LDSH Ladish Co., Inc. (MM)

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended March 31, 2010

Commission File Number 1-34495

Ladish Co., Inc.

Wisconsin		31-1145953
(State or other Jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

5481 South Packard Avenue, Cudahy, Wisconsin		53110
(Address of principal executive offices)		(Zip Code)

(414) 747-2611

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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 o 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 the 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 þ		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding at March 31, 2010
Common Stock, $0.01 Par Value		15,703,004

 

 

PART I — FINANCIAL INFORMATION

Ladish Co., Inc.
Condensed Consolidated Statements of Operations

(Dollars in Thousands, Except Per Share Data)

		For the Three Months
		Ended March 31,
		(unaudited)
		2010				2009
Net sales		$	98,948			$	105,739
Cost of sales			85,285				98,415
Gross profit			13,663				7,324
Selling, general and administrative expenses			4,200				4,042
Income from operations			9,463				3,282
Other income (expense):
Interest expense			(1,475	)			(845	)
Other, net			250				(434	)
Income before income tax provision			8,238				2,003
Income tax provision			2,886				803
Net income			5,352				1,200
Noncontrolling interest in net earnings of subsidiary			4				—
Net income attributable to the controlling interest		$	5,348			$	1,200
Basic earnings per share		$	0.34			$	0.08
Diluted earnings per share		$	0.34			$	0.08
Basic weighted average shares outstanding			15,858,560				15,901,216
Diluted weighted average shares outstanding			15,859,650				15,901,247

See accompanying notes to condensed consolidated financial statements.

Ladish Co., Inc.
Condensed Consolidated Balance Sheets

(Dollars in Thousands, Except Share Data)

		March 31,				December 31,
		2010				2009
		(unaudited)
Assets:
Current assets:
Cash and cash equivalents		$	26,508			$	19,917
Accounts receivable, less allowance of $75 at each date			73,214				59,382
Inventories			86,669				92,697
Deferred income taxes			5,145				5,144
Prepaid expenses and other current assets			4,147				6,118
Total current assets			195,683				183,258
Property, plant and equipment:
Land and improvements			6,908				6,905
Buildings and improvements			60,492				60,416
Machinery and equipment			241,669				240,352
Construction in progress			58,861				58,451
			367,930				366,124
Less — accumulated depreciation			(171,372	)			(167,688	)
Net property, plant and equipment			196,558				198,436
Deferred income taxes			24,928				26,522
Goodwill			37,571				37,571
Other intangible assets, net			19,365				19,465
Other assets			4,353				4,262
Total assets		$	478,458			$	469,514
Liabilities:
Current liabilities:
Accounts payable		$	26,916			$	23,613
Senior notes			5,714				5,714
Accrued liabilities:
Pensions			273				259
Postretirement benefits			3,464				3,464
Officers’ deferred compensation			155				155
Wages and salaries			5,721				3,314
Taxes, other than income taxes			624				289
Interest			1,181				1,355
Profit sharing			513				611
Paid progress billings			995				2,428
Other			5,738				4,541
Total current liabilities			51,294				45,743
Noncurrent liabilities:
Senior notes			84,286				84,286
Pensions			70,797				69,653
Postretirement benefits			30,059				30,215
Officers’ deferred compensation			9,447				9,276
Other noncurrent liabilities			4,210				4,220
Total liabilities			250,093				243,393
Equity:
Stockholders’ equity:
Common stock — authorized 100,000,000, issued 15,907,552 shares at each date of $.01 par value			159				159
Additional paid-in capital			153,292				153,292
Retained earnings			150,726				145,378
Treasury stock, 204,548 and 4,548 shares of common stock at each date at cost			(3,283	)			(33	)
Accumulated other comprehensive loss			(73,071	)			(73,214	)
Total stockholders’ equity			227,823				225,582
Noncontrolling interest in equity of subsidiary			542				539
Total equity			228,365				226,121
Total liabilities and equity		$	478,458			$	469,514

See accompanying notes to condensed consolidated financial statements.

Ladish Co., Inc.
Condensed Consolidated Statements of Cash Flows

(Dollars in Thousands)

		For the Three Months
		Ended March 31,
		(unaudited)
		2010				2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income attributable to the controlling interest		$	5,348			$	1,200
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation			3,838				3,835
Amortization of intangibles			100				136
Non-cash deferred compensation			93				(133	)
Deferred income taxes			1,560				383
Noncontrolling interest in net earnings of subsidiary			4				—
Gain on purchase of stock — noncontrolling interest			—				(16	)
(Gain) Loss on disposal of property, plant and equipment			(22	)			298
Changes in assets and liabilities:
Accounts receivable			(13,811	)			5,330
Inventories			6,043				6,185
Other assets			1,888				(672	)
Accounts payable and accrued liabilities			5,530				(4,178	)
Other liabilities			1,144				1,359
Net cash provided by operating activities			11,715				13,727
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment			(1,929	)			(4,475	)
Proceeds from sale of property, plant and equipment			48				32
Purchase of ZKM stock — noncontrolling interest			—				(32	)
Net cash used in investing activities			(1,881	)			(4,475	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of Facility			—				(10,700	)
Retirement of capital lease obligations			—				(97	)
Purchase of treasury stock			(3,250	)			—
Net cash used in financing activities			(3,250	)			(10,797	)
Effect of exchange rate changes on cash and cash equivalents			7				(467	)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			6,591				(2,012	)
CASH AND CASH EQUIVALENTS, beginning of period			19,917				4,903
CASH AND CASH EQUIVALENTS, end of period		$	26,508			$	2,891

See accompanying notes to condensed consolidated financial statements.

Ladish Co., Inc.
Notes to Condensed Consolidated Financial Statements

(Dollars in Thousands, Except Share Data)

(1) Basis of Presentation

In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly its financial position at March 31, 2010 and its results of operations and cash flows for the interim periods presented. All adjustments are of a normal recurring nature.

The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with Article 10 of Regulation S-X and therefore do not include all disclosures required for annual financial statements presented in conformity with accounting principles generally accepted in the United States of America. The Company has filed a report on Form 10-K which contains audited consolidated financial statements that include all information and footnotes necessary for a fair presentation of its financial position at December 31, 2009 and 2008, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years ended December 31, 2009, 2008 and 2007.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results will likely differ from those estimates, but management believes such differences will not be material.

The results of operations for any interim period are not necessarily indicative of the results to be expected for a full year.

(2) Inventories

		March 31,				December 31,
		2010				2009
Raw materials		$	13,915			$	18,038
Work-in-process and finished goods			75,975				77,209
Less progress payments			(3,221	)			(2,550	)
Total inventories		$	86,669			$	92,697

(3) Interest and Income Tax Payments

		For the Three Months
		Ended March 31,
		2010				2009
Interest paid		$	1,686			$	1,754
Income taxes paid			204				94

(4) Cash and Cash Equivalents

Cash in excess of daily requirements is invested in marketable securities consisting of commercial paper and money market instruments which mature in three months or less. Such investments are deemed to be cash equivalents due to the high liquidity and short term duration of such money market accounts. The Company maintains deposits in financial institutions that consistently exceed the FDIC limit of $250. The Company has not experienced any losses in such accounts and management believes the Company is not at significant risk. Outstanding payroll and accounts payable checks related to certain bank accounts are recorded as accounts payable on the balance sheets. These checks amounted to $959 and $105 as of March 31, 2010 and December 31, 2009, respectively.

(5) Revenue Recognition

Sales revenue is recognized when the title and risk of loss have passed to the customer, there is pervasive evidence of an arrangement, delivery has occurred or the services have been provided, the sales price is determinable and collectibility is reasonably assured. This occurs at the time of shipment. Net sales include freight out as well as reductions for returns and allowances, and sales discounts. Progress payments on contracts are recognized as reductions of the related inventory costs. Progress payments in excess of inventory costs are reflected as a liability. The Company does not recognize revenue from the disposal of by-products. Any proceeds received from by-product disposal are considered an offset to cost of sales. The allowance for doubtful accounts is based on a review of sales reports, open deduction reports, trends in collections, historical experience and existing economic conditions. Bad debt write-offs occur upon notice of insolvency or other evidence of business closure. The Company has reviewed SEC Staff Accounting Bulletin No. 104 and believes its revenue recognition policy to be in compliance with FASB ASC 605-10-S99-1.

(6) Income Taxes

The year-to-date tax provision for 2010 was based on an annualized combined federal, state and foreign effective rate of 35% in contrast to an effective tax rate of 40% for the same period in 2009. The lower tax rate in 2010 is primarily attributable to the increase in the federal domestic production activities deduction from 6% of taxable income in 2009 to 9% in 2010 along with lower state taxes due to an increase in apportionment of Wisconsin taxable income in 2010.

(7) Pension and Postretirement Benefits

The components of net periodic benefit costs recognized for the three-month periods ended March 31, 2010 and 2009 are presented in the table below.

										Other
		Pension Benefits								Postretirement Benefits
		2010				2009				2010				2009
Service cost		$	401			$	337			$	57			$	48
Interest cost			2,731				2,963				413				476
Expected return on plan assets			(3,059	)			(3,316	)			—				—
Amortization of prior service cost			123				98				3				3
Amortization of the net loss			2,043				1,318				25				1
Net periodic benefit cost		$	2,239			$	1,400			$	498			$	528

The Company previously disclosed in its financial statements for the year ended December 31, 2009, that it expected to contribute $7,456 to its pension plans in 2010. As of March 31, 2010, the Company has made $873 of cash contributions to the pension plans versus $487 during the same period in 2009. The Company currently estimates its total contributions to its pension plans in 2010 will be $7,456.

In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 was enacted. The Company has concluded that certain benefits provided by its postretirement benefit plan are actuarially equivalent to Medicare Part D under the Act and has filed a refund request with the Claims Management Services, a division of the Health and Human Services Department. In the first three months of 2010 and 2009, respectively, the Company received refunds of $54 and $159.

(8) Debt

On May 16, 2006, the Company sold $40,000 of Series B senior notes (the “Series B Notes”) in a private placement to certain institutional investors. The Series B Notes are unsecured and bear interest at a rate of 6.14% per annum with interest being paid semiannually. The Series B Notes have a ten-year duration with the principal amortizing equally over the duration after the fourth year.

On September 2, 2008, the Company sold $50,000 of Series C senior notes (the “Series C Notes”) in a private placement to certain institutional investors. The Series C Notes are unsecured and bear interest at a rate of 6.41% per annum with interest being paid semiannually. The Series C Notes have a seven-year duration with the principal amortizing equally over the duration after the third year.

The Company’s Series B and Series C Notes contain financial covenants which (a) limit the incurrence of certain additional debt; (b) require a certain level of consolidated adjusted net worth; (c) require a minimum fixed charges coverage ratio; and (d) require a limited amount of funded debt to consolidated cash flow. The covenant on incurrence of additional debt limits funded debt to 60% of total capitalization. At March 31, 2010, funded debt at Ladish was at 26% of total capitalization. This covenant also limits priority debt to 20% of adjusted net worth. Ladish had no priority debt at March 31, 2010. The covenant on adjusted net worth requires a minimum of $112,829. At March 31, 2010, Ladish had $261,888 of adjusted net worth. The covenant on fixed charges coverage ratio requires that consolidated cash flow to fixed charges be a minimum of 2.00. The Company’s fixed charges coverage ratio at March 31, 2010 was 5.44. The final covenant on net debt to consolidated cash flow allows for a maximum level of 4.00. At March 31, 2010, the Company’s actual level was 2.05. The Note Agreement for the Series B and Series C Notes also contains customary representations and warranties and events of default.

At March 31, 2010, the Company was in compliance with all covenants in the Series B and Series C Notes and the Facility.

The Company and a syndicate of lenders have entered into a revolving credit facility (the “Facility”) which was renewed on April 10, 2009. The Facility consists of a $35,000 unsecured revolving line of credit which bears interest at a rate of LIBOR plus 2.00% or at a base rate. At March 31, 2010, there were no borrowings under the Facility and $35,000 was available pursuant to the terms of the Facility. The Facility had a maturity date of April 9, 2010.

On July 31, 2009, the Company and the syndicate of lenders participating in the Facility entered into Amendment No. 1 to the Facility. This Amendment, effective as of the date of execution, modified the covenant on maximum indebtedness to EBITDA by deleting that covenant and substituting in its place a covenant on minimum EBITDA. In addition, the lenders and the Company agreed to modify the definition of EBITDA for this covenant by now allowing the Company to add back non-cash charges to EBITDA.

The Facility also contains certain financial covenants which (a) require a minimum amount of modified EBITDA and (b) require a minimum fixed charge coverage ratio of 1.7x. At March 31, 2010, the Company was in compliance with the minimum modified EBITDA and had a fixed charge coverage ratio of 7.01x. The Facility also contains customary representations and warranties and events of default.

On April 8, 2010, the Company and the syndicate of lenders participating in the Facility entered into Amendment No. 2 to the Facility. This Amendment, effective as of April 8, 2010, modified the covenant on minimum EBITDA by deleting that covenant and substituting in its place a covenant on the ratio of net debt to EBITDA. The amended Facility has a maturity date of April 7, 2011.

(9) Earnings Per Share

The incremental difference between basic weighted average shares outstanding and diluted weighted average shares outstanding is due to the dilutive impact of outstanding options.

(10) Stockholders’ Equity

The Company has a Stock Option Plan (the “Plan”) that covers certain employees. Under the Plan, incentive stock options for up to 983,333 shares may be granted to employees of the Company, of which 943,833 options have been granted. These options expire ten years from the grant date. Options granted vest over two years. There were no options granted and no options were exercised in the three months ended March 31, 2010. As of March 31, 2010, 4,548 options granted under the Plan remain outstanding and exercisable.

(11) Legal Proceedings

From time to time the Company is involved in legal proceedings relating to claims arising out of its operations in the normal course of business. Although the Company believes that there are no material legal proceedings pending or threatened against the Company or any of its properties, the Company has been named as a defendant in a number of asbestos cases. As of the date of this filing, the Company has eleven individual claims pending in Mississippi, two individual claims pending in Illinois and one individual claim pending in Wisconsin. The Company has never manufactured or processed asbestos. The Company’s only exposure to asbestos involves products the Company purchased from third parties. Given that the consortium of insurers are handling the defense of the Company, combined with the lack of actual exposure or prior negative judgments, the Company has not made any provision in its financial statements for the asbestos litigation.

The Company is also participating in an investigation initiated by U.S. Customs & Border Protection (“Customs”) into duty drawback claims filed on behalf of the Company by its former export agent. The Company is cooperating with Customs in this investigation and has voluntarily suspended its duty drawback claims. Based upon its internal investigation, the Company believes any errors or omissions with respect to its filings were solely attributable to its former export agent. The Company intends to continue to cooperate with Customs in resolving this matter.

(12) New Accounting Pronouncements

None.

(13) Subsequent Events

On April 8, 2010, the Company and the syndicate of lenders participating in the Facility entered into Amendment No. 2 to the Facility. This Amendment, effective as of April 8, 2010, modified the covenant on minimum EBITDA by deleting that covenant and substituting in its place a covenant on the ratio of net debt to EBITDA. The amended Facility has a maturity date of April 7, 2011.

The Company is not aware of any other subsequent events which would require recognition or disclosure in the financial statements.

MANAGEMENT’S DISCUSSION
AND ANALYSIS OF RESULTS OF OPERATIONS AND
CHANGES IN FINANCIAL POSITION
(Dollars in Thousands, except per share data)

RESULTS OF OPERATIONS

First Quarter 2010 Compared to First Quarter 2009

Net sales for the three months ended March 31, 2010 were $98,948 compared to $105,739 for the same period in 2009. The 6.4% decrease in net sales for the first quarter of 2010 versus 2009 was due to the decline in jet engine and industrial markets served by the Company, partially offset by the growth in general aerospace markets. Gross profit for the first quarter of 2010 was 13.8% of net sales in contrast to 6.9% of net sales in the first quarter of 2009. The increase in gross profit in the first quarter of 2010 is primarily a result of improved productivity, lower employment levels and improved by-product sales partially offset by the lack of fixed cost absorption caused by the reduced level of net sales.

Selling, general and administrative expenses were $4,200 and $4,042 and, as a percentage of net sales, were 4.2% and 3.8% for the first quarters of 2010 and 2009, respectively. The percentage increase in selling, general and administrative expenses was attributed to the 6.4% decrease in net sales and increased benefit expense in 2010.

Interest expense for the first quarter of 2010 was $1,475 in contrast to $845 for the same period in 2009. The higher interest expense in 2010 is due primarily to reduced capitalization of interest expense on capital projects. During the first quarter of 2010, the Company’s revolving line of credit had an interest rate equal to the LIBOR rate plus 2.00% or at a base rate. Series B and Series C senior notes bore interest at the rate of 6.14% and 6.41%, respectively. The Company had no borrowings under the revolving line of credit facility and had $90,000 of senior notes outstanding at the end of the first quarter of 2010.

Pretax income for the first quarter of 2010 was $8,238 in contrast to $2,003 for the same period in 2009. The increase in pretax income was due to the growth of by-product sales, significantly reduced expenses associated with employment reductions and reduced utility costs.

The 2010 and 2009 first quarter income tax provisions are based on effective tax rates of 35% and 40%, respectively. The lower tax rate in 2010 is primarily attributable to the increase in the federal domestic production activities deduction from 6% of taxable income in 2009 to 9% in 2010 along with lower state taxes due to an increase in apportionment of Wisconsin taxable income in 2010.

The Company’s net income for the first quarter of 2010 was $5,348, an increase from $1,200 in net income for the same quarter of 2009. Profitability increased from the prior period due to the lower employment costs, improved productivity, higher by-product sales and lower utility costs. The Company’s contract backlog at March 31, 2010 was $503,298 in comparison to backlogs of $523,258 and $504,207 at March 31, 2009 and December 31, 2009, respectively.

Liquidity and Capital Resources

The Company’s cash position as of March 31, 2010 was $6,591 more than it was at December 31, 2009. For the first three months of 2010, the Company generated $11,715 of cash from operating activities in contrast to $13,727 of cash from operations in the same period of 2009. The Company expended $1,929 and $4,475 of cash on capital expenditures in the first three months of 2010 and 2009, respectively. The Company expects capital expenditures for the remainder of 2010 will be at a reduced level. The Company also expended $3,250 in the first quarter of 2010 on the repurchase of 200,000 shares of the common stock of the Company.

On May 16, 2006, the Company sold $40,000 of Series B Notes in a private placement to certain institutional investors. The Series B Notes are unsecured and bear interest at a rate of 6.14% per annum with interest being paid semiannually. The Series B Notes have a ten-year duration with the principal amortizing equally over the duration after the fourth year.

On September 2, 2008, the Company sold $50,000 of Series C Notes in a private placement to certain institutional investors. The Series C Notes are unsecured and bear interest at a rate of 6.41% per annum with interest being paid semiannually. The Series C Notes have a seven-year duration with the principal amortizing equally over the duration after the third year.

The Company’s Series B and Series C Notes contain financial covenants which (a) limit the incurrence of certain additional debt; (b) require a certain level of consolidated adjusted net worth; (c) require a minimum fixed charges coverage ratio; and (d) require a limited amount of funded debt to consolidated cash flow. The covenant on incurrence of additional debt limits funded debt to 60% of total capitalization. At March 31, 2010, funded debt at Ladish was at 26% of total capitalization. This covenant also limits priority debt to 20% of adjusted net worth. Ladish had no priority debt at March 31, 2010. The covenant on adjusted net worth requires a minimum of $112,829. At March 31, 2010, Ladish had $261,888 of adjusted net worth. The covenant on fixed charges coverage ratio requires that consolidated cash flow to fixed charges be a minimum of 2.00. The Company’s fixed charges coverage ratio at March 31, 2010 was 5.44. The final covenant on net debt to consolidated cash flow allows for a maximum level of 4.00. At March 31, 2010, the Company’s actual level was 2.05. The Note Agreement for the Series B and Series C Notes also contains customary representations and warranties and events of default.

At March 31, 2010, the Company was in compliance with all covenants in the Series B and Series C Notes and the Facility.

In addition, the Company and a syndicate of lenders have entered into the Facility which was renewed on April 10, 2009. The Facility consists of a $35,000 unsecured revolving line of credit which bears interest at a rate of LIBOR plus 2.00% or at a base rate. At March 31, 2010, there were no borrowings under the Facility and $35,000 of credit was available pursuant to the terms of the Facility. The Facility had a maturity date of April 9, 2010.

On July 31, 2009, the Company and the syndicate of lenders participating in the Facility entered into Amendment No. 1 to the Facility. This amendment, effective as of the date of execution, modified the covenant on maximum indebtedness to EBITDA by deleting that covenant and substituting in its place a covenant on minimum EBITDA. In addition, the lenders and the Company agreed to modify the definition of EBITDA for this covenant by now allowing the Company to add back non-cash charges to EBITDA.

The Facility also contains certain financial covenants which (a) require a minimum amount of modified EBITDA and (b) require a minimum fixed charge coverage ratio of 1.7x. At March 31, 2010, the Company was in compliance with the minimum modified EBITDA and had a fixed charge coverage ratio of 7.01x. The Facility also contains customary representations and warranties and events of default.

On April 8, 2010, the Company and the syndicate of lenders participating in the Facility entered into Amendment No. 2 to the Facility. This Amendment, effective as of April 8, 2010, modified the covenant on minimum EBITDA by deleting that covenant and substituting in its place a covenant on the ratio of net debt to EBITDA. The amended Facility has a maturity date of April 7, 2011.

As of March 31, 2010 and December 31, 2009, the Company had net deferred tax assets of $30,073 and $31,666, respectively. Realization of net deferred tax assets is dependent upon the Company generating sufficient taxable income in future periods. In determining that realization of net deferred tax assets was more likely than not, the Company has given consideration to a number of factors including its recent earnings history, expectations for earnings in the future, the timing of reversal of temporary differences and tax planning strategies available to the Company. If, in the future, the Company determines that it is no longer more likely than not that net deferred tax assets will be realized, a valuation allowance will be established against all or part of the net deferred tax assets with an offsetting charge to the income tax provision.

The Company’s market capitalization at March 31, 2010 was $316,573. The increase in the trading price of the Company’s common stock is believed to be related to overall improvement in the domestic equity markets and aerospace stocks in particular rather than any direct assessment of the Company.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company believes that its exposure to market risk related to changes in foreign currency exchange rates and trade accounts receivable is immaterial as the vast majority of the Company’s sales are made in U.S. dollars. The Company does not consider itself subject to the market risks addressed by Item 305 of Regulation S-K.

Any statements contained herein that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and involve risks and uncertainties. These forward-looking statements include expectations, beliefs, plans, objectives, future financial performance, estimates, projections, goals and forecasts. Potential factors which could cause the Company’s actual results of operations to differ materially from those in the forward-looking statements include:

•		Market conditions and demand for the Company’s products
•		Interest rates and capital costs
•		Unstable governments and business conditions in emerging economies
•		Legal, regulatory and environmental issues
•		Health care costs
•		Competition
•		Technologies
•		Raw material and energy prices
•		Taxes

Any forward-looking statement speaks only as of the date on which such statement is made. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made.

Item 4. Controls and Procedures

Under the direction of the principal executive officer and principal financial officer, the Company has evaluated the effectiveness of its disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of March 31, 2010. Based on that evaluation, the chief executive officer and the chief financial officer have concluded that the Company’s disclosure controls and procedures were effective.

There were no significant changes in the Company’s internal controls over financial reporting or in other factors that could significantly affect these controls during the quarter ended March 31, 2010, including any corrective actions with regard to significant deficiencies and material weaknesses.

PART II — OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of the stockholders during the period covered by this report.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit 31.1 is the written statement of the chief executive officer of the Company certifying this Form 10-Q complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934.

Exhibit 31.2 is the written statement of the chief financial officer of the Company certifying this Form 10-Q complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934.

Exhibit 32.1 is the written statement of the chief executive officer and chief financial officer of the Company pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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.

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