UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2005
Commission File No. 0-7099
CECO ENVIRONMENTAL CORP.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
3120 Forrer Street, Cincinnati, Ohio 45209
(Address of principal executive offices) (Zip Code)
513-458-2600
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ 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
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of latest practical date.
Class: Common, par value $.01 per share outstanding at August 10, 2005 - 9,993,260
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
JUNE 30, 2005
INDEX
CONDENSED CONSOLIDATED BALANCE SHEETS
Dollars in thousands, except per share data
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable, net
Costs and estimated earnings in excess of billings on uncompleted contracts
Inventories
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Goodwill
Intangible assets – finite life, net
Intangible assets – indefinite life
Deferred charges and other assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of debt
Accounts payable and accrued expenses
Billings in excess of costs and estimated earnings on uncompleted contracts
Total current liabilities
Other liabilities
Debt, less current portion
Deferred income tax liability
Subordinated notes (including, related party - $7,012 and $6,884, respectively)
Total liabilities
Shareholders’ equity:
Common stock, $.01 par value; 100,000,000 shares authorized, 10,168,479 shares issued in 2005 and 2004
Capital in excess of par value
Accumulated deficit
Accumulated other comprehensive loss
Less treasury stock, at cost, 175,220 shares in 2005 and 2004
Total shareholders’ equity
The notes to condensed consolidated financial statements are an integral part of the above statements.
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Net sales
Costs and expenses:
Cost of sales, exclusive of items shown separately below
Selling and administrative
Depreciation and amortization
Income (loss) from operations
Other income
Interest expense (including related party interest of $259 and $199, and $518 and $398, respectively)
Income (loss) from operations before income taxes
Income tax provision (benefit)
Net income (loss)
Per share data:
Basic net income (loss)
Diluted net income (loss)
Weighted average number of common shares outstanding:
Basic
Diluted
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Dollars in thousands
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Non cash interest expense included in net loss
Non cash gains included in net loss
Changes in operating assets and liabilities:
Accounts receivable
Other
Net cash provided by (used in) operating activities
Net cash used in investing activities - acquisition of property and equipment
Cash flows from financing activities:
Proceeds from stock issuance
Long-term debt borrowings
Net cash provided by financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Cash and cash equivalents at end of the period
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid (refunded) during the period for:
Interest
Income taxes
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
The accompanying unaudited condensed consolidated financial statements of CECO Environmental Corp. and subsidiaries (the “Company”, “we”, “us”, or “our”) have been prepared in accordance with accounting principles generally accepted in the United States of America. In the opinion of management, the accompanying unaudited condensed consolidated financial statements of the Company contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position as of June 30, 2005 and December 31, 2004 and the results of operations for the three-month and six-month periods ended June 30, 2005 and 2004 and of cash flows for the six-month periods ended June 30, 2005 and 2004. The results of operations for the three-month period and six-month period ended June 30, 2005 are not necessarily indicative of the results to be expected for the full year.
These financial statements should be read in conjunction with the audited financial statements and notes thereto in our 2004 Annual Report on Form 10-K filed with the Securities and Exchange Commission.
Stock Based Compensation - We apply Accounting Principles Board Opinion No. 25 and related interpretations in the accounting for stock option plans. Under such method, compensation is measured by the quoted market price of the stock at the measurement date less the amount, if any, that the employee is required to pay. The measurement date is the first date on which the number of shares that an individual employee is entitled to receive and the option or purchase price, if any, are known. We did not incur any compensation expense in 2005 or 2004 related to our stock option plans. We adopted the disclosure-only provisions of SFAS No. 123, “Accounting for Stock-Based Compensation” and related pronouncements.
The following table compares 2005 and 2004 as reported to the pro forma results, considering both options and warrants discussed in Note 11 in our 2004 Annual Report filed on Form 10-K, had we adopted the expense recognition provision of SFAS No. 123:
Net income (loss) as reported
Deduct: compensation cost based on fair value recognition, net of tax
Pro forma net loss under SFAS No. 123
Basic and diluted loss per share:
As reported
Pro forma under SFAS No. 123
Certain amounts in the June 30, 2004 financial statements have been reclassified to conform to the June 30, 2005 presentation.
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In December 2003, the FASB issued a revised FASB Interpretation No. 46, entitled “Consolidation of Variable Interest Entities.” As revised, the new interpretation requires that the Company consolidate all variable interest entities in its financial statements under certain circumstances. We adopted the revised interpretation as of March 31, 2004 as required; however, the adoption of this interpretation currently did not affect our financial condition or results of operations, as we do not have any variable interest entities.
In November 2004, the FASB issued SFAS No. 151, “Inventory Costs, an amendment of ARB No. 43, Chapter 4”. This statement clarifies the accounting for abnormal amounts of idle facility expense, freight, handling cost and wasted material. SFAS No. 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The adoption of this interpretation will not affect our financial condition or results of operations.
In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections—a Replacement of APB Opinion No. 20 and FASB Statement No. 3.” This Statement replaces APB Opinion No. 20, “Accounting Changes,” and FASB Statement No. 3, “Reporting Accounting Changes in Interim Financial Statements,” and changes the requirements for the accounting for and reporting of a change in accounting principle. This Statement requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. This Statement applies to all voluntary changes in accounting principle. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. This Statement is effective for accounting changes and error corrections made in fiscal years beginning after December 15, 2005. The adoption of this Statement is not expected to have a material effect on the Registrant’s Condensed Consolidated Financial Statements.
Inventories consist of the following:
Raw materials and subassemblies
Finished goods
Parts for resale
Reserve for obsolescence
Our structure and operational integration results in one segment that focuses on engineering, designing, building and installing systems that remove airborne contaminants from industrial facilities, as well as equipment that controls emissions from such facilities. Accordingly, the condensed consolidated financial statements herein reflect the operating results of the segment.
For the three months ended June 30, 2005 and 2004, basic weighted average common shares outstanding were 9,993,260 and 9,989,836, respectively, while diluted average common shares outstanding were 10,575,497 and 9,989,836, respectively. For the six months ended June 30, 2005 and 2004, basic weighted average common shares outstanding and diluted average common shares outstanding were 9,993,260 and 9,987,405, respectively. We consider outstanding options and warrants in computing diluted net income per share only when they are dilutive. Options and warrants to purchase 3,435,000 and 3,503,700 shares for the six months ended June 30, 2005 and 2004, respectively, were not included in the computation of diluted earnings per share due to their having an anti-dilutive effect.
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Total bank debt as of June 30, 2005 was $8,980 and $8,737 at December 31, 2004. Unused credit availability under our $10 million revolving line of credit at June 30, 2005 was $3,796. Availability is determined by a borrowing base formula contained in the credit agreement.
The bank term loan and revolving line of credit are reported as current portion of debt in the balance sheet at June 30, 2005, since the term loan matures in August 2005 and the revolving line of credit matures in January 2006. In April 2005, the credit facility was amended to increase our capacity to issue letters of credit under the existing $10 million facility from $2 million to $4 million. Any letters of credit issued under this new agreement do not reduce our borrowing base availability but are counted in the aggregate toward our credit limit. $3.4 million of this capacity is secured by the personal guaranty of our Chairman, Philip DeZwirek. As of June 30, 2005, $365,000 has been issued under this agreement. An additional $3.4 million will be issued in August 2005, as collateral for a performance bond on a major contract. The bank credit facility was amended in June, 2005 by extending the maturities of the term loan from July 1, 2005 to August 31, 2005. The amendment also modified the extension fees originally due at July 1, 2005 from $60,000 to $20,000 and deferred $40,000 in fees to August 31, 2005. These fees will be due in the event that we fail to pay the entire principal balance by August 31, 2005. In August 2005, the credit facility was amended to extend the maturity of the term loan to January 1, 2006 and reduce the Company’s payment requirements to interest only, payable monthly in arrears. The interest on the term loan was reduced from 6% over the base rate (prime) to 5% over the base rate. Additionally, Fifth Third Bank has acquired the interest of PNC and JPMC in the term loan by a second Intercreditor Agreement. Fifth Third has waived minimum coverage requirements under several financial covenants through June 30, 2005. We would not have been in compliance with the financial covenants had the amendment not been made.
We have received credit approval from our existing line of credit lender for a new loan agreement which is contingent upon closing the sale of our Cincinnati property. This new agreement will allow us to consolidate our term debt with one lender by paying off two existing term debt lenders and combining our term debt and line of credit with a single bank. The agreement calls for reduced interest rates and longer amortization of the term debt.
In June 2005, we accepted an offer to sell our Cincinnati property with a contemplated closing date of July 15, 2005 subject to various contingencies. The purchase agreement calls for 10.7 acres of real estate and improvements to be divided into two parcels, with the first parcel scheduled to close on or before July 15, 2005, for a purchase price of $6.9 million and the second parcel scheduled to close on or before April 1, 2006, for a purchase price of $1.1 million. The buyer has the option to extend each closing up to three times for thirty days each, with the payment of a nonrefundable extension fee. On July 15, 2005, the buyer exercised the first 30 day extension option and paid the non-refundable fee.
We sponsor a non-contributory defined benefit pension plan for certain union employees. The plan is funded in accordance with the funding requirements of the Employee Retirement Income Security Act of 1974. We also sponsor a post-retirement health care plan for office employees retiring before January 1, 1990. The plan allows retirees who have attained the age of 65 to elect the type of coverage desired. Retirement and health care plan expense is based on valuations performed by plan actuaries as of the beginning of each fiscal year. The components of the expense consisted of the following:
Retirement plan:
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Amortization of net actuarial (gain)/loss
Net periodic benefit cost
Health care plan:
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We previously disclosed in our financial statements for the year ended December 31, 2004 that we expected to make $398 in contributions to the Pension Plan during the year ending December 31, 2005. As of June 30, 2005, $165 has been contributed to the Pension Plan and we plan on making the balance of $233 during the remainder of Fiscal Year 2005.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Our condensed consolidated statements of operations for the three-month and six-month periods ended June 30, 2005 and 2004 reflect our operations consolidated with the operations of our subsidiaries.
($’s in millions)
Sales
Cost of sales
Gross profit (excluding depreciation)
Percent of sales
Selling and administrative expenses
Operating income (loss)
Consolidated net sales for the second quarter were $20.0 million, an increase of $4.9 million, compared to the same quarter in 2004. Consolidated net sales for the first six months of 2005 were $35.1 million an increase of $6.0 million compared to the same period in 2004. Sales of our component parts and duct product lines, which are sold to contractors and end-users throughout North America, experienced increased sales volume during the second quarter and first six months. Sales of our contracting group and equipment group also experienced increased sales volume during the second quarter and first six months.
Orders booked were $23.6 million during the second quarter of 2005 and $40.7 million for the first six months of 2005, as compared to $15.9 million during the second quarter of 2004 and $30.9 million in the first half of 2004.
Second quarter 2005 gross profit was $4.3 million. This compares to gross profit of $3.2 million during the same period in 2004. Gross profit as a percentage of revenues for the three-month period ended June 30, 2005 was 21.3% compared with 21.2% for the comparable period in 2004.
Gross profit was $6.4 million for the first six months of 2005, an increase of $500,000 compared to the same period in 2004. Gross profit as a percentage of revenues for the first six months of 2005 was 18.4% compared with 20.4% for the comparable period in 2004. Gross margin increased during the second quarter by .1 percentage points and decreased 2.0 percentage points during the first half of 2005 compared with the same periods in 2004 principally due to decreased construction margins partially offset by reduced overhead spending.
Selling and administrative expenses remained constant at $2.8 million during the second quarter and increased by $200,000 or 3.7% to $5.6 million during the first six months of 2005 from $5.4 million in the same period of 2004.
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Depreciation and amortization decreased by $30,000 to $291,000 during the second quarter of 2005 from $321,000 in the same period of 2004. Depreciation and amortization decreased by $65,000 to $583,000 in the first six months of 2005 from $648,000 in the same period of 2004.
Other income was $26,000 in the second quarter of 2005 compared to $18,000 in the second quarter of 2004. Other income for the first six months of 2005 was $76,000 compared to $ 36,000 during the same period in 2004. The other income during 2005 includes revaluation of warrants in the amount of $36,000 and the amortization of the deferred gain recognized from the sale and leaseback of our Conshohocken, Pennsylvania property. The other income during 2004 is the result of the gain recognized from the sale and leaseback of our Conshohocken, Pennsylvania property during the second quarter of 2004 of $222,000. A deferred gain of $218,000 is being recognized over the ensuing three-year leaseback period.
Operating income was $1.2 million in the second quarter of 2005 compared to operating income of $93,000 during the same quarter of 2004. Operating income for the first six months of 2005 was $232,000 compared to an operating loss of ($76,000) during the same period of 2004. The impact from higher sales, partially offset by reduced gross profit margin percentages, along with decreased depreciation and amortization, were the primary factors for the increases in operating income.
Interest expense remained constant at $625,000 during the second quarter of 2005. Interest expense decreased by $17,000 to $1,222,000 from $1,239,000 during the first six months of 2005. The decrease was due to lower debt during the quarter that was partially offset by higher interest rates.
Federal and state income tax provision was $358,000 during the second quarter of 2005 compared to a benefit of $232,000 during the second quarter of 2004. Federal and state income tax benefit was $517,000 for the first six months of 2005, a decrease of $59,000 from the comparable period in 2004. The federal and state income tax provision for the first six months of 2005 was 57%, which reflects the estimated effective tax rate for 2005. Our statutory income tax rate is affected by certain permanent differences including non-deductible interest expense.
Net lncome for the quarter ended June 30, 2005 was $235,000 compared with a net loss of $282,000 for the same period in 2004. Net loss for the six months ended June 30, 2005 was $397,000 compared with a net loss of $703,000 for the same period in 2004.
Backlog
Our backlog consists of orders we have received for products and services we expect to ship and deliver within the next 12 months. Our backlog, as of June 30, 2005 was $26.3 million compared to $20.7 million as of December 31, 2004. There can be no assurances that backlog will be replicated, increased or translated into higher revenues in the future. The success of our business depends on a multitude of factors related to our backlog and the orders secured during the subsequent period(s). Certain contracts are highly dependent on the work of contractors and other subcontractors participating in a project, over which we have no or limited control, and their performance on such project could have an adverse effect on the profitability of our contracts. Delays resulting from these contractors and subcontractors, changes in the scope of the project, weather, and labor availability also can have an effect on a contract’s profitability.
Financial Condition, Liquidity and Capital Resources
The Company’s principal sources of liquidity are cash flow from operations and available borrowings under our revolving credit facility. The Company’s principal uses of cash are operating costs, debt service, payment of interest on our outstanding senior debt, working capital and other general corporate requirements.
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At June 30, 2005 and December 31, 2004, cash and cash equivalents totaled $486,000 and $339,000 respectively. Generally, we do not carry significant cash and cash equivalent balances because excess amounts are used to pay down our revolving line of credit.
The bank term loan and revolving line of credit are reported as current portion of debt in the balance sheet at June 30, 2005, since the term loan matures in August 2005 and the revolving line of credit matures in January 2006. In April 2005, the credit facility was amended to increase our capacity to issue letters of credit under the existing $10 million facility from $2 million to $4 million. Any letters of credit issued under this new agreement do not reduce our borrowing base availability but are counted in the aggregate toward our credit limit. $3.4 million of this capacity is secured by the personal guaranty of our Chairman, Philip DeZwirek. As of June 30, 2005, $365,000 has been issued under this agreement. An additional $3.4 million will be issued in August 2005, as collateral for a performance bond on a major contract. The bank credit facility was amended in June, 2005 by extending the maturities of the term loan from July 1, 2005 to August 31, 2005. The amendment also modified the extension fees originally due at July 1, 2005 from $60,000 to $20,000 and deferred $40,000 in contingent fees to August 31, 2005. These fees will be due in the event that we fail to pay the entire principal balance by August 31, 2005. In August 2005, the credit facility was amended to extend the maturity of the term loan to January 1, 2006 and reduce the Company’s payment requirements to interest only, payable monthly in arrears. The interest on the term loan was reduced from 6% over the base rate (prime) to 5% over the base rate. Additionally, Fifth Third Bank has acquired the interest of PNC and JPMC in the term loan by a second Intercreditor Agreement. Fifth Third has waived minimum coverage requirements under several financial covenants through June 30, 2005. We would not have been in compliance with the financial covenants had the amendment not been made.
We have received credit approval from our existing line of credit lender for a new loan agreement which is contingent upon closing the sale of our Cincinnati property. This new agreement will allow us to consolidate our term debt with one lender by paying off the two existing term debt lenders and combining our term debt and line of credit with a single bank. The agreement calls for reduced interest rates and longer amortization of the term debt.
Overview of Cash Flows and Liquidity
($’s in thousands)
Net cash (used) in investing activities
Net increase
Cash provided by operating activities increased to $224,000 in 2005 compared to cash used in 2004 of $913,000. Cash provided by operating activities for the first six months of 2005 was the result of an increase of $2,265,000 in billings in excess of costs and estimated earnings on uncompleted contracts partially offset by a decrease in accounts payable of $1,419,000 and increases in prepaid expenses and other assets of $896,000 and an increase in accounts receivable of $134,000. Other changes in working capital items provided cash of $92,000. Our net investment in working capital (excluding cash and cash equivalents and current portion of debt) at June 30, 2005 and December 31, 2004 was $5,952,000 and $5,759,000, respectively.
Net cash used in investing activities related to the acquisition of capital expenditures for property and equipment was $320,000 for the first six months of 2005 compared with $119,000 for the same period in 2004.
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Financing activities provided cash of $243,000 during the first six months of 2005 compared with cash provided by financing activities of $1,051,000 during the same period of 2004. Approximately $743,000 was borrowed against the line of credit and $500,000 was used to reduce the term debt. We are managing our capital expenditure spending in light of the current level of sales. Should sales continue to increase in 2005, we would anticipate increased capital spending. Additionally, capital expenditures may be incurred depending on the ultimate disposition of our Cincinnati property.
Forward-Looking Statements
We desire to take advantage of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 and are making this cautionary statement in connection with such safe harbor legislation. This Form 10-Q, the Annual Report to Shareholders, Form 10-K/A or Form 8-K of the Company or any other written or oral statements made by or on our behalf may include forward-looking statements, which reflect our current views with respect to future events and financial performance. The words “believe,” “expect,” “anticipate,” “intends,” “estimate,” “forecast,” “project,” “should” and similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All forecasts and projections in this Form 10-Q are “forward-looking statements,” and are based on management’s current expectations of our near-term results, based on current information available pertaining to us.
We wish to caution investors that any forward-looking statements made by or on our behalf are subject to uncertainties and other factors that could cause actual results to differ materially from such statements. These uncertainties and other risk factors include, but are not limited to: changing economic and political conditions in the United States and in other countries, war, changes in governmental spending and budgetary policies, governmental laws and regulations surrounding various matters such as environmental remediation, contract pricing, and international trading restrictions, customer product acceptance, continued access to capital markets, and foreign currency risks.
We wish to caution investors that other factors might, in the future, prove to be important in affecting our results of operations. New factors emerge from time to time and it is not possible for management to predict all such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or a combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Investors are further cautioned not to place undue reliance on such forward-looking statements as they speak only to our views as of the date the statement is made. We undertake no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events or otherwise.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Risk Management Activities
In the normal course of business, we are exposed to market risk including changes in interest and raw material commodity prices. We may use derivative instruments to manage our interest rate exposures. We do not use derivative instruments for speculative or trading purposes. Generally, we enter into hedging relationships such that changes in the fair values of cash flows of items and transactions being hedged are expected to be offset by corresponding changes in the values of the derivatives.
Interest Rate Management
We may use interest rate swap contracts to adjust the proportion of our total debt that is subject to variable interest rates. Our interest rate swap contract matured in 2002 and was not renewed.
The remaining amount of loans outstanding under the Credit Agreement bear interest at the floating rates as described in Note 9 to the consolidated statements contained in the Company’s 2004 Annual Report on Form 10-K filed with the Securities and Exchange Commission.
Credit Risk
As part of our ongoing control procedures, we monitor concentrations of credit risk associated with financial institutions with which we conduct business. Credit risk is minimal as credit exposure is limited with any single high quality financial institution to avoid concentration. We also monitor the creditworthiness of our customers to which we grant credit terms in the normal course of business. Concentrations of credit associated with these trade receivables are considered minimal due to our geographically diverse customer base. Bad debts have not been significant. We do not normally require collateral or other security to support credit sales.
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ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e)) under the Securities and Exchange Act of 1934 (the “Exchange Act”) designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the specified time periods. Our Chief Executive Officer and Chief Financial Officer evaluated, with the participation of our management, the effectiveness of our disclosure controls and procedures as of June 30, 2005. Based on the evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective. There were no significant changes in our disclosure controls or in other factors that could significantly affect our disclosure controls and procedures subsequent to the evaluation.
Internal Controls Over Financial Reporting
We are not subject to the disclosure requirements promulgated under Section 404 of the Sarbanes-Oxley Act of 2002 regarding internal controls over financial reporting until we file our Annual Report on Form 10-K for the year ended December 31, 2006. There were no significant changes in our internal controls over financial reporting that occurred during our most recent fiscal quarter that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II -OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At its Annual Meeting on May 25, 2005, the shareholders of CECO Environmental Corp. took the following actions:
1. Elected the following seven directors for terms to expire at the 2006 Annual Meeting of Shareholders, with votes as indicated opposite each director’s name:
Director
Richard J. Blum
Jason Louis DeZwirek
Phillip DeZwirek
Thomas Flaherty
Ronald Krieg
Melvin F. Lazar
Donald A. Wright
2. Shareholders ratified the appointment of Deloitte & Touche LLP as the Company’s independent auditors for the fiscal year ending December 31, 2005 as follows:
Votes For:
Votes Against
Votes Abstained:
ITEM 6. EXHIBITS
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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.
/s/ Dennis W. Blazer
Dennis W. Blazer
V.P. - Finance and Administration
and Chief Financial Officer
Date: August 12, 2005
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