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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 2004
OR
[ ] 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 1-2299
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 34-0117420
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
One Applied Plaza, Cleveland, Ohio 44115
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 426-4000
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [X] No [ ]
Shares of common stock outstanding on April 30, 2004 19,384,970
(No par value)
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX
Page No.
--------
Part I: FINANCIAL INFORMATION
Item 1: Financial Statements
Condensed Statements of Consolidated Income - 2
Three Months and Nine Months Ended
March 31, 2004 and 2003
Condensed Consolidated Balance Sheets - 3
March 31, 2004 and June 30, 2003
Condensed Statements of Consolidated Cash Flows - 4
Nine Months Ended March 31, 2004 and 2003
Notes to Condensed Consolidated Financial Statements 5 - 11
Review By Independent Public Accountants 12
Item 2: Management's Discussion and Analysis of 13 - 18
Financial Condition and Results of Operations
Item 3: Quantitative and Qualitative Disclosures About Market Risk 19
Item 4: Controls and Procedures 20
Part II: OTHER INFORMATION
Item 1: Legal Proceedings 21
Item 2: Changes in Securities 21
Item 6: Exhibits and Reports on Form 8-K 22
Signatures 24
Exhibit Index
Exhibits
PART I: FINANCIAL INFORMATION
ITEM I: Financial Statements
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(Unaudited)
(Thousands, except per share amounts)
Three Months Ended Nine Months Ended
March 31 March 31
2004 2003 2004 2003
-------------------------- --------------------------
Net Sales $ 391,053 $ 368,203 $ 1,111,910 $ 1,091,929
Cost of sales 286,630 270,471 818,844 813,104
----------- ----------- ----------- -----------
Gross Profit 104,423 97,732 293,066 278,825
Selling, distribution and
administrative expenses 89,543 87,578 259,940 253,507
----------- ----------- ----------- -----------
Operating Income 14,880 10,154 33,126 25,318
Interest expense, net 1,397 1,295 4,120 3,898
Other, net (458) 1,966 (400) 2,292
----------- ----------- ----------- -----------
Income Before Income Taxes 13,941 6,893 29,406 19,128
Income Taxes 3,330 2,510 8,830 6,980
----------- ----------- ----------- -----------
Net Income $ 10,611 $ 4,383 $ 20,576 $ 12,148
=========== =========== =========== ===========
Net Income Per Share - Basic $ 0.55 $ 0.23 $ 1.07 $ 0.64
=========== =========== =========== ===========
Net Income Per Share - Diluted $ 0.54 $ 0.23 $ 1.05 $ 0.63
=========== =========== =========== ===========
Cash dividends per common
share $ 0.12 $ 0.12 $ 0.36 $ 0.36
=========== =========== =========== ===========
Weighted average common shares
outstanding for basic computation 19,296 18,833 19,176 18,935
Dilutive effect of stock options
and awards 360 257 395 287
----------- ----------- ----------- -----------
Adjusted average common shares
outstanding for diluted computation 19,656 19,090 19,571 19,222
=========== =========== =========== ===========
See notes to condensed consolidated financial statements.
2
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in thousands)
March 31 June 30
2004 2003
---------- -----------
ASSETS
Current assets
Cash and temporary investments $ 33,386 $ 55,079
Accounts receivable, less allowances
of $6,600 and $6,100 190,932 173,915
Inventories (at LIFO) 178,209 159,798
Other current assets 15,751 11,702
---------- -----------
Total current assets 418,278 400,494
Property, less accumulated depreciation
of $95,369 and $85,836 78,662 77,942
Goodwill 49,934 49,687
Other assets 26,486 25,281
---------- -----------
TOTAL ASSETS $ 573,360 $ 553,404
========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 80,714 $ 75,411
Other accrued liabilities 62,579 65,724
---------- -----------
Total current liabilities 143,293 141,135
Long-term debt 77,965 78,558
Other liabilities 26,464 25,855
---------- -----------
TOTAL LIABILITIES 247,722 245,548
---------- -----------
Shareholders' Equity
Preferred stock - no par value; 2,500
shares authorized; none issued or
outstanding
Common stock - no par value; 50,000
shares authorized; 24,096 shares issued 10,000 10,000
Additional paid-in capital 87,884 84,898
Income retained for use in the business 303,355 289,724
Treasury shares - at cost, 4,761 and 5,076 shares (75,554) (78,706)
Unearned restricted common stock compensation (1,249) (114)
Accumulated other comprehensive income 1,202 2,054
---------- -----------
TOTAL SHAREHOLDERS' EQUITY 325,638 307,856
---------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 573,360 $ 553,404
========== ===========
See notes to condensed consolidated financial statements.
3
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)
(Amounts in thousands)
Nine Months Ended
March 31
2004 2003
-------- --------
Cash Flows from Operating Activities
Net income $ 20,576 $ 12,148
Adjustments to reconcile net income to cash provided by (used in)
operating activities:
Depreciation and amortization 12,882 11,925
Gain on sale of property (102) (2,702)
Treasury shares contributed to employee benefit and deferred
compensation plans 4,702 2,514
Changes in operating assets and liabilities, net of
effects from acquisition of businesses (35,077) 7,546
Other - net (593) (554)
-------- --------
Net Cash provided by Operating Activities 2,388 30,877
-------- --------
Cash Flows from Investing Activities
Property purchases (11,916) (9,348)
Proceeds from property sales 1,004 5,947
Net cash paid for acquisition of businesses, net of cash (1,285) (10,255)
Deposits and other (966) 1,579
-------- --------
Net Cash used in Investing Activities (13,163) (12,077)
-------- --------
Cash Flows from Financing Activities
Borrowings (repayments) of notes payable - net (2,850)
Long-term debt repayments (5,714)
Proceeds from termination of interest rate swap 2,517
Dividends paid (6,945) (6,877)
Purchases of treasury shares (6,258) (9,872)
Exercise of stock options 5,135 2,011
-------- --------
Net Cash used in Financing Activities (10,918) (17,935)
-------- --------
Increase (decrease) in cash and temporary
investments (21,693) 865
Cash and temporary investments
at beginning of period 55,079 23,060
-------- --------
Cash and Temporary Investments
at End of Period $ 33,386 $ 23,925
======== ========
See notes to condensed consolidated financial statements.
4
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share amounts)(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with the instructions to Form 10-Q and
therefore do not include all information and footnotes necessary for a
fair presentation of financial position, results of operations and cash
flows in conformity with generally accepted accounting principles.
However, in the opinion of management, all adjustments (consisting of
only normal recurring adjustments) necessary to a fair statement of
operations of the interim periods have been made. This Quarterly Report
on Form 10-Q should be read in conjunction with the Applied Industrial
Technologies, Inc. (the Company) Annual Report on Form 10-K for the
year ended June 30, 2003.
The results of operations for the three and nine month periods ended
March 31, 2004 are not necessarily indicative of the results to be
expected for the fiscal year.
Cost of sales for interim financial statements are computed using
estimated gross profit percentages, which are adjusted throughout the
year based upon available information. Adjustments to actual cost are
made based on periodic physical inventories and the effect of year-end
inventory quantities on LIFO costs.
The Company recognizes shipping and handling fees billed when products
are shipped or delivered to a customer and includes such amounts in net
sales. Third party freight payments are recorded in cost of sales in
the accompanying condensed consolidated statements of income.
2. STOCK OPTIONS
Effective July 1, 2003, the Company adopted the fair value recognition
provisions of SFAS 123, "Accounting for Stock-Based Compensation" as
amended by SFAS 148, "Accounting for Stock-Based Compensation -
Transition and Disclosure," using the modified prospective method for
the transition. Under the modified prospective method, stock-based
compensation cost recognized during this fiscal year is the same as
that which would have been recognized had the fair value recognition
provisions been applied to all awards granted after July 1, 1995.
Results for prior years have not been restated. The compensation
expense recorded during the quarter and nine months ended March 31,
2004 was $629, $449 net of tax, or $0.02 per share and $1,315, $874 net
of tax, or $0.04 per share, respectively. The following table discloses
the compensation expense and net income as if the fair value based
method had been applied in each period:
5
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share amounts) (Unaudited)
Three Months Ended Nine Months Ended
March 31 March 31
----------------------- ------------------------
2004 2003 2004 2003
---------- --------- ---------- ----------
Net income, as reported $ 10,611 $ 4,383 $ 20,576 $ 12,148
Plus: Stock-based employee compensation expense
included in reported net income, net of related
tax effects 449 874
Less: Total stock-based employee compensation
expense determined under fair value based method,
net of tax (449) (335) (874) (978)
========== ========= ========== ==========
Pro forma net income $ 10,611 $ 4,048 $ 20,576 $ 11,170
========== ========= ========== ==========
Earnings per share:
Basic - as reported $ 0.55 $ 0.23 $ 1.07 $ 0.64
========== ========= ========== ==========
Basic - pro forma $ 0.55 $ 0.21 $ 1.07 $ 0.59
========== ========= ========== ==========
Diluted - as reported $ 0.54 $ 0.23 $ 1.05 $ 0.63
========== ========= ========== ==========
Diluted - pro forma $ 0.54 $ 0.21 $ 1.05 $ 0.58
========== ========= ========== ==========
Compensation expense has been determined using the Black-Scholes option-pricing
model. The assumptions used for grants issued during the nine months ended March
31, 2004 and 2003 are:
NINE MONTHS ENDED
MARCH 31
-----------------------
2004 2003
--------- ---------
Expected life 7.3 years 7.0 years
Risk free interest rate 3.8% 3.9%
Dividend yield 3.0% 3.0%
Volatility 31.7% 30.9%
3. SEGMENT INFORMATION
The accounting policies of the Company's reportable segment and its
other businesses are the same as those used to prepare the condensed
consolidated financial statements. Certain reclassifications have been
made to prior year amounts to be consistent with the presentation in
the current year. Sales between the service center based distribution
segment and the other businesses are not significant. The Company has
operations in the United States, Canada, Mexico and Puerto Rico.
Operations in Canada, Mexico and
6
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share amounts) (Unaudited)
Puerto Rico represent approximately 9.0% of the total net sales of
Applied for the nine months ended March 31, 2004 and therefore are not
presented separately. Approximately 30.0% of the net sales in Canada,
Mexico and Puerto Rico relate to our fluid power business and are
included as part of the "Other" column in the segment disclosures that
follow. The long-lived assets located outside of the United States are
not material.
SEGMENT FINANCIAL INFORMATION:
SERVICE CENTER
BASED
DISTRIBUTION OTHER TOTAL
-------------------------------------
THREE MONTHS ENDED MARCH 31, 2004
Net sales $ 368,130 $22,923 $391,053
Operating income 16,497 832 17,329
Depreciation 3,356 170 3,526
Capital expenditures 1,439 160 1,599
-------------------------------------
THREE MONTHS ENDED MARCH 31, 2003
Net sales $ 348,141 $20,062 $368,203
Operating income 10,528 (699) 9,829
Depreciation 3,442 151 3,593
Capital expenditures 4,202 97 4,299
-------------------------------------
A reconciliation from the segment operating profit to the condensed consolidated
balances is as follows:
THREE MONTHS ENDED
MARCH 31
-------------------
2004 2003
------- -------
Operating income for
reportable segment $16,497 $10,528
Other operating income 832 (699)
Adjustments for:
Other intangible amortization (170) (184)
Corporate and other income (expense),
net of allocations (a) (2,279) 509
------- -------
Total operating income 14,880 10,154
Interest expense, net 1,397 1,295
Other expense, net (458) 1,966
------- -------
Income before income taxes $13,941 $ 6,893
======= =======
7
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share amounts) (Unaudited)
SEGMENT FINANCIAL INFORMATION:
SERVICE CENTER
BASED
DISTRIBUTION OTHER TOTAL
---------------------------------------
NINE MONTHS ENDED MARCH 31, 2004
Net sales $ 1,041,666 $70,244 $1,111,910
Operating income 37,144 2,843 39,987
Assets used in the business 553,928 19,432 573,360
Depreciation 10,364 507 10,871
Capital expenditures 11,693 223 11,916
-------------- ------- ----------
NINE MONTHS ENDED MARCH 31, 2003
Net sales $ 1,027,075 $64,854 $1,091,929
Operating income 28,414 (626) 27,788
Assets used in the business 512,827 23,301 536,128
Depreciation 10,234 517 10,751
Capital expenditures 8,922 426 9,348
-------------- ------- ----------
A reconciliation from the segment operating profit to the condensed consolidated
balances is as follows:
NINE MONTHS ENDED
MARCH 31
-------------------
2004 2003
-------------------
Operating income for
reportable segment $37,144 $28,414
Other operating income 2,843 (626)
Adjustments for:
Other intangible amortization (547) (601)
Corporate and other income (expense),
net of allocations (a) (6,314) (1,869)
------- -------
Total operating income 33,126 25,318
Interest expense, net 4,120 3,898
Other expense, net (400) 2,292
------- -------
Income before income taxes $29,406 $19,128
------- -------
(a) The change in corporate and other income (expense), net, is due to
various changes in the levels and amounts of expense being allocated to
the segments. The expenses being allocated include corporate charges
for working capital, logistics support and other items.
8
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share amounts) (Unaudited)
4. COMPREHENSIVE INCOME
The components of comprehensive income are as follows:
Three Months Ended Nine Months Ended
March 31 March 31
---------------------- ----------------------
2004 2003 2004 2003
-------- -------- -------- --------
Net income $ 10,611 $ 4,383 $ 20,576 $ 12,148
Other comprehensive income (loss):
Unrealized loss on cross currency swap (582) (728) (230) (200)
Foreign currency translation (109) 1,392 (622) 1,473
adjustment
-------- -------- -------- --------
Total comprehensive income $ 9,920 $ 5,047 $ 19,724 $ 13,421
======== ======== ======== ========
5. GUARANTEES
The Company had a construction and lease facility under which a
distribution center and three service centers were constructed by the
lessor and leased to the Company under operating lease arrangements. At
the end of the lease term in September 2003, the Company purchased the
properties for $7,500. The residual value guarantee provisions of this
lease arrangement expired with the purchase of the properties.
In December 2003, the Company paid the $2,990 outstanding balance of
bank debt for iSource Performance Materials, L.L.C. (iSource) and
assumed the bank's rights under the loan agreement. Prior to assuming
the loan, the Company had guaranteed the bank debt of iSource.
6. CONSOLIDATION OF VARIABLE INTEREST ENTITIES
In January 2003, the Financial Accounting Standards Board issued FIN
46, "Consolidation of Variable Interest Entities" which the Company
adopted as of July 1, 2003. The Company is a minority owner in iSource.
iSource has assets of $2,800 and accounts payable of $2,200 at March
31, 2004. In December 2003, the Company paid the outstanding amount of
$2,990 of bank debt and assumed the bank's rights under the loan
agreement. The Company's purchases currently account for more than 90%
of iSource's sales and the Company is considered the primary
beneficiary of iSource's operations. In accordance with FIN 46,
iSource's financial statements were consolidated with the Company's
beginning in July 2003. The effect of the consolidation was not
material to the Company's consolidated financial statements.
9
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share amounts) (Unaudited)
7. BUSINESS COMBINATION
In November 2003, the Company acquired the stock of a Mexican
distributor of industrial products for approximately $2,800. The
results of the acquired operations are included in our service center
based distribution segment from the acquisition date. Results of
operations for this acquisition are not material for all periods
presented. Other intangibles of $880, consisting of customer
relationships and non-competition agreements, were recognized in
connection with this combination and will be amortized over a period of
seven to ten years.
The preliminary fair values of the acquired assets and liabilities
assumed at the date of acquisition are as follows:
Cash $ 815
Accounts receivable 2,313
Inventory 1,815
Other current assets 90
Property 238
Other assets 7
Goodwill 138
Other intangibles 880
------
Total assets acquired 6,296
Liabilities assumed 3,496
------
Net assets acquired $2,800
======
8. DEBT
During the quarter ended March 31, 2004, the Company entered into an
agreement with Prudential Insurance Company, expiring in February 2007,
for an uncommitted shelf facility that enables the Company to borrow up
to $100,000 in additional long-term financing at the Company's sole
discretion with terms of up to twelve years. At March 31, 2004, there
was no borrowing under this agreement.
In November 2003, the Company replaced its existing revolving credit
facility with a five year revolving credit facility with a group of
banks. This agreement provides for unsecured borrowings of up to
$100,000 at various interest rate options, none of which is in excess
of the banks' prime rate at interest determination dates. The Company
had no borrowings outstanding under this facility at March 31, 2004.
Fees on this facility range from .15% to .30% per year on the average
amount of the total revolving credit commitments during the year.
Unused lines under this facility, net of outstanding letters of credit,
totaled $92,114 and is available to fund future acquisitions or other
capital and operating requirements.
10
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share amounts) (Unaudited)
9. BENEFIT PLANS
During December 2003, the FASB issued a revision to Statement of
Financial Accounting Standards No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits, an amendment of FASB
Statements No. 87, 88, and 106," which expands the disclosure
requirements regarding plan assets, benefit costs and benefit
obligations for the Company's benefit and pension plans. Certain
provisions of this statement are effective for the quarter ended March
31, 2004, while the remaining provisions relating to the annual
financial statement disclosures are effective for the fiscal year
ending June 30, 2004.
The following table provides summary disclosures of the net periodic
benefit costs recognized for the Company's Supplemental Executive
Retirement Benefits Plan, qualified retirement plan, salary
continuation benefits and retiree medical benefits:
Pension Benefits Other Benefits
-------------------- -------------------
2004 2003 2004 2003
------- ------- ------- -------
THREE MONTHS ENDED MARCH 31
COMPONENTS OF NET PERIODIC BENEFIT COST
Service cost $ 263 $ 178 $ 14 $ 16
Interest cost 314 281 76 72
Expected return on plan assets (79) (64)
Recognized net actuarial (gain) loss 55 18 5 (2)
Amortization of prior service cost 148 119 12 12
------- ------- ------- -------
Net periodic pension cost $ 701 $ 532 $ 107 $ 98
======= ======= ======= =======
NINE MONTHS ENDED MARCH 31
COMPONENTS OF NET PERIODIC BENEFIT COST
Service cost $ 788 $ 534 $ 43 $ 47
Interest cost 943 843 228 215
Expected return on plan assets (236) (193)
Recognized net actuarial (gain) loss 165 55 14 (4)
Amortization of prior service cost 442 356 37 37
------- ------- ------- -------
Net periodic pension cost $ 2,102 $ 1,595 $ 322 $ 295
======= ======= ======= =======
During the nine months ended March 31, 2004, the Company contributed
$2,025 to its pension benefit plans. The Company expects to contribute
an additional $126 by June 30, 2004.
11
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
The accompanying condensed consolidated financial statements of the Company have
been reviewed by the Company's independent accountants, Deloitte & Touche LLP,
whose report covering their review of the financial statements follows.
INDEPENDENT ACCOUNTANTS' REPORT
Applied Industrial Technologies, Inc.
We have reviewed the accompanying condensed consolidated balance sheet of
Applied Industrial Technologies, Inc. and subsidiaries (the "Company") as of
March 31, 2004, and the related condensed statements of consolidated income for
the three-month and nine-month periods ended March 31, 2004 and 2003, and of
consolidated cash flows for the nine-month periods ended March 31, 2004 and
2003. These interim financial statements are the responsibility of the Company's
management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures and
making inquiries of persons responsible for financial and accounting matters. It
is substantially less in scope than an audit conducted in accordance with
auditing standards generally accepted in the United States of America, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to such condensed consolidated interim financial statements for them to
be in conformity with accounting principles generally accepted in the United
States of America.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet of
Applied Industrial Technologies, Inc. and subsidiaries as of June 30, 2003, and
the related statements of consolidated income, shareholders' equity, and cash
flows for the year then ended (not presented herein); and in our report dated
August 8, 2003, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of June 30, 2003 is fairly
stated, in all material respects, in relation to the consolidated balance sheet
from which it has been derived.
As discussed in Note 2 to the condensed consolidated interim financial
statements, effective July 1, 2003, the Company changed its method of accounting
for stock-based compensation and adopted the fair value recognition provisions
of SFAS 123 "Accounting for Stock-Based Compensation," as amended by SFAS 148,
"Accounting for Stock-Based Compensation - Transition and Disclosure."
/s/Deloitte & Touche LLP
Cleveland, Ohio
May 12, 2004
12
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is Management's Discussion and Analysis of certain significant
factors which have affected the Company's (1) financial condition at March 31,
2004 and June 30, 2003, and (2) results of operations and cash flows during the
periods included in the accompanying Condensed Statements of Consolidated Income
and Consolidated Cash Flows.
Overview
During the quarter, net income increased 142.1% compared to the same quarter in
the prior year. Sales increased 6.2%. Significant factors in the increase were
the improving U.S. economy and the continued strength of the Canadian currency
and Canadian operations. Gross margin improved as our initiatives in the areas
of product pricing, freight recovery, cost controls and asset management
continue to show progress. During the quarter ended March 31, 2004, the Company
recorded unusual tax benefits primarily from a settlement with the Internal
Revenue Service related to audits of our 1997 and 1998 tax returns and the
acceptance by the IRS of tax refund claims for 1999, 2000 and 2001. These items
added approximately $1.6 million, or $0.08 per share to net income. We expect
the effective tax rate to be approximately 35.5% for the fourth quarter.
Inventories decreased $13.0 million from the December 31 balances as the
calendar year-end buys were sold off through the normal course of business. We
expect an additional inventory decrease of approximately $15.0 million by June
30, 2004.
The Company monitors the ISM Purchasing Managers Index (ISM) and the
government's Manufacturers Capacity Utilization (MCU) index and considers these
indexes key indicators of potential Company business environment changes. The
ISM began to show improvement in the quarter ended December 31, 2003, while
improvement in the MCU began late in the quarter ended September 30, 2003. The
indicators continue to show signs of economic recovery. The Company's
performance traditionally lags these key indicators by approximately 6 months.
Given the recent improvement in sales and the improvement in these indicators,
we expect the fourth quarter of fiscal 2004 sales to improve over the same
period in fiscal 2003.
The Company expects to sustain our improvements in profitability. We anticipate
fiscal fourth quarter sales to increase 3.4% to 7.4% and gross profit levels to
be in the range of 26.2% to 26.7%. We anticipate that a decline in supplier
rebates during the remainder of the year will continue to be offset by
improvements in freight recovery, pricing and asset management. We expect
selling, distribution and administrative expenses for the fourth quarter to be
relatively flat compared to the prior year.
Liquidity and Capital Resources
Cash provided by operating activities was $2.4 million in the nine months ended
March 31, 2004. This compares to $30.9 million provided by operating activities
in the same period a year ago.
Cash flow from operations depends primarily upon generating operating income,
controlling the investment in inventories and receivables, and managing the
timing of payments to suppliers. In
13
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
the area of inventory, the Company has negotiated with key suppliers to effect
mutually beneficial cost advantages by buying product through special
purchasing programs. In addition, the Company has made system enhancements in
recent quarters to improve inventory tracking and receivables collection
efforts. During the nine month period ended March 31, 2004, inventories
increased approximately $18.4 million primarily due to purchases made under
special calendar year-end programs offered by certain suppliers. Inventories
decreased $13.0 million from December 31, 2003 balances, as a portion of the
calendar year-end buys worked through our system. The inventory increase also
includes $2.3 million from the consolidation of iSource resulting from the
adoption of FIN 46 and $1.8 million from the acquisition of a Mexican
distributor (see notes to the condensed consolidated financial statements).
Accounts receivable increased $17.0 million during the nine months ended March
31, 2004 due to the increase in sales and the acquisition of a Mexican
distributor (see notes to the condensed consolidated financial statements).
Capital expenditures were $11.9 million for the nine months ended March 31, 2004
compared to $9.3 million in the prior year. In September 2003, the Company
purchased, for $7.5 million, four operating facilities which had previously been
leased (see notes to the condensed consolidated financial statements). For the
entire year we expect our total capital expenditures to be approximately $15.0
million. Our depreciation and amortization for the entire year is expected to be
within the range of $17.0 million to $17.5 million.
In November 2003, the Company replaced its existing revolving credit facility
with a $100.0 million revolving credit facility with a group of banks expiring
in November 2008. The Company had no borrowings outstanding under this facility
at March 31, 2004. Unused lines under this facility, net of outstanding letters
of credit, totaled $92.1 million, and is available to fund future acquisitions
or other capital and operating requirements.
During the quarter ended March 31, 2004, the Company entered into an agreement
with Prudential Insurance Company expiring in February 2007, for an uncommitted
shelf facility that enables the Company to borrow up to $100.0 million in
additional long-term financing at the Company's sole discretion with terms up to
twelve years. At March 31, 2004, there was no borrowing under this agreement.
The aggregate annual maturities of long-term debt includes $50.0 million due in
fiscal 2008 and $25.0 million due in fiscal 2011.
The Board of Directors has authorized the purchase of shares of the Company's
common stock to fund employee benefit programs, stock option and award programs,
and future business acquisitions. These purchases are made in open market and
negotiated transactions, from time to time, depending upon market conditions.
The Company acquired 287,000 shares of its common stock for $6.3 million during
the nine months ended March 31, 2004 compared to 577,000 shares for $9.9 million
during the nine months ended March 31, 2003. At March 31, 2004, the Company had
remaining authorization to repurchase up to 841,000 additional shares.
14
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Other Matters
In November 2003, the Company acquired the stock of a Mexican distributor of
industrial products for approximately $2.8 million. The acquisition was paid for
from our cash balances. The acquired operations are reported in our service
center based distribution segment from the acquisition date (see notes to the
condensed consolidated financial statements).
In January 2003, the Financial Accounting Standards Board issued FIN 46,
"Consolidation of Variable Interest Entities." The Company is a minority owner
in iSource Performance Materials L.L.C. (iSource). iSource has assets of $2.8
million and accounts payable of $2.2 million at March 31, 2004. In December
2003, the Company paid the outstanding amount of $3.0 million of bank debt and
assumed the bank's rights under the loan agreement. The Company's purchases
currently account for more than 90% of iSource's sales and the Company is
considered the primary beneficiary of iSource's operations. In accordance with
FIN 46, iSource's financial statements were consolidated with the Company's
beginning in July 2003 (see notes to the condensed consolidated financial
statements).
Effective July 1, 2003, the Company adopted the fair value recognition
provisions of SFAS 123, "Accounting for Stock-Based Compensation," using the
modified prospective method for the transition. Under the modified prospective
method, stock-based compensation cost recognized during this fiscal year for
stock options is the same as that which would have been recognized had the fair
value recognition provisions been applied to all stock option awards granted
after July 1, 1995. The compensation expense recorded during the quarter and
nine months ended March 31, 2004 related to stock options was $.6 million or
$.02 per share after tax and $1.3 million or $.04 per share after tax,
respectively.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2004 AND 2003
Net sales increased 6.2% compared to the prior year primarily due to the
improvement of the performance of our U.S. service centers and fluid power
subsidiaries, along with the continued strength of the Canadian currency and our
Canadian operations. U.S. service centers and the U.S. fluid power subsidiaries
both experienced increases of 2.6% in same store sales per day as compared to
the same quarter last year. We expect this positive trend to continue through
our fiscal fourth quarter.
Gross profit as a percentage of sales increased to 26.7% from 26.5%. This
increase is primarily due to higher recovery of our shipping expenses, lower
freight costs and improvements from product pricing initiatives. In addition, we
recorded cost adjustments during the quarter related to inventory cycle counting
programs and interim inventory reconciliations. In the prior year, adjustments
were primarily reflected in the fourth quarter annual physical inventory
results.
15
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
These positive developments were offset somewhat by lower purchase rebates from
our product suppliers.
Selling, distribution and administrative expenses increased 2.2% compared to the
prior year, however, as a percentage of sales, they decreased to 22.9% compared
to 23.8% in the prior year. The increase in expense was primarily due to the
acquisition of a Mexican distributor and the increase in employee benefit
expenses, including the expensing of stock options which began during the
quarter ended September 30, 2003.
Interest expense-net for the quarter increased $.1 million or 7.9% as compared
to the prior year. Average outstanding borrowings and rates paid on borrowings
were comparable for the quarters ended March 31, 2004 and 2003. The net increase
in interest expense was due to the impact of Canadian currency translation.
Other expenses decreased $2.4 million compared to the prior year. During the
quarter ended March 31, 2003, the Company recorded a liability of $1.7 million
to provide for potential losses on investments and advances for iSource. In
accordance with FIN 46, iSource's financial statements were consolidated with
the Company's beginning in July 2003. The effect of the consolidation was not
material to the Company's consolidated financial statements.
Income tax expense as a percentage of income before taxes was 23.9% for the
quarter ended March 31, 2004 compared to 36.4% for the quarter ended March 31,
2003. During the quarter ended March 31, 2004, the Company recorded unusual tax
benefits primarily from a settlement with the Internal Revenue Service related
to audits of our 1997 and 1998 tax returns and the acceptance by the IRS of tax
refund claims for 1999, 2000 and 2001. These items added approximately $1.6
million or $0.08 per share to net income. We expect the effective tax rate to be
approximately 35.5% in the fourth quarter.
As a result of the above factors, net income increased by 142.1% compared to the
same quarter of last year and net income per share increased 134.8%.
NINE MONTHS ENDED MARCH 31, 2004 AND 2003
Net sales increased 1.8% compared to the prior year primarily due to the
continued strength of the Canadian currency and our Canadian operations. U.S.
service centers and fluid power sales remained flat compared to the same period
last year. Same store sales per day for our U.S. service centers decreased 1.3%
compared to those in the same period last year.
Gross profit as a percentage of sales increased to 26.4% from 25.5%. This
increase is primarily due to higher recovery of our shipping expenses, lower
freight costs and improvements from product pricing initiatives. In addition, we
have recorded, throughout the year, cost adjustments related to inventory cycle
counting programs and interim inventory reconciliations. In the prior year,
these adjustments were primarily reflected in the fourth quarter annual physical
inventory
16
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
results. These positive developments were offset somewhat by lower purchase
rebates from our product suppliers.
Selling, distribution and administrative expenses increased 2.5% compared to the
prior year. The difference primarily relates to a relatively high level of gains
on the sales of unneeded real estate and other property in the prior year.
Employee benefit expenses increased versus last year and the Company also began
to expense stock options during the quarter ended September 30, 2003. Also
contributing to the increase was the consolidation of iSource and the
acquisition of a Mexican distributor.
Interest expense-net for the period ended March 31, 2004 increased by $.2
million or 5.7% as compared to the prior year due to the impact of Canadian
currency translation.
Other expenses decreased $2.7 million compared to the prior year. During the
quarter ended March 31, 2003, the Company recorded a liability of $1.7 million
to provide for potential losses on investments and advances for iSource. In
accordance with FIN 46, iSource's financial statements were consolidated with
the Company's beginning in July 2003. The effect of the consolidation was not
material to the Company's consolidated financial statements.
Income tax expense as a percentage of income before taxes was 30.0% for the
period ended March 31, 2004 compared to 36.5% for the period ended March 31,
2003. During the quarter ended March 31, 2004, the Company recorded unusual tax
benefits primarily from a settlement with the Internal Revenue Service related
to audits of our 1997 and 1998 tax returns and the acceptance by the IRS of tax
refund claims for 1999, 2000 and 2001. These items added approximately $1.6
million or $0.08 per share to net income. We expect the effective tax rate to be
approximately 35.5% for the fourth quarter.
As a result of the above factors, net income increased by 69.4% compared to the
same period of last year and net income per share increased 66.7%.
17
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CAUTIONARY STATEMENT UNDER PRIVATE SECURITIES LITIGATION REFORM ACT
Management's Discussion and Analysis and other sections of this Form 10-Q
contain statements that are forward-looking, based on management's current
expectations about the future. Forward-looking statements are often identified
by qualifiers such as "expect", "believe", "anticipate", "should", "project",
"forecast", "will", and similar expressions. The Company intends that the
forward-looking statements be subject to the safe harbors established in the
Private Securities Litigation Reform Act of 1995 and by the Securities and
Exchange Commission in its rules, regulations and releases.
Readers are cautioned not to place undue reliance on any forward-looking
statements. All forward-looking statements are based on current expectations
regarding important risk factors, many of which are outside the Company's
control. Accordingly, actual results may differ materially from those expressed
in the forward-looking statements, and the making of such statements should not
be regarded as a representation by the Company or any other person that the
results expressed in the statements will be achieved. In addition, the Company
undertakes no obligation publicly to update or revise any forward-looking
statements, whether because of new information or events, or otherwise.
Important risk factors include, but are not limited to, the following: changes
in the economy or in specific customer industries; changes in manufacturing
capacity in the Company's targeted geographic markets; changes in interest
rates; changes in customer procurement policies and practices; changes in
product manufacturer sales policies and practices; the availability of product
and labor; changes in operating expenses; the effect of price increases or
decreases in both procuring and selling products and services; the variability
and timing of business opportunities including acquisitions, alliances, customer
agreements and supplier authorizations; the Company's ability to realize the
anticipated benefits of acquisitions and marketing and other business
strategies; the incurrence of additional debt and contingent liabilities in
connection with acquisitions; changes in accounting policies and practices; the
effect of organizational changes within the Company; the emergence of new
competitors, including firms with greater financial resources than the Company;
risks and uncertainties associated with the Company's expansion into foreign
markets, including inflation rates, recessions, and foreign currency exchange
rates; adverse results in significant litigation matters; adverse regulation and
legislation; and the occurrence of extraordinary events (including prolonged
labor disputes, war, natural events and acts of God, fires, floods and
accidents).
18
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has evaluated its exposure to various market risk factors, including
but not limited to, interest rate, foreign currency exchange and commodity price
risks. The Company is primarily affected by market risk exposure through the
effect of changes in interest rates. The Company manages interest rate risk
through the use of a combination of fixed rate long-term debt and variable rate
borrowings under its committed revolving credit agreement and interest rate
swaps. The Company had no variable rate borrowings outstanding under its
committed revolving credit agreement at March 31, 2004. The Company has no
interest rate swap agreements outstanding. All of the Company's outstanding
long-term debt is currently at fixed interest rates at March 31, 2004 and
scheduled for repayment in December 2007 and beyond.
The Company mitigates its foreign currency exposure from the Canadian dollar
through the use of cross currency swap agreements as well as of foreign-currency
denominated debt. Hedging of the U.S. dollar denominated debt, used to fund a
substantial portion of Company's net investment in its Canadian operations, is
accomplished through the use of cross currency swaps. Any gain or loss on the
hedging instrument offsets the gain or loss on the underlying debt. Translation
exposures with regard to our Mexican business are not hedged because the Mexican
activity is not material. For the nine months ended March 31, 2004, a uniform
10% strengthening of the U.S. dollar relative to foreign currencies that affect
the Company would have resulted in a $.1 million decrease in net income. A
uniform 10% weakening of the U.S. dollar would have resulted in a $.1 million
increase in net income.
19
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDARIES
ITEM 4: CONTROLS AND PROCEDURES
Management, under the supervision and with the participation of the Chief
Executive Officer (CEO) and the Chief Financial Officer (CFO), has evaluated the
Company's disclosure controls and procedures as of the end of the period covered
by this report. Based upon that evaluation, the CEO and the CFO have concluded
that the disclosure controls and procedures are effective in timely alerting
them to material information about the Company required to be included in the
Company's Exchange Act reports.
Management has not identified any change in internal control over financial
reporting occurring during the quarter ended March 31, 2004 that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
20
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.
Applied Industrial Technologies, Inc. and/or one of its subsidiaries is a
party to various pending judicial and administrative proceedings. Based on
circumstances currently known, the Company does not believe that any
liabilities that may result from these proceedings are reasonably likely
to have a material adverse effect on the Company's consolidated financial
position, results of operations, or cash flows.
ITEM 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity
Securities.
Repurchases in the quarter ended March 31, 2004 were as follows:
- ---------------------------------------------------------------------------------------------------------
(c) Total Number (d) Maximum
of Shares Number of Shares
Purchased as Part that May Yet Be
(a) Total (b) Average of Publicly Purchased Under
Number of Price Paid per Announced Plans the Plans or
Period Shares Share or Programs Programs
- ---------------------------------------------------------------------------------------------------------
January 1, 2004 to
January 31, 2004 -0- -0- 1,000,000
February 1, 2004 to 24,200 $20.78 24,200 975,800
February 29, 2004
March 1, 2004 to March 134,425 $21.24 134,425 841,375
31, 2004
Total 158,625 $21.17 158,625 841,375
(1) On July 16, 2003, the Board of Directors authorized the purchase of up to
one million shares of the Company's common stock. The Company announced
the authorization on July 16, 2003. These purchases may be made in the
open market or in privately negotiated transactions. This authorization is
in effect until all shares are purchased or the authorization is revoked
or amended by the Board of Directors.
(2) During the quarter the Company also purchased 32,512 shares in connection
with the exercise of stock options and other employee benefit programs.
These purchases are not counted within the aforementioned Board
authorization.
21
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit No. Description
- ---------- -----------
3(a) Amended and Restated Articles of
Incorporation of Applied Industrial
Technologies, Inc., as amended on
October 8, 1998 (filed as Exhibit
3(a) to the Company's Form 10-Q for
the quarter ended September 30,
1998, SEC File No. 1-2299, and
incorporated here by reference).
3(b) Code of Regulations of Applied
Industrial Technologies, Inc., as
amended on October 19, 1999 (filed
as Exhibit 3(b) to the Company's
Form 10-Q for the quarter ended
September 30, 1999, SEC File No.
1-2299, and incorporated here by
reference).
4(a) Certificate of Merger of Bearings,
Inc. (Ohio) and Bearings, Inc.
(Delaware) filed with the Ohio
Secretary of State on October 18,
1988, including an Agreement and
Plan of Reorganization dated
September 6, 1988 (filed as Exhibit
4(a) to the Company's Registration
Statement on Form S-4 filed May 23,
1997, Registration No. 333-27801,
and incorporated here by reference).
4(b) Private Shelf Agreement dated as of
November 27, 1996, as amended on
January 30, 1998, between the
Company and The Prudential Insurance
Company of America (filed as Exhibit
4(f) to the Company's Form 10-Q for
the quarter ended March 31, 1998,
SEC File No. 1-2299, and
incorporated here by reference).
4(c) Amendment dated October 24, 2000 to
1996 Private Shelf Agreement between
the Company and The Prudential
Insurance Company of America (filed
as Exhibit 4(e) to the Company's
Form 10-Q for the quarter ended
September 30, 2000, SEC File No.
1-2299, and incorporated here by
reference).
4(d) Amendment dated November 14, 2003 to
1996 Private Shelf Agreement between
the Company and The Prudential
22
Insurance Company of America (filed
as Exhibit 4(d) to the Company's
Form 10-Q for the quarter ended
December 31, 2003, SEC File No.
1-2299, and incorporated here by
reference).
4(e) Amendment dated February 25, 2004 to
1996 Private Shelf Agreement between
the Company and The Prudential
Insurance Company of America.
4(f) $100,000,000 Credit Agreement dated
as of October 31, 2003 among the
Company, KeyBank National
Association as Agent, and various
financial institutions (filed as
Exhibit 4(e) to the Company's Form
10-Q for the quarter ended December
31, 2003, SEC File No. 1-2299, and
incorporated here by reference).
4(g) Rights Agreement, dated as of
February 2, 1998, between the
Company and Computershare Investor
Services LLP (successor to Harris
Trust and Savings Bank), as Rights
Agent, which includes as Exhibit B
thereto the Form of Rights
Certificate (filed as Exhibit No. 1
to the Company's Registration
Statement on Form 8-A filed July 20,
1998, SEC File No. 1-2299, and
incorporated here by reference).
15 Letter from independent accountants regarding
unaudited interim financial information.
31 Rule 13a-14(a)/15d-14(a) certifications.
32 Section 1350 certifications.
Applied will furnish a copy of any exhibit described above and not
contained herein upon payment of a specified reasonable fee which shall be
limited to Applied's reasonable expenses in furnishing the exhibit.
Certain instruments with respect to long-term debt have not been filed as
exhibits because the total amount of securities authorized under any one of the
instruments does not exceed 10 percent of the total assets of Applied and its
subsidiaries on a consolidated basis. Applied agrees to furnish to the
Securities and Exchange Commission, upon request, a copy of each such
instrument.
23
(b) Reports on Form 8-K.
The Company filed the following Reports on Form 8-K with the Securities
and Exchange Commission during the quarter ended March 31, 2004:
1. Filing on January 13, 2004 - the Company attached its press
release of January 13, 2004, regarding second quarter
earnings.
2. Filing on March 11,2004 - the Company attached its press release
of March 11,2004, regarding earnings guidance for third quarter.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
(Company)
Date: May 13, 2004 By: /s/ David L. Pugh
----------------------------------------
David L. Pugh
Chairman & Chief Executive Officer
Date: May 13, 2004 By: /s/ Mark O. Eisele
-----------------------------------------
Mark O. Eisele
Vice President-Chief Financial Officer
& Treasurer
24
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
EXHIBIT INDEX
TO FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2004
EXHIBIT NO. DESCRIPTION
- ---------- -----------
3(a) Amended and Restated Articles of Incorporation of
Applied Industrial Technologies, Inc., as amended on
October 8, 1998 (filed as Exhibit 3(a) to the
Company's Form 10-Q for the quarter ended September
30, 1998, SEC File No. 1-2299, and incorporated here
by reference).
3(b) Code of Regulations of Applied Industrial
Technologies, Inc., as amended on October 19, 1999
(filed as Exhibit 3(b) to the Company's Form 10-Q for
the quarter ended September 30, 1999, SEC File No.
1-2299, and incorporated here by reference).
4(a) Certificate of Merger of Bearings, Inc. (Ohio) and
Bearings, Inc. (Delaware) filed with the Ohio
Secretary of State on October 18, 1988, including an
Agreement and Plan of Reorganization dated September
6, 1988 (filed as Exhibit 4(a) to the Company's
Registration Statement on Form S-4 filed May 23, 1997,
Registration No. 333-27801, and incorporated here by
reference).
4(b) Private Shelf Agreement dated as of November 27, 1996,
as amended on January 30, 1998, between the Company
and Prudential Investment Management, Inc. (assignee
of The Prudential Insurance Company of America) (filed
as Exhibit 4(f) to the Company's Form 10-Q for the
quarter ended March 31, 1998, SEC File No. 1-2299, and
incorporated here by reference).
4(c) Amendment dated October 24, 2000 to November 27, 1996
Private Shelf Agreement between the Company and
Prudential Investment Management, Inc. (assignee of
The Prudential Insurance Company of America) (filed as
Exhibit 4(e) to the Company's Form 10-Q for the
quarter ended September 30,
2000, SEC File No. 1-2299, and incorporated here by
reference).
4(d) Amendment dated November 14, 2003 to 1996 Private
Shelf Agreement between the Company and Prudential
Investment Management, Inc. (assignee of The
Prudential Insurance Company of America) (filed as
Exhibit 4(d) to the Company's Form 10-Q for the
quarter ended December 31, 2003, SEC File No. 1-2299,
and incorporated here by reference).
4(e) Amendment dated February 25, 2004 to 1996 Attached
Private Shelf Agreement between the Company and
Prudential Investment Management, Inc.
4(f) $100,000,000 Credit Agreement dated as of October 31,
2003 among the Company, KeyBank National Association
as Agent, and various financial institutions (filed as
Exhibit 4(e) to the Company's Form 10-Q for the
quarter ended December 31, 2003, SEC File No. 1-2299,
and incorporated here by reference).
4(g) Rights Agreement, dated as of February 2, 1998,
between the Company and Computershare Investor
Services LLP (successor to Harris Trust and Savings
Bank), as Rights Agent, which includes as Exhibit B
thereto the Form of Rights Certificate (filed as
Exhibit No. 1 to the Company's Registration Statement
on Form 8-A filed July 20, 1998, SEC File No. 1-2299,
and incorporated here by reference).
15 Letter from independent accountants regarding Attached
unaudited interim financial information.
31 Rule 13a-14(a)/15d-14(a) certifications. Attached
32 Section 1350 certifications. Attached