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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
- --------------------------------------------------------------------------------
QUARTERLY REPORT PURSUANT TO SECTION 12 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended September 30, 2002 Commission File Number 333-19257
KINETEK, INC.
(Exact name of registrant as specified in charter)
Delaware 36-4109641
(State or other jurisdiction of incorporation (I.R.S. Employer
Identification No.)
ArborLake Centre, Suite 550 60015
1751 Lake Cook Road (Zip Code)
Deerfield, Illinois
(Address of Principal Executive Offices)
Registrant's telephone number, including area code:
(847) 945-5591
Former name, former address and former fiscal year, if changed since last
report: Not applicable
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 twelve (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 ninety (90) days.
Yes x No
--- ---
The aggregate market value of voting stock held by non-affiliates of the
Registrant is not determinable as such shares were privately placed and there
is currently no public market for such shares.
The number of shares outstanding of Registrant's Common Stock as of
November 12, 2002: 10,000.
KINETEK, INC.
INDEX
Part I FINANCIAL INFORMATION PAGE NO.
------ --------------------- --------
Item 1. Financial Statements (Unaudited) 3
Item 2. Management's Discussion and Analysis of Financial 11
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About 13
Market Risk
Item 4. Controls and Procedures 13
Part II OTHER INFORMATION
------- -----------------
Item 1. Legal Proceedings 14
Item 2. Changes in Securities and Use of Proceeds 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security 14
Holders
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-k 14
Signatures 15
Certificates 16
2
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS (Unaudited)
--------------------------------
PAGE NO.
--------
Condensed Consolidated Balance Sheets at September 30, 2002 4
and December 31, 2001
Condensed Consolidated Statements of Operations for the 5
three and nine months ended September 30, 2002 and 2001
Condensed Consolidated Statements of Cash Flows for the nine 6
months ended September 30, 2002 and 2001
Notes to Condensed Consolidated Financial Statements 7-10
3
KINETEK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(ALL DOLLAR AMOUNTS IN THOUSANDS)
September 30, December 31,
2002 2001
-------------------- -------------------
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 22,438 $ 17,558
Accounts receivable, net 59,448 50,875
Inventories 46,089 41,313
Prepaid expenses and other current assets 4,134 1,695
Due from affiliated company 5,417 5,370
-------- --------
Total Current Assets 137,526 116,811
Property, plant, and equipment, net 32,127 19,651
Goodwill, net 179,840 196,469
Deferred financing costs, net 10,534 10,693
Deferred income taxes 2,510 2,510
Investment in affiliate 12,344 12,344
Other assets, net 880 937
-------- --------
Total Assets $375,761 $359,415
======== ========
LIABILITIES AND SHAREHOLDER'S EQUITY (NET CAPITAL DEFICIENCY)
Current Liabilities:
Accounts payable $ 30,237 $ 21,853
Accrued interest payable 11,356 4,292
Accrued expenses and other current liabilities 17,372 10,826
Current portion of long term debt 15,898 8,135
-------- --------
Total Current Liabilities 74,863 45,106
Long-term debt 297,026 300,620
Other non-current liabilities 5,691 3,005
Shareholder's Equity (Net Capital Deficiency):
Common Stock 10 10
Additional paid-in-capital 49,996 49,996
Accumulated other comprehensive loss (8,960) (13,104)
Accumulated deficit (42,865) (26,218)
-------- --------
Total Shareholder's Equity (Net Capital Deficiency) (1,819) 10,684
-------- --------
Total Liabilities and Shareholder's Equity
(Net Capital Deficiency) $375,761 $359,415
======== ========
See accompanying notes to condensed consolidated financial statements.
4
KINETEK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- -------------------------------
2002 2001 2002 2001
---- ---- ---- ----
Net Sales $74,463 $70,309 $216,904 $222,850
Cost of sales, excluding
depreciation 48,051 44,886 139,474 142,050
Selling, general and
administrative expenses 12,325 11,561 36,891 36,904
Depreciation 1,757 1,406 4,966 4,485
Amortization of goodwill
and other intangibles 129 2,111 356 6,345
Management fees and other 751 702 2,188 2,233
---------- --------- -------- --------
Operating Income 11,450 9,643 33,029 30,833
Other (income)/ expense:
Interest expense 8,267 8,069 24,818 24,598
Interest income (176) (96) (325) (282)
Miscellaneous, net 151 90 77 183
---------- ---------- --------- --------
Income before income taxes and
cumulative effect of accounting change 3,208 1,580 8,459 6,334
Provision for income taxes 1,442 710 3,806 2,850
---------- ---------- --------- --------
Income before cumulative effect of
accounting change 1,766 870 4,653 3,484
---------- ---------- ---------- --------
Cumulative effect of change in
accounting principle, net of tax - - (21,300) -
---------- ---------- ---------- ---------
Net Income (loss) $ 1,766 $ 870 $(16,647) $ 3,484
=========== ========== =========== =========
See accompanying notes to condensed consolidated financial statements.
5
KINETEK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Nine Months Ended
September 30,
------------------------------------
2002 2001
---- ----
Cash flows from operating activities:
Net income (loss) $(16,647) $ 3,484
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Cumulative effect of change in accounting
principle 21,300 -
Depreciation and amortization 7,257 11,797
Deferred income taxes (2,388) 1,426
Changes in operating assets and liabilities net of effects from acquisitions:
Current assets (6,708) 1,535
Current liabilities 17,285 5,097
Non-current assets & liabilities (1,613) 125
Due from affiliated company (47) (2,572)
--------- -------
Net cash provided by operating activities 18,439 20,892
Cash flows from investing activities:
Capital expenditures, net (3,579) (3,115)
Acquisition of subsidiary (9,503) (731)
--------- --------
Net cash used in investing activities (13,082) (3,846)
Cash flows from financing activities:
Net repayment of borrowings under revolving
credit facility and other long-term debt (23,513) (13,151)
Proceeds from issuance of long term debt 20,456 -
Cash acquired in purchase of subsidiary 892 -
Additional purchase price for acquisition (100) -
-------- --------
Net cash used in financing activities (2,265) (13,151)
Effect of exchange rate changes on cash 1,788 129
-------- -------
Net increase (decrease) in cash and cash equivalents 4,880 4,024
Cash and cash equivalents at beginning of period 17,558 8,490
-------- -------
Cash and cash equivalents at end of period $22,438 $ 12,514
======== ========
See accompanying notes to condensed consolidated financial statements.
6
KINETEK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
1. Organization
The unaudited condensed consolidated financial statements, which reflect all
adjustments that management believes necessary to present fairly the results
of interim operations and which are of a normal recurring nature, should be
read in conjunction with the Company's consolidated financial statements for
the year ended December 31, 2001, included in the Company's annual report on
Form 10-K. The Company conducts its operations exclusively through its
subsidiaries. Results of operations for the interim periods are not
necessarily indicative of annual results of operations.
2. Summary of Significant Accounting Policies
The condensed consolidated financial statements include the accounts of
Kinetek, Inc. and its subsidiaries. Material intercompany transactions and
balances are eliminated in consolidation. Operations of certain subsidiaries
outside the United States are included for periods ending two months prior to
the Company's year-end and interim periods to ensure timely preparation of the
condensed consolidated financial statements.
3. Inventories
Inventories are summarized as follows:
September 30, December 31,
2002 2001
------------------------ ---------------------
(Dollar amounts in thousands)
Raw materials $23,701 $22,268
Work in process 16,002 12,864
Finished goods 6,386 6,181
------- -------
$46,089 $41,313
======= ========
4. Comprehensive Income
Total comprehensive income (loss) for the three and nine months ended
September 30, 2002 and 2001 is as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------------- ----------------------------------
(Dollar amounts in thousands)
-----------------------------
2002 2001 2002 2001
---- ---- ---- ----
Net income (loss) $ 1,766 $ 870 $(16,647) $ 3,484
Foreign currency
translation adjustment 4,024 (968) 4,144 1,284
-------- -------- --------- -------
Comprehensive income (loss) $ 5,790 $(98) $(12,503) $ 4,768
======== ======== ========= =======
7
5. Acquisitions
On April 11, 2002, the Company formed a cooperative joint venture with Shunde
De Sheng Electric Motor Group Co., Ltd. ("De Sheng Group"), which is named
Kinetek De Sheng (Shunde) Motor Co., Ltd. (the "JV"). The Company initially
contributed approximately $8.0 million for 80% ownership of the JV, with an
option to purchase the remaining 20% in the future. The JV acquired all of the
net assets of Shunde De Sheng Electric Motor Co., Ltd. ("De Sheng"), a
subsidiary of De Sheng Group. The JV also assumed approximately $7.2 million
of outstanding debt.
6. Financing
On April 12, 2002, Kinetek Industries, Inc., a wholly-owned subsidiary of the
Company, issued $15 million principal amount of 5% Senior Secured Notes and
$11 million principal amount of 10% Senior Secured Notes for net proceeds of
approximately $20.5 million. The notes are due in 2007 and are guaranteed by
the Company and substantially all of its domestic subsidiaries. The notes are
also secured by a second priority lien on substantially all of the assets of
the issuer and the guarantors, which lien is subordinate to the existing lien
securing the Company's credit facility. Interest is payable semi-annually on
May 1 and November 1 of each year.
7. New Accounting Standards
The Company adopted the non-amortization provisions of Statement of Financial
Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets,"
on January 1, 2002, which resulted in a $2.0 million increase in the third
quarter's net earnings and a $6.0 million increase to the first nine month's
net earnings. The adoption of SFAS No. 142 is expected to increase full-year
net earnings by approximately $8.0 million.
The Company completed the transitional impairment review of its reporting
units during the second quarter and recorded a non-cash pretax and after-tax
charge of $21.3 million. This charge has been recorded as a cumulative effect
of a change in accounting principle retroactive to January 1, 2002 and
therefore reduced the previously reported first quarter 2002 net earnings of
$0.9 million to a net loss of $20.4 million.
The impaired goodwill was in the Motors segment and relates to the 1997
acquisition of FIR Electromeccanica and the 1999 acquisition of the L'Europea
product line. The impairment is primarily attributable to a change in the
evaluation criteria for goodwill utilized under previous accounting guidance,
to the fair value approach stipulated in SFAS No. 142. Various external
factors, especially foreign currency devaluation has negatively impacted the
value of the FIR and L'Europea acquisitions.
The Company determined the fair value of each reporting unit using a
discounted cash flow approach taking into consideration projections based on
the individual characteristics of the reporting units, historical trends and
market multiples for comparable businesses. The cash flow estimates
incorporate assumptions on future cash flow growth, terminal values and
discount rates. Any such valuation is sensitive to these assumptions.
8
The following table provides comparative operating results had the
non-amortization provisions of SFAS No. 142 been adopted for all periods
presented:
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- ---------------------------------
(Dollar amounts in thousands)
-----------------------------
2002 2001 2002 2001
---- ---- ---- ----
Reported net income (loss) $1,766 $ 870 $(16,647) $3,484
Goodwill amortization - 1,984 - 5,980
---------- ---------- -------------- -----------
Adjusted net income (loss) $1,766 $2,854 $(16,647) $9,464
========== ========== ============== ===========
The changes in the carrying amount of goodwill for the nine months ended
September 30, 2002 were as follows:
Motors Controls Consolidated
--------------- -------------- ------------------
(Dollar amounts in thousands)
Balance as of January 1, 2002 $160,599 $ 35,870 $196,469
Foreign exchange 2,119 - 2,119
Acquisitions 2,552 - 2,552
Impairment loss (21,300) - (21,300)
--------- -------- ---------
Balance at September 30, 2002 $143,970 $ 35,870 $179,840
========= ======== =========
As of September 30, 2002, the Company had no indefinite-lived intangible
assets and $395 of other intangible assets, which is net of $1,726 accumulated
amortization, which will continue to be amortized over their remaining useful
lives ranging from 1 to 6 years. Amortization expense is estimated to be $100
in each of the next five years. These other intangible asset amounts are
included in other assets in the Company's balance sheets.
On January 1, 2002, the company adopted SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." There was no impact to the
Company's operating results or financial position related to the adoption of
this standard.
8. Business Segment Information
See Part 1 "Financial Information" - Item 2 "Management's Discussion and
Analysis of Financial Condition and Results of Operations" for the Company's
business segment disclosures. There have been no changes from the Company's
December 31, 2001 consolidated financial statements with respect to
segmentation or the measurement of segment profit.
9
9. Additional Purchase Price Arrangements
The terms of the Company's 1997 Motion Control Engineering ("MCE")
acquisition agreement provide for additional consideration to be paid to
the sellers. The agreement is exercisable at the seller's option during a
five year period beginning in 2003. When exercised, the additional
consideration will be based on MCE's operating results over the two
preceding fiscal years. Payments, if any, under the contingent agreement
will be placed in a trust and paid from the trust over a four-year period.
These payments to the trust, when made, will be recorded as an addition to
goodwill. Based on MCE's current projections for 2002, the Company would
have to pay $4.6 million to the trust in September, 2003, if the agreement
is exercised by March 31, 2003.
10. Subsequent Event
On November 8, 2002, Ron Sansom resigned as President and CEO of Kinetek, Inc.
He also resigned as a Director of Kinetek, Inc. Tom Quinn, Chairman of
Kinetek, Inc., and President and COO of Jordan Industries, Inc., will act as
interim CEO until a new CEO is appointed.
10
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Summary financial information included in the financial statements of the
Company is as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ -----------------------------
2002 2001 2002 2001
---- ---- ---- ----
(Unaudited)
(Dollar amounts in thousands)
Net sales
Motors $53,690 $51,067 $155,608 $161,764
Controls 20,773 19,242 61,296 61,086
-------- ------- -------- --------
74,463 70,309 216,904 222,850
Operating income
Motors 10,806 9,429 32,083 30,486
Controls 2,964 2,568 8,044 7,883
-------- ------- --------- --------
13,770 11,997 40,127 38,369
Management fees and unallocated
corporate overhead 2,320 2,354 7,098 7,536
-------- ------- -------- ---------
Total operating income 11,450 9,643 33,029 30,833
Interest expense 8,267 8,069 24,818 24,598
Interest income and other (25) (6) (248) (99)
-------- -------- --------- ---------
Income before income taxes and cumulative
effect of accounting change $ 3,208 $ 1,580 $8,459 $6,334
======= ======== ========= =========
Consolidated Results of Operations
Net sales for the third quarter of 2002 were $74.5 million, an increase of
5.9% ($4.2 million) over those of the same period for 2001. Net sales for the
first nine months of 2002 were $216.9 million, a decrease of 2.7% ($5.9
million) from 2001. The addition of the Kinetek DeSheng ("KDS") joint venture
(see footnote 5) resulted in $3.0 million in added sales during the third
quarter of 2002 and $4.7 million for the year to date. The increase in sales
for the third quarter is mainly attributable to the inclusion of KDS results.
The decline in total year to date sales resulted from general softness in
substantially all of the Company's principal markets, somewhat offset by the
KDS revenue. The motors segment delivered a 5.1% increase in third quarter
sales versus 2001, with year to date sales 3.8% below the same period in 2001.
11
Net sales of subfractional motors increased 5.1% for the third quarter and
increased 0.1% year to date, led by increased demand for refrigeration
appliance motors and by the Company's new product introductions, but offset by
protracted weakness in vending motor markets. Net sales of fractional and
integral motors increased 8.4% for the third quarter and decreased 4.4% for
the year to date, compared with the same periods in 2001. The increase in
third quarter sales was led by the inclusion of KDS and from share gains and
new products introduced in the floor care and elevator motor product lines.
These increases more than offset sharp declines in sales of DC products used
in material handling applications, and moderately reduced demand for AC and DC
products used in the floor care end market, as well as a weak European market.
Net sales in the controls segment rose 8.0% in the third quarter and 0.3% for
the year to date compared with 2001 performance. The elevator modernization
market that drives this segment has experienced general softness and moderate
pricing pressure throughout 2002. The third quarter improvement is primarily
the result of comparison to a very weak third quarter of 2001.
Gross margins (excluding depreciation) decreased slightly from 36.2% of sales
for the third quarter of 2001 to 35.5% in 2002. For the first nine months,
gross margins (excluding depreciation) decreased from 36.3% of sales in 2001
to 35.7% of sales for 2002. Price competition in several key markets, and a
shift in mix toward less profitable product lines have placed downward
pressure on gross margins in 2002. This has been offset in part by the
Company's continued emphasis on cost reduction through productivity and
sourcing initiatives. Operating income for the motors segment increased 14.6%
for the quarter ending on September 30, 2002, to $10.8 million, and increased
5.2% to $32.1 million for the nine month period then ending. The operating
income of the controls segment increased 15.4% to $3.0 million for the
quarter, and increased 2.0% to $8.0 million for the year to date. Operating
margins increased from 17.1% to 18.5% of sales for the three months ended
September 30, 2001, and 2002, respectively, and from 17.2% to 18.5%
respectively for the nine month periods ending on those dates. The higher
operating margins are driven by the non-amortization of goodwill due to the
Company's adoption of Statement of Accounting Standards No. 142, "Goodwill and
Other Intangible Assets". This adoption resulted in a $2.0 million reduction
in amortization expense ($1.6 million and $0.4 million for the motors and
controls segments, respectively) for the third quarter, and a $6.0 million
reduction in amortization expense ($5.0 million and $1.0 million for motors
and controls, respectively) for the nine month period. The improved operating
margins also reflect lower selling, general, and administrative expenses from
the Company's cost control efforts, such as facility closings and reductions
in staff. These reductions in cost compared to the prior year are offset by
unfavorable manufacturing leverage from the decreased sales described above,
and by increased research and development costs related to future products.
Management fees and unallocated corporate overhead during the third quarter
were $2.3 million, which was marginally lower than in the previous year. For
the nine months ending September 30, management fees and unallocated corporate
overhead were $7.1 million, which is $0.4 million or 5.8% lower than in the
same period in 2001. The lower costs are due to the impact of lower sales on
the management fee and to actions taken by the Company to reduce
administrative and headquarter costs.
In the second quarter of 2002, a non-cash pretax and after-tax charge of $21.3
million was recognized as a result of adopting SFAS No. 142 "Goodwill and
Other Intangible Assets" (see Note 7).
12
Liquidity and Capital Resources
In general, the Company requires liquidity for working capital, capital
expenditures, interest, taxes, debt repayment and its acquisition strategy. Of
primary importance are the Company's working capital requirements, which
increase whenever the Company experiences strong incremental demand or
geographical expansion. The Company expects to satisfy its liquidity
requirements through a combination of funds generated from operating
activities and the funds available under its revolving credit facility.
Operating activities. Net cash provided by operating activities for the nine
months ended September 30, 2002 was $18.4 million, compared to $20.9 million
provided from operating activities for the nine months ended September 30,
2001. The decrease is due primarily to the Company's lower operating
performance discussed under the heading "Consolidated Results of Operations".
Investing activities. In the first nine months of 2002, the Company made $3.6
million in payments for capital expenditures. In addition, the Company made
$9.5 million in payments for the De Sheng acquisition, including related
transaction costs.
Financing activities. The Company is party to a Credit Agreement under which
the Company is able to borrow up to approximately $31.5 million to fund
acquisitions and provide working capital, and for other general corporate
purposes. Borrowings are secured by the stock and substantially all of the
assets of the Company. As of November 12, 2002, the Company has approximately
$17.9 million of available funds under this Credit Agreement.
On April 12, 2002, Kinetek Industries, Inc., a wholly-owned subsidiary of the
Company, issued $15 million principal amount of 5% Senior Secured Notes and
$11 million principal amount of 10% Senior Secured Notes for net proceeds of
approximately $20.5 million.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's debt obligations are primarily fixed-rate in nature and, as
such, are not sensitive to changes in interest rates. At September 30, 2002
the Company had variable rate debt outstanding of $1.4 million. A
one-percentage point increase in interest rates would increase the amount of
annual interest paid by approximately $0.01 million. The Company does not
believe that its market risk from financial instruments on September 30, 2002
would have a material effect on future operations or cash flow.
The Company is exposed to market risk from changes in foreign currency
exchange rates, including fluctuations in the functional currency of foreign
operations. The functional currency of operations outside the United States is
the respective local currency. Foreign currency translation effects are
included in accumulated other comprehensive income in shareholder's equity.
Item 4. CONTROLS AND PROCEDURES
The Company's Chairman and the Company's Vice President, Chief Financial
Officer and Treasurer have concluded that the Company's disclosure controls
and procedures are effective for gathering, analyzing and disclosing
information required to be disclosed in the Company's reports filed under the
Securities Exchange Act of 1934. There have been no significant changes in the
Company's internal controls or in other factors that could significantly
affect these controls subsequent to the date of the foregoing evaluation.
13
PART II. OTHER INFORMATION
-----------------
Item LEGAL PROCEEDINGS
1. -----------------
None
Item CHANGES IN SECURITIES AND USE OF PROCEEDS
2. -----------------------------------------
None
Item DEFAULTS UPON SENIOR SECURITIES
3. -------------------------------
None
Item SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
4. ---------------------------------------------------
None
Item OTHER INFORMATION
-----------------
5. None
Item EXHIBITS AND REPORTS ON FORM 8-K
6. --------------------------------
None
14
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.
KINETEK, INC.
By: /s/ Daniel D. Drury
-----------------------
Daniel D. Drury
Chief Financial Officer
November 12, 2002
15
CERTIFICATE
I, Thomas H. Quinn, certify that:
1) I have reviewed this quarterly report on Form 10-Q of Kinetek, 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 officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5) The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6) The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
Date: November 12, 2002
By: /s/ Thomas H. Quinn
-----------------------
Name: Thomas H. Quinn
Title: Chairman
16
CERTIFICATE
I, Daniel D. Drury, certify that:
1) I have reviewed this quarterly report on Form 10-Q of Kinetek, 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 officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5) The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6) The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
Date: November 12, 2002
By: /s/ Daniel D. Drury
------------------------
Name: Daniel D. Drury
Title: Chief Financial Officer
17