Back to GetFilings.com

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

         For the quarterly period ended March 25, 2005

Commission file number 1-8048

TII NETWORK TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)

State of incorporation: Delaware                          IRS Employer Identification No: 66-0328885

1385 Akron Street, Copiague, New York 11726
(Address and zip code of principal executive office)

(631) 789-5000
(Registrant’s telephone number, including area code)

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 Securities Exchange Act of 1934). Yes ___ No  X 

The number of shares of the registrant’s Common Stock, $.01 par value, outstanding as of May 3, 2005 was 11,907,784.

Part I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

TII NETWORK TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

See Notes to Unaudited Consolidated Financial Statements

TII NETWORK TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

See Notes to Unaudited Consolidated Financial Statements

TII NETWORK TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(Dollars in thousands)
(Unaudited)

See Notes to Unaudited Consolidated Financial Statements

TII NETWORK TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)

See Notes to Unaudited Consolidated Financial Statements

TII NETWORK TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1 — Interim financial statements: The unaudited interim consolidated financial statements presented herein have been prepared in accordance with accounting principles generally accepted in the United States for interim financial statements and in accordance with the instructions to Form 10-Q and Regulation S-X pertaining to interim financial statements. Accordingly, they do not include all information and notes required by accounting principles generally accepted in the United States for complete financial statements. The consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments and accruals which, in the opinion of management, are considered necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the interim periods presented. The consolidated financial statements should be read in conjunction with the summary of significant accounting policies and notes to consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 25, 2004. Results of operations for interim periods are not necessarily indicative of the results that may be expected for the full fiscal year.

Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from such estimates.

Note 2 – Comprehensive income: For the three and nine months ended March 25, 2005 and March 26, 2004, comprehensive income (loss) equaled net income (loss).

Note 3 — Fiscal year: The Company reports on a 52-53 week fiscal year ending on the last Friday in June, with fiscal quarters ending on the last Friday of each calendar quarter. The Company’s fiscal year ending June 24, 2005 will contain 52 weeks. Fiscal 2004 also had 52 weeks.

Note 4 – Stock–Based Compensation: The Company applies the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” in accounting for its stock option plans. The exercise price of all options granted under all the plans has equaled at least the market value of the common stock on the dates of grants. Accordingly, no compensation expense has been recognized for options granted to employees or directors. The Company has adopted the disclosure-only provisions of SFAS No. 123, “Accounting for Stock-Based Compensation.” If the Company had elected to recognize compensation cost based on the fair value of the options granted at grant date, as prescribed by SFAS No. 123, the Company’s net (loss) earnings would have changed to the pro forma amounts indicated in the table below:

Note 5 — Net earnings per common share: Basic net earnings per share is computed based on the weighted average number of common shares outstanding. Diluted earnings per share is computed based on the weighted average number of common shares outstanding increased by dilutive common stock warrants and options.

The following table sets forth the amounts used in the computation of basic and diluted net earnings per share:

Options and warrants to purchase an aggregate of approximately 1,358,000 and 3,702,000 shares of common stock outstanding as of March 25, 2005 and March 26, 2004, respectively, are not included in the computation of diluted earnings per share for the nine months ended because their exercise prices were greater than the average market price of the Company’s common stock and were thus antidilutive.

Note 6 — Inventories: Inventories consisted of the following major classifications:

Note 7 – Credit Facility: The Company has a credit facility that enables it to have up to $3.0 million of borrowings outstanding at any one time, limited by a borrowing base equal to 85% of eligible accounts receivable, subject to certain reserves. The maximum amount of borrowings under the credit facility can be reduced by the lender upon written notice. Outstanding borrowings under the credit facility will bear interest at a specified bank’s prime rate (5.50% at March 25, 2005) plus 1%, but never less than 5% per annum, and the Company is also required to pay an annual facility fee of 3/4 of 1% of the maximum amount of the credit facility. At March 25, 2005, the borrowing base was $2.3 million and there were no borrowings outstanding. The credit facility had an initial one year term and automatically renewed in September 2004 for a two year period until September 2006 but may be terminated by the lender at any time on 60 days notice. The credit facility is guaranteed by the Company’s subsidiary and is secured by a lien and security interest against substantially all of the assets of the Company. The credit facility requires, among other covenants, that the Company maintain a consolidated tangible net worth of at least $12.0 million and working capital of at least $6.0 million. The credit facility also prohibits, without the lender’s consent, the payment of cash dividends, significant changes in management or ownership of the Company, business acquisitions, the incurrence of additional indebtedness, other than lease obligations for the purchase of equipment, and the guarantee of the obligations of others.

Note 8 – Significant Customers: The following customers accounted for 10% or more of the Company’s consolidated net sales during one or more of the periods presented below:

        As of March 25, 2005, two of these customers accounted for 32% and 22% of accounts receivable and as of June 25, 2004 those two customers accounted for approximately 47% and 19% of accounts receivable.

Note 9 – Other Assets: In September 2004 and March 2005, the Company sold its remaining two condominiums, which had been included in other assets on the June 25, 2004 balance sheet, for $162,000 and $175,000, respectively, resulting in gains of $116,000 and $106,000, respectively. These gains are included in selling, general and administrative expenses for the three months and nine months ended March 25, 2005 in the accompanying consolidated statement of operations, and amounted to $106,000 and $222,000, respectively. In March 2005, the Company received a net settlement from the surrender of whole-life insurance policies of $433,000, which resulted in a gain of $265,000 that is included in the accompanying consolidated statement of operations in other income for the three months and nine months ended March 25, 2005. Prepaid expenses and other current assets at March 25, 2005 include a receivable of $433,000 related to the settlement, which was collected in April 2005.

Note 10 – Impact of Recently Issued Accounting Standards: On December 16, 2004, the Financial Accounting Standard Board (FASB) issued SFAS 123 (R), Share-Based Payment, which is a revision of SFAS 123, supersedes APB 25, Accounting for Stock Issued to Employees, and amends SFAS 95, Statement of Cash Flows. Generally, the approach in SFAS 123 (R) is similar to the approach described in SFAS 123. However, SFAS 123 (R) requires companies to recognize compensation expense for all share-based payments to employees, including grants of employee stock options, in the income statement based on their fair value. This revised standard will be effective for the Company beginning July 1, 2005. The Company has not yet determined the transition method it expects to select in adopting the provisions of SFAS 123 (R).

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the foregoing consolidated financial statements and notes thereto.

Business

TII Network Technologies, Inc., formerly named TII Industries, Inc., and subsidiary (together, the “Company” or “TII”), designs, produces and markets lightning and surge protection products, network interface devices (“NIDs”), station electronic and other products. The Company has been a leading supplier of overvoltage surge protectors to U.S. telephone operating companies (“Telcos”) for over 30 years.

Critical Accounting Policies, Estimates and Judgments

TII’s consolidated financial statements have been prepared in accordance with accounting principles that are generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and judgments. The Company believes that the determination of the carrying value of the Company’s inventories and long-lived assets and establishment of a valuation allowance for deferred tax assets are the most critical areas where management’s judgments and estimates most affect the Company’s reported results. While the Company believes its estimates are reasonable, misinterpretation of the conditions that affect the valuation of these assets could result in actual results varying from reported results, which are based on the Company’s estimates, assumptions and judgments as of the balance sheet date.

Inventories are required to be stated at net realizable value at the lower of cost or market. In establishing the appropriate inventory write-downs, management assesses the ultimate recoverability of the inventory considering such factors as technological advancements in products as required by the Company’s customers, average selling prices for finished goods inventory, changes within the marketplace, quantities of inventory items on hand, historical usage or sales of each inventory item, forecasted usage or sales of inventory and general economic conditions.

The Company reviews long-lived assets, such as fixed assets to be held and used or disposed of, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the expected cash flows undiscounted and without interest is less than the carrying amount of the asset, an impairment loss is recognized in the amount by which the carrying amount of the asset exceeds its fair value.

At March 25, 2005, the Company has provided a valuation allowance against all its net deferred tax assets due to the uncertainty of realizing any future benefits therefrom. If and when the Company’s historical and projected pre-tax earnings indicate it will be more likely than not, that all or a portion of its deferred tax assets will be realized, the Company will reduce its valuation allowance accordingly.

General

The Company’s primary market, the traditional Telco copper-based transmission network, has been declining over the last several years. This is due principally to the impact of alternative technologies that compete with the Telco’s traditional copper-based transmission network (examples include cellular service and Fiber to the Premise (“FTTP”)) and competition from multi-system operators (“MSOs”). This trend, which has resulted in cutbacks in copper-based construction and maintenance budgets by the Telcos and a reduction in the number of their access lines, has adversely affected the Company’s principal copper-based business. In response to this trend, the Company has been pursuing new markets with new products that take advantage of the Company’s proprietary protection and enclosure technologies.

The Company’s major customer, Verizon, has begun its strategy to deploy FTTP within its region. This multi-year program has resulted in a reduction of capital outlays on its traditional copper network and has therefore impacted the Company’s traditional protection based products since FTTP networks require less traditional protection than current copper networks. Though the full extent of the impact on the Company of this program is not yet known, the Company believes that the current embedded copper infrastructure will continue to play a significant role as a transmission medium for years to come.

Sales of the Company’s products to Telcos are generally through “as-ordered” general supply agreements. General supply agreements do not require Telcos to purchase specific quantities of products and can be terminated, amended or extended for reasons, such as changing technologies, product standardizations, or a policy of consolidation of vendors. The Verizon general supply agreement is scheduled to expire in April of 2006. However, Verizon is in discussions with the Company and the Company’s competitors to, among other things, incorporate new sealing technologies into the NIDs that the Company is currently supplying under its agreement. The Company believes that Verizon will accept the Company’s offer to fulfill Verizon’s new NID requirements.

Results of Operations

Net sales for the third quarter of fiscal 2005 were $5.2 million compared to $6.0 million for the comparative prior year period, a decrease of approximately $807,000 or 13.4%. This decrease was primarily due to the extreme winter weather conditions which resulted in lower than normal NID installations in the Northeast. Net sales for the first nine months of fiscal 2005 were $19.2 million compared to $22.3 million for the similar prior year period, a decrease of approximately $3.0 million or 13.5%. The lower comparative sales for the first nine months of fiscal 2005 was due to the lower fiscal 2005 third quarter sales, together with the sharp increase in sales that occurred in the first quarter of fiscal 2004, primarily due to the need to replace damaged NIDs as a result of the hurricanes that occurred during that summer.

Gross profit for the third quarter of fiscal 2005 was $1.4 million compared to $1.9 million for the comparable prior year period, a decrease of $547,000 or 28.3%, while gross profit margins for those quarters were 26.5% and 32.0%, respectively. The lower gross profit levels and margin is due to the effect of fixed overhead costs and the lower sales levels. Gross profit for the nine months ended March 25, 2005 was $5.6 million compared to $6.8 million for the similar prior year period, a decrease of approximately $1.2 million or 17.6 %, while gross profit margins for those periods were 29.1% and 30.5%, respectively. The lower gross profit level for the first nine months of fiscal 2005 compared to the prior year ago period was primarily due to the lower sales levels.

Selling, general and administrative expenses for the third quarter of fiscal 2005 were $1.3 million compared to $1.4 million for the comparable prior year third quarter, a decrease of approximately $47,000 or 3.4%. Selling, general and administrative expenses for the nine months ended March 25, 2005 were $4.1 million compared to $4.3 million for the similar prior year period, a decrease of approximately $213,000 or 4.9%. Included in the fiscal 2005 third quarter was a gain of $106,000 resulting from the sale of the Company’s remaining condominium and, combined with a gain of $116,000 from the sale of a condominium earlier in the year, the nine months expense includes cumulative gains of $222,000. Excluding the gains, selling, general and administrative expenses for the three and nine months of fiscal 2005 increased by $59,000 and $9,000, respectively. This increase was due to higher selling and marketing expenses resulting from the Company’s increased efforts to pursue new markets and diversify its customer base.

Research and development expenses for the third quarter of fiscal 2005 were $405,000 compared to $343,000 for the comparable prior year period. Research and development expenses for the nine months ended March 25, 2005 were $987,000 compared to $1.0 million for the comparable prior year period, a decrease of approximately $50,000 or 4.8%. The Company is spending a higher proportion of these expenses on products outside its traditional copper-based telecom related protection products as it seeks to diversify its traditional customer and product base.

The Company did not incur interest expense in the third quarter of fiscal 2005 and 2004. Interest expense for the nine months ended March 25, 2005 was $4,000 compared to $12,000 for the comparable prior year period, a decrease of approximately $8,000 due to lower interest costs under the Company’s leasing arrangements.

Interest income for the third quarter of fiscal 2005 was $26,000 compared to $8,000 for the comparable prior year period, an increase of approximately $18,000. For the nine months ended March 25, 2005, interest income was $62,000 compared to $25,000 for the comparative prior year period, an increase of $37,000. The increases were primarily due to higher average cash and cash equivalent balances held by the Company.

Other income in fiscal 2005 includes a gain of $265,000 resulting from the net settlement received from the surrender of whole-life insurance policies that the Company had held on the Company’s Chief Executive Officer.

For the three months ended March 25, 2005, the Company recorded a recovery of $2,000 for income taxes as a result of its loss for the period and recorded a provision of $29,000 for the nine months then ended. Though the Company has approximately $36.0 million of Federal net operating loss carryforwards, which are subject to certain limitations, a provision for income taxes was recorded for the nine months due to the limitations on the use of the Federal net operating loss carryforwards under alternative minimum tax regulations.

Net loss for the third quarter of fiscal 2005 was $53,000, compared to net earnings of $217,000 or $0.02 per diluted share in the year ago quarter. For the nine months ended March 25, 2005, net earnings were $798,000 or $0.06 per diluted share, compared to net earnings of $1.5 million or $0.11 per diluted share for the comparable prior year period.

Liquidity and Capital Resources

The Company’s cash and cash equivalents were $5.3 million at March 25, 2005 compared to $4.2 million at the end of fiscal 2004, an increase of approximately $1.1 million. Working capital increased to $11.8 million at the end of the third quarter of fiscal 2005 from $11.0 million at the end of fiscal 2004 and $10.6 million at March 26, 2004.

For the nine months ended March 25, 2005, the Company generated $1.9 million of net cash from operating activities compared to $3.5 million for the nine months ended March 26, 2004. The cash generated from operating activities in the first nine months of fiscal 2005 was due to net cash operating earnings of $1.4 million (net earnings of $798,000 plus depreciation and amortization expense of $818,000 less gain on disposal of capital assets of $222,000), a decrease in accounts receivable of $761,000 due to lower sales in the third quarter of fiscal 2005 and an increase in accounts payable and accrued liabilities of $425,000 due to increased payables for product associated with the higher level of inventories. These increases were offset, in part, by an increase in inventories of $582,000 due to the ordering of long-lead inventory items in anticipation of orders and an increase in other assets of $97,000 for advance payments for equipment and certain materials.

Net cash used in investing activities was $805,000 in the first nine months of fiscal 2005 compared to $324,000 used in the comparable prior year period. The increase in the first nine months of fiscal 2005 was principally the result of $1.1 million of purchases of capital assets. Most of these purchases were for equipment utilized in establishing production lines at the Company’s new sub-contract manufacturer in China. During the period, the Company successfully completed the transition of substantially all production to this new supplier. The increases in investing activities were partially offset by proceeds from the sale of the Company’s two remaining condominiums for net proceeds of $337,000.

The Company had no financing activities in the first nine months of fiscal 2005 compared to net cash provided by financing activities of $96,000 in the comparable prior year period due to proceeds received from the exercise of options of $127,000, partially offset by $31,000 of payments for obligations under capital leases.

The company has no current material commitment for capital expenditures.

The Company has a credit facility that enables it to have up to $3.0 million of borrowings outstanding at any one time, limited by a borrowing base equal to 85% of eligible accounts receivable, subject to certain reserves. The maximum amount of borrowings under the credit facility can be reduced by the lender upon written notice. Outstanding borrowings under the credit facility will bear interest at a specified bank’s prime rate (5.50% at March 25, 2005) plus 1%, but never less than 5% per annum, and the Company is also required to pay an annual facility fee of 3/4 of 1% of the maximum amount of the credit facility. At March 25, 2005, the borrowing base was $2.3 million and there were no borrowings outstanding. The credit facility had an initial one year term and automatically renewed in September 2004 for a two year period until September 2006 but may be terminated by the lender at any time on 60 days notice. The credit facility is guaranteed by the Company’s subsidiary and is secured by a lien and security interest against substantially all of the assets of the Company. The credit facility requires, among other covenants, that the Company maintain a consolidated tangible net worth of at least $12.0 million and working capital of at least $6.0 million. The credit facility also prohibits, without the lender’s consent, the payment of cash dividends, significant changes in management or ownership of the Company, business acquisitions, the incurrence of additional indebtedness, other than lease obligations for the purchase of equipment, and the guarantee of the obligations of others.

Funds anticipated to be generated from operations, together with available cash and borrowings under the credit facility, are believed to be adequate to finance the Company’s current operational and capital needs for the next twelve months.

Off Balance Sheet Financing

The Company has no off-balance sheet contractual arrangements, as that term is defined in Item 304 (a) (4) of Regulation S-K.

Forward-Looking Statements

Certain statements in this Report are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this Report, words such as “may,” “should,” “seek,” “believe,” “expect,” anticipate,” “estimate,” “project,” “intend,” “strategy” and similar expressions are intended to identify forward-looking statements regarding events, conditions and financial trends that may affect the Company’s future plans, operations, business strategies, operating results and financial position.

Forward-looking statements are subject to a number of known and unknown risks and uncertainties that could cause the Company’s actual results, performance or achievements to differ materially from those described or implied in the forward-looking statements. These factors include, but are not limited to:

• dependence on, and ability to retain, its 'as-ordered' general supply agreements with its largest three customers and win new contracts;
• the ability of the Company to market and sell products to new markets beyond its principal market - the copy-based Telco market;
• the Company's ability to timely develop products and adapt its existing products to address the technological changes, including changes in its principal market;
• exposure to increases in the cost of the Company's products, including increases in the cost of the Company's petroleum-based plastic products
• the Company's dependence for products and product components on Pacific Rim contract manufacturers, including on-time delivery, quality and exposure to changes in cost in the event of changes in the valuation of the Chinese Yuan;
• the Company's dependence upon one of its principal contact manufacturers;
• the potential for the disruption of shipments as a result of, among other things, third party labor disputes, political unrest in or shipping disruptions from countries in which the Company's contract manufaturers produce the Company's products;
• weather and similar conditions, particularly the effect of hurricanes/typhoons on the Company's manufacturing, assembly and warehouse facilities in Puerto Rico or the Pacific Rim;
• competition in the Company's traditional telecommunications market and new markets the Company is seeking to penentrate;
• potential changes in customers' spending and purchasing policies and practices;
• general economic and business conditions, especially as they pertain to the telecommunications industry;
• dependence on third parties for product development;
• risks inherent in new product development sales, such as start-up delays and uncertainty of customers acceptance;
• the Company's ability to attract and retain technologically qualified personnel;
• the Company's ability to fulfill its growth strategies;
• the level of inventories maintained by the Company's customers;
• the Company's ability to maintain listing of its Common Stock on the Nasdaq SmallCap market;
• the availability of financing on satisfactory terms.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company is exposed to market risks, including changes in interest rates. The interest payable under the Company’s Credit Facility is based on prime plus 1% and, therefore, is affected by changes in market interest rates. Historically, the effects of movements in the market interest rates on the consolidated operating results of the Company have been immaterial. As of March 25, 2005 there were no amounts outstanding under the Credit Facility.

The Company requires foreign sales to be paid for in U.S. currency and is billed by its contract manufacturers in U.S. currency. Therefore, the Company is not subject to foreign currency risk. However, since the Company’s Pacific Rim suppliers are based principally in China, the cost of the Company’s products could be affected by changes in the valuation of the Chinese Yuan.

Historically, the Company has not purchased or entered into interest rate swaps or future, forward, option or other instruments designed to hedge against changes in interest rates, the price of materials it purchases or the value of foreign currencies.

Item 4. Controls and Procedures

As of the end of the period covered by this Report, management of the Company, with the participation of the Company’s President and principal executive officer and the Company’s Vice President-Finance and principal financial 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. Based on that evaluation, these officers concluded that, as of March 25, 2005, the Company’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the Company’s periodic filings under the Securities Exchange Act of 1934 is accumulated and communicated to the Company’s management, including those officers, to allow timely decisions regarding required disclosure. It should be noted that a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in the Company’s periodic reports.

During the period covered by this Report, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II.

Item 6. Exhibits

31(a)     Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31(b)     Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32(a)     Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32(b)     Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

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.

Date: May 9, 2005

                          TII NETWORK TECHNOLOGIES, INC.

                    By:       /s/Kenneth A. Paladino                                
Kenneth A. Paladino,
                             Vice President - Finance, Treasurer and
  Chief Financial Officer

Exhibit Index

31(a)     Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31(b)     Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32(a)     Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32(b)     Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.