TransAct Technologies - 10-Q quarterly report FY

(Mark One)

Commission file number: 0-21121

______________________________________________________________________

(Exact name of registrant as specified in its charter)

(Former name, former address and former fiscal year, if changed since last report.)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   ý   No   o

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  o     No o

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.  (check one):

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

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

See notes to condensed consolidated financial statements.

See notes to condensed consolidated financial statements.

See notes to condensed consolidated financial statements.

(unaudited)

The accompanying unaudited financial statements of TransAct Technologies Incorporated have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information.  Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America to be included in full year financial statements.  In the opinion of management, all adjustments considered necessary for a fair statement of the results for the periods presented have been included.  The December 31, 2010 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.  These interim financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2010 included in our Annual Report on Form 10-K.

The financial position and results of operations of our U.K. foreign subsidiary are measured using local currency as the functional currency.  Assets and liabilities of such subsidiary have been translated at the end of period exchange rates, and related revenues and expenses have been translated at the weighted average exchange rates with the resulting translation gain or loss recorded in accumulated other comprehensive income in the condensed consolidated balance sheets.  Transaction gains and losses are included in other income in the condensed consolidated statement of income.

The results of operations for the three months ended March 31, 2011 are not necessarily indicative of the results to be expected for the full year.  Certain prior period amounts in the Condensed Consolidated Financial Statements have been reclassified to conform with the current period presentation.

Multiple-Deliverable Revenue Arrangements:  In October 2009, the FASB established the accounting and reporting guidance for arrangements including multiple revenue-generating activities.  This guidance provides amendments to the criteria for separating deliverables, measuring and allocating arrangement consideration to one or more units of accounting.  The amendments also establish a selling price hierarchy for determining the selling price of a deliverable.  Significantly enhanced disclosures are also required to provide information about a vendor’s multiple-deliverable revenue arrangements, including information about the nature and terms, significant deliverables, and its performance within arrangements.  The amendments also require providing information about the significant judgments made and changes to those judgments and about how the application of the relative selling-price method affects the timing or amount of revenue recognition.  The amendments are effective prospectively for revenue arrangements entered into or materially modified in the fiscal years beginning on or after June 15, 2010.  Early adoption was permitted. We adopted this standard effective January 1, 2011 and it did not have an impact on our condensed consolidated financial statements.

Business combinations: In December 2010, the Financial Accounting Standards Board (“FASB”) issued amended guidance to clarify the acquisition date that should be used for reporting pro forma financial information for business combinations.  If comparative financial statements are presented, the pro forma revenue and earnings of the combined entity for the comparable prior reporting period should be reported as though the acquisition date has been completed as of the beginning of the comparable prior annual reporting period.  The amendments in this guidance are effective prospectively for business combinations for which the acquisition date is on or after January 1, 2011.  Adoption of this amended guidance did not have an impact on our consolidated financial results.

Goodwill impairment testing: In December 2010, the FASB issued amendments to the guidance on goodwill impairment testing.  The amendments modify Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts.  For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists.  In making that determination, an entity should consider whether there are any adverse qualitative factors indicating that an impairment may exist.  These amendments were effective for fiscal years and interim periods beginning January 1, 2011 and are not expected to have an impact on our financial position, results of operations or cash flows.

The components of inventories are:

(unaudited)

We generally warrant our products for between 24 and 36 months and record the estimated cost of such product warranties at the time the sale is recorded. Estimated warranty costs are based upon actual past experience of product repairs and the related estimated cost of labor and material to make the necessary repairs.

The following table summarizes the activity recorded in the accrued product warranty liability during the three months ended March 31, 2011:

The current portion of the accrued product warranty liability is included in accrued liabilities in the condensed consolidated balance sheets.

The following table sets forth the reconciliation of basic weighted average shares outstanding and diluted weighted average shares outstanding:

Unvested restricted stock is excluded from the calculation of weighted average common shares for basic EPS.  For diluted EPS, weighted average common shares include the impact of unvested restricted stock under the treasury stock method.

For the three months ended March 31, 2011 and 2010, there were 149,750 and 257,250, respectively, potentially dilutive shares consisting of stock options and nonvested restricted stock, that were excluded from the calculation of earnings per diluted share.

The following table summarizes our comprehensive income:

(unaudited)

Changes in stockholders’ equity for the three months ended March 31, 2011 were as follows (in thousands):

We paid a portion of the 2010 incentive bonus for the chief executive officer and chief financial officer in the form of deferred stock units.  Such deferred stock units were granted in March 2011 and were fully vested at the time of grant.

We recorded an income tax provision for the first quarter of 2011 of $982,000 at an effective tax rate of 35.0%, compared to an income tax provision during the first quarter of 2010 of $361,000 at an effective tax rate of 36.5%.

We are subject to U.S. federal income tax as well as income tax of certain state and foreign jurisdictions.  We have substantially concluded all U.S. federal income tax, state and local, and foreign tax matters through 2003.  During 2008, a limited scope examination of our 2005 and 2006 federal tax returns was completed.  However, our federal tax returns for the years 2004 through 2009 remain open to examination.  Various state and foreign tax jurisdiction tax years remain open to examination as well, though we believe that any additional assessment would be immaterial to the consolidated financial statements.  No federal, state or foreign tax jurisdiction income tax returns are currently under examination.

As of March 31, 2011, we had $204,000 of total gross unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in any future periods.  Within the next twelve months, we expect the total amount of unrecognized tax benefits to increase due to the recognition of certain credits.

TransAct Technologies Incorporated designs, develops, assembles, markets and services world-class transaction printers under the Epic and Ithaca® brand names. Known and respected worldwide for innovative designs and real-world service reliability, our thermal, inkjet and impact printers generate top-quality transaction records such as receipts, tickets, coupons, register journals and other documents. We focus on the following core markets: banking and point-of-sale (“POS”), casino and gaming, and lottery. We sell our products to original equipment manufacturers (“OEMs”), value-added resellers (“VARs”), selected distributors, as well as directly to end-users. Our product distribution spans across the Americas, Europe, the Middle East, Africa, Asia, Australia, the Caribbean Islands and the South Pacific. Beyond printers, TransAct is a leader in providing printing supplies to the full transaction printer market.  Through our TransAct Services Group (“TSG”) we provide a complete range of supplies and consumables used in the printing and scanning activities of customers in the hospitality, banking, retail, gaming, and government markets.  Through our webstore, www.transactsupplies.com, and our direct selling team, we address the on-line demand for these products.  We operate in one reportable segment: the design, development, assembly and marketing of transaction-based printers and providing printer-related services, supplies and spare parts.

Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared by us in accordance with accounting principles generally accepted in the United States of America.  The presentation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and disclosure of contingent assets and liabilities.  Our estimates include those related to revenue recognition, inventory obsolescence, the valuation of deferred tax assets and liabilities, depreciable lives of equipment, warranty obligations, and contingent liabilities.  We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances.

For a complete description of our accounting policies, see Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations,  “Critical Accounting Policies and Estimates,” included in our Form 10-K for the year ended December 31, 2010.  We have reviewed those policies and determined that they remain our critical accounting policies for the three months ended March 31, 2011.

Intangible Software - Costs incurred in researching and developing a computer software product are charged to expense until technological feasibility has been established for the product.  Once technological feasibility is established, all material software costs are capitalized within Intangible and other assets in our consolidated balance sheet until the product is available for general release to customers.  Judgment is required in determining when technological feasibility of a product is established.  We have determined that technological feasibility for our software products is reached after all high-risk development issues have been documented in a formal detailed plan design.  The amortization of these costs will be included in cost of sales over the estimated life of the product.

Net Sales. Net sales, which include printer sales and sales of replacement parts, consumables and repair services, by market for the three months ended March 31, 2011 and 2010 were as follows:

Net sales for the first quarter of 2011 increased $6,486,000, or 46%, from the same period last year due primarily to higher printer sales into our lottery (an increase of $5,886,000, or 355%) and banking and point-of-sale markets (an increase of $109,000, or 5%) as well as increased sales in TSG (an increase of $498,000, or 15%) partially offset by a $7,000, or less than 1% decrease from our casino and gaming market.  Overall, international sales increased $709,000, or 15%, largely due to higher international shipments of our printers in all three printer markets.  During the first quarter of 2011, our printer sales volume increased 72% to 72,000 units compared to the first quarter of 2010.  This increase in unit volume was led by the lottery market where our unit volume increased 391% from the prior year’s first quarter.  The average selling price of our printers decreased 10% in the first quarter of 2011 compared to the first quarter of 2010 as we sold significantly more lottery printers, which have lower average selling prices than our other printers.

Revenue from the banking and point-of-sale (“POS”) market includes sales of printers used by banks, credit unions, and other financial institutions to print and/or validate receipts at bank teller stations.  Revenue from this market also includes sales of inkjet, thermal and impact printers used primarily by retailers in the restaurant (including fine dining, casual dining and fast food), hospitality, and specialty retail industries to print receipts for consumers, validate checks, or print on linerless labels or other inserted media.  Sales of our banking and POS printers worldwide increased $109,000, or 5%, from the first quarter of 2010.

Domestic banking and POS revenue decreased to $2,084,000, representing a $132,000, or 6%, decrease from the first quarter of 2010 primarily due to a 77% decrease in banking printer sales partially offset by an 8% increase in POS printer sales.  Banking printer sales decreased 77% in the first quarter of 2011 compared to the first quarter of 2010 due to the completion of a project by one of our large banking customers utilizing our BANKjet® 2500 bank teller printers in the fourth quarter of 2010.  Although we are currently pursuing several banking opportunities, due to the project-oriented nature of these sales, we cannot predict the level of future sales.  POS printer sales increased 8% from the first quarter of 2010 due to higher sales of our two printer products for McDonalds, the Ithaca® 8000 and Ithaca® 8040.  We expect to continue to benefit from our relationship with McDonalds during 2011 as McDonalds continues and completes the roll out of its new POS system, which includes the grill initiative printer upgrades, to more than 14,000 U.S. stores and begins to expand the roll out to more than 18,000 international stores.

International banking and POS printer shipments increased $241,000, or 176%, to $378,000, due primarily to the roll out of the McDonalds POS system upgrade and grill initiative as well as the combined beverage initiative to its Canadian stores.

Revenue from the casino and gaming market includes sales of printers used in slot machines, video lottery terminals (“VLTs”), and other gaming machines that print tickets or receipts instead of issuing coins (“ticket-in, ticket-out” or “TITO”) at casinos and racetracks (“racinos”) and other gaming venues worldwide.  Revenue from this market also includes sales of printers used in the international off-premise gaming market in gaming machines such as Amusement with Prizes (“AWP”), Skills with Prizes (“SWP”) and Fixed Odds Betting Terminals (“FOBT”) at non-casino gaming establishments, as well as royalties related to our patented casino and gaming technology.  Sales of our casino and gaming printers decreased $7,000 or less than 1%, from the first quarter of 2010.

Domestic sales of our casino and gaming printers decreased $291,000, or 11%, due largely to a decrease in sales of our thermal casino printers that we believe resulted from a significant customer purchasing a large stocking order in the fourth quarter of 2010 that resulted in no purchases in the first quarter of 2011 as well as the overall replacement cycle of slot machines being lower in the first quarter of 2011 as compared to the first quarter of 2010.  Even though we anticipate little improvement in the domestic slot machine replacement cycle in 2011, we expect our domestic casino sales to be higher in 2011 than in 2010 as we expect to continue to gain market share.  However, we believe the current uncertain economic environment could continue to negatively impact the casino industry’s level of capital expenditures in 2011, and as a result, our future sales to the domestic casino and gaming market could be unpredictable and adversely affected.

International casino and gaming printer sales increased $284,000, or 7%, to $4,604,000 in the first quarter of 2011.  This increase was due primarily to an 83% increase in thermal casino printer sales to our European distributor as well as approximately $600,000 of sales of our off-premise gaming printer to a new customer for use in gaming machines in the U.K.  These increases were somewhat offset by an 88% decrease in thermal casino printer sales to our Australian distributor and Canadian OEM.  The decline in sales to our Canadian OEM was primarily due to sales of gaming machines into Italy during 2010 as the Italian government approved the installation of approximately 50,000 VLT games beginning in 2010.  Since a substantial portion of these games were installed during 2010, installations (and resulting printer sales) were significantly lower in the first quarter of 2011 as compared to the first quarter of 2010, and we expect such sales for the remainder of 2011 to continue to be lower than the comparable 2010 period.

Revenue from the lottery market includes sales of thermal lottery printers to GTECH Corporation (“GTECH”), the world’s largest provider of lottery terminals, for various lottery applications.  Sales of our lottery products increased $5,886,000, or 355%, from the first quarter of 2010.

Domestic and international printer sales to GTECH, which include thermal on-line and other lottery printers, increased $5,886,000, or 355%, in the first quarter of 2011 compared to 2010, with domestic sales increasing $5,739,000 and international sales increasing $147,000.  Our sales to GTECH are directly dependent on the timing and number of new and upgraded lottery terminal installations GTECH performs, and as a result, may fluctuate significantly quarter-to-quarter.  Our sales to GTECH are not indicative of GTECH’s overall business or revenue.  Based on our backlog of orders, we expect total sales to GTECH for 2011 to be significantly higher than those reported during 2010, particularly during the first half of 2011.  

Revenue from TSG includes sales of consumable products (inkjet cartridges, ribbons, receipt paper and other printing supplies), replacement parts, maintenance and repair services, testing services, refurbished printers, and shipping and handling charges.  Sales from TSG increased $498,000, or 15%, from the first quarter of 2010.

Domestic revenue from TSG increased $461,000, or 16%, largely due to an increase of 31% in sales of consumable products compared to the same period in 2010.  The increase in consumable products sales was primarily due to a 41% increase in sales of inkjet cartridges largely due to increased volume to existing customers as well as newly acquired customers.  In addition, sales of replacement parts increased 38%.  We expect TSG sales in 2011 to be consistent with 2010.

Internationally, TSG revenue increased $37,000, or 15%, to $293,000, due primarily to increased sales of consumable products.

Gross Profit.  Gross profit information is summarized below (in thousands, except percentages):

Gross profit is measured as revenue less cost of goods sold.  Cost of goods sold includes primarily the cost of all raw materials and component parts, direct labor and the associated manufacturing overhead expenses, and the cost of finished products purchased directly from contract manufacturers.  Gross profit increased $1,743,000, or 34%, to $6,932,000 and gross margin decreased to 33.5% from 36.5%.  Our gross profit increased and our gross margin decreased due to (1) a 46% increase in sales and (2) a less favorable sales mix as we sold more lower margin lottery printers and consumable products in the first quarter of 2011 compared to the first quarter of 2010.

Engineering, Design and Product Development.  Engineering, design and product development information is summarized below (in thousands, except percentages):

Engineering, design and product development expenses primarily include salary and payroll related expenses for our engineering staff, depreciation and product design expenses (including prototype printer expenses, outside design and testing services, and supplies).  Such expenses for the first quarter of 2011 increased $24,000, or 3%, due primarily to an increase of $27,000 in employee compensation related expenses resulting largely from annual salary increases compared to the prior year period.  

Selling and Marketing. Selling and marketing information is summarized below (in thousands, except percentages):

Selling and marketing expenses primarily include salaries and payroll related expenses for our sales and marketing staff, sales commissions, travel expenses, expenses associated with the lease of sales offices, advertising, trade show expenses, e-commerce and other promotional marketing expenses.  Selling and marketing expenses for the first quarter of 2011 decreased $64,000, or 4%, primarily due to $73,000 of lower employee compensation related expenses associated with decreased headcount within the sales and marketing departments as compared to the first quarter of 2010.      

General and Administrative. General and administrative information is summarized below (in thousands, except percentages):

General and administrative expenses primarily include salaries and payroll related expenses for our executive, accounting, human resource, business development and information technology staff, expenses for our corporate headquarters, professional and legal expenses, telecommunication expenses, and other expenses related to being a publicly-traded company.  General and administrative expenses decreased $23,000, or 1%, due primarily to $88,000 in lower legal expenses related to business development and general corporate matters, $24,000 in lower severance charges, and $8,000 in lower information technology expenses.  These decreases were partially offset by an increase of $70,000 in employee compensation related expenses and $53,000 in recruitment expenses.

Operating Income.  Operating income information is summarized below (in thousands, except percentages):

During the first quarter of 2011, we reported operating income of $2,788,000, or 13.5% of net sales, compared to operating income of $982,000, or 6.9% of net sales in the first quarter of 2010.  The increase in our operating income and operating margin was primarily due to higher gross profit resulting from a 46% increase in net sales combined with lower operating expenses in the first quarter of 2011 compared to that of 2010.

Interest.  We recorded net interest income of $4,000 in the first quarter of 2011 compared to net interest income of $2,000 in the first quarter of 2010.  Interest expense related to the unused revolving credit line fee and amortization of the deferred financing costs on our revolving credit facility with TD Bank remained consistent in the first quarter of 2011 compared to the first quarter of 2010.  See “Liquidity and Capital Resources” below for more information.

Other Income.  We recorded other income of $15,000 in the first quarter of 2011 compared to $6,000 in the first quarter of 2010.  The increase was primarily due to a higher foreign currency transaction exchange gain recorded by our U.K. subsidiary in the first quarter of 2011.

Income Taxes.  We recorded an income tax provision for the first quarter of 2011 of $982,000 at an effective tax rate of 35.0%, compared to an income tax provision during the first quarter of 2010 of $361,000 at an effective tax rate of 36.5%.  Our effective tax rate for the first quarter of 2010 was unusually high because it did not include any benefit from the federal research and development credit that expired at the end of 2009.  We expect our annual effective tax rate for 2011 to be between 34% and 35%.

Net Income.  We reported net income during the first quarter of 2011 of $1,825,000, or $0.19 per diluted share, compared to $629,000, or $0.07 per diluted share, for the first quarter of 2010.

In the first three months of 2011, our cash flows primarily reflected the results of higher sales volume, purchases of treasury stock and  investment in the development of our new EPICENTRAL™ promotional printing system (“EPICENTRAL™”) for the casino market.  Our cash balance decreased $2,090,000, or 19%, from December 31, 2010 and we ended the first quarter of 2011 with $9,195,000 in cash and cash equivalents and no debt outstanding.

Operating activities:  The following significant factors affected our cash used in operations of $1,258,000 in the first three months of 2011 as compared to our cash provided by operations of $801,000 in the first three months of 2010:

During the first three months of 2011:

During the first three months of 2010:

Investing activities:  Our capital expenditures were $122,000 and $209,000 in the first three months of 2011 and 2010, respectively.  Expenditures in 2011 included $89,000 for the purchase of computer equipment, $30,000 for the purchase of new product tooling and the remaining amount primarily for the purchase of engineering and manufacturing equipment.  Expenditures in 2010 included $99,000 for the purchase of new product tooling, $85,000 for the purchase of computer equipment, and the remaining amount primarily for the purchase of engineering and manufacturing equipment.  

Our capitalized software development costs were $318,000 in the first three months of 2011.  These expenditures were for the development costs of our new EPICENTRAL™ promotional printing system for the casino market.

Capital expenditures, including capitalized software development costs, for 2011 are expected to be approximately $1,500,000 to $2,000,000, primarily for new product tooling and tooling enhancements for our existing products, as well as development costs for EPICENTRAL™.

Financing activities:  We used $389,000 of cash from financing activities during the first three months of 2011 due to the repurchase of $544,000 of Company stock partially offset by proceeds and tax benefits from stock option exercises of $155,000.  During the first three months of 2010, we generated $90,000 of cash from financing activities from proceeds from stock option exercises.

Our working capital increased 7% to $27,204,000 at March 31, 2011 from $25,525,000 at December 31, 2010.  The increase in our working capital was largely due to higher accounts receivable balances and inventory balances offset by lower cash and cash equivalent balances and higher accounts payable balances resulting from higher sales and inventory purchases.  Our current ratio remained consistent at 3.2 as of March 31, 2011 and December 31, 2010.

On November 28, 2006, we signed a five-year $20,000,000 credit facility (the “TD Bank Credit Facility”) with TD Bank, N.A. (“TD Bank”). The credit facility provides for a $20,000,000 revolving credit line expiring on November 28, 2011.  Borrowings under the revolving credit line

bear a floating rate of interest at the prime rate minus one percent and are collateralized by a lien on all of our assets.  We also pay a fee of 0.25% on unused borrowings under the revolving credit line.  The total deferred financing costs relating to expenses incurred to complete the TD Bank Credit Facility was $94,000.  The TD Bank Credit Facility imposes certain quarterly financial covenants on us and restricts, among other things, our ability to incur additional indebtedness, the payment of dividends on our common stock and the creation of other liens.  We were in compliance with all financial covenants of the TD Bank Credit Facility at March 31, 2011.  The following table lists the financial covenants and the performance measurements at March 31, 2011:

As of March 31, 2011, we had no balances outstanding on the revolving credit line.  Undrawn commitments under the TD Bank Credit facility were $20,000,000 at March 31, 2011.

On May 27, 2010, our Board of Directors approved a new stock repurchase program (the “Stock Repurchase Program”).  Under the Stock Repurchase Program, we are authorized to repurchase up to $10,000,000 of our outstanding shares of common stock from time to time in the open market over a three-year period ending May 27, 2013, depending on market conditions, share price and other factors. 

During the three months ended March 31, 2011, we repurchased 49,137 shares of our common stock for $544,000 at an average price per share of $11.06.  As of March 31, 2011, approximately $9,279,000 remains authorized for future repurchases under this program.

The disclosure of payments we have committed to make under our contractual obligations is set forth under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations" in our Form 10-K for the fiscal year ended December 31, 2010.  There have been no material changes in our contractual obligations outside the ordinary course of business since December 31, 2010.  We have no material off-balance sheet arrangements as defined in Regulation S-K 303(a)(4)(ii).

We believe that our cash on hand and cash flows generated from operations will provide sufficient resources to meet our working capital needs, finance our capital expenditures and meet our liquidity requirements through at least the next twelve months.  

The disclosure of our exposure to market risk is set forth under the heading “Quantitative and Qualitative Disclosures about Market Risk” in our Form 10-K for the fiscal year ended December 31, 2010.  There has been no material changes in our exposure to market risk during the three months ended March 31, 2011.

The Company, under the supervision and with the participation of its management, including the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the design and operation of the company’s “disclosure controls and procedures” (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this report.  Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2011.  There have been no change in the Company’s internal control over financial reporting during the quarter ended March 31, 2011, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

None.

Information regarding risk factors appears in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2010.  There have been no material changes from the risk factors previously disclosed in that Annual Report on Form 10-K.   The risks described in our Annual Report on Form 10-K are not the only risks facing our Company.  Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

On May 27, 2010, our Board of Directors approved a new stock repurchase program (the “Stock Repurchase Program”).  Under the Stock Repurchase Program, we are authorized to repurchase up to $10,000,000 of our outstanding shares of common stock from time to time in the open market over a three-year period ending May 27, 2013, depending on market conditions, share price and other factors.

During the three months ended March 31, 2011, we repurchased 49,137 shares of our common stock for $544,000 at an average price per share of $11.06.  As of March 31, 2011, approximately $9,279,000 remains authorized for future repurchases under this program.  The following table summarizes the repurchase of our common stock in the three months ended March 31, 2011:

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.

EXHIBIT LIST

The following exhibits are filed herewith.