SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001, or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________to___________
__________________
Commission file number 0-17272
__________________
TECHNE CORPORATION
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1427402
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
614 MCKINLEY PLACE N.E. (612) 379-8854
MINNEAPOLIS, MN 55413 (Registrant's telephone number,
(Address of principal including area code)
executive offices) (Zip 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 ( )
At May 2, 2001, 41,428,990 shares of the Company's Common Stock (par value
$.01) were outstanding.
ITEM 1 - FINANCIAL STATEMENTS
TECHNE CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
3/31/01 6/30/00
------------ ------------
ASSETS
Cash and cash equivalents $ 18,621,915 $ 17,356,108
Short-term investments 69,069,281 42,468,183
Accounts receivable (net) 15,143,807 14,056,481
Interest receivable 2,336,873 1,544,387
Inventories 5,089,922 4,651,615
Income taxes receivable - 3,290,314
Deferred income taxes 2,507,000 2,440,000
Other current assets 1,023,087 494,117
------------ ------------
Total current assets 113,791,885 86,301,205
Deferred income taxes 4,064,000 3,938,000
Property and equipment (net) 46,817,974 46,266,177
Intangible assets (net) 29,668,560 36,335,500
Other assets 7,426,015 7,568,699
------------ ------------
TOTAL ASSETS $201,768,434 $180,409,581
============ ============
LIABILITIES & EQUITY
Trade accounts payable $ 3,088,176 $ 2,630,164
Salary and related accruals 2,214,605 2,998,696
Other payables 6,125,919 6,107,979
Income taxes payable 1,488,165 -
Current portion of long-term debt 869,120 824,315
------------ ------------
Total current liabilities 13,785,985 12,561,154
Royalty payable 4,884,000 7,768,000
Long-term debt 18,274,789 18,935,049
Common stock, par value $.01 per
share; authorized 100,000,000;
issued and outstanding 41,428,990
and 41,381,998, respectively 414,290 413,820
Additional paid-in capital 53,930,118 52,857,444
Retained earnings 111,814,382 88,336,230
Accumulated other comprehensive loss (1,335,130) (462,116)
------------ ------------
Total stockholders' equity 164,823,660 141,145,378
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $201,768,434 $180,409,581
============ ============
See notes to unaudited Consolidated Financial Statements.
TECHNE CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
QUARTER ENDED NINE MONTHS ENDED
------------------------ ------------------------
3/31/01 3/31/00 3/31/01 3/31/00
----------- ----------- ----------- -----------
Sales $30,240,889 $26,776,906 $84,651,118 $76,524,798
Cost of sales 7,492,795 6,382,933 21,063,962 20,357,435
----------- ----------- ----------- -----------
Gross margin 22,748,094 20,393,973 63,587,156 56,167,363
Operating expenses
(income):
Selling, general and
administrative 4,551,285 4,356,323 13,180,533 13,485,476
Research and
development 3,857,116 2,468,439 10,720,325 8,320,262
Amortization expense 2,222,313 2,307,313 6,666,940 6,921,938
Interest expense 338,843 356,783 1,042,477 1,087,974
Interest income (904,975) (421,423) (2,425,191) (950,127)
----------- ----------- ----------- -----------
10,064,582 9,067,435 29,185,084 28,865,523
----------- ----------- ----------- -----------
Earnings before
income taxes 12,683,512 11,326,538 34,402,072 27,301,840
Income taxes 2,519,000 3,677,000 9,752,000 9,240,000
----------- ----------- ----------- -----------
Net earnings $10,164,512 $ 7,649,538 $24,650,072 $18,061,840
=========== =========== =========== ===========
Earnings per share
(Note D):
Basic earnings per
share $ 0.25 $ 0.19 $ 0.59 $ 0.45
Diluted earnings per
share $ 0.24 $ 0.18 $ 0.58 $ 0.43
Weighted average
common shares
outstanding:
Basic 41,452,109 40,736,596 41,441,347 40,462,740
Diluted 42,530,383 42,471,990 42,710,247 42,077,146
See notes to unaudited Consolidated Financial Statements.
TECHNE CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
NINE MONTHS ENDED
---------------------------
3/31/01 3/31/00
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 24,650,072 $ 18,061,840
Adjustments to reconcile net earnings to
net cash provided by
operating activities:
Depreciation and amortization 9,434,430 9,289,286
Deferred income taxes (232,000) (687,000)
Other 642,684 (100,548)
Change in current assets and current
liabilities:
(Increase) decrease in:
Accounts receivable/interest
receivable (2,138,885) (1,462,221)
Inventories (499,330) 1,387,063
Other current assets (545,020) (131,475)
Increase (decrease) in:
Trade account/other payables (2,462,187) (1,993,822)
Salary and related accruals (770,116) 710,104
Income taxes, net 5,162,911 1,838,672
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 33,242,559 26,911,899
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investments (44,329,044) (24,315,000)
Proceeds from sale of short-term investments 17,727,946 10,035,879
Additions to property and equipment (3,344,760) (27,621,979)
Real estate deposit - (2,001,000)
Increase in other long term assets (500,000) (1,552,160)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (30,445,858) (45,454,260)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 758,992 3,730,714
Proceeds from issuance of long-term debt - 20,400,000
Payments on long-term debt (615,455) (446,347)
Repurchase of common stock (1,163,768) -
------------ ------------
NET CASH (USED IN) PROVIDED BY FINANCING
ACTIVITIES (1,020,231) 23,684,367
EFFECT OF EXCHANGE RATE CHANGES ON CASH (510,663) 246,827
------------ ------------
NET CHANGE IN CASH AND EQUIVALENTS 1,265,807 5,388,833
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 17,356,108 12,769,468
------------ ------------
CASH AND EQUIVALENTS AT END OF PERIOD $ 18,621,915 $ 18,158,301
============ ============
See notes to unaudited Consolidated Financial Statements.
TECHNE CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
A. BASIS OF PRESENTATION:
The unaudited Consolidated Financial Statements have been prepared in
accordance with generally accepted accounting principles and with
instructions to Form 10-Q and Article 10 of Regulation S-X. The accompanying
unaudited Consolidated Financial Statements reflect all adjustments which
are, in the opinion of management, necessary to a fair presentation of the
results for the interim periods presented. All such adjustments are of a
normal recurring nature.
A summary of significant accounting policies followed by the Company is
detailed in the Annual Report to Shareholders for Fiscal 2000. The Company
follows these policies in preparation of the interim Financial Statements.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that the
Consolidated Financial Statements be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto for the fiscal year ended
June 30, 2000 included in the Company's Annual Report to Shareholders for
Fiscal 2000.
Certain Consolidated Balance Sheet captions appearing in this interim report
are as follows:
3/31/01 6/30/00
----------- -----------
ACCOUNTS RECEIVABLE
Accounts receivable $15,296,807 $14,218,481
Less reserve for bad debts 153,000 162,000
----------- -----------
NET ACCOUNTS RECEIVABLE $15,143,807 $14,056,481
=========== ===========
INVENTORIES
Raw materials $ 2,276,930 $ 2,288,719
Supplies 146,235 124,732
Finished goods 2,666,757 2,238,164
----------- -----------
TOTAL INVENTORIES $ 5,089,922 $ 4,651,615
=========== ===========
FIXED ASSETS
Land $ 871,000 $ 871,000
Buildings and improvements 46,398,373 43,965,312
Laboratory equipment 14,770,567 14,114,039
Office equipment 3,654,875 3,535,164
Leasehold improvements 168,689 180,770
----------- -----------
65,863,504 62,666,285
Less accumulated depreciation
and amortization 19,045,530 16,400,108
----------- -----------
NET FIXED ASSETS $46,817,974 $46,266,177
=========== ===========
INTANGIBLE ASSETS
Customer list $18,010,000 $18,010,000
Technology licensing agreements 500,000 500,000
Goodwill 39,075,089 39,075,089
----------- -----------
57,585,089 57,585,089
Less accumulated amortization 27,916,529 21,249,589
----------- -----------
NET INTANGIBLE ASSETS $29,668,560 $36,335,500
=========== ===========
Effective July 1, 2000, the Company adopted Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
which provides guidance on accounting for derivatives and hedge transactions.
The adoption of this pronouncement did not impact operating results or
financial position.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements," which provides guidance in applying generally accepted
accounting principles to revenue recognition in financial statements. The
application of this SAB did not have a material impact on the Company's
reported operating results or financial position.
B. EARNINGS PER SHARE:
Shares used in the earnings per share computations are as follows:
QUARTER ENDED NINE MONTHS ENDED
---------------------- ----------------------
3/31/01 3/31/00 3/31/01 3/31/00
---------- ---------- ---------- ----------
Weighted average
common shares
outstanding-basic 41,452,109 40,736,596 41,441,347 40,462,740
Dilutive effect of
stock options
and warrants 1,078,274 1,735,394 1,268,900 1,614,406
---------- ---------- ---------- ----------
Average common shares
outstanding-diluted 42,530,383 42,471,990 42,710,247 42,077,146
========== ========== ========== ==========
C. SEGMENT INFORMATION:
Following is financial information relating to the Company's operating
segments:
QUARTER ENDED NINE MONTHS ENDED
------------------------ ------------------------
3/31/01 3/31/00 3/31/01 3/31/00
----------- ----------- ----------- -----------
External sales
Hematology $ 3,248,378 $ 3,143,364 $10,434,272 $ 9,527,863
Biotechnology 19,399,700 16,658,266 53,906,598 47,192,193
R&D Systems Europe 7,592,811 6,975,276 20,310,248 19,804,742
----------- ----------- ----------- -----------
Total external sales $30,240,889 $26,776,906 $84,651,118 $76,524,798
=========== =========== =========== ===========
Intersegment sales
Hematology $ -- $ -- $ -- $ --
Biotechnology 3,940,320 3,711,183 11,225,897 10,167,601
R&D Systems Europe 31,500 27,195 68,882 110,826
----------- ----------- ----------- -----------
Total intersegment
sales $ 3,971,820 $ 3,738,378 $11,294,779 $10,278,427
=========== =========== =========== ===========
Income before taxes
Hematology $ 861,258 $ 869,536 $ 3,309,908 $ 2,746,207
Biotechnology 10,402,814 9,090,026 28,768,623 22,121,598
R&D Systems Europe 1,739,481 1,455,526 4,100,548 3,731,621
Corporate and other (320,041) (88,550) (1,777,007) (1,297,586)
----------- ----------- ----------- -----------
Total income
before taxes $12,683,512 $11,326,538 $34,402,072 $27,301,840
=========== =========== =========== ===========
D. STOCK SPLIT:
On November 9, 2000, the Company declared a two-for-one stock split to be
effected in the form of a 100% stock dividend to shareholders of record on
November 24, 2000. The payment date for the stock split was December 1,
2000. All earnings per share and share amounts included in these financial
statements have been restated to reflect the stock split. The shareholders
also approved an amendment to the Company's Articles of Incorporation to
increase authorized common stock from 50,000,000 to 100,000,000 shares.
E. CONTINGENCIES:
A party has presented invoices in the amount of $28 million for materials
provided to the Company over past years, allegedly pursuant to a contract
under which no accounting or invoices were rendered for nine years. The
Company has brought a declaratory judgement action seeking to have the court
declare that no amount is owed. The Company's management believes that no
material amount is owed, that it has claims against the other party, and that
the ultimate resolution of the matter will not have a material adverse effect
on the financial condition or results of operations of the Company.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations Quarter and Nine Months Ended March 31, 2001
vs. Quarter and Nine Months Ended March 31, 2000
Techne Corporation (Techne) has two operating subsidiaries: Research and
Diagnostic Systems, Inc. (R&D Systems) located in Minneapolis, Minnesota and
R&D Systems Europe Ltd. (R&D Europe) located in Abingdon, England. R&D
Systems has two divisions: Biotechnology and Hematology. The Biotechnology
Division's principal products are purified cytokines (proteins), antibodies
and assay kits, which are sold primarily to biomedical researchers at
pharmaceutical companies and academic and government research laboratories.
The Hematology Division's principal products are whole blood hematology
controls and calibrators which are sold to hospital and clinical laboratories
to check the performance of their hematology instruments to assure the
accuracy of hematology test results. R&D Europe sells R&D Systems'
biotechnology products in Europe, both directly and through a sales
subsidiary in Germany. The Company has a foreign sales corporation, Techne
Export Inc.
The Company has an equity interest in ChemoCentryx, Inc. (CCX), a technology
and drug development company working in the area of chemokines. Chemokines
are cytokines which regulate the trafficking patterns of leukocytes, the
effector cells of the human immune system. In conjunction with the equity
investment and joint research efforts, Techne obtains exclusive worldwide
research and diagnostic marketing rights to chemokine proteins, antibodies
and receptors discovered or developed by CCX or R&D Systems. The Company
accounts for this investment under the equity method of accounting and
through January 2001 had a 49% interest in CCX. Through January 2001, the
Company recognized 100% of CCX's losses due to the limited amount of cash
consideration provided by the holders of the common shares of CCX. In
February 2001, CCX obtained $23 million in financing through the issuance of
additional preferred stock. The Company currently holds approximately 26% of
the outstanding stock of CCX and is recognizing CCX operating results based
on its ownership percentage. The Company's net investment in CCX was
$3,191,791 and $3,553,516 at March 31, 2001 and June 30, 2000, respectively.
Net Sales
Net sales for the quarter ended March 31, 2001 were $30,240,889, an increase
of $3,463,983 (13%) from the quarter ended March 31, 2000. Sales for the
nine months ended March 31, 2001 increased $8,126,320 (11%) from $76,524,798
to $84,651,118. R&D Systems' Biotechnology Division sales increased
$2,741,434 (16%) and $6,714,405 (14%) and R&D Systems' Hematology Division
sales increased $105,014 (3%) and $906,409 (10%) for the quarter and nine
months, respectively. R&D Europe sales increased $617,535 (9%) and $505,506
(3%) for the quarter and nine months ended March 31, 2001. R&D Europe's
revenue increase was effected by changes in foreign currency exchange rates.
In British pounds, R&D Europe's sales increased 20% and 14% over the third
quarter and first nine months of last year. Adjusted for all changes in
exchange rates, R&D Europe's revenues for the third quarter and first nine
months of fiscal 2001 would have been approximately $.6 million and $2.5
million higher than reported.
Gross Margins
Gross margins for the third quarter of fiscal 2001 were 75.2% compared to
76.2% for the same quarter in fiscal 2000. Margins for the nine months ended
March 31, 2001 were 75.1% compared to 73.4% for the same period in fiscal
2000.
Biotechnology Division margins decreased slightly from 79.7% to 78.5% for the
quarter, but increased from 75.7% to 78.6% for the nine months ended March
31, 2001. Margins in the first six months of last year were affected by the
higher cost of inventory acquired from Genzyme Corporation. R&D Europe gross
margins decreased from 40.6% to 39.3% for the quarter and from 42.8% to 38.1%
for the nine months ended March 31, 2001 as a result of changes in exchange
rates. Hematology Division gross margins decreased from 44.9% to 40.9% for
the quarter and from 46.3% to 44.9% for the nine months as a result of
changes in product mix.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $194,962 (4%) from the
third quarter of last year, but decreased $304,943 (2%) from the first nine
months of last year. The increase in the third quarter of fiscal 2001 was
due to the timing of certain printing and promotion costs. The decrease in
selling, general and administrative expenses in the first nine months of
fiscal 2001 was mainly the result of exchange rate changes.
Research and Development Expenses
Research and development expenses increased $1,388,677 (56%) and $2,400,063
(29%) for the quarter and nine months ended March 31, 2001. Research and
development expenses by R&D Systems increased $951,000 (33%) and $1,888,000
(22%) for the quarter and nine months, respectively. The R&D Systems research
expense increase relates to products currently under development, many of
which are expected to be released in fiscal 2001 and 2002. Products
currently under development include both biotechnology and hematology
products. Research expenses related to ChemoCentryx increased $450,000 and
$718,000 for the quarter and nine months ended March 31, 2001 as a result of
increased spending. The increases in research and development expenses by
R&D Systems and ChemoCentryx were offset by a reduction in R&D Europe
research expenses as a result of the cancellation of a research agreement
with British Biotechnology Group plc. and the completion of the transfer of
all R&D Europe research activities to R&D Systems.
Net Earnings
Earnings before income taxes increased $1,356,974 from $11,326,538 in the
third quarter of fiscal 2000 to $12,683,512 in the third quarter of fiscal
2001. Earnings before taxes for the nine months increased $7,100,232 from
$27,301,840 to $34,402,072. The increase in earnings before income taxes was
due primarily to the increase in sales discussed previously.
Income taxes for the quarter and nine months ended March 31, 2001 were
provided at a rate of approximately 20% and 28% of consolidated pretax
earnings compared to 32% and 34% for the quarter and first nine months of the
prior year. The decrease in tax rate from the prior year is due primarily to
a one-time $1.4 million credit in the third quarter of fiscal 2001 as a
result of the close-out of pending issues related to a state income tax
examination for fiscal years 1996 through 1999. The tax rate is also
effected by an increase in tax exempt interest income. U.S. federal taxes
have been reduced by the credit for research and development expenditures and
the benefit of the foreign sales corporation. Foreign income taxes have been
provided at rates which approximate the tax rates in the United Kingdom and
Germany.
Liquidity and Capital Resources
At March 31, 2001, cash and cash equivalents and short-term investments were
$87,691,196 compared to $59,824,291 at June 30, 2000. The Company believes
it can meet its future cash, working capital and capital addition
requirements through currently available funds, cash generated from
operations and maturities of short-term investments. The Company has an
unsecured line of credit of $750,000. The interest rate on the line of
credit is at prime. There were no borrowings on the line in the prior or
current fiscal years.
Cash Flows From Operating Activities
The Company generated cash of $33,242,559 from operating activities in the
first nine months of fiscal 2001 compared to $26,911,899 for the first nine
months of fiscal 2000. The increase was mainly the result of increased net
earnings.
Cash Flows From Investing Activities
During the nine months ended March 31, 2001 and March 31, 2000, short-term
investments increased by $26,601,098 and $14,279,121, respectively. The
Company's investment policy is to place excess cash in short-term tax-exempt
bonds. The objective of this policy is to obtain the highest possible return
with the lowest risk, while keeping the funds accessible.
Capital expenditures for fixed assets for the first nine months of fiscal
2001 and 2000 were $3,344,760 and $27,621,979 (including $21.9 million for
the purchase of R&D Systems' Minneapolis facility), respectively. Included
in the fiscal 2001 and 2000 additions were $1,739,000 and $4,364,000 for
building improvements related to remodeling of facilities by R&D Systems.
The remaining capital additions in fiscal 2001 and 2000 were for laboratory
and computer equipment. Total expenditures for capital additions and
building improvements planned for the remainder of fiscal 2001 are expected
to cost approximately $3.5 million and are expected to be financed through
currently available funds and cash generated from operating activities.
During the first nine months of fiscal 2000, the Company invested an
additional $1 million in ChemoCentryx, Inc. The Company also paid $2,001,000
and issued warrants to purchase 120,000 shares of common stock as a deposit
on an option to purchase property adjacent to its Minneapolis facility.
Cash Flows From Financing Activities
Cash of $758,992 and $3,730,714 was received during the nine months ended
March 31, 2001 and 2000, respectively, for the exercise of options for 86,216
and 665,346 shares of common stock. During the first nine months of fiscal
2001 and 2000 options for 1,000 and 77,584 shares of common stock were
exercised by the surrender of 224 and 12,942 shares of the Company's common
stock with fair market values of $8,552 and $305,510, respectively.
During the first nine months of fiscal 2001, the Company purchased and
retired 40,000 shares of Company common stock at a market value of
$1,163,768. The Board of Directors has authorized the Company, subject to
market conditions and share price, to purchase and retire up to $20 million
of its common stock. From the start of the repurchase program through May 2,
2001, 1,341,200 shares have been purchased at a market value of $9,917,882.
The Company has never paid cash dividends and has no plans to do so in fiscal
2001.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
At March 31, 2001, the Company had an investment portfolio of fixed income
securities, excluding those classified as cash and cash equivalents, of
$69,069,281. These securities, like all fixed income instruments, are
subject to interest rate risk and will decline in value if market interest
rates increase. However, the Company has the ability to hold its fixed
income investments until maturity and therefore the Company does not expect
any such increase in interest rates to have an adverse impact on income or
cash flows.
The Company operates internationally, and thus is subject to potentially
adverse movements in foreign currency rate changes. The Company does not
enter into foreign exchange forward contracts to reduce its exposure to
foreign currency rate changes on intercompany foreign currency denominated
balance sheet positions.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The information required by Item 1 is contained in the Company's Form 10-Q
for the quarter ended September 30, 2000, which is incorporated herein by
reference.
ITEM 2 - CHANGES IN SECURITIES
None
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 - SUBMISSION OF MATTERS TO VOTE OF SHAREHOLDERS
None
ITEM 5 - OTHER INFORMATION
Forward Looking Information and Cautionary Statements: Statements in this
filing, and elsewhere, which look forward in time involve risks and
uncertainties which may affect the actual results of operations. The
following important factors, among others, have affected and, in the future,
could affect the Company's actual results: the introduction and acceptance
of new biotechnology and hematology products, the levels and particular
directions of research into cytokines by the Company's customers, the impact
of the growing number of producers of cytokine research products and related
price competition, the retention of hematology OEM and proficiency survey
business, the impact of changes in foreign currency exchange rates, the
outcome of litigation involving the Company and the costs and results of
research and product development efforts of the Company and of companies in
which the Company has invested or with which it has formed strategic
relationships.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS
None.
B. REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended March 31,
2001.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TECHNE CORPORATION
(Company)
Date: May 14, 2001 /s/ Thomas E. Oland
----------------------------
President, Chief Executive and
Financial Officer