SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended April 26, 2003 Commission file number 0-11736
THE DRESS BARN, INC.
(Exact name of registrant as specified in its charter)
Connecticut 06-0812960
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
30 Dunnigan Drive, Suffern, New York 10901
(Address of principal executive offices) (Zip Code)
(845) 369-4500
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Common Stock $.05 par value
Indicate 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 [ ].
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
.05 par value 29,165,593 shares on June 6, 2003
Page 1 of 24
THE DRESS BARN, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED APRIL 26, 2003
TABLE OF CONTENTS
Page
Number
Part I. FINANCIAL INFORMATION (Unaudited):
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets
April 26, 2003 (unaudited)
and July 27, 2002 I-3
Condensed Consolidated Statements of Earnings
(unaudited) for the Thirteen weeks ended
April 26, 2003 and April 27, 2002 I-4
Condensed Consolidated Statements of Earnings
(unaudited) for the Thirty-nine weeks ended
April 26, 2003 and April 27, 2002 I-5
Condensed Consolidated Statements of Cash Flows
(unaudited) for the Thirty-nine weeks ended
April 26, 2003 and April 27, 2002 I-6
Notes to Unaudited Condensed Consolidated
Financial Statements (unaudited) I-7 through I-10
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations I-13 through I-18
Item 3. Quantitative and Qualitative Disclosure
About Market Risk I-18
Item 4 Controls and Procedures I-18
Part II. OTHER INFORMATION:
Item 1. Legal Proceedings I-19
Item 2. Changes in Securities *
Item 3. Defaults Upon Senior Securities *
Item 4. Submissions of Matters to a Vote
of Security Holders *
Item 5. Other Information *
Item 6. Exhibits and Reports on Form 8-K I-19
Signatures I-20
Certifications I-21
* Not applicable in this filing.
Item 1 - FINANCIAL STATEMENTS
The Dress Barn, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
Dollars in thousands except share data
April 26, July 27,
2003 2002
-------------------- --------------
ASSETS
Current Assets: (unaudited)
Cash & cash equivalents $44,720 $91,899
Marketable securities and investments 52,404 163,677
Merchandise inventories 118,777 113,371
Prepaid expenses and other 3,233 2,182
-------------------- --------------
Total Current Assets 219,134 371,129
-------------------- --------------
Property and Equipment:
Land and buildings 45,385 --
Leasehold improvements 64,402 61,414
Fixtures and equipment 165,832 154,139
Computer software 18,955 17,344
Automotive equipment 622 554
-------------------- --------------
295,196 233,451
Less: accumulated depreciation and amortization 158,647 140,025
-------------------- --------------
136,549 93,426
-------------------- --------------
Deferred Taxes 5,798 5,869
Other Assets 4,908 3,999
-------------------- --------------
Total Assets $366,389 $474,423
==================== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable- trade $58,582 $62,802
Accrued salaries, wages and related expenses 18,869 18,089
Other accrued expenses 40,361 43,974
Customer credits 7,664 6,650
Income taxes payable 7,603 8,655
-------------------- --------------
Total Current Liabilities 133,079 140,170
-------------------- --------------
Commitments and Contingencies
Shareholders' Equity:
Preferred stock, par value $.05 per share:
Authorized- 100,000 shares
Issued and outstanding- none -- --
Common stock, par value $.05 per share:
Authorized- 50,000,000 shares
Issued and outstanding- - 29,139,190 and
36,507,919 shares, respectively 1,457 1,825
Additional paid-in capital 56,460 52,210
Retained earnings 175,289 279,671
Accumulated other comprehensive income 104 547
-------------------- --------------
Total Shareholders' Equity 233,310 334,253
-------------------- --------------
Total Liabilities and Shareholders' Equity $366,389 $474,423
==================== ==============
See notes to unaudited condensed consolidated financial statements
The Dress Barn, Inc. and Subsidiaries
Condensed Consolidated Statements of Earnings - Third Quarter (unaudited)
Amounts in thousands except earnings per share data
Thirteen Weeks Ended
---------------------------------------
April 26, April 27,
2003 2002
------------------ -----------------
Net sales $165,692 $177,119
Cost of sales, including
occupancy and buying costs 109,956 111,804
------------------ -----------------
Gross profit 55,736 65,315
Selling, general and
administrative expenses 46,973 45,271
Depreciation and amortization 5,193 6,082
------------------ -----------------
Operating income 3,570 13,962
Interest income- net 507 923
------------------ -----------------
Earnings before
income taxes 4,077 14,885
Income taxes 1,468 5,359
------------------ -----------------
Net earnings $2,609 $9,526
================== =================
Earnings per share:
Basic $0.09 $0.26
================== =================
Diluted $0.09 $0.25
================== =================
Weighted average shares outstanding:
Basic 29,125 36,334
------------------ -----------------
Diluted 29,847 37,443
------------------ -----------------
See notes to unaudited condensed consolidated financial statements
The Dress Barn, Inc. and Subsidiaries
Condensed Consolidated Statements of Earnings - Nine Months (unaudited) Amounts
in thousands except earnings per share data
Thirty-Nine Weeks Ended
---------------------------------------
April 26, April 27,
2003 2002
------------------ -----------------
Net sales $518,990 $530,439
Cost of sales, including
occupancy and buying costs 336,927 340,997
------------------ -----------------
Gross profit 182,063 189,442
Selling, general and
administrative expenses 142,671 137,198
Depreciation and amortization 17,225 17,902
------------------ -----------------
Operating income 22,167 34,342
Interest income- net 2,891 3,976
------------------ -----------------
Earnings before
income taxes 25,058 38,318
Income taxes 9,022 13,795
------------------ -----------------
Net earnings $16,036 $24,523
================== =================
Earnings per share:
Basic $0.50 $0.67
================== =================
Diluted $0.49 $0.66
================== =================
Weighted average shares outstanding:
Basic 31,903 36,505
------------------ -----------------
Diluted 32,656 37,412
------------------ -----------------
See notes to unaudited condensed consolidated financial statements
The Dress Barn, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (unaudited)
Dollars in thousands
Thirty Nine Weeks Ended
-----------------------------------
April 26, April 27,
2003 2002
----------------- ----------------
Operating Activities:
Net earnings $16,036 $24,523
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 17,225 17,902
Change in deferred income taxes 71 1,590
Changes in assets and liabilities:
Increase in merchandise inventories (5,406) (2,172)
Increase in prepaid expenses and other (1,051) (231)
Increase in other assets (909) (1,710)
(Decrease) increase in accounts payable- trade (4,220) 6,357
Increase in accrued salaries, wages and related expenses 780 461
(Decrease) in other accrued expenses (3,613) (3,102)
Increase in customer credits 1,014 1,077
(Decrease) increase in income taxes payable (1,052) 6,446
----------------- ----------------
Total adjustments 2,840 26,618
----------------- ----------------
Net cash provided by operating activities 18,875 51,141
----------------- ----------------
Investing Activities:
Purchases of property and equipment - net (60,348) (22,459)
Sales and maturities of marketable securities and investments 128,636 52,331
Purchases of marketable securities and investments (17,806) (62,222)
----------------- ----------------
Net cash provided by (used in) investing activities 50,482 (32,350)
----------------- ----------------
Financing Activities:
Proceeds from Employee Stock Purchase Plan 66 68
Purchase of treasury stock (120,818) (8,964)
Proceeds from stock options exercised 4,216 4,070
----------------- ----------------
Net cash used in financing activities (116,536) (4,826)
----------------- ----------------
Net (decrease) increase in cash and cash equivalents (47,179) 13,965
Cash and cash equivalents- beginning of period 91,899 28,804
----------------- ----------------
Cash and cash equivalents- end of period $44,720 42,769
================= ================
Supplemental Disclosure of Cash Flow Information:
Cash paid for income taxes $9,712 $5,759
================= ================
See notes to unaudited condensed consolidated financial statements
THE DRESS BARN, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. In the
opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments (consisting of normal recurring
adjustments) which management considers necessary to present fairly the
consolidated financial position of The Dress Barn, Inc. and its wholly owned
subsidiaries (the "Company") as of April 26, 2003 and July 27, 2002 and the
consolidated results of its operations and its cash flows for the thirteen weeks
and thirty-nine weeks ended April 26, 2003 and April 27, 2002. The results of
operations for a thirteen-week period may not be indicative of the results for
the entire year.
The Company's Board of Directors approved a 2-for-1 stock split in the form
of a 100% stock dividend on the Company's issued and outstanding common stock in
May 2002. The stock dividend was distributed on May 31, 2002 to shareholders of
record on May 17, 2002. All historic share and per share information contained
in this report have been adjusted to reflect the impact of the stock split.
Significant accounting policies and other disclosures necessary for
complete financial statements in conformity with generally accepted accounting
principles have been omitted since such items are reflected in the Company's
audited financial statements and related notes thereto. Accordingly, these
condensed consolidated financial statements should be read in conjunction with
the audited financial statements and notes thereto included in the Company's
July 27, 2002 Annual Report to Shareholders. The condensed consolidated balance
sheet as of July 27, 2002 was derived from the audited balance sheet included in
the Form 10-K for the fiscal year ended July 27, 2002. Certain reclassifications
have been made to the condensed consolidated financial statements of prior
periods to conform to the current period presentation.
2. Stock Repurchase Program and Dutch Auction Tender Offer
On March 30, 2000, the Board of Directors authorized a $50 million stock
repurchase program, which was increased to $75 million on April 5, 2001. As of
the date of this filing, the Company had repurchased 2,323,000 shares at an
aggregate purchase price of approximately $24.8 million. During the nine months
ended April 26, 2003, no shares were repurchased under this authorization.
On October 30, 2002 the Company completed a "Dutch Auction" Tender Offer
(the "Tender Offer"), resulting in the Company's purchase of 8 million shares of
its common stock at $15 per share for a total cost of approximately $121 million
including transaction costs.
Reacquired shares are retired and treated as authorized but unissued
shares, with the cost of the reacquired shares (less the par value) debited to
retained earnings and the par value debited to common stock.
THE DRESS BARN, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. Earnings Per Share ("EPS")
Basic EPS is based upon the weighted average number of common shares
outstanding and diluted EPS is based upon the weighted average number of common
shares outstanding plus the dilutive effect of stock options outstanding during
the period. Antidilutive options are excluded from the earnings per share
calculations when the exercise price of the option exceeds the average market
price of the common shares for the period. The following is a reconciliation of
the denominators of the basic and diluted EPS computations shown on the
accompanying consolidated statements of earnings:
Thirteen Weeks Ended Thirty-Nine Weeks Ended
-------------------- -----------------------
April 26, April 27, April 26, April 27,
Shares in thousands 2003 2002 2003 2002
--------------- -------------- -------------- ---------------
Basic weighted average outstanding shares 29,125 36,334 31,903 36,505
Dilutive effect of options outstanding 722 1,109 753 907
--------------- -------------- -------------- ---------------
Diluted weighted average shares outstanding 29,847 37,443 32,656 37,412
--------------- -------------- -------------- ---------------
Anti-dilutive options excluded from calculations 150 -- 150 --
--------------- -------------- -------------- ---------------
4. Comprehensive Income
The Company's short-term investments are classified as available for sale
securities, and therefore, are carried at fair value, with unrealized gains and
losses reported as a component of other comprehensive income. Total
comprehensive income is composed of net earnings and net unrealized gains or
losses on available for sale securities. The following is a reconciliation of
comprehensive income and net earnings as shown on the face of the accompanying
consolidated statements of earnings:
Thirteen Weeks Ended Thirty-Nine Weeks Ended
-------------------- -----------------------
April 26, April 27, April 26, April 27,
Dollars in thousands 2003 2002 2003 2002
--------------- -------------- -------------- ---------------
Net earnings $2,609 $9,526 $16,036 $24,523
Net unrealized (loss) on available for sale
securities (85) (966) (443) (806)
--------------- -------------- -------------- ---------------
Comprehensive income $2,524 $8,560 $15,593 $23,717
--------------- -------------- -------------- ---------------
5. Stock Based Compensation
At April 26, 2003, the Company has various stock option plans. The Company
accounts for these plans under the recognition and measurement principles of APB
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
Interpretations. No stock option-based employee compensation cost is reflected
in net income, as all options granted under those plans had an exercise price
equal to the market value of the underlying common stock on the date of the
grant.
THE DRESS BARN, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table illustrates the effect on net income and earnings per
share if the Company had applied the fair value recognition provisions of FASB
Statement No. 123, "Accounting for Stock-Based Compensation," as amended by SFAS
No. 148, to stock-based employee compensation (in millions, except per share
amounts):
Thirteen Weeks Ended Thirty-Nine Weeks Ended
-------------------- -----------------------
April 26, April 27, April 26, April 27,
2003 2002 2003 2002
-------------- -------------- --------------- -----------
Net earnings as reported $2,609 $9,526 $16,036 $24,523
Deduct: Total stock-based employee
compensation expense determined
under fair value based method --------------------------------------------------------------
for all awards net of related tax effects (469) (441) (1,375) (1,355)
--------------------------------------------------------------
Pro forma net earnings $2,140 $9,085 $14,661 $23,168
==============================================================
Earnings per share
Basic - as reported $0.09 $0.26 $0.50 $0.67
--------------------------------------------------------------
Basic - pro forma $0.07 $0.25 $0.46 $0.63
--------------------------------------------------------------
Diluted - as reported $0.09 $0.25 $0.49 $0.66
--------------------------------------------------------------
Diluted - pro forma $0.07 $0.24 $0.45 $0.62
--------------------------------------------------------------
The fair values of the options granted under the Company's fixed stock
option plans were estimated on the date of grant using the Black-Scholes
option-pricing model with the following assumptions:
Thirteen Weeks Ended Thirty-Nine Weeks Ended
-------------------- -----------------------
April 26, April 27, April 26, April 27,
2003 2002 2003 2002
--------------- -------------- -------------- ---------------
Weighted average risk-free interest rate 3.0% 3.9% 3.0% 3.9%
Weighted average expected life (years) 5.0 5.0 5.0 5.0
Expected volatility of the market price of
the Company's common stock 43.2% 44.1% 43.2% 44.1%
6. Purchase of Real Estate
On January 28, 2003, the Company, through a wholly owned subsidiary,
completed the purchase of real estate which includes its current corporate
headquarters and distribution facility in Suffern, New York (the "Suffern
facility") for a total cost, including purchase price and transaction costs, of
approximately $45.5 million. The Company intends to utilize fixed rate long-term
mortgage financing for the major portion of the acquisition cost, with the
remainder financed through the Company's existing cash.
THE DRESS BARN, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Suffern facility consists of approximately 65 acres of land, with a
current total of approximately 900,000 square feet of rentable distribution and
office space, the majority of which is occupied by the Company. The remainder of
the rentable square footage is 100% leased through 2012. In order to obtain
mortgage financing for the facility, the Company is expected to be required to
sign a long-term lease with its wholly-owned subsidiary for the office and
distribution space it currently occupies corresponding to the term of the
related fixed-rate mortgage.
7. Litigation
The Company's third quarter results do not reflect an April 10, 2003 jury
verdict of $30 million of compensatory damages in a lawsuit brought by Alan M.
Glazer and related parties. The Company cannot reasonably estimate the amount of
the judgment, if any, that may be entered in such lawsuit. The Company has filed
motions to set aside the verdict. The trial court will determine any punitive
damages. The Company anticipates that before the release of its results for its
fiscal year ending July 26, 2003, the trial court will likely determine the
amount of the judgment, and the Company intends to reflect in its fourth quarter
and fiscal year financial results the amount, if any, of any judgment entered.
If a judgment against the Company is entered, the Company expects to vigorously
pursue an appeal.
8. Recent Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141, "Business
Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No.
141 requires that all business combinations initiated after June 30, 2001 be
accounted for under the purchase method of accounting and addresses the initial
recognition and measurement of goodwill and other intangible assets acquired in
a business combination. SFAS No. 142 addresses the initial recognition and
measurement of intangible assets acquired outside of a business combination and
the accounting for goodwill and other intangible assets subsequent to their
acquisition. SFAS No. 142 provides that intangible assets with finite useful
lives be amortized and that goodwill and intangible assets with indefinite lives
will not be amortized, but will rather be tested at least annually for
impairment. The Company adopted SFAS No. 142 at the beginning of its fiscal year
ending July 26, 2003 ("fiscal 2003") with no impact on its financial statements.
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations". SFAS 143 addresses the financial accounting and
reporting for obligations and retirement costs related to the retirement of
tangible long-lived assets, requiring the recognition of a liability for an
asset retirement obligation in the period in which it is incurred. The Company
adopted SFAS No. 143 at the beginning of fiscal 2003 with no impact on its
financial statements.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 supersedes SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" and the accounting and reporting provisions relating
to the disposal of a segment of a business of Accounting Principals Board No.
30. The Company adopted SFAS No. 144 at the beginning of fiscal 2003 with no
impact on its financial statements.
THE DRESS BARN, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities", which addresses accounting for
restructuring and similar costs. SFAS No. 146 supersedes previous accounting
guidance, principally Emerging Issues Task Force Issue (the "Issue") No. 94-3.
The Company will adopt the provisions of SFAS No. 146 for any restructuring
activities initiated after December 31, 2002. Prior to December 31, 2002, the
Company has not had any restructuring activities. SFAS No. 146 requires that the
liability for costs associated with an exit or disposal activity be recognized
when the liability is incurred. Under Issue 94-3, a liability for an exit cost
was recognized at the date of a company's commitment to an exit plan. SFAS No.
146 also establishes that the liability should initially be measured and
recorded at fair value. Accordingly, SFAS No. 146 may affect the timing of
recognizing any future restructuring costs as well as the amounts recognized.
In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others- an Interpretation of FASB Statements No.
5, 57, and 107 and Rescission of FASB Interpretation No. 34" ("FIN 45"). FIN 45
elaborates on the disclosures to be made by a guarantor in its interim and
annual financial statements about its obligations under certain guarantees that
it has issued. It also clarifies that a guarantor is required to recognize, at
the inception of a guarantee, a liability for the fair value of the obligation
undertaken in issuing the guarantee. The initial recognition and initial
measurement provisions of FIN 45 are applicable on a prospective basis to
guarantees issued or modified after December 31, 2002, irrespective of the
guarantor's fiscal year-end. However, the disclosure requirements in FIN 45 are
effective for financial statements of interim or annual periods ending after
December 15, 2002. The Company is not a party to any agreement in which it is a
guarantor of indebtedness of others. Accordingly, this pronouncement is
currently not applicable to the Company.
In December 2002, the FASB issued Statement of Financial Accounting
Standards No. 148, "Accounting for Stock-Based Compensation - Transition and
Disclosure" ("SFAS 148"). SFAS 148 amends Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), to
provide alternative methods of transition for companies that voluntarily change
to a fair value-based method of accounting for stock-based employee
compensation. SFAS 148 also amends the disclosure provisions of SFAS 123 for
both interim and annual financial statements. The disclosure provisions of SFAS
148 are effective for annual reports for fiscal years ending after December 15,
2002, and for interim financials for periods beginning after December 15, 2002.
As such, the Company adopted the interim reporting provisions of SFAS 148 for
its third quarter ended April 26, 2003.
In January 2003, the FASB issued FASB Interpretation No. 46, "
Consolidation of Variable Interest Entities - an Interpretation of ARB No. 51"
("FIN 46"). FIN 46 addresses consolidation by business enterprises of variable
interest entities (formerly special purpose entities or SPEs). In general, a
variable interest entity is a corporation, partnership, trust, or any other
legal structure used for business purposes that either (a) does not have equity
investors with voting rights or (b) has equity investors that do not provide
sufficient financial resources for the entity to support its activities. The
objective of FIN 46 is not to restrict the use of variable interest entities but
to improve financial reporting by companies involved with variable interest
entities. FIN 46 requires a variable interest entity to be consolidated by a
company if that company is subject to a majority of the risk of loss from the
variable interest entity's activities or entitled to receive a majority of the
entity's residual returns or both. The consolidation requirements of FIN 46
apply to variable interest entities created after January 31, 2003. The
consolidation requirements apply to older entities in the first fiscal year or
interim period beginning after June 15, 2003. However, certain of the disclosure
requirements apply to financial statements issued after January 31, 2003,
regardless of when the variable interest entity was established. The Company
currently does not have any variable interest entities as defined in FIN 46.
Accordingly, this pronouncement is currently not applicable to the Company.
THE DRESS BARN, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." SFAS No. 149 amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities under SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities." SFAS No. 149 is generally effective for contracts
entered into or modified after June 30, 2003 and for hedging relationships
designated after that date. The Company currently does not have any derivative
instruments. Accordingly, this pronouncement is currently not applicable to the
Company.
In May 2003, the FASB issued Statement No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity"
("SFAS 150"). SFAS 150 improves the accounting for certain financial instruments
that, under previous guidance, issuers could account for as equity. The new
Statement requires that those instruments be classified as liabilities in
statements of financial position. The Company currently does not have any of the
financial instruments referred to in SFAS 150. As such, this pronouncement is
currently not applicable to the Company.
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
The following table sets forth the percentage change in dollars from last
year for the thirteen and thirty-nine week periods ended April 26, 2003, and the
percentage of net sales for each component of the Consolidated Statements of
Earnings for each of the periods presented:
Third Quarter Nine Months
------------- -----------
% Change % of Sales % Change % of Sales
---------- ----------
from L/Y T/Y L/Y from L/Y T/Y L/Y
-------- --- --- -------- --- ---
Net Sales -6.5% -2.2%
Cost of Sales, including
Occupancy & Buying -1.7% 66.4% 63.1% -1.2% 64.9% 64.3%
Gross Profit -14.7% 33.6% 36.9% -3.9% 35.1% 35.7%
Selling, General and
Admin. Expenses 3.8% 28.3% 25.6% 4.0% 27.5% 25.9%
Depreciation and Amortization -14.6% 3.1% 3.4% -3.8% 3.3% 3.4%
Operating Income -74.4% 2.2% 7.9% -35.5% 4.3% 6.5%
Interest Income - Net -45.1% 0.3% 0.5% -27.3% 0.6% 0.8%
Earnings Before Income Taxes -72.6% 2.5% 8.4% -34.6% 4.8% 7.2%
Net Earnings -72.6% 1.6% 5.4% -34.6% 3.1% 4.6%
Net sales for the thirteen weeks ended April 26, 2003 (the "third quarter")
decreased by 6.5% to $165.7 million from $177.1 million for the thirteen weeks
ended April 27, 2002 (the "prior period"). The sales decrease is attributable to
a 9% decrease in comparable store sales, which was offset, in part, by an
approximate 4% increase in average selling square footage. Net sales for the
thirty-nine weeks ended April 26, 2003 (the "nine months") decreased 2.2% to
$519.0 million from $530.4 million for the thirty-nine weeks ended April 27,
2002 ("prior nine months"). The sales decrease is attributable to a 5% decrease
in comparable store sales, which was offset, in part, by an approximate 3%
increase in average selling square footage.
The Company believes the continuing weakness in its comparable store sales
performance reflects primarily weak consumer confidence from geopolitical
uncertainties and the unsettled economy, as well as unseasonable weather
throughout the nine-month period. The unseasonably warm weather through early
October impacted the selling of the Company's traditional fall merchandise
categories and the unusually cold winter negatively impacted customer traffic
during the second quarter. The Company's sales weakness continued in the third
quarter, exacerbated by the blizzard in the Northeast on President's Day and the
cooler than normal weather during the Easter selling season.
Primarily as a result of the decrease in comparable store sales in the
third quarter, inventories at the end of the third quarter were above the
Company's planned levels. Since the increase was solely in current season
merchandise, the Company believes that upon the arrival of warmer weather,
coupled with the Company's increased ongoing promotional activity, sales of such
merchandise should improve.
THE DRESS BARN, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
During the nine months, the Company's total selling square footage
increased approximately 3%. The increase in store square footage was primarily
due to the opening of new combination Dress Barn/Dress Barn Woman stores ("combo
stores"), which carry both Dress Barn and Dress Barn Woman merchandise, as well
as the conversion of single-format stores into combo stores. During the nine
months the Company opened 48 new stores, including 6 in Southern California.
These store openings offset the square footage reduction from the closing of 25
underperforming stores during the nine months (2 of which were closed during the
third quarter). During the third quarter the Company opened 18 new stores.
As of April 26, 2003, the Company had 777 stores in operation, (200 Dress
Barn stores, 58 Dress Barn Woman stores and 519 combo stores), versus 760 stores
in operation at April 27, 2002, (215 Dress Barn stores, 60 Dress Barn Woman
stores and 485 combo stores). The Company's real estate strategy continues to be
opening primarily combo stores and converting its existing single-format stores
into combo stores, while closing or relocating its underperforming locations.
The Company anticipates opening 2 stores and closing approximately 10 stores
during the remainder of the fiscal year. The Company seeks new locations in both
its existing trading markets and new markets.
The Company has continued to test and reevaluate its direct selling
strategy. The Company briefly sold a limited assortment of merchandise via its
web site (www.dressbarn.com) and via telephone during the second quarter, but
the results were below expectations. The Company has decided at this time to
only sell merchandise in its retail stores, utilizing its web site as a
marketing and informational vehicle to communicate with its customers and help
drive store traffic. The Company's third quarter and nine month's earnings per
share-diluted were minimally impacted by its direct selling operations versus
approximately $0.01 and $0.12 in last year's three and nine month periods,
respectively, on a post-split basis.
Gross profit (net sales less cost of goods sold, including occupancy and
buying costs) for the third quarter decreased by 14.7% to $55.7 million, or
33.6% of net sales, from $65.3 million, or 36.9% of net sales, for the prior
period. For the nine months, gross profit decreased 3.9%, to $182.1 million, or
35.1% of net sales, from $189.4 million, or 35.7% of net sales, for the prior
nine months. For both the third quarter and nine months, store occupancy costs
were higher as a percentage of sales as a result of the decreases in comparable
store sales and higher rents for new stores, store expansions and lease
renewals. In the second and third quarters, higher markdowns led to decreases in
merchandise margins as a percent of sales. In view of the higher than planned
inventory levels at the end of the third quarter, the Company anticipates
merchandise margins as a percentage of sales will be below last year for its
fourth quarter ending in July 2003.
Selling, general and administrative (SG&A) expenses increased by 3.8% to
$47.0 million, or 28.3% of net sales, in the third quarter as compared to $45.3
million, or 25.6% of net sales, in the prior period. For the nine months, SG&A
expenses increased by 4.0% to $142.7 million, or 27.5% of net sales, versus
$137.2 million, or 25.9% of net sales, in the prior nine-month period. The
increase in SG&A as a percentage of net sales for both the third quarter and the
nine months were primarily due to negative comparable store sales leverage on
SG&A expenses. SG&A expenses increased in both periods primarily due to
increased store operating costs, primarily selling, benefits and insurance costs
resulting from the increase in the Company's store base. In addition, the colder
than normal winter in most parts of the country put added pressure on utility
costs in the second and third quarters. The Company continues to focus on
controlling its costs and enhancing productivity.
THE DRESS BARN, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Depreciation decreased to $5.2 million in the third quarter from $6.1
million in the prior period. For the nine months, depreciation expense decreased
to $17.2 million from $17.9 million in the prior nine months. Both the third
quarter and nine months were favorably impacted by last year's fourth quarter
writedown of obsolete software and equipment. This offsets the increase in
depreciation from the acquisition of our Suffern, NY headquarters/distribution
center facility (the "Suffern facility") during the third quarter. The third
quarter and nine months also benefited from less store construction costs than
the prior year as the Company has opened 48 stores during the nine months versus
73 stores opened during the prior nine months.
Interest income decreased 45.1% to $0.5 million in the third quarter and
decreased 27.3% to $2.9 million in the nine months versus last year's $0.9
million and $4.0 million, respectively. These decreases were due to lower
investment rates versus last year coupled with less cash available for
investments. During the current fiscal year, the Company has used a total of
$166.5 million for the Dutch Auction Tender Offer completed October 30, 2002
(the "Tender Offer"), in which the Company repurchased 8 million shares at a
cost of approximately $121 million, and the acquisition of the Suffern facility.
Principally as a result of the above factors, net earnings for the third
quarter decreased 72.6% to $2.6 million, compared to net income of $9.5 million
for the prior period. As a percentage of sales, net income decreased to 1.6%
from 5.4% last year. Net income for the nine months decreased 34.6% to $16.0
million, or 3.1% of net sales, versus $24.5 million, or 4.6% of net sales, for
the prior nine-month period.
Third quarter net earnings per share were $0.09, a decrease of 64%, versus
last year's $0.25 per diluted share. This year's earnings per share were
favorably impacted by $.02 for the quarter as a result of the Tender Offer.
Earnings per share for the nine-month period were favorably impacted by $.07 as
a result of the Tender Offer.
Liquidity and Capital Resources
The Company believes that its cash, cash equivalents and short-term
investments, together with cash flow from operations, will be adequate to fund
the Company's fiscal 2003 planned capital expenditures and all other operating
requirements and other proposed or contemplated expenditures. The Suffern
facility was purchased on January 28, 2003 for approximately $45.5 million. The
Company utilized its existing cash as temporary financing for the purchase of
the Suffern facility. The Company intends to finance its purchase with a
fixed-rate long-term mortgage for the major portion of the acquisition cost. The
Company is currently in negotiations for a $34 million mortgage.
The Company does not have any off-balance sheet arrangements or
transactions with unconsolidated, limited purpose entities, other than operating
leases entered into in the normal course of business and letters of credit.
Litigation
The Company's third quarter results do not reflect an April 10, 2003 jury
verdict of $30 million of compensatory damages in a lawsuit brought by Alan M.
Glazer and related parties. The Company cannot reasonably estimate the amount of
the judgment, if any, that may be entered in such lawsuit. The Company has filed
motions to set aside the verdict. The trial court will determine any punitive
damages. The Company anticipates that before the release of its results for its
fiscal year ending July 26, 2003, the trial court will likely determine the
amount of the judgment, and the Company intends to reflect in its fourth quarter
and fiscal year financial results the amount, if any, of any judgment entered.
If a judgment against the Company is entered, the Company expects to vigorously
pursue an appeal. See also Part II "Other Information", Item 1 "Legal
Proceedings".
THE DRESS BARN, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
The Company is not a party to any other legal proceedings, other than
various claims and lawsuits arising in the normal course of the Company's
business, none of which the Company believes should have a material adverse
effect on its financial condition or results of operations. Such matters are
subject to many uncertainties, and outcomes are not predictable with assurance.
Critical Accounting Policies and Estimates
The Company's accounting policies are more fully described in Note 1 of the
Notes to Consolidated Financial Statements in the Company's Annual Report to
Shareholders. Management's discussion and analysis of the Company's financial
condition and results of operations are based upon the Company's consolidated
financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States of America. The preparation
of these financial statements requires the Company to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses, income taxes and related disclosures of contingent assets and
liabilities. On an ongoing basis, the Company evaluates estimates, including
those related primarily to inventories, investments, long-lived assets, income
taxes and claims and contingencies. The Company bases its estimates on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. The Company's accounting
policies are generally straightforward; however, Management believes the
following accounting principles are the most critical because they involve the
most significant judgments, assumptions and estimates used in preparation of the
Company's financial statements.
Revenue Recognition
While the Company's recognition of revenue does not involve significant
judgment, revenue recognition represents an important accounting policy of the
Company. The Company recognizes sales at the point of purchase when the customer
takes possession of the merchandise and pays for the purchase, generally with
cash or credit card. Sales from purchases made with gift certificates and
layaway sales are also recorded when the customer takes possession of the
merchandise. Gift certificates and merchandise credits issued by the Company are
recorded as a liability until they are redeemed.
Merchandise Inventories
The Company's inventory is valued using the retail method of accounting and
is stated at the lower of cost or market. Under the retail inventory method, the
valuation of inventory at cost and resulting gross margin are calculated by
applying a calculated cost to retail ratio to the retail value of inventory. The
retail inventory method is an averaging method that has been widely used in the
retail industry due to its practicality. Inherent in the retail method are
certain significant management judgments and estimates including, among others,
initial merchandise markup, markdowns and shrinkage, which significantly impact
the ending inventory valuation at cost as well as the resulting gross margins.
Estimates are used to charge inventory shrinkage for the first and third fiscal
quarters of the fiscal year. Physical inventories are conducted at the end of
the second fiscal quarter and at the end of the fiscal year to calculate actual
shrinkage and inventory on hand. The Company has not experienced significant
fluctuations in historical shrink rates.
The Company continuously reviews its inventory levels to identify
slow-moving merchandise and broken assortments, using markdowns to clear
merchandise. A provision is recorded to reduce the cost of inventories to its
estimated net realizable value. Consideration is given to a number of
quantitative factors, including anticipated subsequent markdowns and aging of
inventories. To the extent that actual markdowns are higher or lower than
estimated, the Company's gross margins could increase or decrease and,
accordingly, affect its financial position and results of operations. A
significant variation between the estimated provision and actual results could
have a substantial impact on the Company's results of operations.
THE DRESS BARN, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Long-lived assets
The Company primarily invests in property and equipment in connection with
the opening and remodeling of stores and in computer software and hardware. Most
of the Company's store leases give the Company the option to terminate the lease
if certain specified sales volumes are not achieved generally during the first
two years of the lease. The Company periodically reviews its store locations and
estimates the recoverability of its assets, recording an impairment charge when
the Company expects to exercise its right to terminate the store's lease early
using this option. This determination is based on a number of factors, including
the store's historical operating results and cash flows, estimated future sales
growth, real estate development in the area and perceived local market
conditions that can be difficult to predict and may be subject to change. In
addition, the Company regularly evaluates its computer-related and other assets
and may accelerate depreciation over the revised useful life if the asset is no
longer in use or has limited future value. When assets are retired or otherwise
disposed of, the cost and related accumulated depreciation or amortization are
removed from the accounts, and any resulting gain or loss is reflected in income
for that period.
Claims and Contingencies
The Company is subject to various claims and contingencies related to
insurance, taxes, lawsuits and other matters arising out of the normal course of
business. The Company has risk participation agreements with insurance carriers
with respect to workers' compensation and medical insurance. Pursuant to these
arrangements, the Company is responsible for paying claims up to designated
dollar limits. The Company accrues its estimate of the eventual costs related to
these claims, which can vary based on changes in assumptions or claims
experience. The Company accrues its estimate of probable settlements of tax
audits. At any one time, many tax years are subject to audit by various taxing
jurisdictions. The results of these audits and negotiations with taxing
authorities may affect the ultimate settlement of these issues. If the Company
believes the likelihood of an adverse legal outcome is probable and the amount
is estimable it accrues a liability. The Company consults with legal counsel on
matters related to litigation and seeks input from other experts both within and
outside the Company with respect to matters in the ordinary course of business.
The Company believes its accruals for claims and contingencies are adequate.
Income taxes.
The Company does business in various jurisdictions that impose income
taxes. Management determines the aggregate amount of income tax expense to
accrue and the amount currently payable based upon the tax statutes of each
jurisdiction. This process involves adjusting income determined by using
generally accepted accounting principles for items that are treated differently
by the applicable taxing authorities. Deferred tax assets and liabilities are
reflected on the Company's balance sheet for temporary differences that will
reverse in subsequent years. If different judgments had been made, the Company's
tax expense, assets and liabilities could have been different.
Seasonality
The Company has historically experienced substantially lower earnings in
its second fiscal quarter ending in January than during its other three fiscal
quarters, reflecting the intense promotional atmosphere that has characterized
the Christmas shopping season in recent years. Due to the 9% decrease in
comparable sales in the third quarter, the net earnings were actually lower than
that of the second quarter. In addition, the Company's quarterly results of
operations may fluctuate materially depending on, among other things, increases
or decreases in comparable store sales, adverse weather conditions, shifts in
timing of certain holidays, the timing of new store openings, the promotional
activities of other retailers, net sales contributed by new stores and changes
in the Company's merchandise mix.
THE DRESS BARN, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Forward-Looking Statements and Factors Affecting Future Performance
This Form 10-Q contains forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended. These statements
reflect the Company's current views with respect to future events and financial
performance. The Company's actual results of operations and future financial
condition may differ materially from those expressed or implied in any such
forward looking statements as a result of certain factors set forth in the
Company's Annual Report on Form 10-K for its fiscal year ended July 27, 2002.
Item 3 -- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's portfolio of investments consisting of cash, cash equivalents
and marketable securities can be affected by changes in market interest rates.
The portfolio consists primarily of municipal bonds that can readily be
converted to cash. Financial instruments, which potentially subject the Company
to concentrations of credit risk, are principally bank deposits and short-term
money-market investments. Cash and cash equivalents are deposited with high
credit quality financial institutions. Short-term investments principally
consist of triple A or double A rated instruments. The carrying amounts of cash,
cash equivalents, short-term investments and accounts payable approximate fair
value because of the short-term nature and maturity of such instruments. The
Company holds no options or other derivative instruments.
A discussion of the Company's accounting policies for financial instruments
and further disclosures relating to financial instruments is included in the
Summary of Significant Accounting Policies in the Notes to Consolidated
Financial Statements in the Company's Form 10-K for the year ended July 27,
2002. In addition, also refer to Note 2 of the Notes to the Unaudited Condensed
Consolidated Financial Statements, "Stock Repurchase Program and Dutch Auction
Tender Offer".
Item 4 -- CONTROLS AND PROCEDURES
In the 90-day period before the filing of this report, the Chief Executive
Officer and Chief Financial Officer of the Company (collectively, the
"certifying officers") have evaluated the effectiveness of the Company's
disclosure controls and procedures (as such term is defined in Rules 13a-14(c)
and 15d-14(c) under the Securities and Exchange Act of 1934, as amended). These
disclosure controls and procedures are designed to ensure that the information
required to be disclosed by the Company in its periodic reports filed with the
Securities and Exchange Commission (the "Commission") is recorded, processed,
summarized and reported within the time periods specified by the Commission's
rules and forms, and that the information is communicated to the certifying
officers on a timely basis.
The certifying officers concluded, based on their evaluation, that the
Company's disclosure controls and procedures are effective for the Company,
taking into consideration the size and nature of the Company's business and
operations.
No significant changes in the Company's internal controls or in other
factors were detected that could significantly affect the Company's internal
controls subsequent to the date when the internal controls were evaluated.
Part II - OTHER INFORMATION
Item 1 - Legal Proceedings
On May 18, 2000, Alan M. Glazer, GLZR Acquisition Corp. and Bedford Fair
Industries, Ltd. commenced an action against the Company in the Superior Court
of Connecticut seeking compensatory and punitive damages for alleged unfair
trade practices arising out of negotiations before Bedford Fair Industries'
Chapter 11 bankruptcy filing for the acquisition of the Bedford Fair business
which the Company never concluded.
On April 10, 2003, after a trial in the Superior Court of Connecticut,
Waterbury District, a jury returned a verdict of $30 million of compensatory
damages in the lawsuit described above. The Company has filed motions to set
aside the verdict. The plaintiffs have filed motions seeking $50 million in
punitive damages and expenses and seeking pre-judgment and post-judgment
interest. The Company is opposing the plaintiffs' motions.
The Company continues to believe there is no merit in any of the
plaintiffs' asserted claims and is vigorously defending the litigation. If a
judgment against the Company is entered, the Company expects to pursue an
appeal.
The Company is not a party to any other legal proceedings, other than
various claims and lawsuits arising in the normal course of the Company's
business, none of which the Company believes should have a material adverse
effect on its financial condition or results of operations. Such matters are
subject to many uncertainties, and outcomes are not predictable with assurance.
Item 4 -- Submission of Matters to a Vote of Security Holders
None
Item 6 -- Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Description
99.1 Certification of David R. Jaffe pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1 Certification of Armand Correia pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(b) The Company filed two reports on Form 8-K during the quarter ended
April 26, 2003.
Date Filed Description
January 28, 2003 Purchase of Real Estate
April 11, 2003 Jury Verdict - Lawsuit
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.
BY: /s/ DAVID R. JAFFE
- ----------------------
David R. Jaffe
President, Chief Executive Officer and Director
(Principal Executive Officer)
BY: /s/ ARMAND CORREIA
- ----------------------
Armand Correia
Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
CERTIFICATIONS
I, David R. Jaffe, certify that:
1. I have reviewed this quarterly report on Form 10-Q of The Dress Barn, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: June 10, 2003
BY: /s/ DAVID R. JAFFE
- ----------------------
David R. Jaffe
President, Chief Executive Officer and Director
CERTIFICATIONS
I, Armand Correia, certify that:
1. I have reviewed this quarterly report on Form 10-Q of The Dress Barn, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: June 10, 2003
BY: /s/ ARMAND CORREIA
- ----------------------
Armand Correia
Senior Vice President and Chief Financial Officer