Form 10-Q
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ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Lancaster Colony Corporation
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(Exact name of registrant as specified in its charter)
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Ohio
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13-1955943
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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37 West Broad Street
Columbus, Ohio
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43215
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(Address of principal executive offices)
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(Zip Code)
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614-224-7141
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(Registrant’s telephone number, including area code)
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Large Accelerated filer
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ý
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Accelerated filer
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¨
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Non-accelerated filer
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o
(Do not check if a smaller reporting company)
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Smaller Reporting Company
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¨
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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Item 1A.
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Item 2.
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Item 5.
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Item 6.
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(Amounts in thousands, except share data)
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September 30,
2016 |
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June 30,
2016 |
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ASSETS
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Current Assets:
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Cash and equivalents
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$
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145,747
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$
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118,080
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Receivables (less allowance for doubtful accounts, September-$90; June-$125)
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70,691
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66,006
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Inventories:
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Raw materials
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31,659
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26,153
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Finished goods
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58,106
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49,944
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Total inventories
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89,765
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76,097
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Other current assets
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4,071
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7,644
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Total current assets
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310,274
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267,827
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Property, Plant and Equipment:
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Land, buildings and improvements
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117,596
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116,858
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Machinery and equipment
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265,741
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263,336
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Total cost
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383,337
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380,194
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Less accumulated depreciation
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215,458
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210,599
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Property, plant and equipment-net
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167,879
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169,595
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Other Assets:
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Goodwill
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143,788
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143,788
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Other intangible assets-net
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44,175
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44,866
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Other noncurrent assets
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8,252
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8,656
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Total
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$
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674,368
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$
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634,732
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LIABILITIES AND SHAREHOLDERS’ EQUITY
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Current Liabilities:
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Accounts payable
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$
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41,540
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$
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39,931
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Accrued liabilities
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51,242
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33,072
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Total current liabilities
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92,782
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73,003
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Other Noncurrent Liabilities
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26,794
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26,698
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Deferred Income Taxes
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20,287
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21,433
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Commitments and Contingencies
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Shareholders’ Equity:
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Preferred stock-authorized 3,050,000 shares; outstanding-none
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Common stock-authorized 75,000,000 shares; outstanding-September-27,423,599 shares; June-27,423,550 shares
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111,824
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110,677
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Retained earnings
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1,170,027
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1,150,337
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Accumulated other comprehensive loss
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(11,272
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)
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(11,350
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)
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Common stock in treasury, at cost
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(736,074
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)
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(736,066
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)
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Total shareholders’ equity
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534,505
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513,598
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Total
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$
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674,368
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$
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634,732
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Three Months Ended
September 30, |
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(Amounts in thousands, except per share data)
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2016
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2015
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Net Sales
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$
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291,361
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$
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294,085
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Cost of Sales
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210,727
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226,118
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Gross Profit
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80,634
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67,967
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Selling, General and Administrative Expenses
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29,880
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26,079
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Operating Income
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50,754
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41,888
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Other, Net
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87
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122
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Income Before Income Taxes
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50,841
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42,010
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Taxes Based on Income
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17,441
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14,382
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Net Income
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$
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33,400
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$
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27,628
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Net Income Per Common Share:
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Basic and diluted
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$
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1.22
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$
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1.01
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Cash Dividends Per Common Share
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$
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0.50
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$
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0.46
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Weighted Average Common Shares Outstanding:
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Basic
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27,363
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27,319
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Diluted
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27,430
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27,344
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Three Months Ended
September 30, |
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(Amounts in thousands)
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2016
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2015
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Net Income
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$
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33,400
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$
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27,628
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Other Comprehensive Income:
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Defined Benefit Pension and Postretirement Benefit Plans:
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Amortization of loss, before tax
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170
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131
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Amortization of prior service credit, before tax
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(45
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(1
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Total Other Comprehensive Income, Before Tax
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125
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130
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Tax Attributes of Items in Other Comprehensive Income:
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Amortization of loss, tax
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(63
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(49
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Amortization of prior service credit, tax
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16
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—
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Total Tax Expense
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(47
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(49
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Other Comprehensive Income, Net of Tax
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78
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81
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Comprehensive Income
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$
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33,478
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$
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27,709
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Three Months Ended
September 30, |
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(Amounts in thousands)
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2016
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2015
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Cash Flows From Operating Activities:
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Net income
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$
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33,400
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$
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27,628
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Adjustments to reconcile net income to net cash provided by operating activities:
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Depreciation and amortization
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5,986
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6,039
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Deferred income taxes and other noncash changes
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(746
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(791
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Stock-based compensation expense
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1,145
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785
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Excess tax benefit from stock-based compensation
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(64
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(186
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Pension plan activity
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(61
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(74
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)
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Changes in operating assets and liabilities:
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Receivables
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(4,679
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(11,633
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)
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Inventories
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(13,668
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)
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(12,256
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)
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Other current assets
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3,573
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2,587
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Accounts payable and accrued liabilities
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20,487
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21,212
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Net cash provided by operating activities
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45,373
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33,311
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Cash Flows From Investing Activities:
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Cash paid for acquisition, net of cash acquired
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—
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(12
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Payments for property additions
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(4,144
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)
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(3,360
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)
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Other-net
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92
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(331
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)
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Net cash used in investing activities
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(4,052
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(3,703
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Cash Flows From Financing Activities:
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Payment of dividends
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(13,710
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(12,586
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Purchase of treasury stock
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(8
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—
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Excess tax benefit from stock-based compensation
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64
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186
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Net cash used in financing activities
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(13,654
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(12,400
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)
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Net change in cash and equivalents
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27,667
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17,208
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Cash and equivalents at beginning of year
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118,080
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182,202
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Cash and equivalents at end of period
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$
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145,747
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$
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199,410
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Supplemental Disclosure of Operating Cash Flows:
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Cash paid during the period for income taxes
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$
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470
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$
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2,237
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September 30,
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||||||
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2016
|
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2015
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Construction in progress in Accounts Payable
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$
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154
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$
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616
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Three Months Ended
September 30, |
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2016
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2015
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Net income
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$
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33,400
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$
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27,628
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Net income available to participating securities
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(66
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)
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(35
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)
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Net income available to common shareholders
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$
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33,334
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$
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27,593
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Weighted average common shares outstanding – basic
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27,363
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27,319
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Incremental share effect from:
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Nonparticipating restricted stock
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5
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5
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Stock-settled stock appreciation rights
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62
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20
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Weighted average common shares outstanding – diluted
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27,430
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27,344
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Net income per common share – basic and diluted
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$
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1.22
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$
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1.01
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Three Months Ended
September 30, |
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2016
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2015
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Accumulated other comprehensive loss at beginning of period
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$
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(11,350
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)
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$
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(10,057
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)
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Defined Benefit Pension Plan Items:
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Amortization of unrecognized net loss
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179
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135
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Postretirement Benefit Plan Items:
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Amortization of unrecognized net gain
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(9
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)
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(4
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)
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Amortization of prior service credit
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(45
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)
|
|
(1
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)
|
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Total other comprehensive income, before tax
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125
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|
|
130
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Total tax expense
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(47
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)
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(49
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)
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Other comprehensive income, net of tax
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78
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|
|
81
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Accumulated other comprehensive loss at end of period
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$
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(11,272
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)
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$
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(9,976
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)
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September 30,
2016 |
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June 30,
2016 |
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Tradename (30-year life)
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Gross carrying value
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$
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34,500
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$
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34,500
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Accumulated amortization
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(1,773
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)
|
|
(1,485
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)
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Net carrying value
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$
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32,727
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|
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$
|
33,015
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Trademarks (40-year life)
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Gross carrying value
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$
|
370
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$
|
370
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Accumulated amortization
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(235
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)
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|
(232
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)
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Net carrying value
|
$
|
135
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$
|
138
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Customer Relationships (10 to 15-year life)
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Gross carrying value
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$
|
13,920
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$
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13,920
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Accumulated amortization
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(6,321
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)
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|
(6,048
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)
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Net carrying value
|
$
|
7,599
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$
|
7,872
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Technology / Know-how (10-year life)
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Gross carrying value
|
$
|
3,900
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|
$
|
3,900
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Accumulated amortization
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(601
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)
|
|
(504
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)
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Net carrying value
|
$
|
3,299
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|
|
$
|
3,396
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Non-compete Agreements (5-year life)
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|
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Gross carrying value
|
$
|
600
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|
|
$
|
600
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|
Accumulated amortization
|
(185
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)
|
|
(155
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)
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Net carrying value
|
$
|
415
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|
|
$
|
445
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|
Total net carrying value
|
$
|
44,175
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|
|
$
|
44,866
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Three Months Ended
September 30, |
||||||
|
2016
|
|
2015
|
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Amortization expense
|
$
|
691
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|
|
$
|
746
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2018
|
$
|
2,764
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2019
|
$
|
2,764
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2020
|
$
|
2,729
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2021
|
$
|
2,644
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2022
|
$
|
2,594
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Three Months Ended
September 30, |
||||||
|
2016
|
|
2015
|
||||
Net Sales
|
$
|
291,361
|
|
|
$
|
294,085
|
|
Operating Income
|
|
|
|
||||
Specialty Foods
|
$
|
54,825
|
|
|
$
|
44,961
|
|
Corporate Expenses
|
(4,071
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)
|
|
(3,073
|
)
|
||
Total
|
$
|
50,754
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|
|
$
|
41,888
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•
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leading retail market positions in several product categories with a high-quality perception;
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•
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recognized innovation in retail products;
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•
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a broad customer base in both retail and foodservice accounts;
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•
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well-regarded culinary expertise among foodservice customers;
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•
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recognized leadership in foodservice product development;
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•
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experience in integrating complementary business acquisitions; and
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•
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historically strong cash flow generation that supports growth opportunities.
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•
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leveraging the strength of our retail brands to increase current product sales;
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•
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introducing new retail products and expanding distribution;
|
•
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growing our foodservice sales through the strength of our reputation in product development and quality; and
|
•
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pursuing acquisitions that meet our strategic criteria.
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|
Three Months Ended
September 30, |
|
|
|
|
|||||||||
(Dollars in thousands)
|
2016
|
|
2015
|
|
Change
|
|||||||||
Net Sales
|
$
|
291,361
|
|
|
$
|
294,085
|
|
|
$
|
(2,724
|
)
|
|
(1
|
)%
|
Gross Profit
|
$
|
80,634
|
|
|
$
|
67,967
|
|
|
$
|
12,667
|
|
|
19
|
%
|
Gross Margin
|
27.7
|
%
|
|
23.1
|
%
|
|
|
|
|
|
Three Months Ended
September 30, |
|
|
|
|
|||||||||
(Dollars in thousands)
|
2016
|
|
2015
|
|
Change
|
|||||||||
SG&A Expenses
|
$
|
29,880
|
|
|
$
|
26,079
|
|
|
$
|
3,801
|
|
|
15
|
%
|
SG&A Expenses as a Percentage of Net Sales
|
10.3
|
%
|
|
8.9
|
%
|
|
|
|
|
|
Three Months Ended
September 30, |
|
|
|
|
|||||||||
(Dollars in thousands)
|
2016
|
|
2015
|
|
Change
|
|||||||||
Operating Income
|
|
|
|
|
|
|
|
|||||||
Specialty Foods
|
$
|
54,825
|
|
|
$
|
44,961
|
|
|
$
|
9,864
|
|
|
22
|
%
|
Corporate Expenses
|
(4,071
|
)
|
|
(3,073
|
)
|
|
(998
|
)
|
|
32
|
%
|
|||
Total
|
$
|
50,754
|
|
|
$
|
41,888
|
|
|
$
|
8,866
|
|
|
21
|
%
|
Operating Income as a Percentage of Net Sales
|
|
|
|
|
|
|
|
|||||||
Specialty Foods
|
18.8
|
%
|
|
15.3
|
%
|
|
|
|
|
|||||
Total
|
17.4
|
%
|
|
14.2
|
%
|
|
|
|
|
•
|
price and product competition;
|
•
|
the impact of any regulatory matters affecting our food business, including any required labeling changes and their impact on consumer demand;
|
•
|
the potential for loss of larger programs or key customer relationships;
|
•
|
fluctuations in the cost and availability of ingredients and packaging;
|
•
|
the reaction of customers or consumers to the effect of price increases we may implement;
|
•
|
the effect of consolidation of customers within key market channels;
|
•
|
the success and cost of new product development efforts;
|
•
|
the lack of market acceptance of new products;
|
•
|
the possible occurrence of product recalls or other defective or mislabeled product costs;
|
•
|
changes in demand for our products, which may result from loss of brand reputation or customer goodwill;
|
•
|
maintenance of competitive position with respect to other manufacturers;
|
•
|
adverse changes in freight, energy or other costs of producing, distributing or transporting our products;
|
•
|
capacity constraints that may affect our ability to meet demand or may increase our costs;
|
•
|
dependence on contract manufacturers;
|
•
|
efficiencies in plant operations;
|
•
|
stability of labor relations, including the impact of our current contract negotiations with a collective bargaining unit;
|
•
|
the outcome of any litigation or arbitration;
|
•
|
the impact of fluctuations in our pension plan asset values on funding levels, contributions required and benefit costs;
|
•
|
the extent to which future business acquisitions are completed and acceptably integrated;
|
•
|
dependence on key personnel and changes in key personnel;
|
•
|
changes in estimates in critical accounting judgments; and
|
•
|
certain other factors, including the information disclosed in our discussion of risk factors under Item 1A of our
2016
Annual Report on Form 10-K.
|
Period
|
Total
Number of
Shares
Purchased
|
|
Average
Price Paid
Per Share
|
|
Total Number
of Shares
Purchased as
Part of
Publicly
Announced
Plans
|
|
Maximum
Number of
Shares that
May Yet be
Purchased
Under the
Plans
|
|||||
July 1-31, 2016
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
1,418,152
|
|
August 1-31, 2016 (1)
|
64
|
|
|
$
|
133.13
|
|
|
64
|
|
|
1,418,088
|
|
September 1-30, 2016
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
1,418,088
|
|
Total
|
64
|
|
|
$
|
133.13
|
|
|
64
|
|
|
1,418,088
|
|
|
|
|
|
|
|
|
|
|
LANCASTER COLONY CORPORATION
|
||
|
|
|
|
|
(Registrant)
|
Date:
|
October 31, 2016
|
|
By:
|
|
/s/ JOHN B. GERLACH, JR.
|
|
|
|
|
|
John B. Gerlach, Jr.
|
|
|
|
|
|
Chairman, Chief Executive Officer
|
|
|
|
|
|
and Director
|
|
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
Date:
|
October 31, 2016
|
|
By:
|
|
/s/ DOUGLAS A. FELL
|
|
|
|
|
|
Douglas A. Fell
|
|
|
|
|
|
Treasurer, Vice President,
|
|
|
|
|
|
Assistant Secretary and
|
|
|
|
|
|
Chief Financial Officer
|
|
|
|
|
|
(Principal Financial and Accounting Officer)
|
|
|
|
|
Exhibit 10.1
|
|
|
|
|
|
|
|
|
Lancaster Colony Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[_____________________]
|
|
|
|
|
[_____________________]
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[_____________________]
|
|
THE COMPANY:
|
|
EXECUTIVE:
|
|
|
|
LANCASTER COLONY CORPORATION
|
|
[_____________________]
|
|
|
|
Signature
|
|
Signature
|
|
|
|
Printed Name
|
|
Printed Name
|
|
|
|
Title
|
|
Date
|
|
|
|
Date
|
|
|
|
|
|
|
Exhibit 10.2
|
|
|
|
LANCASTER COLONY CORPORATION
|
|
|
|
|
|
|
|
|
|
By
|
/s/ John B. Gerlach, Jr.
|
|
|
|
|
|
|
|
|
Name: John B. Gerlach, Jr.
|
|
|
|
|
Title: Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXECUTIVE
|
|
|
|
|
|
|
|
|
|
/s/ David A. Ciesinski
|
|
|
|
|
David A. Ciesinski
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Lancaster Colony Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
|
|
|
|
|
Date:
|
October 31, 2016
|
|
By:
|
|
/s/ JOHN B. GERLACH, JR.
|
|
|
|
|
|
John B. Gerlach, Jr.
|
|
|
|
|
|
Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Lancaster Colony Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
|
|
|
|
|
Date:
|
October 31, 2016
|
|
By:
|
|
/s/ DOUGLAS A. FELL
|
|
|
|
|
|
Douglas A. Fell
|
|
|
|
|
|
Chief Financial Officer
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
|
|
By:
|
|
/s/ JOHN B. GERLACH, JR.
|
|
|
John B. Gerlach, Jr.
|
|
|
Chief Executive Officer
|
|
||
October 31, 2016
|
||
|
|
|
By:
|
|
/s/ DOUGLAS A. FELL
|
|
|
Douglas A. Fell
|
|
|
Chief Financial Officer
|
|
||
October 31, 2016
|