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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 December 31, 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 0-10068
ICO, INC.
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(Exact name of registrant as specified in its charter)
Texas 76-0566682
---------------------------------------- ----------------------------------
(State of Incorporation) (IRS Employer Identification Number)
5333 Westheimer, Suite 600, Houston, Texas 77056
- ------------------------------------------ ---------------------------------
(Address of Principal Executive Offices) (Zip Code)
(713) 351-4100
------------------
(Telephone Number)
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 [ ]
Common stock, without par value 24,778,162 shares
outstanding as of February 14, 2003
ICO, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheets as of December 31, 2002 and September 30, 2002 3
Consolidated Statement of Operations for the Three Months
Ended December 31, 2002 and 2001 . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Comprehensive Income (Loss) for the Three
Months Ended December 31, 2002 and 2001. . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows for the Three Months Ended
December 31, 2002 and 2001 . . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . 11
IItem 3. Quantitative and Qualitative Disclosures About Market Risks . . . . . 16
IItem 4. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . . . 17
-2-
ICO, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited and in thousands, except share data)
DECEMBER 31, SEPTEMBER 30,
2002 2002
------------- -------------
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 6,778 $ 129,072
Trade accounts receivables (less allowance for doubtful accounts of $1,809
and $1,695, respectively) 38,740 39,498
Inventories (less inventory reserve of $565 and $502, respectively) 20,298 19,367
Prepaid expenses and other 12,969 11,603
Oilfield Services assets held for sale 3,856 2,783
------------- -------------
Total current assets 82,641 202,323
------------- -------------
Property, plant and equipment, net 64,650 62,607
Goodwill 7,786 36,669
Other 1,087 3,082
------------- -------------
Total assets $ 156,164 $ 304,681
============= =============
LIABILITIES, STOCKHOLDERS' EQUITY AND ACCUMULATED OTHER COMPREHENSIVE LOSS
- --------------------------------------------------------------------------
Current liabilities:
Short-term borrowings and current portion of long-term debt $ 8,536 $ 7,361
Accounts payable 19,011 19,062
Accrued interest 141 4,006
Accrued salaries and wages 2,347 2,319
Income taxes payable 1,854 8,247
Other accrued expenses 7,763 8,760
Oilfield Services liabilities held for sale and retained 3,161 6,629
------------- -------------
Total current liabilities 42,813 56,384
------------- -------------
Deferred income taxes 5,994 6,525
Long-term liabilities 1,471 1,406
Long-term debt, net of current portion 24,024 128,877
------------- -------------
Total liabilities 74,302 193,192
------------- -------------
Commitments and contingencies:
Stockholders' equity:
Preferred stock, without par value - 345,000 shares authorized; 322,500 shares
issued and outstanding with a liquidation preference of $32,250 13 13
Undesignated preferred stock, without par value- 105,000 shares authorized;
0 shares issued and outstanding -- --
Junior participating preferred stock, without par value
50,000 shares authorized; 0 shares issued and outstanding -- --
Common stock, without par value 50,000,000 shares authorized;
24,705,928 and 24,450,345 shares issued and outstanding, respectively 42,994 42,674
Additional paid-in capital 103,220 103,157
Accumulated other comprehensive loss (7,893) (9,608)
Accumulated deficit (56,472) (24,747)
------------- -------------
Total stockholders' equity 81,862 111,489
------------- -------------
Total liabilities and stockholders' equity $ 156,164 $ 304,681
============= =============
The accompanying notes are an integral part of these financial statements.
-3-
ICO, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited and in thousands, except share data)
THREE MONTHS ENDED
DECEMBER 31,
-------------------------
2002 2001
----------- -----------
Revenues $ 45,248 $ 42,870
Cost and expenses:
Cost of sales and services 37,928 35,653
Selling, general and administrative 8,023 6,722
Stock option compensation expense 63 --
Depreciation 2,084 2,015
Amortization of intangibles 130 517
----------- -----------
Operating loss (2,980) (2,037)
Other income (expense):
Interest income 250 175
Interest expense (1,786) (3,416)
Other 519 489
----------- -----------
Loss from continuing operations before income taxes and cumulative
effect of change in accounting principle (3,997) (4,789)
Benefit for income taxes (1,163) (502)
----------- -----------
Loss from continuing operations before cumulative effect of change in accounting principle (2,834) (4,287)
Income from discontinued operations, net of provision for income taxes
of $0 and $480, respectively -- 702
Gain on disposition of discontinued operations, net of income taxes of
$66 and $0, respectively 516 --
----------- -----------
Net loss before cumulative effect of change in accounting principle (2,318) (3,585)
Cumulative effect of change in accounting principle, net of benefit for income
taxes of $(580) and $0, respectively (28,863) --
----------- -----------
Net loss $ (31,181) $ (3,585)
----------- -----------
Preferred dividends (544) (544)
----------- -----------
Net loss applicable to common stock $ (31,725) $ (4,129)
=========== ===========
Basic and diluted income (loss) per share:
Loss from continuing operations before cumulative effect of
change in accounting principle $ (.14) $ (.21)
Income from discontinued operations .02 .03
----------- -----------
Net loss before cumulative effect of change in accounting principle (.12) (.18)
Cumulative effect of change in accounting principle (1.17) --
----------- -----------
Basic and diluted net loss per common share $ (1.29) $ (.18)
=========== ===========
Basic and diluted weighted average shares outstanding 24,670,000 22,957,000
=========== ===========
The accompanying notes are an integral part of these financial statements.
-4-
ICO, INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(Unaudited and in thousands)
THREE MONTHS
ENDED DECEMBER 31,
-------------------
2002 2001
--------- --------
Net loss $(31,181) $(3,585)
Other comprehensive income (loss)
Foreign currency translation adjustment 1,733 (776)
Unrealized loss on foreign currency hedges (18) --
-------- -------
Comprehensive loss $(29,466) $(4,361)
======== =======
The accompanying notes are an integral part of these financial statements.
-5-
ICO, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited and in thousands)
THREE MONTHS ENDED
DECEMBER 31,
--------------------
2002 2001
--------- --------
Cash flows from operating activities:
Net loss $ (31,181) $ (3,585)
Adjustments to reconcile net loss to net cash provided by
(used for) operating activities:
Depreciation and amortization 2,214 3,712
Cumulative effect of change in accounting principle before tax 29,443 --
Litigation reserve -- 1,840
Stock option compensation expense 63 --
Gain on early retirement of debt (14) (489)
Matching contribution to employee savings plan 104 262
Unrealized gain on foreign currency (430) --
Gain on disposition of Oilfield Services before tax (582) --
Changes in assets and liabilities, net of the effects of
business acquisitions:
Receivables 1,393 6,161
Inventories (345) 1,816
Prepaid expenses and other assets 253 268
Income taxes payable (6,411) (215)
Deferred taxes (2,291) (587)
Accounts payable (473) (4,689)
Accrued interest (3,865) (3,067)
Accrued expenses (1,259) (878)
Oilfield Services liabilities held for sale and retained (3,468) --
--------- --------
Total adjustments 14,332 4,134
--------- --------
Net cash provided by (used for) operating activities (16,849) 549
--------- --------
Cash flows used for investing activities:
Capital expenditures (2,476) (3,009)
Acquisitions -- (1,581)
Proceeds from dispositions of property, plant and equipment 44 293
--------- --------
Net cash used for investing activities (2,432) (4,297)
--------- --------
Cash flows used for financing activities:
Payment of dividend on preferred stock (544) (544)
Proceeds from debt 858 --
Debt repayments (103,105) (3,893)
Debt retirement costs (483) --
--------- --------
Net cash used for financing activities (103,274) (4,437)
--------- --------
Effect of exchange rates on cash 261 (33)
--------- --------
Net decrease in cash and equivalents (122,294) (8,218)
Cash and equivalents at beginning of period 129,072 31,642
--------- --------
Cash and equivalents at end of period $ 6,778 $ 23,424
========= ========
The accompanying notes are an integral part of these financial statements.
-6-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and in thousands, except share and per share data)
NOTE 1. BASIS OF FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements have been
prepared in accordance with Rule 10-01 of Regulation S-X, "Interim Financial
Statements," and accordingly do not include all information and footnotes
required under generally accepted accounting principles for complete financial
statements. The financial statements have been prepared in conformity with the
accounting principles and practices as disclosed in the Annual Report on Form
10-K for the year ended September 30, 2002 for ICO, Inc. (the Company). In the
opinion of management, these interim financial statements contain all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the Company's financial position as of December 31, 2002,
the results of operations for the three months ended December 31, 2002 and 2001
and the changes in its cash position for the three months ended December 31,
2002 and 2001. Results of operations for the three-month period ended December
31, 2002 are not necessarily indicative of the results that may be expected for
the year ending September 30, 2003. For additional information, refer to the
consolidated financial statements and footnotes included in the Company's Annual
Report on Form 10-K for the year ended September 30, 2002.
NOTE 2. CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
Effective October 1, 2002, the Company was required to adopt Financial
Accounting Standards No. 142 ("SFAS 142"), Goodwill and Other Intangible Assets,
which established Standards for reporting acquired goodwill and other intangible
assets. This Statement accounts for goodwill based on the reporting units of the
combined entity into which an acquired entity is integrated. In accordance with
the statement, goodwill and indefinite lived intangible assets will not be
amortized, but will be tested for impairment at least annually at the reporting
unit level, and the amortization period of intangible assets with finite lives
will not be limited to forty years. Using the discounted cash flow method under
the requirements of SFAS 142, the Company recorded an impairment of goodwill of
$28,863, net of income tax benefit of $580 in the three months ended December
31, 2002 as a result of the adoption of SFAS 142 on October 1, 2002. The
goodwill impaired was derived from business acquisitions made before fiscal year
2001. This impairment is reflected in the consolidated statement of operations
as a cumulative effect of change in accounting principle. The cessation of
goodwill amortization under SFAS 142 will result in a reduction of approximately
$1,140 in annual operating expense, assuming no additional impairment of
goodwill. The following proforma information adjusts the historical financial
information to reflect the effect of not amortizing goodwill in accordance with
SFAS 142.
THREE MONTHS ENDED
DECEMBER 31,
-------------------------
2002 2001
---------- ----------
Reported net loss before cumulative effect of change in accounting principle $ (2,318) $ (3,585)
Add back: goodwill amortization, net of income taxes of $0 and $19, respectively - 265
---------- ----------
Adjusted net loss before cumulative effect of change in accounting principle (2,318) (3,320)
Cumulative effect of change in accounting principle (28,863) -
---------- ----------
Adjusted net loss $ (31,181) $ (3,320)
========== ==========
Basic and diluted income (loss) per share:
Reported net loss before cumulative effect of change in accounting principle $ (.12) $ (.18)
Add back: goodwill amortization, net of income taxes of $0 and $19, respectively - .01
---------- ----------
Adjusted net loss before cumulative effect of change in accounting principle (.12) (.17)
Cumulative effect of change in accounting principle (1.17) -
---------- ----------
Adjusted net loss $ (1.29) $ (.17)
========== ==========
-7-
NOTE 3. EARNINGS PER SHARE AND STOCKHOLDERS' EQUITY
Earnings per share is based on earnings applicable to common shareholders
and is calculated using the weighted average number of common shares
outstanding. During the three months ended December 31, 2002 and December 31,
2001, the potentially dilutive effects of the Companys exchangeable preferred
stock (which would have an anti-dilutive effect) and common stock options and
warrants, with exercise prices exceeding fair market value of the underlying
common shares, have been excluded from diluted earnings per share. Additionally,
the potentially dilutive effects of common stock options have been excluded from
diluted earnings per share for those periods in which the Company generated a
net loss. The total number of anti-dilutive securities for the three months
ended December 31, 2002 was 4,779,000 compared to 5,473,000 for the three months
ended December 31, 2001.
NOTE 4. STOCK OPTION PLANS
Prior to fiscal year 2003, the Company accounted for its stock option plans
under recognition and measurement provisions of APB Opinion No. 25, Accounting
for Stock Issued to Employees, and related interpretations. Effective October
1, 2002, the Company adopted the fair value recognition provisions of FASB
Statement No. 123, Accounting for Stock-Based Compensation ("SFAS 123") to all
employee awards granted, modified or settled after October 1, 2002. The Company
adopted the prospective method to implement SFAS 123 under the provisions of
FASB Statement No. 148, Accounting for Stock-Based Compensation-Transition and
Disclosure- an amendment of FASB Statement No. 123. Awards under the Company's
plans vest over periods ranging from immediate vesting to five years. The
following table illustrates the effect on net income and earnings per share if
the fair value based method had been applied to all outstanding and unvested
awards in each period.
THREE MONTHS ENDED
DECEMBER 31,
-------------------------
2002 2001
---------- ----------
Net loss before cumulative effect of change in accounting principle, as reported $ (2,318) $ (3,585)
Stock-based employee compensation expense included in reported net income,
net of related tax effects of $25 and $0, respectively 38 --
Total stock-based employee compensation expense determined under fair value
based method for all awards, net of related tax effects of $25 and $0,
respectively (38) --
---------- ----------
Pro forma net loss $ (2,318) $ (3,585)
=========== ==========
Basic and diluted loss per share, as reported and pro forma $ (.12) $ (.18)
=========== ==========
NOTE 5. INVENTORIES
Inventories consisted of the following:
DECEMBER 31, 2002 SEPTEMBER 30, 2002
------------------ ------------------
Finished goods $ 9,244 $ 7,547
Raw materials 10,014 10,664
Work in progress 167 201
Supplies 873 955
------------------ ------------------
Total inventory $ 20,298 $ 19,367
================== ==================
-8-
NOTE 6. INCOME TAXES
The Company's effective income tax rates were benefits of 29% and 10%
during the three months ended December 31, 2002 and 2001, respectively. The tax
rate change was due to a change in the mix of pre-tax income or loss generated
by the Company's operations in various taxing jurisdictions. Additionally,
during the three months ended December 31, 2001, a valuation allowance of $754
was placed against the benefit of U.S. net operating losses expiring in fiscal
year 2002. The Company's effective tax rate also increased during the first
quarter of fiscal 2003 because the Company ceased amortization of goodwill in
fiscal year 2002 (as discussed in Note 2- "Cumulative Effect of Change of
Accounting Principle"). For the most part, goodwill amortization was not tax
deductible and therefore the Company's permanent differences between book and
tax income declined during fiscal 2002 compared to fiscal 2001.
NOTE 7. COMMITMENTS AND CONTINGENCIES
The Company has letters of credit outstanding in the United States of
approximately $2,040 and $2,405 as of December 31, 2002 and September 30, 2002,
respectively and foreign letters of credit outstanding of $2,340 and $2,290 as
of December 31, 2002 and September 30, 2002, respectively.
NOTE 8. DISCONTINUED OPERATIONS
On September 6, 2002, ICO, Inc. (the "Company") completed the sale of
substantially all of its oilfield services business ("Oilfield Services") to
Varco International, Inc. ("Varco"). The initial purchase price was subject to a
post-closing working capital adjustment for which $2,000 of the sale proceeds
had been placed in escrow. The post-closing working capital adjustment was
settled on January 17, 2003 for $2,390. At September 30, 2002, the Company had
recorded a receivable of $1,808 which was the initial amount computed by Varco.
The additional $582 was recorded to adjust the gain on disposition of Oilfield
Services in the three months ended December 31, 2002. The total $4,390 related
to the working capital adjustment is recorded in prepaid expense and other in
the consolidated balance sheet as of December 31, 2002. In accordance with SFAS
144, the Oilfield Services results of operations are presented as discontinued
operations, net of income taxes in the consolidated statement of operations. In
addition, the Oilfield Services assets held for sale and liabilities held for
sale and retained are shown as two separate line items in the consolidated
balance sheet. The Company is currently negotiating the sale of the remaining
Oilfield Services operation. Should these negotiations not be successful,
management intends to actively market the remaining Oilfield Services operation
for sale.
Assets and liabilities (including those retained) of discontinued
operations are as follows:
DECEMBER 31, SEPTEMBER 30,
2002 2002
------------- --------------
ASSETS
Trade accounts receivables $ 1,490 $ 495
Inventories 513 435
Property, plant and equipment, net 407 407
Goodwill 1,446 1,446
------------- --------------
Total Oilfield Services assets held for sale $ 3,856 $ 2,783
============= ==============
LIABILITIES
Accounts payable $ 445 $ 458
Accrued insurance 1,979 2,261
Litigation settlement 115 2,850
Other 622 1,060
------------- --------------
Total Oilfield Services liabilities held for sale and retained $ 3,161 $ 6,629
============= ==============
-9-
Of the $3,161 and $6,629 Oilfield Services liabilities held for sale and
retained at December 31, 2002 and September 30, 2002, respectively, $400 and
$222 relate to Oilfield Services liabilities held for sale and the remaining
$2,761 and $6,407 were retained by the Company in connection with the sale of
the Oilfield Services business to Varco less amounts paid since that date as of
December 31, 2002 and September 30, 2002, respectively.
NOTE 9. LONG-TERM DEBT
In the first quarter of fiscal year 2003, the Company repurchased $104,480
principal amount of its 10 3/8% Senior Notes due 2007 at a weighted average net
discount of $976.78 per $1,000 principal amount plus accrued interest in two
separate transactions. The Company recorded a gain on these purchases of
approximately $14, net of transaction costs and write-off of debt offering
costs. The Company used the investment banking services of Jefferies and Company
to manage the repurchases. David E.K. Frischkorn, Jr., a member of the Company's
Board of Directors, is a Managing Director with Jefferies and Company. The
Company paid Jefferies and Company approximately $380 for their services.
In the first quarter of fiscal 2002, the Company repurchased $2,250
principle amount of its 10 % Senior Notes due 2007, recognizing a net gain of
$489.
In April 2002, the FASB issued Statement of Financial Accounting Standards
No. 145 ("SFAS 145"), Rescission of FASB Statements No. 4, 44 and 64, Amendment
of FASB Statement No. 13 and Technical Corrections. SFAS 145 rescinds SFAS 4,
Reporting Gains and Losses from Extinguishment of Debt. By rescinding FASB
Statement No. 4, gains or losses from extinguishment of debt that do not meet
the criteria of APB No. 30 should not be reported as an extraordinary item and
should be reclassified to income from continuing operations in all periods
presented. APB No. 30 states that extraordinary items are events and
transactions that are distinguished by their unusual nature and by the
infrequency of their occurrence. SFAS 145 became effective for the Company on
October 1, 2002 and the Company's early retirement of the Senior Notes is not
considered extraordinary under APB No. 30. Therefore, the Company has recorded
the gains of $14 and $489 as other income in the consolidated statement of
operations for the three months ended December 31, 2002 and 2001, respectively.
NOTE 10. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary market risk exposures include debt obligations
carrying variable interest rates, and forward purchase contracts intended to
hedge accounts payable obligations denominated in currencies other than a given
operation's functional currency. Forward currency contracts are used by the
Company as a method to establish a fixed functional currency cost for certain
raw material purchases denominated in non-functional currency (typically the
U.S. dollar).
The following table summarizes the Company's market-sensitive financial
instruments. These transactions are considered non-trading activities.
ON-BALANCE SHEET FINANCIAL INSTRUMENTS
- --------------------------------------
WEIGHTED
US$ EQUIVALENT AVERAGE INTEREST RATE
--------------------- ---------------------
DECEMBER 31, DECEMBER 31,
--------------------- ---------------------
2002 2001 2002 2001
-------- -------- -------- --------
CURRENCY DENOMINATION
British Pounds Sterling (1) $ 2,144 $ 1,407 5.75% 6.25%
U.S. Dollar (1) 1,250 -- 4.75% --
New Zealand Dollar (1) 968 1,379 7.17% 6.61%
Euro (1) 736 3,598 6.00% 6.11%
Swedish Krona (1) 630 -- 5.45% --
- -------------
(1) Maturity dates are expected to be less than one year.
-10-
DECEMBER 31, 2002 DECEMBER 31, 2001
--------------------------- -----------------------------
RECEIVE US$/PAY NZ$:
- ------------------------------
Contract Amount US $227 US $380
Average Contractual Exchange Rate (US$/NZ$) .5082 (US$/NZ$) .4159
Expected Maturity Dates January 2003 January through February 2002
RECEIVE US$/PAY AUSTRALIAN $:
- -----------------------------
Contract Amount US $1,891 US $1,075
Average Contractual Exchange Rate (US$/A$) .5591 (US$/A$) .5125
Expected Maturity Dates January through March 2003 January through March 2002
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (UNAUDITED AND IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
INTRODUCTION
The Company's revenues are primarily derived from (1) product sales and (2)
toll services in the polymers processing industry. Product sales entail the
Company purchasing resin which is further processed within the Company's
operating facilities. The further processing of the material may involve size
reduction services and/or compounding services. Compounding services include
the manufacture and sale of concentrates. After processing, the Company then
sells the finished products to customers. Toll services involve both size
reduction and compounding services whereby these services are performed on
customer owned material. Service revenues are recognized as the services are
performed and, in the case of product sales, revenues are recognized when the
title of the product passes to the customer, which is generally upon shipment to
third parties.
Cost of sales and services is primarily comprised of purchased raw
materials, compensation and benefits to non-administrative employees, occupancy
costs, repair and maintenance, electricity and equipment costs and supplies.
Selling, general and administrative expenses consist primarily of compensation
and related benefits to the sales and marketing, executive management,
information technology, accounting, legal, human resources and other
administrative employees of the Company, other sales and marketing expenses,
communications costs, systems costs, insurance costs and legal and accounting
professional fees.
Demand for the Company's products and services tends to be driven by
overall economic factors and, particularly, consumer spending. The trend of
applicable resin prices also impacts customer demand. As resin prices are
falling, customers tend to reduce their inventories and, therefore, reduce their
need for the Company's products and services. Conversely, as resin prices are
rising, customers often increase their inventories and accelerate their
purchases of products and services from the Company. Additionally, demand for
the Company's products and services tends to be seasonal, with customer demand
being weakest during the Company's first fiscal quarter due to the holiday
season and also due to property taxes levied in the U.S. on customers'
inventories on December 31. The Company's fourth fiscal quarter also tends to
be softer compared to the Company's second and third fiscal quarters, in terms
of customer demand, due to vacation periods in the Company's European markets.
CRITICAL ACCOUNTING POLICIES
The Company's consolidated financial statements are impacted by the
accounting policies used and the estimates and assumptions made by management
during their preparation. The following is a discussion of the Company's
critical accounting policies pertaining to use of estimates, revenue and related
cost recognition, impairment of long-lived assets and currency translation.
Use of Estimates- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities, if any, at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. The more significant areas requiring use
-11-
of estimates relate to post-retirement and other employee benefit liabilities,
valuation allowances for deferred tax assets, workers compensation, allowance
for doubtful accounts related to accounts receivable, and fair value of
financial instruments. Actual results could differ from these estimates.
Management believes that its estimates are reasonable.
Revenue and Related Cost Recognition- The Company recognizes revenue from
services upon completion of the services and related expenses are recognized as
incurred. For product and equipment sales, revenues and related expenses are
recognized when ownership is transferred, which generally occurs when the
products are shipped.
Impairment of Property and Equipment- Property and equipment are reviewed
for impairment whenever an event or change in circumstances indicates the
carrying amount of an asset or group of assets may not be recoverable. The
impairment review includes comparison of future cash flows expected to be
generated by the asset or group of assets with the associated assets' carrying
value. If the carrying value of the asset or group of assets exceeds the
expected future cash flows (undiscounted and without interest charges), an
impairment loss is recognized to the extent that the carrying amount of the
asset exceeds its fair value.
Impairment of Goodwill and Other Intangible Assets- Effective October 1,
2002, the Company was required to adopt Financial Accounting Standards No. 142
("SFAS 142"), Goodwill and Other Intangible Assets, which established Standards
for reporting acquired goodwill and other intangible assets. This Statement
accounts for goodwill based on the reporting units of the combined entity into
which an acquired entity is integrated. In accordance with the statement,
goodwill and indefinite lived intangible assets will not be amortized, but will
be tested for impairment at least annually at the reporting unit level, and the
amortization period of intangible assets with finite lives will not be limited
to forty years.
Currency Translation- Amounts in foreign currencies are translated into
U.S. dollars. When local functional currency is translated to U.S. dollars, the
effects are recorded as a separate component of Other Comprehensive Income.
Exchange gains and losses resulting from foreign currency transactions are
recognized in earnings.
The fluctuations of the U.S Dollar against the Euro, Swedish Krona, British
Pound, New Zealand Dollar, Brazilian Real and the Australian Dollar have
impacted the translation of revenues and expenses of the Company's international
operations. The table below summarizes the impact of changing exchange rates
for the above currencies for the three months ended December 31, 2002 and 2001.
THREE MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, 2002 DECEMBER 31, 2001
------------------ ------------------
Net revenues $ 2,651 $ 80
Operating loss (56) (7)
Pre-tax loss (94) (11)
Net loss (1,370) (6)
Stock Options- Effective October 1, 2002, the Company adopted the fair
value recognition provisions of FASB Statement No. 123, Accounting for
Stock-Based Compensation ("SFAS 123") to all employee awards granted, modified
or settled after October 1, 2002. The Company adopted the prospective method to
implement SFAS 123 under the provisions of FASB Statement No. 148, Accounting
for Stock-Based Compensation-Transition and Disclosure- an amendment of FASB
Statement No. 123. Awards under the Company's plans vest over periods ranging
from immediate vesting to five years. See Note 4- "Stock Option Plans" for
further discussion.
RESULTS OF OPERATIONS
Three Months Ended December 31, 2002 Compared to the Three Months Ended December
31, 2001
REVENUES. Revenues increased from $42,870 to $45,248 during the three
months ended December 31, 2002, compared to the same period of fiscal 2001.
Product sales revenues increased from $34,632 to $37,531 for the three months
ended December 31, 2002 compared to the same periods of fiscal 2001. The
increase in product sales revenue was caused by an increase in product sales
-12-
volumes, particularly for the Company's European locations and due to stronger
foreign currencies compared to the U.S. Dollar (See "Currency Translation"
within Critical Accounting Policies). These increases were offset by a reduction
in volume at the Company's domestic concentrate manufacturing operation
("Bayshore") and lower average sales prices (caused in part by lower resin
prices) primarily for the Company's European operations. Toll service revenues
declined from $8,238 to $7,717 for the three months ended December 31, 2002
compared to the same period in fiscal 2001, caused by lower processing volumes
in the United States and Europe resulting from reduced customer demand.
COSTS AND EXPENSES. Gross margins (calculated as the difference between net
revenues and cost of sales, divided by net revenues) declined to 16.2% during
the three ended December 31, 2002, compared to 16.8% in the three months ended
December 31, 2001, respectively. Gross margins declined due to the further
erosion of toll processing volumes and lower Bayshore gross margins due to weak
customer demand. The detrimental gross margin impact of these factors was
partially offset by an improvement of product sales volumes during the quarter.
Selling, general and administrative expenses (including stock option
compensation expense) were $8,086 during the three months ended December 31,
2002, compared to $6,722 during the same periods of fiscal 2001. As a
percentage of revenues, sales, general and administrative expenses increased to
17.9% of revenue compared to 15.7% for the same quarter last year. The increase
in sales, general and administrative expenses was primarily due to an increase
in North American sales expenses, worldwide marketing expenses and the impact of
the Euro and other foreign currencies relative to the U.S. Dollar.
Depreciation and amortization expenses decreased to $2,214 during the three
months ended December 31, 2002 from $2,532 during the same period of fiscal 2001
due primarily to the Company no longer amortizing goodwill due to the adoption
of FAS 142 (See Note 2- "Cumulative Effect of Change in Accounting Principle").
OTHER INCOME (EXPENSE). Other income (expense) for the three months ended
December 31, 2002 was $(1,017) compared to $(2,752) for the same period in 2001.
This decline in expense was due to a reduction in net interest expenses of
$1,630 or 48% due primarily from the repurchase of $104,480 of Senior Notes and
an unrealized foreign currency gain of $430 in the period ended December 31,
2002. The three months ended December 31, 2001 includes a $489 gain on the
early retirement of the Company's Senior Notes.
INCOME TAXES. The Company's effective income tax rates were benefits of 29%
and 10% during the three months ended December 31, 2002 and 2001, respectively.
The tax rate change was due to a change in the mix of pre-tax income or loss
generated by the Company's operations in various taxing jurisdictions.
Additionally, during the three months ended December 31, 2001, a valuation
allowance of $754 was placed against the benefit of U.S. net operating losses
expiring in fiscal year 2002. The Company's effective tax rate also increased
during the first quarter of fiscal 2003 because the Company ceased amortization
of goodwill in fiscal year 2002 (as discussed in Note 2- "Cumulative Effect of
Change of Accounting Principle"). For the most part, goodwill amortization was
not tax deductible and therefore the Company's permanent differences between
book and tax income declined during fiscal 2002 compared to fiscal 2001.
INCOME (LOSS) FROM DISCONTINUED OPERATIONS. In accordance with SFAS
144, the Oilfield Services results of operations are presented as discontinued
operations, net of income taxes in the consolidated statement of operations. In
addition, the Oilfield Services assets held for sale and liabilities held for
sale and retained are shown as two separate line items in the consolidated
balance sheet. The Company is currently negotiating the sale of the remaining
Oilfield Services operation. Should these negotiations not be successful,
management intends to actively market the remaining Oilfield Services operation
for sale. The working capital adjustment had the effect of increasing the
consideration received by the Company, pursuant to the sale agreement related to
the sale of substantially all of the Company's Oilfield Services operations to
Varco International, Inc.
-13-
THREE MONTHS ENDED
DECEMBER 31,
------------------
2002 2001
-------- -------
Revenues $ 1,470 $30,106
Operating income -- 1,247
Income from discontinued operations before gain on disposal,
net of income taxes -- 702
Gain on disposal of discontinued operations, net of income taxes 516 --
Income from discontinued operations before the gain on disposition, net of
income taxes, decreased due to the sale of substantially all of its Oilfield
Services business. The gain on disposition of discontinued operations, net of
income taxes, is due to the finalization of the post-closing working capital
adjustment (See Note 8- "Discontinued Operations" for further discussion of this
gain).
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE. Effective October 1,
2002, the Company was required to adopt Financial Accounting Standards No. 142
("SFAS 142"), Goodwill and Other Intangible Assets, which established Standards
for reporting acquired goodwill and other intangible assets. This Statement
accounts for goodwill based on the reporting units of the combined entity into
which an acquired entity is integrated. In accordance with the statement,
goodwill and indefinite lived intangible assets will not be amortized, but will
be tested for impairment at least annually at the reporting unit level, and the
amortization period of intangible assets with finite lives will not be limited
to forty years. Using the discounted cash flow method under the requirements of
SFAS 142, the Company recorded an impairment of goodwill of $28,863, net of
income tax benefit of $580 in the three months ended December 31, 2002 as a
result of the adoption of SFAS 142 on October 1, 2002. The goodwill impaired
was derived from business acquisitions made before fiscal year 2001. This
impairment is reflected in the statement of operations as a cumulative effect of
change in accounting principle. The cessation of goodwill amortization under
SFAS 142 will result in a reduction of approximately $1,140 in annual operating
expense, assuming no additional impairment of goodwill. (See Note 2-
"Cumulative Effect of Change of Accounting Principle" for further information on
this charge).
NET LOSS. For the three months ended December 31, 2002, the Company had
net losses of $(31,181) compared to net losses of $(3,585) for the comparable
period in fiscal 2001, due to the factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES. The following are considered by
management as key measures of liquidity applicable to the Company:
DECEMBER 31, 2002 SEPTEMBER 30, 2002
------------------ ------------------
Cash and cash equivalents $ 6,778 $ 129,072
Working capital 39,828 145,939
Current ratio 1.9 3.6
Debt-to-capitalization .28 to 1 .55 to 1
Debt, net of cash to capitalization .24 to 1 .06 to 1
Cash and cash equivalents declined $122,294 and net working capital
decreased $106,111 during the three months ended December 31, 2002 due to the
factors described below.
For the three months ended December 31, 2002, cash provided by (used for)
operating activities decreased to ($16,849) from cash provided of $549 for the
three months ended December 31, 2001. The decrease in cash provided by (used
for) operating activities occurred primarily due to the tax payment made on the
Company's fiscal year 2002 income, payment of accrued interest expense and
payments related to the Oilfield Services liabilities retained.
Capital expenditures totaled $2,476 during the three months ended December
31, 2002. The Company anticipates that available cash and existing credit
facilities will be sufficient to fund remaining fiscal 2003 capital expenditure
requirements.
-14-
Cash used for financing activities was $103,274 during the three months
ended December 31, 2002 compared to cash used of $4,437 during the three months
ended December 31, 2001. The change was primarily the result of increased debt
repayments due to the retirement of $104,480 of Senior Notes during the three
months ended December 31, 2002.
As of December 31, 2002, the Company had approximately $17,200 of
additional borrowing capacity available under various foreign and domestic
credit arrangements. In April 2002, the Company established a three-year
domestic credit facility secured by domestic receivables and inventory with a
maximum borrowing capacity of $15,000. The borrowing capacity varies based upon
the levels of domestic receivables and inventory. As of December 31, 2002, the
Company had approximately $9,700 of borrowing capacity under the domestic credit
facility.
The Company's foreign credit facilities are generally secured by assets
owned by subsidiaries of the Company and also carry various financial covenants.
The Company's domestic credit facility is secured by domestic receivables,
inventory and certain domestic property, plant and equipment and carries a
variable interest rate. The variable interest rate is currently equal to either
one-quarter (1/4%) percent per annum in excess of the prime rate or two and
one-quarter (2 1/4%) percent per annum in excess of the adjusted euro dollar
rate and may be adjusted depending upon the Company's leverage ratio, as
defined, and excess credit availability under the credit facility. The Company's
domestic credit facility contains customary financial covenants which vary
depending upon excess availability, as defined in the credit facility agreement.
The Company's domestic credit facility contains a number of covenants
including, among others, limitations on the ability of the Company and its
restricted subsidiaries to (i) incur additional indebtedness, (ii) pay dividends
or redeem any capital stock, (iii) incur liens or other encumbrances on their
assets, (iv) enter into transactions with affiliates, (v) merge with or into any
other entity or (vi) sell any of their assets. In addition, any "change of
control" of the Company or its restricted subsidiaries will constitute a default
under the facility ("change of control" means (i) the sale, lease or other
disposition of all or substantially all of the assets of such entity, (ii) the
adoption of a plan relating to the liquidation or dissolution of such entity,
(iii) any person or group becoming beneficial owner of more than 50% of the
total voting power of the voting stock of such entity or (iv) until April 2004,
a majority of the members of the board of directors of any such entity no longer
being "continuing directors" where "continuing directors" means the members of
the board on the date of the credit facility and members that were nominated for
election or elected to the board with the affirmative vote of a majority of the
"continuing directors" who were members of the board at the time of such
nomination or election).
The Company anticipates that existing cash balances, together with the
borrowing capacity will provide adequate liquidity for fiscal 2003. There can,
however, be no assurance the Company will be successful in obtaining sources of
capital that will be sufficient to support the Company's capital requirements in
the long-term.
In connection with the Company's October 2002 tender offer for the
Company's outstanding Senior Notes, the terms of the Senior Notes indenture were
amended significantly. The amended Senior Notes indenture contains a number of
covenants including: restrictions on the sale of assets of the Company in excess
of $150,000 and a change of control provision that requires the Company to
repurchase all of the Senior Notes at a repurchase price in cash equal to 101%
of the principal amount of the Senior Notes upon the occurrence of a change of
control. A "change of control" means (i) the sale, lease or other disposition
of all or substantially all of the assets of the Company and its restricted
subsidiaries, (ii) the adoption of a plan relating to the liquidation or
dissolution of the Company, (iii) any person or group becoming the beneficial
owner of more than 50% of the total voting power of the voting stock of the
Company or (iv) a majority of the members of the Board of Directors no longer
being "continuing directors" where "continuing directors" means the members of
the Board of Directors on the date of the indenture and members that were
nominated for election or elected to the Board of Directors with the affirmative
vote of a majority of the "continuing directors" who were members of the Board
at the time of such nomination or election. The interpretation of the phrase
"all or substantially all" as used in the Senior Notes indenture varies
according to the facts and circumstances of the subject transaction, has no
clearly established meaning under New York law (which governs the indenture) and
is subject to judicial interpretation.
-15-
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary market risk exposures include debt obligations
carrying variable interest rates, and forward purchase contracts intended to
hedge accounts payable obligations denominated in currencies other than a given
operation's functional currency. Forward currency contracts are used by the
Company as a method to establish a fixed functional currency cost for certain
raw material purchases denominated in non-functional currency (typically the
U.S. dollar).
The following table summarizes the Company's market-sensitive financial
instruments. These transactions are considered non-trading activities.
ON-BALANCE SHEET FINANCIAL INSTRUMENTS
- -----------------------------------------
WEIGHTED
US$ EQUIVALENT AVERAGE INTEREST RATE
--------------------- ---------------------
DECEMBER 31, DECEMBER 31,
--------------------- ---------------------
2002 2001 2002 2001
-------- -------- -------- --------
CURRENCY DENOMINATION
British Pounds Sterling (1) $ 2,144 $ 1,407 5.75% 6.25%
U.S. Dollar (1) 1,250 -- 4.75% --
New Zealand Dollar (1) 968 1,379 7.17% 6.61%
Euro (1) 736 3,598 6.00% 6.11%
Swedish Krona (1) 630 -- 5.45% --
- -------------
(1) Maturity dates are expected to be less than one year.
DECEMBER 31, 2002 DECEMBER 31, 2001
--------------------------- -----------------------------
RECEIVE US$/PAY NZ$:
- ---------------------------------
Contract Amount US $227 US $380
Average Contractual Exchange Rate (US$/NZ$) .5082 (US$/NZ$) .4159
Expected Maturity Dates January 2003 January through February 2002
RECEIVE US$/PAY AUSTRALIAN $:
- ---------------------------------
Contract Amount US $1,891 US $1,075
Average Contractual Exchange Rate (US$/A$) .5591 (US$/A$) .5125
Expected Maturity Dates January through March 2003 January through March 2002
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. Within 90 days before the
filing of this Report, the Company's principal executive officer and
principal financial officer evaluated the effectiveness of the Company's
disclosure controls and procedures. Based on the evaluation, the Company's
principal executive officer and principal financial officer believe that
the Company's disclosure controls and procedures were effective to ensure
that material information was accumulated and communicated to the Company's
management, including the Company's principal executive officer and
principal financial officer, as appropriate to allow timely decisions
regarding required disclosure.
(b) Changes in internal controls. 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 evaluation
referred to in the preceding paragraph (a) nor have there been any
corrective actions with regard to significant deficiencies or material
weaknesses.
-16-
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Part I, Item 3 in the Company's Form 10-K dated December 20, 2002.
ITEM 5. OTHER INFORMATION
The Company's chief executive and chief financial officers have each
submitted to the Securities and Exchange Commission their certifications as
required under 18 U.S.C. 1350, accompanying the filing of this Report.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - Reference is hereby made to the exhibit index which appears
below.
The following instruments and documents are included as Exhibits to this
Form 10-Q. Exhibits incorporated by reference are so indicated by parenthetical
information.
EXHIBIT NO. EXHIBIT
- ----------- -------
4.1 - Third Supplemental Indenture, dated November 1, 2002 among the Registrant, ICO P&O, Inc.,
a Texas corporation, and State Street Bank and Trust Company (formerly Fleet National Bank),
as trustee, relating to Senior Notes due 2007 (filed as Exhibit 4.6 to Form 10-K dated December
20, 2002)
10.1 - First Amendment to Employment Agreement by and between the Registrant and Christopher N.
O'Sullivan dated October 23, 2002 (filed as Exhibit 10.10 to Form 10-K dated December 20,
2002)
10.2 - First Amendment to Employment Agreement by and between the Registrant and Timothy J.
Gollin dated October 31, 2002 (filed as Exhibit 10.12 to Form 10-K dated December 20, 2002)
10.3 - Second Amendment to First Amended and Restated Employment Agreement by and between
the Registrant and Jon C. Biro dated October 24, 2002 (filed as Exhibit 10.15 to Form 10-K
dated December 20, 2002)
10.4* - Third Amendment to First Amended and Restated Employment Agreement by and between the
Registrant and Jon C. Biro dated January 15, 2003
10.5 - First Amendment to Employment Agreement by and between the Registrant and Charlotte J.
Fischer dated October 24, 2002 (filed as Exhibit 10.17 to Form 10-K dated December 20, 2002)
10.6 - Employment Agreement dated February 15, 2001 by and between the Registrant's subsidiary and
Brad Leuschner (filed as Exhibit 10.18 to Form 10-K dated December 20, 2002)
10.7 - Amendment to Employment Agreement by and between the Registrant and Brad Leuschner
dated July 31, 2002 (filed as Exhibit 10.19 to Form 10-K dated December 20, 2002)
10.8 - Second Amendment to Employment Agreement by and between the Registrant and Brad
Leuschner dated October 31, 2002 (filed as Exhibit 10.20 to Form 10-K dated
December 20, 2002)
- ---------------
*Filed herewith
(b) Reports on Form 8-K - None
-17-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ICO, Inc.
-----------------------------------------
(Registrant)
February 14, 2002
/s/ Jon C. Biro
-----------------------------------------
Jon C. Biro
Chief Financial Officer and Treasurer
/s/ Bradley T. Leuschner
-----------------------------------------
Bradley T. Leuschner
Chief Accounting Officer
-18-
CERTIFICATION
-------------
I, Timothy J. Gollin, certify that:
1. I have reviewed this quarterly report on Form 10-Q of ICO, Inc. (the
"Company") for the period ending December 31, 2002;
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 Company as of, and for, the periods presented in this
quarterly report;
4. The Company'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 Company and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the Company, 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 Company'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 Company's other certifying officer and I have disclosed, based on our
most recent evaluation, to the Company's auditors and the audit committee
of Company's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Company's ability to record,
process, summarize and report financial data and have identified for
the Company'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 Company's internal
controls; and
6. The Company'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.
/s/ Timothy J. Gollin
- -----------------------------
Name: Timothy J. Gollin
Chief Executive Officer
Date: February 13, 2003
-19-
CERTIFICATION
-------------
I, Jon C. Biro, certify that:
1. I have reviewed this quarterly report on Form 10-K of ICO, Inc. (the
"Company") for the period ending December 31, 2002;
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 Company as of, and for, the periods presented in this
quarterly report;
4. The Company'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 Company and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the Company, 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 Company'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 Company's other certifying officer and I have disclosed, based on our
most recent evaluation, to the Company's auditors and the audit committee
of Company's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Company's ability to record,
process, summarize and report financial data and have identified for
the Company'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 Company's internal
controls; and
6. The Company'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.
/s/ Jon C. Biro
- -------------------------------------------
Name: Jon C. Biro
Chief Financial Officer and Treasurer
Date: February 13, 2003