UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
For the quarterly period ended September 30, 2004
OR
For the transition period from to
Commission File number 1-4982
PARKER-HANNIFIN CORPORATION
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of
incorporation or organization)
(IRS Employer
Identification No.)
Registrant’s telephone number, including area code: (216) 896-3000
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
Number of Common Shares outstanding at September 30, 2004 119,474,143
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF INCOME
(Dollars in thousands, except per share amounts)
(Unaudited)
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Interest expense
Other expense, net
Income before income taxes
Income taxes
Net income
Earnings per share - basic
Earnings per share - diluted
Cash dividends per common share
See accompanying notes to consolidated financial statements.
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CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable, net
Inventories:
Finished products
Work in process
Raw materials
Prepaid expenses
Deferred income taxes
Total current assets
Plant and equipment
Less accumulated depreciation
Goodwill
Intangible assets, net
Other assets
Total assets
LIABILITIES
Current liabilities:
Notes payable
Accounts payable, trade
Accrued liabilities
Accrued domestic and foreign taxes
Total current liabilities
Long-term debt
Pensions and other postretirement benefits
Other liabilities
Total liabilities
SHAREHOLDERS’ EQUITY
Serial preferred stock, $.50 par value; authorized 3,000,000 shares; none issued
Common stock, $.50 par value; authorized 600,000,000 shares; issued 119,711,056 shares at September 30 and 119,711,057 shares at June 30
Additional capital
Retained earnings
Unearned compensation related to guarantee of ESOP debt
Deferred compensation related to stock options
Accumulated other comprehensive (loss)
Less treasury shares, at cost:
236,913 shares at September 30 and 227,067 shares at June 30
Total shareholders’ equity
Total liabilities and shareholders’ equity
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CONSOLIDATED STATEMENT OF CASH FLOWS
CASH FLOWS FROM OPERATING ACTIVITIES
Adjustments to reconcile net income to net cash provided by operations:
Depreciation
Amortization
Foreign currency transaction loss (gain)
Loss on sale of plant and equipment
Changes in assets and liabilities:
Accounts receivable
Inventories
Accrued payrolls and other compensation
Other accrued liabilities
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions
Capital expenditures
Proceeds from sale of plant and equipment
Other
Net cash (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Net (payments for) proceeds from common share activity
Payments of notes payable, net
Proceeds from long-term borrowings
Payments of long-term borrowings
Dividends
Net cash (used in) financing activities
Effect of exchange rate changes on cash
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of period
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BUSINESS SEGMENT INFORMATION BY INDUSTRY
The Company operates in two principal business segments: Industrial and Aerospace. The Industrial Segment is the largest and includes a significant portion of International operations.
Industrial - This segment produces a broad range of motion control and fluid systems and components used in all kinds of manufacturing, packaging, processing, transportation, mobile construction, agricultural and military machinery and equipment. Sales are made directly to major original equipment manufacturers (OEMs) and through a broad distribution network to smaller OEMs and the aftermarket.
Aerospace - This segment designs and manufactures products and provides aftermarket support for commercial, military and general aviation aircraft, and also performs a vital role in naval vessels and land-based weapon systems. The Aerospace Segment provides a full range of systems and components for hydraulic, fuel and pneumatic applications.
The Company also reports a Climate & Industrial Controls Segment and an Other Segment. The Climate & Industrial Controls Segment manufactures motion-control systems and components for use primarily in the refrigeration and air conditioning and transportion industries. The Other Segment consists of a business unit which designs and manufactures custom-engineered buildings and a business unit which develops and manufactures chemical car care products and maintenance equipment.
Certain prior period amounts have been reclassified to conform to the current year presentation.
Business Segment Results by Industry
Industrial:
North America
International
Aerospace
Climate & Industrial Controls
Total
Segment operating income
Total segment operating income
Corporate general and administrative expenses
Income before interest expense and other
Other expense
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dollars in thousands, except per share amounts
In the opinion of the management of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of September 30, 2004, the results of operations for the three months ended September 30, 2004 and 2003 and cash flows for the three months then ended. These financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s 2004 Annual Report on Form 10-K. Interim period results are not necessarily indicative of the results to be expected for the full fiscal year.
Effective July 1, 2004 the Company adopted the provisions of FASB Staff Position No. FAS 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003.” The implementation of this accounting pronouncement did not have a material effect on the Company’s results of operations, financial position or cash flows.
The Company uses the intrinsic-value based method to account for stock options and makes no charges against earnings with respect to options granted. The following table illustrates the effect on net income and earnings per share as if the fair value based method had been applied to all outstanding and unvested awards in each period.
Net income, as reported
Add: Stock-based employee compensation expense included in reported net income, net of tax
Deduct: Total stock-based employee compensation expense determined under fair value method, net of tax
Pro forma net income
Earnings per share:
Basic – as reported
Basic – pro forma
Diluted – as reported
Diluted – pro forma
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In the ordinary course of business, the Company warrants its products against defect in design, materials and workmanship over various time periods. The warranty accrual as of September 30, 2004 and June 30, 2004 is immaterial to the financial position of the Company and the change in the accrual for the current quarter is immaterial to the Company’s results of operations and cash flows.
During the first quarter of fiscal 2005, the Company recognized an impairment loss of $8,766 ($5,470 after-tax or $.05 per share) related to a real estate investment. The impairment loss results from a cash flow analysis performed by the Company which indicated that the carrying value of the investment is not recoverable. The loss is reflected in the Other expense, net caption in the Consolidated Statement of Income and in the Other caption in the Cash Flow From Investing Activities section of the Consolidated Statement of Cash Flows.
The following table presents a reconciliation of the numerator and denominator of basic and diluted earnings per share for the three months ended September 30, 2004 and 2003.
Three Months Ended
September 30,
Numerator:
Net income applicable to common shares
Denominator:
Basic - weighted average common shares
Increase in weighted average from dilutive effect of exercise of stock options
Diluted - weighted average common shares, assuming exercise of stock options
Basic earnings per share
Diluted earnings per share
At September 30, 2004 and 2003, 577,927 and 1,143,510 common shares, respectively, subject to stock options were excluded from the computation of diluted earnings per share because the effect of their exercise would be anti-dilutive.
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The Board of Directors has approved a program to repurchase the Company’s common stock on the open market, when the strike price is within a specific range, and the systematic repurchase of up to $10 million each fiscal quarter. Repurchases are primarily funded from operating cash flows, and the shares are initially held as treasury stock. The Company repurchased 177,700 shares of its common stock at an average price of $56.50 during the three-month period ended September 30, 2004.
The Company’s items of other comprehensive income (loss) are foreign currency translation adjustments and unrealized gains (losses) on marketable equity securities. Comprehensive income for the three months ended September 30, 2004 and 2003 was as follows:
Foreign currency translation adjustments
Net realized loss on marketable equity securities (net of tax of $25)
Unrealized (loss) gain on marketable equity securities (net of taxes of $6,435 in 2004 and $312 in 2003)
Comprehensive income
In 2004, the unrealized (loss) on marketable equity securities primarily resulted from the contribution of the marketable equity securities to the Company’s charitable foundation. The contribution of the marketable equity securities had an immaterial effect on the Company’s results of operations and financial position.
During the first quarter of fiscal 2005, the Company recorded a $1,459 charge ($910 after-tax or $.01 per share) for the costs to structure its businesses in light of current and anticipated customer demand. The Company believes the realignment actions will positively impact future results of operations but will have no material effect on liquidity and sources and uses of capital. The charge primarily relates to severance costs attributable to approximately 200 employees in the Industrial Segment. All severance payments are expected to be made by June 30, 2005. The business realignment costs are presented in the Consolidated Statement of Income for the three months ended September 30, 2004 as follows: $1,035 in Cost of sales and $424 in Selling, general and administrative expenses.
During the first quarter of fiscal 2004, the Company recorded a $6,940 charge ($4,650 after-tax or $.04 per share) for the costs to structure its businesses in light of current and anticipated customer demand. The Company believes the realignment actions will positively impact future results of operations but will have no material effect on liquidity and sources and uses of capital. The charge primarily related to severance costs attributable to 525 employees in the Industrial Segment. All severance payments have been made. The business realignment costs are presented in the Consolidated Statement of Income for the three months ended September 30, 2003 as follows: $6,815 in Cost of sales and $125 in Selling, general and administrative expenses.
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The changes in the carrying amount of goodwill for the three months ended September 30, 2004 are as follows:
Balance June 30, 2004
Foreign currency translation
Goodwill adjustments
Balance September 30, 2004
“Goodwill adjustments” primarily represent final adjustments to the purchase price allocation for acquisitions completed within the last twelve months.
Intangible assets are amortized on the straight-line method over their legal or estimated useful lives. The following summarizes the gross carrying value and accumulated amortization for each major category of intangible assets:
Patents
Trademarks
Engineering drawings and other
Total intangible amortization expense for the three months ended September 30, 2004 was $2,103. The estimated amortization expense for the five years ending June 30, 2005 through 2009 is $10,083, $9,423, $8,391, $7,401 and $6,569, respectively.
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Net periodic pension cost recognized included the following components:
Service cost
Interest cost
Expected return on plan assets
Net amortization and deferral and other
Net periodic benefit cost
Net amortization and deferral and other in 2004 includes a curtailment loss of $4,610. The curtailment loss results from the recognition of unamortized prior service costs related to certain North American employees who have elected to terminate their participation in a defined benefit pension plan and receive future pension benefits under a defined contribution scheme.
Postretirement benefit cost recognized included the following components:
On October 11, 2004, the Company announced that it had completed the acquisition of the Sporlan Valve Company. Sporlan is a market leader in refrigeration and air conditioning components, controls and systems and has annual sales of approximately $150 million. The purchase price was funded from existing cash on hand and commercial paper borrowings.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004
AND COMPARABLE PERIOD ENDED SEPTEMBER 30, 2003
OVERVIEW
The Company is a leading worldwide diversified manufacturer of motion control technologies and systems, providing precision engineered solutions for a wide variety of commercial, mobile, industrial and aerospace markets. The Company’s order rates are highly indicative of the Company’s future revenues and thus a key metric for future performance. The Company publishes its order rates on a monthly basis. The lead time between the time an order is received and revenue is realized can range from one day to 12 weeks for commercial, mobile and industrial orders and three to 18 months for aerospace orders. The Company believes the leading economic indicators of these markets that have a strong correlation to the Company’s future order rates are the Institute of Supply Management (ISM) index of manufacturing activity with respect to commercial, mobile and industrial markets and aircraft miles flown, revenue passenger miles and Department of Defense spending for aerospace markets. An ISM index above 50 indicates that the manufacturing economy is expanding resulting in the expectation that the Company’s order rates in the commercial, mobile and industrial markets should be increasing. The ISM index at the end of September 2004 was 58.5 compared to 61.1 at the end of June 2004. With respect to the aerospace market, aircraft miles flown and passenger miles have shown improvement over comparable fiscal 2004 levels.
The Company’s major opportunities for growth are as follows:
The financial condition of the Company remains strong as evidenced by the continued generation of substantial cash flows from operations, a debt to debt-equity ratio under 30 percent, ample borrowing capabilities and strong credit ratings.
Many acquisition opportunities remain available to the Company within its target markets. Acquisitions will be considered from time to time to the extent there is a strong strategic fit, while at the same time, maintaining the Company’s strong financial position.
Current challenges facing the Company include maintaining premier customer service levels while benefiting from strong customer demand, successfully matching price increases to raw material price increases, the rising costs related to employee retirement and health care benefits, insurance, and compliance with the provisions of the Sarbanes-Oxley Act and other corporate governance measures. The Company has implemented a number of strategic financial performance initiatives relating to growth and margin improvement in order to meet these challenges including strategic procurement, strategic pricing, lean manufacturing and business realignments.
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The discussion below is structured to provide a separate analysis of the Consolidated Statement of Income, Results by Business Segment, Balance Sheet and Statement of Cash Flows.
(in millions)
Gross profit margin
Selling general and administrative expenses, as a percent of sales
Effective tax rate
Net income, as a percent of sales
Backlog
Net sales for the first quarter of fiscal 2005 increased 22.7 percent over the prior-year first quarter sales reflecting higher volume experienced in all Segments. Acquisitions made in the last 12 months and the effect of currency rate changes also contributed to the sales increase.
Gross profit margin increased due to a combination of the increase in sales as well as the effects of the Company’s financial performance initiatives. Included in current-year and prior-year gross profit was $1.0 million and $6.8 million, respectively, in business realignment charges (see Note 9 on page 8 for further discussion).
Selling, general and administrative expenses increased primarily due to higher expenses related to employee health and welfare plans.
Interest expense for the current-year quarter decreased 25.4 percent due primarily to lower average debt outstanding. Interest expense in the prior-year quarter included expenses associated with renewing the Company’s revolving credit agreement.
Other expense, net in the current-year quarter includes a $8.8 million expense related to the writedown of a real estate investment.
Effective tax rate for the current-year quarter is lower primarily due to tax planning initiatives related to recent acquisitions.
Net income was adversely affected by an additional expense of approximately $5.7 million related to domestic qualified defined benefit plans, resulting primarily from the amortization of actuarial losses and the recognition of a one-time curtailment loss.
Backlog increased from the prior year due to an increase in order rates throughout most businesses in the Aerospace and Industrial Segments. Backlog declined from the June 30, 2004 amount of $2,203.7 million due to shipments exceeding new order rates during the current-year quarter.
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RESULTS BY BUSINESS SEGMENT
Industrial Segment
Sales
Operating income
Operating income, as a percent of sales
The increase in Industrial North American sales reflects higher end-user demand experienced across all of the Industrial North American markets, particularly in the semi-conductor manufacturing, construction, agriculture, heavy-duty truck and mobile equipment markets. The increase in Industrial International sales is attributed to higher volume across most markets in Europe, Latin America and the Asia Pacific region. Acquisitions and currency rate changes accounted for approximately 1.6 percent of the Industrial North American increase and 17.4 percent of the Industrial International sales increase.
The increase in Industrial North American and Industrial International margins is primarily due to the higher sales volume and benefits realized from the Company’s financial performance initiatives and benefits from past business realignment actions as well as the lower business realignment charges recorded during the current-year quarter.
Included in Industrial North American current-year and prior-year operating income was $0.9 million and $3.7 million, respectively, of business realignment charges and included in Industrial International current-year and prior-year operating income was $0.6 million and $3.0 million, respectively, of business realignment charges. These charges were made as a result of actions the Company took to appropriately structure the Industrial operations to operate in their current economic environment and primarily consisted of severance costs.
The increase in backlog from a year ago is due to higher order rates experienced in virtually all of the markets of the Industrial North American and Industrial International operations. Backlog declined from the June 30, 2004 amount of $840.1 million due to shipments exceeding new order rates in the current-year quarter.
The Company anticipates sales volume in the Industrial Segment for the remainder of fiscal 2005 will continue to exceed the amounts reported for fiscal 2004, however, the rate at which sales will exceed the prior year amounts may not remain at the current quarter rate. Operating income is expected to increase as a result of higher sales and the continued implementation of the Company’s financial performance initiatives and improvements stemming from recent business realignment actions. The Company expects to continue to take the actions necessary to structure appropriately the Industrial Segment operations to operate in their current economic environment. Such actions may include the necessity to record additional business realignment charges in fiscal 2005.
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Aerospace Segment
The increase in sales in the Aerospace Segment is primarily due to an increase in both commercial original equipment manufacturer (OEM) and aftermarket volume as well as an increase in military volume. The higher margins were primarily due to product mix as well as the overall higher sales volume partially offset by higher aircraft product liability insurance premiums.
The increase in backlog from a year ago is due to higher order rates experienced in both the commercial and military businesses. Shipments exceeded order rates in the current quarter resulting in the slight decline in backlog from the June 30, 2004 amount of $1,202.7 million. The Company expects an upward trend in commercial order rates for the balance of fiscal 2005 and expects order rates in the military market to remain at current levels.
Climate & Industrial Controls Segment
The increase in sales in the Climate & Industrial Controls Segment is primarily due to higher end-user demand in the commercial refrigeration and general industrial markets. The decrease in margins is primarily due to unfavorable overhead absorption levels as compared to the prior-year quarter as well as the absence of a government grant received in the prior-year quarter.
The lower backlog reflects the decrease in order rates in both the automotive and residential air conditioning markets. For the remainder of fiscal 2005, business conditions in the Climate & Industrial Controls Segment are expected to be the same as those experienced in the first quarter of fiscal 2005.
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Other Segment
The Other Segment consists of a business unit which designs and manufactures custom-engineered buildings and a business unit which develops and manufactures chemical car care products and maintenance equipment.
The increase in sales in the Other Segment is primarily due to higher demand in the custom-engineered buildings business unit as well as the effect of currency rate changes. The increased margins resulted primarily from the higher sales volume.
Corporate general and administrative expenses increased to $25.4 million for fiscal 2005 compared to $23.0 million in the prior year. As a percent of sales, corporate general and administrative expenses for the current-year quarter decreased slightly to 1.3 percent compared to 1.4 percent in the prior year.
Included in Other expense (in the Business Segment Results by Industry) in fiscal 2005 are currency transaction losses of $6.7 million, an $8.8 million expense associated with the writedown of a real estate investment, and a $4.6 million pension curtailment loss.
BALANCE SHEET
Plant and equipment, net of accumulated depreciation
Shareholders’ equity
Working capital
Current ratio
Accounts receivable are primarily receivables due from customers for sales of product ($1,063.5 million at September 30, 2004 and $1,064.6 million at June 30, 2004). Days sales outstanding relating to trade accounts receivable increased to 50 days from 49 days during the quarter.
Inventories increased $53.2 million since June 30, 2004, with days supply increasing to 72 days from 67 days at June 30, 2004.
Plant and equipment, net of accumulated depreciation, decreased primarily as a result of depreciation exceeding capital expenditures.
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Other assets decreased since June 30, 2004 primarily as a result of decreases in qualified benefit plan assets and other investment assets.
Accounts payable, trade decreased from June 30, 2004 primarily in the Industrial Segment.
Accrued liabilities decreased as a result of the payment of fiscal 2004 incentive compensation during the current-year quarter.
Accrued domestic and foreign taxes increased primarily due to higher taxable income in 2005.
Due to the weakening of the dollar, foreign currency translation adjustments resulted in an increase in shareholders’ equity of $28.1 million during the first quarter of fiscal 2005. The translation adjustments primarily affected Accounts receivable, Inventories, Plant and equipment, Goodwill, Long-term debt and Accrued liabilities.
The working capital increase was primarily due to an increase in Cash and cash equivalents and Inventories and a decrease in Accrued liabilities.
STATEMENT OF CASH FLOWS
Cash provided by (used in):
Operating activities
Investing activities
Financing activities
Effect of exchange rates
Cash flows from operating activities - The change in net cash provided by operating activities in fiscal 2005 is primarily due to an increase in net income and an increase in other assets, mostly offset by a decrease in working capital items, particularly Inventories. Other assets increased primarily due to the decrease in qualified benefit plan assets.
Cash flow used in investing activities - The decrease in the amount of cash used in investing activities in fiscal 2005 is attributable to the writedown of a real estate investment, partially offset by a $3.3 million increase in capital expenditures.
Cash flow from financing activities - In fiscal 2005 the Company decreased its outstanding borrowings by a net total of $3.5 million compared to a decrease of $145.6 million in fiscal 2004.
The Company’s goal is to maintain no less than an “A” rating on senior debt to ensure availability and reasonable cost of external funds. As a means of achieving this objective, the Company has established a financial goal of maintaining a ratio of debt to debt-equity of 34 to 37 percent.
Debt to Debt-Equity Ratio (in millions)
Debt
Debt & equity
Ratio
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The Company has committed lines of credit totaling $1,025 million through two multi-currency unsecured revolving credit agreements with a group of banks, all of which was available as of September 30, 2004. One agreement, totaling $625 million, expires in September 2008 and the other, totaling $400 million, expires September 2009. The credit agreements support the Company’s commercial paper note program, which is rated A-1 by Standard & Poor’s, P-1 by Moody’s and F-1 by Fitch, Inc. These ratings are considered investment grade. These revolving credit agreements require facility fees of up to 8/100ths of one percent of the commitment per annum at the Company’s present rating level. The revolving credit agreements contain provisions that increase the facility fee of the credit agreement in the event the Company’s credit ratings are lowered. A lowering of the Company’s credit ratings would not limit the Company’s ability to use the credit agreements nor would it accelerate the repayment of any outstanding borrowings.
The Company’s revolving credit agreements and certain debt agreements contain certain financial and other covenants, the violation of which would limit or preclude the use of the agreements for future borrowings. The most restrictive financial covenant provides that the ratio of debt to total capitalization be less than 60 percent. As of September 30, 2004, the ratio of debt to total capitalization was 24.1 percent compared to 24.9 percent as of June 30, 2004. The Company is in compliance with all covenants and expects to remain in compliance during the term of the agreements.
FORWARD-LOOKING STATEMENTS
Forward-looking statements contained in this Report on Form 10-Q and other written reports and oral statements are made based on known events and circumstances at the time of release, and as such, are subject in the future to unforeseen uncertainties and risks. All statements regarding future performance, earnings projections, events or developments are forward-looking statements. It is possible that the future performance and earnings projections of the Company may differ materially from current expectations, depending on economic conditions within both its industrial and aerospace markets, and the Company’s ability to achieve anticipated benefits associated with announced realignment activities, strategic initiatives to improve operating margins and growth initiatives. A change in the economic conditions in individual markets may have a particularly volatile effect on segment performance. Among other factors which may affect future performance are:
The Company undertakes no obligation to update or publicly revise these forward-looking statements to reflect events or circumstances that arise after the date of this Report.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company enters into forward exchange contracts, costless collar contracts and cross-currency swap agreements to reduce its exposure to fluctuations in related foreign currencies. These contracts are with major financial institutions and the risk of loss is considered remote. The Company does not hold or issue derivative financial instruments for trading purposes. In addition, the Company’s foreign locations, in the ordinary course of business, enter into financial guarantees through financial institutions, which enable customers to be reimbursed in the event of nonperformance by the Company. The total carrying and fair value of open contracts and any risk to the Company as a result of these arrangements is not material to the Company’s financial position, liquidity or results of operations.
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The Company’s debt portfolio contains variable rate debt, inherently exposing the Company to interest rate risk. The Company’s objective is to maintain a 60/40 mix between fixed rate and variable rate debt thereby limiting its exposure to changes in near-term interest rates. As of September 30, 2004, the Company has no interest rate swap agreements.
ITEM 4. CONTROLS AND PROCEDURES
The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the first quarter of fiscal 2005. Based on this evaluation, the principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures are effective.
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PART II - OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Period
(a) Total
Number of
Shares
Purchased
(b) Average
Price Paid
Per Share
(c) Total Number of
Shares Purchased
as Part of PubliclyAnnounced Plans
or Programs (1)
(d) Maximum Number
(or Approximate DollarValue) of Shares that
May Yet Be Purchased
Under the Plans or
Programs
July 1, 2004 throughJuly 31, 2004
August 1, 2004 throughAugust 31, 2004
September 1, 2004 throughSeptember 30, 2004
Total:
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Item 5. Other Information.
On August 11, 2004 the Compensation and Management Development Committee of the Registrant approved a consulting arrangement between the Registrant and Duane E. Collins to be effective on October 27, 2004. Mr. Collins retired as Chairman of the Board of Directors of the Registrant on October 27, 2004 and will remain as a Director of the Registrant. Mr. Collins’ responsibilities under the consulting arrangement include:
Mr. Collins will receive annual compensation in the amount of $175,000 for his services as a director and for the services rendered pursuant to the consulting arrangement. He will also receive use of the Registrant’s plane and facilities, a leased automobile, and reimbursement of certain expenses including club memberships and estate and tax planning services. The consulting arrangement will remain in effect through October 2006.
Item 6. Exhibits.
The following documents are furnished as exhibits and are numbered pursuant to Item 601 of Regulation S-K:
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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.
(Registrant)
/s/ Timothy K. Pistell
Timothy K. Pistell
Vice President - Finance and Administration
and Chief Financial Officer
Date: October 29, 2004
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EXHIBIT INDEX
Description of Exhibit