UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY
REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2004
Commission File Number 0-15582
MINUTEMAN INTERNATIONAL, INC.
(Exact name of registrant, as specified in its charter)
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Illinois |
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36-2262931 |
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(State
or other jurisdiction of |
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(I.R.S. Employer Identification No.) |
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111 South Rohlwing Road, Addison, Illinois |
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60101 |
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(Address of principal executive offices) |
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(Zip Code) |
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Registrant’s telephone number, including area code |
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(630) 627-6900 |
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 ý No o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý
The number of shares of common stock, no par value, of the registrant outstanding as of March 31, 2004 was 3,580,173.
MINUTEMAN INTERNATIONAL, INC.
AND SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 2004
TABLE OF CONTENTS
2
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
MINUTEMAN INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
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Unaudited |
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Audited |
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ASSETS |
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Current assets: |
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Cash & cash equivalents |
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$ |
1,477,000 |
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$ |
836,000 |
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Short-term investments |
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2,700,000 |
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5,800,000 |
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Accounts receivable, less allowances of $1,449,000 in 2004 and $1,339,000 in 2003 |
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20,912,000 |
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18,136,000 |
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Due from affiliates |
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24,000 |
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19,000 |
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Inventories |
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18,769,000 |
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17,190,000 |
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Prepaid expenses |
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721,000 |
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403,000 |
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Deferred income taxes |
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844,000 |
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778,000 |
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Total current assets |
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45,447,000 |
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43,162,000 |
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Property, plant and equipment, at cost |
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25,639,000 |
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25,379,000 |
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Accumulated depreciation |
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(18,508,000 |
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(18,158,000 |
) |
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Net property, plant and equipment |
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7,131,000 |
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7,221,000 |
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Intangible assets, net of amortization of $1,066,000 in 2004 and 2003 |
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5,201,000 |
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5,201,000 |
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Total assets |
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$ |
57,779,000 |
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$ |
55,584,000 |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current liabilities: |
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Current maturities of long-term debt |
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$ |
1,500,000 |
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$ |
1,500,000 |
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Accounts payable |
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4,600,000 |
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2,552,000 |
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Accrued expenses |
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3,124,000 |
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3,384,000 |
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Income taxes |
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319,000 |
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108,000 |
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Total current liabilities |
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9,543,000 |
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7,544,000 |
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Long-term debt, less current maturities |
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6,000,000 |
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6,000,000 |
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Derivative financial instrument |
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495,000 |
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444,000 |
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Deferred income taxes |
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609,000 |
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603,000 |
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Total liabilities |
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16,647,000 |
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14,591,000 |
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Commitments and contingencies (Note 8) |
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Shareholders’ equity: |
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Common stock, no par value; 10,000,000 shares authorized; 3,580,173 shares issued and outstanding at March 31, 2004 and December 31, 2003 |
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6,596,000 |
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6,596,000 |
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Retained earnings |
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34,721,000 |
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34,594,000 |
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Unearned restricted stock |
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— |
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(16,000 |
) |
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Accumulated other comprehensive loss |
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(185,000 |
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(181,000 |
) |
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Total shareholders’ equity |
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41,132,000 |
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40,993,000 |
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Total liabilities and shareholders’ equity |
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$ |
57,779,000 |
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$ |
55,584,000 |
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See accompanying notes to condensed consolidated financial statements.
3
MINUTEMAN INTERNATIONAL, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF INCOME
(Unaudited)
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Three Months Ended |
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March 31, |
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March 31, |
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Net sales |
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$ |
19,810,000 |
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$ |
18,634,000 |
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Cost of sales |
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13,907,000 |
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13,080,000 |
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Gross profit |
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5,903,000 |
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5,554,000 |
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Operating expenses: |
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Selling |
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3,696,000 |
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3,451,000 |
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General and administrative |
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1,319,000 |
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1,131,000 |
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Total operating expenses |
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5,015,000 |
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4,582,000 |
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Income from operations |
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888,000 |
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972,000 |
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Other income (expense): |
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Interest income |
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2,000 |
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7,000 |
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Interest expense |
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(157,000 |
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(199,000 |
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Other, net |
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(25,000 |
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(2,000 |
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Total other expense |
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(180,000 |
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(194,000 |
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Income before income taxes |
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708,000 |
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778,000 |
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Provision for income taxes |
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259,000 |
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305,000 |
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Net income |
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$ |
449,000 |
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$ |
473,000 |
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Weighted average number of common shares outstanding |
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• Basic |
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3,586,724 |
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3,580,437 |
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• Diluted |
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3,587,245 |
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3,587,245 |
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Net income per common share - basic and diluted |
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$ |
0.13 |
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$ |
0.13 |
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Dividends per share of common stock |
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$ |
0.09 |
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$ |
0.09 |
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See accompanying notes to condensed consolidated financial statements.
4
MINUTEMAN INTERNATIONAL, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
(Unaudited)
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Three Months Ended |
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March 31, 2004 |
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March 31,2003 |
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OPERATING ACTIVITIES |
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Net income |
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$ |
449,000 |
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$ |
473,000 |
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Adjustments to reconcile net income to net cash used in operating activities: |
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Depreciation |
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350,000 |
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398,000 |
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Compensation earned under restricted stock plan |
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16,000 |
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18,000 |
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Deferred income taxes |
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(60,000 |
) |
— |
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Derivative financial instrument |
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51,000 |
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63,000 |
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Other |
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(6,000 |
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(7,000 |
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Changes in operating assets and liabilities: |
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Accounts receivable and due from affiliates |
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(2,781,000 |
) |
(2,293,000 |
) |
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Inventories |
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(1,579,000 |
) |
(2,594,000 |
) |
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Prepaid expenses and refundable income taxes |
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(318,000 |
) |
129,000 |
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Accounts payable, accrued expenses and income taxes payable |
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1,999,000 |
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1,554,000 |
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Net cash used in operating activities |
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(1,879,000 |
) |
(2,259,000 |
) |
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INVESTING ACTIVITIES |
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Purchases of property, plant and equipment, net |
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(260,000 |
) |
(98,000 |
) |
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Maturities of short-term investments |
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3,100,000 |
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2,100,000 |
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Net cash provided by investing activities |
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2,840,000 |
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2,002,000 |
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FINANCING ACTIVITIES |
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Dividends paid |
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(322,000 |
) |
(322,000 |
) |
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Net cash used in financing activities |
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(322,000 |
) |
(322,000 |
) |
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Effect of foreign exchange rate changes |
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2,000 |
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52,000 |
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Increase (decrease) in cash and cash equivalents |
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641,000 |
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(527,000 |
) |
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Cash and cash equivalents at beginning of period |
|
836,000 |
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1,307,000 |
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Cash and cash equivalents at end of period |
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$ |
1,477,000 |
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$ |
780,000 |
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See accompanying notes to condensed consolidated financial statements.
5
MINUTEMAN INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1—Basis of Presentation
The Condensed Consolidated Balance Sheet as of March 31, 2004 and the Condensed Consolidated Statements of Income and Cash Flows for the three months ended March 31, 2004 in the opinion of the Company, reflect all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, the results of operations and cash flows, as of and for the periods then ended. Certain information and footnote disclosures normally included in financial statements, prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted, pursuant to Securities and Exchange Commission rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed consolidated financial Statements be read in conjunction with the financial statements and the notes thereto, included in the Company’s Annual Report on Form 10-K for the year-ended December 31, 2003. The results of operations for fiscal 2004 interim periods are not necessarily indicative of the results to be expected for the fiscal year ended December 31, 2004.
Note 2—Inventories
It is the Company’s policy to take annual physical inventories, in conjunction with the preparation of the annual financial statements. At times, other than year-end, it is necessary to estimate the breakdown of raw materials, work-in-process, and finished goods inventories. The estimate for the period ended March 31, 2004, and the components of the December 31, 2003 inventories, based on the physical count, and primarily on a LIFO basis, were as follows:
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March 31, 2004 |
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December 31, 2003 |
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Finished goods |
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$ |
8,012,000 |
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$ |
7,116,000 |
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Work in process |
|
8,251,000 |
|
7,219,000 |
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Raw materials |
|
4,713,000 |
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4,935,000 |
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|
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20,976,000 |
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19,270,000 |
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Less LIFO reserve |
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(2,207,000 |
) |
(2,080,000 |
) |
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Total at LIFO cost |
|
$ |
18,769,000 |
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$ |
17,190,000 |
|
Note 3—Earnings Per Share
Basic earnings per share is computed by dividing income available to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) for the period. The computation of the diluted earnings per share is similar to basic earnings per share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potentially dilutive common shares had been issued.
Note 4—Line of Credit
The Company has an unsecured line of credit with a financial institution, which expires May 31, 2004. Under the terms of this facility the Company may borrow up to $5 million on terms mutually agreeable to the Company and financial institution. There are no requirements for compensating balances or restrictions of any kind involved in this arrangement. At March 31, 2004 there were no borrowings outstanding.
6
Note 5—Derivative Financial Instruments
The Company recognizes all derivative financial instruments, such as interest rate swap contracts in the consolidated financial statements at fair value regardless of the purpose or intent for holding the instrument. Changes in the fair value of derivative financial instruments are either recognized periodically in income or in shareholders’ equity as a component of comprehensive income depending on whether the derivative financial instrument qualifies for hedge accounting, and if so, whether it qualifies as a fair value hedge or cash flow hedge. Generally, changes in fair values of derivatives accounted for as fair value hedges are recorded in income along with the portions of the changes in the fair values of the hedged items that relate to the hedged risks. Changes in fair values of derivatives accounted for as cash flow hedges, to the extent they are effective and designated as hedges, are recorded in other comprehensive income net of tax. Changes in fair values of derivatives not qualifying as hedges are reported as interest expense. The fair market value of the interest rate swap at March 31, 2004 and December 31, 2003 is classified as a non-current liability on the condensed consolidated balance sheets.
The Company records the change in the fair market value of its interest rate swap as interest expense. The effect of adjusting the interest rate swap to market in the first quarter of 2004 was $40,000, resulting in a $24,000 (net of a tax benefit of $16,000) charge to net income.
Note 6—Comprehensive Income
The components of comprehensive income are as follows:
|
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Three Months Ended |
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|
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March 31, |
|
March 31, |
|
||
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Net income |
|
$ |
449,000 |
|
$ |
473,000 |
|
|
|
|
|
|
|
|
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Foreign currency translation adjustments |
|
2,000 |
|
52,000 |
|
||
|
|
|
|
|
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Amortization to income of cumulative effect of change in accounting for derivatives net of income tax benefit |
|
(6,000 |
) |
(6,000 |
) |
||
|
|
|
|
|
|
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Comprehensive income |
|
$ |
445,000 |
|
$ |
519,000 |
|
Note 7—Restricted Stock Plan
On April 18, 2000 the shareholders approved the Minuteman 2000 Restricted Stock Plan, (“Restricted Stock Plan”), which is designed to attract and retain the services of key management employees by providing such persons with a proprietary interest in the Company through the granting of Company common stock. The maximum number of shares of Company common stock available for issuance is 150,000 shares. At March 31, 2004 and December 31, 2003 there were 131,140 shares available to be granted. As of March 31, 2004 and December 31, 2003, awards with respect to 18,860 shares have been granted.
On May 1, 2003 the shareholders approved an amendment to the Restricted Stock Plan changing the vesting period for any future award to a period not to exceed two years. At the sole discretion of the Company, restricted stock may be awarded to an eligible employee based upon certain conditions and restrictions including, but not limited to, past and continued service with the Company, achievement of specific business objectives, superior work performance, and other measurements of individual or Company performance. In the event that an employee is terminated (except due to retirement, death or
7
total disability) prior to the end of the vesting period, the non-vested portion of the award will be forfeited. However, in the event of an employee’s retirement, death or total disability, or a change in control of the Company, the award shall immediately become fully vested. Shares granted under the plan are recorded at fair market value on the date of grant with a corresponding charge to shareholders’ equity representing the unearned portion of the award. The unearned portion of the award is amortized as compensation expense ($16,000 and $18,000 in the first quarter of 2004 and 2003, respectively) on a straight-line basis over the related vesting period. At March 31, 2004, 11,788 shares were issued in connection with fully vested awards.
Note 8—Commitments and Contingencies
Legal Matters
The Company is subject to various proceedings, lawsuits and other claims related to labor, product and other matters. Included among these lawsuits are product liability claims seeking compensation for property damage, lost profits or other relief, including, in some cases, punitive damages. The Company disputes these claims and intends to defend the lawsuits vigorously. A determination of the amount of reserves required, if any, for each of these contingencies is made after careful analysis by the Company. The reserves may change in the future due to new developments in each matter or changes in approach in resolving these claims. While the Company believes that these contingencies will not have a material adverse effect on the financial condition of the Company, there can be no assurance that they will be resolved in a manner that does not materially adversely affect the Company.
Note 9—Guarantees
Performance Guarantees
The Company is party to financing agreements between leasing companies and distributors. The agreements contain repurchase provisions, whereby the Company will, upon default of the customer, repurchase the equipment from the leasing companies. The terms of the guarantees are related to the standard equipment lease terms. The maximum potential amount of future payments the Company could be required to make under these guarantees at March 31, 2004 is $45,000.
Warranties
The Company provides for the estimated cost of product warranties at the time revenue is recognized. The Company’s warranty liability is affected by product failure rates, material usage and costs incurred in correcting a product failure. Should actual product failure rates, material usage or costs differ from the Company’s estimates, revisions to the estimated warranty liability may be required.
Changes in the Company’s warranty liability during the period were as follows:
|
Description |
|
Balance at |
|
Charged to |
|
Deductions |
|
Balance at |
|
||||
|
For the three months ended March 31, 2004 |
|
|
|
|
|
|
|
|
|
||||
|
Accrued warranties |
|
$ |
610,000 |
|
$ |
182,000 |
|
$ |
143,000 |
|
$ |
649,000 |
|
(1) — Provision for warranty liability.
(2) — Warranty claims processed.
8
Note 10— Subsequent Events
On April 5, 2004, the Company announced that it had received a letter from Hako-Werke International GmbH, a German corporation (“Hako-Werke International”), expressing an interest in acquiring all of the outstanding shares of common stock of the Company that are not already owned by a subsidiary of Hako-Werke International. Hako-Werke International owns, through its subsidiary, approximately 68% of the issued and outstanding common stock of the Company.
The Board of Directors of the Company has formed a Special Committee of independent directors to review the offer price and other terms of the proposed transaction. The Special Committee has retained its own legal counsel and independent financial advisor to assist it in evaluating the proposed transaction on behalf of the public shareholders of the Company.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
General
The Company’s discussion and analysis of its financial condition and results of operations are based upon its condensed consolidated financial statements. The preparation of these financial statements is based upon the selection and application of significant accounting policies, which require management to make significant estimates and judgments that affect the amounts reported in these financial statements. Actual results may differ from these estimates under different assumptions or conditions.
Accounting Policies and Critical Accounting Estimates
The Company believes the following are the accounting policies that affect its more significant judgments and estimates used in the preparation of consolidated financial statements.
Revenue Recognition
The Company recognizes revenue when persuasive evidence of an arrangement exists, when title and risk of ownership passes, the sales price is fixed or determinable, and collectibility is reasonably assured. Generally, these criteria are met at the time product is shipped. Provision is made at the time the related revenue is recognized for discounts and allowances, estimated cost of product warranties, bad debts and rebates.
Accounts Receivable and Allowance for Doubtful Accounts
The Company carries its accounts receivable at their face amounts less an allowance for doubtful accounts. On a periodic basis, the Company evaluates its accounts receivable and establishes the allowance for doubtful accounts based on a combination of specific customer circumstances and credit conditions and based on a history of write-offs and collections. The Company’s policy is to generally not charge interest on trade receivables after the invoice becomes past due. A receivable is considered past due if payments have not been received within agreed upon invoice terms.
Inventory
The Company is required to state its inventories at lower of cost or market. The Company writes down its inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required.
9
Warranties
The Company provides for the estimated cost of product warranties at the time revenue is recognized. The Company’s warranty obligation is affected by product failure rates, material usage and costs incurred in correcting a product failure. Should actual product failure rates, material usage or costs differ from the Company’s estimates, revisions to the estimated warranty liability may be required.
Income Taxes
The Company currently has significant deferred tax assets, which are subject to periodic recoverability assessments. Realization of our deferred tax assets is principally dependent upon our achievement of projected future taxable income. Judgments regarding future profitability may change due to future market conditions and other factors. These changes, if any, may require possible material adjustments to these deferred tax asset balances.
Intangible Assets
Intangible assets were primarily recorded as the result of the November 1998 PowerBoss acquisition. The Company has concluded that these assets are not impaired at December 31, 2003 in accordance with Statement of Financial Accounting Standards No. 142 “Goodwill and Other Intangible Assets”.
The determination of whether these assets are impaired involves significant judgments. Changes in strategy and/or market conditions could significantly impact these judgments and require adjustments to recorded asset balances.
Inflation
Although the Company cannot accurately determine the precise effect of inflation on operations, the Company does not believe inflation has had a material effect on sales or results of operations.
Forward-Looking Statements
This report contains not only historical information, but also forward-looking statements which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. Statements that are not historical are forward-looking and reflect expectations about the Company’s future performance. In addition, forward-looking statements may be made orally or in press releases, conferences, reports, on the Company’s web site, or otherwise, in the future by the Company or on our behalf. The Company has tried to identify such statements by using words such as “expect”, “foresee”, “looking ahead”, “anticipate”, “estimate”, “believe”, “should”, “intend”, and similar expressions to identify forward-looking statements.
Forward-looking statements involve risks and uncertainties and are not guarantees of future performance. Actual future results may differ materially from those discussed in forward-looking statements. These uncertainties include factors that affect all businesses operating in a global market as well as matters specific to the Company. The Company believes that forward-looking statements made by it are based upon reasonable expectations. However, no assurances can be given that the actual results will not differ materially from those contained in such forward-looking statements. The following are some of the factors that could cause the Company’s financial condition to differ materially from what the Company has anticipated in forward-looking statements: the effectiveness of operating and technology initiatives and advertising and promotional efforts, as well as changes in: global and local business and economic conditions; currency exchange and interest rates; labor and other operating costs; political or economic instability in local markets; disruptions from outbreak of hostilities, war or terrorists’ attacks; competition; customer preferences; effects of unanticipated materially adverse litigation or product claims; unexpected
10
product failures or non-acceptance of new products by the market; legislation and governmental regulation; and accounting policies and practices. The foregoing list of important factors is not exclusive.
Results of Operations
Net Sales and Earnings
Net sales were $19,810,000 in the first quarter of 2004, compared to $18,634,000 in the first quarter of 2003 an increase of $1,176,000 or 6.3%. Domestic sales in the first quarter of 2004 increased 8.2% on increased demand from the Company’s domestic dealers for commercial equipment, partially offset by an 16.6% decrease in domestic industrial sales and a 14.8% decrease in domestic chemical sales. Total international sales for the first quarter of 2004 were $4,422,000 an increase of 0.2% compared to $4,411,000 for the first quarter of 2003. Excluding foreign currency exchange effects, total international sales decreased 5.3%. International sales of commercial equipment increased 6.6% over the previous year quarter. International industrial equipment sales and chemical sales for the first quarter of 2004 decreased 2.7% and 39.2%, respectively from the previous year quarter. Excluding foreign currency exchange effects, international commercial and chemical product sales decreased 6.9%. Gross profit dollars increased 6.3% in the first quarter of 2004 from the comparable prior year period due to the increase in sales. Net income for the first quarter of 2004 was $449,000 or $0.13 per common share, a decrease of $24,000 from the prior year’s first quarter. The decrease in net income was primarily due to higher selling, general and administrative costs, partially offset by a reduction in interest expense.
Operating Expenses
Selling expenses in the first quarter of 2004 were $3,696,000, an increase of 7.1% from the first quarter of 2003. Higher payroll and health insurance costs, increased rent and auto lease expense contributed to the increase in selling expenses quarter over quarter partially offset by a decrease in promotional expense. General and administrative expenses in the first quarter of 2004 were $1,319,000, an increase of 16.6% compared to the first quarter of 2003. The increase was primarily related to higher payroll, health insurance costs, casualty insurance and professional fees.
Other Income/Expense
Other expense in the first quarter of 2004 decreased $14,000 from the prior year quarter primarily due to a decrease in interest expense.
The Company incurred interest expense, related principally to debt obligations, of $157,000 and $199,000 for the quarter ended March 31, 2004 and 2003, respectively. Included in the interest expense for the first quarter of 2004 is $51,000 related to the change in fair market value of the derivative financial instrument and income of $11,000 related to amortization of cumulative effect of change in accounting for the derivative. In the first quarter of 2003 interest expense included $63,000 related to the change in fair market value of the derivative financial instrument and income of $11,000 related to amortization of cumulative effect of change in accounting for the derivative.
Income Taxes
The effective income tax rate was approximately 37% for the first quarter of 2004 and 39% for the first quarter of 2003.
Liquidity, Capital Resources and Financial Condition
At March 31, 2004, cash and cash equivalents and short-term investments totaled $4.2 million, down from $6.6 million at December 31, 2003. The Company had working capital of $35.9 million at March 31, 2004 and $35.6 million at December 31, 2003. This represented a current ratio of 4.8 for 2004 and 5.7 for
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2003. At March 31, 2004, total short-term and long-term debt was $7.5 million and represented 18.2% of stockholders’ equity. At December 31, 2003, total short-term and long-term debt was $7.5 million and represented 18.3% of stockholders’ equity. At March 31, 2004 and December 31, 2003, the Company had shareholders’ equity of $41.1 million and $41.0 million, respectively, which when compared to total liabilities represented an equity to liability ratio of 2.5 and 2.8, respectively.
During the first three months of 2004 and 2003, the Company used $1.9 million and $2.3 million, respectively in cash flows from operating activities, which represents the Company’s principal source of cash. During the first three months of 2004, cash used in operating activities resulted from the changes in operating working capital, primarily a $2.8 million increase in accounts receivable and $1.6 million increase in inventories. The increase in accounts receivable is primarily a result of higher sales in the first quarter of 2004 compared to the first quarter of 2003. The increase in inventories resulted from planned increases for new product introductions.
Cash provided by investing activities was $2,840,000 in the first three months of fiscal year 2004, an increase of $838,000 from the comparable period in 2003. The increase is due to the increase in maturities of short-term investments in the first three months of 2004 compared to the first three months of 2003, partially offset by a $162,000 increase in capital expenditures.
Cash used in financing activities was $322,000 in the first three months of 2004 and 2003. Financing activities consisted of dividend payments.
The Company has sufficient capital resources to meet business and liquidity needs as they arise. The Company has an unsecured line of credit with a financial institution, which expires May 31, 2004. Under the terms of this facility the Company may borrow up to $5 million on terms mutually agreeable to the Company and financial institution. There are no requirements for compensating balances or restrictions of any kind involved in this arrangement. At March 31, 2004 there were no borrowings outstanding. The Company foresees no unusual future events that will materially change the foregoing summary.
Legal Matters
The Company is subject to various proceedings, lawsuits and other claims related to labor, product and other matters. Included among these lawsuits are product liability claims seeking compensation for property damage, lost profits or other relief, including, in some cases, punitive damages. The Company disputes these claims and intends to defend the lawsuits vigorously. A determination of the amount of reserves required, if any, for each of these contingencies is made after careful analysis by the Company. The reserves may change in the future due to new developments in each matter or changes in approach in resolving these claims. While the Company believes that these contingencies will not have a material adverse effect on the financial condition of the Company, there can be no assurance that they will be resolved in a manner that does not materially adversely affect the Company.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company’s earnings and cash flow are subject to fluctuations due to changes in foreign currency exchange rates. Currently these earnings and foreign currency translation adjustments have not been material to the overall financial results of the Company.
The Company has also entered into an interest rate swap agreement to obtain a fixed interest rate on variable rate debt to reduce certain exposures to interest rate fluctuations. In the event that the counterparty fails to meet the terms of the interest rate swap agreement, the Company’s exposure is limited to the interest rate differential. The Company manages the credit risk of counterparties by dealing only with institutions that the Company considers financially sound. The Company considers the risk of nonperformance to be remote.
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Item 4. Controls and Procedures
As of the end of the period covered by this report, the Company’s Chief Executive Officer, its Chief Financial Officer and its Chief Accounting Officer evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended). Based on their evaluation, they have concluded that the Company’s disclosure controls and procedures are adequate and effective to ensure that material information relating to the Company is made known to them by others within the Company, particularly during the period for which this quarterly report was prepared.
During the period covered by this report, there have been no changes to our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
MINUTEMAN INTERNATIONAL, INC.
AND SUBSIDIARIES
On April 5, 2004, the Company announced that it had received a letter from Hako-Werke International expressing an interest in acquiring all of the outstanding shares of common stock of the Company that are not already owned by a subsidiary of Hako-Werke International. Hako-Werke International owns, through its subsidiary, approximately 68% of the issued and outstanding common stock of the Company.
The Board of Directors of the Company has formed a Special Committee of independent directors to review the offer price and other terms of the proposed transaction. The Special Committee has retained its own legal counsel and independent financial advisor to assist it in evaluating the proposed transaction on behalf of the public shareholders of the Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Index:
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Exhibit |
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Description |
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Certifications |
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31.1 |
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Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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31.2 |
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Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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31.3 |
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Certification of the Chief Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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32.1 |
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Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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32.2 |
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Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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32.3 |
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Certification of the Chief Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
(b) Reports on Form 8-K:
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1. The Company filed a report on Form 8-K on January 21, 2004 pursuant to Item 5, “Other Events and Regulation FD Disclosure” announcing the resignation of Stephen A. Schroeder, Vice President of Sales for the Commercial Division of the Company.
2. The Company filed a report on Form 8-K on March 1, 2004 pursuant to Item 12, “Results of Operations and Financial Condition” announcing earnings for the quarter and year ended December 31, 2003 and a quarterly dividend.
3. The Company filed a report on Form 8-K on April 5, 2004 pursuant to Item 5, “Other Events and Regulation FD Disclosure” that it had received a letter from Hako-Werke International, expressing an interest in acquiring all of the outstanding shares of common stock of the Company that are not already owned by a subsidiary of Hako-Werke International.
4. The Company filed a report on Form 8-K on April 14, 2004 pursuant to Item 5, “Other Events and Regulation FD Disclosure” announcing that it had appointed Brian Slack as its Vice President of Sales, effective April 21, 2004.
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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.
MINUTEMAN INTERNATIONAL, INC.
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/s/ Gregory J. Rau |
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May 10, 2004 |
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Gregory J. Rau |
Date |
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President, Chief Executive Officer and Director |
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/s/ Thomas J. Nolan |
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May 10, 2004 |
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Thomas J. Nolan |
Date |
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Chief Financial Officer, Secretary, Treasurer and Director |
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/s/ James A. Berg |
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May 10, 2004 |
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James A. Berg |
Date |
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Chief Accounting Officer |
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