r10q906.pdf -- Converted by SECPublisher 4.0, created by BCL Technologies Inc., for SEC Filing
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30,
2006
Commission File Number
1-7635
TWIN DISC,
INCORPORATED
(Exact name of registrant as
specified in its charter)
Wisconsin |
|
39-0667110 |
(State or other
jurisdiction of |
|
(I.R.S.
Employer |
Incorporation or
organization) |
|
Identification
No.) |
|
1328 Racine
Street, Racine, Wisconsin 53403 |
(Address of principal executive
offices) |
|
(262)
638-4000 |
(Registrant's telephone number,
including area code) |
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 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__
No X .
Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, or a
non-accelerated filer. See definition of accelerated filer and large
accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer
__ Accelerated Filer X
Non-accelerated filer __.
Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes__ No X .
At October 31, 2006, the registrant had
5,841,588 shares of its common stock outstanding.
PART 1 FINANCIAL
INFORMATION
Item 1. Financial
Statements
TWIN DISC,
INCORPORATED
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In Thousands, Unaudited)
|
September 30, |
June 30, |
|
2006 |
2006 |
Assets |
|
|
Current
assets: |
|
|
Cash and cash equivalents |
$15,914 |
$ 16,427 |
Trade accounts receivable, net |
49,655 |
55,963 |
Inventories, net |
72,475 |
65,081 |
Deferred income taxes |
5,740 |
5,780 |
Other |
8,118 |
7,880 |
|
|
|
|
Total current assets |
151,902 |
151,131 |
|
Property, plant and
equipment, net |
46,730 |
46,958 |
Goodwill |
15,559 |
15,304 |
Deferred income
taxes |
4,351 |
4,152 |
Intangible assets,
net |
11,938 |
12,211 |
Other
assets |
6,493 |
6,416 |
|
|
$236,973 |
$236,172 |
Liabilities
and Shareholders' Equity |
|
|
Current
liabilities: |
|
|
Bank overdraft |
$ 1,942 |
$ 3,194 |
Notes payable |
120 |
16 |
Current maturities of long-term debt |
582 |
633 |
Accounts payable |
25,308 |
27,866 |
Accrued liabilities |
44,380 |
47,912 |
|
|
|
|
Total current liabilities |
72,332 |
79,621 |
|
Long-term
debt |
49,946 |
38,369 |
Accrued retirement
benefits |
20,611 |
28,065 |
Other long-term
liablilities |
553 |
312 |
|
|
|
|
|
143,442 |
146,367 |
|
Minority
interest |
594 |
572 |
|
Shareholders'
equity: |
|
|
Common shares authorized: 15,000,000; |
|
|
issued: 6,550,224; no par value |
12,103 |
11,777 |
Retained earnings |
104,770 |
101,652 |
Accumulated other comprehensive loss |
(9,107) |
(9,166) |
|
|
107,766 |
104,263 |
Less treasury stock, at cost |
|
|
(708,636 and 718,236 shares,
respectively) |
14,829 |
15,030 |
|
|
|
|
Total shareholders' equity |
92,937 |
89,233 |
|
|
|
|
|
$236,973 |
$236,172 |
The notes to condensed consolidated
financial statements are an integral part of these statements.
TWIN DISC,
INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(In Thousands Except Per Share Data,
Unaudited)
|
Three
Months Ended |
|
September
30, |
|
2006 |
2005 |
|
Net sales |
$65,774 |
$49,577 |
Cost of goods
sold |
45,461 |
35,173 |
|
20,313 |
14,404 |
|
Marketing, engineering and
administrative expenses |
13,652 |
10,147 |
Interest
expense |
643 |
316 |
Other expense (income),
net |
(80) |
(54) |
|
14,215 |
10,409 |
|
Earnings before income
taxes and minority interest |
6,098 |
3,995 |
Income
taxes |
2,377 |
1,466 |
|
Earnings before minority
interest |
3,721 |
2,529 |
Minority
interest |
(49) |
(43) |
|
Net earnings |
$
3,672 |
$
2,486 |
|
Dividends per
share |
$0.0950 |
$ 0.0875 |
|
Earnings per share
data: |
|
|
Basic earnings per share |
$0.63 |
$0.43 |
Diluted earnings per share |
$0.62 |
$0.42 |
|
Shares outstanding
data: |
|
|
Average shares outstanding |
5,802 |
5,731 |
Dilutive stock options |
103 |
109 |
|
Diluted shares outstanding |
5,905 |
5,840 |
|
Comprehensive
income: |
|
|
Net earnings |
$ 3,672 |
$ 2,486 |
Foreign currency translation adjustment |
59 |
(275) |
|
|
|
|
Comprehensive income |
$
3,731 |
$
2,211 |
The notes to condensed consolidated
financial statements are an integral part of these statements.
TWIN DISC,
INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In Thousands, Unaudited)
|
Three Months
Ended |
|
September 30, |
|
2006 |
2005 |
|
Cash flows from operating
activities: |
|
|
Net earnings |
$ 3,672 |
$ 2,486 |
Adjustments to reconcile net earnings
to |
|
|
net cash used by
operating activities: |
|
|
Depreciation and amortization |
1,444 |
1,317 |
Net change in working capital, |
|
|
excluding
cash |
(14,438) |
(10,226) |
|
|
(9,322) |
(6,423) |
Cash flows from investing
activities: |
|
|
Acquisitions of fixed
assets |
(1,267) |
(1,303) |
|
|
(1,267) |
(1,303) |
Cash flows from financing
activities: |
|
|
Bank overdraft |
(1,252) |
606 |
Increase (decrease) in notes payable,
net |
101 |
(303) |
Proceeds from long-term
debt |
11,577 |
5,375 |
Proceeds from exercise of stock
options |
100 |
731 |
Purchase of treasury
stock |
- |
(125) |
Dividends paid |
(554) |
(505) |
|
|
|
|
|
9,972 |
5,779 |
|
|
|
|
Effect of exchange rate changes on
cash |
104 |
(165) |
|
|
|
|
Net change in cash and cash
equivalents |
(513) |
(2,112) |
|
Cash and cash equivalents: |
|
|
Beginning of period |
16,427 |
11,614 |
|
|
|
|
End of period |
$15,914 |
$
9,502 |
The notes to condensed consolidated
financial statements are an integral part of these statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
A. Basis of Presentation
The unaudited financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) and, in the opinion of the Company, include all adjustments,
consisting only of normal recurring items, necessary for a fair statement of results for each period. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such SEC rules and regulations. The Company believes that the disclosures made are adequate to make the information presented not misleading. It is suggested that these financial statements be
read in conjunction with financial statements and the notes thereto included in the Company's latest Annual Report. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures
required by accounting principles generally accepted in the the United States of America.
Certain balances in prior fiscal years have been reclassified to conform to the presentation adopted in the current year. This reclassification had no impact on the Companys Condensed Consolidated Statement of
Operations.
New Accounting Releases
In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation (FIN) No. 48 Accounting for Uncertainty in Income Taxes an interpretation of FASB Statement No. 109.
This interpretation clarifies the accounting for uncertainty in income taxes recognized in an entitys financial statements in accordance with SFAS No. 109, Accounting for Income Taxes. It prescribes a recognition threshold and
measurement attribute for financial statement disclosure of tax positions taken or expected to be taken on a tax return. FIN No. 48 is effective for fiscal years beginning after December 15, 2006. The Company is currently evaluating the impact of
adoption of FIN No. 48 on its financial statements.
In September 2006, the FASB issued SFAS No. 157 Fair Value Measurements. This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and
expands disclosures about fair value measurements. The provisions of this statement are effective for financial statements issued for fiscal years beginning after November 15, 2007 and are not expected to have a material impact on the financial
statements of the Company.
During September 2006, the FASB issued SFAS No. 158 Employers Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R). This
statement requires an employer that sponsors one or more single-employer defined benefit plans to:
1. |
Recognize the funded status of a benefit plan measured as the difference between plan assets at fair value and the benefit obligation in its statement of financial position. |
|
2. |
Recognize as a component of other comprehensive income, net of tax, the gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net periodic benefit cost
pursuant to FASB Statement No. 87 , Employers Accounting for Pensions, or No. 106, Employers Accounting for Postretirement
Benefits Other Than Pensions. |
|
3. |
Measure defined benefit plan assets and obligations as of the date of the employers fiscal year-end statement of financial position. |
|
4. |
Disclose in the notes to the financial statements additional information about certain effects on net periodic benefit cost for the next fiscal year that arise from delayed recognition of the gains or losses, prior service
costs or credits, and transition asset or obligation. |
|
This statement is effective for fiscal
years ending after December 15, 2006. The Companys initial estimate of the
impact of adopting this statement results in the recognition of an additional
liability of $6,544,000 (primarily related to postretirement healthcare), a
deferred tax impact of $2,552,000 and an offsetting charge to other
comprehensive income of $3,992,000.
B. Inventory
The major classes of inventories were as
follows (in thousands):
|
September 30, |
June 30, |
|
2006 |
2006 |
Inventories: |
|
|
Finished parts |
$48,466 |
$39,656 |
Work in process |
10,507 |
11,176 |
Raw materials |
13,502 |
14,249 |
|
|
$72,475 |
$65,081 |
C. Warranty
Twin Disc engages in extensive product
quality programs and processes, including actively monitoring and evaluating the
quality of its suppliers. However, its warranty obligation is affected by
product failure rates, the extent of the market affected by the failure and the
expense involved in satisfactorily addressing the situation. The warranty
reserve is established based on our best estimate of the amounts necessary to
settle future and existing claims on products sold as of the balance sheet date.
When evaluating the adequacy of the reserve for warranty costs, management takes
into consideration the term of the warranty coverage, historical claim rates and
costs of repair, knowledge of the type and volume of new products and economic
trends. While we believe the warranty reserve is adequate and that the judgment
applied is appropriate, such amounts estimated to be due and payable in the
future could differ materially from what actually transpires. The following is a
listing of the activity in the warranty reserve during the three month periods
ended September 30, 2006 and 2005 (in thousands).
|
Three
Months Ended |
|
September 30, |
|
2006 |
2005 |
|
Reserve balance, beginning
of period |
$6,948 |
$6,679 |
Current period
expense |
899 |
837 |
Payments or credits to
customers |
(895) |
(1,053) |
Acquisition
accounting |
210 |
- |
Translation |
(33) |
(26) |
|
|
|
|
Reserve balance, end of
period |
$7,129 |
$6,437 |
D.
Contingencies
The Company is involved in litigation of
which the ultimate outcome and liability to the Company, if any, is not
presently determinable. Management believes that final disposition of such
litigation will not have a material impact on the Companys results of
operations, financial position or cash flows.
E. Business Segments
Information about the Companys segments
is summarized as follows (in thousands):
|
Three Months
Ended September 30, |
|
2006 |
2005 |
Manufacturing segment
sales |
$57,666 |
$44,404
|
Distribution segment
sales |
22,763 |
19,452 |
Inter/Intra segment
sales |
(14,655) |
(14,279) |
|
Net sales |
$65,774 |
$49,577 |
|
Manufacturing segment
earnings |
$ 5,686 |
$ 3,753 |
Distribution segment
earnings |
2,299 |
2,044 |
Inter/Intra segment
loss |
(1,887) |
(1,802) |
|
Earnings before income
taxes |
|
|
and minority interest
|
$
6,098 |
$ 3,995 |
|
|
September 30, |
June 30, |
Assets |
2006 |
2006 |
|
Manufacturing segment
assets |
$239,898 |
$239,138 |
Distribution segment
assets |
52,120 |
53,896 |
Corporate assets and
elimination |
|
|
of inter-company assets
|
(55,045) |
(56,862) |
|
|
$236,973 |
$236,172
|
F. Stock Based
Compensation
In July 2005, the Company adopted the
Financial Accounting Standards Board SFAS No. 123R Share Based Payment (FAS
123R). This statement requires the Company to expense the cost of employee
services received in exchange for an award of equity instruments using the
fair-value-based method. No options were granted in the first quarter of fiscal
2007 or 2006. All options outstanding were 100% vested at the adoption of this
statement, therefore no compensation cost has been recognized in the condensed
consolidated statements of operations.
In fiscal 2007 and 2006, the Company
granted 30,434 and 47,510 performance stock unit award grants, respectively, to
various employees of the Company, including executive officers. The performance
stock unit awards granted in fiscal 2007 will vest if the Company achieves a
specified target objective relating to consolidated net operating profit after
tax (NOPAT) in the cumulative three fiscal year period ending June 30, 2009.
The performance stock unit awards granted in fiscal 2007 are subject to
adjustment if the Companys NOPAT for the period falls below or exceeds the
specified target objective, and the maximum number of performance stock units
that can be awarded if the target objective is exceeded is 36,521. The stock
unit awards granted in fiscal 2006 will vest if the Company achieves specified
consolidated gross revenue objectives in the fiscal year ending June 30, 2008.
If such objectives are met, the employees will receive a cash payment equal to
the number of units multiplied by the fair-value of the Companys common stock
as of June 30, 2008 and 2009. There were 74,569 and 0 unvested stock unit awards
outstanding at September, 2006 and 2005, respectively. The performance stock
unit awards are remeasured at fair-value at the end of each reporting period.
The fair-value of the stock unit awards are expensed over the performance period
for the shares that are expected to ultimately vest. The compensation expense
for the three months ended September 30, 2006 and 2005, related to the
performance stock unit award grants approximated $242,000 and $0, respectively.
In fiscal 2007 and 2006, the Company
granted 30,441 and 66,700 performance stock awards, respectively, to various
employees of the Company, including executive officers. The performance stock
awards granted in fiscal 2007 will vest if the Company achieves a specified
target objective relating to consolidated net operating profit after tax
(NOPAT) in the cumulative three fiscal year period ending June 30, 2009. The
performance stock awards granted in fiscal 2007 are subject to adjustment if the
Companys NOPAT for the period falls below or exceeds the specified
target objective, and the maximum number
of performance shares that can be awarded if the target objective is exceeded is
36,532. The 2006 stock awards will vest if the Company achieves specified
consolidated gross revenue objectives in the fiscal years ending June 30, 2008.
There were 127,650 and 148,891 unvested stock awards outstanding at September,
2006 and 2005, respectively. The fair value of the stock awards (on the date of
grant) is expensed over the performance period for the shares that are expected
to ultimately vest. The compensation expense for the three months ended
September 30, 2006 and 2005, related to performance stock awards, approximated
$222,000 and $173,000, respectively.
In addition to the performance shares
mentioned above, the Company has unvested restricted stock outstanding that will
vest if certain service conditions are fulfilled. During fiscal 2007 and 2006,
the Company granted 0 and 3,600 service based restricted shares to non-employee
directors. There were 34,000 and 37,600 unvested shares outstanding at
September, 2006 and 2005, respectively. Compensation expense of $33,000 and
$45,000 was recognized during the three months ended September 2006 and 2005,
respectively, related to these service-based awards.
G. Pension and Other Postretirement
Benefit Plans
The Company has non-contributory,
qualified defined benefit plans covering substantially all domestic employees
hired prior to October 1, 2003 and certain foreign employees. Additionally, the
Company provides health care and life insurance benefits for certain domestic
retirees. Components of net periodic benefit cost for the defined benefit
pension plans and other postretirement benefit plan are as follows(in
thousands):
|
Three Months Ended |
|
September 30, |
|
2006 |
2005 |
|
Pension Benefits: |
|
|
Service
cost |
$294 |
$281 |
Interest
cost |
1,743 |
1,731 |
Expected
return on plan assets |
(2,129) |
(1,945) |
Amortization
of prior service cost |
(180) |
(156) |
Amortization
of transition obligation |
11 |
11 |
Amortization
of net loss |
674 |
963 |
|
|
|
Net periodic benefit
cost |
$413 |
$885 |
|
|
Postretirement
Benefits: |
|
|
Service
cost |
19 |
18 |
Interest
cost |
334 |
352 |
Amortization
of net actuarial loss |
52 |
86 |
|
|
|
Net periodic benefit
cost |
$405 |
$
456 |
The Company previously disclosed in its
financial statements for the year ended June 30, 2006, that it expected to
contribute $5,077,000 to its pension plan in fiscal 2007 and indicated that a
review of the Pension Protection Act of 2006 may result in the Company electing
to make additional contributions. In the first fiscal quarter, the Company
elected to make $7.7 million of contributions to its domestic defined benefit
plans. This amount included contributions of $5.5 million in excess of the
minimum required. This allowed the plans to be at the Full Funding Limit for the
2005 plan year, and as a result, the plans will be exempt from paying PBGC
variable rate premiums for the 2006 plan year. For the balance of fiscal 2007,
the Company is not required to make any additional contributions to its domestic
defined benefit plans. However, based on overall financial performance, cash
flows and in light of the recently enacted Pension Protection Act of 2006, the
Company may elect to make further contributions beyond those
required.
H. Acquisitions
Effective May 31, 2006, the Company
acquired 100% of the outstanding stock of four related foreign entities: B.C.S.
S.r.l., an Italian limited liability company; B.C.S. Service S.r.l., an Italian
limited liability company; Boat Equipment Limited, a Maltese limited liability
company; and Vetus Italia S.r.l., an Italian limited liability company
(collectively the BCS Group). This acquisition was accounted for using the
purchase method of accounting. See the Notes to the Annual Financial Statements
for the year ended June 30, 2006 for a complete description of the BCS
acquisition. The purchase price, including acquisition costs, net of cash
acquired was $20,330,000. A preliminary allocation of the purchase price was
completed at June 30, 2006. Additional adjustments to the BCS preliminary
purchase price allocation remain a possibility as further review and analysis is
completed in relation to this acquisition.
Pro forma disclosures have not been
included due to the lack of available quarterly information in prior
periods.
I. Goodwill and Other
Intangibles
The changes in the carrying amount of
goodwill, substantially all of which is allocated to the manufacturing segment,
for the three months ended September 30, 2006 were as follows (in
thousands):
Balance at June 30,
2006 |
$15,304 |
Translation
adjustment |
(2) |
Acquisition
accounting |
257 |
|
Balance at September 30,
2006 |
$15,559 |
The gross carrying amount and accumulated
amortization of the Companys intangible assets that have defined useful lives
and are subject to amortization as of September 30, 2006 and June 30, 2006 are
as follows (in thousands):
|
September
30, |
June
30, |
|
2006 |
2006 |
Intangible assets with finite lives: |
|
|
Licensing
agreements |
$ 3,015 |
$ 3,015 |
Non-compete
agreements |
4,732 |
4,732 |
Other |
4,993 |
4,971 |
|
|
12,740 |
12,718 |
Accumulated
amortization |
(3,663) |
(3,382) |
Translation
adjustment |
100 |
116 |
|
Total |
$
9,177 |
$
9,452 |
The weighted average remaining useful life
of the intangible assets included in the table above is approximately 10
years.
Intangible amortization expense for the
three months ended September 30, 2006 and 2005 was $281,000 and $84,000,
respectively. Estimated intangible amortization expense for each of the next
five fiscal years is as follows (in thousands):
Fiscal
Year |
|
2008 |
$ 1,151 |
2009 |
1,149 |
2010 |
949 |
2011 |
949 |
2012 |
949 |
The gross carrying amount of the Companys
intangible assets that have indefinite lives and are not subject to amortization
as of September 30, 2006 and June 30, 2006 are $2,761,000 and $2,759,000,
respectively. These assets are comprised of acquired tradenames.
Item 2. Management Discussion and
Analysis
In the financial review that follows, we
discuss our results of operations, financial condition and certain other
information. This discussion should be read in conjunction with our consolidated
2006 financial statements and related notes.
Some of the statements in this Quarterly
Report on Form 10-Q are forward looking statements as defined in the Private
Securities Litigation Reform Act of 1995. Forward-looking statements include the
Companys description of plans and objectives for future operations and
assumptions behind those plans. The words anticipates, believes, intends,
estimates, and expects, or similar anticipatory expressions, usually
identify forward-looking statements. In addition, goals established by Twin
Disc, Incorporated should not be viewed as guarantees or promises of future
performance. There can be no assurance the Company will be successful in
achieving its goals.
In addition to the assumptions and
information referred to specifically in the forward-looking statements, other
factors, including but not limited to those factors discussed under Item 1A,
Risk Factors, of the Companys Annual Report filed on Form 10-K for June 30,
2006 could cause actual results to be materially different from what is
presented here.
Results of
Operations
(In
thousands) |
|
|
|
|
|
Three Months
Ended |
|
September
30, |
|
2006 |
% |
2005 |
% |
|
Net sales |
$ 65,774 |
|
$ 49,577 |
|
Cost of goods
sold |
45,461 |
|
35,173 |
|
|
|
|
|
|
|
Gross profit |
20,313 |
30.9% |
14,404 |
29.1% |
|
Marketing, engineering
and |
|
|
|
|
administrative expenses |
13,652 |
20.8 |
10,147 |
20.5 |
|
Earnings from
operations |
$
6,661 |
10.1 |
$
4,257 |
8.6 |
Comparison of the First Quarter of FY
2007 with the First Quarter of FY 2006
Net sales for the first quarter improved
32.7%, or $16.2 million, to $65.8 million from $49.6 million in the
same
period a year ago. The recent BCS Group
acquisition contributed $6.6 million to net sales in the fiscal 2007 first
quarter. Sales from our existing operations, after backing out the recent
acquisition, increased 19.4% . The year-over-year improvement came in a number
of the Companys product markets. The Companys North American manufacturing
operations saw increased demand for transmission and industrial products for
oil-servicing and commercial applications. In addition, sales of the Companys
military transmissions were up. Sales of marine transmissions for commercial
applications also saw year-over-year improvement in sales and order activities.
Compared to the first quarter of fiscal 2006, the Euro and Asian currencies
strengthened against the US dollar. The translation effect of this strengthening
on foreign operations was to increase revenues by approximately $1 million
versus the prior year, before eliminations.
Sales at our manufacturing segment were up
29.9% versus the same period last year. Adjusting for the impact of the BCS
group acquisition, sales of existing manufacturing operations were up 20.2%
versus the first quarter of fiscal 2006. Sales at our US domestic manufacturing
location were up nearly 23%. As noted above, the sales growth in our domestic
operations was primarily driven by increased sales of commercial marine
transmissions, military and oilfield series transmissions, and industrial
products. Sales at our Belgian manufacturing location were up 19.1% over the
same period last year. Less than 20% of this increase can be attributed to the
translation effect of a strengthening Euro versus the first quarter of last
fiscal year. Our Italian manufacturing operations, excluding the BCS Group, saw
a 14.4% increase in sales compared to fiscal 2006s first quarter. A third of
this increase can be attributed to the translation effect of a strengthening
Euro versus the first quarter of last fiscal year.
Our distribution segment experienced an
increase of 17.0% in sales compared to the first quarter of fiscal 2006.
Adjusting for the impact of the BCS group acquisition, sales of existing
distribution operations were up 4.5% versus the first quarter of fiscal 2006.
The majority of this increase came from our distribution operations in Italy as
well as our joint venture in Japan.
The elimination for net inter/intra
segment sales increased $0.4 million, accounting for the remainder of the net
change in sales versus the same period last year. Over two-thirds of the net
change in sales, excluding the impact of the BCS Group, came at our domestic
manufacturing location. These increased sales were primarily to third party
entities. After considering this, the net increase in inter/intra segment sales
was consistent with the overall increase in sales and order levels experienced
by the Company in the first quarter.
Gross margin as a percentage of sales
increased to 30.9% of sales, compared to 29.1% of sales for the same period last
year. This 180 basis point improvement can be attributed to improved product
mix, selective price increases, improved productivity and absorption, and the
impact of cost reduction programs. These favorable margin items were partially
offset by higher prices for steel, shipping and energy versus the same period of
the prior fiscal year. Higher volume, level fixed costs, increased manufacturing
productivity and absorption at our domestic manufacturing operations, and lower
pension expense helped to partially offset higher raw material and other costs.
Marketing, engineering, and administrative
(ME&A) expenses were 34.5% higher compared to last years first fiscal
quarter. Excluding the ME&A expenses of the acquired BCS group companies,
the year-over-year increase was 21.9% . As a percentage of sales, ME&A
expenses were up slightly to 20.8% of sales versus 20.5% of sales in the first
quarter of fiscal 2006. The overall increase can be attributed to (1) the
year-over-year increase in salary and wage costs, (2) additional bonus and
stock-based compensation expense, and (3) costs associated with the selection
and implementation of a new global enterprise resource planning (ERP) system.
Interest expense of $0.6 million for the
quarter was up 103.5% versus last years first fiscal quarter. In the quarter,
the Company incurred interest of $0.4 million on the $25 million of Senior Notes
that were entered into in April 2006. In addition, for the first quarter of
fiscal 2006, the interest rate on the Companys revolving credit facility was in
the range of 4.6% to just under 5.0%, whereas for the first quarter of fiscal
2007 the range was 6.3% to just under 6.4% . However, the average balance of the
Companys revolving credit facility decreased versus the prior year. As a
result, total interest on the revolver was flat at $0.2 million.
The consolidated income tax rate was
slightly higher than a year ago primarily due to changes in the mix of foreign
versus domestic earnings.
Financial Condition, Liquidity and
Capital Resources
Comparison between September 30, 2006
and June 30, 2006
As of September 30, 2006, the Company had
net working capital of $79.6 million, which represents an increase of $8.1
million from the net working capital of $71.5 million as of June 30,
2006.
Cash and cash equivalents decreased 3.1%
to $15.9 million as of September 30, 2006. The majority of the cash and cash
equivalents as of September 30, 2006 are at our overseas operations in Europe
and Asia-Pacific.
Trade receivables of $49.7 million were
down $6.3 million to last fiscal year-end. The net decrease is consistent with
the sales volume decline experienced from the fourth quarter of the prior fiscal
year to the first quarter of fiscal 2007.
Net inventory increased by $7.4 million
versus June 30, 2006 to $72.5 million. The majority of the increase came at the
Companys domestic manufacturing location, where a significant increase in the
order rate continues to be experienced. On a consolidated basis, as of September
30, 2006, the Companys backlog of orders to be shipped over the next six
months, excluding the recently acquired BCS group companies, approximates $100.2
million, up 9.4% since the year began and up 34.1% compared with the same period
a year ago.
Net property, plant and equipment
(PP&E) decreased $0.2 million versus June 30, 2006. This includes the
addition of $1.3 million in capital expenditures, primarily at the Companys
Racine-based manufacturing operation, which was more than offset by depreciation
of $1.4 million. In total, the Company expects to invest between $12 and $15
million in capital assets in fiscal 2007. The quoted lead times on certain
manufacturing equipment purchases may push some of the capital expenditures into
the next fiscal year. This compares to $8.4 million in capital expenditures in
fiscal 2006. The Companys capital program is focusing on modernizing key core
manufacturing, assembly and testing processes at its facilities around the world
as well as the selection and implementation of a global ERP system.
Accounts payable as of September 30, 2006
of $25.3 million were down $2.6 million, or 9%, from June 30, 2006. The decrease
is primarily the result of the overall seasonal decline in volume in the first
quarter compared to the fourth quarter of fiscal 2006 as well as a high level of
capital related items in the year-end balance being paid out in the first fiscal
quarter of 2007.
Total borrowings, notes payable and
long-term debt, as of September 30, 2006 increased by $11.6 million, or nearly
30%, to $50.6 million versus June 30, 2006. This increase was driven by (1)
increased contributions to the Companys domestic defined benefit pension plans,
(2) the payment of annual incentive and bonus awards for fiscal 2006 performance
in the first fiscal quarter of 2007 and (3) payments on capital expenditures
capitalized at the end of fiscal 2006. In the first fiscal quarter, the Company
elected to make $7.7 million of contributions to its domestic defined benefit
plans. This amount included contributions of $5.5 million in excess of the
minimum required. This allowed the plans to be at the Full Funding Limit for the
2005 plan year, and as a result, the plans will be exempt from paying PBGC
variable rate premiums for the 2006 plan year. For the balance of fiscal 2007,
the Company is not required to make any additional contributions to its domestic
defined benefit plans. However, based on overall financial performance, cash
flows and in light of the recently enacted Pension Protection Act of 2006, the
Company may elect to make further contributions beyond those
required.
Total shareholders equity increased by
$3.7 million to a total of $92.9 million. Retained earnings increased by $3.1
million. The net increase in retained earnings included $3.7 million in net
earnings reported year-to-date, offset by $0.6 million in dividend payments. Net
favorable foreign currency translation of $0.1 million was reported as the U.S.
Dollar weakened against the Euro and Asian currencies during the first three
months of fiscal 2007.
The Companys balance sheet remains very
strong, there are no off-balance-sheet arrangements, and we continue to have
sufficient liquidity for near-term needs. As of September 30, 2006, the Company
had outstanding available borrowings under its $35 million revolving line of
credit of $14.4 million. Furthermore, the Company has nearly $16 million in cash
and cash equivalents at its subsidiaries around the world. Management believes
that available cash, our revolver facility, cash generated from operations,
existing lines of credit and access to debt markets will be adequate to fund our
capital requirements for the foreseeable future.
As of September 30, 2006, the Company has
obligations under non-cancelable operating lease contracts and a senior note
agreement for certain future payments. A summary of those commitments follows
(in thousands):
|
|
Less
than |
1-3 |
3-5 |
After 5
|
Contractual
Obligations |
Total |
1 year
|
Years |
Years |
Years |
|
|
|
|
|
|
Notes payable
|
$ 120 |
$120 |
|
|
|
|
|
|
|
|
|
Revolver
borrowing |
$20,625 |
|
$20,625 |
|
|
|
|
|
|
|
|
Long-term
debt |
$29,903 |
$582 |
$ 2,570 |
$8,479 |
$18,272 |
|
|
|
|
|
|
Operating
leases |
$ 9,558 |
$ 2,734 |
$ 3,883 |
$2,187 |
$ 754 |
|
|
|
|
|
|
Total
obligations |
$60,206 |
$ 3,436 |
$27,078
|
$10,666 |
$19,026
|
In October 2006, the revolving loan
agreement scheduled to expire in October 2007 was amended to extend the term to
October 31, 2009. All other terms and covenants remain the same.
New Accounting
Releases
In June 2006, the Financial Accounting
Standards Board (FASB) issued FASB Interpretation (FIN) No. 48 Accounting for
Uncertainty in Income Taxes an interpretation of FASB Statement No. 109. This
interpretation clarifies the accounting for uncertainty in income taxes
recognized in an entitys financial statements in accordance with SFAS No. 109,
Accounting for Income Taxes. It prescribes a recognition threshold and
measurement attribute for financial statement disclosure of tax positions taken
or expected to be taken on a tax return. FIN No. 48 is effective for fiscal
years beginning after December 15, 2006. The Company is currently evaluating the
impact of adoption of FIN No. 48 on its financial statements.
In September 2006, the FASB issued SFAS
No. 157 Fair Value Measurements. This statement defines fair value,
establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value measurements.
The provisions of this statement are effective for financial statements issued
for fiscal years beginning after November 15, 2007 and are not expected to have
a material impact on the financial statements of the Company.
During September 2006, the FASB issued
SFAS No. 158 Employers Accounting for Defined Benefit Pension and Other
Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and
132(R). This statement requires an employer that sponsors one or more
single-employer defined benefit plans to:
1. |
Recognize the funded status of a benefit plan measured as the difference between plan assets at fair value and the benefit obligation in its statement of financial position. |
|
2. |
Recognize as a component of other comprehensive income, net of tax, the gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net periodic benefit cost
pursuant to FASB Statement No. 87 , Employers Accounting for Pensions, or No. 106, Employers Accounting for Postretirement
Benefits Other Than Pensions. |
|
3. |
Measure defined benefit plan assets and obligations as of the date of the employers fiscal year-end statement of financial position. |
|
4. |
Disclose in the notes to the financial statements additional information about certain effects on net periodic benefit cost for the next fiscal year that arise from delayed recognition of the gains or losses, prior service
costs or credits, and transition asset or obligation. |
|
This statement is effective for fiscal years ending after December 15, 2006. The Companys initial estimate of the impact of adopting this statement results in the recognition of an additional liability of
$6,544,000 (primarily related to postretirement healthcare), a deferred tax impact of $2,552,000 and an offsetting charge to other comprehensive income of $3,992,000.
Critical Accounting Policies
The preparation of this Quarterly Report requires managements judgment to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at
the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates.
Twin Discs critical accounting policies are described in Item 7 of the Companys Annual Report filed on Form 10-K for June 30, 2006. There have been no significant changes to those accounting policies subsequent
to June 30, 2006.
Item 3. Quantitative and Qualitative Disclosure About Market Risk.
The Company is exposed to market risks from changes in interest rates, commodities and foreign exchange. To reduce such risks, the Company selectively uses financial instruments and other pro-active management techniques.
All hedging transactions are authorized and executed pursuant to clearly defined policies and procedures, which prohibit the use of financial instruments for trading or speculative purposes.
Interest rate risk - The Companys earnings exposure related to adverse movements of interest rates is primarily derived from outstanding floating rate debt instruments that are indexed to the prime and LIBOR interest
rates. In accordance with the $35,000,000 revolving loan agreement expiring October 31, 2009, the Company has the option of borrowing at the prime interest rate or LIBOR plus an additional Add-On, between 1% and 2.75%, depending on
the Companys Total Funded Debt to EBITDA ratio. Due to the relative stability of interest rates, the Company did not utilize any financial instruments at September 30, 2006 to manage interest rate risk exposure. A 10 percent increase or
decrease in the applicable interest rate would result in a change in pretax interest expense of approximately $131,000.
Commodity price risk - The Company is exposed to fluctuation in market prices for such commodities as steel and aluminum. The Company does not utilize commodity price hedges to manage commodity price risk
exposure.
Currency risk - The Company has exposure to foreign currency exchange fluctuations. Approximately 45% of the Companys revenues in the three months ended September 30, 2006 and 2005 were denominated in currencies other
than the U.S. dollar. Of that total, approximately 65% was denominated in euros with the balance composed of Japanese yen, the Swiss Franc and the Australian and Singapore dollars. The Company does not hedge the translation exposure represented by
the net assets of its foreign subsidiaries. Foreign currency translation adjustments are recorded as a component of shareholders equity. Forward foreign exchange contracts are used to hedge the currency fluctuations on significant transactions
denominated in foreign currencies.
Derivative Financial Instruments - The Company has written policies and procedures that place all financial instruments under the direction of the company corporate treasury and restrict derivative transactions to those
intended for hedging purposes. The use of financial instruments for trading purposes is prohibited. The Company uses financial instruments to manage the market risk from changes in foreign exchange rates.
The Company primarily enters into forward exchange contracts to reduce the earnings and cash flow impact of nonfunctional currency denominated receivables and payables. These contracts are highly effective in hedging the
cash flows attributable to changes in currency exchange rates. Gains and losses resulting from these contracts offset the foreign exchange gains or losses on the underlying assets and liabilities being hedged. The maturities of the forward exchange
contracts generally coincide with the settlement dates of the related transactions. Gains and losses on these contracts are recorded in Other income (expense), net in the Consolidated Statement of Operations as the changes in the fair value of the
contracts are recognized and generally offset the gains and losses on the hedged items in the same period. The primary currency to which the Company was exposed in fiscal 2007 and 2006 was the Euro. At September 30, 2006 the Company had net
outstanding forward exchange contracts to purchase Euros in the value of $3,200,000 with a weighted average maturity of 56 days. The fair value of the Companys contracts was a gain of approximately $10,000 at September, 2006. At June
30, 2006 the Company had net outstanding forward exchange contracts to purchase Euros in the value of $2,250,000 with a weighted average maturity of 47 days. The fair value of the Companys contracts was a gain of approximately $31,000
at June 30, 2006.
Item 4. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures.
The Companys management, with the participation of the Companys Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the Companys disclosure controls and procedures (as
such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by this report. Based on such evaluation, the Companys Chief
Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Companys disclosure controls and procedures are effective in recording, processing, summarizing, and reporting, on a timely basis, information
required to be disclosed by the Company in the reports that it files or submits under the Exchange Act, and that such information is accumulated and communicated to the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow
timely discussions regarding required disclosure.
(b) Changes in Internal Control Over Financial Reporting.
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). During the period covered by this report,
no changes were made which have materially affected, or which are reasonably likely to materially affect, our internal control over financial reporting. On May 31, 2006, the Company acquired the BCS Group for approximately $20.3 million,
including acquisitions costs, net of cash acquired. As part of its ongoing integration activities, the Company is continuing to incorporate its controls and procedures into this recently acquired business.
Part II.
|
|
OTHER INFORMATION
|
Item 1.
|
|
Legal Proceedings.
|
Twin Disc is a defendant in several product liability or related claims considered either adequately covered by appropriate liability insurance or involving amounts not deemed material to the business or financial condition
of the Company.
Item 1A. Risk Factors
There have been no material changes to the risk factors previously disclosed in response to Item 1A to Part I of our 2006 Annual Report on Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
There were no securities of the Company sold by the Company during the three months ended September 30, 2006, which were not registered under the Securities Act of 1933, in reliance upon an exemption from registration
provided by Section 4 (2) of the Act.
During the period covered by this report,
the Company offered participants in the Twin Disc, Incorporated B The
Accelerator 401(k) Savings Plan (the Plan) the option to invest their Plan
accounts in a fund comprised of Company stock. Participation interests of Plan
participants in the Plan, which may be considered securities, were not
registered with the SEC. Participant accounts in the Plan consist of a
combination of employee deferrals, Company matching contributions, and, in some
cases, additional Company profit-sharing contributions. No underwriters were
involved in these transactions. On September 6, 2002, the Company filed a Form
S-8 to register 200,000 shares of Company common stock offered through the Plan,
as well as an indeterminate amount of Plan participation interests.
Issuer Purchases of Equity
Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(d) Maximum
|
Period |
|
(a) Total |
|
|
|
(c) Total Number
of |
|
Number of Shares |
|
|
Number of |
|
(b) Average
|
|
Shares Purchased as Part
|
|
that May Yet
Be |
|
|
Shares |
|
Price Paid per |
|
of Publicly
Announced |
|
Purchased Under the
|
|
|
Purchased |
|
Share |
|
Plans or Programs |
|
Plans or Programs |
|
|
|
|
|
|
|
|
|
July 1 - 31,
2006 |
|
0 |
|
NA |
|
0 |
|
195,392 |
|
|
|
|
|
|
|
|
|
August 1 - 31,
2006 |
|
0 |
|
NA |
|
0 |
|
195,392 |
|
|
|
|
|
|
|
|
|
September 1 - 30,
2006 |
|
0 |
|
NA |
|
0 |
|
195,392 |
|
|
|
|
|
|
|
|
|
Total |
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
In April 1995, the Company authorized
200,000 shares to be purchased in a Stock Repurchase Program. In January 2002,
the program was extended to authorize an additional 200,000 shares (split
adjusted) to be purchased. There is no expiration date for this
program.
Item 3. Defaults Upon Senior
Securities
None.
Item 4. Submission of Matters to a Vote
of Security Holders
There were no matters submitted to a vote
of security holders during the period covered by this report.
Item
5. |
|
Other Information. |
|
|
None. |
|
|
|
|
Item
6. |
|
Exhibits. |
|
|
31a |
|
Certfication of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002. |
31b |
|
Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002. |
32a |
|
Certification of Chief Executive Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002. |
32b |
|
Certification of Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
|
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.
|
TWIN DISC,
INCORPORATED |
|
(Registrant)
|
|
|
Date: November 9,
2006 |
/S/JEFFREY S.
KNUTSON |
|
Jeffrey S.
Knutson |
|
Corporate
Controller |
|
Chief Accounting
Officer |
Exhibit 31a
CERTIFICATION
I, Michael E. Batten, certify
that:
1.
|
I have reviewed this
quarterly report on Form 10-Q of Twin Disc, Incorporated; |
|
2.
|
Based on my knowledge,
this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
|
|
3.
|
Based on my knowledge,
the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the
periods presented in this report; |
|
4.
|
The registrant's other
certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant
and have: |
|
|
a)
|
Designed such disclosure controls
and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the
period in which this report is being prepared; |
|
|
b)
|
Designed such internal control
over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance
with generally accepted accounting principles; |
|
|
c)
|
Evaluated the effectiveness of
the registrant's disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based
on such evaluation; and |
|
|
d)
|
Disclosed in this report any
change in the registrants internal control over financial reporting that
occurred during the registrants most recent fiscal quarter (the
registrants first fiscal quarter in the case of this quarterly report)
that has materially affected, or is reasonably likely to materially
affect, the registrants internal control over financial reporting;
and |
|
5.
|
The registrant's other
certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent function): |
|
|
a)
|
All significant deficiencies and
material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the
registrants ability to record, process, summarize and report financial
information; and |
|
|
b)
|
Any fraud, whether or not
material, that involves management or other employees who have a
significant role in the registrant's internal control over financial
reporting. |
|
Date: November 9,
2006 |
|
/s/ MICHAEL E.
BATTEN |
|
|
Michael E.
Batten |
|
|
Chairman, President and
Chief Executive |
|
|
Officer
|
Exhibit 31b
CERTIFICATIONS
I, Christopher J. Eperjesy, certify
that:
1.
|
I have reviewed this
quarterly report on Form 10-Q of Twin Disc, Incorporated; |
|
2.
|
Based on my knowledge,
this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
|
|
3.
|
Based on my knowledge,
the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the
periods presented in this report; |
|
4.
|
The registrant's other
certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant
and have: |
|
|
a)
|
Designed such disclosure controls
and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the
period in which this report is being prepared; |
|
|
b)
|
Designed such internal control
over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance
with generally accepted accounting principles; |
|
|
c)
|
Evaluated the effectiveness of
the registrant's disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based
on such evaluation; and |
|
|
d)
|
Disclosed in this report any
change in the registrants internal control over financial reporting that
occurred during the registrants most recent fiscal quarter (the
registrants first fiscal quarter in the case of this quarterly report)
that has materially affected, or is reasonably likely to materially
affect, the registrants internal control over financial reporting;
and |
|
5.
|
The registrant's other
certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent function): |
|
|
a)
|
All significant deficiencies and
material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the
registrants ability to record, process, summarize and report financial
information; and |
|
|
b)
|
Any fraud, whether or not
material, that involves management or other employees who have a
significant role in the registrant's internal control over financial
reporting. |
|
Date: November 9,
2006 |
|
/s/ CHRISTOPHER J.
EPERJESY |
|
|
Christopher J.
Eperjesy |
|
|
Vice President Finance,
Chief Financial |
|
|
Officer and
Secretary |
EXHIBIT 32a
CERTIFICATION PURSUANT TO 18 U.S.C.
SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT
OF 2002
In
connection with the Quarterly Report of Twin Disc, Incorporated (the Company)
on Form 10-Q for the fiscal quarter ending September 30, 2006, as filed with the
Securities and Exchange Commission as of the date hereof (the Report), I,
Michael E. Batten, Chairman, President and Chief Executive Officer of the
Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my
knowledge:
(1)
|
The Report fully complies with
the requirements of Section 13(a) or 15(d) of the Securities Exchange Act
of 1934, as amended, and |
|
(2)
|
The information contained in the
Report fairly presents, in all material respects, the financial condition
and results of operations of the Company. |
|
|
/s/ MICHAEL E. BATTEN Michael E. Batten Chairman, President and Chief Executive Officer
|