| | Financial
Instruments & Debt Maturities. Our financial instruments consist of cash and
cash equivalents, accounts receivable, accounts payable and bank borrowings, including
borrowings under our Second Lien Credit Facility. The carrying amounts of cash
and cash equivalents, accounts receivable and accounts payable approximate fair
value due to the highly liquid nature of these short-term instruments. The fair
values of the bank and vendor borrowings approximate the carrying amounts as of
December 31, 2005 and 2004, and were determined based upon interest rates currently
available to us for borrowings with similar terms. Maturities of the debt are
$1.5 million in 2006, $1.5 million in 2007, $1.5 million in 2008 and $1.5 million
in 2009 and the balance, or $143.3 million, in 2010. Item
8. Financial Statements and Supplementary Data The
response to this item is included elsewhere in this report.
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial
Disclosure None. Item 9A.
Controls and Procedures (a) Disclosure Controls
and Procedures. We maintain disclosure controls and procedures that are designed
to provide reasonable assurance that information required to be disclosed by us
in the reports that we file or submit to the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is
recorded, processed, summarized and reported within the time periods specified
by the Commission’s rules and forms, and that information is accumulated and communicated
to our management, including our Chief Executive Officer and Chief Financial Officer,
as appropriate to allow timely decisions regarding required disclosure. In
accordance with Exchange Act Rules 13a-15 and 15d-15, we carried out an evaluation,
under the supervision and with the participation of management, including our
Chief Executive Officer and Chief Financial Officer, of the effectiveness of our
disclosure controls and procedures as of the end of the period covered by this
report. As described below under Management’s Annual Report on Internal Control
over Financial Reporting, we identified material weaknesses in the Company’s internal
control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)). As a result of these material weaknesses, our Chief Executive Officer
and Chief Financial Officer have concluded that, as of the end of the period covered
by this Annual Report on Form 10-K/A, the Company’s disclosure controls and procedures
were not effective. The Company has outlined a number of initiatives, as discussed
below under paragraph (b) of this Item 9A, that it believes will remediate these
material weaknesses in 2006. As a result of such material weaknesses, the Company
was not able to file its Annual Report on Form 10-K for the year ended December
31, 2005 with the Securities and Exchange Commission in the time required. The
audit report of Pannell Kerr Forster of Texas, P.C., dated March 31, 2006, which
is included in the Form 10-K/A, expressed an unqualified opinion on our consolidated
financial statements, and its assessment of Management’s Annual Report on Internal
Control over Financial Reporting is included herein under paragraph (d) of this
Item 9A. (b) Management’s Annual Report on Internal
Control Over Financial Reporting. Management, including the Company’s Chief
Executive Officer and Chief Financial Officer, has the responsibility for establishing
and maintaining adequate internal control over financial reporting, as defined
in Exchange Act Rule 13a-15(f). Internal control over financial reporting is a
process designed by, or under the supervision of, the Company’s principal executive
and principal financial officers, or persons performing similar functions and
effected by the Company’s Board of Directors, management and other personnel,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with accounting principles generally accepted in the United States of America
(“GAAP”). Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. In addition, projections of
any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate or insufficient because of changes in operating
conditions, or that the degree of compliance with the policies or procedures may
deteriorate. A control deficiency exists when the design
or operation of a control does not allow management or employees, in the ordinary
course of performing their assigned functions, to prevent or detect misstatements
on a timely basis. A significant deficiency is a control deficiency, or combination
of control deficiencies, that adversely affects the Company’s ability to initiate,
authorize, record, process, or report external financial data reliably in accordance
with GAAP, such that there is a more than remote likelihood that a misstatement
of the Company’s annual or interim financial statements that is more than inconsequential
will not be prevented or detected. A material weakness is a control deficiency,
or combination of control deficiencies, that results in more than a remote likelihood
that a material misstatement of the annual or interim financial statements will
not be prevented or detected. | |
