10-Q 1 flng00q3.txt SEPTEMBER, 2000 10Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-Q (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ---------- --------------- Commission File Number 0 - 23426 ---------- REPTRON ELECTRONICS, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Florida 38-2081116 -------------------------------- ------------------------------------ State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization 14401 McCormick Drive Tampa, Florida 33626 --------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (813)854-2351 ------------- 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 X No ------- ------- 6,304,005 shares of common stock issued and outstanding as of November 1, 2000. ------------------ REPTRON ELECTRONICS, INC. INDEX Page PART I. FINANCIAL INFORMATION Number ------ Item 1. Financial Statements Consolidated Statements of Operations -- Three months ended September 30, 2000 and September 30, 1999 and nine months ended September 30, 2000 and September 30, 1999 3 Consolidated Balance Sheets -- September 30, 2000 and December 31, 1999 4 Consolidated Statement of Shareholders' Equity -- Nine months ended September 30, 2000 and year ended December 31, 1999 5 Consolidated Statements of Cash Flows -- Nine months ended September 30, 2000 and September 30, 1999 6 Notes to Consolidated Financial Statements -- September 30, 2000 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 PART II. OTHER INFORMATION Item 3. Quantitative and Qualitative Disclosures about Market Risk 12 Item 6. Exhibits and Reports on Form 8-K 13 SIGNATURES 14 PART I. FINANCIAL INFORMATION Item 1. Financial Statements
REPTRON ELECTRONICS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share and per share data) Three months ended Nine months ended September 30, September 30, (Unaudited) (Unaudited) --------------------- ---------------------- 2000 1999 2000 1999 ------- ------- -------- --------- Net sales $152,653 $ 93,559 $416,526 $251,970 Cost of goods sold 127,613 80,119 348,104 217,525 ------- ------- ------- ------- Gross profit 25,040 13,440 68,422 34,445 Selling, general and administrative expenses 18,449 14,130 53,390 40,353 ------- ------- ------- ------- Operating earnings (loss) 6,591 (690) 15,032 (5,908) Interest expense, net 3,066 1,964 8,117 6,131 ------- ------- ------- ------- Earnings (loss) before income taxes 3,525 (2,654) 6,915 (12,039) Income tax provision (benefit) 1,632 (990) 3,252 (4,595) ------- ------- ------- ------- Earnings (loss) before extraordinary item 1,893 (1,664) 3,663 (7,444) Extraordinary gain on extinguishment of debt, Net of tax - 4,527 - 12,776 ------- ------- ------- ------- Net earnings $ 1,893 $ 2,863 $ 3,663 $ 5,332 ======= ======= ======= ======= Net earnings per common share - basic: Earnings (loss) before extraordinary item $ 0.30 $ (0.27) $ 0.59 $ (1.21) Extraordinary gain 0.00 0.74 0.00 2.08 ------- ------- ------- ------ Net earnings per common share - basic $ 0.30 $ 0.47 $ 0.59 $ 0.87 ======= ======= ======= ====== Weighted average common shares outstanding - basic 6,282,405 6,147,119 6,229,121 6,147,119 ========= ========= ========= ========= Net earnings per common share - diluted: Earnings (loss) before extraordinary item $ 0.27 $ (0.27) $ 0.54 $ (1.21) Extraordinary gain 0.00 0.74 0.00 2.08 ------- ------- ------- ------ Net earnings per common share - diluted $ 0.27 $ 0.47 $ 0.54 $ 0.87 ======= ======= ======= ====== Weighted average common shares outstanding - diluted 6,973,455 6,147,119 6,837,620 6,147,119 ========= ========= ========= =========
The accompanying notes are an integral part of these financial statements 3
REPTRON ELECTRONICS, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share data) ASSETS (Unaudited) September 30, December 31, 2000 1999 ------------- ------------ CURRENT ASSETS Cash and cash equivalents $ 1,786 $ 108 Accounts receivable - trade, less allowances for doubtful accounts of $1,214 and $609, respectively 86,055 62,754 Inventories, net 117,167 82,553 Prepaid expenses and other assets 2,738 2,118 ------- ------- Total current assets 207,746 147,533 PROPERTY, PLANT & EQUIPMENT - AT COST, NET 35,511 34,997 EXCESS OF COST OVER NET ASSETS ACQUIRED, NET 29,546 30,507 OTHER ASSETS 2,738 2,816 ------- ------- $275,541 $215,853 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable - trade $ 55,779 42,062 Current portion of long-term obligations 2,589 3,280 Accrued expenses 7,106 6,068 Income taxes payable 1,126 446 ------- ------- Total current liabilities 66,600 51,856 NOTE PAYABLE TO BANK 75,488 37,413 LONG-TERM OBLIGATIONS, less current portion 81,270 79,104 DEFERRED TAX LIABILITY 750 520 SHAREHOLDERS' EQUITY Preferred Stock - authorized 15,000,000 shares of $.10 par value; no shares issued - - Common Stock - authorized 50,000,000 shares of $.01 par value; issued and outstanding, 6,298,379 and 6,167,119 shares, respectively 63 62 Additional paid-in capital 22,549 21,740 Retained earnings 28,821 25,158 ------- ------- 51,433 46,960 ------- ------- $275,541 $215,853 ======= =======
The accompanying notes are an integral part of these financial statements 4
REPTRON ELECTRONICS, INC. CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (In thousands, except share data) Common Stock ------------------ Additional Total Shares Par Paid-In Retained Shareholders' Outstanding Value Capital Earnings Equity ----------- ----- ---------- -------- ------------- Balance at December 31, 1998 6,147,119 $61 $21,676 $20,389 $42,126 Exercise of stock options 20,000 1 64 - 65 Net earnings - - - 4,769 4,769 --------- -- ------ ------ ------ Balance at December 31, 1999 6,167,119 62 21,740 25,158 46,960 Exercise of stock options (Unaudited) 131,260 1 809 - 810 Net Earnings (Unaudited) - - - 3,663 3,663 --------- -- ------ ------ ------ Balance at September 30, 2000 (Unaudited) 6,298,379 $63 $22,549 $28,821 $51,433 ========= == ====== ====== ======
The accompanying notes are an integral part of this financial statement 5
REPTRON ELECTRONICS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Nine months ended September 30, (Unaudited) ------------------ 2000 1999 ------- ------- Increase (decrease) in cash and cash equivalents: Cash flows from operating activities: Net earnings $ 3,663 $ 5,332 Adjustments to reconcile net earnings to net cash used in operating activities: Depreciation and amortization 7,873 8,198 Extraordinary gain - (12,776) Deferred income taxes 230 (4,595) Loss on disposal of assets 25 - Change in assets and liabilities: Accounts receivable - trade (23,301) (9,502) Inventories (34,614) (7,469) Prepaid expenses and other current assets (620) 8,424 Other assets (449) (228) Accounts payable - trade 13,717 10,421 Accrued expenses 1,038 (3,455) Deferred revenue - (70) Income taxes payable 680 (715) ------ ------- Net cash used in operating activities (31,758) (6,435) ------ ------- Cash flows from investing activities: Purchases of property, plant and equipment (6,924) (2,541) Proceeds from the sale of property - 99 ------ ------- Net cash used in investing activities (6,924) (2,442) ------ ------- Cash flows from financing activities: Proceeds from exercise of stock options 810 - Net proceeds from note payable to bank 38,075 - Proceeds from long-term obligations 4,000 29,302 Payments on long-term obligations (2,525) (27,642) ------ ------- Net cash provided by financing activities 40,360 1,660 ------ ------- Net increase (decrease) in cash and cash equivalents 1,678 (7,217) Cash and cash equivalents at beginning of period 108 10,065 ------ ------- Cash and cash equivalents at end of period $ 1,786 $ 2,848 ====== ======
The accompanying notes are an integral part of these financial statements 6 REPTRON ELECTRONICS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (In thousands) Nine months ended September 30, (Unaudited) ------------------ 2000 1999 -------- -------- Supplemental cash flow information: Interest paid $ 8,670 $ 7,561 ====== ====== Income taxes paid $ 2,469 $ 690 ====== ====== Non-cash investing and financing activities: During the nine month period ended September 30, 1999, we incurred approximately $372,000 of obligations under capital leases for the acquisition of equipment. Goodwill, related to the 1998 Hibbing acquisition, was reduced approximately $767,000 during the period ended September 30, 1999. Net capitalized financing costs of approximately $1.2 million, related to the year to date repurchase of convertible subordinated bonds, was written off during the period ended September 30, 1999, and was included in the calculation of the extraordinary item. The accompanying notes are an integral part of these financial statements. 7 REPTRON ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2000 NOTE A -- BASIS OF PRESENTATION The accompanying consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all the information and footnote disclosure required by generally accepted accounting principles for complete financial statements. The consolidated financial statements as of September 30, 2000 and for the three and nine months ended September 30, 2000 and September 30, 1999 are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the interim periods. The results of operations for the three and nine months ended September 30, 2000 are not necessarily indicative of results that may be expected for the year ending December 31, 2000. The consolidated financial statements should be read in conjunction with the financial statements and notes thereto, together with management's discussion and analysis of financial condition and results of operations, included in the 1999 Form 10-K.
NOTE B -- INVENTORIES Inventories consist of the following (in thousands): September 30, December 31, 2000 1999 ------------- ------------- Electronic Component Distribution: Inventories $ 76,355 $45,503 Electronic Manufacturing Services: Work in process 12,954 12,270 Raw materials 27,858 24,780 ------- ------ $117,167 $82,553 ======= ======
8 REPTRON ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) SEPTEMBER 30, 2000 NOTE C -- FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS Reptron Electronics, Inc. is a leading electronics manufacturing supply chain services company operating as a national distributor of electronic components, a contract manufacturer of electronic products and display solution provider. Our Electronic Component Distribution customers are in diverse industries including robotics, telecommunications, computers and computer peripherals, consumer electronics, healthcare, industrial controls and contract manufacturing. Our Electronic Manufacturing Services segment manufactures electronic products according to customer design, primarily for customers in the telecommunications, healthcare, industrial/instrumentation, banking and office products industries. As a display solution provider, we provide display design engineering, systems integration and turnkey manufacturing services. The following table shows net sales and gross profit by industry segments:
Three months ended Nine months ended September 30, September 30, (in thousands) (in thousands) ------------------ ----------------- 2000 1999 2000 1999 ------ ------ ------ ------ Net Sales Electronic Component Distribution $ 93,071 $52,858 $248,966 $136,552 Electronic Manufacturing Services 59,582 40,701 167,560 115,418 ------- ------ ------- ------- $152,653 $93,559 $416,526 $251,970 ======= ====== ======= ======= Gross Profit Electronic Component Distribution $ 16,737 $ 8,659 $ 46,387 $ 22,689 Electronic Manufacturing Services 8,303 4,781 22,035 11,756 ------- ------ ------- ------- $ 25,040 $13,440 $ 68,422 $ 34,445 ======= ====== ======= =======
NOTE D -- EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted net earnings per common share: Three months ended Nine months ended September 30, September 30, ------------------ ------------------- 2000 1999 2000 1999 --------- --------- --------- --------- Numerator: Net earnings (in thousands) $ 1,893 $ 2,863 $ 3,663 $ 5,332 ========= ========= ========= ========= Denominator: For basic earnings per share - Weighted average shares 6,282,405 6,147,119 6,229,121 6,147,119 Effect of dilutive securities: Employee stock options 691,050 - 608,499 - --------- --------- --------- --------- For diluted earnings per share 6,973,455 6,147,119 6,837,620 6,147,119 ========= ========= ========= ========= Net earnings per common share - basic $ 0.30 $ 0.47 $ 0.59 $ 0.87 ========= ========= ========= ========= Net earnings per common share - diluted $ 0.27 $ 0.47 $ 0.54 $ 0.87 ========= ========= ========= =========
9 Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This document contains certain forward-looking statements that involve a number of risks and uncertainties. Such forward-looking statements are within the meaning of that term in Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Act of 1934, as amended. Factors that could cause actual results to differ materially include the following: business conditions and growth in our industry and in the general economy; competitive factors; risks due to shifts in market demand; the ability of Reptron to complete and integrate acquisitions; and the risk factors listed from time to time in our reports filed with the Securities and Exchange Commission as well as assumptions regarding the foregoing. The words "believe", "estimate", "expect", "intend", "anticipate", "plan" and similar expressions and variations thereof identify certain of such forward-looking statements, which speak only as of the dates on which they were made. Reptron undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those indicated in the forward- looking statements as a result of various factors. Readers are cautioned not to place undue reliance on these forward-looking statements. RESULTS OF OPERATIONS Net Sales. Third quarter net sales increased $59.1 million, or 63.2%, from $93.6 million in the third quarter of 1999 to $152.7 million in the third quarter of 2000. Total net sales for the first three quarters of 2000 increased $164.5 million, or 65.3% from $252.0 million in the first three quarters of 1999 to $416.5 million in the first three quarters of 1999. Electronic Component Distribution ("ECD") third quarter net sales increased $40.2 million, or 76.1%, from $52.9 million in the third quarter of 1999 to $93.1 million in the third quarter of 2000. This increase resulted primarily from improved market conditions for the sale of electronic components in the United States. Additionally, we have made significant investments in personnel and other infrastructure, which has aided in sales volume growth. Sales of semiconductors, passive components and electromechanical components accounted for 67.0%, 24.3% and 8.7%, respectively, of third quarter 2000 ECD net sales compared to 72.0%, 19.2% and 8.8%, respectively, of third quarter 1999 ECD net sales. Sales generated from the top four ECD vendors accounted for approximately $40.0 million, or 43.0% of third quarter 2000 ECD net sales, as compared with approximately $18.4 million or 34.8% of third quarter 1999 ECD net sales. ECD net sales increased $112.4 million, or 82.3%, from $136.6 million in the first three quarters of 1999 to $249.0 million in the first three quarters of 2000. This increase was primarily the result of the factors stated above. Sales of semiconductors, passive components and electromechanical components accounted for 65.9%, 25.8% and 8.3%, respectively, of first three quarters 2000 ECD net sales, compared to 72.3%, 19.8% and 7.9%, respectively, of first three quarters 1999 ECD net sales. Sales generated from the top four ECD vendors accounted for approximately $103.0 million, or 41.4% of first three quarters 2000 ECD net sales, as compared with approximately $45.6 million or 33.4% of first three quarters 1999 ECD net sales Electronic Manufacturing Services ("EMS") net sales increased $18.9 million, or 46.4%, from $40.7 million in the third quarter of 1999 to $59.6 million in the third quarter of 2000. After adjusting for net sales of Applied Instruments, Inc. ("Applied"), acquired in October, 1999, third quarter 2000 net sales increased $14.9 million or 36.5% as compared with third quarter 1999 net sales. This increase is primarily attributable to increased demands from within the existing customer base of EMS. EMS transacted business with 87 customers in the third quarter of 2000. The three largest EMS customers accounted for approximately 16.5%, 10.5% and 9.7%, respectively, of third quarter 2000 EMS net sales (6.4%, 4.1% and 3.8%, respectively, of total Company third quarter 2000 net sales) as compared to 12.9%, 8.4% and 6.8%, respectively, of third quarter 1999 EMS net sales (5.6%, 3.6% and 2.9%, respectively, of total Company third quarter 1999 net sales). Sales from the Hibbing, Minnesota; Tampa, Florida; Gaylord, Michigan and Fremont, California manufacturing facilities accounted for approximately 36%, 33%, 24% and 7% respectively, of EMS third quarter 2000 net sales as compared with 49%, 27%, 24% and 0%, respectively, of EMS third quarter 1999 net sales. 10 EMS net sales increased $52.2 million, or 45.2%, from $115.4 million in the first three quarters of 1999 to $167.6 million in the first three quarters of 2000. After adjusting for net sales of Applied, net sales for the first three quarters of 2000 increased $39.7 million, or 34.4% as compared with net sales from the first three quarters of 1999. This increase is primarily attributable to increased demand from within the existing EMS customer base. EMS transacted business with 105 customers during the first three quarters of 2000. The three largest EMS customers accounted for approximately 14.7%, 9.3%, and 9.1%, respectively, of first three quarters 2000 EMS net sales (5.9%, 3.7% and 3.7%, respectively, of total Company first three quarters 2000 net sales) as compared to 7.6%, 7.2% and 6.0%, respectively, of first three quarters 1999 EMS net sales (3.6%, 3.4% and 2.8%, respectively, of total Company first three quarters 1999 net sales). Sales from the Hibbing, Minnesota; Tampa, Florida; Gaylord, Michigan and Fremont, California manufacturing facilities accounted for approximately 37%, 32%, 23% and 8% respectively, of total EMS sales in the first three quarters of 2000 as compared with 40%, 30%, 30% and 0%, respectively, of total EMS sales in the first three quarters of 1999. Gross Profit. Total third quarter gross profit increased $11.6 million or 86.3%, from $13.4 million in the third quarter of 1999 to $25.0 million in the third quarter of 2000. The gross margin increased from 14.3% in the third quarter of 1999 to 16.4% in the third quarter of 2000. Total gross profit increased $34.0 million, or 98.6%, from $34.4 million in the first three quarters of 1999 to $68.4 million in the first three quarters of 2000. The gross margin increased from 13.6% in the first three quarters of 1999 to 16.4% in the first three quarters of 2000. ECD third quarter gross profit increased $8.0 million, or 93.3%, from $8.7 million in the third quarter of 1999 to $16.7 million in the third quarter of 2000. ECD gross margin increased from 16.3% in the third quarter of 1999 to 18.0% in the third quarter of 2000. This increase in gross margin is due primarily to improved selling and pricing practices and stronger electronic component market conditions experienced in the third quarter of 2000 as compared with market conditions in the third quarter of 1999. ECD first three quarters gross margin increased from 16.6% in the first three quarters of 1999 to 18.6% in the first three quarters of 2000, for similar reasons. EMS gross profit increased $3.5 million, or 73.7%, from $4.8 million in the third quarter of 1999 to $8.3 million in the third quarter of 2000 and its gross margin increased from 11.7% in the third quarter of 1999 to 13.9% in the third quarter of 2000. EMS first three quarters gross profit increased $10.2 million, or 87.4% from $11.8 million in 1999 to $22.0 million in 2000 and its gross margin increased from 10.2% in the first three quarters of 1999 to 13.2% in the first three quarters of 2000. This increase in gross margin is primarily attributable to the improvements in asset utilization and manufacturing processes. Additionally, Applied generated higher gross margins than the other EMS facilities. Selling, General, and Administrative Expenses. Selling, general, and administrative expenses increased $4.3 million, or 30.6%, from $14.1 million in the third quarter of 1999 to $18.4 million in the third quarter of 2000. Third quarter selling, general and administrative expenses of Applied were approximately $915,000. After adjusting for the affects of Applied, the $3.4 million increase in selling, general and administrative expenses is primarily attributable to increased variable expenses associated with increased sales volumes. These expenses, as a percentage of net sales, decreased from 15.1% in the third quarter of 1999 to 12.1% in the third quarter of 2000. First three quarters selling, general and administrative expenses increased $13.0 million or 32.3% from $40.4 million in the first three quarters of 1999 to $53.4 million in the first three quarters of 2000. First three quarters 2000 selling, general and administrative expenses of Applied were approximately $2.7 million. After adjusting for the affects of Applied, selling, general and administrative expenses increased $10.3 million or 25.5%. This increase is primarily attributable to increased investment in our ECD sales channel and variable expenses associated with increased sales volumes. First three quarters selling, general and administrative expenses as a percentage of net sales decreased from 16.0% in the first three quarters of 1999 to 12.8% in the first three quarters of 2000. Interest Expense. Net interest expense increased $1.1 million, or 56.1%, from $2.0 million in the third quarter of 1999 to $3.1 million in the third quarter of 2000. First three quarters net interest expense increased $2.0 million, or 32.4%, from $6.1 million in the first three quarters of 1999 to $8.1 million in the first three quarters of 2000. These increases in net interest expense resulted primarily from an increase in average outstanding debt of $16.7 million from $122.9 million during the first three quarters of 1999 to $139.6 million during the first three quarters of 2000. In addition, our overall average interest rate increased from 6.7% during the first three quarters of 1999 to 7.8% during the first three quarters of 2000. 11 LIQUIDITY AND CAPITAL RESOURCES We primarily finance our operations through subordinated notes, bank credit lines, capital equipment leases, and short-term financing through supplier credit lines. Net cash provided by or used in operating activities has historically been driven by net income (loss) levels combined with fluctuations in inventory, accounts receivable and accounts payable. Operating activities for the first three quarters of 2000 used cash of approximately $31.8 million. This decrease in liquidity resulted primarily from an increase in inventories of $34.6 million and an increase in accounts receivable of $23.3 million. These items were offset by an increase in accounts payable of $13.7 million and an increase in accrued expenses of $1.0 million. Days sales in accounts receivable as of September 30, 2000 were approximately 51 days. Annualized inventory turns for the first three quarters of 2000 were 3.9 times. Capital expenditures totaled approximately $6.9 million in the first three quarters of 2000. These capital expenditures were primarily for the acquisition of manufacturing equipment and building improvements. These purchases were funded by our working capital credit facility. We believe that available credit facilities will be sufficient for us to meet our capital expenditures and working capital needs for our operations as presently conducted. However, our future liquidity and cash requirements will depend on a wide range of factors, including the level of business in existing operations, expansion of facilities, and possible acquisitions. While there can be no assurance that such financing will be available in amounts and on terms acceptable to us, we believe that such financing would likely be available on acceptable terms. Item 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK While we had no holdings of derivative financial or commodity instruments at September 30, 2000, we are exposed to financial market risks, including changes in interest rates. A majority of our borrowings bear a fixed interest rate. However, borrowings under our bank Credit Facility bears interest at a variable rate based on the prime rate or the London Interbank Offered Rate. 12 REPTRON ELECTRONICS, INC. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K a. Exhibits None b. Reports on Form 8-K None 13 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: November 12, 2000 REPTRON ELECTRONICS, INC. (Registrant) By: /s/ Michael Branca ------------------------------- Michael Branca Chief Financial Officer (Principal Financial and Accounting Officer) 14