UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-------------------------------
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
ENDED APRIL 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number -- 0-20490
-------------------------------
THE CARBIDE/GRAPHITE GROUP, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 25-1575609
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Code)
One Gateway Center, 19th Floor
Pittsburgh, PA 15222
(412) 562-3700
(Address, including zip code, and
telephone number, including area code,
of principle executive offices)
- -------------------------------------------------------------------------------
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
As of the close of business on June 3, 1996, there were 8,070,170 shares of the
Registrant's $.01 par value common stock outstanding.
<PAGE>
THE CARBIDE/GRAPHITE GROUP, INC.
INDEX TO FORM 10-Q
ITEM DESCRIPTION PAGE
- ------------ ---------------------------------------------------- ------
PART I
1 Index to Financial Statements ...................... 2
2 Management's Discussion and Analysis of Financial
Condition and Results of Operations ........... 12
PART II
1 Legal Proceedings .................................. 18
2 Changes in Securities .............................. *
3 Defaults Upon Senior Securities .................... *
4 Submission of Matters to a Vote of Security Holders *
5 Other Information .................................. *
6 Index to Exhibits and Reports on Form 8-K .......... 19
Signatures ......................................... 21
- ------------------
* Item not applicable to the Registrant for this filing on Form 10-Q.
1
<PAGE>
PART I
Item 1
INDEX TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
PAGE
------
Condensed Consolidated Balance Sheets
as of July 31, 1995 and April 30, 1996 ......................... 3
Unaudited Consolidated Statements of Operations
for the Quarters and Nine Months Ended April 30, 1995 and 1996 . 4
Unaudited Consolidated Statement of Stockholders' Equity
for the Nine Months Ended April 30, 1996 ....................... 5
Unaudited Consolidated Statements of Cash Flows
for the Quarters and Nine Months Ended April 30, 1995 and 1996 . 6
Footnotes to Unaudited Condensed Consolidated Financial Statements .. 7
2
<PAGE>
<TABLE>
THE CARBIDE/GRAPHITE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
as of July 31, 1995 and April 30, 1996
(in thousands, except share information)
<CAPTION>
July 31, April 30,
1995 * 1996
----------- -----------
<S> <C> <C>
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents ..................................... $ 42,656 $ 28,682
Accounts receivable -- trade, net of allowance for doubtful
accounts: $5,152 at July 31 and $2,765 at April 30 ....... 45,247 42,879
Inventories (Note 3) .......................................... 51,021 52,606
Income taxes receivable ....................................... -- 2,947
Other current assets .......................................... 9,899 9,625
----------- -----------
Total current assets ...................................... 148,823 136,739
Property, plant and equipment, net ................................ 58,370 63,121
Other assets ...................................................... 7,216 5,960
----------- -----------
Total assets ............................................ $ 214,409 $ 205,820
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued expenses:
Interest .................................................... $ 5,308 $ 1,626
Income taxes payable ........................................ 662 --
Other current liabilities ..................................... 36,404 32,127
----------- -----------
Total current liabilities ................................. 42,374 33,753
Long-term debt .................................................... 110,000 84,284
Other liabilities ................................................. 19,023 18,353
----------- -----------
Total liabilities ....................................... 171,397 136,390
----------- -----------
Stockholders' equity:
Common stock, $.01 par value; shares authorized: 11,200,000
at July 31 and 18,000,000 at April 30; shares issued:
7,249,375 at July 31 and 9,190,170 at April 30 ............ 72 92
Additional paid-in capital, net of equity issue costs:
$408 at July 31 and $1,398 at April 30 .................... 7,560 28,522
Treasury stock, at cost: 1,120,000 shares .................... (4,895) (4,895)
Retained earnings ............................................. 36,239 44,571
Common stock to be issued under options ....................... 4,501 1,605
Unfunded pension obligation ................................... (465) (465)
----------- -----------
Total stockholders' equity ............................ 43,012 69,430
----------- -----------
Total liabilities and stockholders' equity ........... $ 214,409 $ 205,820
=========== ===========
</TABLE>
- ------------------
* Summarized from audited fiscal 1995 balance sheet.
The accompanying notes are an integral part of the unaudited
condensed consolidated financial statements.
3
<PAGE>
<TABLE>
THE CARBIDE/GRAPHITE GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
for the quarters and nine months ended April 30, 1995 and 1996
(in thousands, except share and per share data)
<CAPTION>
Quarter Ended April 30, Nine Months Ended April 30,
----------------------- ---------------------------
1995 1996 1995 1996
--------- --------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales ................................... $ 66,684 $ 65,174 $ 177,494 $ 193,486
Operating costs and expenses:
Cost of goods sold ...................... 55,510 53,478 145,385 159,930
Selling, general and administrative ..... 3,507 3,119 10,467 9,268
Other compensation (Note 6) ............. 599 588 1,896 1,474
Other income (Note 7) ................... (777) 24 (2,131) (253)
--------- --------- --------- ---------
Operating income .................... 7,845 7,965 21,877 23,067
Other costs and expenses:
Interest expense ........................ 2,675 2,148 7,857 6,989
Special financing expenses (Note 2) ..... 203 286 203 889
--------- --------- --------- ---------
Income before income taxes,
discontinued operations and
extraordinary loss ................ 4,967 5,531 13,817 15,189
Provision for taxes on income
from continuing operations (Note 4) ....... 1,838 1,551 5,115 4,857
--------- --------- --------- ---------
Income from continuing operations ... 3,129 3,980 8,702 10,332
Discontinued operations (Note 1):
Gain on sale of graphite specialty
product business, net of $9,096
tax provision ........................ -- -- 15,723 --
--------- --------- --------- ---------
Income from operations of discontinued
business, net of $387 tax provision ... -- -- 659 --
--------- --------- --------- ---------
Income before extraordinary loss .... 3,129 3,980 25,084 10,332
Extraordinary loss on early
extinguishment of debt, net of $45 and
$1,334 tax benefit for the quarter and nine
months ended, respectively (Note 5) ...... -- (67) -- (2,000)
--------- --------- --------- ---------
Net income ...................... $ 3,129 $ 3,913 $ 25,084 $ 8,332
========= ========= ========= =========
Earnings per share information (Note 1):
Income from continuing operations $ 0.40 $ 0.46 $ 1.12 $ 1.22
Gain on sale of graphite specialty
product business ......................... -- -- 2.03 --
Income from operations of
discontinued business ..................... -- -- 0.09 --
Extraordinary loss on early
extinguishment of debt .................... -- (0.01) -- (0.24)
--------- --------- --------- ---------
Net income .......................... $ 0.40 $ 0.45 $ 3.24 $ 0.98
========= ========= ========= =========
Common and common
equivalent shares ......................... 7,827,681 8,699,653 7,739,876 8,496,116
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the unaudited
condensed consolidated financial statements.
4
<PAGE>
<TABLE>
THE CARBIDE/GRAPHITE GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
for the nine months ended April 30, 1996
(in thousands, except share amounts)
<CAPTION>
Common
Stock to
Additional be Issued Unfunded
Common Stock Paid-In Treasury Retained Under Pension
Shares Amount Capital Stock Earnings Options Obligation
------------ --------- ----------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at July 31,
1995 *.................... 7,249,375 $ 72 $ 7,560 $ (4,895) $ 36,239 $ 4,501 $ (465)
Net income ................ 8,332
Issuance of common
stock (Note 2)........... 806,363 8 11,098
Exercise of stock
options ................. 1,134,432 12 9,864 (2,962)
Stock option
compensation ............ 66
------------ --------- ----------- ---------- ---------- ---------- -----------
Balance at April 30,
1996 (Unaudited) ........ 9,190,170 $ 92 $ 28,522 $ (4,895) $ 44,571 $ 1,605 $ (465)
============ ========= =========== ========== ========== ========== ===========
</TABLE>
- ------------------
* Summarized from audited fiscal year 1995 statement of stockholders' equity.
The accompanying notes are an integral part of the unaudited
condensed consolidated financial statements.
5
<PAGE>
<TABLE>
THE CARBIDE/GRAPHITE GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
for the quarters and nine months ended April 30, 1995 and 1996
(in thousands)
<CAPTION>
Quarter Ended Nine Months Ended
April 30, April 30,
------------------- -------------------
1995 1996 1995 1996
-------- -------- -------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net income ......................................... $ 3,129 $ 3,913 $ 25,084 $ 8,332
Adjustments for noncash transactions:
Depreciation and amortization .................... 1,957 2,255 6,154 6,453
Amortization of debt issuance costs .............. 147 89 617 336
Amortization of intangible assets ................ 123 78 562 239
Deferred revenue ................................. (34) (34) (101) (101)
Stock option compensation ........................ 186 21 430 66
Adjustments to deferred taxes .................... (3,294) 453 (4,109) 1,050
Provision for loss - accounts receivable ......... 30 30 136 90
Gain on disposition of discontinued business ..... -- -- (24,792) --
Extraordinary loss on early extinguishment of debt -- 112 -- 3,334
Increase (decrease) in cash from changes in:
Accounts receivable .............................. (6,795) 1,353 (4,916) 2,278
Inventories ...................................... 4,059 (1,364) (3,813) (1,585)
Income taxes ..................................... (3,999) (1,756) 3,523 (3,609)
Other current assets ............................. (973) 2,486 (2,397) 4,316
Accounts payable and accrued expenses ............ (3,373) (1,747) (4,011) (6,595)
Net change in other non-current
assets and liabilities ........................ (250) 176 781 (1,871)
-------- -------- -------- --------
Net cash provided by (used for) operations ... (9,087) 6,065 (6,852) 12,733
-------- -------- -------- --------
Investing activities:
Capital expenditures ............................. (2,298) (4,003) (7,461) (11,204)
Proceeds from disposition of discontinued business 3,286 -- 56,371 --
Proceeds from sale (purchases) of
short-term investments, net .................... -- 5,353 (30,001) --
-------- -------- -------- --------
Net cash provided by
(used for) investing activities ............ 988 1,350 18,909 (11,204)
-------- -------- -------- --------
Financing activities:
Payments on revolving credit facility ............ -- -- (18,800) --
Additions to revolving credit facility ........... -- -- 13,800 --
Repurchase of senior notes,
including premium of $86 and $2,386 for the
quarter and nine months ended, respectively .... -- (1,047) -- (28,098)
Issuance of common stock,
net of equity issue costs of $990 ............. -- -- -- 11,106
Proceeds from exercise of stock options .......... -- 846 145 1,489
Other ............................................ (253) -- (4,926) --
-------- -------- -------- --------
Net cash used for financing activities .... (253) (201) (9,781) (15,503)
-------- -------- -------- --------
Effect of exchange rate changes on cash ............ -- -- (20) --
-------- -------- -------- --------
Net change in cash and cash equivalents ............ (8,352) 7,214 2,256 (13,974)
Cash and cash equivalents, beginning of period ..... 10,608 21,468 -- 42,656
-------- -------- -------- --------
Cash and cash equivalents, end of period ........... $ 2,256 $ 28,682 $ 2,256 $ 28,682
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the unaudited
condensed consolidated financial statements.
6
<PAGE>
THE CARBIDE/GRAPHITE GROUP, INC. AND SUBSIDIARIES
FOOTNOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
The Carbide/Graphite Group, Inc. and Subsidiaries herein are referenced as
the "Company." The Company's current fiscal year ends July 31, 1996.
1. Summary of Significant Accounting Policies:
Interim Accounting
The Company's Form 10-K for the fiscal year ended July 31, 1995 includes
additional information about the Company, its operations and its consolidated
financial statements, and contains a summary of significant accounting policies
followed by the Company in preparation of its consolidated financial statements
and should be read in conjunction with this quarterly report on Form 10-Q. These
policies were also followed in preparing the unaudited condensed consolidated
financial statements included herein. The 1995 year-end consolidated balance
sheet data contained herein was derived from audited financial statements, but
does not include all disclosures required by generally accepted accounting
principles.
In the opinion of management, all adjustments which are of a normal and
recurring nature necessary for a fair statement of the results of operations of
these interim periods have been included. Net income for the nine months ended
April 30, 1996 is not necessarily indicative of the results to be expected for
the full fiscal year. The Management Discussion and Analysis which follows these
notes contains additional information on the results of operations and financial
position of the Company. These comments should be read in conjunction with these
financial statements.
Discontinued Operations
On January 17, 1995, the Company and SGL Carbon Corporation (SGL Corp.)
consummated the sale (Specialty Products Sale) of the Company's graphite
specialty products business (Specialty Products). In exchange for $62.0 million,
less certain graphite specialty working capital items retained by the Company,
SGL Corp. acquired the Company's graphite machine shop and related processing
equipment located at its St. Marys, PA facility, isostatic processing equipment
located at its facility in Niagara Falls, NY, the related graphite specialty
product inventory at each of the above locations and all of the operating assets
of MTC Corporation located in Dallas. In addition, a wholly-owned subsidiary of
SGL Corp. acquired the Company's subsidiary, Speer Canada, which has graphite
machining facilities located in Montreal, Quebec and Kitchner, Ontario. The
Specialty Products Sale resulted in a net gain of $15.7 million which was
recorded within discontinued operations in the unaudited consolidated statement
of operations for the nine months ended April 30, 1995. Included in the gain on
the Specialty Products Sale was (i) a $0.5 net charge for the partial
curtailment of the St. Mary's defined benefit pension plan which resulted from
the Specialty Products Sale, (ii) a $0.5 million net charge for severance
benefits to be paid to certain employees terminated as a result of the Specialty
Products Sale and (iii) a $0.8 million net charge for legal and other costs
incurred as a direct result of the Specialty Products Sale.
Income from operations of discontinued business for the nine months ended
April 30, 1995 represents the operating results of Specialty Products. Net sales
applicable to discontinued operations were $24.9 million for the nine months
ended April 30, 1995. Interest expense allocated to discontinued operations was
$2.0 million for the nine months ended April 30, 1995.
7
<PAGE>
THE CARBIDE/GRAPHITE GROUP, INC. AND SUBSIDIARIES
FOOTNOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS--Continued
Earnings per Share
Primary earnings per share were computed by dividing net income by the
weighted average number of common and common equivalent shares outstanding
during the applicable period. The dilutive effect of common stock equivalents
was considered in the primary earnings per share computation utilizing the
treasury stock method. Fully diluted earnings per share were not presented as
the dilution was not material.
2. Public Offering of Common Stock:
On September 19, 1995, the Company completed an initial public offering of
its $.01 par value common stock (the Common Stock). 5,375,750 shares of Common
Stock were sold to the public by certain selling stockholders in a secondary
underwritten offering (the Initial Offering). The initial public offering price
was $15.00 per share. The Company also granted the underwriters an option to
purchase an additional 806,363 shares of Common Stock to cover over-allotments,
which was exercised on September 19, 1995 and resulted in $11.2 million in net
proceeds to the Company.
On March 12, 1996, the Company completed a secondary public offering of its
Common Stock. 1,032,236 shares of Common Stock were sold to the public by
certain management and former management stockholders in an underwritten
offering (the Offering). 999,958 shares were sold under the Company's
registration statement on Form S-1, while 32,278 shares were sold under a
registration statement on Form S-8. 590,000 Common Stock options were excercised
by certain selling shareholders in connection with the Offering, resulting in
$0.8 million in cash proceeds to the Company.
During the quarter and nine months ended April 30, 1996, the Company
recorded $0.3 million and $0.9 million, respectively, of charges for accounting,
legal, printing and other fees related to is public stock offerings. These
charges have been reflected as "special financing expenses" in the unaudited
consolidated statement of operations for the quarter and nine months ended April
30, 1996.
3. Inventories:
Inventories consisted of the following (in thousands):
July 31, April 30,
1995 1996
-------- --------
Finished goods..... $ 9,660 $ 11,375
Work in process.... 26,820 28,638
Raw materials ..... 8,273 8,253
-------- --------
44,753 48,266
LIFO reserve ...... (2,981) (5,561)
-------- --------
41,772 42,705
Supplies .......... 9,249 9,901
-------- --------
$ 51,021 $ 52,606
======== ========
8
<PAGE>
THE CARBIDE/GRAPHITE GROUP, INC. AND SUBSIDIARIES
FOOTNOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS--Continued
During the quarter ended January 31, 1996, the Company received a $1.0
million favorable settlement from a utility rate dispute with one of its
electric power suppliers. The $1.0 million payment received has been reflected
as a reduction to cost of goods sold for the nine months ended April 30, 1996.
4. Income Taxes:
The provision for income taxes for the quarters and nine months ended April
30, 1995 and 1996 are summarized by the following effective tax rate
reconciliations:
Quarter Ended Nine Months Ended
April 30, April 30,
------------- -----------------
1995 1996 1995 1996
----- ----- ----- -----
Federal statutory tax rate ............. 35.0% 35.0% 35.0% 35.0%
Effect of:
State taxes, net of federal benefit 2.7 2.2 2.7 2.2
Foreign sales corporation benefit . (1.7) (1.3) (1.7) (1.3)
Adjustments to prior year returns . -- (7.2) -- (3.8)
Other ............................. 1.0 (0.7) 1.0 (0.1)
---- ---- ---- ----
Effective tax rate .............. 37.0% 28.0% 37.0% 32.0%
==== ==== ==== ====
The income tax provisions for the quarter and nine months ended April 30,
1996 were recorded based on the Company's projected effective income tax rate
for the fiscal year ended July 31, 1996, adjusted for period specific items. The
adjustment to the effective tax rate associated with prior year returns during
the quarter and nine months ended April 30, 1996 is principally a $0.4 million
fiscal year 1995 tax benefit from the Company's foreign sales corporation. The
effective income tax rate for discontinued operations approximates the effective
rate for continuing operations for the nine months ended April 30, 1995.
All federal tax returns prior to fiscal 1993 have been settled with the
Internal Revenue Service. Management does not believe that the settlement of its
open tax years will have a material adverse effect on the Company's future
operating results.
5. Long-Term Debt:
Repurchase of Senior Notes
During the nine months ended April 30, 1996, the Company repurchased, in
three open market transactions, $16.8 million in aggregate principal amount of
11.5% Senior Notes due 2003 (Senior Notes) (together, the Repurchase), $1.0
million of which was repurchased during the quarter ended April 30, 1996. The
Repurchase resulted in a $1.2 million net extraordinary charge during the nine
months ended April 30, 1996 for the payment of the premiums associated with the
Repurchase and the write off of unamortized deferred financing fees related to
the original issuance of the Senior Notes.
In November 1995, the Company completed the redemption of $9.0 million in
aggregate principal amount of Senior Notes for 110% of par plus accrued and
unpaid interest (the Redemption). The Redemption was initiated pursuant to the
Senior Note Indenture which permits the redemption of a limited amount of Senior
9
<PAGE>
THE CARBIDE/GRAPHITE GROUP, INC. AND SUBSIDIARIES
FOOTNOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS--Continued
Notes with proceeds obtained from the Initial Offering. The Redemption resulted
in a $0.8 net extraordinary charge recorded during the nine months ended April
30, 1996 for the payment of the premium associated with the Redemption and the
write off of deferred financing fees related to the original issuance of the
Senior Notes.
New Revolving Credit Facility
On December 1, 1995, the Company entered into an agreement with PNC Bank
for a new revolving credit facility which replaces a revolving credit facility
previously entered into in August 1993. The new credit facility, which expires
on December 1, 1998, provides a $25 million line of credit, with a $10 million
sub-limit for letters of credit. Borrowings under the new facility are
collateralized by the Company's accounts receivable and inventory. Interest
under the new facility is calculated, at the option of the Company, based upon
either the greater of PNC Bank's prime rate, or an adjusted Eurodollar Rate,
which is adjusted based upon the Company's interest coverage ratio. The most
restrictive financial covenants under the new facility include a minimum
Consolidate Tangible Net Worth, as defined in the agreement, a minimum Interest
Coverage Ratio (earnings before interest, taxes, depreciation and amortization
to interest expense) of 2.25 to 1 and a minimum liquidity (working capital less
borrowings under the new facility) of $30.0 million.
6. Other Compensation:
Other compensation for the nine months ended April 30, 1996 includes a $0.3
million non-cash charge for the revaluation of the Company's outstanding
performance unit plan (PUPII). The revaluation of PUPII resulted from the
increase in the fair market value of the Company's Common Stock resulting from
the Initial Offering. The compensation charge for the nine months ended April
30, 1996 also includes a $0.8 million charge for the vesting of benefits
expected to be paid under PUPII at the close of fiscal 1996 and $0.4 million in
payroll taxes associated with the exercise of compensatory stock options during
the period.
As a result of the Initial Offering, the Company accelerated the payment of
two-thirds of the units outstanding under PUPII. This early distribution
resulted in an aggregate cash payment of $0.8 million and the issuance of 89,432
shares of Common Stock which were recorded during the nine months ended April
30, 1996. The issuance of Common Stock resulted in a non-cash increase to
stockholders' equity of $1.4 million.
7. Other Income:
In October 1994, the Company formally entered into a long-term contract
with an engineering design and consulting firm to provide process design
expertise and training services related to the construction of a graphite
electrode plant in the People's Republic of China. Revenue related to the
contract is recognized as services are performed for the
process-design-expertise portion of the contract, and using a percentage-of-
contract-completed approach for the training services stage of the contract.
Other income for the quarters and nine months ended April 30, 1995 and 1996
represents revenues earned under the process-design-expertise portion of the
contract, less applicable expenses. Total revenues under the contract are
expected to be approximately $5.2 million, $4.1 million of which has been
recognized as of April 30, 1996.
10
<PAGE>
THE CARBIDE/GRAPHITE GROUP, INC. AND SUBSIDIARIES
FOOTNOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS--Continued
8. Contingencies:
The Company has investigated the regulatory requirements related to closing
a pond located on its Louisville, KY facility which was used to store
non-hazardous production waste. In November 1993, the Company contacted the
Kentucky Department of Environmental Protection (the Agency) and informed the
Agency that based on the Company's investigations of the historical facts
related to the pond, the Company does not believe that any further remedial
actions are required. The Agency has not yet responded to the Company's
findings.
The Company operates a permitted landfill for the disposal of residual
wastes at its St. Mary's facility. The adoption of new residual waste
regulations in Pennsylvania, coupled with decreasing capacity, will require the
upgrading or closure of this landfill by July 1997. The Company has decided to
close the landfill and contract outside of the Company for disposal services.
The Company's closure plan was approved by the Pennsylvania Department of
Environmental Resources during fiscal 1995 and consists of on-going stage
closure activities through July 1997, followed by a 15 year monitoring
commitment. Future costs related to the landfill closure and monitoring process
are expected to be approximately $0.8 million. Future closure and monitoring
costs not accrued as of April 30, 1996 are not material. The timing of payments
related to these activities, including payments for disposal services, is not
expected to materially impact the Company's cash flow in the future.
During fiscal 1995, the Company was named as a third-party defendant in a
Superfund action in United States District Court in New Jersey relating to waste
disposal at a landfill located in Sayreville, New Jersey (the Sayreville
Litigation). Carbon Graphite Group, Inc. was named as successor to Airco-Speer
Company (Airco- Speer). Since this landfill was closed prior to the organization
of the Company in 1988, the Company's only possible connection with the
Sayreville Litigation would be if it were a successor to Airco-Speer, a claim
which it disputes. Furthermore, in the Asset Purchase Agreement by which the
Company acquired assets from The BOC Group, plc (BOC), BOC agreed to provide an
indemnification for certain environmental matters. BOC has assumed and commenced
the defense of the Sayreville Litigation and agreed to indemnify the Company for
certain losses associated therewith in accordance with the terms of the Asset
Purchase Agreement. BOC in turn is being indemnified by certain plaintiffs in
the litigation pursuant to a 1992 agreement. In addition, BOC asserts that the
liability in this matter was settled by the 1992 agreement with the plaintiffs
in the present case. A motion seeking summary judgement based upon the 1992
agreement is currently pending before the court. Based on the above, management
does not believe that the Company will incur a material loss with respect to the
Sayreville Litigation.
The Company is also party to various legal proceedings considered
incidental to the conduct of its business or otherwise not material in the
judgement of management. Management does not believe that its loss exposure
related to these cases is materially greater than amounts provided in the
unaudited condensed consolidated balance sheet as of April 30, 1996. As of April
30, 1996, a $0.4 million reserve has been recorded to provide for estimated
exposure on claims for which a loss is deemed probable.
11
<PAGE>
<TABLE>
PART I
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
The following table sets forth certain financial information for the
quarters and nine months ended April 30, 1995 and 1996 and should be read in
conjunction with the Unaudited Condensed Consolidated Financial Statements,
including the notes thereto, appearing elsewhere in this Form 10-Q:
<CAPTION>
Quarter Ended April 30, Nine Months Ended April 30,
---------------------------- ---------------------------------
1995 1996 1995 1996
------------ ------------ -------------- ---------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales:
Graphite electrode products .............. $ 45,441 $ 45,136 $ 117,122 $ 132,497
Calcium carbide products ................. 21,243 20,038 60,372 60,989
------------ ------------ -------------- ---------------
Total net sales .................... $ 66,684 $ 65,174 $ 177,494 $ 193,486
============ ============ ============== ===============
Percentage of net sales:
Graphite electrode products .............. 68.1% 69.3% 66.0% 68.5%
Calcium carbide products ................. 31.9 30.7 34.0 31.5
------------ ------------ -------------- ---------------
Total net sales .................... 100.0% 100.0% 100.0% 100.0%
============ ============ ============== ===============
Gross profit as a percentage of segment net sales:
Graphite electrode products .............. 14.7% 17.3% 17.3% 15.8%
Calcium carbide products ................. 21.2 19.5 19.6 20.8
Percentage of total net sales:
Total gross profit ....................... 16.8% 17.9% 18.1% 17.3%
Selling, general and administrative ...... 5.3 4.8 5.9 4.8
Operating income ......................... 11.8 12.2 12.3 11.9
Income from continuing operations ......... 4.7 6.1 4.9 5.3
</TABLE>
------------------
Net sales for the quarter ended April 30, 1996 were $65.2 million, versus
$66.7 million in the prior year comparable quarter, a 2.3% decrease. Graphite
electrode product sales were relatively unchanged at $45.1 million, while
calcium carbide product sales decreased 5.7% to $20.0 million. Net sales for the
nine months ended April 30, 1996 were $193.5 million, versus $177.5 million in
the prior year comparable period, a 9.0% increase. Graphite electrode product
sales increased 13.1% over the prior year to $132.5 million, while calcium
carbide product sales were up slightly to $61.0 million.
Within the graphite electrode products segment, graphite electrode net
sales for the quarter ended April 30, 1996 were $32.3 million, a 3.9% decrease
over the prior year comparable quarter. The decrease in graphite electrode sales
was the result of a 12.0% decrease in shipments during the current quarter,
principally due to lower demand from several European graphite electrode
customers. Also, a domestic customer "buy ahead" in the quarter ended January
31, 1996 resulted in lower domestic shipments in the current quarter. Shipments
are generally lower in the period following a price increase as customers
increase purchasing volume ahead of the price increase. As compared to a year
ago, domestic electrode shipments decreased 5.5% in the current quarter, while
foreign electrode shipments decreased 17.9%. Domestic and foreign electrode
shipments as a percentage
12
<PAGE>
of total electrode shipments for the quarter ended April 30, 1996 were 51.3% and
48.7%, respectively, versus 47.8% and 52.2%, respectively, in 1995. A 9.2%
increase in the net sales price of graphite electrodes partially offset the
effect of lower shipments in the current quarter. Needle coke sales for the
quarter ended April 30, 1996 were $4.5 million, versus $4.4 million in the prior
year comparable quarter, a 2.8% increase. A 15.6% increase in the net sales
price of needle coke was partially offset by a 11.1% decrease in needle coke
shipments. The decline in needle coke shipments was due primarily to increased
internal usage of needle coke for the Company's graphite electrode production.
Included in graphite electrode product sales for the quarter ended April 30,
1996 and 1995 were approximately $4.2 million and $4.5 million, respectively, in
sales of large graphite rods and plates and other processing sales to SGL Corp.
under a supply agreement which began in January 1995 and has a term of
approximately three years (the SGL Supply Agreement). Sales of other graphite
specialty material of $4.2 million increased $1.2 million, or 40.5% as compared
to the quarter a year ago, principally due to increased shipments.
For the nine months ended April 30, 1996, graphite electrode sales were
$99.9 million, a 15.8% increase over the prior year comparable period as a
result of a 8.3% increase in shipments and a 7.0% increase in the average net
sales price of graphite electrodes. Overall graphite electrode sales volume has
increased in the current nine-month period as a result of the Company's
increased graphite electrode production capacity. Domestic electrode shipments
increased 11.7% during the current period, while foreign electrode shipments
increased 5.1%. Domestic and foreign electrode shipments as a percentage of
total electrode shipments for the nine months ended April 30, 1996 were 49.4%
and 50.6%, respectively, versus 47.9% and 52.1%, respectively, in the 1995
comparable period. Needle coke sales for the nine months ended April 30, 1996
were $11.9 million, versus $15.5 million in the prior year comparable period, a
22.8% decrease. The decline in needle coke sales was due primarily lower
customer shipments which is due to increased internal usage of needle coke for
the Company's graphite electrode production during the current nine-month
period. The lower needle coke shipments were partially offset by a 5.6% increase
in needle coke prices during the current nine-month period. Included in graphite
electrode product sales for the nine months ended April 30, 1996 and 1995 were
approximately $11.6 million and $5.4 million, respectively, in sales under the
SGL Supply Agreement.
Within the calcium carbide products segment, sales of desulfurization
products for the quarter ended April 30, 1996 were down 12.9% due to a 10.0%
decrease in shipments, coupled with a 3.0% decrease in the average sales price.
The decrease in shipments was due primarily to timing, as sales in the fiscal
1995 third quarter were exceptionally high. The decrease in price was due to
increased competition in the desulfurization market as a result of a new entrant
in the market. For the nine months ended April 30, 1996, pipeline acetylene
sales were $22.0 million, an increase of 5.7% compared to the prior year period,
on a 6.9% increase in shipments. Desulfurization sales decreased 3.4% to $18.5
million principally due to a 2.6% decrease in shipments.
Gross profit as a percentage of graphite electrode product sales for the
quarter ended April 30, 1996 was 17.3%, versus 14.7% in the prior year
comparable quarter. The increase in gross profit was the result of higher sales
prices for both graphite electrodes and needle coke. Benefits derived from
higher selling prices for graphite electrodes and needle coke were partially
offset by higher decant oil costs, which were 15.7% higher as compared to a year
ago, coupled with the effect of lower electrode and needle coke shipments. Gross
profit as a percentage of graphite electrode product sales for the nine months
ended April 30, 1996 was 15.8%, versus 17.3% in the prior year comparable
period. Benefits derived from increased graphite electrode shipments and higher
selling prices for graphite electrodes and needle coke were offset by sales
under the SGL Supply Agreement, lower needle coke shipments and higher operating
costs in the graphite electrode products business, principally decant oil costs.
The SGL Supply Agreement, which was entered into in connection with the
Specialty Products Sale, requires the Company to supply certain graphite
products at prices which approximate the Company's manufacturing costs, which
negatively impacted the graphite electrode product gross margin to a larger
degree in the current nine-month period. Decant oil prices, on average, were
approximately 8.2% higher during the current nine-month period versus a year
ago.
13
<PAGE>
Gross profit as a percentage of calcium carbide product sales for the
quarter ended April 30, 1996 was 19.5%, versus 21.2% in the prior year
comparable quarter. The decrease in the gross profit percentage is attributable
to lower desulfurization volumes and selling prices. Gross profit as a
percentage of calcium carbide product sales for the nine months ended April 30,
1996 was 20.8%, versus 19.6% in the prior year comparable period. As previously
reported, the Company received a $1 million favorable settlement during the
quarter ended January 31, 1996 from a utility rate dispute with one of its
electric power suppliers. The $1 million payment received has been reflected as
a reduction to cost of goods sold for the nine months ended April 30, 1996.
Exclusive of this settlement, gross profit as a percentage of calcium carbide
product sales for the nine months ended April 30, 1996 was 19.1%.
Selling, general and administrative expenditures for the quarter ended
April 30, 1996 were $3.1 million versus $3.5 million in the comparable 1995
quarter, an 11.1% decrease. Selling, general and administrative expenditures for
the nine months ended April 30, 1996 were $9.3 million versus $10.5 million in
the comparable 1995 period, an 11.5% decrease. The decreases were principally
due to lower employee, marketing and consulting expenditures, as well as a $0.3
million reduction in amortization expense associated with intangibles.
Other compensation in the quarter and nine months ended April 30, 1996
includes $0.3 million and $0.8 million, respectively, in charges for the vesting
of benefits expected to be paid under PUPII at the close of fiscal 1996. Other
compensation for the nine months ended April 30, 1996 also includes a $0.3
million non-cash charge for the revaluation of PUPII in connection with the
Initial Offering. The revaluation resulted from the increase in the fair market
value of the Company's Common Stock which was a result of the Initial Offering.
Other compensation in the current quarter and nine-month period also includes
$0.4 million in payroll taxes associated with the exercise of compensatory stock
options during the period. Other compensation for the quarter and nine months
ended April 30, 1995 includes $0.4 million and $1.5 million charges,
respectively, representing a pro rata accrual for vested benefits paid under
PUPII.
In October 1994, the Company formally entered into a long-term contract
with an engineering design and consulting firm to provide process design
expertise and training services related to the construction of a graphite
electrode plant in The People's Republic of China. Revenue related to the
contract is recognized as services are performed for the
process-design-expertise portion of the contract, and using a percentage-of-
contract-completed approach for the training services stage of the contract.
Other income for the quarter and nine months ended April 30, 1996 and 1995
represents revenues earned under the process-design-expertise portion of the
contract, less applicable expenses. Total revenues under the contract are
expected to be approximately $5.2 million, $4.1 million of which has been
recognized as of April 30, 1996.
Special financing expenses for the quarter and nine months ended April 30,
1996 and 1995 represent charges for accounting, legal, printing and other fees
related to the Company's public stock offerings.
Net interest expense for the quarter ended April 30, 1996 was $2.1 million
and included $2.4 million of interest expense associated with the Senior Notes,
less $0.4 million in interest income associated with the Company's cash
equivalents and short-term investments. The average outstanding balance of
Senior Notes during the current quarter was approximately $85 million. Interest
expense for the nine months ended April 30, 1996 was $7.0 million, including
$8.1 million of interest expense associated with the Senior Notes, less $1.4
million of interest income. The average outstanding balance of Senior Notes
during the current nine months was approximately $94 million. Interest expense
for the quarter ended April 30, 1995 was $2.7 million. On a consolidated basis,
interest expense for the nine months ended April 30, 1995 was $9.9 million, with
$7.9 million included in income from continuing operations. Interest expense was
allocated to discontinued operations based on the ratio of net assets of the
discontinued business to consolidated equity plus corporate indebtedness.
14
<PAGE>
The income tax provisions for the quarter and nine months ended April 30,
1996 were recorded based on the Company's projected effective income tax rate
for the fiscal year ended July 31, 1996, adjusted for period specific items. The
current year effective rate differs from the federal statutory rate due
primarily to state taxes, offset by benefits derived from the Company's foreign
sales corporation. During the quarter ended April 30, 1996, the Company also
realized a $0.4 million fiscal year 1995 tax benefit from its Company's foreign
sales corporation. See Note 4 to the Unaudited Condensed Consolidated Financial
Statements for more details on the Company's effective tax rate.
On January 17, 1995, the Company and SGL Corp. consummated the Specialty
Products Sale. The Specialty Products Sale resulted in a net gain of $15.7
million which was recorded within discontinued operations in the unaudited
consolidated statement of operations for the nine months ended April 30, 1995.
Included in the gain on the Specialty Products Sale was (i) a $0.5 net charge
for the partial curtailment of the St. Mary's defined benefit pension plan which
resulted from the Specialty Products Sale, (ii) a $0.5 million net charge for
severance benefits to be paid to certain employees terminated as a result of the
Specialty Products Sale and (iii) a $0.8 million net charge for legal and other
costs incurred as a direct result of the Specialty Products Sale.
Income from operations of discontinued business represents the operating
results of Specialty Products for the nine months ended April 30, 1995, net of
applicable income taxes.
The extraordinary loss from the early extinguishment of debt recorded
during the quarter and nine months ended April 30, 1996 represent charges for
the payment of premiums and the write-off of unamortized deferred financing fees
associated with the Repurchase and the Redemption of Senior Notes. See Note 5 to
the Unaudited Condensed Consolidated Financial Statements.
Recently Issued Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards #121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of" (SFAS #121).
SFAS #121 must be implemented for the Company's fiscal year ended July 31, 1997.
Management estimates that implementation of SFAS #121 will not have a material
effect on the Company's financial statements.
In October 1995, the FASB issued Statement of Financial Accounting
Standards #123, "Accounting for Stock-Based Compensation" (SFAS #123). SFAS #123
establishes compensation recognition alternatives and disclosure requirements
for stock-based compensation plans. The Company is currently evaluating the
provisions of SFAS #123 and its potential impact on its various stock-based
compensation plans. The Company must adopt SFAS #123 for its fiscal year ended
July 31, 1997. At this time, management has not finalized its evaluation of SFAS
#123 and has not made a decision regarding its implementation.
Liquidity and Capital Resources
Liquidity
The Company's liquidity needs are primarily for debt service, capital
expenditures and working capital. As previously reported, the Company has
undertaken a substantial modernization program with respect to its graphite
electrode production facilities which is expected to result in approximately $31
million in capital improvements during fiscal 1996 and 1997 (the Modernization
Program). The Company believes that its
15
<PAGE>
liquidity, capital resources and cash flows from operations will be sufficient
to fund all of its liquidity needs through at least the expiration of its
revolving credit facility in on December 1, 1998, subject to extension. Also,
the deferral of principal payments until 2003 under the Senior Note Indenture
significantly reduces the Company's short-term debt service requirements. In the
event that the Company's cash flows from operations and working capital are not
sufficient to fund the Company's expenditures and service its indebtedness, the
Company would be required to raise additional funds. There can be no assurance
that sources of funds would be available in amounts sufficient for the Company
to meet its obligations.
On December 1, 1995, the Company entered into an agreement with PNC Bank
for a new revolving credit facility which replaces a revolving credit facility
previously entered into in August 1993. The new credit facility, which expires
on December 1, 1998, provides a $25 million line of credit, with a $10 million
sub-limit for letters of credit. Borrowings under the new facility are
collateralized by the Company's accounts receivable and inventory. Interest
under the new facility is calculated, at the option of the Company, based upon
either the greater of PNC Bank's prime rate, or an adjusted Eurodollar Rate,
which is adjusted based upon the Company's interest coverage ratio. The most
restrictive financial covenants under the new facility include a minimum
Consolidate Tangible Net Worth, as defined in the agreement, a minimum Interest
Coverage Ratio (earnings before interest, taxes, depreciation and amortization
to interest expense) of 2.25 to 1 and a minimum liquidity (working capital less
borrowings under the new facility) of $30.0 million.
As of April 30, 1996, the Company had cash, cash equivalents and short-term
investments of $28.7 million and had approximately $19 million of availability
under its new revolving credit facility. As of April 30, 1996, no borrowings
were outstanding under the new revolving credit facility; however, approximately
$6.0 million of letters of credit were outstanding.
During the nine months ended April 30, 1996, total assets decreased $8.6
million, principally due to a $14.0 million decrease in cash and cash
equivalents. This decrease, as well as a $25.7 million decrease in long- term
debt, was principally the result of the Repurchase and Redemption. Stockholders'
equity increased $26.4 million during the nine months ended April 30, 1996,
which was the result of $8.3 million of net income and an $18.1 million
increase, $12.5 million of which was in cash, resulting from transactions
associated with the Company's stock offerings during the period.
On March 12, 1996, the Company completed a secondary public offering of its
Common Stock. 1,032,236 shares of Common Stock were sold to the public by
certain management and former management stockholders in an underwritten
offering. (the Offering). 999,958 shares were sold under the Company's
registration statement on Form S-1, while 32,278 shares were sold under a
registration statement on Form S-8. 590,000 Common Stock options were excercised
by certain selling shareholders in connection with the Offering, resulting in
$0.8 million in cash proceeds to the Company.
Cash Flow Information
Operating activities: Cash flow provided by operations for the quarter
ended April 30, 1996 was $6.1 million, including $6.9 million of cash inflows
from net income plus non-cash items, partially offset by $0.8 million of net
cash outflows from changes in working capital items. Significant working capital
cash outflows during the quarter ended April 30, 1996 included $4.5 million in
net interest payments on Senior Notes and $0.8 million in tax payments. Cash
flow provided by operations for the nine months ended April 30, 1996 was $12.7
million. Cash inflows from net income plus non-cash items of $19.8 million were
partially offset by a $7.1 million net cash outflow due to changes in working
capital items. Significant working capital cash outflows during the nine months
ended April 30, 1996 included $10.5 million in net interest payments on Senior
Notes and $2.6 million in tax payments.
16
<PAGE>
Investing activities: Investing activities for the quarter and nine months
ended April 30, 1996 included $4.0 million and $11.2 million, respectively, in
capital expenditures. The Company believes that most of its future investing
activity cash flow requirements will be for capital expenditures, including the
Modernization Program. The Company believes that its current cash reserves,
future cash flow provided by operations and borrowings under the revolving
credit facility will be adequate to fund its investing needs in the future.
Financing activities: Financing cash flows for the quarter ended April 30,
1996 included a $1.0 million payment for principal and premium in connection
with a $1.0 million Senior Note repurchase, partially offset by $0.8 million in
proceeds from Common Stock option exercises during the quarter. Financing cash
flows for the nine months ended April 30, 1996 included $28.1 million in
principal and premium payments associated with the Repurchase and Redemption.
This financing cash outflow was partially offset by $12.6 million in cash from
the issuance of Common Stock and exercise of Common Stock options, both of which
were related to the Company's public stock offerings.
Recent Developments
In May 1996, the Company reached an agreement on a three-year labor
contract with the union representing its hourly employees at its St. Marys,
Pennsylvania graphite electrode production facility. The new contract will
expire on June 7, 1999.
17
<PAGE>
PART II
Item 1
LEGAL PROCEEDINGS
During fiscal 1995, the Company was named as a third-party defendant in a
Superfund action in United States District Court in New Jersey relating to waste
disposal at a landfill located in Sayreville, New Jersey (the Sayreville
Litigation). Carbon Graphite Group, Inc. was named as successor to Airco-Speer
Company (Airco- Speer). Since this landfill was closed prior to the organization
of the Company in 1988, the Company's only possible connection with the
Sayreville Litigation would be if it were a successor to Airco-Speer, a claim
which it disputes. Furthermore, in the Asset Purchase Agreement by which the
Company acquired assets from The BOC Group, plc (BOC), BOC agreed to provide an
indemnification for certain environmental matters. BOC has assumed and commenced
the defense of the Sayreville Litigation and agreed to indemnify the Company for
certain losses associated therewith in accordance with the terms of the Asset
Purchase Agreement. BOC in turn is being indemnified by certain plaintiffs in
the litigation pursuant to a 1992 agreement. In addition, BOC asserts that the
liability in this matter was settled by the 1992 agreement with the plaintiffs
in the present case. A motion seeking summary judgement based upon the 1992
agreement is currently pending before the court. Based on the above, management
does not believe that the Company will incur a material loss with respect to the
Sayreville Litigation.
The Company is also party to various legal proceedings considered
incidental to the conduct of its business or otherwise not material in the
judgement of management. Management does not believe that its loss exposure
related to these cases is materially greater than amounts provided in the
unaudited condensed consolidated balance sheet as of April 30, 1996. As of April
30, 1996, a $0.4 million reserve has been recorded to provide for estimated
exposure on claims for which a loss is deemed probable.
18
<PAGE>
PART II
Item 6
A. INDEX TO EXHIBITS
Exhibit Page
- ----------- --------
11.1 Form of Computation of Earnings per Common Share ..... 20
B. REPORTS ON FORM 8-K
During the quarter ended April 30, 1996, the Company filed a Current Report
on Form 8-K which, pursuant to "Item 5 - Other Events" of Form 8-K, reported the
filing and effectiveness of its Registration Statement on Form S-1 with respect
to 2,457,958 shares of Common Stock owned by certain stockholders of the Company
. A Prospectus Supplement was filed with the SEC on March 7, 1996 with respect
to the public offering through PaineWebber Incorporated, as underwriter, of
998,958 of such shares. The Registration Statement on Form S-1 and Prospectus
Supplement, including relevant financial statements included therewith, were
filed as exhibits.
19
<PAGE>
<TABLE>
Exhibit 11.1
FORM OF COMPUTATION OF EARNINGS PER COMMON SHARE for the
quarters and nine months ended April 30, 1995 and 1996
(in thousands, except share and per share amounts
<CAPTION>
Quarter Ended April 30, Nine Months Ended April 30,
----------------------------- ---------------------------------
1995 1996 1995 1996
------------- ------------- -------------- ---------------
<S> <C> <C> <C> <C>
1. Income from continuing operations ...... $ 3,129 $ 3,980 $ 8,702 $ 10,332
2. Discontinued operations.................. - - 16,382 -
3. Extraordinary loss on early
extinguishment of debt ............. - (67) - (2,000)
------------- ------------- -------------- ---------------
4. Net income (1 + 2 + 3)............. $ 3,129 $ 3,913 $ 25,084 $ 8,332
============= ============= ============== ===============
5. Weighted average
shares outstanding .................. 6,187,708 7,873,503 6,184,141 7,309,715
6. Shares issuable under dilutive
management stock options and
performance units ................... 1,639,973 826,150 1,555,735 1,186,401
------------- ------------- -------------- ---------------
7. Common and common equivalent
shares outstanding (5 + 6)........... 7,827,681 8,699,653 7,739,876 8,496,116
============= ============= ============== ===============
Per share information:
Income from continuing operations
(1 / 7).............................. $ 0.40 $ 0.46 $ 1.12 $ 1.22
Discontinued operations (2 / 7)......... - - 2.12 -
Extraordinary loss on debt repayment
(3 / 7).............................. - (0.01) - (0.24)
------------- ------------- -------------- ---------------
Net income (4 / 7)................ $ 0.40 $ 0.45 $ 3.24 $ 0.98
============= ============= ============== ===============
</TABLE>
20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the following authorized officers on June 3, 1996.
Signature Title
- ------------------------------------------------------------------------------
/s/ Nicholas T. Kaiser Chief Executive Officer
- ----------------------------- (Principal Executive Officer)
(Nicholas T. Kaiser)
/s/ Stephen D. Weaver Vice President - Finance and Chief
- ----------------------------- Financial Officer (Principal Financial Officer)
(Stephen D. Weaver)
/s/ Jeffery T. Jones Controller (Principal Accounting Officer)
- -----------------------------
(Jeffery T. Jones)
21
