þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 34-0514850 | |
(State or Other Jurisdiction | (I.R.S. Employer Identification No.) | |
of Incorporation or Organization) | ||
3550 West Market Street, Akron, Ohio | 44333 | |
(Address of Principal Executive Offices) | (ZIP Code) |
For the three months ended | For the nine months ended | |||||||||||||||
May 31 , | May 31, | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Unaudited | Unaudited | |||||||||||||||
Net sales |
$ | 466,955 | $ | 427,313 | $ | 1,322,450 | $ | 1,195,057 | ||||||||
Cost of sales |
407,576 | 369,891 | 1,165,372 | 1,027,025 | ||||||||||||
Selling, general and administrative expenses |
39,858 | 39,440 | 119,923 | 112,156 | ||||||||||||
Interest expense |
2,096 | 1,986 | 5,957 | 4,069 | ||||||||||||
Foreign currency transaction (gains) losses |
1,674 | 1,174 | 376 | 2,099 | ||||||||||||
Minority interest |
291 | 242 | 720 | 823 | ||||||||||||
Interest income |
(755 | ) | (1,293 | ) | (1,643 | ) | (2,504 | ) | ||||||||
Other (income) expense |
9 | (700 | ) | (72 | ) | (1,818 | ) | |||||||||
Loss on extinguishment of debt |
| | | 4,986 | ||||||||||||
Restructuring expense North America |
130 | | 1,058 | | ||||||||||||
450,879 | 410,740 | 1,291,691 | 1,146,836 | |||||||||||||
Income before taxes |
16,076 | 16,573 | 30,759 | 48,221 | ||||||||||||
Provision for U.S. and foreign income taxes |
5,955 | 7,653 | 16,626 | 23,052 | ||||||||||||
Net income |
10,121 | 8,920 | 14,133 | 25,169 | ||||||||||||
Less: Preferred stock dividends |
(13 | ) | (13 | ) | (40 | ) | (40 | ) | ||||||||
Net income applicable to common stock |
$ | 10,108 | $ | 8,907 | $ | 14,093 | $ | 25,129 | ||||||||
Weighted-average number of shares outstanding: |
||||||||||||||||
Basic |
26,995 | 29,798 | 26,942 | 30,550 | ||||||||||||
Diluted |
27,340 | 30,285 | 27,280 | 30,987 | ||||||||||||
Earnings per share of common stock: |
||||||||||||||||
Basic |
$ | 0.37 | $ | 0.30 | $ | 0.52 | $ | 0.82 | ||||||||
Diluted |
$ | 0.37 | $ | 0.29 | $ | 0.52 | $ | 0.81 | ||||||||
- 2 -
May 31, | August 31, | |||||||
2007 | 2006 | |||||||
Unaudited | ||||||||
(In thousands except share data) | ||||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 81,323 | $ | 50,662 | ||||
Accounts receivable, less allowance for doubtful accounts of $9,230 at May 31, 2007
and $9,409 at August 31, 2006 |
310,942 | 272,929 | ||||||
Inventories, average cost or market, whichever is lower |
259,760 | 286,079 | ||||||
Prepaid expenses and other current assets |
13,026 | 17,678 | ||||||
Total current assets |
665,051 | 627,348 | ||||||
Other assets: |
||||||||
Cash surrender value of life insurance |
2,242 | 1,800 | ||||||
Deferred charges |
21,720 | 20,444 | ||||||
Goodwill |
5,534 | 5,392 | ||||||
Intangible assets |
1,444 | 1,382 | ||||||
30,940 | 29,018 | |||||||
Property, plant and equipment, at cost: |
||||||||
Land and improvements |
16,404 | 15,778 | ||||||
Buildings and leasehold improvements |
141,964 | 136,526 | ||||||
Machinery and equipment |
342,809 | 317,499 | ||||||
Furniture and fixtures |
37,937 | 35,918 | ||||||
Construction in progress |
9,589 | 11,079 | ||||||
548,703 | 516,800 | |||||||
Accumulated depreciation and investment grants of $1,088 at May 31, 2007 and
$1,119 at August 31, 2006 |
357,218 | 329,921 | ||||||
191,485 | 186,879 | |||||||
$ | 887,476 | $ | 843,245 | |||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Notes payable |
$ | 2,657 | $ | 10,976 | ||||
Accounts payable |
149,761 | 135,930 | ||||||
U.S. and foreign income taxes payable |
6,430 | 14,708 | ||||||
Accrued payrolls, taxes and related benefits |
32,542 | 30,866 | ||||||
Other accrued liabilities |
37,831 | 31,081 | ||||||
Total current liabilities |
229,221 | 223,561 | ||||||
Long-term debt |
146,473 | 120,730 | ||||||
Other long-term liabilities |
89,423 | 82,482 | ||||||
Deferred income taxes |
6,655 | 7,196 | ||||||
Minority interest |
5,404 | 5,784 | ||||||
Commitments and contingencies |
| | ||||||
Stockholders equity: |
||||||||
Preferred stock, 5% cumulative, $100 par value, authorized, issued and outstanding -
10,564 shares at May 31, 2007 and August 31, 2006 |
1,057 | 1,057 | ||||||
Special stock, 1,000,000 shares authorized, none outstanding |
| | ||||||
Common Stock, $1 par value, authorized - 75,000,000 shares, issued -
41,363,806 shares at May 31, 2007 and 40,707,018 shares at August 31, 2006 |
41,364 | 40,707 | ||||||
Other capital |
95,166 | 86,894 | ||||||
Accumulated other comprehensive income |
46,892 | 32,893 | ||||||
Retained earnings |
504,985 | 502,998 | ||||||
Treasury stock, at cost, 14,113,977 shares at May 31, 2007 and
13,343,711 shares at August 31, 2006 |
(279,164 | ) | (261,057 | ) | ||||
Common stockholders equity |
409,243 | 402,435 | ||||||
Total stockholders equity |
410,300 | 403,492 | ||||||
$ | 887,476 | $ | 843,245 | |||||
- 3 -
For the nine months ended | ||||||||
May 31, | ||||||||
2007 | 2006 | |||||||
Unaudited | ||||||||
(In thousands) | ||||||||
Provided from (used in) operating activities: |
||||||||
Net income |
$ | 14,133 | $ | 25,169 | ||||
Adjustments to reconcile net income to net cash provided from (used in)
operating activities: |
||||||||
Depreciation and amortization |
18,918 | 18,296 | ||||||
Non-current deferred taxes |
(1,432 | ) | (2,148 | ) | ||||
Pension and other deferred compensation |
5,207 | 7,426 | ||||||
Postretirement benefit obligation |
1,923 | 2,527 | ||||||
Minority interest in net income of subsidiaries |
720 | 823 | ||||||
Restructuring charges, including accelerated depreciation of $1.0 million |
2,042 | | ||||||
Non-cash items related to the loss on extinguishment of debt |
| 180 | ||||||
Changes in working capital: |
||||||||
Accounts receivable |
(26,501 | ) | (46,604 | ) | ||||
Inventories |
36,393 | (35,021 | ) | |||||
Prepaid expenses |
463 | 504 | ||||||
Accounts payable |
8,884 | 29,581 | ||||||
Income taxes |
(5,479 | ) | 8,680 | |||||
Restructuring
payments |
(812 | ) | | |||||
Accrued payrolls and other accrued liabilities |
6,236 | 14,568 | ||||||
Proceeds from life insurance benefits |
| 580 | ||||||
Changes in other assets and other long-term liabilities |
822 | (6,200 | ) | |||||
Net cash provided from (used in) operating activities |
61,517 | 18,361 | ||||||
Provided from (used in) investing activities: |
||||||||
Expenditures for property, plant and equipment |
(20,029 | ) | (17,855 | ) | ||||
Disposals of property, plant and equipment |
762 | 162 | ||||||
Net cash used in investing activities |
(19,267 | ) | (17,693 | ) | ||||
Provided from (used in) financing activities: |
||||||||
Cash dividends paid |
(12,146 | ) | (13,420 | ) | ||||
Increase (decrease) in notes payable |
(8,376 | ) | 931 | |||||
Borrowings on revolving credit facilities |
56,081 | 112,557 | ||||||
Repayments on revolving credit facilities |
(35,160 | ) | (68,532 | ) | ||||
Prepayment of 7.27% senior notes |
| (50,000 | ) | |||||
Proceeds from issuance of 4.485% and floating rate senior notes |
| 91,208 | ||||||
Payment of debt issuance costs |
| (2,637 | ) | |||||
Cash distributions to minority shareholders |
(1,100 | ) | (600 | ) | ||||
Purchase of treasury stock |
(18,107 | ) | (60,036 | ) | ||||
Exercise of stock options |
6,031 | 9,589 | ||||||
Net cash provided from (used in) financing activities |
(12,777 | ) | 19,060 | |||||
Effect of exchange rate changes on cash |
1,188 | 2,224 | ||||||
Net increase (decrease) in cash and cash equivalents |
30,661 | 21,952 | ||||||
Cash and cash equivalents at beginning of period |
50,662 | 102,329 | ||||||
Cash and cash equivalents at end of period |
$ | 81,323 | $ | 124,281 | ||||
- 4 -
(1) | The interim financial statements furnished reflect all adjustments, which are, in the opinion of management, necessary for a fair presentation of the results of the interim period presented. All such adjustments are of a normal recurring nature. | |
The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. | ||
The results of operations for the nine months ended May 31, 2007 are not necessarily indicative of the results expected for the year ending August 31, 2007. | ||
The accounting policies for the periods presented are the same as described in Note 1 Summary of Significant Accounting Policies to the consolidated financial statements contained in the Companys Annual Report on Form 10-K for the fiscal year ended August 31, 2006. | ||
(2) | Effective in December 2002, the Company adopted the 2002 Equity Incentive Plan which provided for the grant of incentive stock options, nonqualified stock options, restricted stock awards and director deferred units for employees and non-employee directors. The option price of incentive stock options is the fair market value of the common shares on the date of the grant. In the case of nonqualified options, the Company grants options at 100% of the fair market value of the common shares on the date of the grant. All options vest at the rate of 33% per year, commencing on the first anniversary date of the grant. Each option expires ten years from the date of the grant. Restricted stock awards under the 2002 Equity Incentive Plan vest ratably over four years following the date of grant. In accordance with the 2006 Incentive Plan, the shares available for grant under the Companys 2002 Equity Incentive Plan were terminated upon adoption of the 2006 Incentive Plan. | |
On December 7, 2006, the Company adopted the 2006 Incentive Plan which provides for the grant of incentive stock options, nonqualified stock options, whole shares, restricted stock awards, restricted stock units, stock appreciation rights, performance shares, performance units, cash-based awards, dividend equivalents and performance-based awards. The time-based nonqualified stock options become exercisable at the rate of 33% per year, commencing on the first anniversary date of the grant. It has been the Companys practice to issue new common shares upon stock option exercise. On May 31, 2007, there were approximately 3.1 million shares available for grant pursuant to the Companys 2006 Incentive Plan. | ||
A summary of non-qualified stock options is as follows: |
Nine months ended May 31, | ||||||||||||||||
2007 | 2006 | |||||||||||||||
Outstanding | Outstanding | |||||||||||||||
shares under | Weighted-average | shares under | Weighted-average | |||||||||||||
option | exercise price | option | exercise price | |||||||||||||
Outstanding at beginning of period |
1,568,276 | $ | 18.93 | 1,672,362 | $ | 17.09 | ||||||||||
Granted |
| | 572,750 | 19.78 | ||||||||||||
Exercised |
(325,721 | ) | 18.52 | (631,977 | ) | 15.08 | ||||||||||
Forfeited and expired |
(11,037 | ) | 19.35 | (10,602 | ) | 19.16 | ||||||||||
Outstanding at end of period |
1,231,518 | 19.04 | 1,602,533 | 18.83 | ||||||||||||
Exercisable at the end of the period |
795,721 | 18.57 | 507,676 | 17.43 | ||||||||||||
- 5 -
Nine months ended | ||||
Weighted-Average Assumptions | May 31, 2007 | |||
Dividend yield |
2.63 | % | ||
Expected volatility |
26.00 | % | ||
Risk-free interest rate |
4.45 | % | ||
Correlation |
30.00 | % |
Outstanding | Weighted-Average | |||||||
Restricted Stock | Fair Market Value | |||||||
Awards | (per share) | |||||||
Outstanding at August 31, 2006 |
362,900 | $ | 18.05 | |||||
Granted |
228,250 | 21.15 | ||||||
Issued |
(102,817 | ) | 15.05 | |||||
Forfeited |
(11,833 | ) | 19.07 | |||||
Outstanding at May 31, 2007 |
476,500 | 20.15 | ||||||
(3) | All highly liquid investments purchased with an original maturity of three months or less are considered to be cash equivalents. Such investments amounted to $36.5 million at May 31, 2007 and $13.7 million at August 31, 2006. |
- 6 -
(4) | A summary of the stockholders equity section for the nine months ended May 31, 2007 and 2006 is as follows: |
Accumulated Other | Total | |||||||||||||||||||||||||||
Preferred | Common | Other | Comprehensive | Retained | Stockholders | |||||||||||||||||||||||
Stock | Stock | Capital | Income (loss) | Earnings | Treasury Stock | Equity | ||||||||||||||||||||||
Balance at September 1, 2006 |
$ | 1,057 | $ | 40,707 | $ | 86,894 | $ | 32,893 | $ | 502,998 | $ | (261,057 | ) | $ | 403,492 | |||||||||||||
Comprehensive income: |
||||||||||||||||||||||||||||
Net income |
| | | | 14,133 | | ||||||||||||||||||||||
Foreign currency
translation gain (loss) |
| | | 13,999 | | | ||||||||||||||||||||||
Total comprehensive income |
28,132 | |||||||||||||||||||||||||||
Cash dividends paid or accrued: |
||||||||||||||||||||||||||||
Preferred stock, $3.75 per share |
| | | | (40 | ) | | (40 | ) | |||||||||||||||||||
Common stock, $.435 per share |
| | | | (12,106) | * | | (12,106 | ) | |||||||||||||||||||
Stock options exercised |
| 326 | 5,705 | | | | 6,031 | |||||||||||||||||||||
Restricted stock issued |
| 331 | (331 | ) | | | | | ||||||||||||||||||||
Purchase of treasury stock |
| | | | | (18,107 | ) | (18,107 | ) | |||||||||||||||||||
Non-cash stock based
compensation |
| | 1,489 | | | | 1,489 | |||||||||||||||||||||
Amortization of
restricted stock |
| | 1,409 | | | | 1,409 | |||||||||||||||||||||
Balance at May 31, 2007 |
$ | 1,057 | $ | 41,364 | $ | 95,166 | $ | 46,892 | $ | 504,985 | $ | (279,164 | ) | $ | 410,300 | |||||||||||||
* | Includes approximately $.3 million related to the redemption of the special stock purchase rights which were paid at a price of $.01 per share for shareholders of record on January 19, 2007. This $.01 is not included in the $.435 per share for common stock dividends. |
Accumulated Other | Unearned Stock | Total | ||||||||||||||||||||||||||||||
Preferred | Common | Other | Comprehensive | Retained | Treasury | Grant | Stockholders | |||||||||||||||||||||||||
Stock | Stock | Capital | Income (loss) | Earnings | Stock | Compensation | Equity | |||||||||||||||||||||||||
Balance at September 1, 2005 |
$ | 1,057 | $ | 39,989 | $ | 74,973 | $ | 26,552 | $ | 487,998 | $ | (165,232 | ) | $ | (3,234 | ) | $ | 462,103 | ||||||||||||||
Comprehensive income: |
||||||||||||||||||||||||||||||||
Net income |
| | | | 25,169 | | | |||||||||||||||||||||||||
Foreign currency
translation gain (loss) |
| | | 4,273 | | | | |||||||||||||||||||||||||
Total comprehensive income |
29,442 | |||||||||||||||||||||||||||||||
Cash dividends paid or accrued: |
||||||||||||||||||||||||||||||||
Preferred stock, $3.75 per share |
| | | | (40 | ) | | | (40 | ) | ||||||||||||||||||||||
Common stock, $.435 per share |
| | | | (13,380 | ) | | | (13,380 | ) | ||||||||||||||||||||||
Stock options exercised |
| 635 | 8,954 | | | | | 9,589 | ||||||||||||||||||||||||
Restricted stock issued |
3 | (3 | ) | | ||||||||||||||||||||||||||||
Purchase of treasury stock |
| | | | | (60,036 | ) | | (60,036 | ) | ||||||||||||||||||||||
Reclassification due to
adoption of SFAS 123R |
| | (3,234 | ) | | | | 3,234 | | |||||||||||||||||||||||
Non-cash stock based
compensation |
| | 3,610 | | | | | 3,610 | ||||||||||||||||||||||||
Amortization of
restricted stock |
| | 1,060 | | | | | 1,060 | ||||||||||||||||||||||||
Balance at May 31, 2006 |
$ | 1,057 | $ | 40,627 | $ | 85,360 | $ | 30,825 | $ | 499,747 | $ | (225,268 | ) | $ | | $ | 432,348 | |||||||||||||||
- 7 -
(5) | Basic earnings per share is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if common stock equivalents were exercised, and the impact of restricted stock and performance based awards expected to vest, which would then share in the earnings of the Company. | |
The difference between basic and diluted weighted-average common shares results from the assumed exercise of outstanding stock options and grants of restricted stock, calculated using the treasury stock method. The following presents the number of incremental weighted-average shares used in computing diluted per share amounts: |
Three Months Ended May 31, | Nine Months Ended May 31, | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
(In thousands) | ||||||||||||||||
Weighted-average shares outstanding: |
||||||||||||||||
Basic |
26,995 | 29,798 | 26,942 | 30,550 | ||||||||||||
Incremental shares from stock options |
165 | 208 | 156 | 188 | ||||||||||||
Incremental shares from restricted stock |
180 | 279 | 182 | 249 | ||||||||||||
Diluted |
27,340 | 30,285 | 27,280 | 30,987 | ||||||||||||
For the three and nine months ended May 31, 2007, there were approximately .1 million and .3 million, respectively, of equivalent shares related to stock options that were excluded from diluted weighted-average shares outstanding because inclusion would have been anti-dilutive. | ||
(6) | The components of Accumulated Other Comprehensive Income (Loss) are as follows: |
May 31, | August 31, | |||||||
2007 | 2006 | |||||||
(In thousands) | ||||||||
Foreign currency translation gain |
$ | 53,201 | $ | 39,202 | ||||
Minimum pension liability |
(6,309 | ) | (6,309 | ) | ||||
$ | 46,892 | $ | 32,893 | |||||
Foreign currency translation gains are not tax effected as such gains are considered permanently reinvested. Minimum pension liability adjustments are recorded net of tax using the applicable effective tax rate. | ||
(7) | The Company is engaged in the sale of plastic resins in various forms, which are used as raw materials by its customers. To identify reportable segments, the Company considered its operating structure and the types of information subject to regular review by its President and Chief Executive Officer, who is the Chief Operating Decision Maker. On this basis, the Company operates in two geographic segments, North America and Europe, including Asia (Europe). A reconciliation of segment income to consolidated income (loss) before taxes is presented below: |
- 8 -
North | ||||||||||||||||
America | Europe | Other | Consolidated | |||||||||||||
Three months ended May 31, 2007 |
||||||||||||||||
Sales to unaffiliated customers |
$ | 124,464 | $ | 342,491 | $ | | $ | 466,955 | ||||||||
Gross profit |
$ | 11,479 | $ | 47,900 | $ | | $ | 59,379 | ||||||||
Income (loss) before interest,
restructuring and taxes |
$ | (5,202 | ) | $ | 22,749 | $ | | $ | 17,547 | |||||||
Interest expense, net |
| | (1,341 | ) | (1,341 | ) | ||||||||||
Restructuring North America |
| | (130 | ) | (130 | ) | ||||||||||
Income (loss) before taxes |
$ | (5,202 | ) | $ | 22,749 | $ | (1,471 | ) | $ | 16,076 | ||||||
Three months ended May 31, 2006 |
||||||||||||||||
Sales to unaffiliated customers |
$ | 128,420 | $ | 298,893 | $ | | $ | 427,313 | ||||||||
Gross profit |
$ | 13,407 | $ | 44,015 | $ | | $ | 57,422 | ||||||||
Income (loss) before interest and taxes |
$ | (4,034 | ) | $ | 21,300 | $ | | $ | 17,266 | |||||||
Interest expense, net |
| | (693 | ) | (693 | ) | ||||||||||
Income (loss) before taxes |
$ | (4,034 | ) | $ | 21,300 | $ | (693 | ) | $ | 16,573 | ||||||
Nine months ended May 31, 2007 |
||||||||||||||||
Sales to unaffiliated customers |
$ | 354,509 | $ | 967,941 | $ | | $ | 1,322,450 | ||||||||
Gross profit |
$ | 29,359 | $ | 127,719 | $ | | $ | 157,078 | ||||||||
Income (loss) before interest,
restructuring and taxes |
$ | (18,881 | ) | $ | 55,012 | $ | | $ | 36,131 | |||||||
Interest expense, net |
| | (4,314 | ) | (4,314 | ) | ||||||||||
Restructuring North America |
| | (1,058 | ) | (1,058 | ) | ||||||||||
Income (loss) before taxes |
$ | (18,881 | ) | $ | 55,012 | $ | (5,372 | ) | $ | 30,759 | ||||||
Nine months ended May 31, 2006 |
||||||||||||||||
Sales to unaffiliated customers |
$ | 369,596 | $ | 825,461 | $ | | $ | 1,195,057 | ||||||||
Gross profit |
$ | 43,755 | $ | 124,277 | $ | | $ | 168,032 | ||||||||
Income (loss) before interest,
debt extinguishment and taxes |
$ | (6,860 | ) | $ | 61,631 | $ | | $ | 54,771 | |||||||
Interest expense, net |
| | (1,564 | ) | (1,564 | ) | ||||||||||
Loss on extinguishment of debt |
| | (4,986 | ) | (4,986 | ) | ||||||||||
Income (loss) before taxes |
$ | (6,860 | ) | $ | 61,631 | $ | (6,550 | ) | $ | 48,221 | ||||||
- 9 -
For the three months ended May 31, | ||||||||||||||||
Product Family | 2007 | 2006 | ||||||||||||||
(In thousands, except for %s) | ||||||||||||||||
Color and additive concentrates |
$ | 163,534 | 35 | % | $ | 159,810 | 37 | % | ||||||||
Polyolefins |
146,985 | 31 | 126,457 | 30 | ||||||||||||
Engineered compounds |
105,930 | 23 | 102,620 | 24 | ||||||||||||
Polyvinyl chloride (PVC) |
16,659 | 4 | 16,225 | 4 | ||||||||||||
Tolling |
4,555 | 1 | 4,355 | 1 | ||||||||||||
Other |
29,292 | 6 | 17,846 | 4 | ||||||||||||
$ | 466,955 | 100 | % | $ | 427,313 | 100 | % | |||||||||
For the nine months ended May 31, | ||||||||||||||||
Product Family | 2007 | 2006 | ||||||||||||||
(In thousands, except for %s) | ||||||||||||||||
Color and additive concentrates |
$ | 461,578 | 35 | % | $ | 425,094 | 36 | % | ||||||||
Polyolefins |
411,630 | 31 | 364,278 | 30 | ||||||||||||
Engineered compounds |
319,666 | 24 | 295,347 | 25 | ||||||||||||
Polyvinyl chloride (PVC) |
47,705 | 4 | 45,899 | 4 | ||||||||||||
Tolling |
15,364 | 1 | 11,858 | 1 | ||||||||||||
Other |
66,507 | 5 | 52,581 | 4 | ||||||||||||
$ | 1,322,450 | 100 | % | $ | 1,195,057 | 100 | % | |||||||||
(8) | A reconciliation of the statutory U.S. federal income tax rate of 35% with the effective tax rate is as follows: |
Three months ended | Nine months ended | |||||||||||||||
May 31, | May 31, | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Statutory U.S. tax rate |
35.0 | % | 35.0 | % | 35.0 | % | 35.0 | % | ||||||||
Loss on extinguishment of debt
- no benefit |
| | | 3.6 | ||||||||||||
Domestic losses with no benefit |
9.3 | 11.6 | 26.5 | 9.3 | ||||||||||||
Estimated dividends to be
repatriated from Europe |
| | | 4.7 | ||||||||||||
Amount of foreign taxes at less than
statutory U.S. tax rate |
(8.3 | ) | (5.9 | ) | (9.4 | ) | (7.7 | ) | ||||||||
Tax contingencies |
| 4.6 | | 2.4 | ||||||||||||
Other |
1.0 | 0.9 | 1.9 | 0.5 | ||||||||||||
37.0 | % | 46.2 | % | 54.0 | % | 47.8 | % | |||||||||
- 10 -
(9) | During fiscal 2007, the Company announced multiple phases of a restructuring plan to restore its North American segment to profitability. In November 2006, in order to balance capacity with demand, reduce costs and improve efficiencies in the North American segment, the Company announced a plan to close two of its manufacturing lines at its Orange, Texas plant, close a warehouse also located in Orange, Texas and reduce the workforce at its Bellevue, Ohio plant. The two manufacturing lines at the Orange, Texas plant are anticipated to continue production through the fourth quarter of fiscal 2007 and the Orange, Texas warehouse closed during the third quarter of fiscal 2007. In connection with this plan, the Company reduced its workforce by 65 positions. | |
In February 2007, the Company announced the second phase of its North America restructuring plan which implements several initiatives that will improve the Companys operations and profitability in North America. These plans are expected to deliver annual savings of approximately $14 million to $15 million, $7 million of which the Company expects to realize in the second half of fiscal 2007. These estimated savings are coming from the following initiatives: |
| Reduction in the Companys North American workforce by approximately 30 positions, primarily in the sales and administrative functions, | ||
| Reduction in the Companys United States retiree healthcare coverage plan, | ||
| Greater cost sharing of employee and retiree medical plan costs, | ||
| Broad discretionary selling, general and administrative cost reductions, | ||
| Savings from improved purchasing processes, and | ||
| Improved logistics efficiencies. |
Fiscal 2007 | Accrual balance | |||||||||||
charges | Paid fiscal 2007 | May 31, 2007 | ||||||||||
Employee related costs |
$ | 990 | $ | (744 | ) | $ | 246 | |||||
Other costs |
68 | (68 | ) | | ||||||||
Restructuring |
1,058 | $ | (812 | ) | $ | 246 | ||||||
Accelerated depreciation, included in North America
cost of sales in 2007 |
984 | |||||||||||
$ | 2,042 | |||||||||||
- 11 -
(10) | The components of the Companys net periodic benefit cost for defined benefit pension plans and other postretirement benefits are shown below. | |
Net periodic pension cost recognized included the following components: |
Three Months Ended May 31, | Nine Months Ended May 31, | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
(In thousands) | ||||||||||||||||
Service cost |
$ | 630 | $ | 594 | $ | 1,843 | $ | 1,734 | ||||||||
Interest cost |
953 | 775 | 2,777 | 2,266 | ||||||||||||
Expected return on plan assets |
(267 | ) | (218 | ) | (786 | ) | (640 | ) | ||||||||
Net actuarial loss and net
amortization of prior service
cost and transition obligation |
340 | 223 | 847 | 656 | ||||||||||||
Net periodic benefit cost |
$ | 1,656 | $ | 1,374 | $ | 4,681 | $ | 4,016 | ||||||||
Three Months Ended May 31, | Nine Months Ended May 31, | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
(In thousands) | ||||||||||||||||
Service cost |
$ | 192 | $ | 499 | $ | 1,113 | $ | 1,498 | ||||||||
Interest cost |
313 | 417 | 1,195 | 1,250 | ||||||||||||
Net amortization of prior service
cost and unrecognized loss |
(119 | ) | 117 | (40 | ) | 350 | ||||||||||
Net periodic benefit cost |
$ | 386 | $ | 1,033 | $ | 2,268 | $ | 3,098 | ||||||||
The Companys postretirement benefit costs for the three and nine months ended May 31, 2007 decreased as a result of a plan amendment to its U.S. retiree healthcare coverage plan as a part of its North American restructuring plan. | ||
(11) | The Company is engaged in various legal proceedings arising in the ordinary course of business. The ultimate outcome of these proceedings is not expected to have a material adverse effect on the Companys financial condition, results of operations or cash flows. | |
During fiscal 2006, a railroad company filed suit against the Company seeking compensatory damages and reimbursement of environmental costs to investigate and remediate property located near its Bellevue, Ohio facility. The Company and the railroad company agreed that the Company would pay the railroad company a settlement of approximately $64,000. This payment is expected to be made during the fourth quarter of fiscal 2007. With payment of this settlement, the Company will be released from liability for current and future right of way investigations on this property. | ||
(12) | One of the Companys major facilities in Texas was closed for a two-week period in September 2005 because of Hurricane Rita. In addition, a warehouse in Texas also incurred damage from Hurricane Rita. The claim for this hurricane was filed with the insurance carriers, but the ultimate amount related to this claim had not yet been realized as of May 31, 2007. In June 2007, the Company received $1.5 million as partial settlement of this claim which will be recorded as a gain in the fourth quarter of fiscal 2007. |
- 12 -
(13) | On February 28, 2006 the Company completed a refinancing in which it replaced a $100.0 million credit facility with a new $260.0 million credit facility. The new credit facility consists of $260.0 million of revolving credit lines of which the U.S. dollar equivalent of $160.0 million is available to certain of the Companys foreign subsidiaries for borrowings in euros or other currencies. The facility, which matures on February 28, 2011, contains certain covenants that, among other things, limit the Companys ability to incur indebtedness and enter into certain transactions beyond specified limits. The Company must also maintain a minimum interest coverage ratio and may not exceed a maximum net debt leverage ratio. | |
Interest rates on the facility are based on LIBOR or EURIBOR (depending on the borrowing currency) plus a spread determined by the Companys total leverage ratio. The Company also pays a facility fee on the commitments whether used or unused. At May 31, 2007, there was $48.7 million outstanding under the revolving credit facility. | ||
The Company used proceeds from the new credit facility to prepay its $50.0 million in 7.27% senior notes which were due in 2009 on February 28, 2006. In conjunction with the prepayment of these notes the Company recorded a loss on extinguishment of debt of approximately $5.0 million, which included a make-whole provision of approximately $3.3 million, interest rate swap termination fee of $1.5 million and the write-off of related deferred debt costs and deferred interest. Deferred interest related to proceeds deferred in 1999 when the Company completed an interest rate lock effectively reducing the annual interest rate from 7.27% to 7.14% over the life of the notes. In connection with the prepayment of debt and termination of this interest rate lock, the remaining balance of these deferred proceeds of $.2 million was written off. | ||
On March 1, 2006, the Company issued senior guaranteed notes in the private placement market consisting of the following: |
| $30.0 million of senior notes in the United States maturing on March 1, 2013 with an interest rate of LIBOR plus 80 bps | ||
| 50.3 million of senior notes in Germany maturing on March 1, 2016 with an interest rate of 4.485% (Euro Notes). The Euro Notes approximate $67.7 million at May 31, 2007. |
The senior notes are guaranteed by the Companys wholly-owned domestic subsidiaries and contain covenants substantially identical to those in the $260.0 million revolving credit facility. The senior notes are also secured by up to 65% of the capital stock of certain of the Companys directly owned foreign subsidiaries. | ||
Costs of $2.6 million related to the issuance of the private placement notes and the revolving credit facility were deferred and are being amortized over the contractual lives of the senior notes and the revolving credit facility, respectively. | ||
(14) | In the third quarter of fiscal 2007, the Company determined that its anticipated customer claims for products sold in Europe are expected to be more favorable than originally anticipated. Accordingly, the Company changed its estimate for these reserves and recorded an adjustment which resulted in an increase in sales and pre-tax income of $2.4 million ($1.4 million in net income) for the three and nine months ended May 31, 2007. | |
(15) | In July 2006, the FASB issued FASB interpretation No. 48, (FIN 48), Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109, Accounting for Income Taxes. FIN 48 clarifies the accounting for uncertain income tax positions that are recognized in a companys financial statements. FIN 48 prescribes a comprehensive model for how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return. Under the interpretation, the financial statements will reflect expected future tax consequences of such positions presuming the taxing authorities full knowledge of the position and all relevant facts, but without considering time values. The adoption of FIN 48 is required by the Company in the beginning of fiscal year 2008. The Company is currently evaluating the impact, if any, of FIN 48 on its financial position, results of operations and cash flows. |
- 13 -
(16) | In September 2006, the FASB issued FASB Statement No. 157, (SFAS 157), Fair Value Measurement. SFAS 157 addresses standardizing the measurement of fair value for companies who are required to use a fair value measure of recognition for recognition or disclosure purposes. The FASB defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measure date. The Company is required to adopt SFAS 157 for fiscal year 2009. The Company is currently evaluating the impact, if any, of SFAS 157 on its financial position, results of operations and cash flows. | |
(17) | In September 2006, the FASB issued FASB Statement No. 158, (SFAS 158), Employers Accounting for Defined Benefit Pension and Other Postretirement Plans. SFAS 158 requires companies to recognize the funded status of defined benefit pension and other postretirement plans as a net asset or liability in its financial statements. In addition, disclosure requirements related to such plans are affected by SFAS 158. As required by SFAS 158, the Company will use a prospective approach in its adoption of SFAS 158. The Company will begin recognition of the funded status of its defined benefit postretirement plans and include the required disclosures under the provisions of SFAS 158 at the end of fiscal year 2007. If the Company had adopted SFAS 158 at May 31, 2007, the Companys liabilities would have increased by approximately $17.0 million and accumulated other comprehensive income would have decreased by approximately $17.0 million, excluding any tax effect. The adoption of SFAS 158 is not expected to impact the Companys compliance with its debt covenants of its borrowing arrangements or its cash position. Additionally, the Company does not expect the adoption of SFAS 158 to affect the results of operations. | |
(18) | In February 2007, the FASB issued FASB Statement No. 159, (SFAS 159), The Fair Value Option for Financial Assets and Financial Liabilities Including an Amendment of FASB Statement No. 115. SFAS 159 permits entities to choose, at specified election dates, to measure many financial instruments and certain other items at fair value that are not currently measured at fair value. Unrealized gains and losses on items for which the fair value option has been elected would be reported in earnings at each subsequent reporting date. Upfront costs and fees related to items for which the fair value option is elected shall be recognized in earnings as incurred and not deferred. The Company is required to adopt SFAS 159 for fiscal year 2009. The Company is currently evaluating the impact, if any, of SFAS 159 on its financial position, results of operations and cash flows. |
- 14 -
Increase (decrease) | ||||||||
Three months ended | Nine months ended | |||||||
May 31, 2007 | May 31, 2007 | |||||||
Tonnage |
5.3 | % | 4.7 | % | ||||
Price and product mix |
(1.9 | ) | 0.1 | |||||
Translation effect |
5.9 | 5.9 | ||||||
9.3 | % | 10.7 | % | |||||
Three months ended | Increase | Nine months ended | Increase | |||||||||||||||||||||||||||||
May 31, | (decrease) | May 31, | (decrease) | |||||||||||||||||||||||||||||
Sales | 2007 | 2006 | $ | % | 2007 | 2006 | $ | % | ||||||||||||||||||||||||
(In thousands, except for %s) | ||||||||||||||||||||||||||||||||
Europe |
$ | 342,491 | $ | 298,893 | $ | 43,598 | 14.6 | % | $ | 967,941 | $ | 825,461 | $ | 142,480 | 17.3 | % | ||||||||||||||||
North America |
124,464 | 128,420 | (3,956 | ) | -3.1 | % | 354,509 | 369,596 | (15,087 | ) | -4.1 | % | ||||||||||||||||||||
$ | 466,955 | $ | 427,313 | $ | 39,642 | 9.3 | % | $ | 1,322,450 | $ | 1,195,057 | $ | 127,393 | 10.7 | % | |||||||||||||||||
- 15 -
For the three months ended May 31, | ||||||||||||||||
Product Family | 2007 | 2006 | ||||||||||||||
(In thousands, except for %s) | ||||||||||||||||
Color and additive concentrates |
$ | 163,534 | 35 | % | $ | 159,810 | 37 | % | ||||||||
Polyolefins |
146,985 | 31 | 126,457 | 30 | ||||||||||||
Engineered compounds |
105,930 | 23 | 102,620 | 24 | ||||||||||||
Polyvinyl chloride (PVC) |
16,659 | 4 | 16,225 | 4 | ||||||||||||
Tolling |
4,555 | 1 | 4,355 | 1 | ||||||||||||
Other |
29,292 | 6 | 17,846 | 4 | ||||||||||||
$ | 466,955 | 100 | % | $ | 427,313 | 100 | % | |||||||||
For the nine months ended May 31, | ||||||||||||||||
Product Family | 2007 | 2006 | ||||||||||||||
(In thousands, except for %s) | ||||||||||||||||
Color and additive concentrates |
$ | 461,578 | 35 | % | $ | 425,094 | 36 | % | ||||||||
Polyolefins |
411,630 | 31 | 364,278 | 30 | ||||||||||||
Engineered compounds |
319,666 | 24 | 295,347 | 25 | ||||||||||||
Polyvinyl chloride (PVC) |
47,705 | 4 | 45,899 | 4 | ||||||||||||
Tolling |
15,364 | 1 | 11,858 | 1 | ||||||||||||
Other |
66,507 | 5 | 52,581 | 4 | ||||||||||||
$ | 1,322,450 | 100 | % | $ | 1,195,057 | 100 | % | |||||||||
- 16 -
(In thousands, except for %s) | ||||||||||||||||
For the three months ended May 31, | Increase/(decrease) | |||||||||||||||
Gross profit $ | 2007 | 2006 | $ | % | ||||||||||||
Europe |
$ | 47,900 | $ | 44,015 | $ | 3,885 | 8.8 | |||||||||
North America |
11,479 | 13,407 | (1,928 | ) | (14.4 | ) | ||||||||||
$ | 59,379 | $ | 57,422 | $ | 1,957 | 3.4 | ||||||||||
Gross profit % | ||||||||||||||||
Europe |
14.0 | 14.7 | ||||||||||||||
North America |
9.2 | 10.4 | ||||||||||||||
Consolidated |
12.7 | 13.4 | ||||||||||||||
For the nine months ended May 31, | Increase/(decrease) | |||||||||||||||
Gross profit $ | 2007 | 2006 | $ | % | ||||||||||||
Europe |
$ | 127,719 | $ | 124,277 | $ | 3,442 | 2.8 | |||||||||
North America |
29,359 | 43,755 | (14,396 | ) | (32.9 | ) | ||||||||||
$ | 157,078 | $ | 168,032 | $ | (10,954 | ) | (6.5 | ) | ||||||||
Gross profit % | ||||||||||||||||
Europe |
13.2 | 15.1 | ||||||||||||||
North America |
8.3 | 11.8 | ||||||||||||||
Consolidated |
11.9 | 14.1 |
| Increased sales of lower margin products which drove increased sales tonnage, | ||
| Decrease of production at the Companys European manufacturing facilities, combined with successful efforts to reduce inventory negatively impacted the capacity utilization at these facilities, and | ||
| Higher raw material costs were not able to be fully passed on through increased selling prices due to competitive price pressures. |
- 17 -
For the three months ended May 31, | For the nine months ended May 31, | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Europe |
93 | % | 113 | % | 93 | % | 102 | % | ||||||||
North America |
88 | % | 82 | % | 82 | % | 83 | % | ||||||||
Worldwide |
91 | % | 100 | % | 89 | % | 94 | % |
(In thousands, except for %s) | ||||||||||||||||
For the three months ended May 31, 2007 | For the nine months ended May 31, 2007 | |||||||||||||||
$ Increase/ | % Increase/ | $ Increase/ | % Increase/ | |||||||||||||
(decrease) | (decrease) | (decrease) | (decrease) | |||||||||||||
Change in selling, general and
administrative expenses |
$ | 418 | 1.1 | % | $ | 7,767 | 6.9 | % | ||||||||
Effect of foreign currency
translation |
1,665 | 4.2 | 4,898 | 4.4 | ||||||||||||
Change in selling, general and
administrative expenses,
excluding
the effect of foreign currency
translation |
$ | (1,247 | ) | (3.1 | )% | $ | 2,869 | 2.5 | % | |||||||
- 18 -
| Reduction in the Companys North American workforce by approximately 30 positions, primarily in the sales and administrative functions, | ||
| Reduction in the Companys United States retiree healthcare coverage plan, | ||
| Greater cost sharing of employee and retiree medical plan costs, | ||
| Broad discretionary selling, general and administrative cost reductions, | ||
| Savings from improved purchasing processes, and | ||
| Improved logistics efficiencies. |
(In thousands) | ||||||||||||
Fiscal 2007 | Accrual balance | |||||||||||
charges | Paid fiscal 2007 | May 31, 2007 | ||||||||||
Employee related costs |
$ | 990 | $ | (744 | ) | $ | 246 | |||||
Other costs |
68 | (68 | ) | | ||||||||
Restructuring |
1,058 | $ | (812 | ) | $ | 246 | ||||||
Accelerated depreciation, included in North America
cost of sales in 2007 |
984 | |||||||||||
$ | 2,042 | |||||||||||
- 19 -
For the three months ended May 31, | For the nine months ended May 31, | |||||||||||||||||||||||
Favorable | Favorable | |||||||||||||||||||||||
2007 | 2006 | (Unfavorable) | 2007 | 2006 | (Unfavorable) | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Europe |
$ | 22,749 | $ | 21,300 | $ | 1,449 | $ | 55,012 | $ | 61,631 | $ | (6,619 | ) | |||||||||||
North America |
(5,202 | ) | (4,034 | ) | (1,168 | ) | (18,881 | ) | (6,860 | ) | (12,021 | ) | ||||||||||||
Restructuring, North
America |
(130 | ) | | (130 | ) | (1,058 | ) | | (1,058 | ) | ||||||||||||||
Loss on extinguishment
of debt |
| | | | (4,986 | ) | 4,986 | |||||||||||||||||
Interest expense, net |
(1,341 | ) | (693 | ) | (648 | ) | (4,314 | ) | (1,564 | ) | (2,750 | ) | ||||||||||||
Income before taxes |
$ | 16,076 | $ | 16,573 | $ | (497 | ) | $ | 30,759 | $ | 48,221 | $ | (17,462 | ) | ||||||||||
- 20 -
Three months ended | Nine months ended | |||||||||||||||
May 31, | May 31, | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Statutory U.S. tax rate |
35.0 | % | 35.0 | % | 35.0 | % | 35.0 | % | ||||||||
Loss on extinguishment of debt
- no benefit |
| | | 3.6 | ||||||||||||
Domestic losses with no benefit |
9.3 | 11.6 | 26.5 | 9.3 | ||||||||||||
Estimated dividends to be
repatriated from Europe |
| | | 4.7 | ||||||||||||
Amount of foreign taxes at less than
statutory U.S. tax rate |
(8.3 | ) | (5.9 | ) | (9.4 | ) | (7.7 | ) | ||||||||
Tax contingencies |
| 4.6 | | 2.4 | ||||||||||||
Other |
1.0 | 0.9 | 1.9 | 0.5 | ||||||||||||
37.0 | % | 46.2 | % | 54.0 | % | 47.8 | % | |||||||||
May 31, | August 31, | |||||||||||
2007 | 2006 | % Change | ||||||||||
(in millions, except for %s) | ||||||||||||
Cash and Cash Equivalents |
$ | 81.3 | $ | 50.7 | 60.4 | % | ||||||
Working Capital, excluding cash |
354.5 | 353.1 | 0.4 | |||||||||
Long-Term Debt |
146.5 | 120.7 | 21.4 | |||||||||
Stockholders Equity |
410.3 | 403.5 | 1.7 |
- 21 -
| $30.0 million of Senior Notes in the United States, maturing on March 1, 2013, with a variable interest rate of LIBOR plus 80 bps. | ||
| 50.3 million of Senior Notes in Germany, maturing on March 1, 2016, with a fixed interest rate of 4.485% (Euro Notes). The Euro Notes approximate $67.7 million at May 31, 2007. |
- 22 -
(In millions) | ||||||||||||||||||||
Less than 1 | ||||||||||||||||||||
Total | year | 1-3 years | 3-5 years | After 5 years | ||||||||||||||||
Short-term Debt |
$ | 2.7 | $ | 2.7 | $ | | $ | | $ | | ||||||||||
Long-term Debt |
146.5 | | | 48.7 | 97.8 | |||||||||||||||
$ | 149.2 | $ | 2.7 | $ | | $ | 48.7 | $ | 97.8 | |||||||||||
- 23 -
- 24 -
§ | Worldwide and regional economic, business and political conditions, including continuing economic uncertainties in some or all of the Companys major product markets; | |
§ | Fluctuations in the value of currencies in major areas where the Company operates, including the U.S. dollar, euro, U.K. pound sterling, Canadian dollar, Mexican peso, Chinese yuan and Indonesian rupiah; | |
§ | Fluctuations in the prices of sources of energy or plastic resins and other raw materials; | |
§ | Changes in customer demand and requirements; | |
§ | Escalation in the cost of providing employee health care; | |
§ | The outcome of any legal claims known or unknown; and | |
§ | The performance of the North American automotive market. |
- 25 -
- 26 -
(a) | Not applicable. | |
(b) | Not applicable. | |
(c) | On April 25, 2006, the Company announced that its Board of Directors authorized the repurchase of up to 6.75 million shares of its outstanding common stock (the Repurchase Program) representing approximately 23.3% of the Companys outstanding shares at the authorization date. It is anticipated that the Company will complete the Repurchase Program through open market repurchases from time to time. The number of shares to be repurchased and the timing of repurchases will depend upon the prevailing market prices and any other considerations that may, in the opinion of the Board of Directors or management, affect the advisability of repurchasing shares. The Repurchase Program replaced the Companys prior repurchase authorization, under which approximately 1.7 million shares had remained authorized for repurchase. The Companys purchases of its common stock under the Repurchase Program during the third quarter of fiscal 2007 were as follows: |
Average price paid per | Total number of shares | Maximum number of | ||||||||||||||
Total number of shares | share (excluding | purchased as part of a | shares that may yet be | |||||||||||||
repurchased | commissions) | publicly announced plan | purchased under the plan | |||||||||||||
Beginning shares available |
3,979,653 | |||||||||||||||
March 1-31, 2007 | | $ | | | 3,979,653 | |||||||||||
April 1-30, 2007 | | $ | | | 3,979,653 | |||||||||||
May 1-31, 2007 | | $ | | | 3,979,653 | |||||||||||
Total |
| $ | | | 3,979,653 | |||||||||||
- 27 -
Exhibit Number | Exhibit | |
3.1
|
Amended and Restated Articles of Incorporation of the Company (for purposes of Commission reporting compliance only) (filed herewith). | |
3.2
|
Amended and Restated Bylaws of the Company (for purposes of Commission reporting compliance only) (filed herewith). | |
10.1
|
Form of Restricted Stock Agreement (Time Based) (filed herewith). | |
10.2
|
Form of Restricted Stock Agreement (Performance Based) (filed herewith). | |
10.3
|
Form of Restricted Unit Agreement (filed herewith). | |
10.4
|
Form of Restricted Stock Agreement (Non-Employee Directors) (filed herewith). | |
10.5
|
Form of Restricted Unit Agreement (Non-Employee Directors) (filed herewith). | |
31.1
|
Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a). | |
31.2
|
Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a). | |
32
|
Certifications of Principal Executive and Principal Financial Officers pursuant to 18 U.S.C. 1350. |
- 28 -
Date: June 29, 2007
|
A. Schulman, Inc. | |
(Registrant) | ||
/s/ Paul F. DeSantis | ||
Paul F. DeSantis, Chief Financial Officer (Signing on behalf of Registrant as a duly authorized officer of Registrant and signing as the Principal Financial Officer of Registrant) |
- 29 -