-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LsOb9OA8jp4VuupPYHZd2u0OKfD0DtMkgm5RllxWMduqNleC/JYPZCRonzWkpYFh 0tF0QRGXV88/o2M5nVeQZA== 0000003753-04-000006.txt : 20040514 0000003753-04-000006.hdr.sgml : 20040514 20040514163937 ACCESSION NUMBER: 0000003753-04-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLEN ORGAN CO CENTRAL INDEX KEY: 0000003753 STANDARD INDUSTRIAL CLASSIFICATION: MUSICAL INSTRUMENTS [3931] IRS NUMBER: 231263194 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-00275 FILM NUMBER: 04808315 BUSINESS ADDRESS: STREET 1: 150 LOCUST ST STREET 2: PO BOX 36 CITY: MACUNGIE STATE: PA ZIP: 18062 BUSINESS PHONE: 2159662200 MAIL ADDRESS: STREET 1: 150 LOCUST STREET STREET 2: PO BOX 36 CITY: MACUNGIE STATE: PA ZIP: 18062-0036 10-Q 1 n10q0304.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (Mark One) (X) Quarterly Report Under Section 13 or 15(D) of The Securities Exchange Act of 1934 For Quarter Ended March 31, 2004 OR ( ) Transition Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Commission File Number 0-275 Allen Organ Company (Exact name of registrant as specified in its charter) Pennsylvania 23-1263194 (State of Incorporation) (I.R.S. Employer Identification No.) 150 Locust Street, P. O. Box 36, Macungie, Pennsylvania 18062-0036 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 610-966-2200 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark whether the registrant is an accelerated filer as defined in Rule 12b-2 of the Exchange Act. Yes No X Number of shares outstanding of each of the issuer's classes of common stock, as of May 13, 2004: Class A - Voting 83,864 shares Class B - Non-voting 1,072,379 shares ALLEN ORGAN COMPANY INDEX Part I Financial Information Item 1.Financial Statements Consolidated Condensed Statements of Income for the three months ended March 31, 2004 and 2003 Consolidated Condensed Balance Sheets at March 31, 2004 and December 31, 2003 Consolidated Condensed Statements of Cash Flows for the three months ended March 31, 2004 and 2003 Notes to Consolidated Condensed Financial Statements Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations Item 3.Quantitative and Qualitative Disclosures About Market Risk Item 4.Controls and Procedures Part II Other Information Item 2.Changes in Securities and Use of Proceeds Item 6.Exhibits and Reports on Form 8-K Signatures Exhibits PART I FINANCIAL INFORMATION ITEM 1.FINANCIAL STATEMENTS ALLEN ORGAN COMPANY AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited) Three Months Ended March 31, 2004 2003 Net Sales $16,718,716 $13,874,464 Costs and Expenses Costs of sales 8,839,700 8,599,510 Selling, general and administrative 4,320,415 3,467,966 Research and development 2,826,396 1,930,495 Other expense, net 11,688 878 Total costs and expenses 15,998,199 13,998,849 Income (Loss) from Operations 720,517 (124,385) Interest and Other Income 83,157 104,577 Income (Loss) Before Taxes 803,674 (19,808) Income Taxes 121,000 -- Net Income (Loss) $ 682,674 $ (19,808) Basic and Diluted Earnings (Loss) Per Share $ 0.59 $ (0.02) Dividends Per Share - Cash $ 0.14 $ 0.14 Total Comprehensive Income (Loss) $ 692,190 $ (22,322) See accompanying notes. ALLEN ORGAN COMPANY AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS March 31, December 31, ASSETS 2004 2003 (Unaudited) (Audited) Current Assets Cash $6,859,159 $5,907,576 Investments Including Accrued Interest 17,206,668 17,143,171 Accounts Receivable, net of reserves of $616,892 and $605,496, respectively 9,510,525 11,652,365 Inventories: Raw Materials 4,454,634 4,456,060 Work in Process 5,944,017 5,525,106 Finished Goods 3,977,327 3,945,007 Total Inventories 14,375,978 13,926,173 Prepaid Expenses 956,151 491,444 Deferred Income Taxes 2,736,191 2,741,167 Total Current Assets 51,644,672 51,861,896 Property, Plant and Equipment 28,784,968 28,283,282 Less Accumulated Depreciation (18,567,428)(18,116,278) Net Property, Plant and Equipment 10,217,540 10,167,004 Other Assets Note Receivable from Related Party 2,397,291 2,397,291 Cash Value of Life Insurance 2,474,002 2,474,002 Deferred Income Taxes 3,493,238 3,493,238 Intangible Assets, net 1,232,204 1,347,822 Goodwill, net 194,523 194,523 Other Assets 14,500 14,500 Total Other Assets 9,805,758 9,921,376 Total Assets $71,667,970 $71,950,276 LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Current Liabilities Accounts Payable $1,219,585 $1,278,535 Accrued Income Taxes 383,626 657,941 Other Accrued Expenses 3,903,412 3,811,025 Customer Deposits 2,364,774 2,197,393 Total Current Liabilities 7,871,397 7,944,894 Noncurrent Liabilities Deferred and Other Noncurrent Liabilities 2,069,661 1,946,696 Accrued Pension Costs 4,831,853 5,693,853 Total Noncurrent Liabilities 6,901,514 7,640,549 Total Liabilities 14,772,911 15,585,443 STOCKHOLDERS' EQUITY Class A Voting Common stock, $1 par value, 400,000 shares authorized, 127,232 shares issued 127,232 127,232 Class B Non-Voting Common stock, $1 par value, 3,600,000 shares authorized, 1,410,761 shares issued 1,410,761 1,410,761 Capital in Excess of Par Value 13,150,610 13,150,610 Retained Earnings Balance, Beginning 58,015,139 57,267,763 Net Income 682,674 1,396,896 Dividends - Cash 2004 and 2003 (161,874) (649,520) Balance, End 58,535,939 58,015,139 Accumulated Other Comprehensive Loss (3,823,178) (3,832,694) Sub-total 69,401,364 68,871,048 Treasury Stock, at cost, 43,368 Class A shares in 2004 and 2003,338,382 Class B shares in 2004 and 338,380 in 2003 (12,506,305)(12,506,215) Total Stockholders' Equity 56,895,059 56,364,833 Total Liabilities and Stockholders' Equity $71,667,970 $71,950,276 See accompanying notes. ALLEN ORGAN COMPANY AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended March 31, 2004 2003 CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $682,674 $(19,808) Adjustments to reconcile net income (loss) to net cash provided by operating activities Depreciation and amortization 566,768 606,069 Deferred income taxes 4,976 (1,083) Change in assets and liabilities: Accounts receivable 2,141,840 3,992,215 Inventories (449,805) 267,349 Prepaid income taxes -- 161,071 Prepaid expenses (464,707) (325,294) Other assets -- 1,092 Accounts payable (58,950) (4,364,594) Accrued income taxes (274,315) 33,175 Other accrued expenses 92,387 (16,735) Customer deposits 167,381 (258,888) Accrued pension costs (862,000) 249,999 Deferred and other noncurrent liabilities 122,965 79,065 Net Cash Provided by Operating Activities 1,669,214 403,633 CASH FLOW FROM INVESTING ACTIVITIES Net additions to property, plant and equipment (501,686) (189,545) Net purchase of short term investments (53,981) (60,278) Net Cash Used In Investing Activities (555,667) (249,823) CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid in cash (161,874) (163,808) Reacquired Class B common shares (90) -- Proceeds from exercise of subsidiary stock options -- 121,250 Subsidiary company stock reacquired from minority shareholders -- (194,656) Net Cash Used In Financing Activities (161,964) (237,214) NET INCREASE (DECREASE) IN CASH 951,583 (83,404) CASH, BEGINNING 5,907,576 4,515,189 CASH, ENDING $6,859,159 $4,431,785 SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION Cash paid (refunded) for: Income Taxes $ 395,315 $ (194,246) See accompanying notes. ALLEN ORGAN COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 1. Interim Financial Statements In the opinion of management, the information contained herein reflects all adjustments necessary to present fairly the Company's financial position, results of operations and cash flows. All such adjustments are of a normal recurring nature. The results of operations for the interim periods shown in this report are not necessarily indicative of results to be expected for the fiscal year. Certain notes and other information have been condensed or omitted from the interim financial statements presented in the Quarterly Report on Form 10-Q. Therefore, these financial statements should be read in conjunction with the Company's 2003 Annual Report on Form 10-K. 2. Stock-Based Compensation The Company accounts for its stock-based compensation plans using the accounting prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. Since the Company is not required to adopt the fair value based recognition provisions prescribed under Statement of Financial Accounting Standards No. 123, as amended by SFAS No. 148, Accounting for Stock-Based Compensation, it has elected only to comply with the disclosure requirements set forth in the Statements. Had compensation cost been determined on the basis of fair value pursuant to SFAS No. 123, as amended by SFAS No. 148, net income (loss) and earnings per share would have been decreased as follows: Three Months Ended March 31, 2004 2003 Net income (loss) As reported $682,674 $(19,808) Total stock-based employee compensation (expense) benefit determined under fair value based method for all awards, net of related tax effects (16,079) 11,790 Pro forma $666,595 $ (8,018) Earnings (Loss) per share As reported $ 0.59 $ (0.02) Pro forma $ 0.58 $ (0.01) The Company granted options on an additional 4,500 shares of its Class B stock during the three months ended March 31, 2004. The fair value of each option granted is estimated on the grant date using the Black-Scholes option pricing model. The following assumptions were made in estimating the fair value of options granted under the Allen Organ Company stock option plan during 2004: Assumptions Dividend yield 1.40% Risk-free interest rate 2.25% Expected life 7 years Expected volatility 15% 3. Warranty Costs The Company provides a warranty covering manufacturing defects for certain of its products for varying lengths of time. The Company's policy is to accrue the estimated cost of warranty coverage at the time the sale is recorded. The activity in the warranty accrual for the three months ended March 31, 2004 is summarized as follows: Accrual at January 1, 2004 $1,210,000 Additions charged to warranty expense 88,750 Claims paid and charged against the accrual (231,038) Accrual at March 31, 2004 $1,067,712 4. Earnings Per Share The following shows the amounts used in computing earnings per share and the effect on weighted average number of shares for dilutive common stock. Three Months Ended March 31, 2004 2003 Weighted average number of common shares used in basic earnings per share 1,156,244 1,170,160 Effect of stock options 1,113 -- Weighted average number of common shares use in diluted earnings per share 1,157,357 1,170,160 Outstanding stock options to purchase 12,000 shares of common stock were not included in computing earnings per share for the three months ended March 31, 2003 because the effect was antidilutive. 5. Retirement Plan The net periodic pension benefit cost included in the statement of income is as follows: Three Months Ended March 31, 2004 2003 Service Cost $ -- $109,076 Interest Cost 249,163 272,382 Expected return of plan assets (205,090) (192,179) Amortization of net loss from prior periods 94,517 104,308 Net Pension Cost $138,590 $293,587 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS. Liquidity and Capital Resources: Cash flows from operating activities increased during the three months ended March 31, 2004, due to higher operating results in the Musical Instruments, Electronic Assemblies and Data Communications segments and a decrease in accounts receivable in the Data Communications segment. Cash inflows from these activities were partially offset by a $1,000,000 contribution made to the Company's defined benefit pension plans. Cash flows from operating activities during the three month period ended March 31, 2003, included a decrease in accounts receivable and accounts payable in the Data Communications segment related to a large customer order produced and shipped in the fourth quarter of 2002. Cash flows from investing activities for the three months ended March 31, 2004, includes approximately $500,000 of plant and equipment additions primarily computer and test equipment purchased for the Data Communications segment. Sales and Operating Income Three Months Ended March 31, 2004 2003 Net Sales to Unaffiliated Customers Musical Instruments $ 5,066,244 $ 5,370,725 Data Communications 10,572,051 7,331,983 Electronic Assemblies 628,554 776,393 Audio Equipment 451,867 395,363 Total $16,718,716 $13,874,464 Intersegment Sales Musical Instruments $ 257,369 $ 159,311 Data Communications 20,174 -- Electronic Assemblies 331,855 -- Audio Equipment 2,782 12,051 Total $ 612,180 $ 171,362 Income (Loss) from Operations Musical Instruments $ 26,774 $ (89,194) Data Communications 882,236 245,832 Electronic Assemblies (21,466) (235,010) Audio Equipment (167,027) (46,013) Total $ 720,517 $ (124,385) Musical Instruments Segment Sales decreased $304,481 in the first quarter of 2004 when compared to the same period in 2003 due to lower order volume during the second half of 2003, which management believes was attributable to the overall economic slowdown. While the order rate has improved during the first quarter of 2004, as compared to the same period in 2003, the order backlog at the beginning of 2004 was lower than at the beginning of 2003 resulting in fewer orders produced and shipped in the first quarter of 2004 versus 2003. Gross profit margins increased to 27.1% of sales in the first quarter of 2004 from 22.4% in the same period in 2003. This increase is due to cost reduction efforts that were initiated during 2003 to reduce material and other operating costs. Selling, general and administrative expenses and research and development expenditures increased slightly during the three months ended March 31, 2004 when compared to the same period in 2003. Data Communications Segment This segment's sales in the first quarter of 2004 increased $3,240,068 (44%) when compared to the same period in 2003. This increase is due to higher order volume which management believes is attributable to an improvement in the data communications market and the timing of completing sales with larger customers. Gross profit margins in the first quarter of 2004 increased to 58.7%, compared to 54.9% in the same period of 2003, due to reductions in product costs and changes in product mix. Sales and marketing expenses increased approximately $580,000 (35%) during the three month ended March 31, 2003, when compared to the same period in 2003, due to the addition of sales and marketing personnel, higher travel costs related to international sales efforts and higher sales volume. General and administrative expenditures in the first quarter of 2004 increased slightly when compared to the same period in 2003. Research and development expenses increased approximately $884,000 (58%) in the first quarter of 2004 when compared to the same period in 2003. This increase is related to increased expenditures incurred in connection with the acquisition of Avail Networks and additional personnel and related costs associated with the development of next generation products. Electronic Assemblies Segment Sales for the first quarter of 2004 decreased $147,839, when compared to the same period in 2003, due to lower order volume from the Company's contract manufacturing customers. This segment is focused on diversifying its customer base. The gross profit margin was 6.3% in the first quarter of 2004, compared to a loss of approximately $(148,006) (19%) in the first quarter of 2003. This increase is due to cost reduction efforts that were initiated during 2003 to reduce operating costs. Selling, general and administrative expenses decreased slightly when compared to the same period in 2003. Audio Equipment Segment Sales for the first quarter of 2004 increased slightly when compared to the same period in 2003. Legacy Audio remains focused on developing a quality independent dealer network of high end audio-video stores and custom installers. Gross profit margins in the first quarter of 2004 decreased to 34.2% as compared to 39.2% for the same period in 2003, primarily due to reductions in wholesale selling prices to comparable industry levels. Selling, general and administrative costs for the period increased in the first quarter of 2004 when compared to the same period in 2003. Other Income and Expense Investment income for the three months ended March 31, 2004 was lower than the same period in 2003 due to lower rates of return available on invested funds. Income Taxes The tax provision for the three months ended March 31, 2004 is based on the estimated effective tax rate for the year, which is less than the statutory rate due to tax credits and exempt income. Contractual Obligations and Commercial Commitments During the three months ended March 31, 2004, there have been no items that significantly impacted the Company's commitments and contingencies as disclosed in the notes to the 2003 consolidated financial statements as filed on Form 10-K. In addition, the Company has no off balance sheet arrangements. Factors that May Affect Operating Results The statements contained in this report on Form 10-Q that are not purely historical are forward looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements regarding the Company's expectations, hopes, intentions or strategies regarding the future. Forward looking statements include: statements regarding future products or product development; statements regarding future research and development spending and the Company's marketing and product development strategy, statements regarding future production capacity. All forward looking statements included in this document are based on information available to the Company on the date hereof, and the Company assumes no obligation to update any such forward looking statements. Readers are cautioned not to place undue reliance on these forward looking statements, which reflect management's opinions only as of the date hereof. Readers should carefully review the risk factors described in other documents the Company files from time to time with the Securities and Exchange Commission, including the Annual Report on Form 10-K. It is important to note that the Company's actual results could differ materially from those in such forward looking statements. Some of the factors that could cause actual results to differ materially are set forth below. The Company has experienced and expects to continue to experience fluctuations in its results of operations. Factors that affect the Company's results of operations include the volume and timing of orders received, changes in global economics and financial markets, changes in the mix of products sold, market acceptance of the Company's and its customer's products, competitive pricing pressures, global currency valuations, the availability of electronic components that the Company purchases from suppliers, the Company's ability to meet increasing demand, the Company's ability to introduce new products on a timely basis, the timing of new product announcements and introductions by the Company or its competitors, changing customer requirements, delays in new product qualifications, the timing and extent of research and development expenses and fluctuations in manufacturing yields. As a result of the foregoing or other factors, there can be no assurance that the Company will not experience material fluctuations in future operating results on a quarterly or annual basis, which would materially and adversely affect the Company's business, financial condition and results of operations. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. No change from information disclosed in the Company's 2003 annual report on form 10-K. ITEM 4. CONTROLS AND PROCEDURES. The Company's Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures, which are designed to insure that the Company records, processes, summarizes and reports in a timely and effective manner the information required to be disclosed in the reports filed with or submitted to the Securities and Exchange Commission. Based upon this evaluation, they concluded that the Company's disclosure controls are effective as of March 31, 2004. There has been no change in the Company's internal control over financial reporting that occurred during the quarter ended March 31, 2004 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. PART II OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds (e) The following table sets forth certain information relating to shares of the Company's common stock repurchased by the Company during the quarter ended March 31, 2004. Issuer Purchases of Equity Securities Maximum Number (or Approximate Total Dollar Number of Value) of Shares (or Shares (or Units) Units) Purchased that May Total Average as Part of Yet Be Number of Price Paid Publicly Purchased Shares (or per Share Announced Under the Units) (or Units) Plans or Plans or Period Purchased Purchased Programs Programs Month #1 (January 1-31, 2004) 2 $ 45.00 -- -- Month #2 (February 1-29, 2004) -- -- -- -- Month #3 (March 1-31, 2004) -- -- -- -- Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit No. Description 31.1 Rule 13a-14(a)/15d-14(a) Certification-Chief Executive Officer 31.2 Rule 13a-14(a)/15d-14(a) Certification-Chief Financial Officer 32 Section 1350 Certifications 99.1 Audit Committee Charter (b) Forms 8-K 1. The Company filed a Form 8-K dated February 13, 2004 announcing its 2003 earnings for the fourth quarter and full year results of operations. 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. Allen Organ Company (Registrant) Date:May 14, 2004 /s/STEVEN MARKOWITZ Steven Markowitz, President and Chief Executive Officer Date:May 14, 2004 /s/NATHAN S. ECKHART Nathan S. Eckhart, Vice President-Finance, Chief Financial and Principal Accounting Officer EX-99 2 s302cert.txt ALLEN ORGAN COMPANY AND SUBSIDIARIES Exhibit 31.1 Section 302 Certification I, Steven Markowitz, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Allen Organ Company; 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 officers 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)) 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 quarterly report is being prepared; b)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 c)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 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 officers 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 function): 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. /s/STEVEN MARKOWITZ Steven Markowitz Chief Executive Officer May 14, 2004 EX-99 3 n302cert.txt ALLEN ORGAN COMPANY AND SUBSIDIARIES Exhibit 31.2 Section 302 Certification I, Nathan S. Eckhart, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Allen Organ Company; 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 officers 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)) 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 quarterly report is being prepared; b)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 c)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 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 officers 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 function): 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. /s/NATHAN S. ECKHART Nathan S. Eckhart Chief Financial Officer May 14, 2004 EX-99 4 sn906cert.txt ALLEN ORGAN COMPANY Exhibit 32 Section 1350 Certifications In connection with the Quarterly Report of Allen Organ Company (the "Company") on Form 10-Q for the quarter ended March 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), we certify, pursuant to 18 U.S.C. 1350 as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that: 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 result of operations of the Company. Date: May 14, 2004 /s/STEVEN MARKOWITZ /s/NATHAN S. ECKHART Steven Markowitz Nathan S. Eckhart Chief Executive Officer Chief Financial Officer EX-99.1 CHARTER 5 audcom.txt Exhibit 99.1 Charter of the Audit Committee of the Board of Directors I. Audit Committee Purpose The Audit Committee is appointed by the Board of Directors to assist the Board in fulfilling its oversight responsibilities. The Audit Committee's primary duties and responsibilities are to: - Monitor the integrity of the Company's financial reporting process and systems of internal controls regarding finance, accounting, and legal compliance. - Monitor the independence and performance of the Company's independent auditors and internal auditing department. - Provide an avenue of communication among the independent auditors, management, the internal auditing department, and the Board of Directors. The Audit Committee has the authority to conduct any investigation appropriate to fulfilling its responsibilities, and it has direct access to the independent auditors as well as anyone in the organization. The Audit Committee has the ability to retain, at the Company's expense, special legal, accounting, or other consultants or experts it deems necessary in the performance of its duties. II. Audit Committee Composition and Meetings Audit Committee members shall meet the requirements of the NASDAQ stock Exchange. The Audit Committee shall be comprised of three or more directors as determined by the Board, each of whom shall be independent nonexecutive directors, free from any relationship that would interfere with the exercise of his or her independent judgment. All members of the Committee shall have a basic understanding of finance and accounting and be able to read and understand fundamental financial statements, and at least one member of the Committee shall be designated as a "financial expert" as defined by the SEC. Audit Committee members shall be appointed by the Board. If an audit committee Chair is not designated or present, the members of the Committee may designate a Chair by majority vote of the Committee membership. The Committee shall meet at least two times annually, or more frequently as circumstances dictate. The Audit Committee Chair shall prepare and/or approve an agenda in advance of each meeting. The Committee should meet privately in executive session at least annually with management, the independent auditors, and as a committee to discuss any matters that the Committee or each of these groups believe should be discussed. In addition, the Committee, or at least its Chair, should communicate with management and the independent auditors quarterly to review the Company's financial statements and significant findings based upon the auditors limited review procedures. III. Audit Committee Responsibilities and Duties Review Procedures 1.Review and reassess the adequacy of this Charter at least annually. Submit the charter to the Board of Directors for approval and have the document published at least every three years in accordance with SEC regulations. 2. Review the Company's annual audited financial statements prior to filing or distribution. Review should include discussion with management and independent auditors of significant issues regarding accounting principles, practices, and judgments. 3.In consultation with the management and the independent auditors, consider the integrity of the Company's financial reporting processes and controls. Discuss significant financial risk exposures and the steps management has taken to monitor, control, and report such exposures. Review significant findings prepared by the independent auditors and the internal auditing department together with management's responses. 4. Review and approve all related party transactions of the Company. 5. Review the Company's code of business conduct and ethics to ensure that it is adequate and up to date. 6. Review procedures for the confidential and/or anonymous submission by employees or others of concerns regarding questionable accounting or auditing matters. 7. Review with financial management and the independent auditors the company's quarterly financial results prior to the release of earnings and/or the company's quarterly financial statements prior to filing or distribution. Discuss any significant changes to the Company's accounting principles and any items required to be communicated by the independent auditors in accordance with SAS 61 (see item 9). The Chair of the Committee may represent the entire Audit Committee for purposes of this review. Independent Auditors 8. The independent auditors are ultimately accountable to the Audit Committee and the Board of Directors. The Audit Committee shall review the independence and performance of the auditors and annually recommend to the Board of Directors the appointment of the independent auditors or approve any discharge of auditors when circumstances warrant. 9. Approve the fees and other significant compensation to be paid to the independent auditors. 10. On an annual basis, the Committee should review and discuss with the independent auditors all significant relationships they have with the Company that could impair the auditors' independence. 11. Review the independent auditors audit plan - discuss scope, staffing, locations, reliance upon management, and internal audit and general audit approach. 12. Prior to releasing the year-end earnings, discuss the results of the audit with the independent auditors. Discuss certain matters required to be communicated to audit committees in accordance with AICPA SAS 61. 13. Consider the independent auditors' judgments about the quality and appropriateness of the Company's accounting principles as applied in its financial reporting. Legal Compliance 14. On at least an annual basis, review with the Company's counsel, any legal matters that could have a significant impact on the organization's financial statements, the Company's compliance with applicable laws and regulations, and inquiries received from regulators or governmental agencies. Other Audit Committee Responsibilities 15. Annually prepare a report to shareholders as required by the Securities and Exchange Commission. The report should be included in the Company's annual report. 16. Perform any other activities consistent with this Charter, the Company's by-laws, and governing law, as the Committee or the Board deems necessary or appropriate. 17. Maintain minutes of meetings and periodically report to the Board of Directors on significant results of the foregoing activities. -----END PRIVACY-ENHANCED MESSAGE-----