UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

 

 

For the quarterly period ended June 30, 2014

OR

 

 

 

 

 

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 ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes ☒  No ☐ 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b‑2 of the Exchange Act.

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes ☐ No ☒

 

The number of shares of the registrant’s common stock, $0.01 par value, outstanding as of July 24, 2014 was  12,858,979.

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MWI VETERINARY SUPPLY, INC.

 

 

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MWI VETERINARY SUPPLY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Dollars and sterling pounds in thousands, except share and per share data
(unaudited)

NOTE 1 — GENERAL

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements include the results of operations, financial position and cash flows of MWI Veterinary Supply, Inc. (“MWI” or the “Company”) and its wholly-owned subsidiaries (collectively referred to as “we,” “us,” and “our” throughout this Form 10-Q).  All intercompany balances have been eliminated. 

 

In the opinion of our management, the accompanying unaudited condensed consolidated financial statements include all adjustments necessary to present fairly, in all material respects, our results for the periods presented. These condensed consolidated financial statements have been prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).  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 such rules and regulations.  These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in our 2013 Annual Report on Form 10-K filed with the SEC on November 27, 2013.  The results of operations for the three and nine months ended June 30, 2014 are not necessarily indicative of results to be expected for the entire fiscal year.

 

Our unaudited condensed consolidated balance sheet as of September 30, 2013 has been derived from the audited consolidated balance sheet as of that date. 

 

Use of Estimates

 

The accompanying unaudited condensed consolidated financial statements have been prepared on the accrual basis of accounting using accounting principles generally accepted in the United States. In preparing financial information, we use certain estimates and assumptions that may affect the reported amounts and disclosures. Some of these estimates require difficult, subjective and complex judgments about matters that are inherently uncertain. As a result, actual results could differ materially from these estimates. Estimates are used when accounting for, among other items, allowance for doubtful accounts, customer incentives, vendor rebates, inventories, goodwill and intangible assets, income taxes, and contingencies. The estimates of fair value of assets and liabilities and the disclosure of contingent assets and liabilities as of the balance sheet date and reported amounts of revenue and expenses for the periods are based on assumptions that we believe to be reasonable.

 

Revenue Recognition

 

We sell products we source from vendors to our customers through either a “buy/sell” transaction or an agency relationship with our vendors. In a “buy/sell” transaction, we purchase or take inventory of products from the vendor. When a customer places an order with us, we pick, pack, ship and invoice the customer for the order. We recognize revenue from “buy/sell” transactions as product sales when the product is delivered to the customer. We accept product returns from our customers. We estimate returns based on historical experience and recognize these estimated returns as a reduction of product sales. Product returns have historically not been significant to our financial statements. We record revenues net of sales tax.  In an agency relationship, we generally do not purchase and take inventory of products from vendors. We receive an order from a customer, then transmit the order to the vendor, who picks, packs and ships the order to the customer. In some cases, the vendor invoices and collects payment from the customer, while in other cases we invoice and collect payment from the customer on behalf of the vendor. We receive a commission payment for soliciting the order from the customer and for providing other customer service activities. Commissions are recognized when the services upon which the commissions are based are complete. Gross billings from agency contracts were  $105,626 and $97,337 for the three months ended June 30, 2014 and 2013, respectively, and generated commission revenue of $5,961 and $4,772, respectively. Gross billings from agency contracts were $267,190 and $258,647 for the nine months ended June 30, 2014 and 2013, respectively, and generated commission revenue of $15,670  and $14,237, respectively.

 

Customer incentives are accrued based on the terms of the contracts with each customer. These incentive programs provide that the customer receive an incentive based on their product purchases or attainment of performance goals.

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Incentives are estimated based on the specific terms in each agreement, historical experience and product growth rates.  Incentives are recognized as a reduction to product sales.

 

Cost of Product Sales and Vendor Rebates

 

Cost of product sales consist of our inventory product cost, including shipping and delivery costs to and from our distribution centers.  Vendor rebates are recorded based on the terms of the contracts or programs with each vendor.  Many of our vendors’ rebate programs are based on a calendar year.  We may receive quarterly, semi-annual or annual performance-based rebates from third-party vendors based upon attainment of certain sales and/or purchase goals. Sales rebates are classified in the accompanying condensed consolidated statements of income as a reduction to cost of product sales at the time the sales performance measures are achieved. Purchase rebates are measured against inventory purchases from the vendors and are classified as a reduction of inventory until the product is sold. When the inventory is sold and purchase measures are achieved, purchase rebates are recognized as a reduction to cost of product sales. 

 

Historically, actual results have not significantly deviated from those determined using the estimates described above. We expect that our estimates in the future will continue to be reasonable as our rebates are based on specific vendor program goals and are principally recorded upon achievement of sales or purchase performance measures. Vendors may change or eliminate rebate programs from year to year.

 

Concentrations of Risk

 

Our financial instruments that are exposed to concentrations of credit risk consist primarily of our receivables. Our customers are geographically dispersed throughout the United States and United Kingdom.  In the United Kingdom, our business relies on a smaller number of relatively larger customers than does our business in the United States. Our customers in the United Kingdom accounted for an aggregate of 13.3% and 14.5% of our consolidated accounts receivable balance as of June 30, 2014 and September 30, 2013, respectively.  We routinely assess the financial strength of our customers and review their credit history before extending credit. In addition, we establish an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information.

 

NOTE 2 — EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS

 

In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, which requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. This guidance is effective for our fiscal year and interim periods beginning October 1, 2017. We are currently evaluating the effect that adopting this new accounting guidance will have on our consolidated financial statements.

 

In January 2013, the FASB issued ASU No. 2013-01, Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, which includes bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending arrangements that are either offset on the balance sheet or subject to an enforceable master netting arrangement or similar agreement.  This guidance is effective for our fiscal year beginning October 1, 2013.  The adoption of this guidance did not have a material impact on our consolidated financial statements.

 

In February 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which provides additional disclosure requirements for items reclassified out of accumulated other comprehensive income.  This guidance is effective for our fiscal year beginning October 1, 2013.  The adoption of this guidance did not have a material impact on our consolidated financial statements.

 

NOTE 3 — BUSINESS ACQUISITIONS

 

On December 31, 2012, MWI Veterinary Supply Co. (“MWI Co.”) purchased substantially all of the assets of Prescription Containers Inc. (“PCI Animal Health”) for $17,107, after giving effect to post-closing adjustments.  PCI Animal Health was a distributor of companion animal health products to veterinary practices, primarily in the Northeastern United States.  The intangible asset acquired in the acquisition is for customer relationships and has an estimated useful life of 10 years.  The amount recorded in goodwill is expected to be deductible for tax purposes over 15 years. The fair values assigned to the tangible and intangible assets acquired and liabilities assumed are based on management's estimates and assumptions,

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as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques.

 

On November 1, 2013, MWI Co. purchased substantially all of the assets of IVESCO Holdings, LLC (“IVESCO”) for a net purchase price of $79,633, after giving effect to post-closing adjustments.  The cash purchase price was funded with borrowings by the Company under its Credit Agreement (as defined herein). IVESCO engaged in the distribution and sale of animal health and related products and services, logistics and technical support relating to such distribution and sale of animal health and related products. The intangible assets acquired in the acquisition include trade name and customer relationships.  The intangible asset representing customer relationships acquired in the acquisition has an estimated useful life of 9 years.  The amount recorded in goodwill is expected to be deductible for tax purposes over 15 years. The fair values assigned to the tangible and intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques.

 

The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition, which may be adjusted during the allocation period as defined in Accounting Standards Codification (“ASC”) 805.  These purchase price allocations are based on a combination of valuations and analyses.

 

 

Due to the commencement of the integration of IVESCO, it is impracticable to separately present the revenues and earnings of IVESCO that are included in our consolidated statements of income from the acquisition date of November 1, 2013 through June 30, 2014. This information for PCI Animal Health is also not presented as it is impracticable due to the integration of the acquired operations.

 

The following table presents supplemental pro forma information for the nine months ended June 30, 2014 and 2013 as if the acquisition of substantially all of the assets of IVESCO had occurred on October 1, 2012 (pro forma information is not presented for PCI Animal Health as it is not material):

 

Results for the nine months ended June 30, 2014 include approximately $2,329 of integration and acquisition related expenses incurred in connection with the acquisition of substantially all of the assets of IVESCO on November 1, 2013. The

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unaudited pro forma consolidated results are not necessarily indicative of what our consolidated results of operations would have been had we completed the acquisition on October 1, 2012.  Additionally, the unaudited pro forma consolidated results do not purport to project the future results of operations of the combined company.

 

NOTE 4 — RECEIVABLES

 

 

 

 

 

 

 

 

 

 

 

 

NOTE 5 — PROPERTY AND EQUIPMENT

 

 

Depreciation expense was $2,160 and $1,753 for the three months ended June 30, 2014 and 2013, respectively. Depreciation expense was $6,214 and $5,202 for the nine months ended June 30, 2014 and 2013, respectively.

 

NOTE 6 — GOODWILL AND INTANGIBLES

 

The changes in the carrying value of goodwill are as follows:

 

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Balances of intangibles are as follows:

 

 

 

 

Amortization expense was $830 and $797 for the three months ended June 30, 2014 and 2013, respectively.  Amortization expense was $2,500 and $2,264 for the nine months ended June 30, 2014 and 2013, respectively.

 

Estimated future annual amortization expense related to intangible assets as of June 30, 2014 is as follows:

 

 

The above projection of amortization expense is based upon preliminary estimates of intangible assets and lives associated with the acquisition of substantially all of the assets of IVESCO.  These amounts may be adjusted during the allocation period as defined in ASC 805.

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NOTE 7 — DEBT

 

The following table presents the outstanding debt and capital lease obligations as of June 30, 2014 and September 30, 2013:

 

 

Revolving Credit Facility — On February 3, 2014, MWI Co., as borrower, entered into a Fifth Amendment to Credit Agreement (the “Fifth Amendment”), amending the Credit Agreement dated December 13, 2006, as amended (the “Credit Agreement”), by and among MWI Co., MWI, and Memorial Pet Care, Inc. (“Memorial”) and Bank of America, N.A. and Wells Fargo Bank, N.A. as lenders (collectively, the “Lenders”).  As amended by the Fifth Amendment, the Credit Agreement allows for an aggregate revolving commitment of the Lenders of $200,000 and a maturity date of November 1, 2016.  Under the Credit Agreement, the margin on variable interest rate borrowings ranges from 0.95% to 1.50%.  The commitment fee under the Credit Agreement ranges from 0.15% to 0.25% depending on the funded debt to EBITDA ratio.  The variable interest rate is equal to the Daily LIBOR Floating Rate or the LIBOR 1-month, 2-month, 3-month or 6-month fixed rate (at MWI Co.’s option) plus the margin.  The Credit Agreement contains financial covenants, including a fixed charge ratio and a funded debt to EBITDA ratio.  We were in compliance with all of the financial covenants as of June 30, 2014 and September 30, 2013. 

 

Sterling Revolving Credit Facility— On March 15, 2013, Centaur Services Limited (“Centaur”) entered into a First Amendment (the “Amendment”) to the unsecured revolving line of credit facility (the “Sterling Revolving Credit Facility”) dated November 5, 2010 with Wells Fargo Bank, N.A. London Branch.  The Amendment increases the maximum loan amount of the Sterling Revolving Credit Facility to £20,000, an increase of £7,500, and extends the term of the facility to November 1, 2016. Interest is based on LIBOR for the applicable interest period plus an applicable margin of 0.95% to 1.50%, and the commitment fee ranges from 0.15% to 0.25%, depending on our funded debt to EBITDA ratio.  The facility contains a financial covenant requiring Centaur to maintain a minimum tangible net worth of £5,000.  As of June 30, 2014 and September 30, 2013, Centaur was in compliance with the covenant.

 

Also on March 15, 2013, Centaur entered into an uncommitted overdraft facility (the “Overdraft Facility”) with Wells Fargo. The Overdraft Facility allows Centaur to borrow an additional £10,000 to fund short term normal trading cycle fluctuations. The Overdraft Facility will expire on November 1, 2016.  Interest on the borrowing under the Overdraft Facility is the same as the terms under the Amendment.

 

MWI Co. guarantees the obligations of Centaur under the Sterling Revolving Credit Facility and the Overdraft Facility.

 

NOTE 8 — FAIR VALUE OF FINANCIAL INSTRUMENTS

 

Current fair value accounting guidance includes a hierarchy that is intended to increase consistency and comparability in fair value measurements and disclosures.  This hierarchy prioritizes inputs to valuation techniques based on observable and unobservable data.  The guidance categorizes these inputs used in measuring fair value into three levels which include the following:

 

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As of June 30, 2014 and September 30, 2013, financial instruments include cash and cash equivalents, receivables and accounts payable, and the fair values approximate book values due to their short maturities.

 

Our revolving credit facilities in the United States and in the United Kingdom were amended in the recent past and are based on market conditions such as LIBOR.  Because these credit facilities include interest rates based on current market conditions (Level 1 inputs), we believe that the estimated fair value of our debt approximated carrying value.

 

NOTE 9 — COMMON STOCK AND STOCK-BASED AWARDS

 

We have a 2005 Stock-Based Award and Incentive Compensation Plan (the “2005 Plan”), under which we may offer shares of our common stock and grant options to purchase shares of our common stock to selected employees and non-employee directors. The purpose of the 2005 Plan is to promote our long-term financial success by attracting, retaining and rewarding eligible participants. As of June 30, 2014 and September 30, 2013, we had 809,065 and 815,260 shares, respectively, of our common stock available for issuance under the 2005 Plan. As of June 30, 2014,  12,766 options to purchase common stock were outstanding with a weighted average exercise price of $17.46 per share and which expire through September 2015.

 

The 2005 Plan permits us to grant stock options (both incentive stock options and non‑qualified stock options), restricted and unrestricted stock and deferred stock. The compensation committee will determine the number and type of stock-based awards to each participant, the exercise price of each award, the duration of the award (not to exceed ten years), vesting provisions and all other terms and conditions of such award in individual award agreements. The 2005 Plan provides for the cancellation of all unvested awards upon termination of employment with us, unless determined otherwise by the compensation committee at the time awards are granted.

 

We did not grant common stock options during each of the nine months ended June 30, 2014 and 2013.  During the nine months ended June 30, 2014 and 2013, we issued 5,300 and 3,650 shares, respectively, of restricted stock under the 2005 Plan. We also granted 4,505 and 6,000 shares of unrestricted stock to non-employee directors during the nine months ended June 30, 2014 and 2013, respectively. During the three months ended June 30, 2014 and 2013, we recognized $1,054 and $701 of compensation expense related to stock grants, respectively. During the nine months ended June 30, 2014 and 2013, we recognized $3,992 and $2,893 of compensation expense related to stock grants, respectively.

 

We also have an employee stock purchase plan (“ESPP”) that allows substantially all employees to purchase shares of our common stock at 95% of the fair market value on the date of purchase.  The purchase date is the last trading date of the purchase periods, which begin in March, June, September and December.  Employees accumulate amounts through payroll deductions during the purchase period of between 1% and 10% but no more than $20 annually.  An employee is allowed to purchase a maximum of 200 shares per purchase period.  During the nine months ended June 30, 2014 and 2013, we issued 4,022 and 4,155 shares, respectively, of our common stock under the ESPP. 

 

NOTE 10 — INCOME TAXES

Our effective tax rate for the three months ended June 30, 2014 and 2013 was 38.0% and 36.9%, respectively. Our effective tax rate for the nine months ended June 30, 2014 and 2013 was 38.5 % and 37.7%, respectively.  The increase was primarily due to higher estimated state income taxes.

With few exceptions, we are no longer subject to income tax examination for years before 2010 in the U.S. and 2009 in significant state and local jurisdictions.  We are no longer subject to income tax examination for years before 2011 in significant foreign jurisdictions.

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NOTE 11 — COMPUTATION OF EARNINGS PER SHARE (In thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

NOTE 12 — ACCUMULATED OTHER COMPREHENSIVE INCOME

 

Changes in accumulated other comprehensive income, comprised entirely of foreign currency translation adjustments, consisted of the following:

 

 

 

 

 

 

NOTE 13 — RELATED PARTIES

 

MWI Co. holds a 50.0% membership interest in Feeders’ Advantage LLC (“Feeders’ Advantage”).  MWI Co. charged Feeders’ Advantage for certain operating and administrative services in the amounts of $241 and $240 for the three months ended June 30, 2014 and 2013, respectively, and $832 and $797 for the nine months ended June 30, 2014 and 2013,  

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respectively. Sales of products to Feeders’ Advantage were $14,569 and $15,229, for the three months ended June 30, 2014 and 2013, respectively, which represented 2% and 3% of total product sales for the three-month periods ended June 30, 2014 and 2013. Sales of products to Feeders’ Advantage were $52,056 and $51,034 for the nine months ended June 30, 2014 and 2013, respectively, which represented 2% and 3% of total product sales for the nine-month periods ended June 30, 2014 and 2013.

 

MWI Co. allows Feeders’ Advantage to use its cash management system to finance its day-to-day operations. At any given time, the outstanding position used in the cash management system may be a receivable or payable depending on the cash activity.  A receivable balance bears interest at the prime rate. The interest due on the outstanding receivable is calculated and charged to Feeders’ Advantage on the last day of each month. Conversely, to the extent MWI Co. has a payable balance due to Feeders’ Advantage, the payable balance accrues interest in favor of Feeders’ Advantage at the average federal funds rates in effect for that month.  MWI Co. had a payable balance to Feeders’ Advantage of $1,647 and $777 as of June 30, 2014 and September 30, 2013, respectively.

 

NOTE 14 — STATEMENTS OF CASH FLOWS – SUPPLEMENTAL AND NON-CASH DISCLOSURES

 

 

 

 

NOTE 15 — COMMITMENTS AND CONTINGENCIES

 

From time to time, in the normal course of business, we may become a party to legal proceedings that may have an adverse effect on our financial position, results of operations and cash flows. At June 30, 2014, we were not a party to any material pending legal proceedings and were not aware of any claims that individually or in the aggregate could have a material adverse effect on our financial position, results of operations or cash flows.

 

 

NOTE 16 — SUBSEQUENT EVENT

 

As previously disclosed, on July 24, 2014, IDEXX Laboratories, Inc. (“IDEXX”) delivered to the Company a notice that it was moving to a direct sales and distribution model effective January 1, 2015.  The Company estimates that sales of these IDEXX products represent approximately 3.4% of annual revenues, and approximately 2.5% of pretax income.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders of

MWI Veterinary Supply, Inc.

Boise, Idaho

 

We have reviewed the accompanying condensed consolidated balance sheet of MWI Veterinary Supply, Inc. and subsidiaries (the "Company") as of June  30, 2014, and the related condensed consolidated statements of income and comprehensive income for the three-month and nine-month periods ended June 30, 2014 and 2013, and of cash flows for the nine-month periods ended June 30, 2014 and 2013. These interim financial statements are the responsibility of the Company’s management.

 

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 the standards of the Public Company Accounting Oversight Board (United States), 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 the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of MWI Veterinary Supply, Inc. and subsidiaries as of September 30, 2013, and the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated November 27, 2013, 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 September 30, 2013 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

 

/s/ DELOITTE & TOUCHE LLP

Boise, Idaho

July 31, 2014

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

All dollar amounts are presented in thousands, except for per share amounts.

Overview

 

We are a leading distributor of animal health products in the United States and the United Kingdom. We sell our products in both the companion and production animal markets. Our growth has primarily been from internal growth initiatives and, to a lesser extent, selective acquisitions, including the following transactions:    

 

 

As a result of the acquisition of substantially all of the assets of IVESCO, we estimate that in the United States approximately 52% of our total revenues have been generated from sales to the companion animal market and 48% from sales to the production animal market during the nine months ended June 30, 2014.  Including the gross billings from agency commissions which are excluded from our total revenues in order to comply with generally accepted accounting principles, we estimate that in the United States approximately 56% of our total revenues have been generated from sales to the companion animal market and 44% from sales to the production animal market during the nine months ended June 30, 2014. We estimate that approximately two-thirds of our total revenues have been generated from sales to the companion animal market and one-third from sales to the production animal market in the United Kingdom during the nine months ended June 30, 2014.  The state of the overall economy in both the United States and United Kingdom and consumer spending have impacted both the companion animal and production animal markets, with tightening credit markets, volatile commodity prices such as milk, grains, livestock and poultry, and changes in weather patterns (e.g. droughts or seasons of higher precipitation) also affecting demand in the production animal market.  Both the companion animal and production animal markets have been integral to our financial results and we intend to continue supporting both markets.

 

Industry

 

We believe that growth in the companion animal market in both the United States and United Kingdom has slowed as a result of a decrease in consumer spending, but has shown signs of a recovery in 2012, 2013 and the first half of 2014.  Historically, growth in the companion animal market has been due to the increasing number of households with companion animals, increased expenditures on animal health and preventative care, an aging pet population, advancements in pharmaceuticals and diagnostic testing and extensive marketing programs sponsored by companion animal nutrition and pharmaceutical companies. While the average order size for companion animal health products is often smaller than production animal health products, companion animal health products typically have higher margins. We intend to continue to penetrate this market through internal growth initiatives and selective acquisitions.  We believe that some of our customers in this market have experienced liquidity issues as a result of the tightening credit markets.

 

Product sales in the production animal market in both the United States and United Kingdom are impacted by volatility in commodity prices such as milk, grains, livestock and poultry, changes in weather patterns (e.g. droughts or seasons of higher precipitation that determine how long cattle will graze and consequently the number of days an animal is on feed during a finishing phase) or a change in the general economy, which can shift the number of animals treated, the timing of when animals are treated, to what extent they are treated and with which products they are treated.  This could also create cash-flow challenges for these customers and in turn, could impact the time it takes for us to collect our outstanding accounts receivable from these customers as well as affect the overall collectability of these accounts.  Historically, sales in this market have been largely driven by spending on animal health products to improve productivity, weight gain and disease prevention, as well as a growing focus on food safety.

 

We generally extend some level of credit to our customers without requiring collateral, which exposes us to credit risk.  If customers’ cash flow or operating and financial performance deteriorates, or if they are unable to make scheduled payments or obtain other sources of credit, they may not be able to pay or may delay payment to us, or in some cases may return products to us. In the United Kingdom, our business relies on a smaller number of relatively larger customers than

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does our business in the United States.  Our customers in the United Kingdom accounted for an aggregate of 13.3% and 14.5% of our consolidated accounts receivable balance as of June 30, 2014 and September 30, 2013, respectively.  We continually assess our customers’ ability to pay us and adjust our allowance for doubtful accounts, as necessary. 

 

Our quarterly sales and operating results have varied significantly in the past, and will likely continue to do so in the future. Historically, our total revenues have typically been higher during the spring and fall months due to increased sales of production animal products. Product use cycles for production animal products are directly related to medical procedures performed by veterinarians on production animals during the spring and fall months. These buying patterns can also be affected by the marketing programs or price increase announcements of vendors and distributors, which can cause veterinarians to purchase production animal health products earlier than those products are needed. This kind of early purchasing may reduce our sales in the months these purchases would have otherwise been made.

 

Sales

 

We sell products that we source from our vendors to our customers through either a “buy/sell” transaction or an agency relationship with our vendors. In a “buy/sell” transaction, we purchase or take inventory of products from our vendors. When a customer places an order with us, we pick, pack, ship and invoice the customer for the order. We record sales from “buy/sell” transactions, which account for the vast majority of our business, as revenues in conformity with generally accepted accounting principles in the United States. In an agency relationship, we generally do not purchase and take inventory of products from our vendors. When we receive an order from our customer, we transmit the order to our vendor, who picks, packs and ships the order to our customer. In some cases, our vendor invoices and collects payment from our customer, while in other cases we invoice and collect payment from our customer on behalf of our vendor. We receive a commission payment for soliciting the order from our customer and for providing other customer service activities. The aggregate revenues we receive in agency transactions constitute the “commissions” line item on our condensed consolidated statements of income and are recorded in conformity with accounting principles generally accepted in the United States. Our vendors determine the method we use to sell our products. Historically, vendors have occasionally switched between the “buy/sell” and agency models for particular products in response to market conditions related to that particular product. A switch between models can impact our revenues and our operating income. We cannot know in advance when a vendor will switch between the “buy/sell” and agency models or what impact, if any, such a change may have. A switch can occur even with vendors with whom we have written agreements, because most of our agreements with vendors have relatively short terms and are terminable with or without cause on short notice, normally 30 to 90 days. The impact of any individual change from a “buy/sell” to an agency model depends on the costs and expenses associated with a particular product, and can have either a positive or a negative effect on our profitability.

 

We typically renegotiate vendor contracts annually.  These vendor contracts may include terms defining margins, rebates, commissions, exclusivity requirements and the manner in which we go to market.  For example, vendors could require us to distribute their products on an exclusive basis, which could cause us to forego distributing competing products which may also be profitable.  Conversely, competitors could obtain exclusive rights to market particular products, which we would be unable to market.  If we lose the right to distribute products under such exclusive agreements, we may lose access to certain products and lose a competitive advantage.  Exclusivity agreements could allow potential competitors to sell products that we cannot offer and erode our market share.  In addition, vendors have the ability to expand the distributors that they use which could have a material adverse effect on our business. 

 

Some of our current and future vendors may decide to compete with us in the future by pursuing or increasing their efforts in direct marketing and sales of their products. These vendors could sell their products at lower prices and maintain a higher gross margin on their product sales than we can. In this event, veterinarians or animal owners may elect to purchase animal health products directly from these vendors.

 

Many of our vendors’ rebate programs are based on a calendar year.  Historically, the three months ended December 31 has been our most significant quarter for recognition of rebates.  Vendor rebates based on sales are classified in our accompanying condensed consolidated statements of income as a reduction to cost of product sales at the time the sales performance measures are achieved. Purchase rebates are measured against inventory purchases from the vendors and are a reduction of inventory until the product is sold. When the inventory is sold, purchase rebates are recognized as a reduction to cost of product sales.

 

Vendor Consolidation

 

Our ten largest vendors supplied products that accounted for approximately 67% and 73% of our revenues during the nine months ended June 30, 2014 and 2013, respectively, and 70% of our revenues for the fiscal year ended September 30,

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2013.  Zoetis supplied products that accounted for approximately 20% and 21% of our revenues during each of the nine months ended June 30, 2014 and 2013, and 20% of our revenues for our fiscal year ended September 30, 2013.  Of the Zoetis supplied products, production animal products under a livestock agreement accounted for approximately 10% and 11% of our revenues for the nine months ended June 30, 2014 and 2013, respectively, and approximately 10% of our revenues for our fiscal year ended September 30, 2013.  Elanco supplied products that accounted for approximately 10% and 11% of our revenues during the June 30, 2014 and 2013, respectively, and 10% of our revenues for our fiscal year ended September 30, 2013.  Merck supplied products that accounted for approximately 11% and 15% of our revenues during the nine months ended June 30, 2014 and 2013, respectively, and 14% of our revenues for our fiscal year ended September 30, 2013.  Merial, a subsidiary of Sanofi-Aventis, supplies the majority of their products to us under an agency relationship.  Commission revenue generated from Merial products accounted for approximately 48% and 53% of total commission revenues during the nine months ended June 30, 2014 and 2013, respectively, and 50% of total commission revenues for our fiscal year ended September 30, 2013.

 

For more information on our business, see our Annual Report on Form 10-K filed with the SEC on November 27, 2013.

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Results of Operations

 

The following table summarizes our results of operations for the three and nine months ended June 30, 2014 and 2013, in dollars and as a percentage of total revenues.

 

 

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Three Months Ended June 30, 2014 Compared to Three Months Ended June 30, 2013

Total Revenues.  Total revenues increased 28.4% to $778,448 for the three months ended June 30, 2014, from $606,443 for the three months ended June 30, 2013.  Revenue growth in the United States was 30.4% for the three months ended June 30, 2014, compared to the same period in the prior fiscal year. This strong growth was due to revenues related to the acquisition of substantially all of the assets of IVESCO, which were acquired on November 1, 2013, and organic revenue growth.  Growth in flea, tick and heartworm products represented 2.0% of the revenue growth in the United States for the three months ended June 30, 2014. Revenue growth in the United States also benefited from increased sales of diagnostic lines, which represented approximately 0.6% of the growth.  Revenues in the United Kingdom increased 14.0% from the same period in the prior fiscal year, as a result of a 4.1% organic increase combined with a 9.9% increase related to foreign currency translation.

Product sales to a related party decreased slightly to $14,569 for the three months ended June 30, 2014, from $15,229 for the three months ended June 30, 2013. Commissions increased 24.9% to $5,961 for the three months ended June 30, 2014, from $4,772 for the three months ended June 30, 2013.  Gross agency billings increased to $105,626 from $97,337 for the three months ended June 30, 2014 and 2013, respectively. 

Gross Profit.  Gross profit increased by 25.8% to $97,475 for the three months ended June 30, 2014, from $77,511 for the three months ended June 30, 2013.  The change in gross profit is primarily a result of increased total revenues as discussed above.  Gross profit as a percentage of total revenues decreased to 12.5% for the three months ended June 30, 2014 from 12.8% for the three months ended June 30, 2013.  Product margin as a percentage of total revenues decreased primarily due to the addition of the IVESCO business in November 2013. The product margin on the IVESCO business is generally lower than our overall product margin.  This serves to reduce the overall product margin of the consolidated company when compared to our results for the same period in the prior fiscal year.  Vendor rebates for the three months ended June 30, 2014  increased by approximately $2,646 compared to the three months ended June 30, 2013 primarily due to the growth in revenues.

Selling, General and Administrative (“SG&A”).  SG&A expenses increased 30.4% to $63,162 for the three months ended June 30, 2014, from $48,432 for the three months ended June 30, 2013.  SG&A expenses as a percentage of total revenues were 8.1% for the three months ended June 30, 2014 compared to 8.0% for the three months ended June 30, 2013. These increases were primarily due to the addition of the IVESCO business in November 2013 and costs associated with the commencement of the consolidation process.  We incurred $771 of integration and acquisition related costs during the quarter in connection with the acquisition of substantially all of the assets of IVESCO on November 1, 2013.             

Depreciation and Amortization.  Depreciation and amortization increased 17.2% to $2,984 for the three months ended June 30, 2014, from $2,545 for the three months ended June 30, 2013.  The increase was primarily due to technology and equipment investments, as well as the assets acquired from IVESCO. 

Income Tax Expense.  Our effective tax rate for the three months ended June 30, 2014 and 2013 was 38.0% and 36.9%, respectively.  The increase was primarily due to higher estimated state income taxes.

Nine Months Ended June 30, 2014 Compared to Nine Months Ended June 30, 2013

Total Revenues.  Total revenues increased 25.5% to $2,186,979 for the nine months ended June 30, 2014, from $1,742,405 for the nine months ended June 30, 2013.  Revenue growth in the United States was 29.4% for the nine months ended June 30, 2014, compared to the same period in the prior fiscal year. This strong growth was due to revenues related to the acquisition of substantially all of the assets of IVESCO, which were acquired on November 1, 2013, and organic revenue growth.  Revenues in the United Kingdom increased 1.1% from the same period in the prior fiscal year, consisting of a 4.1% organic decrease, offset by a 5.2% increase related to foreign currency translation. 

Product sales to a related party increased by 2.0% to $52,056 for the nine months ended June 30, 2014, from $51,034 for the nine months ended June 30, 2013.  Commissions increased 10.1% to $15,670 for the nine months ended June 30, 2014, from $14,237 for the nine months ended June 30, 2013. Gross agency billings increased to $267,190 from $258,647 for the nine months ended June 30, 2014 and 2013, respectively.

Gross Profit.  Gross profit increased by 21.2% to $277,623 for the nine months ended June 30, 2014, from $229,119 for the nine months ended June 30, 2013.  The change in gross profit is primarily a result of increased total revenues as discussed above.  Gross profit as a percentage of total revenues decreased to 12.7% from 13.1% for the nine months ended June 30, 2014 and 2013.  Product margin as a percentage of total revenues decreased primarily due to the addition of the IVESCO business during the quarter ended December 31, 2013. The product margin on the IVESCO business is generally lower than our overall product margin.  This serves to reduce the overall product margin of the consolidated company when compared to our results for the same period in the prior fiscal year.  Vendor rebates for the nine months ended June 30, 2014  increased by approximately $9,129 compared to the nine months ended June 30, 2013 primarily due to the growth in revenues.

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Selling, General and Administrative (“SG&A”).  SG&A expenses increased 25.1% to $179,958 for the nine months ended June 30, 2014, from $143,820 for the nine months ended June 30, 2013.  The increase in SG&A expenses was primarily due to the addition of the IVESCO business during the quarter ended December 31, 2013.  SG&A expenses as a percentage of total revenues were 8.2% for the nine months ended June 30, 2014 compared to 8.3% for the nine months ended June 30, 2014.  We incurred $2,329 of integration and acquisition related costs during the nine months ended June 30, 2014 in connection with the acquisition of substantially all of the assets of IVESCO on November 1, 2013.                         

Depreciation and Amortization. Depreciation and amortization increased 16.8% to $8,699 for the nine months ended June 30, 2014, from $7,450 for the nine months ended June 30, 2013.  The increase was primarily due to technology and equipment investments, as well as the assets acquired from IVESCO. 

Income Tax Expense.  Our effective tax rate for the nine months ended June 30, 2014 and 2013 was 38.5% and 37.7%, respectively.  The increase was primarily due to higher estimated state income taxes.

Critical Accounting Policies

The preparation of financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities.  The accompanying condensed consolidated financial statements are prepared using the same critical accounting policies discussed in our Annual Report on Form 10-K filed with the SEC on November 27, 2013.

Liquidity and Capital Resources

Our principal sources of liquidity are cash flows generated from operations and borrowings on our credit facilities. We use capital primarily to fund day-to-day operations and to maintain sufficient inventory levels in order to promptly fulfill customer orders and to expand our operations and sales growth. We believe our capital resources, including our ability to borrow funds from our credit facilities, will be sufficient to meet our anticipated cash needs for at least the next twelve months. 

We generally extend some level of credit to our customers without requiring collateral, which exposes us to credit risk. If customers’ cash flow or operating and financial performance deteriorates, or if they are unable to make scheduled payments or obtain other sources of credit, they may not be able to pay or may delay payment to us, or in some cases may return products to us. Any inability of current and/or potential customers to pay us for our products and/or services due to their deteriorating financial condition or otherwise may adversely affect our results of operations and financial condition. Volatility in commodity prices, such as milk, grains, livestock and poultry, and deteriorating economic conditions can have a significant impact on the financial results of our customers. In the United Kingdom, we rely on a smaller number of relatively larger customers than does our business in the United States.  Our customers in the United Kingdom accounted for an aggregate of 13.3% and 14.5% of our consolidated accounts receivable balance as of June 30, 2014 and September 30, 2013, respectively.  We continually assess our customers’ ability to pay us and adjust our allowance for doubtful accounts, as necessary.

We consider the undistributed earnings of our foreign subsidiaries to be indefinitely reinvested and, accordingly, no provision for U.S. income taxes has been made with respect to any such amounts.  As of June 30, 2014, the amount of cash and cash equivalents associated with indefinitely reinvested foreign earnings was approximately $2,459.  We have not, nor do we anticipate the need to, repatriate funds to the United States to satisfy domestic liquidity needs arising in the ordinary course of business, including liquidity needs associated with our domestic debt service requirements. In the event that these funds are repatriated, such amounts would be subject to income tax liabilities in the United States.  We believe that there are no material implications or restrictions upon our liquidity based on the insignificance of the amounts currently held by our foreign subsidiaries.

Capital Resources. On February 3, 2014, MWI Co., as borrower, entered into the Fifth Amendment, amending the Credit Agreement by and among MWI Co., MWI, Memorial and the Lenders.  As amended by the Fifth Amendment, the Credit Agreement allows for an aggregate revolving commitment of the Lenders of $200,000 and a maturity date of November 1, 2016.  Under the Credit Agreement, the margin on variable interest rate borrowings ranges from 0.95% to 1.50%.  The commitment fee under the Credit Agreement ranges from 0.15% to 0.25% depending on the funded debt to EBITDA ratio.  The variable interest rate is equal to the Daily LIBOR Floating Rate or the LIBOR 1-month, 2-month, 3-month or 6-month fixed rate (at MWI Co.’s option) plus the margin.  The facility contains financial covenants, including a fixed charge ratio and a funded debt to EBITDA calculation.  We were in compliance with all of the financial covenants as of June 30, 2014 and September 30, 2013.  Our outstanding balance on the Credit Agreement at June 30, 2014 was $55,100, and the interest rate was 1.04% as of June 30, 2014. 

On March 15, 2013, Centaur entered into the Amendment to the Sterling Revolving Credit Facility dated November 5, 2010 with Wells Fargo Bank, N.A. London Branch.  The Amendment increases the maximum loan amount of the Sterling

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Revolving Credit Facility to £20,000, an increase of £7,500, and extends the term of the facility to November 1, 2016. Interest is based on LIBOR for the applicable interest period plus an applicable margin of 0.95% to 1.50%, and the commitment fee ranges from 0.15% to 0.25%, depending on our funded debt to EBITDA ratio.  The facility contains a financial covenant requiring Centaur to maintain a minimum tangible net worth of £5,000.  As of June 30, 2014 and September 30, 2013, Centaur was in compliance with the covenant. No balance was outstanding on the Sterling Revolving Credit Facility at June 30, 2014.

Also on March 15, 2013, Centaur entered into the Overdraft Facility with Wells Fargo. The Overdraft Facility allows Centaur to borrow an additional £10,000 to fund short term normal trading cycle fluctuations. The Overdraft Facility will expire on November 1, 2016.  Interest on the borrowing under the Overdraft Facility is the same as the terms under the Amendment.

MWI Co. guarantees the obligations of Centaur under the Sterling Revolving Credit Facility and the Overdraft Facility.

 

Operating Activities.  For the nine months ended June 30, 2014, cash provided by operations was $54,335 and was primarily attributable to net income of $54,581.  The increase in net income is a result of the factors discussed above in “Results of Operations.”

 

For the nine months ended June 30, 2013, cash provided by operations was $60,470 and was primarily attributable to net income of $48,632.  Cash flow from operations benefitted during the quarter ended June 30, 2013 due to the timing of payments for inventory that was purchased ahead of price increases during the previous quarter ended March 31, 2013.

 

Investing Activities.  For the nine months ended June 30, 2014, net cash used in investing activities was $89,900.  We acquired substantially all of the assets of IVESCO for $78,246, net of $1,387 of cash acquired. Additionally, we paid for capital expenditures of $11,575 which related primarily to technology and equipment purchases. 

 

For the nine months ended June 30, 2013, net cash used in investing activities was $24,986.  We paid $17,006 in cash for the acquisition of substantially all of the assets of PCI Animal Health.  Additionally, we paid for capital expenditures of $7,845 which primarily related to equipment purchased for our move into a new distribution center in Shakopee, Minnesota and technology and equipment purchases.

 

Financing Activities.  For the nine months ended June 30, 2014, net cash provided by financing activities was $36,680, which was primarily due to net borrowings of $36,139 on our revolving credit facilities.  Our revolving credit facilities are used to fund strategic acquisitions, capital expenditures and meet our working capital requirements.   

 

For the nine months ended June 30, 2013, net cash used in financing activities was $35,291, which was primarily due to net payments of $35,888 on our revolving credit facilities.

 

Contractual Obligations and Guarantees

For information on our contractual obligations and guarantees, see our Annual Report on Form 10-K filed on November 27, 2013 with the SEC.

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Item 3.  Quantitative and Qualitative Disclosures About Market Risk

 

We are exposed to market risks primarily from changes in interest rates, in particular, the Daily LIBOR Floating Rate, and foreign currency translation risk. We do not engage in financial transactions for trading or speculative purposes.  We do not hedge the translation of foreign currency profits into U.S. dollars.  We continually evaluate our foreign currency exchange rate risk and the different options available for managing such risk.

 

We are exposed to foreign currency risk due to our U.K. subsidiary Centaur.  A hypothetical 10% change in the value of the U.S. dollar in relation to the British Pound, which is the Company’s most significant foreign currency exposure, would have changed net sales for the three months ended June 30, 2014 by approximately $8,500. This amount is not indicative of the hypothetical net earnings impact due to the partially offsetting impact of the currency exchange movements on cost of sales and operating expenses.

 

The interest payable on our revolving credit facilities is based on variable interest rates and is affected by changes in market interest rates. The outstanding balance on the revolving credit facility in the United States as of June 30, 2014 was $55,100.  The outstanding balance on the revolving credit facilities in the United Kingdom as of June 30, 2014 was $0.  If there had been a combined balance on the revolving credit facilities of $250,000, which is the approximate maximum available amount on the facilities based on the foreign currency rates as of June 30, 2014, a change of 10% from the interest rates as of June 30, 2014 would have changed interest by $281 for the three months ended June 30, 2014.

 

 

Item 4.  Controls and Procedures

 

Management of the Company, including the Chief Executive Officer and the Chief Financial Officer of the Company, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934) as of June 30, 2014.  Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures, including the accumulation and communication of disclosures to the Company’s Chief Executive Officer and Chief Financial Officer as appropriate to allow timely decisions regarding required disclosure, are effective to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms.

 

On November 1, 2013, we acquired substantially all of the assets of IVESCO. In connection with integrating IVESCO, we are evaluating our internal control over financial reporting, and, where necessary, will implement changes as the integration proceeds.  This process may result in additions or changes to our internal control over financial reporting. Except for the acquisition, 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.

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PART II.  OTHER INFORMATION

 

Cautionary Statement for Purposes of “Safe Harbor Provisions” of the Private Securities Litigation Reform Act of 1995

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements include statements preceded by, followed by or that include the words “may,” “could,” “would,” “should,” “believe,” “expect,” “anticipate,” “plan,” “estimate,” “target,” “project,” “intend” and similar expressions. These statements include, among others, statements regarding our expected business outlook, anticipated financial and operating results, our business strategy and means to implement our strategy, our objectives, the amount and timing of capital expenditures, the amount and timing of interest expense, the likelihood of our success in expanding our business, financing plans, budgets, working capital needs and sources of liquidity.

Forward-looking statements are only predictions and are not guarantees of our performance. These statements are based on our management’s beliefs and assumptions, which in turn are based on currently available information. Important assumptions relating to the forward-looking statements include, among others, assumptions regarding demand for our products, the expansion of product offerings geographically or through new applications, the timing and cost of planned capital expenditures, competitive conditions and general economic conditions. These assumptions could prove inaccurate. Forward-looking statements also involve known and unknown risks and uncertainties, which could cause actual results that differ materially from those contained in any forward-looking statement. Many of these factors are beyond our ability to control or predict. Such factors include, but are not limited to, the following:

 

Except as required by applicable law, including the securities laws of the United States and the rules and regulations of the SEC, we are under no obligation to publicly update or revise any forward-looking statements, whether as a result of any new information, future events or otherwise. You should not place undue reliance on our forward-looking statements.

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Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results or performance.

Investors should also be aware that while we do, from time to time, communicate with securities analysts, it is against our policy to disclose any material non-public information or other confidential commercial information. Accordingly, stockholders should not assume that we agree with any statement or report issued by any analyst irrespective of the content of the statement or report. Furthermore, we have a policy against issuing or confirming financial forecasts or projections issued by others. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not the responsibility of MWI Veterinary Supply, Inc.

 

Item 1.  Legal Proceedings

 

On July 30, 2014, Ealena Callender, a purported stockholder of the Company, brought a derivative lawsuit in the Court of Chancery of the State of Delaware against the Company as nominal defendant and against each of the Company’s directors, as well as a former director, as defendants, alleging breach of fiduciary duty and unjust enrichment relating to the Company’s non-employee director stock grants made between 2012 and 2014.  The complaint alleges that the directors breached their fiduciary duties by issuing stock grants that were inconsistent with the terms of the Company’s Amended and Restated 2005 Stock-Based Incentive Compensation Plan.  The complaint seeks rescission of a total of 16,505 shares of common stock issued to the directors as well as damages plus pre-judgment and post-judgment interest.  The Company believes that the allegations in the complaint are without merit.

 

Except as set forth above, we are not currently a party to any material pending legal proceedings and are not aware of any claims that individually or in the aggregate could have a material adverse effect on our financial position, results of operations or cash flows.

 

Item 1A.  Risk Factors

 

There have been no material changes from the risk factors disclosed in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2013.

 

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

 

Recent Sales of Unregistered Securities

None. 

Issuer Purchases of Equity Securities

The table below provides information concerning our repurchase of shares of our common stock during the three months ended June 30, 2014.

 

 

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Item 3.  Defaults upon Senior Securities

None.

Item 4.  Mine Safety Disclosures

Not applicable.

Item 5.  Other Information

None.

 

 

Item 6.  Exhibits

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

 

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