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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(see note below)
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2003
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 333-43335
AIRXCEL, INC.
(Exact name of Registrant as specified in its charter)
Delaware 48-1071795
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3050 North Saint Francis, Wichita, Kansas 67219
(Address of principal executive offices)
(Zip Code)
(316) 832-3400
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year,
if changed, since last year)
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 XX 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.
1,000 shares of Common Stock as of March 31, 2003
Note: This information is provided solely to comply with the obligation
contained in the indenture
agreement governing the Company's Senior Subordinated Notes.
1
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AIRXCEL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
March 31, December 31,
2003 2002
---- ----
(Unaudited) (Note 1)
ASSETS
Current assets:
Cash and cash equivalents $ 205 $ 179
Accounts receivable, net of allowances for doubtful accounts
of $363 and $314, in 2003 and 2002, respectively 16,245 11,171
Inventories 23,341 22,498
Other current assets 4,221 3,939
--------- ---------
Total current assets 44,012 37,787
--------- ---------
Deferred income taxes 3,688 4,096
Property, plant and equipment, net 17,158 17,725
Loan financing costs, net 1,940 1,956
Other identifiable intangible assets, net 1,911 1,987
Goodwill and other indefinite lived intangible assets 15,873 15,873
Notes receivable from Holdings 3,448 --
--------- ---------
Total assets $ 88,030 $ 79,424
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIENCY)
Current liabilities:
Current portion of long-term debt $ 77 $ 81
Cash overdraft 2,390 --
Accounts payable 8,759 9,097
Warranty reserve 1,833 1,905
Accrued interest 3,753 1,239
Accrued payroll 1,914 3,357
Accrued expenses and other current liabilities 1,813 1,972
--------- ---------
Total current liabilities 20,539 17,651
--------- ---------
Pension liability 1,812 1,693
Long-term debt, net of current maturities 102,793 97,833
Commitments and contingencies
Stockholder's equity (deficiency):
Common stock 1 1
Additional paid-in capital 27,322 27,322
Accumulated deficit (63,452) (64,091)
Accumulated other comprehensive loss (985) (985)
--------- ---------
Total stockholder's equity (deficiency) (37,114) (37,753)
--------- ---------
Total liabilities and stockholder's equity (deficiency) $ 88,030 $ 79,424
========= =========
See accompanying notes.
2
AIRXCEL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED
March 31, March 31,
2003 2002
--------- ---------
Net sales $ 39,421 $ 37,996
Cost of sales 31,515 30,923
--------- ---------
Gross profit 7,906 7,073
Selling, general and administrative expense 4,115 4,432
--------- ---------
Income from operations 3,791 2,641
Interest expense, net 2,728 2,746
Other expense, net 11 11
--------- ---------
Income (loss) before income tax expense
and cumulative effect of change in
accounting principle 1,052 (116)
Income tax expense (benefit) 408 (35)
--------- ---------
Income (loss) before cumulative effect of
change in accounting principle 644 (81)
Cumulative effect of change in accounting
principle, net of income taxes of $10,130 -- (19,718)
--------- ---------
Net income (loss) $ 644 $ (19,799)
========= =========
See accompanying notes.
3
AIRXCEL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED
March 31, March 31,
2003 2002
-------- --------
Cash flows from operating activities:
Net income (loss) $ 644 $(19,799)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 765 972
Amortization of financing costs 108 108
Deferred income taxes 408 (10,130)
Provision for bad debts 49 (45)
Gain on sale of property, plant and equipment -- (3)
Impairment write off of goodwill and trademark costs -- 29,848
Changes in operating assets and liabilities:
Accounts receivable (5,123) (5,080)
Inventories (843) 3,452
Other assets (282) (755)
Accounts payable (338) 1,262
Accrued expenses and other liabilities 959 2,067
-------- --------
Net cash provided by (used in) operating activities (3,653) 1,897
-------- --------
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment 33 3
Capital expenditures (155) (440)
Purchase of notes receivable from Holdings (3,448) --
Patent acquisition costs incurred -- (6)
-------- --------
Net cash used in investing activities (3,570) (443)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 39,657 29,437
Principal payments on long-term debt (34,701) (32,583)
Cash overdraft 2,390 2,585
Financing costs incurred (92) --
Dividend to parent (5) --
-------- --------
Net cash provided by (used in) financing activities 7,249 (571)
-------- --------
Net increase in cash and cash equivalents 26 883
Cash and cash equivalents, beginning of period 179 583
-------- --------
Cash and cash equivalents, end of period $ 205 $ 1,466
======== ========
See accompanying notes.
4
AIRXCEL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands)
(Unaudited)
1. BASIS OF PRESENTATION:
The accompanying interim consolidated financial statements have not been
audited but reflect normal recurring adjustments which, in the opinion of
management, are necessary for a fair presentation of the Company's financial
position and results of operations and cash flows for the interim periods
presented. The year-end condensed consolidated balance sheet data was derived
from audited financial statements, but does not include all disclosures required
by accounting principles generally accepted in the United States. These interim
financial statements should be read in conjunction with the audited consolidated
financial statements and the notes therein for the fiscal year ended December
31, 2002 included in the Company's Form 10-K filed with the Securities and
Exchange Commission on March 28, 2003. The results of operations for any interim
period are not necessarily indicative of results for the full year or for any
subsequent quarter.
2. ORGANIZATION AND BUSINESS:
Airxcel, Inc. (the "Company") is a wholly-owned subsidiary of Airxcel
Holdings Corporation (Holdings); formerly known as RV Holdings Corporation. The
Company is a diversified designer, manufacturer and marketer of air
conditioners, furnaces, water heaters, cooking appliances and low-voltage
compressors for the recreation vehicle industry, and wall mount air
conditioners, environmental control units and heat pumps for the heating,
ventilating and air conditioning industry in the United States, Canada and
certain international markets. The recreation vehicle industry is supplied by
its RV Products division and Suburban Manufacturing Company while the heating,
ventilating and air conditioning industry is supplied by the Marvair division,
formerly Crispaire division. Due to the similarities of the economic
characteristics, production processes, customers, distribution methods and
regulatory environment of the Company's products, the Company is managed,
operated and reported as one segment.
A significant part of the Company's operations are directly dependent upon
the conditions in the highly cyclical RV industry, highly competitive
telecommunications industry and the commercial and public construction industry.
Companies within these industries, including the Company's largest customers,
are subject to volatility in operating results due to external factors such as
economic, demographic and political changes. These factors include seasonal
factors, fuel availability and fuel prices, overall consumer confidence and
general economic conditions, the level of discretionary consumer spending,
government regulation, interest rates and unemployment.
3. RECLASSIFICATIONS
The Company has made certain reclassifications in the 2002 condensed
consolidated financial statements to conform to the current year presentation.
5
4. INVENTORIES:
Inventory consists of the following:
March 31, 2003 December 31, 2002
-------------- -----------------
Raw Materials $ 9,722 $ 9,431
Work-in-process 1,795 2,104
Finished goods 11,824 10,963
--------- ---------
$ 23,341 $ 22,498
========= =========
5. INTANGIBLE ASSETS:
The Company adopted Statement of Financial Accounting Standards (SFAS) No.
142, "Goodwill and Other Intangible Assets" on January 1, 2002. This new
accounting standard required that goodwill and indefinite lived assets no longer
be amortized but instead be tested at least annually for impairment and expensed
against earnings when the implied fair value of a reporting unit, including
goodwill, is less than its carrying amount. The company engaged an independent
appraisal company in 2002 to assist with the valuation.
Upon initial application of SFAS No. 142, the Company reassessed the
useful lives of the intangible assets and determined that certain trademarks are
deemed to have an indefinite useful life because they are expected to generate
cash flows indefinitely and there are no legal or contractual restrictions on
their use. In addition, assembled work force and customer base was reclassified
to goodwill in accordance with SFAS No. 142. Other tradenames have a finite life
and will continue to be amortized over their remaining useful life.
The Company has three reporting units with goodwill. As determined by the
step one assessment for each reporting unit, the estimated fair value, based on
a present value valuation, was less than its carrying amount including goodwill,
primarily due to the decline in the telecommunications industry. Step two of the
assessment indicated an impairment of goodwill and certain trademark costs
amounting to $19,718, (net of $10,130 in taxes) which was recorded as a
cumulative effect of a change in accounting principle in the accompanying 2002
condensed consolidated statement of operations.
March 31, 2003 December 31, 2002
-------------- -----------------
Intangible assets subject to amortization:
Gross carrying amount:
Computer software $ 712 $ 712
Tradename 1,454 1,454
Patents 3,705 3,705
License agreements 475 475
--------- ---------
Subtotal $ 6,346 $ 6,346
6
March 31, 2003 December 31, 2002
-------------- -----------------
Accumulated amortization:
Computer software $ 497 $ 463
Tradename 347 339
Patent 3,473 3,451
License agreements 118 106
--------- ---------
Subtotal 4,435 4,359
--------- ---------
Net intangible assets subject to amortization $ 1,911 $ 1,987
========= =========
Intangible assets not subject to amortization:
Goodwill $ 12,973 $ 12,973
Trademarks 2,900 2,900
--------- ---------
Subtotal $ 15,873 $ 15,873
========= =========
Amortization for the remaining amount of finite lived intangible assets,
as of March 31, 2003, is expected to be $302 in 2003, $266 in 2004, $111 in
2005, $83 in 2006, and $81 in 2007.
6. NOTES RECEIVABLE FROM HOLDINGS:
On February 19, 2003, the Company purchased certain notes from the holders
for an aggregate purchase price of $3,448 due from Holdings which mature
November 2008. Although the Company may determine to distribute the notes to
Holdings, subject to compliance with the Company's credit facility, senior
subordinated notes and other debt agreements, the Company does not anticipate
this will occur in the foreseeable future.
7. WARRANTY RESERVE:
The Company offers a one to five year warranty for its products. The
specific terms and conditions of those warranties vary depending upon the
product sold. An estimated cost of product warranty is recognized at the time
the revenue is recognized. The Company estimates the cost of its product
warranty obligation based on historical analysis of sales and warranty costs
incurred. The Company periodically assesses the adequacy of its recorded product
warranty obligation and adjusts the amounts as necessary.
Changes in the Company's product warranty liability during the period are as
follows:
Balance, beginning of period $ 1,905
Warranties issued during the period 454
Settlements made during the period (440)
Changes in liability for pre-existing warranties
during the period, including expirations (86)
-------
Balance, end of period $ 1,833
=======
7
8. LONG-TERM DEBT:
The Company maintains a Credit Facility with a Bank which permits
borrowings at interest rates based on either the bank's base rate or LIBOR. On
January 9, 2003 the Company reduced the total commitment available under the
credit facility to $25,000.
9. INCOME TAXES:
Total income taxes, including taxes related to the cumulative effect of a
change in accounting principle in 2002, differ from the statutory rate due
primarily to nondeductible goodwill impairment charges and amortization in 2002,
as well as state income taxes.
10. CONTINGENCY:
On March 13, 2003 the Company amended its letter of credit to increase the
amount to $1,464. This letter of credit obligates the Company to make payment in
the event of a default on an agreement with an insurance company to pay workers
compensation claims incurred. Management does not expect any material losses to
result from this arrangement because performance is not expected to be required,
and therefore, is of the opinion that the fair value of this instrument is zero.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended March 31, 2003 Compared to Three Months Ended March 31,
2002
Net sales. Net sales increased 3.7% from $38.0 million in 2002 to $39.4
million in 2003. The sales increase is primarily due to volume growth within the
RV industry.
Gross Profit. Gross profit increased 11.3% from $7.1 million (19% of net
sales) in 2002 to $7.9 million (20% of net sales) in 2003. The increase was
principally due to increased sales volume, favorable changes in the product mix
and cost reduction efforts.
Selling, general and administrative expense (including amortization of
intangible assets and computer software). Selling, general and administrative
expense decreased 6.8% from $4.4 million in 2002 (12% of net sales) to $4.1
million in 2003 (10% of net sales), primarily due to decreased amortization
expense of fully amortized intangible assets.
Interest expense. Interest expense remained constant at $2.7 million in
2002 and 2003.
Income tax expense (benefit). Income tax expense increased from a benefit
of $.04 million in 2002 to expense of $.4 million in 2003 primarily due to
increased gross profit as described above.
Cumulative effect of change in accounting principle. Cumulative effect of
change in accounting principle decreased as a result of the adoption in 2002 of
Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other
Intangible Assets" and the impairment charges recorded.
LIQUIDITY AND CAPITAL RESOURCES
For the three (3) months ended March 31, 2003, the Company used $3.7
million in net cash flow from operating activities compared to generating $1.9
million for the comparable period in 2002, primarily as a result of the effects
of maintaining higher working capital levels to accommodate the higher sales
volumes.
On February 19, 2003, the Company purchased certain notes from the holders
for an aggregate purchase price of $3.4 million due from Holdings which mature
November 2008. Although the Company may determine to distribute the notes to
Holdings, subject to compliance with the Company's credit facility, senior
subordinated notes and other debt agreements, the Company does not anticipate
this will occur in the foreseeable future.
Covenants under the Company's credit facility with the bank restrict the
ability, subject to certain exceptions, to dispose of assets, incur additional
indebtedness, guarantee obligations, prepay other indebtedness or amend other
debt instruments, make distributions or pay dividends, redeem or repurchase
capital stock, create liens on assets, make acquisitions, engage in mergers or
9
consolidations, and change the business conducted by the Company. In addition,
the Company is required to maintain compliance with a fixed charge coverage
ratio and maintain a minimum effective capital balance. The Company is in
compliance with these ratios at March 31, 2003 and December 31, 2002.
Management's current business plan estimates working capital levels and
operating profitability. The achievement of this plan is necessary for
compliance with various financial covenants during 2003. The possibility exists
that certain financial covenants will not be met if business conditions are
other than as anticipated. In such event, the Company would need an amendment or
waiver of such financial covenants; however, there can be no assurance that such
amendments or waivers will be obtained.
The Company meets its working capital, capital equipment requirements and
cash requirements with funds generated internally and funds from agreements with
a bank. Management currently expects its cash on hand, funds from operations and
borrowings available under existing credit facilities to be sufficient to cover
both short-term and long-term operating requirements.
CERTAIN IMPORTANT FACTORS
Except for the historical financial information contained herein, this
Form 10-Q contains certain forward-looking statements. For this purpose, any
statements contained in this Form 10-Q that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
foregoing, words such as "may", "will", "expect", "believe", "anticipate",
"estimate", or "continue", the negative or other variations thereof, or
comparable terminology, are intended forward-looking statements. These
statements by their nature involve substantial risks and uncertainties, and
actual results may differ materially depending on a variety of factors,
including possible changes in economic conditions, prevailing interest rates or
fuel prices, or the occurrence of unusually severe weather conditions, that can
affect both the purchase and usage of recreational vehicles, which, in turn,
affects purchases by consumers of the products that the Company sells.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk on variable rate financial instruments: The Company maintains
a $25 million credit facility which permits borrowings at interest rates based
on either the bank's base rate or LIBOR. Increases in market interest rates
would cause interest expense to increase and earnings before income taxes to
decrease. The change in interest expense and earnings before income taxes would
be dependent upon the weighted average outstanding borrowings during the
reporting period following an increase in market interest rates. Based on the
Company's outstanding borrowings under the credit facility of $12.6 million at
an average interest rate of 4.1% per annum, a 1% increase in market interest
rates would increase interest expense and decrease earnings before income taxes
by approximately $126,000 annually.
Market risk on fixed-rate financial instruments: Included in long-term
debt are $90 million of 11% Senior Subordinated Notes due 2007. Increases in
market interest rates would generally cause a decrease in the fair market value
of the Notes and a decrease in market interest rates would generally cause an
increase in fair value of the Notes.
10
ITEM 4. CONTROLS AND PROCEDURES
(a) Our chief executive officer and chief financial officer have reviewed and
evaluated the Company's disclosure controls and procedures within 90 days of the
filing date of this Quarterly Report. Based on such review and evaluation, the
officers believe that the disclosure controls and procedures are designed
effectively to ensure that the information required to be disclosed by the
Company in the reports that it files or submits under the Securities Exchange
Act of 1934, as amended, (1.) is recorded, processed, summarized and reported
within the time period specified in the SEC's rules and forms and that the
information required to be discussed by the Company in the reports that it files
and submits under the Securities Exchange Act of 1934, as amended, and (2.) is
documented and communicated to the Company's management, including the officers,
as appropriate to allow timely decisions regarding required disclosure.
(b) Changes in internal controls. There were no significant changes in the
Company's internal controls or in other factors that could significantly affect
these controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
11
PART 2 - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
N/A
ITEM 2. CHANGES IN SECURITIES
N/A
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
N/A
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
N/A
ITEM 5. OTHER INFORMATION
N/A
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
None
b. Reports on Form 8-K
None
12
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.
Airxcel, Inc.
May 14, 2003 /s/ Melvin L. Adams
- ------------------------------ ---------------------------------
Date Melvin L. Adams
President and Chief
Executive Officer
May 14, 2003 /s/ Richard L. Schreck
- ------------------------------- ---------------------------------
Date Richard L. Schreck
Secretary/Treasurer and
Chief Financial Officer
13
SECTION 1350 CERTIFICATIONS
In connection with the Quarterly Report of Airxcel, Inc. (the "Company")
on Form 10-Q for the period ending March 31, 2003 as filed with the Securities
and Exchange Commission and to which this Certification is an exhibit (the
"Report"), the undersigned hereby certify, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
1. The report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the Company for
the periods reflected therein.
Date: May 14, 2003
-------------------------------
By: /s/ Melvin L. Adams
----------------------------------
Melvin L. Adams
President and Chief Executive Officer
Date: May 14, 2003
-------------------------------
By: /s/ Richard L. Schreck
----------------------------------
Richard L. Schreck
Secretary/Treasurer and Chief Financial Officer
14
CERTIFICATION
I, Melvin L. Adams, President and Chief Executive Officer of Airxcel,
Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Airxcel, 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: May 14, 2003
--------------------------------
By: /s/ Melvin L. Adams
----------------------------------
Melvin L. Adams
President and Chief Executive Officer
15
CERTIFICATION
I, Richard L. Schreck, Secretary/Treasurer and Chief Financial Officer of
Airxcel, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Airxcel, 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: May 14, 2003
--------------------------------
By: /s/ Richard L. Schreck
----------------------------------
Richard L. Schreck
Secretary/Treasurer and Chief Financial Officer