PERMA-PIPE INTERNATIONAL HOLDINGS, INC.
10-Ks and 10-Qs
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the quarterly period ended
July 31, 2012
Commission File No. 0-18370
MFRI, Inc.
(Exact name of registrant as specified in its charter)
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Delaware
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36-3922969
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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7720 N. Lehigh Avenue, Niles, Illinois
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60714
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(Address of principal executive offices)
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(Zip Code)
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(847) 966-1000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
Yes
x
No
o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
x
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 definitions of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
o
No
x
On
September 14, 2012
, there were
6,923,996
shares of the registrant's common stock outstanding.
MFRI, Inc.
FORM 10-Q
For the fiscal quarter ended
July 31, 2012
TABLE OF CONTENTS
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Item
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Page
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|
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Part I
|
||
|
1.
|
||
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2
|
||
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Consolidated Statements of Cash Flows for the
Six Months Ended July 31, 2012 and 2011
|
||
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2.
|
||
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4.
|
||
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Part II
|
||
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6.
|
||
MFRI, INC. AND SUBSIDIARIES
(In thousands, except per share information)
|
Three Months Ended July 31,
|
Six Months Ended July 31,
|
||||||||||||
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
||||||
|
Net sales
|
|
$52,261
|
|
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$63,990
|
|
|
$104,989
|
|
|
$117,391
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|
|
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Cost of sales
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42,355
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53,206
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85,955
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98,365
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|||||
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Gross profit
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9,906
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10,784
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19,034
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19,026
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|
|||||
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Operating expenses
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|||||||||||||
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General and administrative expenses
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6,620
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6,615
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13,961
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13,007
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||||||
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Selling expenses
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3,957
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4,081
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7,463
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7,575
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||||||
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Total operating expenses
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10,577
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10,696
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21,424
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20,582
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|
|||||
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(Loss) income from operations
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(671
|
)
|
88
|
|
(2,390
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)
|
(1,556
|
)
|
|||||
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Income (loss) from joint venture
|
69
|
|
84
|
|
(177
|
)
|
(99
|
)
|
|||||
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Interest expense, net
|
420
|
|
332
|
|
791
|
|
619
|
|
|||||
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Loss before income taxes
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(1,022
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)
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(160
|
)
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(3,358
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)
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(2,274
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)
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|||||
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Income tax expense
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335
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1,677
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55
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1,055
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||||||
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Net loss
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($1,357
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)
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($1,837
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)
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($3,413
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)
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($3,329
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)
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Weighted average number of common shares outstanding
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|||||||||||||
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Basic and diluted
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6,923
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6,863
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6,919
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6,859
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|||||
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Loss per share
|
|||||||||||||
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Basic and diluted
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($0.20
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)
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($0.27
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)
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($0.49
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)
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($0.49
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)
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See accompanying notes to consolidated financial statements.
1
MFRI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited)
(In thousands)
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Three Months Ended July 31,
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Six Months Ended July 31,
|
||||||||||||
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2012
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2011
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2012
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2011
|
|
||||||
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Net loss
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($1,357
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)
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($1,837
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)
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($3,413
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)
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($3,329
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)
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Other comprehensive (loss) income
|
|||||||||||||
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Currency translation adjustments
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(798
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)
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(366
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)
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(833
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)
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481
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|||||
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Interest rate swap, net of tax
|
(45
|
)
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(36
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)
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(18
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)
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117
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|||||
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Other comprehensive (loss) income
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(843
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)
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(402
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)
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(851
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)
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598
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|||||
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Comprehensive loss
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($2,200
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)
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($2,239
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)
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($4,264
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)
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($2,731
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)
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See accompanying notes to consolidated financial statements.
2
MFRI, INC. AND SUBSIDIARIES
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(In thousands)
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July 31, 2012
|
|
January 31, 2012
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|
|||
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ASSETS
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Unaudited
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|||||
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Current assets
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|||||||
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Cash and cash equivalents
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$6,127
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$4,209
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Restricted cash
|
2,759
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1,854
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|||
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Trade accounts receivable, less allowance for doubtful accounts of $228 at July 31, 2012 and $235 at January 31, 2012
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32,045
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28,109
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|||
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Inventories, net
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40,710
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40,204
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|||
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Prepaid expenses and other current assets
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4,460
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3,973
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|||
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Deferred tax assets - current
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1,941
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1,946
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|||
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Costs and estimated earnings in excess of billings on uncompleted contracts
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2,962
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2,375
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|
|||
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Income tax receivable
|
478
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|
—
|
|
|||
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Total current assets
|
91,482
|
|
82,670
|
|
|||
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Property, plant and equipment, net of accumulated depreciation
|
48,936
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|
47,842
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|
|||
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Other assets
|
|||||||
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Deferred tax assets - long-term
|
10,531
|
|
10,967
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|
|||
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Note receivable from joint venture
|
5,168
|
|
4,195
|
|
|||
|
Investment in joint venture
|
4,459
|
|
4,636
|
|
|||
|
Cash surrender value of deferred compensation plan
|
2,854
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|
2,782
|
|
|||
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Other assets
|
2,735
|
|
3,860
|
|
|||
|
Patents, net of accumulated amortization
|
377
|
|
331
|
|
|||
|
Total other assets
|
26,124
|
|
26,771
|
|
|||
|
Total assets
|
|
$166,542
|
|
|
$157,283
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|||||||
|
Current liabilities
|
|||||||
|
Trade accounts payable
|
|
$19,555
|
|
|
$20,020
|
|
|
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Accrued compensation and payroll taxes
|
4,509
|
|
4,571
|
|
|||
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Commissions and management incentives payable
|
3,763
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|
4,722
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|
|||
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Current maturities of long-term debt
|
5,761
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|
2,736
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|
|||
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Customers' deposits
|
4,355
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|
2,432
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|
|||
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Billings in excess of costs and estimated earnings on uncompleted contracts
|
2,670
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|
1,978
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|
|||
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Other accrued liabilities
|
2,634
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|
2,610
|
|
|||
|
Income taxes payable
|
—
|
|
417
|
|
|||
|
Total current liabilities
|
43,247
|
|
39,486
|
|
|||
|
Long-term liabilities
|
|||||||
|
Long-term debt, less current maturities
|
44,211
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|
34,682
|
|
|||
|
Deferred compensation liabilities
|
5,493
|
|
5,686
|
|
|||
|
Other long-term liabilities
|
5,195
|
|
5,074
|
|
|||
|
Total long-term liabilities
|
54,899
|
|
45,442
|
|
|||
|
Stockholders' equity
|
|||||||
|
Common stock, $.01 par value, authorized 50,000 shares; 6,923 issued and outstanding at July 31, 2012 and 6,913 issued and outstanding at January 31, 2012
|
69
|
|
69
|
|
|||
|
Additional paid-in capital
|
50,133
|
|
49,828
|
|
|||
|
Retained earnings
|
19,625
|
|
23,038
|
|
|||
|
Accumulated other comprehensive loss
|
(1,431
|
)
|
(580
|
)
|
|||
|
Total stockholders' equity
|
68,396
|
|
72,355
|
|
|||
|
Total liabilities and stockholders' equity
|
|
$166,542
|
|
|
$157,283
|
|
|
See accompanying notes to consolidated financial statements.
3
MFRI, INC. AND SUBSIDIARIES
|
Six Months Ended July 31,
|
|||||||
|
(In thousands)
|
2012
|
|
2011
|
|
|||
|
Operating activities
|
|||||||
|
Net loss
|
|
($3,413
|
)
|
|
($3,329
|
)
|
|
|
Adjustments to reconcile net loss to net cash flows used in operating activities
|
|||||||
|
Depreciation and amortization
|
2,791
|
|
2,866
|
|
|||
|
Deferred tax benefit
|
360
|
|
259
|
|
|||
|
Stock-based compensation expense
|
260
|
|
297
|
|
|||
|
Loss from joint venture
|
177
|
|
99
|
|
|||
|
Cash surrender value of deferred compensation plan
|
(72
|
)
|
92
|
|
|||
|
Loss on disposals of fixed assets
|
74
|
|
89
|
|
|||
|
Changes in operating assets and liabilities
|
|||||||
|
Accounts receivable, net
|
(4,272
|
)
|
(3,428
|
)
|
|||
|
Inventories
|
(793
|
)
|
(5,085
|
)
|
|||
|
Accounts payable
|
18
|
|
3,185
|
|
|||
|
Accrued compensation and payroll taxes
|
(940
|
)
|
(1,933
|
)
|
|||
|
Customers' deposits
|
1,923
|
|
1,108
|
|
|||
|
Income taxes receivable and payable
|
(896
|
)
|
66
|
|
|||
|
Prepaid expenses and other current assets
|
(1,480
|
)
|
(163
|
)
|
|||
|
Other assets and liabilities
|
977
|
|
(618
|
)
|
|||
|
Net cash used in operating activities
|
(5,286
|
)
|
(6,495
|
)
|
|||
|
Investing activities
|
|||||||
|
Additions to property, plant and equipment
|
(4,367
|
)
|
(4,235
|
)
|
|||
|
Loan to joint venture
|
(989
|
)
|
—
|
|
|||
|
Proceeds from sales of property and equipment
|
31
|
|
13
|
|
|||
|
Net cash used in investing activities
|
(5,325
|
)
|
(4,222
|
)
|
|||
|
Financing activities
|
|||||||
|
Borrowings
|
108,844
|
|
97,237
|
|
|||
|
Payment of debt
|
(95,790
|
)
|
(92,780
|
)
|
|||
|
Decrease in drafts payable
|
(248
|
)
|
(650
|
)
|
|||
|
Payment on capitalized lease obligations
|
(264
|
)
|
(151
|
)
|
|||
|
Stock options exercised
|
31
|
|
81
|
|
|||
|
Tax benefit of stock options exercised
|
15
|
|
5
|
|
|||
|
Net cash provided by financing activities
|
12,588
|
|
3,742
|
|
|||
|
Effect of exchange rate changes on cash and cash equivalents
|
(59
|
)
|
14
|
|
|||
|
Net increase (decrease) in cash and cash equivalents
|
1,918
|
|
(6,961
|
)
|
|||
|
Cash and cash equivalents - beginning of period
|
4,209
|
|
16,718
|
|
|||
|
Cash and cash equivalents - end of period
|
|
$6,127
|
|
|
$9,757
|
|
|
|
Supplemental cash flow information
|
|||||||
|
Interest paid
|
|
$1,112
|
|
|
$1,024
|
|
|
|
Income taxes paid
|
116
|
|
925
|
|
|||
See accompanying notes to consolidated financial statements.
4
MFRI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
JULY 31, 2012
(Tabular amounts presented in thousands, except per share amounts)
|
1.
|
Basis of presentation.
The interim consolidated financial statements of MFRI, Inc. and subsidiaries (the "Company") are unaudited, but include all adjustments, which the Company's management considers necessary to present fairly the financial position and results of operations for the periods presented. These adjustments consist of normal recurring adjustments. Information and footnote disclosures have been omitted pursuant to Securities and Exchange Commission ("SEC") rules and regulations. The consolidated balance sheet as of
January 31, 2012
is derived from the audited consolidated balance sheet as of that date. The results of operations for any interim period are not necessarily indicative of future or annual results. Interim financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's latest Annual Report on Form 10-K/A. The Company's fiscal year ends on January 31. Years and balances described as
2012
and
2011
are for the
six months ended July 31,
2012
and
2011
, respectively.
|
|
2.
|
Business segment reporting.
The Company has
three
reportable segments. Piping systems engineers, designs, manufactures and sells specialty piping and leak detection and location systems. Filtration products manufactures and sells a wide variety of filter elements for air filtration and particulate collection. Industrial process cooling engineers, designs, manufactures and sells chillers, cooling towers, plant circulating systems and accessories for industrial process applications. Included in corporate and other activity is a subsidiary which engages in the installation of heating, ventilation and air conditioning systems ("HVAC"), but which is not sufficiently large to constitute a reportable segment.
|
|
Three Months Ended July 31,
|
Six Months Ended July 31,
|
||||||||||||
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
||||||
|
Net sales
|
|||||||||||||
|
Piping Systems
|
|
$22,905
|
|
|
$26,339
|
|
|
$42,649
|
|
|
$45,366
|
|
|
|
Filtration Products
|
19,276
|
|
25,279
|
|
42,252
|
|
50,122
|
|
|||||
|
Industrial Process Cooling
|
8,895
|
|
8,231
|
|
18,026
|
|
15,386
|
|
|||||
|
Corporate and Other
|
1,185
|
|
4,141
|
|
2,062
|
|
6,517
|
|
|||||
|
Total
|
|
$52,261
|
|
|
$63,990
|
|
|
$104,989
|
|
|
$117,391
|
|
|
|
Gross profit
|
|||||||||||||
|
Piping Systems
|
|
$4,869
|
|
|
$4,631
|
|
|
$8,267
|
|
|
$7,444
|
|
|
|
Filtration Products
|
2,552
|
|
3,537
|
|
5,664
|
|
6,849
|
|
|||||
|
Industrial Process Cooling
|
2,437
|
|
2,226
|
|
4,969
|
|
4,171
|
|
|||||
|
Corporate and Other
|
48
|
|
390
|
|
134
|
|
562
|
|
|||||
|
Total
|
|
$9,906
|
|
|
$10,784
|
|
|
$19,034
|
|
|
$19,026
|
|
|
|
Income (loss) from operations
|
|||||||||||||
|
Piping Systems
|
|
$1,443
|
|
|
$927
|
|
|
$1,598
|
|
|
$704
|
|
|
|
Filtration Products
|
(292
|
)
|
516
|
|
(96
|
)
|
1,026
|
|
|||||
|
Industrial Process Cooling
|
314
|
|
293
|
|
877
|
|
497
|
|
|||||
|
Corporate and Other
|
(2,136
|
)
|
(1,648
|
)
|
(4,769
|
)
|
(3,783
|
)
|
|||||
|
Total
|
|
($671
|
)
|
|
$88
|
|
|
($2,390
|
)
|
|
($1,556
|
)
|
|
|
Income (loss) before income taxes
|
|||||||||||||
|
Piping Systems
|
|
$1,511
|
|
|
$1,011
|
|
|
$1,421
|
|
|
$605
|
|
|
|
Filtration Products
|
(292
|
)
|
516
|
|
(96
|
)
|
1,026
|
|
|||||
|
Industrial Process Cooling
|
314
|
|
293
|
|
877
|
|
497
|
|
|||||
|
Corporate and Other
|
(2,555
|
)
|
(1,980
|
)
|
(5,560
|
)
|
(4,402
|
)
|
|||||
|
Total
|
|
($1,022
|
)
|
|
($160
|
)
|
|
($3,358
|
)
|
|
($2,274
|
)
|
|
5
|
3.
|
Income taxes
.
Each quarter, the Company estimates the annual effective income tax rate ("ETR") for the full year and applies that rate to the income (loss) before income taxes in determining its provision for income taxes for the interim periods. The determination of the consolidated provision for income taxes, deferred tax assets and liabilities and related valuation allowances requires management to make judgments and estimates. As a company with subsidiaries in foreign jurisdictions, the process of calculating income taxes involves estimating current tax obligations and exposures in each jurisdiction as well as making judgments regarding the future recoverability of deferred tax assets. Income earned in the United Arab Emirates ("U.A.E.") is not subject to local country income tax. Additionally, the relative proportion of taxable income earned domestically versus internationally can fluctuate significantly from period to period. Changes in the estimated level of annual pre-tax income, tax laws and the results of tax audits can affect the overall effective income tax rate, which impacts the level of income tax expense and net income. Judgments and estimates related to the Company's projections and assumptions are inherently uncertain; therefore, actual results could differ materially from projections.
|
The Company's consolidated ETR was
(1.6)%
and
(46.4)%
for the
six months ended July 31,
2012
and
2011
, respectively. The
July 31, 2012
computation of the ETR was affected primarily by the change in the mix of the projected tax-free earnings in the U.A.E versus total projected earnings. In May 2012, the Company was granted an extension of time to file a tax election from the Commissioner, which allowed the Company to file amended income tax returns to carry back approximately
$3.3 million
of net operating losses ("NOL"). As a result of the increase in NOL utilization, approximately
$0.8 million
of research and development tax credits, which the Company established a liability for unrecognized tax benefits, were released back to the Company for future use. Accordingly, the Company recorded an increase to the liability for unrecognized tax benefits of
$220 thousand
discretely during the second quarter. Additionally, the Company changed its assertion from the first quarter related to the Company's ability to realize the benefit of losses incurred in early periods in a foreign jurisdiction. As a result of this change, a tax benefit of
$165 thousand
recorded in the first quarter was reversed in the second quarter since the annual projected earnings in Saudi Arabia were not included in the projected tax rate. In July 2011, the Company recorded a one-time
$1.8 million
tax expense associated with the
$3.1 million
repatriation of foreign earnings. These foreign earnings were previously considered to be indefinitely reinvested outside the U.S.
The Company periodically reviews the adequacy of its valuation allowance in all of the tax jurisdictions in which it operates and may make further adjustments based on management's outlook for continued profits in each jurisdiction.
The Company files income tax returns in U.S. federal and state jurisdictions. As of
July 31, 2012
, open tax years in federal and some state jurisdictions date back to January 31, 2009. In addition, federal and state tax years January 31, 2002 through January 31, 2008 are subject to adjustment on audit, up to the amount of research tax credit generated in those years. As of July 31, 2012, the Company had NOL carryforwards of
$8 million
expiring in various years beginning in January 31, 2030. Additionally, the Company files income tax returns in Denmark, India, South Africa and Saudi Arabia. As of
July 31, 2012
, open tax years in foreign jurisdictions vary from three to seven years from the date of filing the income tax returns.
6
|
4.
|
Pension plan.
The Winchester filtration hourly rated employees are covered by a defined benefit plan. The major categories of the pension plan's investments remained the same.
|
|
Level 1 market value of plan assets
|
July 31, 2012
|
|
January 31, 2012
|
|
||
|
Equity securities
|
|
$3,151
|
|
|
$3,018
|
|
|
U.S. bond market
|
2,060
|
|
1,968
|
|
||
|
High-quality inflation-indexed bonds issued by the U.S. Treasury and government agencies as well as domestic corporations
|
278
|
|
268
|
|
||
|
Real estate
|
121
|
|
110
|
|
||
|
Subtotal
|
5,610
|
|
5,364
|
|
||
|
Level 2 significant other observable inputs
|
||||||
|
Money market fund
|
299
|
|
138
|
|
||
|
Total
|
|
$5,909
|
|
|
$5,502
|
|
|
Three Months Ended July 31,
|
Six Months Ended July 31,
|
||||||||||||
|
Components of net periodic benefit costs
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
|||||
|
Service cost
|
|
$42
|
|
|
$32
|
|
|
$85
|
|
|
$63
|
|
|
|
Interest cost
|
74
|
|
82
|
|
149
|
|
156
|
|
|||||
|
Expected return on plan assets
|
(111
|
)
|
(102
|
)
|
(222
|
)
|
(203
|
)
|
|||||
|
Amortization of prior service cost
|
13
|
|
32
|
|
25
|
|
64
|
|
|||||
|
Recognized actuarial loss
|
44
|
|
22
|
|
87
|
|
31
|
|
|||||
|
Net periodic benefit costs
|
|
$62
|
|
|
$66
|
|
|
$124
|
|
|
$111
|
|
|
Employer contributions for the remainder of the fiscal year ending
January 31, 2013
are expected to be
$200 thousand
. For the
six months ended July 31,
2012
, contributions of
$292 thousand
were made.
|
5.
|
Stock-based
compensation.
The Company has stock-based compensation awards that can be granted to eligible employees, officers or directors.
|
|
Three Months Ended July 31,
|
Six Months Ended July 31,
|
|||
|
2012
|
2011
|
2012
|
2011
|
|
|
Stock-based compensation expense
|
$174
|
$69
|
$260
|
$297
|
The fair value of the outstanding option awards was estimated on the grant dates using the Black-Scholes option pricing model.
|
Six Months Ended July 31,
|
||
|
Fair value assumptions
|
2012
|
2011
|
|
Expected volatility
|
57.02% - 66.82%
|
51.72% - 66.82%
|
|
Risk free interest rate
|
.74% - 3.57%
|
1.54% - 5.13%
|
|
Dividend yield
|
none
|
none
|
|
Expected life
|
4.9 - 5.7 years
|
4.9 - 7.0 years
|
7
|
Option activity
|
Options
|
Weighted Average Exercise Price Per Share
|
Weighted Average Remaining Contractual Term in Years
|
Aggregate Intrinsic Value
|
||||
|
Outstanding on February 1, 2012
|
843
|
|
$11.48
|
|
6.9
|
|
$430
|
|
|
Granted
|
158
|
6.88
|
|
|||||
|
Exercised
|
(11)
|
2.94
|
|
45
|
|
|||
|
Expired or forfeited
|
(26)
|
10.25
|
|
|||||
|
Outstanding end of period
|
964
|
10.85
|
|
7.0
|
225
|
|
||
|
Exercisable end of period
|
584
|
|
$13.37
|
|
5.8
|
|
$137
|
|
|
Weighted-average fair value of options granted during first six months of 2012
|
|
$3.37
|
|
|||||
|
Unvested option activity
|
Unvested Options Outstanding
|
Weighted Average Price Per Share
|
Aggregate Intrinsic Value
|
||||
|
Outstanding on February 1, 2012
|
373
|
|
$7.84
|
|
|
$212
|
|
|
Granted
|
158
|
6.88
|
|
||||
|
Vested
|
(142)
|
||||||
|
Expired or forfeited
|
(9)
|
7.08
|
|
||||
|
Outstanding end of period
|
380
|
|
$6.98
|
|
|
$89
|
|
As of
July 31, 2012
, there was
$1.2 million
of total unrecognized compensation expense related to unvested stock options. The expense is expected to be recognized over a period of
2.9
years.
|
6.
|
Earnings per share.
|
|
Three Months Ended July 31,
|
Six Months Ended July 31,
|
|||||||
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
|
|
Basic weighted average number of common shares outstanding
|
6,923
|
|
6,863
|
|
6,919
|
|
6,859
|
|
|
Dilutive effect of stock options
|
0
|
|
0
|
|
0
|
|
0
|
|
|
Weighted average number of common shares outstanding assuming full dilution
|
6,923
|
|
6,863
|
|
6,919
|
|
6,859
|
|
|
Stock options not included in the computation of diluted earnings per share of common stock because the option exercise prices exceeded the average market prices of the common shares
|
497
|
|
311
|
|
494
|
|
241
|
|
|
Stock options with an exercise price below the average market price
|
467
|
|
577
|
|
470
|
|
647
|
|
|
7.
|
Other assets.
The $1.1 million decrease in other assets related to deposits applied to the purchase of fixed assets by the new facility in Saudi Arabia.
|
|
July 31, 2012
|
|
January 31, 2012
|
|
|||
|
Other assets
|
|
$2,735
|
|
|
$3,860
|
|
8
|
8.
|
Interest expense, net.
|
|
Three Months Ended July 31,
|
Six Months Ended July 31,
|
|||||||||||
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
|||||
|
Interest expense
|
|
$585
|
|
|
$551
|
|
|
$1,086
|
|
|
$1,071
|
|
|
Interest income
|
(165
|
)
|
(219
|
)
|
(295
|
)
|
(452
|
)
|
||||
|
Interest expense, net
|
|
$420
|
|
|
$332
|
|
|
$791
|
|
|
$619
|
|
|
9.
|
|
|
10.
|
Fair value of financial instruments.
At
July 31, 2012
, interest rate swap agreements were in effect with a notional value of
$9 million
that matures
November 2013
and a value of $
1.3 million
that matures December, 2021. The swap agreements, which reduce the exposure to market risks from changing interest rates, exchanges the variable rate to fixed interest rate payments of
2.23%
plus LIBOR margin and
2.47%
, respectively. The exchange-traded swaps are valued on a recurring basis using quoted market prices and were classified within Level 2 of the fair value hierarchy because the exchange is not deemed to be an active market. The derivative mark to market of
$327 thousand
was classified as a long-term liability on the balance sheet.
|
|
11
.
|
Correction of immaterial errors.
In the second quarter of 2012, management discovered prior period inventory errors. The cumulative adjustment for the inventory errors covering the period from February 1, 2006 to
January 31, 2012
, was approximately
$236 thousand
. The adjustment applicable to the fourth quarter of 2011 was approximately
$28 thousand
, no adjustment to the first three quarters of 2011 and the adjustment applicable to prior years (February 2006 - January 2011) totaled approximately
$208 thousand
.
|
Pursuant to the guidance of Staff Accounting Bulletin ("SAB") No. 99,
Materiality,
the Company concluded that the errors were not material to any of its prior period financial statements. Although the errors were immaterial to prior periods, the prior period financial statements were revised, in accordance with SAB No. 108,
Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements
, due to the significance of the out-of-period correction.
9
A reconciliation of the effects of the adjustments to the previously reported balance sheet at
January 31, 2012
follows:
|
As Reported
|
Adjustment
|
As Adjusted
|
|||||||
|
Inventories, net
|
|
$39,968
|
|
|
$236
|
|
|
$40,204
|
|
|
Total current assets
|
82,434
|
|
236
|
|
82,670
|
|
|||
|
Total assets
|
157,047
|
|
236
|
|
157,283
|
|
|||
|
Retained earnings
|
22,802
|
|
236
|
|
23,038
|
|
|||
|
Total stockholders' equity
|
72,119
|
|
236
|
|
72,355
|
|
|||
|
Total liabilities and stockholders' equity
|
157,047
|
|
236
|
|
157,283
|
|
|||
A reconciliation of the effects of the adjustments to the previously reported statement of operation for the year ending January 31, 2012 follows:
|
As Reported
|
Adjustment
|
As Adjusted
|
|||||||
|
Cost of sales
|
|
$197,203
|
|
|
($28
|
)
|
|
$197,175
|
|
|
Gross profit
|
36,293
|
|
28
|
|
36,321
|
|
|||
|
Loss income from operations
|
(5,091
|
)
|
28
|
|
(5,063
|
)
|
|||
|
Loss before income taxes
|
(4,970
|
)
|
28
|
|
(4,942
|
)
|
|||
|
Net loss
|
(4,987
|
)
|
28
|
|
(4,959
|
)
|
|||
A reconciliation of the effects of the adjustments to the previously reported statement of cash flows for the year ending January 31, 2012 follows:
|
As Reported
|
Adjustment
|
As Adjusted
|
|||||||
|
Net loss
|
|
($4,987
|
)
|
|
$28
|
|
|
($4,959
|
)
|
|
Inventories
|
(4,593
|
)
|
(28
|
)
|
(4,621
|
)
|
|||
A reconciliation of the effects of the adjustments to the previously reported statement of shareholders equity for the year ending January 31, 2012 follows:
|
As Reported
|
Adjustment
|
As Adjusted
|
|||||||
|
Net loss
|
|
($4,987
|
)
|
|
$28
|
|
|
($4,959
|
)
|
|
Retained earnings
|
22,802
|
|
236
|
|
23,038
|
|
|||
|
Total comprehensive loss
|
(6,760
|
)
|
28
|
|
(6,732
|
)
|
|||
|
12.
|
Recent accounting pronouncements
. The Company evaluated recent accounting pronouncements and do not expect them to have a material impact on the consolidated financial statements.
|
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations (
"
MD&A
"
)
The statements contained under the caption MD&A and other information contained elsewhere in this quarterly report, which can be identified by the use of forward-looking terminology such as "may," "will," "expect," "continue," "remains," "intend," "aim," "should," "prospects," "could," "future," "potential," "believes," "plans," "likely" and "probable" or the negative thereof or other variations thereon or comparable terminology, constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbors created thereby. These statements should be considered as subject to the many risks and uncertainties that exist in the Company's operations and business environment. Such risks and uncertainties could cause actual results to differ materially from those projected as a result of many factors, including but not limited to those under the heading Item 1A. Risk Factors included in the Company's latest Annual Report on Form 10-K/A.
10
RESULTS OF OPERATIONS
Consolidated MFRI, Inc.
MFRI, Inc. ("MFRI", the "Company" or the "Registrant") is engaged in the manufacture and sale of products in three reportable segments: piping systems, filtration products and industrial process cooling. The Company website is
www.mfri.com
.
In the latest recession, the economy experienced a severe and prolonged downturn which adversely impacted all of the Company's businesses, directly or indirectly. Although improvement is expected, the timing of economic recovery in the markets we serve remains uncertain. Because economic and market conditions vary within the Company's segments, the Company's future performance by segment will vary. Should current economic conditions continue, or a further downturn occur in one or more of our significant markets, the Company could experience a period of declining net sales, which could adversely impact the Company's results of operations.
This discussion should be read in conjunction with the consolidated financial statements, including the notes thereto, contained elsewhere in this report. An overview of the segment results is provided in "Notes to Consolidated Financial Statements, Note 2 Business segment reporting" contained in Item 1 of this report.
Correction of immaterial errors
In the second quarter of 2012, management discovered prior period inventory net understatements related to quantities. The cumulative adjustment for the inventory errors covering the period from February 1, 2006 to January 31, 2012, was approximately
$236 thousand
. The adjustment applicable to the fourth quarter of 2011 was approximately
$28 thousand
and the adjustment applicable to prior years (February 2006 - January 2011) totaled approximately
$208 thousand
. Pursuant to the guidance of SEC Staff Accounting Bulletin ("SAB") No. 99,
Materiality
, the Company concluded that the errors were not material to any of its prior period financial statements. However, in accordance with SAB No. 108,
Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in the Current Year Financial Statements, the prior period financial statements were revised. Prior period amounts stated in this Form 10-Q have been revised to facilitate comparability between current and prior year periods. For further information, see "Notes to Consolidated Financial Statements, Note 11 Correction of immaterial errors".
Three months ended
July 31, 2012
(
"
current quarter
"
) vs.
Three months ended
July 31, 2011
(
"
prior-year quarter
"
)
Net sales
decreased
18%
to
$52.3 million
in the current quarter from
$64 million
in the prior-year quarter. Filtration products
decreased
by
$6 million
driven primarily by reduced demand for fabric filters. Piping systems sales
decreased
$3.4 million
in the quarter driven by a decline in U.S. sales partially offset by an increase in sales in the Middle East. Corporate and other
decreased
by
$3 million
, as projects in the backlog were not yet ready for us to begin our work. Industrial process cooling sales
increased
$664 thousand
as they continued to improve order intake.
Gross profit
decreased
8%
to
$9.9 million
in the current quarter from
$10.8 million
in the prior-year quarter mainly due to the related sales decrease in filtration products. There were significant increases in piping systems due to higher volume produced at the U.A.E. facility and industrial process cooling due to higher volume. Gross margin increased to
19%
of net sales in the current quarter from
17%
of net sales in the prior-year quarter.
In response to lower demand for fabric filters and domestic piping systems, the Company has reduced staff at both the administrative and factory levels to better match market needs. In addition, the filtration group has replaced some key management, increased marketing activities to drive sales growth and is actively sourcing lower cost but high quality materials to improve margin.
Operating expenses remained level in the quarter. In July 2011, the Company recorded $1.8 million in tax expense associated with the $3.1 million repatriation of foreign earnings. These foreign earnings were previously
considered to be indefinitely reinvested outside the United States. The repatriation was a one-time nonrecurring event. This tax expense included a payment of $0.5 million to the foreign tax authority and an accrual of $1.3 million U.S. tax on foreign source income. No cash was paid for this tax in the U.S. since the Company has a net operating loss carryforward.
Second quarter produced a net loss of
$1.4 million
, which was less than
the net loss of
$1.8 million
in the comparable prior-year's quarter
due to improvement
in piping systems results.
Six months ended
July 31, 2012
(“YTD”) vs.
Six months ended
July 31, 2011
(“prior-year YTD”)
YTD net sales of
$105 million
decreased
10.6%
from
$117.4 million
for the prior-year YTD. Filtration products
decreased
$7.9 million
driven primarily by reduced demand for fabric filters. Piping systems sales
decreased
$2.7 million
driven by a decline in U.S. sales in the second quarter partially offset by an increase in sales in the Middle East. Corporate and other
decreased
by
$4.5 million
as projects in the backlog were not yet ready for us to begin our work. Industrial process cooling sales
increased
$2.6 million
as they continued to improve order intake.
Gross profit remained level at
$19 million
and gross margin
increased
to
18%
of net sales YTD from
16%
of net sales in the prior-year YTD. Gross profit increased significantly in piping systems and industrial process cooling while filtration products gross profit decreased due to reduced volume in fabric filters.
General and administrative expenses increased
7.3%
to
$14 million
YTD from
$13 million
in the prior-year YTD. The increase was mainly due to $460 thousand of start-up costs for the new facility in Saudi Arabia and $452 thousand for audit, tax consulting and other professional service expenses.
Net loss was
$3.4 million
in 2012 compared to a net loss of
$3.3 million
in the comparable prior-year's period.
Piping Systems
Current quarter vs. prior-year quarter
The manufacturing facility in Dammam, Saudi Arabia opened in April 2012. Expenses aggregating $2 million for the second quarter relating to this new start-up facility were recorded to cost of goods sold, general and administrative and selling expenses.
Net sales decreased
12%
to
$23 million
in the current quarter from
$26 million
in the prior-year quarter, attributed to a decrease in sales of domestic district heating and cooling products, ("DHC") and the prior-year quarter included a rise in sales of domestic oil and gas products.
Gross margin increased to
21%
of net sales in the current quarter from
18%
of net sales in the prior-year quarter. Gross profit increased due to higher volume produced at the U.A.E. facility. In the prior-year quarter, piping systems also incurred a one-time warranty claim of approximately $0.5 million.
Operating expenses remained level during the period. The new facility in Saudi Arabia incurred expenses, which were partially offset by decreased commission expense due to lower sales.
YTD vs. prior-year YTD
YTD net sales of
$43 million
declined
4%
from
$45 million
in the prior-year YTD attributed to a decrease in DHC sales in the second quarter while the prior year included a rise in sales of domestic oil and gas products.
Gross margin rose to
19%
of net sales YTD from
16%
of net sales in the prior-year. Gross profit increased due to higher volume produced at the U.A.E. facility. Additionally, in the first quarter, domestic DHC had increased sales and improved margins due to product mix.
General and administrative expenses increased to
$4.8 million
or
11%
of net sales YTD from
$4.5 million
or
10%
11
of net sales for the prior-year YTD. The increase is related to the operation of the new Saudi facility.
Selling expenses decreased to
$1.9 million
or
4%
of net sales YTD from
$2.3 million
or
5%
of net sales for the prior-year YTD. This decrease was due to decreased commission expense due to lower sales and reduced staffing.
Filtration Products
Current quarter vs. prior-year quarter
Net sales decreased
24%
to
$19 million
from
$25 million
in the prior-year quarter. Sales declines were the result of lower market demand across most filtration products. Gross profit decreased
26%
to
$2.6 million
from
$3.5 million
due to lower sales volume and extreme competitive market conditions. In response to lower demand for fabric filters, the Company has reduced staff at both the administrative and factory levels to better match market needs. In addition, management has increased marketing activities and taken other actions to drive sales growth and improve margins. Operating expenses remained level during the period.
YTD vs. prior-year YTD
YTD net sales decreased
16%
to
$42 million
from
$50 million
in the prior-year period. Sales declines were the result of lower market demand across most filtration products. YTD gross profit decreased
16%
to
$5.7 million
from
$6.8 million
in the prior-year period due to lower sales volume and gross margin remained the same as a percentage of YTD net sales. Operating expenses remained level during the period.
Industrial Process Cooling
Current quarter vs. prior-year quarter
Net sales increased
9%
to
$8.9 million
in the current quarter from
$8.2 million
in the prior-year quarter due to improving business conditions in the North American plastic and industrial market sectors. Gross profit increased
9%
to
$2.4 million
from
$2.2 million
primarily due to higher sales volume while gross margin remained level.
General and administrative expenses increased slightly in the current quarter to
$1 million
from
$0.9 million
. This dollar increase was due to additional staff added in later 2011. Selling expenses increased to
$1.2 million
or
13%
of net sales in the current quarter from
$1 million
or
12%
of net sales for the prior-year quarter. The change in spending was a result of additional sales that led to higher commission expense and staff added after the 2011 first quarter.
YTD vs. prior-year YTD
YTD net sales of
$18 million
increased
17%
from
$15.4 million
in the prior-year six months due to improving business conditions in the North American plastic and industrial market sectors. Gross profit increased
19%
to
$5 million
from
$4.2 million
in the prior-year period while gross margin slightly increased.
General and administrative expenses increased YTD to
$1.9 million
from
$1.7 million
in the prior-year period. The change in spending was a result of additional staffing and increased management incentive compensation expense related to improved performance partially offset by lower legal costs. General and administrative expense as a percentage of net sales decreased to
10%
YTD from
11%
of net sales in the prior-year YTD due to the effect of higher sales. YTD selling expenses increased to
$2.2 million
from
$1.9 million
in the prior-year period driven by additional sales that led to higher commission expense and staff added after the 2011 first quarter.
Corporate and Other
Current quarter vs. prior-year quarter
Net sales of
$1.2 million
in the current quarter decreased from
$4 million
in the prior-year quarter due to lower volume in the current period.
12
Corporate expenses include interest expense and general and administrative expenses that are not allocated to the segments. General and administrative expenses increased to
$2.2 million
or
4%
of consolidated net sales in the current quarter from
$2 million
or
3%
of consolidated net sales in the prior-year quarter. This increase was due to $106 thousand higher stock-based compensation expense and $117 thousand for audit, tax consulting and other professional service expenses partially offset by a reduction in deferred compensation expense.
Net interest expense increased to
$420 thousand
in the current quarter from
$332 thousand
in the prior-year quarter, due to less interest income earned overseas by piping systems as this cash was primarily deployed for the new facility in Saudi Arabia.
YTD vs. prior-year YTD
YTD net sales of
$2 million
decreased from
$6.5 million
in the prior-year YTD.
General and administrative expenses increased to
$4.9 million
or
5%
of consolidated net sales YTD from
$4.3 million
or
4%
of consolidated net sales in the prior-year YTD. This increase was due to $0.5 million for audit, tax consulting and other professional service expenses
YTD net interest expense increased to
$791 thousand
from
$619 thousand
in the prior-year YTD primarily due to less interest income earned overseas by piping systems as this cash was primarily deployed for the new facility in Saudi Arabia.
INCOME TAXES
The Company's consolidated ETR was
(1.6)%
and
(46.4)%
for the
six months ended July 31,
2012 and 2011
, respectively. The
July 31, 2012
computation of the ETR was affected primarily by the change in the mix of the projected tax-free earnings in the U.A.E versus total projected earnings. In May 2012, the Company was granted an extension of time to file a tax election from the Commissioner, which allowed the Company to file amended income tax returns to carry back approximately
$3.3 million
of NOL. As a result of the increase in NOL utilization, approximately
$0.8 million
of research and development tax credits, which the Company established a liability for unrecognized tax benefits, were released back to the Company for future use. Accordingly, the Company recorded an increase to the liability for unrecognized tax benefits of
$220 thousand
discretely during the second quarter. Additionally, the Company changed its assertion from the first quarter related to the Company's ability to realize the benefit of losses incurred in early periods in a foreign jurisdiction. As a result of this change, a tax benefit of
$165 thousand
recorded in the first quarter was reversed in the second quarter since the annual projected earnings in Saudi Arabia were not included in the projected tax rate. In July 2011, the Company recorded a one-time
$1.8 million
tax expense associated with the
$3.1 million
repatriation of foreign earnings. These foreign earnings were previously considered to be indefinitely reinvested outside the U.S. For additional information, see "Notes to Consolidated Financial Statements, Note 3 Income taxes".
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents as of
July 31, 2012
were
$6 million
compared to
$4 million
at
January 31, 2012
. Cash and cash equivalents were primarily held at the foreign subsidiaries. The Company's working capital was
$48 million
at
July 31, 2012
compared to
$43 million
at
January 31, 2012
. Net cash used in operating activities during the first
six
months of
2012
was
$5.3 million
compared to
$6.5 million
during the first
six
months of
2011
. The Company does not believe that it will be necessary to repatriate cash and cash equivalents held outside of the U.S.
Net cash used in investing activities for the
six
months ended
July 31, 2012
included
$4.4 million
for capital expenditures, primarily for machinery and equipment in piping systems of which $2.2 million was related to the new plant in Saudi Arabia. In February 2012, the Company loaned
$1 million
to its Canadian joint venture to be used mainly for capital expenditures.
Debt totaled
$50 million
at
July 31, 2012
, a net increase of
$12.6 million
compared to the beginning of the current fiscal year. Net cash provided by financing activities was
$12.6 million
.
On July 11, 2002, the Company entered into the Loan Agreement. Under the terms of the Loan Agreement as
13
amended, which matures on November 30, 2013, the Company can borrow up to
$38 million
, subject to borrowing base and other requirements, under a revolving line of credit. The Loan Agreement covenants restrict debt, liens, investments, do not permit payment of dividends and require attainment of levels of profitability and cash flows. At
July 31, 2012
, the Company was in compliance with all covenants under the Loan Agreement. Interest rates are based on options selected by the Company as follows: (a) a margin in effect plus a prime rate; or (b) a margin in effect plus the LIBOR rate for the corresponding interest period. At
July 31, 2012
, the prime rate was
3.25%
and the margins added to the prime rate and the LIBOR rate, which are determined each quarter based on the applicable financial statement ratio, were
0.50
and
2.75
percentage points, respectively. Monthly interest payments were made during the
Six months ended
July 31, 2012
and
2011
. As of
July 31, 2012
, the Company had borrowed
$20.7 million
and had
$7.1 million
available to it under the revolving line of credit. In addition,
$0.2 million
of availability was used under the Loan Agreement primarily to support letters of credit to guarantee amounts committed for inventory purchases. The Loan Agreement provides that all domestic receipts are deposited in a bank account from which all funds may only be used to pay the debt under the Loan Agreement. At
July 31, 2012
, the amount of such restricted cash was
$3 million
. Cash required for operations is provided by draw downs on the line of credit.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Critical accounting policies are described in Item 7. MD&A and in the Notes to the Consolidated Financial Statements for the year ended
January 31, 2012
contained on Form 10-K/A. Any new accounting policies or updates to existing accounting policies as a result of new accounting pronouncements have been discussed in Notes to Consolidated Financial Statements in this Quarterly Report on Form 10-Q. The application of critical accounting policies may require management to make assumptions, judgments and estimates about the amounts reflected in the Consolidated Financial Statements. Management uses historical experience and all available information to make these estimates and judgments and different amounts could be reported using different assumptions and estimates.
Item 4.
Controls and Procedures
The Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of
July 31, 2012
. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that due to material weaknesses in internal control over financial reporting described below in Management's Report on Internal Control Over Financial Reporting, the Company's disclosure controls and procedures were not effective as of
July 31, 2012
.
Management's Report on Internal Control Over Financial Reporting.
The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. As required by Rule 13a-15(c) under the Exchange Act, MFRI's management carried out an evaluation, with the participation of the Chief Executive Officer and Chief Financial Officer, of the effectiveness of its internal control over financial reporting as of the end of the quarter ended
July 31, 2012
. The framework on which such evaluation was based is contained in the report entitled "Internal Control-Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission (the "COSO Report").
The Company's system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Based on its assessment, management has concluded that the Company has not maintained effective internal control over financial reporting as of
July 31, 2012
, based on criteria in the COSO Report.
14
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis.
The Company's processes, procedures and controls related to the preparation, review and filing of its Quarterly Report on Form 10-Q ("10-Q") were not effective at
July 31, 2012
to ensure that contracts and significant adjustments outside the normal course of business had been properly approved, reviewed and reported in the Consolidated Interim Financial Statements. These material weaknesses did not result in a material adjustment to the Registrant's financial statements, notes thereto, or other disclosures in the 10-Q.
Change in Internal Controls:
In addition to the material weakness in internal control over financial reporting identified during the quarter, as described above, there was a material weakness in internal control described in Item 9A of the Company's January 31, 2012 10-K/A filed on May 9, 2012. The Company's processes, procedures and controls related to the preparation, review and filing of its Annual Report on Form 10-K ("10-K") were not deemed effective at January 31, 2012 to ensure that its Independent Registered Public Accounting Firm ("Auditors") had completed its audit work and signed its Report and Consent prior to filing the 10-K. This material weakness did not result in any material adjustments to the Registrant's financial statements, notes thereto, or other disclosures in the 10-K.
Other than the material weaknesses noted above, there has been no change in internal control over financial reporting during the quarter ended
July 31, 2012
that has materially affected or is reasonably likely to materially affect, internal control over financial reporting except as discussed below.
Remediation Plan for the Material Weakness in Internal Control over Financial Reporting:
Upon discovering the material weaknesses, the Company immediately took steps to implement formal operating policies regarding approval, communication and reporting of contracts and significant adjustments outside the normal course of business, and controls to ensure that such policies have been followed. Beginning with the filing of the Annual Report on Form 10-K/A filed on May 9, 2012, the Company adopted a procedure that requires the Auditors signed Report and Consent, or such other report that is required for filing any report with the SEC to be in hand prior to such filing. The Company will increase senior management's direction and review of filings to ensure compliance with the Company's internal controls.
We believe the actions described above and resulting improvements in controls will strengthen the Company's processes, procedures and controls related to the preparation, review and filing of such reports, and will address the related material weaknesses that were identified as of January 31, 2012 and July 31, 2012.
Item 6.
Exhibits
31
Rule 13a - 14(a)/15d - 14(a) Certifications
(1) Chief Executive Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(2) Chief Financial Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
32
|
Section 1350 Certifications (Chief Executive Officer and Chief Financial Officer certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)
|
15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
MFRI, INC.
|
Date:
|
September 19, 2012
|
/s/ David Unger
|
|
David Unger
|
||
|
Chairman of the Board of Directors and
|
||
|
Chief Executive Officer
|
||
|
(Principal Executive Officer)
|
||
|
Date:
|
September 19, 2012
|
/s/ Michael D. Bennett
|
|
Michael D. Bennett
|
||
|
Vice President, Chief Financial Officer, Secretary and Treasurer
|
||
|
(Principal Financial and Accounting Officer)
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||
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TABLE OF CONTENTS