McDonaldโs Corporation is an American operator and franchisor of fast food restaurants represented worldwide and the biggest fast food company in the world.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
For the quarterly period ended March 31, 2005
OR
For the transition period from to
Commission File Number 1-5231
McDONALD’S CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)
McDonald’s Plaza
Oak Brook, Illinois
(630) 623-3000
(Registrant’s Telephone Number, Including Area Code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
1,267,477,541
(Number of shares of common stock
outstanding as of March 31, 2005)
INDEX
The following trademarks used herein are the
property of McDonald’s Corporation and its
affiliates or the Company: Boston Market,
Chipotle Mexican Grill and McDonald’s.
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PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEET
In millions, except per share data
Assets
Current assets
Cash and equivalents
Accounts and notes receivable
Inventories, at cost, not in excess of market
Prepaid expenses and other current assets
Total current assets
Other assets
Investments in and advances to affiliates
Goodwill, net
Miscellaneous
Total other assets
Property and equipment
Property and equipment, at cost
Accumulated depreciation and amortization
Net property and equipment
Total assets
Liabilities and shareholders’ equity
Current liabilities
Accounts payable
Income taxes
Other taxes
Accrued interest
Accrued payroll and other liabilities
Current maturities of long-term debt
Total current liabilities
Long-term debt
Other long-term liabilities
Deferred income taxes
Shareholders’ equity
Preferred stock, no par value; authorized – 165.0 million shares; issued – none
Common stock, $.01 par value; authorized – 3.5 billion shares; issued – 1,660.6 million
Additional paid-in capital
Unearned ESOP compensation
Retained earnings
Accumulated other comprehensive income (loss)
Common stock in treasury, at cost; 393.1 and 390.7 million shares
Total shareholders’ equity
Total liabilities and shareholders’ equity
See notes to condensed consolidated financial statements.
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CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
In millions, except per common share data
Revenues
Sales by Company-operated restaurants
Revenues from franchised and affiliated restaurants
Total revenues
Operating costs and expenses
Company-operated restaurant expenses
Franchised restaurants – occupancy expenses
Selling, general & administrative expenses
Other operating expense, net
Total operating costs and expenses
Operating income
Interest expense
Nonoperating (income) expense, net
Income before provision for income taxes
Provision for income taxes
Net income
Net income per common share
Net income per common share–diluted
Weighted average shares
Weighted average shares–diluted
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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
In millions
Operating activities
Adjustments to reconcile to cash provided by operations
Noncash charges and credits:
Depreciation and amortization
Income taxes audit benefit
Share-based compensation
Other
Changes in working capital items
Cash provided by operations
Investing activities
Property and equipment expenditures
Purchases and sales of restaurant businesses and sales of property
Cash used for investing activities
Financing activities
Notes payable and long-term financing issuances and repayments
Treasury stock purchases
Proceeds from stock option exercises
Cash used for financing activities
Cash and equivalents increase (decrease)
Cash and equivalents at beginning of period
Cash and equivalents at end of period
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Basis of Presentation
The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements contained in the Company’s December 31, 2004 Annual Report on Form 10-K. In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation have been included. The results for the quarter ended March 31, 2005 do not necessarily indicate the results that may be expected for the full year.
The results of operations of restaurant businesses purchased and sold were not material to the condensed consolidated financial statements for periods prior to purchase and sale.
Comprehensive Income
The following table presents the components of comprehensive income for the quarters ended March 31, 2005 and 2004:
Other comprehensive income (loss):
Foreign currency translation adjustments
Deferred hedging adjustments
Total other comprehensive income (loss)
Total comprehensive income
Per Common Share Information
Diluted net income per common share is calculated using net income divided by diluted weighted-average shares. Diluted weighted-average shares include weighted-average shares outstanding plus the dilutive effect of share-based employee compensation, calculated using the treasury stock method, of 20.5 million shares and 13.8 million shares for the first quarter 2005 and 2004, respectively. Stock options that were not included in diluted weighted-average shares because they would have been antidilutive were 46.4 million shares and 100.1 million shares for the first quarter 2005 and 2004, respectively.
Share-based Compensation
At March 31, 2005, the Company had share-based compensation plans for employees and nonemployee directors, which authorized the granting of various equity-based incentives including stock options, restricted stock and restricted stock units (RSUs). The number of shares of common stock reserved for issuance under the plans was 214.7 million at March 31, 2005, including
50.2 million available for future grants.
Prior to January 1, 2005, the Company accounted for the plans under the measurement and recognition provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations, as permitted by FASB Statement No. 123, Accounting for Stock-Based Compensation. Accordingly, share-based compensation was included as a pro forma disclosure in the financial statement footnotes.
Effective January 1, 2005, the Company early adopted the fair value recognition provisions of FASB Statement No. 123(R), Share-Based Payment (SFAS No. 123(R)), using the modified-prospective transition method. Under this transition method, compensation cost in 2005 includes the portion vesting in the period for (1) all share-based payments granted prior to, but not vested as of January 1, 2005, based on the grant date fair value estimated in accordance with the original provisions of FASB Statement No. 123 and (2) all share-based payments granted subsequent to January 1, 2005, based on the grant date fair value estimated in accordance with the provisions of SFAS No. 123(R). Results for prior periods have not been restated.
In 2005, in connection with the adoption of SFAS No. 123(R), the Company adjusted the mix of employee long-term incentive compensation by reducing stock options awarded and increasing certain cash-based compensation (primarily annual incentive-based compensation) and other equity-based awards. First quarter 2005 results included pretax expense of $57.4 million ($38.3 million after tax or $0.03 per share) of which $48.1 million related to share-based compensation (stock options and RSUs) and $9.3 million related to the shift of a portion of share-based compensation to cash-based. Compensation expense related to share-based awards is generally
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amortized over the vesting period in selling, general & administrative expenses in the Consolidated statement of income. As of March 31, 2005, there was $283.3 million of total unrecognized compensation cost related to nonvested share-based compensation that is expected to be recognized over a weighted-average period of 2.5 years.
Prior to the adoption of SFAS No. 123(R), the Company presented all benefits of tax deductions resulting from the exercise of share-based compensation as operating cash flows in the Statement of cash flows. SFAS No. 123(R) requires the benefits of tax deductions in excess of the compensation cost recognized for those options (excess tax benefits) to be classified as financing cash flows. First quarter 2005 results included $14.0 million of excess tax benefits as a financing cash inflow.
The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of FASB Statement No. 123 to options granted under the Company’s stock options plans in first quarter 2004.
As reported – net income
Add: Total share-based employee compensation expense included in reported net income, net of related tax effects
Deduct: Total share-based employee compensation expense determined under fair value based method for all awards, net of related tax effects
Pro forma – net income
Net income per share:
As reported – basic
Pro forma – basic
As reported – diluted
Pro forma – diluted
Stock Options
Stock options to purchase common stock are granted with an exercise price equal to the market price of the Company’s stock at the date of grant. Substantially all of the options become exercisable in four equal installments, beginning a year from the date of the grant, and generally expire 10 years from the grant date. Options granted between May 1, 1999 and December 31, 2000 (approximately 36 million options currently outstanding) expire 13 years from the date of grant.
The fair value of each stock option granted is estimated on the date of grant using a closed-form pricing model. The following table presents the weighted-average assumptions used in the option pricing model for the first quarter 2005 and 2004 stock option grants. The expected life of the options represents the period of time the options are expected to be outstanding and is based on historical trends. Expected stock price volatility is based on the historical volatility of the Company’s stock for a period approximating the expected life and the expected dividend yield is based on the Company’s most recent annual dividend payout. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant and has a term equal to the expected life.
Weighted-average assumptions
Expected life of options in years
Expected stock price volatility
Expected dividend yield
Risk-free interest rate
Fair value per option granted
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A summary of the Company’s stock option activity during first quarter 2005 is presented in the following table.
Stock options
Outstanding at December 31, 2004
Granted
Exercised
Forfeited/Expired
Outstanding at March 31, 2005
Exercisable at March 31, 2005
Intrinsic value for stock options is defined as the difference between the current market value and the grant price. During first quarter 2005, the total intrinsic value of stock options exercised was $111.4 million. Cash received from stock options exercised during the quarter was $229.0 million and the actual tax benefit realized for tax deductions from stock options exercised totaled $37.7 million. The Company uses treasury shares purchased under the Company’s share repurchase program to satisfy share-based exercises.
RSUs/Restricted stock
RSUs generally vest 100% at the end of three years and are payable in either shares of common stock or cash, at the Company’s option. Certain executives have RSUs that are performance based. The fair value of each RSU granted is equal to the market price of the Company’s stock at date of grant.
A summary of the activity of the Company’s RSUs during first quarter 2005 is presented in the following table.
Nonvested at December 31, 2004
Vested
Forfeited
Nonvested at March 31, 2005
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Segment Information
The Company primarily operates and franchises McDonald’s restaurants in the food service industry. In addition, the Company operates certain non-McDonald’s brands that are not material to the Company’s overall results.
The following table presents the Company’s revenues and operating income by geographic segment. The APMEA segment represents McDonald’s restaurant operations in Asia/Pacific, Middle East and Africa. The Other segment represents non-McDonald’s brands.
U.S.
Europe
APMEA
Latin America
Canada
Operating income (loss)(1)
Corporate
Total operating income
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
Description of the Business
The Company primarily operates and franchises McDonald’s restaurants. In addition, the Company operates certain non-McDonald’s brands that are not material to the Company’s overall results. Of the more than 30,000 McDonald’s restaurants in over 100 countries, more than 8,000 are operated by the Company, approximately 18,000 are operated by franchisees/licensees and about 4,000 are operated by affiliates. In general, the Company owns the land and building or secures long-term leases for restaurant sites regardless of who operates the restaurant. This ensures long-term occupancy rights and helps control related costs.
Revenues consist of sales by Company-operated restaurants and fees from restaurants operated by franchisees and affiliates. These fees primarily include rent, service fees and/or royalties that are based on a percent of sales, with specified minimum rent payments. Fees vary by type of site, amount of Company investment and local business conditions. These fees, along with occupancy and operating rights, are stipulated in franchise/license agreements that generally have 20-year terms.
The business is managed as distinct geographic segments: United States; Europe; Asia/Pacific, Middle East and Africa (APMEA); Latin America and Canada. In addition, throughout this report we present a segment entitled “Other” that includes non-McDonald’s brands (e.g., Boston Market and Chipotle Mexican Grill). The U.S. and Europe segments account for approximately 70% of total revenues.
Strategic Direction and Financial Performance
In 2003, the Company introduced a comprehensive revitalization plan to increase McDonald’s relevance to today’s consumers as well as improve our financial discipline. We redefined our strategy to emphasize growth through adding more customers to existing restaurants and aligned the System around our customer-focused Plan to Win. The near-term goal of our revitalization plan was to fortify the foundation of our business. This was substantially achieved by year-end 2004.
Over the past two years, we have also exercised increased financial discipline; we paid down debt, reduced capital expenditures and reduced selling, general & administrative expenses as a percent of revenues. In addition, we returned a significant amount of excess cash to shareholders in the form of dividends and share repurchases.
For each quarter of 2004, McDonald’s increased customer visits, improved margins and delivered double-digit growth in operating income and earnings per share. In addition, comparable sales were positive across all geographic segments during each and every quarter.
The Company continued this positive momentum in the first quarter 2005 with solid revenue and operating income growth, on top of last year’s double-digit growth that included one additional day due to leap year.
In March, McDonald’s U.S. business marked its 24th consecutive month of positive comparable sales. These strong comparable sales helped offset higher commodity costs. We will continue to focus on building consumer relevance in the U.S. by providing menu choice and variety, and an exceptional customer experience.
For the first quarter, Europe delivered positive comparable sales results in Germany, the U.K. and France. These results benefited from the change in timing of Easter and related school holidays, from April in 2004 to March in 2005. While we continue to face economic challenges in Germany, our focus remains on offering a balanced menu featuring everyday affordability along with relevant premium menu choices to help build sales and customer traffic. Similarly, initiatives in the U.K. to enhance the image and relevance of our brand are on going. While there is clearly more opportunity and work ahead, the Company is focused on strengthening the performance of our European business.
APMEA also delivered a solid quarter. An ongoing commitment to everyday value balanced with premium products that appeal to local tastes contributed to the segment’s financial results.
The long-term goal of our revitalization plan was to create a differentiated customer experience – one that builds brand loyalty and delivers sustainable, profitable growth for shareholders. Looking forward, consistent with that goal, we are targeting average annual Systemwide sales and revenue growth of 3% to 5%, average annual operating income growth of 6% to 7%, and annual returns on incremental invested capital in the high teens. These targets exclude the impact of foreign currency translation.
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Operating Highlights for the Quarter Included:
Outlook
The Following Definitions Apply to These Terms as Used Throughout This Form 10-Q:
Forward-Looking Statements
A number of factors can affect our business, including the effectiveness of operating initiatives and changes in global and local business and economic conditions. These and other risks are noted in the Forward-Looking Statements at the end of Management’s Discussion and Analysis.
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CONSOLIDATED OPERATING RESULTS
Dollars in millions, except per common share data
n/m Not meaningful
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Net Income and Diluted Net Income per Common Share
For the quarter, net income and diluted net income per common share increased to $727.9 million and $0.56 per share or 42% and 40%, respectively (41% and 40%, respectively in constant currencies). The 2005 results included a $0.13 per share benefit from a lower effective tax rate as well as $0.03 per share of expense related to the early adoption of SFAS No. 123(R) and related incremental compensation.
Diluted weighted average shares outstanding for the first quarter increased due to higher weighted average shares outstanding (stock options exercised exceeded treasury stock purchased in 2004) and a more dilutive effect of outstanding stock options.
During the quarter, the Company repurchased $437 million, or 13.5 million shares, of its common stock.
Accounting Change
Effective January 1, 2005, the Company adopted SFAS No. 123(R), although not required to do so until 2006. This new accounting standard requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. The Company adopted this accounting treatment prospectively. Prior to the adoption of SFAS No. 123(R), the Company, like most other U.S. companies, accounted for share-based payments to employees under APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. Accordingly, share-based compensation was included as pro forma disclosure in the financial statement footnotes. The Company’s first quarter 2004 pro forma earnings, as reported in Form 10-Q, included $0.03 per share of share-based compensation expense.
In 2005, in connection with its adoption of SFAS No. 123(R), the Company adjusted the mix of employee long-term incentive compensation by reducing stock options awarded and increasing certain cash-based compensation (primarily annual incentive-based compensation) and other equity based awards. First quarter 2005 results included pretax expense of $57.4 million (or $0.03 per share) of which $48.1 million related to share-based compensation, stock options and RSUs, and $9.3 million related to the shift of a portion of share-based compensation to primarily cash-based incentive compensation.
Impact of Foreign Currency Translation on Reported Results
IMPACT OF FOREIGN CURRENCY TRANSLATION ON REPORTED RESULTS
Quarters Ended March 31,
Combined operating margins*
Foreign currency translation had a positive impact on the growth rates of consolidated revenues, operating income and net income for the quarter, primarily due to the strengthening of the Euro, as well as other major currencies. Foreign currency translation had no impact on reported earnings per share due to rounding.
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Revenues consist of sales by Company-operated restaurants and fees from restaurants operated by franchisees and affiliates. These fees primarily include rent, service fees and/or royalties that are based on a percent of sales, with specified minimum rent payments.
REVENUES
Dollars in millions
Company-operated sales
Total
Franchised and affiliated revenues
Consolidated revenues increased 9% (6% in constant currencies), primarily due to positive comparable sales for each month of the quarter. Revenues in 2004 included an extra day due to leap year.
In the U.S., the increase in revenues was driven by multiple initiatives that are delivering variety, value, choice and convenience to our customers. We remain confident that our combination of initiatives will continue to build on the foundation established and deliver solid results throughout 2005.
Europe’s increase in revenues was due to strong comparable sales in Russia, which is entirely Company-operated, and positive comparable sales in the U.K., Germany and France. Europe’s first quarter revenue performance also reflects a benefit from the change in timing of Easter and related school holidays, from April in 2004 to March in 2005. Revenue growth for the second quarter 2005 will be negatively impacted by this same holiday shift.
In APMEA, the increase in revenues was primarily due to strong comparable sales in Taiwan and Australia, as well as expansion in China.
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The following table presents the percent change in comparable sales for the quarters ended March 31, 2005 and 2004:
COMPARABLE SALES – McDONALD’S RESTAURANTS*
McDonald’s Restaurants
* Excludes non-McDonald’s brands.
The following table present Systemwide sales growth rates for the quarter ended March 31, 2005:
SYSTEMWIDE SALES PERCENT INCREASE / (DECREASE)
Total sales
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Operating Margins
COMPANY-OPERATED AND FRANCHISED RESTAURANT MARGINS –
McDONALD’S RESTAURANTS
Company-operated
Franchised
Combined operating margin dollars increased $105.8 million or 8% for the quarter (6% in constant currencies). The U.S. and Europe segments accounted for almost 85% of the combined margin dollars in both years and approximately 75% of the increase.
In the U.S., Company-operated margin percent decreased for the quarter due to higher commodity costs, higher labor-related costs, partly due to increased staffing levels as well as increased compensation for store managers, and increased rent expense. This was partly offset by positive comparable sales. Commodity cost pressures are expected to continue, with the impact lessening in the second half of the year.
In Europe, the Company-operated margin percent decreased partly due to higher beef costs across the segment, and brand building marketing and promotional initiatives in the U.K. and Germany. This was partly offset by positive comparable sales. Beef cost pressures are expected to lessen in the second half of the year.
In APMEA, the Company-operated margin percent increased due to improved performance in China and Hong Kong, partly offset by poor results in South Korea.
The following table presents margin components as a percent of sales:
COMPANY-OPERATED RESTAURANT EXPENSES AND MARGINS AS A PERCENT OF
SALES – McDONALD’S RESTAURANTS
Food & paper
Payroll & employee benefits
Occupancy & other operating expenses
Total expenses
Company-operated margins
The consolidated Franchised margin percent increased for the quarter primarily due to positive comparable sales in the U.S. and Europe, but reflected higher occupancy costs, due in part to an increased proportion of leased sites.
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Selling, General & Administrative Expenses
Selling, general & administrative expenses increased 14% for the quarter (12% in constant currencies). The share-based and related incremental compensation expense due to the early adoption of SFAS 123(R) accounted for substantially all of the constant currency increase. Selling, general & administrative expenses as a percent of revenues were 10.8% in the first quarter 2005 compared with 10.4% in first quarter 2004 and as a percent of Systemwide sales were 4.0% for 2005 compared with 3.9% for 2004. The share-based and related incremental compensation expense increased these ratios 1.1 percentage points and 0.4 percentage points, respectively, in 2005.
Other Operating (Income) Expense, Net
OTHER OPERATING (INCOME) EXPENSE, NET
Gains on sales of restaurant businesses
Equity in earnings of unconsolidated affiliates
Impairment and other charges (credits)
Other expense
Equity in earnings of unconsolidated affiliates increased for the quarter primarily due to positive results in the U.S. and improved performance from our Japanese affiliate.
Impairment and other charges (credits) included a favorable adjustment to certain restructuring and other liabilities established in 2001 and 2002 due to lower than originally anticipated employee-related and lease termination costs.
Other expense for 2005 reflected a $24.1 million charge related to a supply chain arrangement in Europe.
Operating Income
OPERATING INCOME
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The following discussion on Operating Income relates to Pro Forma % Inc / (Dec) Excluding Currency Translation in the table above.
In the U.S., results increased primarily due to higher combined operating margin dollars, partly offset by higher selling, general & administrative expenses, which included certain information technology expenses previously recorded in the Corporate segment.
In Europe, results included the supply chain charge of $24.1 million which negatively impacted the growth rate by approximately 8 percentage points. In addition, strong results in France were offset by weak results in Germany.
The APMEA segment’s increase was primarily due to positive results in China as well as stronger performance in Japan, Hong Kong and Taiwan, partly offset by poor performance in South Korea.
Corporate results in 2005 benefited from the favorable adjustment to certain liabilities established in 2001 and 2002 previously discussed in the “Other Operating (Income) Expense, Net” section, certain information technology expenses that were shifted to the U.S. segment beginning in 2005, and lower incentive-based compensation.
INTEREST, NONOPERATING (INCOME) EXPENSE AND INCOME TAXES
Interest expense decreased for the quarter due to lower average debt levels, partly offset by higher average interest rates and stronger foreign currencies.
In 2005, nonoperating (income) expense included higher interest income and lower foreign currency translation losses.
The effective income tax rate was 12.3% for first quarter 2005 compared with 32.5% in 2004. The lower effective income tax rate in 2005 included a benefit of $178.8 million primarily due to a favorable audit settlement in late March of the Company’s 2000-2002 U.S. tax returns.
CASH FLOWS AND FINANCIAL POSITION
The Company generates significant cash from operations and has substantial credit capacity to fund operating and discretionary spending such as capital expenditures, debt repayments, dividends and share repurchases.
Cash provided by operations totaled $793.0 million and exceeded capital expenditures by $550.6 million for the quarter. Cash provided by operations decreased $72.1 million compared to first quarter 2004 due to changes in working capital including higher income tax and incentive compensation payments, partly offset by strong operating results, primarily in the U.S.
Cash used for investing activities totaled $285.2 million for the quarter, an increase of $137.9 million due to higher capital spending. Capital expenditures increased $62.1 million or 34% for the quarter consistent with the Company’s strategy to increase investment in existing restaurants, primarily in the U.S.
Cash used for financing activities totaled $531.1 million for the quarter, an increase of $290.1 million primarily due to net debt repayments and higher share repurchases, partly offset by higher proceeds from stock options exercised.
Debt obligations at March 31, 2005 totaled $8,658.8 million compared with $9,219.5 million at December 31, 2004. The decrease in 2005 was due to net repayments of $358.2 million, the impact of changes in exchange rates on foreign currency-denominated debt of $161.0 million and SFAS No. 133 noncash fair value adjustments of $41.5 million.
As a result of the above activity, the Company’s cash balance decreased $23.3 million from December 31, 2004 to
$1,356.5 million at March 31, 2005. For the full year, the Company expects capital expenditures to be approximately $1.7 billion, debt repayments to be approximately $600 million to $800 million and to return at least $1.3 billion to shareholders through dividends and share repurchases in 2005. The guidance related to debt repayments does not take into account any actions that might be taken under the American Jobs Creation Act of 2004.
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RESTAURANT INFORMATION
The following table presents restaurant information by ownership type:
Operated by franchisees
Operated by the Company
Operated by affiliates
Systemwide restaurants
FORWARD-LOOKING STATEMENTS
This report includes forward-looking statements about our operating plans and future performance, including those under Outlook. These statements use such words as “may,” “will,” “expect,” “believe,” “plan” and other similar terminology. They reflect management’s current expectations about future events and speak only as of the date of this report. We undertake no obligation to publicly update or revise them. Management’s expectations may change or not be realized and, in any event, they are subject to risks, uncertainties and changes in circumstances that are difficult to predict and often beyond our control. For these reasons, you should not place undue reliance on forward-looking statements. The following are some of the considerations and factors that could change our expectations (or the underlying assumptions) or affect our ability to realize them:
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
There were no material changes to the disclosure made in the Annual Report on Form 10-K for the year ended December 31, 2004 regarding this matter.
Item 4. Controls and Procedures
An evaluation was conducted under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of March 31, 2005. Based on that evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of such date to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Such officers also confirm that there was no change in the Company’s internal control over financial reporting during the quarter ended March 31, 2005 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
There were no material changes to the disclosure made in our Annual Report on Form 10-K for the year ended December 31, 2004 regarding these matters.
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
The following table presents information related to repurchases of common stock the Company made during the three months ended March 31, 2005.
Issuer Purchases of Equity Securities
January 1-31, 2005
February 1-28, 2005
March 1-31, 2005
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Item 6. Exhibits
Exhibit Number
Description
21
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
May 6, 2005
/s/ Matthew H. Paull
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