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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-5005
SELAS CORPORATION OF AMERICA
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
PENNSYLVANIA 23-1069060
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO)
INCORPORATION OR ORGANIZATION)
DRESHER, PENNSYLVANIA 19025
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(215) 646-6600
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT
WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
(X) YES ( ) NO
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
COMMON SHARES, $1.00 PAR VALUE 5,119,214 (exclusive of 515,754
CLASS treasury shares)
OUTSTANDING AT NOVEMBER 8, 2002
SELAS CORPORATION OF AMERICA
I N D E X
Page
Number
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of
September 30, 2002 and December 31, 2001 3, 4
Consolidated Statements of Operations for
the Three Months Ended September 30, 2002 and 2001 5
Consolidated Statements of Operations for
the Nine Months Ended September 30, 2002 and 2001 6
Consolidated Statements of Cash Flows for
the Nine Months Ended September 30, 2002 and 2001 7
Consolidated Statement of Shareholders' Equity
for the Nine Months Ended September 30, 2002 8
Notes to Consolidated Financial Statements 9-19
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 20-25
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 25
Item 4. Controls and Procedures 25
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 26
Item 6. Exhibits and Reports on Form 8-K 26
Item 99. Certifications 31-32
SELAS CORPORATION OF AMERICA
Consolidated Balance Sheets
Assets
September 30, December 31,
2002 2001
(Unaudited) (Audited)
Current assets
Cash, including cash equivalents of
$407,000 in 2002 and $391,000 in 2001 $ 2,579,368 $ 3,636,673
Accounts receivable (including unbilled
receivables of $1,986,000 in 2002
and $1,857,000 in 2001, less allowance
for doubtful accounts of $691,000 in
2002 and $456,000 in 2001) 19,252,446 17,376,784
Inventories 12,571,453 13,810,209
Deferred income taxes 1,848,622 1,521,809
Other current assets 2,175,256 1,033,689
Assets of discontinued operations 7,527,417 --
Total current assets 45,954,562 37,379,164
Property, plant and equipment
Land 554,944 554,943
Buildings 7,225,070 7,143,408
Machinery and equipment 34,147,754 32,502,680
41,927,768 40,201,031
Less: Accumulated depreciation 27,672,460 25,621,190
Net property, plant and equipment 14,255,308 14,579,841
Assets of discontinued operations -- 16,773,442
Excess of cost over net assets of acquired
subsidiaries, less accumulated amortiza-
tion of $4,531,000 in 2002 and
$4,562,000 in 2001 15,717,312 15,631,502
Deferred income taxes 138,148 350,014
Other assets including patents, less
amortization 1,613,131 1,523,320
$77,678,461 $86,237,283
(See accompanying notes to the consolidated financial statements)
SELAS CORPORATION OF AMERICA
Consolidated Balance Sheets
Liabilities and Shareholders' Equity
September 30, December 31,
2002 2001
Current liabilities (Unaudited) (Audited)
Notes payable $ 10,087,175 $ 9,422,202
Current maturities of long-term debt 1,549,237 1,496,033
Accounts payable 12,735,716 10,232,880
Federal, state and foreign income taxes 411,610 461,393
Customers' advance payments on contracts 2,091,348 2,809,988
Guarantee obligations and estimated costs
of service 1,195,065 878,952
Other accrued liabilities 5,963,795 5,100,021
Liabilities of discontinued operations 4,470,942 --
Total current liabilities 38,504,888 30,401,469
Long-term debt 3,104,607 3,214,934
Other postretirement benefit obligations 3,918,570 3,878,948
Liabilities of discontinued operations -- 10,137,315
Contingencies and commitments
Shareholders' equity
Common shares, $1 par; 10,000,000 shares
authorized; 5,634,968 shares issued 5,634,968 5,634,968
Additional paid-in capital 12,012,541 12,012,541
Retained earnings 16,886,919 23,297,747
Accumulated other comprehensive (loss) (1,118,954) (1,075,561)
Less: 515,754 common shares held
in treasury, at cost (1,265,078) (1,265,078)
Total shareholders' equity 32,150,396 38,604,617
$77,678,461 $86,237,283
(See accompanying notes to the consolidated financial statements)
SELAS CORPORATION OF AMERICA
Consolidated Statements of Operations
(Unaudited)
Three Months Ended
September 30, September 30,
2002 2001
Sales, net $18,994,528 $18,695,667
Operating costs and expenses
Cost of sales 15,656,846 15,393,327
Selling, general and administrative
Expenses 4,680,260 4,369,676
Operating loss (1,342,578) (1,067,336)
Interest (expense) (201,373) (133,535)
Interest income 9,413 11,399
Other income (expense), net 156,114 (156,754)
Loss from continuing operations
before income taxes (1,378,424) (1,346,226)
Income taxes (151,915) (552,721)
Loss from continuing operations (1,226,509) (793,505)
Loss from discontinued operations, net of
income tax benefit (5,277,137) (582,912)
Net loss $(6,503,646) $(1,376,417)
Loss per share
Basic
Continuing operations $(.24) $(.16)
Discontinued operations (1.03) (.11)
$(1.27) $(.27)
Average shares outstanding
Basic 5,119,000 5,119,000
Comprehensive loss $(6,612,600) $(1,083,640)
(See accompanying notes to the consolidated financial statements)
SELAS CORPORATION OF AMERICA
Consolidated Statements of Operations
(Unaudited)
Nine Months Ended
September 30, September 30,
2002 2001
Sales, net $62,499,980 $67,184,407
Operating costs and expenses
Cost of sales 50,148,109 52,741,679
Selling, general and administrative
Expenses 12,891,686 13,091,371
Operating income (loss) (539,815) 1,351,357
Interest (expense) (401,267) (426,667)
Interest income 32,596 33,951
Other income (expense), net 409,893 (97,327)
Income (loss) from continuing operations
before income taxes (498,593) 861,314
Income taxes 44,819 301,353
Income (loss) from continuing operations (543,412) 559,961
Loss from discontinued operations, net of
income taxes (5,867,416) (1,503,104)
Net loss $ (6,410,828) $ (943,143)
Earnings (loss) per share
Basic
Continuing operations $(.10) $.11
Discontinued operations (1.15) (.29)
$(1.25) $(.18)
Average shares outstanding
Basic 5,119,000 5,119,000
Comprehensive loss $(6,454,221) $ (794,424)
(See accompanying notes to the consolidated financial statements)
SELAS CORPORATION OF AMERICA
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
September 30, September 30,
2002 2001
Cash flows from operating activities:
Net loss $ (6,410,828) $ (943,143)
Adjustments to reconcile net loss
to net cash provided (used) by operating
activities:
Depreciation and amortization 2,376,445 3,102,830
(Gain) loss on sale of property and
equipment 1,225 (1,271)
Deferred taxes (349) (634,333)
Changes in operating assets and
liabilities:
Increase in accounts receivable (1,619,958) (1,490,028)
(Increase) decrease in inventories 1,418,500 (2,360,055)
(Increase) decrease in other assets 449,928 (255,950)
Increase in accounts payable 3,400,252 296,548
Increase in accrued expenses 1,061,710 615,693
Increase (decrease) in customer advances (1,220,921) 1,956,067
Increase in other liabilities 27,371 376,926
Net cash provided (used) by
operating activities (516,625) 663,284
Net cash provided (used) by
discontinued operations 1,194,972 (976,988)
Net cash provided (used) by
operations 678,347 (313,704)
Cash flows from investing activities:
Purchases of property, plant and equipment (1,729,393) (1,439,751)
Proceeds from sale of property, plant
and equipment 11,773 11,136
Acquisition of subsidiary companies, net of
cash acquired (68,143)
Net cash (used) by investing
activities (1,717,620) (1,496,758)
Cash flows from financing activities:
Proceeds from short-term bank borrowings 1,514,624 4,162,333
Proceeds from long-term bank borrowings -- 2,136,343
Proceeds from borrowings to acquire
subsidiary company 277,624 672,136
Repayments of short-term bank borrowings (966,488) (2,875,159)
Repayments of long-term debt (999,487) (1,945,752)
Payment of dividends -- (691,349)
Net cash provided (used) by
financing activities (173,727) 1,458,552
Effect of exchange rate changes on cash 155,695 (91,355)
Net decrease in cash and cash
equivalents (1,057,305) (443,265)
Cash and cash equivalents, beginning of
period 3,636,673 3,782,359
Cash and cash equivalents, end of period $ 2,579,368 $ 3,339,094
(See accompanying notes to the consolidated financial statements)
SELAS CORPORATION OF AMERICA
Consolidated Statement of Shareholders' Equity
Nine Months Ended September 30, 2002
(Unaudited)
Common Stock Additional
Number of Paid-in
Shares Amount Capital
Balance January 1,
2002 5,634,968 $5,634,968 $12,012,541
Net loss -- -- --
Foreign currency
translation gain -- -- --
Derivative financial
instrument fair
value adjustment -- -- --
Comprehensive loss -- -- --
Balance September 30,
2002 5,634,968 $5,634,968 $12,012,541
Accumulated
Other
Retained Comprehensive Comprehensive
Earnings Income (Loss) Income (Loss)
Balance January 1,
2002 $23,297,747 $(1,075,561)
Net loss (6,410,828) $ (6,410,828)
Foreign currency
translation loss -- (79,604) (79,604)
Derivative financial
instrument fair
value adjustment -- 36,211 36,211
Comprehensive loss -- -- $6,454,221
Balance September 30,
2002 $16,886,919 $(1,118,954)
Total
Treasury Shareholders'
Stock Equity
Balance January 1,
2002 $(1,265,078) $38,604,617
Net loss -- (6,410,828)
Foreign currency
Translation loss -- (79,604)
Derivative financial
instrument fair value
adjustment -- 36,211
Comprehensive income -- --
Balance September 30,
2002 $(1,265,078) $32,150,396
(See accompanying notes to the consolidated financial statements)
SELAS CORPORATION OF AMERICA
PART I - FINANCIAL INFORMATION
ITEM 1. Notes to Consolidated Financial Statements (Unaudited)
1. In the opinion of management, the accompanying consolidated condensed
financial statements contain all adjustments (consisting of normal
recurring adjustments) necessary to present fairly Selas Corporation of
America's consolidated financial position as of September 30, 2002 and
December 31, 2001, and the consolidated results of its operations for the
three and nine months ended September 30, 2002 and 2001 and consolidated
statements of shareholders' equity and cash flows for the nine months
then ended.
2. The accounting policies followed by the Company are set forth in note 1 to
the Company's financial statements in the 2001 Selas Corporation of America
Annual Report.
In October 2001, the FASB issued SFAS No. 144, 'Accounting for the
Impairment or Disposal of Long-Lived Assets', which addresses financial
accounting and reporting for the impairment or disposal of long-lived
assets and the disposal of a segment of a business. The Company adopted the
statement as of January 1, 2002, which did not have a material impact on
the net earnings of the Company.
In July 2001, the Financial Accounting Standards Board 'FASB'issued
Statement of Financial Accounting Standards 'SFAS' No. 143, 'Accounting for
Asset Retirement Obligation,' which addresses financial accounting and
reporting for obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs. The standard
applies to legal obligations with the retirement of long-lived assets that
result from the acquisition, construction, development and (or)
normal use of the asset. Adoption is required for fiscal years beginning
after June 15, 2002, with earlier adoption encouraged. The Company is in
the process of analyzing the implications of SFAS No. 143 and does not
believe that the adoption of this statement will have a material impact on
the net earnings of the Company.
In April 2002, the FASB issued SFAS No. 145 'Rescission of FASB Statements
Nos. 4, 44 and 64, Amendment of FASB No. 14, and Technical Corrections.'
The Statement rescinds or amends a number of existing authoritative
pronouncements to make various technical corrections, clarify meanings, or
describe their applicability under changed conditions. SFAS No.145 is
effective for transactions occurring after May 15, 2002. There has been no
impact on the Company's consolidated financial statements.
In July 2002, the FASB issued SFAS No. 146, 'Accounting for Costs
Associated with Exit or Disposal Activities.' This standard addresses the
accounting and reporting for costs of so-called exit activities (including
restructuring) and for the disposal of long-lived assets. The standard
changes some of the criteria for recognizing a liability for these
activities. It is effective beginning in 2003 with the liability
recognition criteria under the standard applied prospectively. The Company
is in the process of analyzing the potential impact of adoption on the
accounting policies regarding the exit and disposal activities.
3. Discontinued Operations
In the fourth quarter of 2001, the Company initiated its plan to dispose
of the Company's primary custom-engineered furnace business, Selas SAS
(Paris), along with two other closely related subsidiaries, Selas Italiana,
S.r.L. 'Milan' and Selas U.K.(Derbyshire). These subsidiaries form the
Company's large custom-engineered furnaces division used primarily in the
steel and glass industries worldwide. The furnaces engineered by this
division are custom-engineered to meet customer specific requirements.
These subsidiaries generated approximately $11.1 million and $11.6
million of revenue and a loss from discontinued operations of $5.9 million
and $1.5 million for the nine months ended September 30, 2002 and 2001,
respectively. The Company has accounted for the plan to dispose of the
subsidiaries as a discontinued operation and accordingly, has reclassified
the historical financial data of these subsidiaries.
In October 2002, the Company entered into an agreement with Andritz AG to
sell most of the intellectual property, operating assets and certain
liabilities of its discontinued large custom engineered furnace business
operated by its wholly owned subsidiaries Selas SAS and Selas UK. The sale
is contingent upon certain conditions which are expected to be fulfilled
in the fourth quarter.
The Company anticipates paying the discontinued operations long-term debt
of $1.8 million and notes payable of $5.9 million and, therefore, has
classified these amounts as continuing operations as of September 30, 2002.
These consolidated financial statements have been restated to reflect the
Company's presentation of discontinued operations.
4. Inventories consist of the following:
September 30, December 31,
2002 2001
Raw material $ 4,164,684 $ 4,593,829
Work-in-process 4,020,695 4,855,037
Finished products and components 4,386,074 4,361,343
$12,571,453 $13,810,209
5. Income Taxes
Income taxes for the nine months ended September 30, 2002 and 2001 were
$45,000 and $301,000 which resulted in effective tax rates of (9.0)% and
35.0%, respectively. The rate of tax in relation to pre-tax loss in 2002
results from foreign operating losses that are fully reserved by a valuation
allowance while domestic operations have reportable taxable income. The rate
of tax in relation to pre-tax income in 2001 is high because tax benefits
from certain net operating losses were not utilized for income tax purposes.
6. Legal Proceedings
The Company is a defendant along with a number of other parties in
approximately 253 lawsuits as of December 31, 2001 (approximately 100 as of
December 31, 2000) alleging that plaintiffs have or may have contracted
asbestos-related diseases as a result of exposure to asbestos products or
equipment containing asbestos sold by one or more named defendants. Due to
the noninformative nature of the complaints, the Company does not
know whether any of the complaints state valid claims against the Company.
The lead insurance carrier has informed the Company that the primary policy
for the period July 1, 1972 July 1, 1975 has been exhausted and that the
lead carrier will no longer provide a defense under that policy. The
Company has requested that the lead carrier substantiate this situation.
The Company has contacted representatives of the Company's excess insurance
carrier for some or all of this period. The Company does not believe that
the asserted exhaustion of the primary insurance coverage for this
period will have a material adverse effect on the financial condition,
liquidity, or results of operations of the Company. Management believes
that the number of insurance carriers involved in the defense of the suits
and the significant number of policy years and policy limits to which these
insurance carriers are insuring the Company make the ultimate disposition of
these lawsuits not material to the Company's consolidated financial position
or results of operations.
In August 2002, a French bank initiated court action claiming the unpaid
balance of its overdraft facility was due. This matter was subsequently
resolved with the Company and the court action was withdrawn without any
material impact on the Company.
The Company is also involved in other lawsuits arising in the normal course
of business. While it is not possible to predict with certainty the outcome
of these matters, management is of the opinion that the disposition of these
lawsuits and claims will not materially affect the Company's consolidated
financial position, liquidity, or results of operations.
7. Statements of Cash Flows
Nine Months Ended
September 30, September 30,
2002 2001
Interest received $ 6,469 $ 33,922
Interest paid $ 278,409 $ 463,119
Income taxes paid $ 318,644 $1,534,496
8. Accounts Receivable
At September 30, 2002, the Company had $2,079,000 of trade accounts
receivable due from major U.S. automotive manufacturers and $3,664,000 of
trade accounts receivable due from hearing health manufacturers.
9. Notes Payable and Long Term Debt
On April 15, 2002, the Company entered into a second waiver amendment
agreement for its domestic and foreign revolving credit and term loan
facilities and obtained a new domestic supplemental credit facility in the
amount of $5,000,000 to be used for additional domestic borrowing and for
the issuance of advance payment guarantees. A subsequent amendment to the
second waiver agreement reduced the amount of the supplemental credit
facility to $2,000,000 and waived certain restrictive covenants.
10. Earnings (Loss) Per Share
The following table sets forth the computation of basic and diluted
earnings per share:
For the Three Months
Ended September 30, 2002
Income Shares Per Share
Numerator Denominator Amount
Basic Earnings Per Share
(Loss) from continuing
operations $ (1,226,509) 5,119,214 $(.24)
(Loss) from discontinued
operations (5,277,137) 5,119,214 (1.03)
(Loss) available to
common shareholders $ (6,503,646) 5,119,214 $(1.27)
For the Nine Months
Ended September 30, 2002
Income Shares Per Share
Numerator Denominator Amount
Basic Earnings Per Share
(Loss) from continuing
operations $ (543,412) 5,119,214 $ (.10)
(Loss) from discontinued
operations (5,867,416) 5,119,214 (1.15)
(Loss) available to
common shareholders $(6,410,828) 5,119,214 $(1.25)
For the Three Months
Ended September 30, 2001
Income Shares Per Share
Numerator Denominator Amount
Basic Earnings Per Share
(Loss) from continuing
operations $ (793,505) 5,119,214 $(.16)
(Loss) from discontinued
operations (582,912) 5,119,214 (.11)
(Loss) available to
common shareholders $ (1,376,417) 5,119,214 $ (.27)
For the Nine Months
Ended September 30, 2001
Income Shares Per Share
Numerator Denominator Amount
Basic Earnings Per Share
Income from continuing
operations $ 559,961 5,119,214 $ .11
(Loss) from discontinued
operations (1,503,104) 5,119,214 (.29)
(Loss) available to
common shareholders $ (943,143) 5,119,214 $ (.18)
11. Business Segment Information
The Company has three operating segments. The Company is engaged in
providing engineered heat technology equipment and services to industries
throughout the world, the manufacture of precision miniature medical and
electronic products and the manufacture of original equipment for light
trucks and vans. The results of operations and assets of these segments
are prepared on the same basis as the condensed consolidated financial
statements for the nine months ended Sept 30, 2002 and 2001 and
the consolidated financial statements included in the Company's 2001
Annual Report on Form 10-K.
The Company's reportable segments reflect separately managed, strategic
business units that provide different products and services, and for which
financial information is separately prepared and monitored.
Segments
Tire Precision
For The Holders, Miniature
Nine Months Lifts and Medical and
Ended Heat Related Electronic
September 30, 2002 Technology Products Products
Sales, net $23,490,000 $12,881,000 $26,129,000
Net income
(loss) $(1,066,000) $ 814,000 $ 460,000
Depreciation
and amortiza-
tion $ 336,000 $ 130,000 $ 1,910,000
Property, plant
and equipment
additions $ 95,000 $ 200,000 $ 1,434,000
Total assets $23,296,000 $ 6,642,000 $40,213,000
Segments continued
For The
Nine Months General
Ended Corporate Discontinued
September 30, 2002 Expenses Operations Total
Sales, net $62,500,000
Net income
(loss) $ (751,000) $(5,868,000) $(6,411,000)
Depreciation
and amortiza-
tion -- -- $ 2,376,000
Property, plant
and equipment
additions -- -- $ 1,729,000
Total assets -- $ 7,527,000 $77,678,000
Segments
Tire Precision
For the Holders, Miniature
Nine Months Lifts and Medical and
Ended Heat Related Electronic
September 30, 2001 Technology Products Products
Sales, net $26,752,000 $11,131,000 $29,301,000
Net income
(loss) $ 457,000 $ 374,000 $ 385,000
Depreciation
and amortiza-
tion $ 449,000 $ 150,000 $ 2,504,000
Property, plant
and equipment
additions $ 172,000 $ 21,000 $ 1,247,000
Total assets $27,183,000 $ 6,364,000 $43,069,000
Segments continued
For the
Nine Months General
Ended Corporate Discontinued
September 30, 2001 Expenses Operations Total
Sales, net -- -- $67,184,000
Net income
(loss) $(656,000) $(1,503,000) $ (943,000)
Depreciation
and amortiza-
tion -- -- $ 3,103,000
Property, plant
and equipment
additions -- -- $ 1,440,000
Total assets -- $22,648,000 $99,264,000
12. Revenue Recognition
The following analysis provides a detail of revenue recognition methodology
by segment for the nine months ended September 30, 2002:
Tire Precision
Holders, Miniature
Lifts and Medical and
Heat Related Electronic
Technology Products Products Total
Upon Shipment $ 6,778,000 $12,881,000 $26,129,000 $45,788,000
Percentage of
completion 16,712,000 -- -- 16,712,000
Total Revenue $23,490,000 $12,881,000 $26,129,000 $62,500,000
13. Business Combinations and Goodwill and Other Intangible Assets
As of January 1, 2002, the Company adopted SFAS No. 141, 'Business
Combinations,' and SFAS No. 142, 'Goodwill and Other Intangible Assets.'
SFAS No. 141 requires all business combinations entered into after September
2001 to be accounted for under the purchase method. SFAS No. 142 sets forth
new financial accounting and reporting standards for the acquisition of
intangible assets, other than those acquired in 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 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 accounted for as a cumulative effect of a
change in accounting principle.
The Company has conducted transitional impairment testing with regards to
its goodwill and has determined a potential impairment in the Precision
Miniature Medical and Electronic Products segment. Further valuations will
be completed by the fourth quarter, and the results will be reported in the
Company's December 31, 2002 annual financial statements.
In accordance with SFAS No. 142, the Company discontinued the amortization
of goodwill effective January 1,2002. The effect of adopting this new
standard was to reduce amortization expense by approximately $581,000 and to
increase net earnings by $499,000 (net of tax expense of $82,000) or $.10
diluted earnings per share for the nine months ended September 30, 2002.
A reconciliation of previously reported net earnings (loss) and earnings
(loss) per share to the amounts adjusted for the exclusion of goodwill
amortization net of the related income tax effect follows:
Three Months Ended
September 30, September 30,
2002 2001
Reported net loss $(6,504,000) $(1,376,000)
Add: goodwill amortization,
net of tax -- 183,000
Adjusted net loss $(6,504,000) $(1,193,000)
Basic loss per share
Reported net loss $(1.27) $(.27)
Goodwill amortization, net of tax -- .04
Adjusted net loss $(1.27) $(.23)
Nine Months Ended
September 30, September 30,
2002 2001
Reported net loss $(6,411,000) $ (943,000)
Add: goodwill amortization,
net of tax -- 497,000
Adjusted net loss $(6,411,000) $ (466,000)
Basic loss per share
Reported net loss $(1.25) $(.18)
Goodwill amortization, net of tax -- .10
Adjusted net loss $(1.25) $(.08)
Changes in the carrying amount of goodwill for the nine months ended September
30, 2002 by operating segment in accordance with SFAS No. 142, are as follows:
Segments
Tire Precision
Holders, Miniature
Lifts and Medical and
Heat Related Electronic
Technology Products Products Total
Balance as of
December 31, 2001 $ 1,004,741 $ -- $14,626,761 $15,631,502
Translation
adjustment 139,889 -- -- 139,889
Reclassification to
other intangible
assets -- -- (54,079) (54,079)
Balance as of
September 30, 2002 $ 1,144,630 -- $14,572,682 $15,717,312
In connection with the adoption of SFAS No. 142, the Company reclassified
certain costs to other intangible assets included in the following table.
Patents and other intangible assets at September 30, 2002 and December 31,
2001, subject to amortization expense, are as follows:
September 30, 2002
Carrying Accumulated
Amount Amortization Net
Patents $ 505,712 $ (505,712) $ --
Other intangible
assets 954,764 (681,341) 273,423
Total $1,460,476 $(1,187,053) $ 273,423
December 31, 2001
Carrying Accumulated
Amount Amortization Net
Patents $ 505,712 $ (505,018) $ 694
Other intangible
assets 802,252 (442,395) 359,857
Total $1,307,964 $ (947,413) $ 360,551
Amortization expense for patents and other intangible assets subject to
amortization was approximately $123,000 for the nine months ended September 30,
2002. Estimated amortization expense for each of the five succeeding years is
$172,000, $101,000, $-0-, $-0- and $-0- for years 2003 through 2007.
Patents and other intangible assets are classified in the caption 'Other Assets
Including Patents, Less Amortization' on the consolidated balance sheet. The
remaining balance in this account consists mainly of the cash surrender value
on life insurance policies related to a supplemental pension plan and
development costs.
PART I - FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
In the fourth quarter of 2001, the Company initiated its plan to dispose of the
Company's primary custom-engineered furnace business, Selas SAS (Paris), along
with two other closely related subsidiaries Selas Italiana, S.r.L. (Milan) and
Selas U.K. (Derbyshire). These subsidiaries form the Company's large
custom-engineered furnaces division used primarily in the steel and glass
industries worldwide. The furnaces engineered by this division are
custom-engineered to meet customer specific requirements. These subsidiaries
generated approximately $11.1 million and $11.6 million of revenue and a loss
from operations of $5.9 million and $1.5 million for the nine months ended
September 30, 2002 and 2001, respectively. The Company has accounted for the
plan to dispose of the subsidiaries as a discontinued operation and,
accordingly, has reclassified the historical financial data of
these subsidiaries. See further information in note 3 to the consolidated
financial statements.
Discontinued operations generated losses of $5,277,000 and $5,867,000 for the
three and nine months ended September 30, 2002 compared to losses of $583,000
and $1,503,000 for the same periods in 2001. During the quarter ended September
30, 2002 several contracts were negatively impacted by cost overruns that are
not recoverable. Also, certain assets were written-down as their ultimately
recoverability has become doubtful due to the pending sale of the business.
Additionally, the Company has listed the large furnace businesses
headquarter building for sale and wrote down the carrying value to its estimated
net realizable value. In October 2002, the Company entered into an agreement to
sell most of the intellectual property, operating assets and liabilities of its
discontinued operations. The sale is contingent upon certain conditions that are
expected to be fulfilled in the fourth quarter of 2002.
In accordance with SFAS No. 142, the Company has conducted transitional
impairment testing with regards to its goodwill and has determined a potential
impairment in the Precision Miniature Medical and Electronic Products segment.
Further valuations will be completed by the fourth quarter of 2002 and the
results will be reported on in the Company's December 31, 2002 financial
statements.
Consolidated net sales for the three months ended September 30, were as follows
'in thousands':
2002 2001 Change
Heat Technology $6,392 $6,821 (429)
Tire Holders, Lifts and Related Products 4,032 3,831 201
Precision Miniature Medical
and Electronic Products 8,571 8,044 527
Total 18,995 18,696 299
Consolidated net sales for the nine months ended September 30, were as follows
(in thousands):
2002 2001 Change
Heat Technology $23,490 $26,752 (3,262)
Tire Holders, Lifts and Related Products 12,881 11,131 1,750
Precision Miniature Medical and Electronic
products 26,129 29,301 (3,172)
Total 62,500 67,184 (4,684)
Heat technology segment sales continue to be impacted by the poor worldwide
economy for capital goods, both in the current quarter and year-to-date. We
expect this trend to continue into the fourth quarter. Tire Holders, Lifts and
Related Products sales are within the North American automotive market and have
benefited from a much stronger than expected market. We expect market demand
will continue being strong through the fourth quarter. While Precision Miniature
Medical and Electronic (Precision) products sales for the quarter ended
September 30, 2002 were up over the same year-ago period, this was partially due
to weak sales in last year's third quarter. Year-to-date sales for the Precision
products have suffered from a slump in its primary markets, including the
hearing health market, electronics and telecommunications. We expect this trend
to continue for the remainder of 2002.
Gross margin for the three months ended September 30 was as follows
(in thousands):
2002 2001 Change
Heat Technology $664 $462 202
Tire Holders, Lifts and Related Products 767 754 13
Precision Miniature Medical and Electronic
products 1,906 2,086 (180)
Total 3,337 3,302 35
Gross margin for the nine months ended September 30 was as follows
(in thousands):
2002 2001 Change
Heat Technology $3,691 $5,035 (1,344)
Tire Holders, Lifts and Related Products 2,304 1,628 676
Precision Miniature Medical and Electronic
products 6,356 7,780 (1,424)
Total 12,351 14,443 (2,092)
Gross margin, as a percent of segment sales for both the quarter ended and
year-to-date (YTD) for the nine months ended September 30, were as follows:
2002 2001 Change
Quarter YTD Quarter YTD Quarter YTD
Heat Technology 10.4 15.7 6.8 18.8 3.6 (3.1)
Tire Holders, Lifts
and Related Products 19.0 17.9 19.7 14.6 (0.7) 3.3
Precision Miniature
Medical and Electronic
products 22.2 24.3 25.9 26.6 (3.7) (2.3)
Total 17.6 19.8 17.7 21.5 (0.1) (1.7)
Heat Technology gross profit margins vary markedly from contract to contract,
depending on customer specifications and other conditions related to the
project. The gross profit margins for both the quarter and nine months ended
September 30, 2002 were impacted by revenue recognized on several glass furnace
contracts whose margins were not as profitable as those completed in 2001 and
higher than usual costs on several orders completed by some of the Company's
subsidiaries which supply replacement parts. Margins for the quarter ended
September 30, 2001 were also adversely impacted by glass furnace contracts.
For the nine months ended September 30, 2002,gross margins in the Tire Holders,
Lifts and Related Products segment are higher due to the stronger sales volume
to cover fixed costs. The high margins in the quarter ended September 30, 2001
were due to product mix.
The gross margin in the Precision Miniature Medical and Electronic products
segment benefited from new accounting standards whereby goodwill is no longer
amortized. Despite the decrease in goodwill amortization in 2002, the gross
margin declined due to competitive pricing pressures in the hearing health,
telecommunications, and electronic components markets.
Selling, general and administrative expenses (SG&A) for the quarter and nine
months ended September 30, 2002 and 2001 were:
2002 2001 Change
Quarter YTD Quarter YTD Quarter YTD
Dollars (thousands) $4,680 $12,892 $4,370 $13,091 $310 $(199)
Percent of Sales 24.6% 20.6% 23.4% 19.5% 1.3% 1.1%
The lower SG&A expenses in the nine-months ended September 30, 2002, compared
to the same year-ago period were due to cost savings measures implemented by
the Company during the current economic slowdown, primarily salary and headcount
reductions. SG&A expense for the quarter ended September 30, 2002 increased
compared with the prior year's third quarter primarily due to the write-off of
a $684,000 receivable from a European Heat Technology customer who has filed
bankruptcy. This cost was partially offset by the aforementioned
costs saving measures.
Interest expense for the three and nine months ended September 30, 2002 was
$201,000 and $401,000 compared to $133,000 and $427,000 for the same periods in
2001. The increase in the quarter ended September 30, 2002 was due to higher
average outstanding borrowings and an adjustment of the prior quarter's accrual.
For the nine-months ended September 30, 2002, interest expense was lower due to
lower interest rates during the current year on higher average borrowings.
Interest income for the quarter ended September 30, 2002 decreased to $9,000
compared to $11,000 for the same period in 2001. Interest income for the first
nine months of 2002 and 2001 remained constant at $33,000 to $34,000 which
reflects interest imputed on a trade note receivable in 2002 offset by lower
average cash balances available for investing in the current year.
Other income (expense) primarily includes realized and unrealized gains (losses)
on foreign exchange. Other income (expense) improved in the three and nine
month periods as a result of the improvement of the European currencies
against the U. S. dollar.
Income taxes for the three months ended September 30, 2002 and 2001 were
$152,000 and $553,000 which result in effective tax rates of 11.0% and 41.1%,
respectively. The rate of tax in relation to pre-tax loss in 2002 is low
because tax benefits from certain foreign net operating losses are fully
reserved by a valuation allowance. Income taxes for the nine months ended
September 30, 2002 and 2001 were $45,000 and $301,000 which result in effective
tax rates of (9.0)% and 35.0%, respectively. The rate of tax in relation to
pre-tax loss in 2002 results from foreign operating losses that are fully
reserved by a valuation allowance while domestic operations have reportable
taxable income. The rate of tax in relation to pre-tax income in 2001 is high
because tax benefits from certain net operating losses were not utilized for
income tax purposes.
For the three months ended September 30, 2002, the net loss from continuing
operations was $1,227,000 compared with $794,000 in last year's third quarter.
The increase in the loss was primarily due to increased SG&A expenses due to the
write-off of a $684,000 European Heat Treat receivable and a decreased income
tax benefit due to uncertainty as to the utilization of foreign net operating
loss carry forwards. These factors were partially offset by the discontinuation
of goodwill amortization. For the nine months ended September 30, 2002, the loss
from continuing operations was $543,000 compared with income of $560,000
in the same year-ago period. The change in operating results for the nine months
ended September 30, 2002 was primarily due to the lower sales volume, a decline
in gross margin, as well as the factors mentioned for the third quarter. These
factors were partially offset by the discontinuation of goodwill amortization
in 2002.
Liquidity and Capital Resources
Consolidated net working capital increased to $7.4 million at September 30, 2002
from $7.0 million at December 31, 2001. The main reason for this increase was
the reclassification of assets and liabilities of discontinued operations as
current based on the assumption of disposal within the next twelve months.
Exclusive of this reclassification, consolidated net working capital decreased
to $4.4 million at September 30, 2002. This decrease was due primarily to
purchases of property and equipment and pay down of long term debt partially
offset by borrowings to fund a prior acquisition. The major changes in the
components of working capital for the period were lower cash and cash
equivalents of $1.1 million, higher accounts receivable of $1.9 million, lower
inventories of $1.2 million, higher notes payable of $665,000, higher accounts
payable of $2.5 million, lower customer advance payments on contracts of
$719,000 and higher accrued liabilities of $863,000. These changes relate
mainly to the ongoing operations of the Company. As part of the ongoing
operations of the Company, management periodically performs a strategic analysis
of all assets of the Company to ensure that an appropriate rate of return is
achieved from the invested capital.
On April 15, 2002, the Company entered into a second waiver amendment agreement
for its domestic and foreign revolving credit and term loan facilities and
obtained a new domestic supplemental credit facility in the amount of
$5,000,000 to be used for additional domestic borrowing and for the issuance of
advance payment guarantees. A subsequent amendment to the second waiver
agreement reduced the amount of the supplemental credit facility to $2,000,000
and waived certain restrictive covenants. See additional information in Note 9
to the 2001 Annual Report on Form 10-K.
The Company believes its working capital position, combined with funds expected
to be generated from operations, the available borrowing capacity through its
amended credit loan facilities, the pending sale of its large furnace business,
the curtailment of dividend payments and control of capital spending will be
sufficient to meet its anticipated cash requirements for operating needs and
capital expenditures for 2002.
During the first quarter of 1999, the Company implemented a program to
repurchase up to 250,000 shares of its common stock, which at the time
represented approximately 5% of its total shares outstanding. The shares have
been purchased from time to time on the open market. As of September 30, 2002,
the Company has repurchased a total of 152,190 shares of its common stock at a
cost of $883,141. No purchases have been made under this program in 2002.
In July 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 143, 'Accounting for Asset
Retirement Obligation,' which addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. The standard applies to legal obligations
with the retirement of long-lived assets that result from the
acquisition, construction, development and (or) normal use of the asset.
Adoption is required for fiscal years beginning after June 15, 2002, with
earlier adoption encouraged. The Company is in the process of analyzing the
implications of SFAS 143 and does not believe that the adoption of this
statement will have a material impact on the net earnings of the Company.
In April 2002, the FASB issued SFAS No. 145 'Rescission of FASB Statements Nos.
4, 44 and 64, Amendment of FASB No. 14, and Technical Corrections.' The
statement rescinds or amends a number of existing authoritative pronouncements
to make various technical corrections, clarify meanings, or describe their
applicability under changed conditions. SFAS No. 145 is effective for
transactions occurring after May 15, 2002. There has been no impact on
the Company's consolidated financial statements.
In July 2002, the FASB issued SFAS No. 146, 'Accounting for Costs Associated
with Exit or Disposal Activities.' This standard addresses the accounting and
reporting for costs of so-called exit activities (including restructuring) and
for the disposal of long-lived assets. The standard changes some of the
criteria for recognizing a liability for these activities. It is effective
beginning in 2003 with the liability recognition criteria under the standard
applied prospectively. The Company is in the process of analyzing the
potential impact of adoption on the accounting policies regarding exit and
disposal activities.
The Company believes that its present working capital position, combined with
funds expected to be generated from operations and the available borrowing
capacity through its revolving credit loan facilities, will be sufficient to
meet its anticipated cash requirements for operating needs and capital
expenditures for 2002.
Significant Accounting Policies
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expense during the reporting period.
Certain accounting estimates and assumptions are particularly sensitive because
their significance to the consolidated financial statements and the possibility
that future events affecting them may differ markedly. The accounting policies
of the Company with significant estimates and assumptions include the Company's
revenue recognition, discontinued operations, and deferred taxes policies.
These and other significant accounting policies are described in 'Management'
Discussion and Analysis of Financial Condition and Results of Operations' and
Note 1 to the Company's 2001 financial statements contained in or incorporated
by reference in the Company's Annual Report on Form 10-K for the year ended
December 31, 2001.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
For information regarding the Company's exposure to certain market risks, see
Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in the
Annual Report on Form 10-K for 2001. There have been no material changes in the
Company's portfolio of financial instruments or market risk exposures which have
occurred since year-end.
ITEM 4. Controls and Procedures
(a) Evaluation of disclosure and procedures - Based on their evaluation of the
Company's disclosure and procedures as defined in Exchange Act Rule
13a-14(c) and 15d-14(c) as of a date within 90 days of the filing of this
Quarterly Report on Form 10-Q, the Company's principal executive officer
and principal financial officer have concluded that the Company's
disclosure controls and procedures are effective.
(b) Changes in internal controls There were no significant changes in the
Company's internal controls or in other factors that would significantly
affect these controls subsequent to the date of the principal executive
officer's and principal financials officer's evaluation referred to above,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
Forward-Looking and Cautionary Statements
The Company may from time to time make written or oral forward-looking
statements, including those contained in the foregoing Management's Discussion
and Analysis. In order to take advantage of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995, the Company has identified in
its Annual Report on Form 10-K for the year ending December 31, 2001, certain
important factors which could cause the Company's actual results, performance or
achievement to differ materially from those that may be contained in or implied
by any forward-looking statement made by or on behalf of the Company. All such
forward-looking statements are qualified by reference to the cautionary
statements herein and in such Annual Report on Form 10-K.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
See note 6 to the Consolidated Financial Statements.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
99.1 Certification of the Company's Chief Executive Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes Oxley Act of 2002
99.2 Certification of the Company's Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes Oxley Act of 2002
(b) Reports on Form 8-K
None.
SELAS CORPORATION OF AMERICA
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.
SELAS CORPORATION OF AMERICA
(Registrant)
Dated: November 14, 2002
By: /s/ Robert F. Gallagher
Robert F. Gallagher
Chief Financial Officer
CERTIFICATION
I, Mark S. Gorder, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Selas Corporation of
America;
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 officers 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 officers 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 officers 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.
Dated: November 14, 2002
By: /s/ Mark S. Gorder
Mark S. Gorder
Chief Executive Officer
CERTIFICATION
I, Robert F. Gallagher, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Selas Corporation of
America;
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 officers 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 officers 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 officers 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.
Dated: November 14, 2002
By: /s/ Robert F. Gallagher
Robert F. Gallagher
Chief Financial Officer
EXHIBIT INDEX
99.1 Certification of principal executive officer pursuant to 18 U.S.C.
Section 1350 as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
99.2 Certification of principal financial officer pursuant to 18 U.S.C.
Section 1350 as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
EXHIBIT 99.1 CERTIFICATIONS
CERTIFICATION PURSUANT TO
18 U.S.C.SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Mark S. Gorder, Chief Executive Officer of Selas Corporation of America 'the
Company', certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
18 U.S.C. Section 1350, that:
the quarterly report on Form 10-Q of the Company for the three months and
nine months ended September 30, 2002 'the Report' fully complies with
the requirements of Section 13(a) or 15(d) of the Securities Exchange Act
of 1934 (15 U.S.C. 78m or 78o(d)); and
the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
Dated: November 14, 2002
By: /s/ Mark S. Gorder
Mark S. Gorder
Chief Executive Officer
EXHIBIT 99.2 CERTIFICATIONS
CERTIFICATION PURSUANT TO
18 U.S.C.SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Robert F. Gallagher, Chief Financial Officer of Selas Corporation of America
(the 'Company'), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, 18 U.S.C. Section 1350, that:
the quarterly report on Form 10-Q of the Company for the three months and
nine months ended September 30, 2002 'the 'Report' fully complies with
the requirements of Section 13(a) or 15(d) of the Securities Exchange Act
of 1934 (15 U.S.C. 78m or 78o(d)); and
the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
Dated: November 14, 2002
By: /s/ Robert F. Gallagher
Robert F. Gallagher
Chief Financial Officer