1
TWIN DISC, INCORPORATED
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 2003 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)
(Zip Code)
Registrant's telephone number, including area code
(262) 638-4000
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 .
At September 30 2003, the registrant had 2,836,332 shares of its
common stock
outstanding.
2
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
TWIN DISC, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30
June 30
2003
2003
----
- ----
Assets
Current assets:
Cash and cash equivalents $ 8,524 $
5,908
Trade accounts receivable, net 25,945
35,367
Inventories, net 49,291
47,247
Deferred income taxes 4,469
4,469
Other 4,240
4,104
--------
- --------
Total current assets 92,469
97,095
Property, plant and equipment, net 29,311
30,210
Investment in affiliates 2,627
2,550
Goodwill 12,690
12,876
Deferred income taxes 20,215
20,164
Intangible pension asset 24
24
Other assets 7,835
7,439
--------
- --------
$165,171
$170,358
--------
- --------
--------
- --------
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable $ 1,057 $
2,429
Current maturities on long-term debt 2,857
2,857
Accounts payable 14,273
16,115
Accrued liabilities 25,073
24,885
--------
- --------
Total current liabilities 43,260
46,286
Long-term debt 15,340
16,584
Accrued retirement benefits 56,528
56,732
--------
- --------
115,128
119,602
Minority Interest 495
485
Shareholders' Equity:
Common stock 11,653
11,653
Retained earnings 82,871
83,191
Unearned Compensation (408)
- -
Accumulated other comprehensive loss (27,587)
(26,978)
--------
- --------
66,529
67,866
Less treasury stock, at cost 16,981
17,595
--------
- --------
Total shareholders' equity 49,548
50,271
--------
- --------
$165,171
$170,358
--------
- --------
--------
- --------
The notes to consolidated financial statements are an integral
part of this statement. Amounts in thousands.
3
TWIN DISC, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months
Ended
September
30
2003
2002
----
- ----
Net sales $37,966
$36,521
Cost of goods sold 29,070
30,591
-------
- -------
8,896
5 930
Marketing, engineering and
administrative expenses 8,358
8 319
Interest expense 280
308
Other income, net (205)
(41)
-------
- -------
8,433
8,586
-------
- -------
Earnings (loss) before income taxes
and minority interest 463
(2,656)
Income taxes 281
(895)
------- --
- -----
Earnings (loss) before minority interest 182
(1,761)
Minority Interest (11)
30
-------
- -------
Net earnings (loss) $ 171 ($
1,731)
-------
- -------
-------
- -------
Dividends per share $ 0.175 $
0.175
Earnings per share data:
Basic earnings (loss) per share $ 0.06 ($
0.62)
Diluted earnings (loss) per share $ 0.06 ($
0.62)
Shares outstanding data:
Average shares outstanding 2,803
2,808
Dilutive stock options 36
- -
-------
- -------
Diluted shares outstanding 2,839
2,808
-------
- -------
-------
- -------
Comprehensive income (loss):
Net earnings (loss) $ 171 ($
1,731)
Other comprehensive loss:
Foreign currency translation adjustment (609)
(37)
-------
- -------
Comprehensive loss: ($ 438) ($
1,768)
-------
- -------
------- --
- -----
In thousands of dollars except per share statistics. Per share
figures are based on shares outstanding data.
The notes to consolidated financial statements are an integral
part of this
statement.
4
TWIN DISC, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months
Ended
September
30
2003
2002
----
- ----
Cash flows from operating activities:
Net earnings (loss) $ 171 ($
1,731)
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation and amortization 1,356
1,354
Equity in earnings of affiliate (122)
(147)
Dividends received from affiliate 45
95
Net change in working capital,
excluding cash and debt, and other 4,555
2,571
------
- ------
6,005
2 142
------
- ------
Cash flows from investing activities:
Acquisitions of fixed assets (550)
(703)
------
- ------
(550)
(703)
------ -
- -----
Cash flows from financing activities:
Decrease in notes payable, net (1,213)
(139)
Proceeds (payments) of long-term debt (1,270)
350
Proceeds from exercise of stock options 193
- -
Dividends paid (491)
(491)
------
- ------
(2,781)
(280)
------
- ------
Effect of exchange rate changes on cash (58)
211
------
- ------
Net change in cash and cash equivalents 2,615
1,370
Cash and cash equivalents:
Beginning of period 5,908
7,313
------
- ------
End of period $ 8,524 $
8,683
------
- ------
------
- ------
The notes to consolidated financial statements are an integral
part of
this statement. Amounts in thousands.
5
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 consolidated balance sheet data was derived
from audited financial statements but does not include all
disclosures required by generally accepted accounting principles.
In fiscal 2004, the joint venture agreement governing Twin Disc
Nico Co., LTD (TDN) was amended. Under the new agreement, sales
into certain territories have been transferred to the joint
venture partner in exchange for which TDN receives a product
development fee equal to the gross margin formerly earned on such
sales. The effect of this change was to reduce sales by 3,100,000
for the quarter ended September 30, 2003, with no effect on net
earnings. Product development fees included in first quarter
revenue approximated $155,000.
B. Inventory
The major classes of inventories were as follows (in
thousands):
September 30, June 30
2003 2003
---------- ---------
Inventories:
Finished parts $36,621 $36,175
Work in process 7,930 7,003
Raw materials 4,740 4,069
------- -------
$49,291 $47,247
------- -------
------- -------
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 period ended September 30, 2003.
Three Months Ended
September 30, 2003
Reserve balance, beginning of period $6,070,000
Current period expense 884,000
Payments or credits to customers (855,000)
---------
Reserve balance, end of period $6,099,000
=========
D. Contingencies
The Company has made a $117,000 payment in trust in settlement of
its exposure to a superfund site and anticipates that no further
payments will be required. Additionally, the Company is subject
to certain product liability matters in the normal course of
business.
6
At September 30, 2003 the Company has accrued approximately
$100,000, which represents management's best estimate available
for possible losses related to these contingencies. This amount
has been provided over the past several years. Based on the
information available, the Company does not expect that any
unrecorded liability related to these matters would materially
affect the consolidated financial position, results of operations
or cash flows.
D. BUSINESS SEGMENTS
Information about the Company's segments is summarized as follows
(in
thousands):
September 30,
September 30,
2003
2002
-------------
- -------------
Manufacturing segment sales $ 33,147
$ 30,464
Distribution segment sales 12,961
13,849
Inter/Intra segment sales (8,142)
(7,792)
---------
- ---------
Net sales $ 37,966
$ 36,521
---------
- ---------
---------
- ---------
Manufacturing segment earnings $ (33)
$ (2,477)
Distribution segment earnings 1,164
455
Inter/Intra segment loss (668)
(634)
---------
- ---------
Earnings (loss) income taxes
and minority interest $ 463
$ (2,656)
---------
- ---------
---------
- ---------
Assets September 30,
June 30,
2003
2003
-------------
- ------------
Manufacturing segment assets $ 148,619
$ 152,093
Distribution segment assets 29,312
32,761
Corporate assets and elimination
of inter-company assets (12,760)
(14,496)
--------
- --------
$ 165,171
$ 170,358
--------
- --------
--------
- --------
E. RECENTLY ISSUED ACCOUNTING STANDARDS
In May 2003, the FASB issued SFAS No. 150. "Accounting for Certain
Financial
Instruments with Characteristics of both Liabilities and Equity."
This
Statement establishes standards for how an issuer classifies and
measures
certain financial instruments with characteristics of both
liabilities and
equity. It requires that an issuer classify a financial
instrument that is
within its scope as a liability (or an asset in some
circumstances). Many of
those instruments were previously classified as equity. This
Statement is
effective for financial instruments entered into or modified after
May 31,
2003, and otherwise is effective at the beginning of the first
interim period
beginning after June 15, 2003. The Company does not expect the
adoption of
the provisions of this Statement to have a significant impact on
its financial
statements.
F. STOCK OPTION PLANS
The Company accounts for its stock option plans under the
guidelines of Accounting Principles Board Opinion No. 25.
Accordingly, no compensation cost has been recognized in the
condensed consolidated statements of operations. During the third
quarter of fiscal 2003, the Company adopted the disclosure
provisions of SFAS No. 148, "Accounting for Stock-Based
Compensation " Transition and Disclosure." Had the Company
recognized compensation expense determined based on the fair value
at the grant date for awards under the plans, the net earnings and
earnings per share would have been as follows (in thousands,
except per share amounts):
7
Three Months Ended
September 30,
------------------
2003 2002
---- ----
Net earnings (loss)
As reported $ 171 ($ 1,731)
Pro forma 171 ( 1,805)
Basic earnings (loss) per share
As reported $ 0.06 ($ 0.62)
Pro forma 0.06 ( 0.64)
Diluted earnings (loss) per share
As reported $ 0.06 ($ 0.62)
Pro forma 0.06 ( 0.64)
In fiscal 2004, The Company issued stock grants for 25,000 shares,
12,500 of these grants vest in 2 years from the date of grant and
12,500 vest in 4 years. The fair market value of the grants based
on the market price at the date of grant was $421,000. The grants
are recorded as Unearned Compensation and amortized over 2 and 4
year periods, amortization in the quarter ended September 30, 2003
approximated $13,000.
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 financial statements and related notes.
Net sales for the first quarter were 4.0% above year-ago levels.
In fiscal 2004, the Company's joint venture agreement governing
Twin Disc Nico Co., LTD (TDN) was amended. Under the new
agreement, sales into certain territories have been transferred to
the joint venture partner in exchange for which TDN receives an
engineering and product development fee equal to the gross margin
formerly earned on such sales. The effect of this change was to
reduce sales by $3.1 million for the quarter ended September 30,
2003, with no effect on net earnings. Product development fees
included in first quarter revenue approximated $155,000. Adjusted
for this change, sales would have been up 12.4% versus the
comparable quarter in fiscal 2003. Compared to the first quarter
of fiscal 2003, the Euro and Asian currencies strengthened against
the US dollar. The impact of this strengthening on foreign
operations was to increase revenues by approximately $1.6 million
versus the prior year.
The increase in fiscal 2004's first quarter sales was driven by
improved sales at our domestic operations as well as year-over-
year growth at our foreign operations. All product markets posted
gains versus the prior year, the largest increases coming in
marine and propulsion products. In the first quarter of fiscal
2003, the Company experienced supplier quality problems at our
domestic manufacturing operations that reduced production
efficiency and delayed shipments, primarily of marine and
powershift transmission products.
Our distribution subsidiaries posted double-digit growth in sales
versus the prior year's first quarter, increasing by over $2
million. This growth was primarily driven by the year-over-year
growth in our marine markets. As noted above, sales of our
marine and propulsion products were particularly strong in
comparison to the first fiscal quarter of last year. However,
marine transmissions for the commercial boat market continue to
remain weak. Domestically, continued softness in our industrial
and non-marine products were offset by favorable year-over-year
growth in our propulsion business, driven by sales of Arneson
surface drives, and marine business. Despite the continued
softness in the industrial and non-marine transmission markets,
the Company was able to post modest year-over-year increases.
Gross margin as a percentage of sales improved significantly,
increasing from 16.2% of sales in fiscal 2003's first quarter to
23.4% of sales in fiscal 2004. This increase was driven primarily
by improved product mix, the impact of cost reduction efforts as
well as the impact of the restructuring program undertaken in
fiscal 2003's second quarter. Additionally, the supplier quality
problems encountered in fiscal 2003's first quarter, mentioned
above, caused last year's gross margin as a percentage of sales to
be unusually low. The change in the TDN joint venture agreement
accounted for approximately 140 basis points of the improvement,
as those sales were at lower margin rates.
8
Marketing, engineering, and administrative (ME&A) expenses were
relatively flat to last year's first fiscal quarter. Favorable
improvements at our domestic operations, primarily as a result of
recent cost reduction efforts, of over $0.4 million were offset by
the unfavorable year-over-year exchange rate impact at our foreign
operations of $0.3 million. Interest expense for the quarter was
9% below the same quarter last year due primarily to lower
borrowings as well as a mix of borrowings at a lower weighted
average interest rate. The effective income tax rate was higher
than a year ago due to a greater proportion of overseas earnings,
which are taxed at a higher rate.
Financial Condition, Liquidity and Capital Resources
As of September 30, 2003, the Company had net working capital of
$49.2 million, which represents a slight decrease from a net
working capital of $50.8 million as of June 30, 2003. For the
three months ended September 30, 2003, net cash flows from
operations were $6.0 million compared to $2.1 million for the
first quarter of fiscal 2003. The first quarter of fiscal 2004
saw a significant reduction in accounts receivable balances versus
June 30, 2003. The reduction of $9.4 million occurred as the
Company realized collections from the strong sales months of May
and June 2003. Our domestic manufacturing and Italian operations
accounted for nearly $6 million of the accounts receivable
reduction. The change in the TDN joint venture agreement
discussed above accounted for a further $2 million decrease in
accounts receivable.
Net acquisitions of fixed assets for the quarter totaled $0.6
million. In fiscal 2003, we increased capital spending by $2.3
million compared to fiscal 2002 as the Company further developed
its key manufacturing cells in both our domestic and European
operations. We expect this trend to continue in fiscal 2004.
The Company used excess cash to continue to pay down the balance
on its revolver, which had outstanding balances of $9.6 million
and $10.9 million as of September 30, 2003 and June 30, 2003,
respectively. The impact of the above cash flows was a net
increase of $2.6 million in cash during the quarter. The
Company's balance sheet remains very strong, there are no off-
balance-sheet arrangements, and we continue to have sufficient
liquidity for near-term needs.
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):
Contractual Obligations Total Less than 1-3 4-5
After 5
1 year Years Years
Years
Short-term debt $ 1,094 $ 1,094
Revolver borrowing $ 8,000 $ 8,000
Long-term debt $11,436 $ 2,857 $ 5,722 $2,857
Operating leases $ 7,890 $ 2,605 $ 2,981 $1,152
$1,152
Total obligations $29,230 $ 7,366 $16,703 $4,009
$1,152
New Accounting Releases
In May 2003, the FASB issued SFAS No. 150. "Accounting for Certain
Financial
Instruments with Characteristics of both Liabilities and Equity."
This
Statement establishes standards for how an issuer classifies and
measures certain financial instruments with characteristics of
both liabilities and equity. It requires that an issuer classify
a financial instrument that is within its scope as a liability (or
an asset in some circumstances). Many of those instruments were
previously classified as equity. This Statement is effective for
financial instruments entered into or modified after May 31,
2003, and otherwise is effective at the beginning of the first
interim period beginning after June 15, 2003. The Company does
not expect the adoption of the provisions of this Statement to
have a significant impact on its financial statements.
9
Critical Accounting Policies
The preparation of this Quarterly Report requires management's
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 Disc's significant accounting policies are described in Note
A in the Notes to Consolidated Financial Statements in the Annual
Report for June 30, 2003. There have been no significant changes
to those accounting policies subsequent to June 30, 2003.
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 Company=s 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. Those debt facilities bear
interest predominantly at the prime interest rate minus .5% or
LIBOR plus 2.75%. Due to the relative stability of interest
rates, the Company did not utilize any financial instruments at
September 30, 2003 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
$10,000.
Commodity price risk - The Company is exposed to fluctuation in
market prices for such commodities as steel and aluminum. Due to
the relative stability of these commodities, 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 one-third of the Company=s
revenues in the three months ended September 30, 2003 and 2002
were denominated in currencies other than the U.S. dollar. Of
that total, approximately two-thirds was denominated in euros with
the balance composed of Japanese yen 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 non-functional
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
2003 and 2002 was the Euro. At September 30, 2003 the Company had
net outstanding forward exchange contracts to purchase Euros in
the value of $3,981,000 with a weighted average maturity of 41
days. The fair value of the Company=s contracts was a loss of
approximately $70,000 at September 30, 2003. At June 30, 2003 the
Company had net outstanding forward exchange contracts to purchase
Euros in the value of $2,701,000 with a weighted average maturity
of 50 days. The fair value of the Company=s contracts was
approximately zero at June 30, 2003.
10
Item 4. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures.
As required by new Rules 13a-15 and 15d-15 of the Securities
Exchange Act of 1934, within the 90-day period prior to the filing
of this report and under the supervision and with the
participation of management, including the Chief Executive Officer
and the Chief Financial Officer, the Company has evaluated the
effectiveness of the design and operation of its disclosure
controls and procedures. Based on such evaluation, the Chief
Executive Officer and Chief Financial Officer have concluded that
such disclosure controls and procedures are effective in ensuring
that material information relating to the Company, including its
consolidated subsidiaries, is made known to the certifying
officers by others within the Company and its consolidated
subsidiaries during the period covered by this report.
(b) Changes in Internal Controls.
There were no significant changes in the Company's internal
controls for financial reporting or in other factors that could
significantly affect such internal controls subsequent to the date
of such evaluation. However, in connection with the new rules,
the Company has been engaged in the process of further reviewing
and documenting its disclosure controls and procedures, including
its internal accounting controls. The Company may from time to
time make changes aimed at enhancing the effectiveness of its
disclosure controls and procedures, including its internal
controls, to ensure that the Company's systems evolve with its
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 2. Changes in Securities and Use of Proceeds.
There were no securities of the Company sold by the Company during
the three months ended September 30, 2003, 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. During
the fiscal year ended June 30, 2003, 68 Plan participants
allocated an aggregate of $81,000 toward this investment option.
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 100,000 shares of
Company common stock offered through the Plan, as well as an
indeterminate amount of Plan participation interests.
Item 5. Other Information.
The discussions in this report on Form 10-Q and in the documents
incorporated herein by reference, and oral presentations made by
or on behalf of the Company contain or may contain various
forward-looking statements (particularly those referring to the
expectations as to possible strategic alternatives, future
business and/or operations, in the future tense, or using terms
such as "believe", "anticipate", "expect" or "intend") that
involve risks and uncertainties. The Company's actual future
results could differ materially from those discussed, due to the
factors which are noted in connection with the statements and
other factors. The factors that could cause or contribute to such
differences include, but are not limited to, those further
described in the "Management's Discussion and Analysis".
Item 6. Exhibits and Reports on Form 8-K.
A Form 8-K was filed on July 28, 2003 for a press release
announcing financial results for fiscal 2003 fourth quarter and
full year.
11
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)
November 14, 2003 /S/ FRED H. TIMM
-----------------------
- ---------------------------
(Date) Fred H. Timm
Vice President -
Administration and
Secretary