF DEFAULT, ETC. No condition or event has occurred or exists which constitutes or which, after notice or lapse of time or both, would constitute an Event of Default. (d) COMPLIANCE. The Borrower is in full compliance with all covenants and agreements contained in the Credit Agreement, as amended hereby. 3. EFFECTIVENESS. This Amendment shall become effective on and as of the date (the "EFFECTIVE DATE"), on or before December 24, 1999, if the following conditions are satisfied: (a) this Amendment shall have been executed by the Borrower and the Administrative Agent, and counterparts hereof as so executed shall have been delivered to the Administrative Agent; and (b) the Administrative Agent shall have been notified by the Required Lenders that such Lenders have executed this Amendment (which notification may be by facsimile or other written confirmation of such execution). 2 3 The Administrative Agent shall notify the Borrower and each Lender in writing of the effectiveness hereof and shall deliver copies of this Amendment to the parties hereto. 4. RATIFICATIONS. The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Credit Agreement, and except as expressly modified and superseded by this Amendment, the terms and provisions of the Credit Agreement are ratified and confirmed and shall continue in full force and effect. 5. MISCELLANEOUS. 5.1. SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon and inure to the benefit of the Borrower, each Lender and the Administrative Agent and their respective permitted successors and assigns. 5.2. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made in this Amendment shall survive the execution and delivery of this Amendment, and no investigation by the Administrative Agent or any Lender or any subsequent Loan or issuance of a Letter of Credit shall affect the representations and warranties or the right of the Administrative Agent or any Lender to rely upon them. 5.3. REFERENCE TO CREDIT AGREEMENT. The Credit Agreement and any and all other agreements, instruments or documentation now or hereafter executed and delivered pursuant to the terms of the Credit Agreement as amended hereby, are hereby amended so that any reference therein to the Credit Agreement shall mean a reference to the Credit Agreement as amended hereby. 5.4. EXPENSES. As provided in the Credit Agreement, but without limiting any terms or provisions thereof, the Borrower agrees to pay on demand all costs and expenses incurred by the Administrative Agent in connection with the preparation, negotiation, and execution of this Amendment, including without limitation the costs and fees of the Administrative Agent's special legal counsel, regardless of whether this Amendment becomes effective in accordance with the terms hereof, and all costs and expenses incurred by the Administrative Agent or any Lender in connection with the enforcement or preservation of any rights under the Credit Agreement, as amended hereby. 5.5. SEVERABILITY. Any term or provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and the effect thereof shall be confined to the term or provision so held to be invalid or unenforceable. 5.6. APPLICABLE LAW. This Amendment shall be governed by and construed in accordance with the laws of the State of Ohio. 5.7. HEADINGS. The headings, captions and arrangements used in this Amendment are for convenience only and shall not affect the interpretation of this Amendment. 5.8. ENTIRE AGREEMENT. This Amendment is specifically limited to the matters expressly set forth herein. This Amendment and all other instruments, agreements and documentation executed and delivered in connection with this Amendment embody the final, entire agreement among the parties hereto with respect to the subject matter hereof and supersede any and all prior commitments, agreements, representations and understandings, whether written or oral, relating to the matters covered by this Amendment, and may not be contradicted or varied by evidence of prior, contemporaneous or subsequent oral agreements or discussions of the parties hereto. There are no oral agreements among the parties hereto relating to the subject matter hereof or any other subject matter relating to the Credit Agreement. 5.9. COUNTERPARTS. This Amendment may be executed by the parties hereto separately in one or more counterparts, each of which when so executed shall be deemed to be an original, but all of which when 3 4 taken together shall constitute one and the same agreement. Transmission by a party to another party (or its counsel) via facsimile of a copy of this Amendment (or a signature page of this Amendment) shall be as fully effective as delivery by such transmitting party to the other parties hereto of a counterpart of this Amendment which had been manually signed by such transmitting party. IN WITNESS WHEREOF, this Amendment has been duly executed and delivered as of the date first above written.
- ------------------------------------------------------------------------------------------------------------------- ANTHONY & SYLVAN POOLS CORPORATION NATIONAL CITY BANK, INDIVIDUALLY AS A LENDER AND AS THE LETTER OF CREDIT ISSUER, AND AS BY:_______________________________ THE COLLATERAL AGENT AND AS THE MARK E. BRODY ADMINISTRATIVE AGENT EXECUTIVE VICE PRESIDENT & CHIEF FINANCIAL OFFICER BY:_______________________________ JUDITH M. KUCLO, VICE PRESIDENT - ------------------------------------------------------------------------------------------------------------------- THE HUNTINGTON NATIONAL BANK FIRSTAR BANK, NATIONAL ASSOCIATION BY:_______________________________ BY:_______________________________ TITLE: TITLE: - -------------------------------------------------------------------------------------------------------------------
4 5 ================================================================================ ANTHONY & SYLVAN POOLS CORPORATION AS THE BORROWER AND THE FINANCIAL INSTITUTIONS NAMED HEREIN AS LENDERS AND NATIONAL CITY BANK AS A LENDER, THE LETTER OF CREDIT ISSUER, AND AS THE COLLATERAL AGENT AND AS THE ADMINISTRATIVE AGENT --------------------- AMENDMENT NO. 1 DATED AS OF DECEMBER 20, 1999 TO CREDIT AGREEMENT DATED AS OF JULY 8, 1999 --------------------- ================================================================================ EX-10.2 4 l89537aex10-2.txt EXHIBIT 10.2 1 Exhibit 10.2 AMENDMENT NO. 2 TO CREDIT AGREEMENT THIS AMENDMENT NO. 2 TO CREDIT AGREEMENT, dated as of May 4, 2001 ("THIS AMENDMENT"), by and among: (i) ANTHONY & SYLVAN POOLS CORPORATION, an Ohio corporation (herein, together with its successors and assigns, the "BORROWER"); (ii) the financial institutions listed on the signature pages hereof (the "LENDERS"); and (iii) NATIONAL CITY BANK, a national banking association, as a Lender, the Letter of Credit Issuer, the Collateral Agent and the Administrative Agent: PRELIMINARY STATEMENTS: (1) The Borrower, the Lenders named therein, the Letter of Credit Issuer, the Collateral Agent and the Administrative Agent entered into the Credit Agreement, dated as of July 8, 1999, as amended by Amendment No. 1 thereto dated as of December 20, 1999 (as so amended, the "CREDIT AGREEMENT"; with the terms defined therein, or the definitions of which are incorporated therein, being used herein as so defined). (2) The parties hereto desire to modify certain of the provisions of the Credit Agreement, all as more fully set forth below. NOW, THEREFORE, the parties hereby agree as follows: SECTION 1. AMENDMENTS, ETC. 1.1. PERMITTED GUARANTEES. The Credit Agreement is hereby amended to delete Section 9.5(e) therefrom and to insert in place thereof the following: (e) loans and advances to employees for business-related travel expenses, moving expenses, costs of replacement homes, business machines or supplies, automobiles and other similar expenses, in each case incurred in the ordinary course of business, shall be permitted; and guarantees by the Borrower of loans incurred by employees of the Borrower, in an aggregate principal amount not in excess of $5,000,000, to finance the acquisition by such employees of shares of common stock of the Borrower, shall also be permitted; 1.2. PERMITTED STOCK REPURCHASES. The Credit Agreement is hereby amended to delete Section 9.6(d) and to insert in place thereof the following: (d) the Borrower may repurchase shares of its common stock, PROVIDED (i) no Event of Default is in existence at the time of any such repurchase, or would result therefrom, (ii) the cumulative aggregate consideration paid by the Borrower for all such repurchases during the period from June 30, 1999 through December 31, 1999 does not exceed $7,200,000, and (iii) the cumulative aggregate consideration paid by the Borrower for all such repurchases after December 31, 1999 does not exceed $8,000,000. SECTION 2. REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants to the Lenders and the Administrative Agent as follows: 2 2.1. AUTHORIZATION, VALIDITY AND BINDING EFFECT. This Amendment has been duly authorized by all necessary corporate action on the part of the Borrower, has been duly executed and delivered by a duly authorized officer or officers of the Borrower, and constitutes the valid and binding agreement of the Borrower, enforceable against the Borrower in accordance with its terms. 2.2. REPRESENTATIONS AND WARRANTIES TRUE AND CORRECT. The representations and warranties of the Borrower contained in the Credit Agreement, as amended hereby, are true and correct on and as of the date hereof as though made on and as of the date hereof, except to the extent that such representations and warranties expressly relate to a specified date, in which case such representations and warranties are hereby reaffirmed as true and correct when made. 2.3. NO EVENT OF DEFAULT, ETC. No condition or event has occurred or exists which constitutes or which, after notice or lapse of time or both, would constitute a Default or an Event of Default. 2.4. COMPLIANCE. The Borrower is in full compliance with all covenants and agreements contained in the Credit Agreement, as amended hereby. 2.5. NO CLAIMS, ETC. The Borrower is not aware of any claim or offset against, or defense or counterclaim to, any of its obligations or liabilities under the Credit Agreement or any other Credit Document. SECTION 3. RATIFICATIONS. The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Credit Agreement, and except as expressly modified and superseded by this Amendment, the terms and provisions of the Credit Agreement are ratified and confirmed and shall continue in full force and effect. SECTION 4. EFFECTIVENESS. This Amendment shall become effective on May 4, 2001 (the "EFFECTIVE DATE"), subject to the satisfaction of the following conditions on or before such date: (a) this Amendment shall have been executed by the Borrower, the Required Lenders and the Administrative Agent, and counterparts hereof as so executed shall have been delivered to the Administrative Agent; and (b) the Administrative Agent shall have received an amendment fee of $43,750, for the pro rata benefit of the Lenders. The Administrative Agent shall notify the Borrower and each Lender in writing of the effectiveness hereof and shall deliver copies of this Amendment to the parties hereto. SECTION 5. MISCELLANEOUS. 5.1. SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon and inure to the benefit of the Borrower, each Lender and the Administrative Agent and their respective permitted successors and assigns. 5.2. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made in this Amendment shall survive the execution and delivery of this Amendment, and no investigation by the Administrative Agent or any Lender or any subsequent Loan or issuance of a Letter of Credit shall affect the representations and warranties or the right of the Administrative Agent or any Lender to rely upon them. 2 3 5.3. REFERENCE TO CREDIT AGREEMENT. The Credit Agreement and any and all other agreements, instruments or documentation now or hereafter executed and delivered pursuant to the terms of the Credit Agreement as amended hereby, are hereby amended so that any reference therein to the Credit Agreement shall mean a reference to the Credit Agreement as amended hereby. 5.4. EXPENSES. As provided in the Credit Agreement, but without limiting any terms or provisions thereof, the Borrower agrees to pay on demand all costs and expenses incurred by the Administrative Agent in connection with the preparation, negotiation, and execution of this Amendment, including without limitation the costs and fees of the Administrative Agent's special legal counsel, regardless of whether this Amendment becomes effective in accordance with the terms hereof, and all costs and expenses incurred by the Administrative Agent or any Lender in connection with the enforcement or preservation of any rights under the Credit Agreement, as amended hereby. 5.5. SEVERABILITY. Any term or provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and the effect thereof shall be confined to the term or provision so held to be invalid or unenforceable. 5.6. APPLICABLE LAW. This Amendment shall be governed by and construed in accordance with the laws of the State of Ohio, without regard to principles of conflicts of laws. 5.7. HEADINGS. The headings, captions and arrangements used in this Amendment are for convenience only and shall not affect the interpretation of this Amendment. 5.8. ENTIRE AGREEMENT. This Amendment is specifically limited to the matters expressly set forth herein. This Amendment and all other instruments, agreements and documentation executed and delivered in connection with this Amendment embody the final, entire agreement among the parties hereto with respect to the subject matter hereof and supersede any and all prior commitments, agreements, representations and understandings, whether written or oral, relating to the matters covered by this Amendment, and may not be contradicted or varied by evidence of prior, contemporaneous or subsequent oral agreements or discussions of the parties hereto. There are no oral agreements among the parties hereto relating to the subject matter hereof or any other subject matter relating to the Credit Agreement. 5.9. WAIVER OF CLAIMS. The Borrower, by signing below, hereby waives and releases the Administrative Agent, the Collateral Agent, the Letter of Credit Issuer and each of the Lenders and their respective directors, officers, employees, attorneys, affiliates and subsidiaries from any and all claims, offsets, defenses and counterclaims of which Borrower is aware, such waiver and release being with full knowledge and understanding of the circumstances and effect thereof and after having consulted legal counsel with respect thereto. 5.10. COUNTERPARTS. This Amendment may be executed by the parties hereto separately in one or more counterparts, each of which when so executed shall be deemed to be an original, but all of which when taken together shall constitute one and the same agreement. Transmission by a party to another party (or its counsel) via facsimile of a copy of this Amendment (or a signature page of this Amendment) shall be as fully effective as delivery by such transmitting party to the other parties hereto of a counterpart of this Amendment which had been manually signed by such transmitting party. [Remainder of page intentionally left blank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this Amendment has been duly executed and delivered as of the date first above written. - ------------------------------------------------------------------------------------------------------- ANTHONY & SYLVAN POOLS NATIONAL CITY BANK, CORPORATION INDIVIDUALLY AS A LENDER AND AS THE LETTER OF CREDIT ISSUER, AND AS BY: ___________________________________________ THE COLLATERAL AGENT AND AS THE NAME: _________________________________________ ADMINISTRATIVE AGENT TITLE: ________________________________________ BY:_______________________________ JUDITH M. KUCLO, VICE PRESIDENT - ------------------------------------------------------------------------------------------------------- THE HUNTINGTON NATIONAL BANK FIRSTAR BANK, NATIONAL ASSOCIATION BY:________________________________ BY:________________________________ NAME:_____________________________ NAME:_____________________________ TITLE:______________________________ TITLE:______________________________ - ----------------------------------------------------------- -------------------------------------------
4 5 ================================================================================ ANTHONY & SYLVAN POOLS CORPORATION AS THE BORROWER AND THE FINANCIAL INSTITUTIONS NAMED HEREIN AS LENDERS AND NATIONAL CITY BANK AS A LENDER, THE LETTER OF CREDIT ISSUER, AND AS THE COLLATERAL AGENT AND AS THE ADMINISTRATIVE AGENT --------------------- AMENDMENT NO. 2 DATED AS OF MAY 4, 2001 TO CREDIT AGREEMENT DATED AS OF JULY 8, 1999 --------------------- ================================================================================ -----END PRIVACY-ENHANCED MESSAGE-----