UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 28, 2002.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-6666
SALANT CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3402444
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1114 Avenue of the Americas, New York, New York 10036
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 221-7500
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 has filed all documents and
reports required to be filed by section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes No X
As of November 9, 2002, there were outstanding 8,782,198 shares of the Common
Stock of the registrant.
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited) 3
Condensed Consolidated Statements of Operations 3
Condensed Consolidated Statements of Comprehensive Income/(Loss) 4
Condensed Consolidated Balance Sheets 5
Condensed Consolidated Statements of Cash Flows 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 13
Item 4. Controls and Procedures 22
PART II. OTHER INFORMATION
Item 5. Other Events 23
Item 6. Exhibits and Reports on Form 8-K 23
SIGNATURE 24
CERTIFICATIONS 25
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Salant Corporation and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in thousands, except per share data)
Three Months Ended Nine Months Ended
Sept 28, Sept 29, Sept 28, Sept 29,
2002 2001 2002 2001
Net sales $ 63,811 $ 55,098 $173,734 $148,574
Cost of goods sold 45,055 42,240 124,628 113,559
Gross profit 18,756 12,858 49,106 35,015
Selling, general and
administrative expenses (14,597) (11,404) (43,243) (35,695)
Royalty income 164 68 332 148
Amortization of intangibles (130) (157) (689) (470)
Other income/(expense) 10 2 214 (26)
Income/(loss) before interest and
income taxes 4,203 1,367 5,720 (1,028)
Interest income, net 61 42 161 309
Income/(loss) before income taxes 4,264 1,409 5,881 (719)
Income tax benefit 18 -- 65 37
Net income/(loss) $ 4,282 $ 1,409 $ 5,946 $ (682)
Basic income/(loss)
per share $ .48 $ 0.14 $ .62 $ (0.07)
Weighted average common
stock outstanding - Basic 8,967 9,901 9,590 9,901
Diluted income/(loss)
per share $ .47 $ 0.14 $ .62 $ (0.07)
Weighted average common
stock outstanding - Diluted 9,038 9,901 9,658 9,901
See Notes to Condensed Consolidated Financial Statements.
Salant Corporation and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
(Unaudited)
(Amounts in thousands)
Three Months Ended Nine Months Ended
Sept 28, Sept 29, Sept 28, Sept 29,
2002 2001 2002 2001
Net income/(loss) $ 4,282 $ 1,409 $ 5,946 $ (682)
Other comprehensive income, net of tax:
Foreign currency translation adjustments 5 1 (2) 3
Comprehensive income/(loss) $ 4,287 $ 1,410 $ 5,944 $ (679)
See Notes to Condensed Consolidated Financial Statements.
Salant Corporation and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
September 28, December 29, September 29,
2002 2001 2001
(Unaudited) (*) (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 11,021 $ 19,820 $ 2,409
Accounts receivable, net 32,847 28,544 34,549
Inventories (Note 3) 40,065 34,735 51,890
Prepaid expenses and other current assets 2,025 3,658 3,112
Total current assets 85,958 86,757 91,960
Property, plant and equipment, net 11,736 12,179 12,666
Intangible assets (Notes 2 and 4) 22,846 11,217 11,359
Other assets 7,501 7,579 7,646
Total assets $ 128,041 $ 117,732 $ 123,631
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 17,300 $ 10,576 $ 13,048
Accrued liabilities 7,031 6,619 6,642
Net liabilities of discontinued
operations (Note 7) 477 493 749
Reserve for business restructuring (Note 6) 561 584 830
Total current liabilities 25,369 18,272 21,269
Deferred liabilities 4,444 4,377 5,668
Shareholders' equity:
Common stock (Note 1) 10,000 10,000 10,000
Additional paid-in capital 206,040 206,040 206,040
Deficit (109,949) (115,893) (114,699)
Accumulated other comprehensive loss (Note 5) (4,868) (4,866) (4,449)
Less - treasury stock, at cost (Note 9) (2,995) (198) (198)
Total shareholders' equity 98,228 95,083 96,694
Total liabilities and shareholders' equity $ 128,041 $ 117,732 $ 123,631
(*) Derived from the audited financial statements.
See Notes to Condensed Consolidated Financial Statements.
Salant Corporation and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands)
Nine Months Ended
Sept 28, Sept 29,
2002 2001
Cash Flows from Operating Activities:
Net income/(loss) $ 5,946 $ (682)
Adjustments to reconcile income/(loss) from continuing
operations to net cash provided/(used) by operating
activities:
Depreciation 3,591 3,349
Amortization 689 470
Change in operating assets and liabilities
(net of business acquired):
Accounts receivable (4,303) (17,961)
Inventories (4,769) (4,660)
Prepaid expenses and other assets 1,821 57
Accounts payable 6,724 (1,750)
Accrued and other liabilities 493 (4,529)
Reserve for business restructuring (23) (240)
Net cash provided/(used) by continuing operating activities 10,169 (25,946)
Cash (used)/provided by discontinued operations (16) 5
Net cash provided/(used) by operating activities 10,153 (25,941)
Cash Flows from Investing Activities:
Capital expenditures (2,032) (1,893)
Store fixture expenditures (951) (404)
Acquisition of a business (13,169) --
Asset purchase -- (4,039)
Net cash used by investing activities (16,152) (6,336)
Cash Flows from Financing Activities:
Purchase of treasury stock (2,797) --
Other, net (3) 3
Net cash (used)/provided by financing activities (2,800) 3
Net decrease in cash and cash equivalents (8,799) (32,274)
Cash and cash equivalents - beginning of year 19,820 34,683
Cash and cash equivalents - end of quarter $ 11,021 $ 2,409
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 52 $ 20
Income taxes $ 16 $ 64
Guaranteed future purchase price payment $ -- $ 250
See Notes to Condensed Consolidated Financial Statements.
SALANT CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Amounts in Thousands of Dollars, Except Share Data)
(Unaudited)
Note 1. Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
The accompanying unaudited Condensed Consolidated Financial Statements include
the accounts of Salant Corporation and its subsidiaries (collectively, the
"Company" or "Salant").
The Company's principal business is the designing, sourcing, importing and
marketing of men's apparel and accessories. The Company sells its products to
better department stores, department stores, mid-tier stores, specialty stores
and off-price retailers, as well as through its own retail outlet stores.
The results of the Company's operations for the nine months ended September 28,
2002 and September 29, 2001 are not necessarily indicative of a full year's
operations. In the opinion of management, the accompanying financial statements
include all adjustments of a normal recurring nature, which are necessary to
present fairly such financial statements. Certain reclassifications were made to
the prior period financial statements to conform to the 2002 presentation.
Significant intercompany balances and transactions have been eliminated in
consolidation. Certain information and footnote disclosures normally included in
the financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These condensed
consolidated financial statements should be read in conjunction with the audited
financial statements and notes thereto included in the Company's annual report
on form 10-K for the fiscal year ended December 29, 2001.
New Accounting Standards
Effective December 30, 2001, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets,"
which addresses the financial accounting and reporting standards for the
acquisition of intangible assets outside of a business combination and for
goodwill and other intangible assets subsequent to their acquisition. This
accounting standard requires that goodwill be separately disclosed from other
intangible assets in the statement of financial position and no longer be
amortized, but tested for impairment on a periodic basis. The provisions of this
accounting standard also require the completion of a transitional impairment
test within six months of adoption, with any impairments identified treated as a
cumulative effect of a change in accounting principle. The Company did not
recognize any impairment after completion of the transitional impairment test.
In accordance with SFAS No. 142, the Company discontinued the amortization of
goodwill effective December 30, 2001. Previously reported net income/(loss) for
the quarter and nine months ended September 29, 2001 would have improved by $27
and $81, respectively, had amortization of goodwill been discontinued at the
beginning of fiscal 2001.
In October 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which
addresses the financial accounting and reporting for the impairment or disposal
of long-lived assets. This statement supercedes SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of" and
was effective for the first quarter in the fiscal year ending December 28, 2002.
The adoption of this Statement did not have an impact on the consolidated
financial statements.
In April 2002, the FASB issued SFAS No.145, "Recession of FASB Statements No. 4,
44, and 64, Amendment of FASB Statement No. 13 and Technical Corrections". In
addition to amending and rescinding other existing authoritative pronouncements
to make various technical corrections, clarify meanings, or describe their
applicability under changed conditions, SFAS No. 145 precludes companies from
recording gains and losses from the extinguishment of debt as an extraordinary
item. SFAS No. 145 is effective for the first quarter in the fiscal year ending
January 3, 2004. The Company does not expect the adoption of this pronouncement
to have a material effect on the consolidated results of operations or financial
position.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities". The standard requires companies to recognize
costs associated with exit or disposal activities when they are incurred rather
than at the date of a commitment to an exit or disposal plan. Examples of costs
covered by the standard include lease termination costs and certain employee
severance costs that are associated with a restructuring, discontinued
operation, plant closing, or other exit or disposal activity. SFAS No. 146 is to
be applied prospectively to exit or disposal activities initiated after December
31, 2002. The Company does not expect the adoption of this pronouncement to have
a material effect on the consolidated results of operations or financial
position.
Note 2. Acquisition of a Business
On January 4, 2002, Salant, through its wholly owned subsidiary, Salant Holding
Corporation ("SHC"), acquired from Axis Clothing Corporation ("Axis"), certain
of its assets pursuant to an Asset Purchase Agreement dated October 15, 2001
between SHC, Axis and Richard Solomon ("Solomon"), an individual. The assets
acquired from Axis consisted of, among other things, trademarks, inventory,
contract rights, fixed assets and certain office equipment primarily located in
California (collectively, the "Axis Assets"). As a result of the acquisition,
Salant further diversified its channels of distribution beyond traditional
department stores. The results of Axis' operations are included in the statement
of operations from the acquisition date.
The Company did not assume any accounts payable, accrued liabilities or debt,
however it did assume several leases and contracts. In conjunction with the
Asset Purchase Agreement, a three-year employment contract was signed between
Solomon and SHC, along with SHC signing an agreement to lease office space (at
current market rates) from Solomon. The Company has obtained third-party
valuations of certain intangible assets. Of the total intangibles acquired,
$9,700 has been allocated to trademarks and $2,318 has been allocated to
goodwill. Neither the trademarks nor goodwill will be subject to amortization,
but will be tested for impairment on a periodic basis. The remaining $300 of
miscellaneous intangibles have been amortized over the first six months of 2002.
The following table summarizes the fair values of the assets acquired at the
date of acquisition:
Current assets $ 751
Property, plant, and equipment 100
Intangible assets 300
Trademarks 9,700
Goodwill 2,318
Total assets acquired $13,169
The aggregate purchase price for the Axis Assets was approximately $12,433, plus
direct acquisition costs of $736. Of the total purchase price, $10,633 was paid
at closing and $1,800 has been placed in escrow and is payable in equal payments
over the next 2 years. The purchase price was based upon arms-length
negotiations considering (i) the value of the Axis brand, (ii) the quality of
the Axis Assets and (iii) the estimated cash flow from the Axis Assets. The
principal source of funds for the acquisition of the Axis Assets was from
working capital.
The following unaudited consolidated pro forma results of operations of the
Company for the three months and nine months ended September 29, 2001 give
effect to the acquisition as if it occurred on January 2, 2001:
Three months Nine Months
Ended Ended
Sept 29, Sept 29,
2001 2001
(Unaudited) (Unaudited)
Net Sales $62,060 $174,406
Net Income $ 1,949 $ 1,985
Basic and Diluted Income per Share $ 0.20 $ 0.20
The unaudited pro forma information above has been prepared for comparative
purposes only and includes certain adjustments to the Company's historical
statements of income, such as the recording of goodwill and increased interest
expense, or reduction of interest income, due to the cost of the acquisition.
The results do not purport to be indicative of the results of operations that
would have resulted had the acquisition occurred at the beginning of the period
or of future results of operations of the consolidated entities.
Note 3. Inventories
September 28, December 29, September 29,
2002 2001 2001
Finished goods $ 29,382 $ 23,188 $ 42,859
Work-in-Process 8,847 9,310 7,086
Raw materials and supplies 3,943 4,047 5,000
Total inventories 42,172 36,545 54,945
Inventory markdown reserves (2,107) (1,810) (3,055)
Net inventories $ 40,065 $ 34,735 $ 51,890
Note 4. Intangible Assets
In accordance with SFAS No. 142, the Company discontinued the amortization of
goodwill effective December 30, 2001. During the first nine months of 2002, the
Company recorded amortization expense for identified intangible assets with
finite lives of $689 and estimated amortization expense for fiscal years 2003
through 2007 will be approximately $650 per year. The intangible assets
(unamortized and amortized) are associated with the wholesale segment of the
Company and are as follows:
September 28, 2002 December 29, 2001
Carrying Accumulated Carrying Accumulated
Amount Amortization Net Amount Amortization Net
Amortizable Intangible Assets
Licenses $11,161 $(5,342) $ 5,819 $11,161 $(5,039) $ 6,122
Trademarks 4,600 (1,658) 2,942 4,600 (1,572) 3,028
Other 300 (300) -- -- -- --
Total $16,061 $(7,300) $ 8,761 $15,761 $(6,611) $ 9,150
Unamortizable Intangible Assets
Goodwill $ 2,318 $ -- $ 2,318 $ --$ -- $ --
Trademarks 11,875 (108) 11,767 2,175 (108) 2,067
Total $14,193 $ (108) $14,085 $ 2,175 $ (108) $ 2,067
Total Intangible Assets $30,254 $(7,408) $22,846 $17,936 $(6,719) $11,217
Note 5. Accumulated Other Comprehensive Income/(Loss)
Foreign Minimum Accumulated
Currency Pension Other
Translation Liability Comprehensive
Adjustment Adjustment Income/(Loss)
2002
Beginning of year balance $ (113) $ (4,753) $ (4,866)
Nine months ended
September 28, 2002 change (2) -- (2)
End of quarter balance $ (115) $ (4,753) $ (4,868)
2001
Beginning of year balance $ (118) $ (4,334) $ (4,452)
Nine months ended
September 29, 2001 change 3 -- 3
End of quarter balance $ (115) $ (4,334) $ (4,449)
Note 6. Restructuring Reserve
In the first nine months of 2002, the Company used $23 of the restructuring
reserve primarily for employee costs necessary to complete the shut-down of
Mexican operations. As of September 28, 2002, the reserve balance was $561,
which relates to the shutdown of the operations in Mexico, consisted of $475
which was reserved for severance and other employee costs and $86 which was
reserved for various other restructuring costs.
Note 7. Discontinued Operations
In the first nine months of 2002, the net liabilities of discontinued operations
decreased by $16, due to the reduction of the reserve for miscellaneous legal
fees. As of September 28, 2002, the net liabilities of discontinued operations
consist of $446 of reserve for discontinued operations and $31 of miscellaneous
liabilities. The reserve for discontinued operations consists of $390 for
severance and other employee costs, and $56 of other restructuring costs.
Note 8. Segment Reporting
The Company operates in two business segments, wholesale and retail. The
wholesale apparel segment consists of businesses that design, source, import and
market men's apparel and accessories under various trademarks owned or licensed
by the Company, or by its customers. The retail segment consists of a chain of
retail outlet stores, through which it sells products made under the Perry Ellis
trademarks by the Company and other Perry Ellis licensees. As of September 28,
2002, the Company operated 39 Perry Ellis retail outlet stores.
The Company's total assets as of September 28, 2002, September 29, 2001 and
December 29, 2001 and the results of operations for the nine months, and the
quarters ending September 28, 2002 and September 29, 2001, by segment, were as
follows:
Three Months Ended Nine Months Ended
September 28, September 29, September 28, September 29,
2002 2001 2002 2001
Net Sales
Wholesale $ 57,419 $ 48,713 $ 155,221 $ 131,666
Retail 6,392 6,385 18,513 16,908
$ 63,811 $ 55,098 $ 173,734 $ 148,574
Gross Profit
Wholesale $ 15,917 $ 9,877 $ 40,904 $ 27,391
Retail 2,839 2,981 8,202 7,624
$ 18,756 $ 12,858 $ 49,106 $ 35,015
Income/(loss) before Interest
and Income Taxes
Wholesale $ 4,787 $ 1,429 $ 7,340 $ 89
Retail (584) (62) (1,620) (1,117)
$ 4,203 $ 1,367 $ 5,720 $ (1,028)
September 28, December 29, September 29,
2002 2001 2001
Total Assets
Wholesale $ 119,484 $ 108,547 $ 112,362
Retail 8,557 9,185 11,269
$ 128,041 $ 117,732 $123,631
Note 9. Purchase of Treasury Stock
On July 15, 2002, the Company purchased 1,118,942 shares of its common stock,
par value $1.00 per share, at a price of two and a half dollars ($2.50) per
share, for an aggregate purchase price of $2,797. The shares are being held as
treasury stock of the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Results of Operations
Overview
In January of 2001, the Company acquired the assets of Tricots St. Raphael, Inc.
("Tricots"). In January of 2002, the Company made another acquisition with the
purchase of the assets of Axis Clothing Corporation ("Axis"). Tricots and Axis
are both highly respected better menswear brands distributed primarily through
better men's department and specialty stores in the U.S. These acquisitions were
an important step in the plan to diversify the Company's distribution channels.
The Company's licensed product offerings under the PERRY ELLIS trademarks
continue to be the core of the Company's business. Perry Ellis products compete
in the highly competitive department store arena of retail. The Company also
entered into a licensee agreement in 2001 for the Ocean Pacific men's sportswear
label and the Company made its first shipment in January 2002. During 2002, the
Company entered into a license agreement for the JNCO young men's sportswear
label and shipping began in the second quarter of 2002. The JNCO license also
provides the Company with the rights to several other product categories
associated with the JNCO label.
In 2001, the Company started a Private Brands division to focus on the
development of additional channels of distribution by producing men's apparel
products for customer owned brands and in January 2002, the Company made its
first shipments.
Third Quarter of 2002 Compared with Third Quarter of 2001
Net Sales
Net sales increased by $8.7 million, or 15.8%, in the third quarter of 2002, as
compared to the third quarter of 2001. This increase was the result of net sales
generated by newly acquired and licensed wholesale businesses. Net sales for the
wholesale segment increased by $8.7 million, or 17.9%, in the third quarter of
2002, as compared to the third quarter of 2001. Perry Ellis net sales decreased
by $8.8 million in the third quarter of 2002, primarily due to a reduction of
off-price and prior season inventory dispositions. Other brands and labels
accounted for an increase of $17.5 million for the third quarter of 2002. Net
sales for the Perry Ellis retail outlet stores ("retail segment") remained
constant in the third quarter of 2002, as compared to the third quarter of 2001.
Gross Profit
The gross profit percentage in the third quarter of 2002 increased to 29.4% from
23.3% in the third quarter of 2001. Total wholesale gross profit increased by
$6.0 million from the third quarter of 2001, and the gross profit percentage for
the wholesale segment increased to 27.7% in the third quarter of 2002 from 20.3%
in the third quarter of 2001. The increase was primarily the result of lower
sales deductions from customers and a decrease in the disposition of prior
season inventory. Total gross profit for the retail segment decreased by $0.2
million in the third quarter of 2002, from the third quarter of 2001. The retail
segment's gross profit percentage decreased to 44.4% for the third quarter of
2002, as compared to the third quarter of 2001 of 46.7%. The decrease in the
gross profit percentage was due to the overall softness in the retail outlet
sector.
Selling, General and Administrative Expenses
Selling, general and administrative ("SG&A") expenses in the third quarter of
2002 increased to $14.6 million (22.9% of sales) from $11.4 million (20.7% of
sales) in the third quarter of 2001. The increase in total SG&A was the result
of additional expenses related to newly acquired and licensed businesses. The
increase in the SG&A as a percentage of net sales was due to increased start up
costs related to the newly acquired, licensed and developed businesses.
Income/Loss Before Interest and Income Taxes
Income before interest and income taxes was $4.2 million for the third quarter
of 2002 as compared to income of $1.4 million for the third quarter of 2001. The
increase was primarily the result of higher net sales and improved gross margins
as discussed above, partially offset by increased SG&A. The retail segment's
loss from operations before interest and income taxes was $0.6 million in the
third quarter of 2002 as compared to a loss of $0.1 million in the third quarter
of 2001.
Interest Income, Net
Net interest income was $61 thousand for the third quarter of 2002 as compared
to $42 thousand for the third quarter of 2001. The increase was the result of
higher invested cash balances during the quarter due to lower inventory levels
and higher receivable collections, partially offset by lower interest rates.
Net Income
In the third quarter of 2002, the Company reported net income of $4.3 million,
or $0.48 per share, as compared to income of $1.4 million, or $0.14 per share in
the third quarter of 2001, an increase of $0.34 per share.
Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA")
Earnings before interest, taxes, depreciation and amortization charges were $5.6
million (8.8% of net sales) for the third quarter of 2002, compared to $2.6
million (4.8% of net sales) in the third quarter of 2001. The Company believes
this information is helpful in understanding cash flow from operations that is
available for potential acquisitions and capital expenditures. This measure is
not contained in Accounting Principles Generally Accepted in the United States
of America and is not a substitute for operating income, net income or net cash
flows from operations.
Year to Date 2002 Compared with Year to Date 2001
Net Sales
Net sales increased by $25.2 million, or 16.9%, in the first nine months of
2002, as compared to the first nine months of 2001. This increase was the result
of net sales generated by newly acquired and licensed wholesale businesses. Net
sales for the wholesale segment increased by $23.6 million, or 17.9%, in the
first nine months of 2002, as compared to the first nine months of 2001. Perry
Ellis net sales decreased by $21.2 million in the first nine months of 2002,
primarily due to the reduction of off-price and prior season inventory
dispositions. Other brands and labels accounted for an increase of $44.8 million
for the first nine months of 2002. Net sales for the retail segment increased
$1.6 million, or 9.5%, in the first nine months of 2002, as compared to the
first nine months of 2001. The primary reason for this increase was the opening
of new Perry Ellis retail stores between September 29, 2001 and September 28,
2002.
Gross Profit
The gross profit percentage in the first nine months of 2002 increased to 28.3%
from 23.6% in the first nine months of 2001. Total wholesale gross profit
increased $13.5 million from the first nine months of 2001, and the gross profit
percentage for the wholesale segment increased to 26.4% in the first nine months
of 2002 from 20.8% in the first nine months of 2001. The increase was primarily
the result of lower sales deductions and a decrease in prior-season inventory
dispositions. Total gross profit for the retail segment increased, due to an
increase in the number of stores, by $0.6 million in the first nine months of
2002, from the first nine months of 2001. The retail segment gross profit
percentage decreased to 44.3% for the first nine months of 2002, as compared to
the first nine months of 2001 at 45.1%. The decrease in the gross profit
percentage was due to the overall softness in the retail outlet sector.
Selling, General and Administrative Expenses
SG&A expenses in the first nine months of 2002 increased to $43.2 million (24.9%
of sales) from $35.7 million (24.0% of sales) as compared to the first nine
months of 2001. The increase in total SG&A was primarily the result of
additional expenses related to the new businesses and an increase in the number
of retail outlet stores.
Income/Loss Before Interest and Income Taxes
Income before interest and income taxes was $5.7 million for the first nine
months of 2002 as compared to a loss of $1.0 million for the first nine months
of 2001. The increase was primarily the result of higher net sales and improved
gross margins as discussed above. The retail segment's loss from operations
before interest and income taxes was $1.6 million in the first nine months of
2002 as compared to a loss of $1.1 million in the first nine months of 2001.
Interest Income, Net
Net interest income was $161 thousand for the first nine months of 2002 as
compared to $309 thousand for the first nine months of 2001. The decrease was
the result of lower average invested cash balances due to the acquisition of the
Axis assets and a lower interest rate in the first nine months of 2002.
Net Income/Loss
In the first nine months of 2002, the Company reported net income of $5.9
million, or $0.62 per share, an increase of $0.69 per share, as compared to the
net loss of $0.7 million, or $0.07 per share in the first nine months of 2001.
Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA")
Earnings before interest, taxes, depreciation and amortization charges were
$10.0 million (5.8% of net sales) for the first nine months of 2002, compared to
$2.8 million (1.9% of net sales) in the first nine months of 2001. The Company
believes this information is helpful in understanding cash flow from operations
that is available for potential acquisitions and capital expenditures. This
measure is not contained in Accounting Principles Generally Accepted in the
United States of America and is not a substitute for operating income, net
income or net cash flows from operations.
Liquidity and Capital Resources
On May 11, 1999, the Company entered into a syndicated revolving credit
facility, (the "Credit Agreement"), as amended and restated on November 30,
2001, with The CIT Group/Commercial Services, Inc. ("CIT"). Effective May 11,
2002, the Company signed an amendment with CIT to extend the Credit Agreement
for an additional three years.
The Credit Agreement provides for a general working capital facility, in the
form of direct borrowings and letters of credit, up to $85 million subject to an
asset-based borrowing formula. The Credit Agreement consists of an $85 million
revolving credit facility, with at least a $45 million letter of credit
sub-facility. As collateral for borrowings under the Credit Agreement, the
Company granted to CIT a first priority lien on and security interest in
substantially all of the assets of the Company.
The Credit Agreement also provides, among other things, that (i) the Company
will be charged an interest rate on direct borrowings at the Prime Rate or at
the Company's request, 2.25% in excess of LIBOR (as defined in the Credit
Agreement), and (ii) CIT may, in their sole discretion, make loans to the
Company in excess of the borrowing formula but within the $85 million limit of
the revolving credit facility. The Company is required under the agreement to
comply with certain financial covenants, including but not limited to,
consolidated tangible net worth, capital expenditures, minimum pre-tax income,
minimum interest coverage ratio and an annual provision to reduce cash
borrowings to zero for 30 consecutive days. The Company was in compliance with
all applicable covenants at September 28, 2002. At September 28, 2002, there
were no direct borrowings outstanding; letters of credit outstanding under the
Credit Agreement were $35.3 million and the Company had unused availability,
based on outstanding letters of credit and existing collateral, of $32.5 million
and cash of approximately $11.0 million available to fund its operations. At the
end of the first nine months of 2001, there were no direct borrowings
outstanding; letters of credit outstanding were $23.1 million, and the Company
had unused availability of $37.9 million and cash of approximately $2.4 million
available to fund its operations.
Sept 28, Sept 29,
2002 2001
Maximum Availability under Credit Agreement $67.8 $61.0
Borrowings under Credit Agreement -- --
Outstanding Letters of Credit 35.3 23.1
Current Availability under Credit Agreement 32.5 37.9
Cash on Hand 11.0 2.4
Available to fund operations $43.5 $40.3
The Company's cash provided by operating activities for the first nine months of
2002 was $10.2 million, which primarily reflects (i) an increase in accounts
payable of $6.7 million, (ii) net income from continuing operations of $5.9
million, (iii) a decrease in prepaid and other assets of $1.8 million, (iv) an
increase in accrued liabilities and reserve for business restructuring of $0.5
million, (v) an increase in net inventories of $4.7 million, and (vi) an
increase in net accounts receivable of $4.3 million. In addition, non-cash
charges for depreciation and amortization totaled $4.3 million.
Cash used by investing activities for the first nine months of 2002 was $16.2
million, which reflects $13.2 million used to purchase certain assets of Axis,
$2.0 million for capital expenditures and $1.0 million for department store
fixtures. During fiscal 2002, the Company plans to make capital expenditures of
approximately $4.6 million and to spend $1.0 million for the installation of
fixtures in department stores.
Cash used by financing activities for the first nine months of 2002 included
$2.8 million for the purchase of shares of the Company's common stock which is
being held as treasury stock.
Working Capital
At September 28, 2002, working capital totaled $60.6 million as compared to
$70.7 million at the end of the third quarter of 2001 and the current ratio was
3.4:1 as compared to 4.3:1 in the third quarter of 2001. The components of
working capital changed significantly as of September 28, 2002 as compared to
September 29, 2001. Cash increased by $8.6 million and current liabilities
increased by $4.1 million, which were offset by a decrease in inventory, the
purchase of the Axis assets and the purchase of shares of the Company's common
stock. The decrease in inventory was due to increased inventory turnover, which
improved from 2.9 to 4.5. Current liabilities increased $4.1 million at the end
of the third quarter of 2002 as compared to the third quarter of 2001 due to the
timing of inventory purchases and receipts. Accounts receivable decreased by
$1.7 million due to the timing of sales within the quarter.
Critical Accounting Policies and Estimates
Certain of the Company's accounting policies require the application of
significant judgement by management in selecting the appropriate assumptions for
calculating financial estimates. By their nature, these judgements are subject
to an inherent degree of uncertainty. These judgements are based on historical
experience, the Company's observation of trends in the industry, information
provided by customers and information available from other outside sources, as
appropriate. The Company's significant accounting policies include:
Revenue Recognition - Sales are recognized upon shipment of products to
customers since title passes upon shipment and, in the case of sales by the
Company's retail outlet stores, when goods are sold to consumers. Allowances for
estimated uncollectible accounts, discounts, returns and allowances are provided
when sales are recorded based upon historical experience and current trends.
While such allowances have been within the Company's expectations and the
provisions established, it cannot guarantee to continue to experience the same
allowance rate as in the past.
Inventories - Inventory is valued at the lower of cost or market, cost being
determined on the first-in, first-out method. Reserves for slow moving and aged
merchandise is provided based on historical experience and current product
demand. The Company evaluates the adequacy of the reserves quarterly. While
markdowns have been within the Company's expectations and the provisions
established, it cannot guarantee to continue to experience the same level of
markdowns as in the past.
Valuation of Long-Lived Assets - The Company periodically reviews the carrying
value of the Company's long-lived assets for continued appropriateness. The
review is based upon the Company's projections of anticipated future cash flows.
While the Company believes that the estimates of future cash flows are
reasonable, different assumptions regarding such cash flows could materially
affect the Company's evaluations.
Deferred Taxes -- The Company accounts for income taxes under the liability
method. Deferred tax assets and liabilities are recognized based on differences
between financial statement and tax basis of assets and liabilities using
presently enacted tax rates. A valuation allowance is recorded to reduce a
deferred tax asset to that portion which is expected to more likely than not be
realized.
Factors that May Affect Future Results and Financial Condition.
This report contains or incorporates by reference forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Where any such forward-looking statement includes a statement of the assumptions
or bases underlying such forward-looking statement, the Company cautions that
assumed facts or bases almost always vary from the actual results, and the
differences between assumed facts or bases and actual results can be material,
depending on the circumstances. Where, in any forward-looking statement, the
Company or its management expresses an expectation or belief as to future
results, there can be no assurance that the statement of the expectation or
belief will result or be achieved or accomplished. The words "believe",
"expect", "estimate", "project", "seek", "anticipate" and similar expressions
may identify forward-looking statements. The Company's future operating results
and financial condition are dependent upon the Company's ability to successfully
design, source, import and market its products.
Because of the following factors, as well as other factors affecting the
Company's operating results and financial condition, past financial performance
should not be considered to be a reliable indicator of future performance, and
investors are cautioned not to use historical trends to anticipate results or
trends in the future. In addition, the Company's participation in the highly
competitive apparel industry often results in significant volatility in the
Company's common stock price. The following are identified as important factors
that could cause results to differ materially from those expressed in any
forward-looking statement made by, or on behalf of, the Company:
Current Items. The work stoppage at U.S. ports on the West Coast for 10 days in
October 2002, caused delays in the delivery of a portion of the Company's
finished goods and raw material inventory. The Company is in the process of
obtaining extensions from customers and has made alternate arrangements to
minimize the impact of the work stoppage. The Company is also experiencing a
quota embargo on certain products produced in India. This will delay the receipt
of certain goods until the quota category is reopened in January 2003. The
Company is making arrangements to minimize the impact of the quota embargo on
current operations. Management does not believe these events, based on the
information currently available, will have a material impact on the Company's
operations and financial results.
Competition. The apparel industry in the United States is highly competitive and
characterized by a relatively small number of multi-line manufacturers (such as
the Company) and a large number of specialty manufacturers. The Company faces
substantial competition in its markets from manufacturers in both categories.
Many of the Company's competitors have greater financial resources than the
Company. The Company also competes for private label programs with the internal
sourcing organizations of many of its own customers.
Trademarks Licensed to the Company. Approximately two-thirds of the Company's
net sales are attributable to trademarked products licensed by the Company. The
principal trademarks licensed by the Company are PERRY ELLIS, PORTFOLIO BY PERRY
ELLIS, OCEAN PACIFIC and JNCO. The licenses contain provisions related to, among
other things, products which may be sold, territories where products may be
sold, restrictions on sales to certain levels of distribution, minimum sales and
royalty requirements, advertising and promotion requirements, sales reporting,
design and product standards, renewal options, assignment and change of control
provisions, defaults, cures and termination provisions. The change of control
provisions and their potential effects vary with each licensing agreement.
Assuming the exercise of all renewal options by the Company, The Perry Ellis
licenses will expire on December 31, 2015, the Ocean Pacific license will expire
on December 31, 2008 and the JNCO license will expire on December 31, 2011.
Should any of the Company's material licenses be terminated, outside the normal
course of business, there can be no assurance that the Company's financial
condition and results of operations would not be adversely affected.
Strategic Initiatives. In the first quarter of 2002, the Company acquired
certain assets and trademarks of Axis which designs, produces, and markets
better men's sportswear. In the first quarter of 2001, the Company purchased
certain assets and trademarks of Tricots St. Raphael, Inc. which designs,
produces, and markets better men's sweaters and sportswear. The Company also
entered into a licensee agreement in 2001 to develop the Ocean Pacific menswear
label and the Company began shipping in January 2002. During 2002, the Company
entered into a license agreement to develop the JNCO young men's sportswear
label and shipping began in the second quarter of 2002. In 2001, the Company
started a Private Brands division to focus on the development of additional
channels of distribution for men's apparel products and in January 2002, the
Company delivered its first shipments. As a result of these acquisitions and
licenses, Salant has diversified its operations by expanding into alternate
channels of distribution. Management of the Company is continuing to explore
various strategic opportunities, including but not limited to, new licensing
opportunities and/or acquisitions. Management is also exploring ways to increase
productivity and efficiency, and to reduce the cost structures of its respective
businesses. Through this process management expects to expand its distribution
channels and achieve effective economies of scale. No assurance may be given
that any transactions resulting from this process will be announced or
completed.
Apparel Industry Cycles and other Economic Factors. Historically, the apparel
industry has been subject to substantial cyclical variation, with consumer
spending on apparel tending to decline during recessionary periods. A decline in
the general economy or uncertainties regarding future economic prospects may
affect consumer-spending habits, which, in turn, could have a material adverse
effect on the Company's results of operations and financial condition.
Retail Environment. Various retailers, including some of the Company's
customers, have experienced declines in revenue and profits in recent periods.
To the extent that these difficult financial conditions continue at retail,
there can be no assurance that the Company's financial condition and results of
operations would not be adversely affected.
Seasonality of Business and Fashion Risk. The Company's principal products are
organized into seasonal lines for resale at the retail level during the Spring,
Transition, Fall and Holiday Seasons. Typically, the Company's products are
designed as much as one year in advance and manufactured approximately one
season in advance of the related retail selling season. Accordingly, the success
of the Company's products is often dependent on the ability of the Company to
successfully anticipate the needs of the Company's retail customers and the
tastes of the ultimate consumer up to a year prior to the relevant selling
season.
Foreign Operations. The Company's foreign sourcing operations are subject to
various risks of doing business abroad, including currency fluctuations
(although the predominant currency used is the U.S. dollar), quotas, and in
certain parts of the world, political instability. Any substantial disruption of
its relationship with its foreign suppliers could adversely affect the Company's
operations. Some of the Company's imported merchandise is subject to United
States Customs duties. In addition, bilateral agreements between the major
exporting countries and the United States impose quotas, which limit the amount
of certain categories of merchandise that may be imported into the United
States. Any material increase in duty levels, material decrease in quota levels
or material decrease in available quota allocation could adversely affect the
Company's operations. The Company's operations in Asia are subject to certain
political and economic risks including, but not limited to, political
instability, changing tax and trade regulations and currency devaluations and
controls. Although the Company has experienced no material foreign currency
transaction losses, its operations in the region are subject to an increased
level of economic instability. The impact of these events on the Company's
business, and in particular its sources of supply, could have a material adverse
effect on the Company's performance.
Dependence on Contract Manufacturing. The Company produces substantially all of
its products through arrangements with independent contract manufacturers. The
use of such contractors and the resulting lack of direct control could subject
the Company to difficulty in obtaining timely delivery of products of acceptable
quality. In addition, as is customary in the industry, the Company does not have
any long-term contracts with its fabric suppliers or product manufacturers.
While the Company is not dependent on one particular product manufacturer or raw
material supplier, the loss of several such product manufacturers and/or raw
material suppliers in a given season could have a material adverse effect on the
Company's performance.
New Accounting Pronouncements. Effective December 30, 2001, the Company adopted
Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and
Other Intangible Assets," which addresses the financial accounting and reporting
standards for the acquisition of intangible assets outside of a business
combination and for goodwill and other intangible assets subsequent to their
acquisition. This accounting standard requires that goodwill be separately
disclosed from other intangible assets in the statement of financial position
and no longer be amortized, but tested for impairment on a periodic basis. The
provisions of this accounting standard also require the completion of a
transitional impairment test within six months of adoption, with any impairments
identified treated as a cumulative effect of a change in accounting principle.
The Company did not recognize any impairment after completion of the
transitional impairment test.
In accordance with SFAS No. 142, the Company discontinued the amortization of
goodwill effective December 30, 2001. Previously reported net income for the
quarter and nine months ended September 29, 2001 would have increased by $27 and
$81 respectively due to the amounts adjusted for the exclusion of goodwill
amortization.
In October 2001, the Financial Accounting Standards Board issued ("FASB") SFAS
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which
addresses the financial accounting and reporting for the impairment or disposal
of long-lived assets. This statement supercedes SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of" and
was effective for the first quarter in the fiscal year ending December 28, 2002.
The adoption of this Statement did not have an impact on the consolidated
financial statements.
In April 2002, the FASB issued SFAS No.145, "Recession of FASB Statements No. 4,
44, and 64, Amendment of FASB Statement No. 13 and Technical Corrections". In
addition to amending and rescinding other existing authoritative pronouncements
to make various technical corrections, clarify meanings, or describe their
applicability under changed conditions, SFAS No. 145 precludes companies from
recording gains and losses from the extinguishment of debt as an extraordinary
item. SFAS No. 145 is effective for the first quarter in the fiscal year ending
January 3, 2004. The Company does not expect the adoption of this pronouncement
to have a material effect on the consolidated results of operations or financial
position.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities". The standard requires companies to recognize
costs associated with exit or disposal activities when they are incurred rather
than at the date of a commitment to an exit or disposal plan. Examples of costs
covered by the standard include lease termination costs and certain employee
severance costs that are associated with a restructuring, discontinued
operation, plant closing, or other exit or disposal activity. SFAS No. 146 is to
be applied prospectively to exit or disposal activities initiated after December
31, 2002. The Company does not expect the adoption of this pronouncement to have
a material effect on the consolidated results of operations or financial
position.
Item 4. Controls and Procedures
Within the 90 days prior to the date of this report on Form 10-Q, the Company
carried out an evaluation, under the supervision and with the participation of
the Company's management, including the Company's Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures pursuant to Exchange Act Rule
13a-14. Based upon that evaluation, the Company's Chief Executive Officer and
Chief Financial Officer concluded that the Company's disclosure controls and
procedures are effective in timely alerting them to material information
relating to the Company (including its consolidated subsidiaries) required to be
included in the Company's periodic filings with the Securities and Exchange
Commission.
There have been no significant changes in the Company's internal controls or in
other factors that could significantly affect the Company's internal controls
subsequent to the date the Company carried out this evaluation.
PART II - OTHER INFORMATION
Item 5. Other Events
On August 9, 2002, Magten Asset Management Corp. ("Magten"), a registered
investment advisor, reported on a Form 4 and Amendment No. 5 to Schedule 13D
that it had distributed in kind 1,118,942 shares of common stock to investment
advisory clients on July 19, 2002. Talton R. Embry, a managing director and sole
shareholder of Magten, also filed a Form 4 as a director of the Company on
August 9, 2002, reporting the Magten disposition of 1,118,942 shares of common
stock. In addition, on September 9, 2002 Mr. Embry filed a Form 4 which reported
that on August 5, 2002 Magten distributed in kind 8,694 shares of common stock
to investment advisory clients. As a result of the distribution of such shares
and Magten's previously reported distributions of 4,637,920 shares in 2002,
Magten's beneficial ownership of shares has been reduced since April 15, 2002
from 5,984,850 shares (representing approximately 60.4% of the outstanding
shares at such time) to 219,294 shares (representing approximately 2.5% of the
outstanding shares as of the date hereof). Effective November 6, 2002, Mr. Embry
resigned from the Company's Board of Directors.
On October 31, 2002, the Company retained the services of an investment banking
firm to provide financial advisory services to the Company and to assess the
Company's strategic alternatives.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Reports on Form 8-K
During the third quarter of 2002, the Company filed an 8-K dated July 15, 2002
filing under Items 5 and 7 information relating to the Company's purchase of
1,118,942 shares of its common stock. In addition, the Company filed an 8-K
dated August 9, 2002 furnishing under Items 7 and 9 the transmittal letter and
certificates by the Company's Chief Executive Officer and Chief Financial
Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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.
SALANT CORPORATION
Date: November 12, 2002 /s/ Awadhesh K. Sinha
Awadhesh K. Sinha
Chief Operating Officer and
Chief Financial Officer
CERTIFICATION
I, Michael J. Setola, Chief Executive Officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Salant Corporation;
2. Based on my knowledge, this quarterly 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 quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures 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 as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, 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 in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 12, 2002
/s/ Michael J. Seola
Michael J. Setola
Chief Executive Officer
CERTIFICATION
I, Awadhesh K. Sinha, Chief Financial Officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Salant Corporation;
2. Based on my knowledge, this quarterly 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 quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures 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 as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, 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 in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 12, 2002
/s/ Awadhesh K. Sinha
Awadhesh K. Sinha
Chief Financial Officer