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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
X QUARTERLY REPORT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
- ----- FOR THE QUARTER ENDED NOVEMBER 3, 2002.
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT
- ----- OF 1934 FOR THE TRANSACTION PERIOD FROM ________ TO ________.
COMMISSION FILE NUMBER: 0-25858
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DAVE & BUSTER'S, INC.
(Exact Name of Registrant as Specified in Its Charter)
MISSOURI 43-1532756
(State of Incorporation) (I.R.S. Employer Identification No.)
2481 MANANA DRIVE
DALLAS, TEXAS 75220
(Address of Principle Executive Offices) (Zip Code)
Registrant's telephone number, including area code:
(214) 357-9588
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
The number of shares of the Registrant's common stock, $.01 par value,
outstanding as of December 9, 2002 was 13,293,279 shares.
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
DAVE & BUSTER'S, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
13 WEEKS ENDED 39 WEEKS ENDED
NOVEMBER 3, NOVEMBER 4, NOVEMBER 3, NOVEMBER 4,
2002 2001 2002 2001
----------- ----------- ----------- -----------
Food and beverage revenues $ 43,950 $ 41,171 $ 138,849 $ 126,325
Amusements and other revenues 40,600 40,200 135,092 126,878
--------- --------- --------- ---------
Total revenues 84,550 81,371 273,941 253,203
Cost of revenues 15,583 15,248 50,414 47,504
Operating payroll and benefits 27,301 26,573 86,173 79,207
Other store operating expenses 28,756 26,426 85,373 75,417
General and administrative expenses 5,952 5,120 19,664 15,374
Depreciation and amortization expense 7,405 7,407 22,520 21,315
Preopening costs 857 1,850 1,258 3,750
--------- --------- --------- ---------
Total costs and expenses 85,854 82,624 265,402 242,567
Operating income (loss) (1,304) (1,253) 8,539 10,636
Interest expense, net 1,455 1,683 5,256 6,063
--------- --------- --------- ---------
Income (loss) before provision for
income taxes (2,759) (2,936) 3,283 4,573
Provision (benefit) for income taxes (1,089) (1,063) 1,116 1,655
--------- --------- --------- ---------
Income (loss) before cumulative effect
of a change in an accounting principle $ (1,670) $ (1,873) $ 2,167 $ 2,918
Cumulative effect of a change in an
accounting principle -- -- (7,096) --
--------- --------- --------- ---------
Net income (loss) $ (1,670) $ (1,873) $ (4,929) $ 2,918
========= ========= ========= =========
Net income (loss) per share - basic
Before cumulative effect of a change
in an accounting principle $ (0.13) $ (0.14) $ 0.17 $ 0.23
Cumulative effect of a change in an
accounting principle -- -- (0.55) --
--------- --------- --------- ---------
$ (0.13) $ (0.14) $ (0.38) $ 0.23
Net income (loss) per share - diluted
Before cumulative effect of a change
in an accounting principle $ (0.13) $ (0.14) $ 0.16 $ 0.22
Cumulative effect of a change in an
accounting principle -- -- (0.53) --
--------- --------- --------- ---------
$ (0.13) $ (0.14) $ (0.37) $ .22
Basic weighted average shares outstanding 13,003 12,956 12,987 12,955
Diluted weighted average shares outstanding 13,460 12,956 13,431 13,016
See accompanying notes to consolidated financial statements.
DAVE & BUSTER'S, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
November 3,
2002 February 3,
(unaudited) 2002
----------- -----------
ASSETS
Current assets:
Cash $ 5,841 $ 4,521
Inventories 26,249 25,964
Prepaid expense 5,215 1,442
Other current assets 2,464 2,445
--------- ---------
Total current assets 39,769 34,372
Property and equipment, net 255,252 258,302
Goodwill, net of accumulated amortization of $2,612 -- 7,096
Other assets 8,295 9,364
--------- ---------
Total assets $ 303,316 $ 309,134
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 7,600 $ 5,500
Accounts payable 17,688 15,991
Accrued liabilities 14,122 11,085
Income tax payable 2,381 5,054
Deferred income taxes 1,157 1,220
--------- ---------
Total current liabilities 42,948 38,850
Deferred income taxes 8,143 8,143
Other liabilities 9,588 7,099
Long-term debt, less current installments 76,819 84,896
Commitments and contingencies
Stockholders' equity:
Preferred stock, 10,000,000 authorized; none issued -- --
Common stock, $0.01 par value, 50,000,000 authorized
13,182,779 and 12,959,209 shares issued and outstanding
as of November 3, 2002 and February 3, 2002, respectively 131 131
Paid-in-capital 116,139 115,701
Restricted stock awards 545 382
Retained earnings 50,849 55,778
--------- ---------
167,664 171,992
Less: treasury stock, at cost (175,000 shares) (1,846) (1,846)
--------- ---------
Total stockholders' equity 165,818 170,146
--------- ---------
Total liabilities and stockholders' equity $ 303,316 $ 309,134
========= =========
See accompanying notes to consolidated financial statements.
DAVE & BUSTER'S, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
(UNAUDITED)
Common Stock
------------------ Paid-in- Restricted Retained Treasury
Shares Amount Capital Stock Awards Earnings Stock Total
------ ------ ------- ------------ -------- ----- -----
Balance, February 3, 2002 12,959 $ 131 $ 115,701 $ 382 $ 55,778 $ (1,846) $ 170,146
Proceeds from exercising
stock options 49 -- 376 -- -- -- 376
Tax benefit related to stock
option exercises -- -- 62 -- -- -- 62
Amortization of
restricted stock awards -- -- -- 163 -- -- 163
Net loss -- -- -- -- (4,929) -- (4,929)
-------- ----- --------- ----- -------- -------- ---------
Balance, November 3, 2002 13,008 $ 131 $ 116,139 $ 545 $ 50,849 $ (1,846) $ 165,818
======== ===== ========= ===== ======== ======== =========
See accompanying notes to consolidated financial statements.
DAVE & BUSTER'S, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
39 Weeks Ended 39 Weeks Ended
November 3, 2002 November 4, 2001
---------------- ----------------
Cash flows from operating activities
Income before cumulative change in an accounting principle $ 2,167 $ 2,918
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 22,520 21,315
Provision for deferred income taxes (63) 468
Restricted stock awards -- 93
Gain on sale of assets (121) --
Changes in assets and liabilities:
Inventories (285) (2,298)
Prepaid expenses (3,773) (1,026)
Other current assets (19) --
Other assets 1,060 594
Accounts payable 1,697 7,262
Accrued liabilities 3,037 3,667
Income taxes payable (2,673) (43)
Other liabilities 2,489 1,618
---------- ----------
Net cash provided by operating activities 26,036 34,568
---------- ----------
Cash flows from investing activities
Capital expenditures (19,937) (35,211)
Proceeds from sale of property and equipment 597 7,245
---------- ----------
Net cash used by investing activities (19,340) (27,966)
---------- ----------
Cash flows from financing activities
Borrowing under long-term debt 14,352 18,810
Repayments under long-term debt (20,329) (25,228)
Proceeds from issuance of common stock 601 16
---------- ----------
Net cash used by financing activities (5,376) (6,402)
---------- ----------
Increase in cash and cash equivalents 1,320 200
Beginning cash and cash equivalents 4,521 3,179
---------- ----------
Ending cash and cash equivalents $ 5,841 $ 3,379
========== ==========
See accompanying notes to consolidated financial statements.
DAVE & BUSTER'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 3, 2002
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 1: RESULTS OF OPERATIONS
The results of operations for the interim periods reported are not necessarily
indicative of results to be expected for the year. The information furnished
herein reflects all adjustments (consisting only of normal recurring
adjustments) which are, in the opinion of management, necessary to fairly
present the results of operations and financial position for the interim
periods.
NOTE 2: BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Dave & Buster's,
Inc. and wholly-owned subsidiaries. All material intercompany accounts and
transactions have been eliminated in consolidation. The consolidated balance
sheet data presented herein for February 3, 2002 was derived from our audited
consolidated financial statements for the fiscal year then ended. The
preparation of financial statements in accordance with generally accepted
accounting principles requires our management to make certain estimates and
assumptions for the reporting periods covered by the financial statements. These
estimates and assumptions affect the reported amounts of assets, liabilities,
revenues and expenses. Actual amounts could differ from these estimates. Our one
industry segment is the ownership and operation of restaurant/entertainment
Complexes (a "Complex" or "Store") under the name "Dave & Buster's" which are
located in the United States.
CHANGE IN ACCOUNTING PRINCIPLE. In June 2001, the Financial Accounting Standards
Board issued Statements of Financial Accounting Standards No. 141, Business
Combinations, and No. 142, Goodwill and Other Intangible Assets ("Statements"),
effective for fiscal years beginning after December 15, 2001. Under the new
rules, goodwill and intangible assets deemed to have indefinite lives will no
longer be amortized but will be subject to annual impairment tests in accordance
with the Statements. Other intangible assets will continue to be amortized over
their useful lives.
We have applied the new standards on accounting for goodwill and other
intangible assets during the first quarter of 2002. We performed the required
impairment test of goodwill and other intangible assets during the first quarter
of 2002, which resulted in a one-time charge of $7.1 million representing the
cumulative effect of a change in accounting principle. The write off of goodwill
resulted in a negative $0.53 per diluted share in the first quarter. If the
application of the non-amortization provisions of the Statement had been adopted
as of the first quarter of 2001, third quarter net income would have increased
by $0.1 million ($0.01 per diluted share) or pro forma earnings of negative
$0.13 per diluted share. The year to date income would have increased $0.3
million ($0.03 per diluted share) or pro forma earnings of $0.25 per diluted
share. The remaining intangible (trademark) has a net carrying value of $118,000
and amortization of this intangible is insignificant.
RECENT ACCOUNTING PRONOUNCEMENTS. The FASB recently issued FAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets ("FAS 144"),
which we adopted on February 4, 2002. The FASB's new rules on asset impairment
supersede FAS No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of ("FAS 121").
The adoption of FAS 144 did not have a significant effect on our financial
condition or results of operations.
NOTE 3: INVENTORIES
Inventories, which consist of food, beverage and merchandise are reported at the
lower of cost or market determined on a first-in, first-out method. Static
supplies inventory is capitalized at each store opening date and reviewed
periodically for valuation.
NOTE 4: LONG-TERM DEBT
At November 3, 2002, long-term debt consisted of the following:
Long-term debt $ 84,419
Less: current installments (7,600)
--------
$ 76,819
========
On November 19, 2001, we amended the senior secured revolving credit and term
loan facility. The amendment allows proceeds from sale/leaseback transactions to
be applied to both the revolving credit and the term loans. On December 6, 2002,
Amendment No. 3 was executed to provide for revised financial covenants, thereby
enabling us to remain in compliance with the agreement. The amendment also
amended the restriction on revolving credit usage, mandatory repayment of
revolving credit loans, increase in letter of credit sublimit and consent
relating to new leases on existing units. The Company believes it will be in
compliance with all of its financial and other debt covenants during the fiscal
year ending February 2, 2003. At November 3, 2002, $4,360 was available under
this facility.
NOTE 5: CONTINGENCIES
EBS Litigation
In March 2000, a class of former shareholders of Edison Brothers Stores, Inc.
brought a third party action against us and certain of our directors in Federal
district court in Delaware. The third-party plaintiff class consists of former
shareholders of EBS who received stock in our company following its spin-off
from EBS in 1995. Within five months after the spin-off, EBS filed for
protection under the bankrupt laws. The bankruptcy trustee of EBS (through an
entity named EBS Litigation LLC) is pursuing fraudulent conveyance claims on
behalf of unsecured creditors of EBS against a defendant class of former
shareholders arising out of the spin-off distribution of our stock. The former
shareholders' third party action against us alleges that, if it is determined
that the distribution of our stock to the former shareholders rendered EBS
insolvent and was therefore a fraudulent conveyance, then we and certain of our
directors (who were our directors at the time of the spin-off) aided and abetted
the fraud and are liable for contribution and/or indemnification. We dispute the
former shareholders' third party allegations against us and our directors and
are vigorously defending this litigation.
In March 2001, the trial court dismissed all of the third party claims against
us and rendered judgment in our favor based on a statute of limitations defense.
The third-party plaintiffs appealed this ruling. In September 2002, the Third
Circuit appellate court reversed the judgment of the district court and remanded
the case for further proceedings. In November 2002, our petition for limited
rehearing was denied by the Third Circuit.
The underlying case brought by EBS Litigation LLC against the defendant
shareholder class was tried before the district court in January 2002, but no
verdict has yet been rendered by the court. If the plaintiff
in the underlying case is successful in its case against the former shareholders
and we are ultimately unsuccessful in our defense of the shareholders
third-party litigation against us on the merits, the outcome could have a
material adverse affect on us and our operations.
Shareholder Litigation
We were served with a complaint filed purportedly on behalf of our stockholders
alleging breaches of fiduciary duty by our directors in connection with their
approval of the transactions contemplated by the Merger Agreement. The purported
class action, filed in state district court in Dallas County, Texas on May 31,
2002, purports to seek an injunction preventing consummation of the originally
proposed tender offer and merger transaction and unspecified damages. We were
also served with four similar complaints filed in the State of Missouri, one in
the circuit court of Greene County and three in the circuit court of Cole
County, each filed in June 2002. We and each member of our Board of Directors
have been named as defendants in each of the complaints. We answered the
complaint filed in Dallas County, denying all of the allegations of the
plaintiffs. We filed a motion to dismiss for the complaint filed in Greene
County for improper venue. In July 2002, the plaintiffs in the Dallas County and
one of the Cole County complaints filed amended class action complaints alleging
that the cash consideration in the amended merger transaction of $13.50 per
share is inadequate and renewing the initial allegations of their complaints.
Prior to filing answers in the Cole County cases and the commencement of
discovery in any of the pending cases, we reached agreement in principle with
all plaintiffs for a standstill of all litigation activity and a tentative
settlement of all claims against us and our directors, contingent on the
consummation of the merger transaction. The Merger Agreement was terminated in
October 2002.In November 2002, we were informed by counsel for the plaintiffs
that the standstill would continue indefinitely in anticipation of the voluntary
dismissal without prejudice of all of the pending actions. Since that time, one
of the Cole County cases and the Dallas County case have been dismissed and we
are awaiting similar filings in the remaining cases.
DownCity Energy Company LLC v. Dave & Buster's, Inc.
In September 2002, we were served with a Complaint filed in the Providence,
Rhode Island Superior Court against us by DownCity Energy Company LLC, a
provider of energy services to our store in the Providence Place Mall. DownCity
is seeking damages for breach of contract, services rendered and open account in
the amount of $2.3 million, plus interest, costs and attorney's fees. The claim
relates to alleged unpaid invoices for HVAC charges for a period from
approximately January 2001 through September 2002.
We have disputed the HVAC billing from inception and believe the plaintiff's
claims to be without merit, based on our assertion that we successfully
exercised a right under our lease with Providence Place Group, L.P. in January
2001 to opt out of the alleged HVAC charges and put DownCity on notice thereof.
In addition, in the event that DownCity is successful on the merits of their
claims against us, we believe that we have meritorious third party claims
against the Landlord for damages, including potential indemnification or
contribution. However, if we are ultimately unsuccessful in our defense of
DownCity's claims and in the pursuit of our third party action against our
Landlord, the result could have a material adverse affect on us and our
operations.
Other Legal Proceedings
We are also subject to certain other legal proceedings and claims that arise in
the ordinary course of our business, none of which, in the opinion of
management, would have a material affect on the consolidated results of
operations or our financial condition if adversely determined.
NOTE 6: OTHER MATTERS
On May 30, 2002 we announced that we entered into a definitive Merger Agreement
under which a group led by our founders and certain members of our senior
executive management, together with Investcorp
S.A., a global investment group, and co-investors organized by Investcorp will
acquire the company through a newly-formed holding company, D&B Holdings I, Inc.
The transaction was originally structured as a cash tender offer by D&B
Acquisition Sub, Inc., a wholly-owned subsidiary of D&B Holdings, for all
outstanding shares of our common stock at a price of $12.00 per share, to be
followed by a merger which would result in Dave & Buster's becoming a
wholly-owned subsidiary of D&B Holdings. On July 10, 2002, we announced that the
tender offer by D&B Acquisition Sub. had expired without sufficient shares being
tendered to complete the transaction. On July 12, 2002, we entered into an
amendment to the Merger Agreement providing that the consideration proposed to
be paid for our common stock was increased to $13.50 in cash per share and that
we would proceed with a single-step, all-cash merger, subject to financing on
satisfactory terms and to the approval by a two-thirds vote of our shareholders
at a special meeting to be called for such purpose. In October 2002, the
purchaser under the Merger Agreement informed us that they would be unable to
obtain financing on the terms prescribed by the Merger Agreement, as amended.
The Merger Agreement was then terminated by mutual agreement as of October 24,
2002.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (DOLLARS IN THOUSANDS)
Results of Operations -- 13 Weeks Ended November 3, 2002 Compared to 13 Weeks
Ended November 4, 2001
Total revenues increased to $84,550 for the 13 weeks ended November 3, 2002 from
$81,371 for the 13 weeks ended November 4, 2001, an increase of $3,179 or 3.9%.
New stores opened in 2001 increased revenues during the period by $ 4,121.
Revenues at comparable stores decreased 3.5% for the 13 weeks ended November 3,
2002, the decrease is attributable to a continued weak economic environment. In
an effort to improve sales, the Company is redirecting marketing funds from
media buys towards cost-effective consumer direct marketing for the individual
locations. Emphasis is also being placed upon the special events portion of the
business, particularly holiday parties and other corporate functions.
Cost of revenues increased to $15,583 for the 13 weeks ended November 3, 2002
from $15,248 for the 13 weeks ended November 4, 2001, an increase of $335 or
2.2%. The increase is attributable to the higher level of revenues, offset by
lower food costs and kitchen operation efficiencies. In addition the Company has
experienced a 20% increase in special events sales, which have a higher
contribution margin. As a percentage of revenues, cost of revenues decreased
from 18.7% for the 13 weeks ended November 4, 2001 to 18.4% for the 13 weeks
ended November 4, 2002. The new menu introduced earlier in the year is in
keeping with the initiatives the Company implemented in 2001 to streamline its
kitchen operations and provide greater efficiencies.
Operating payroll and benefits increased to $27,301 for the 13 weeks ended
November 3, 2002 from $26,573 for the 13 weeks ended November 4, 2001, an
increase of $728 or 2.7%. As a percentage of revenues, operating payroll and
benefits decreased to 32.3% in the 13 weeks ended November 3, 2002 from 32.7% in
the 13 weeks ended November 4, 2001. The decrease in payroll and benefits as a
percentage of revenues is due to the Company eliminating certain store hourly,
store management and corporate positions in September and October and continuing
to monitor hourly labor costs (down 1% from prior year). However this saving was
offset by higher health insurance and fixed management labor costs.
Other store operating expenses increased to $28,756 for the 13 weeks ended
November 3, 2002 from $26,426 for the 13 weeks ended November 4, 2001, an
increase of $2,330 or 8.8%. As a percentage of revenues, other store operating
expenses were 34.0% of revenues in the 13 weeks ended November 3, 2002 as
compared to 32.5% of revenues in the 13 weeks ended November 4, 2001. Other
store operating expense as a percentage of revenues increased due to the
sale/leaseback transactions of the Houston and Atlanta locations and additional
equipment leases (games and kitchen equipment for Cleveland and Islandia.
General and administrative expenses increased to $5,952 for the 13 weeks ended
November 3, 2002 from $5,120 for the 13 weeks ended November 4, 2001, an
increase of $832 or 16.3%. The increase is attributable to higher employee
benefits, occupancy costs and one-time transaction costs related to the proposed
merger agreement with D&B Holdings and D&B Acquisition Sub. As a percentage of
revenues, general and administrative expenses increased to 7.0% in the 13 weeks
ended November 3, 2002 from 6.3% in the 13 weeks ended November 4, 2001. This
expense category was directly impacted by a reduction in revenue from comparable
stores. The Company anticipates cost savings from the reduction in work force
which took place during the third quarter and system enhancements to be
completed over the next 18 to 24 months.
Depreciation and amortization decreased to $7,405 for the 13 weeks ended
November 3, 2002 from $7,407 for the 13 weeks ended November 4, 2001. As a
percentage of revenues, depreciation and amortization expense decreased to 8.8%
of revenues from 9.1% in the 13 weeks ended November 4, 2001. This decrease is
attributed to the fourth quarter 2001 sale-leaseback of Houston and Atlanta
locations partially offset by 2002 capital expenditures.
Preopening costs decreased to $857 for the 13 weeks ended November 3, 2002 from
$1,850 for the 13 weeks ended November 4, 2001. Fluctuations are generally due
to the number and timing of new store openings. There was one opening during the
third quarter of fiscal 2002 as compared to two store openings in prior year.
Interest expense decreased to $1,455 for the 13 weeks ended November 3, 2002
from $1,683 for the 13 weeks ended November 4, 2001. The decrease is due to both
lower average debt and interest rates in fiscal year 2002.
The year to date effective tax rate was decreased to 34% during the current
quarter, resulting in the effective tax rate of 39.5% for the thirteen weeks
ended November 3, 2002 as compared to 36.2% for the 13 weeks ended November 4,
2001. The effective tax rate decreased due to the impact of federal tax credits
applied against reduced earnings.
Results of Operations - 39 Weeks Ended November 3, 2002 Compared to 39 Weeks
Ended November 4, 2001
Total revenues increased to $273,941 for the 39 weeks ended November 3, 2002
from $253,203 for the 39 weeks, ended November 4, 2001, an increase of $20,738
or 8.2%. New stores opened in 2001 increased revenues during the period by
$25,797. Revenues at comparable stores were down by 2.6% for the 39 weeks ended
November 3, 2002. The decrease in comparable store revenues is attributable to a
continued weak economic environment. Total revenues for the 39 weeks ended
November 3, 2002 from licensing agreements were $318. In an effort to improve
sales, the Company is redirecting marketing funds from media buys towards
cost-effective consumer direct marketing for the individual locations. Emphasis
is also being placed upon the special events portion of the business,
particularly holiday parties and other corporate functions.
Cost of revenues increased to $50,414 for the 39 weeks ended November 3, 2002
from $47,504 for the 39 weeks ended November 4, 2001, an increase of $2,910 or
6.1%. The increase is attributable to the 8.2% increase in revenues, offset by
cost savings at comparable stores. As a percentage of revenues, cost of revenues
decreased from 18.8% for the 39 weeks ended November 4, 2001 to 18.4% for the 39
weeks ended November 3, 2002 impacted by 1.7% reduction in food costs and
beverage and amusement costs flat on prior year. The new menu introduced earlier
in the year is in keeping with the initiatives the Company implemented in 2001
to streamline its kitchen operations and provide greater efficiencies.
Operating payroll and benefits increased to $86,173 for the 39 weeks ended
November 3, 2002 from $79,207 for the 39 weeks ended November 4, 2001, an
increase of $6,966 or 8.8%. As a percentage of revenues, operating payroll and
benefits increased to 31.5% in the 39 weeks ended November 3, 2002
from 31.3% in the 39 weeks ended November 4, 2001. The increase in payroll and
benefits as a percentage of revenues is due to the decline in comparable store
sales and three new store openings in late fiscal year 2001. The Company is
monitoring hourly labor costs with a 0.5% of revenue cost savings and adjusting
its staffing levels in response to the current economic environment. Certain
store hourly, store management and corporate positions were eliminated in
September and October. However this saving was offset by higher health insurance
costs.
Other store operating expenses increased to $85,373 for the 39 weeks ended
November 3, 2002 from $75,417 for the 39 weeks ended November 4, 2001, an
increase of $9,956 or 13.2%. As a percentage of revenues, other store operating
expenses were 31.2% of revenues in the 39 weeks ended November 3, 2002 as
compared to 29.8% of revenues in the 39 weeks ended November 4, 2001. Other
store operating expenses as a percentage of revenues increased due to the
sale/leaseback transactions of the Houston and Atlanta locations and additional
equipment leases (games and kitchen equipment for Cleveland and Islandia).
General and administrative expenses increased to $19,664 for the 39 weeks ended
November 3, 2002 from $15,374 for the 39 weeks ended November 4, 2001, an
increase of $4,290 or 27.9%. The increase is attributable to higher employee
benefits, occupancy costs and one-time transaction costs of $1.3 million related
to our proposed merger agreement with D&B Holdings and D&B Acquisition Sub. As a
percentage of revenues, general and administrative expenses increased to 7.2% in
the 39 weeks ended November 3, 2002 from 6.1% in the 39 weeks ended November 4,
2001. The Company anticipates cost savings from the reduction in work force
which took place in the third quarter and system enhancements to be completed
over the next 18 to 24 months.
Depreciation and amortization increased to $22,520 for the 39 weeks ended
November 3, 2002 from $21,315 for the 39 weeks ended November 4, 2001, an
increase of $1,205 or 5.7%. As a percentage of revenues, depreciation and
amortization expense decreased to 8.2% of revenues from 8.4% in the 39 weeks
ended November 4, 2001. This decrease is attributed to the fourth quarter 2001
sale-leaseback of Houston and Atlanta partially offset by 2002 capital
expenditures.
Preopening costs decreased to $1,258 for the 39 weeks ended November 3, 2002
from $3,750 for the 39 weeks ended November 4, 2001. The decrease is due to the
timing of new store openings. There was one store opening through the third
quarter of fiscal 2002 as compared to three in the prior year.
Interest expense decreased to $5,256 for the 39 weeks ended November 3, 2002
from $6,063 for the 39 weeks ended November 4, 2001. The decrease is due to both
lower average debt and interest rates in fiscal year 2002.
The effective tax rate for the 39 weeks ended November 3, 2002 was 34.0% as
compared to 36.2% for the 39 weeks ended November 4, 2001. The effective tax
rate decreased due to the impact of federal tax credits applied against reduced
earnings.
Liquidity and Capital Resources
Cash flows from operations was $26,036 for the 39 weeks ended November 3, 2002
compared to $34,568 for the 39 weeks ended November 4, 2001. The decrease in
cash flow was attributable to an increase in prepaid expenses and decrease in
accounts payable and income taxes payable.
Cash used in investing activities was $19,340 for the 39 weeks ended November 3,
2002 compared to $27,966 for the 39 weeks ended November 4, 2001. The decrease
was the result of one new store opening in the third quarter of 2002 compared to
two openings in the third quarter of 2001.
Financing activities resulted in a use of cash of $5,376 compared to $6,402 for
the 39 weeks ended November 4, 2001. This decreased use of cash was directly
attributed to net repayment of long-term debt during the quarter.
We have a $110,000 senior secured revolving credit and term loan facility. The
facility includes a five-year revolver and five and seven-year term debt. The
facility agreement calls for quarterly payments of principal on the term debt
through maturity. Borrowings under the facility bear interest at a floating rate
based on LIBOR (1.80% at November 3, 2002) or, at our option, the bank's prime
rate (4.75% at November 3, 2002) plus, in each case, a margin based upon
financial performance. The facility is secured by all assets of Dave & Buster's.
The facility has certain financial covenants including a minimum consolidated
tangible net worth level, a maximum leverage ratio, minimum fixed charge
coverage and maximum level of capital expenditures. On December 6, 2002,
Amendment No. 3 was executed to provide for revised financial covenants, thereby
enabling us to remain in compliance with the agreement. The amendment also
amended the restriction on revolving credit usage, mandatory repayment of
revolving credit loans, increase in letter of credit sublimit and consent
relating to new leases on existing units. The Company believes it will be in
compliance with all of its financial and other debt covenants during the fiscal
year ending February 2, 2003. At November 3, 2002, $4,360 was available under
this facility.
We have entered into an agreement that expires in 2007, to change a portion of
its variable rate debt to fixed-rate debt. Notional amounts aggregating $48,760
at November 3, 2002 are fixed at 5.44. We are exposed to credit losses for
periodic settlements of amounts due under the agreements if LIBOR decreases. A
charge of $440 was incurred in the second quarter of 2002 under the agreement
and $1,335 for the year to date.
The market risks associated with the agreements are mitigated because increased
interest payments under the agreement resulting from reductions in LIBOR are
effectively offset by a reduction in interest expense under the debt obligation.
We opened one new complex in the third quarter of fiscal 2002. The preopening
and construction costs of the new store were provided from internal cash flow.
The credit facility, as amended, restricts us from opening any new complexes in
fiscal 2003 or in any fiscal year thereafter without the unanimous consent of
the bank group. Rather, we will continue to reduce debt and strategically
reinvest capital in our stores through game replacement and other projects,
which we expect to yield benefits over the long term.
We believe that available cash and cash flow from operations, together with
borrowings under the credit facility, will be sufficient to cover our working
capital, capital expenditures and debt service needs in the foreseeable future.
Our ability to make scheduled payments of principal or interest on, or to
refinance, our indebtedness, or to fund planned capital expenditures, will
depend on our future performance, which is subject to general economic
conditions, competitive environment and other factors. We may not generate
sufficient cash flow from operations, realize anticipated revenue growth and
operating improvements or obtain future capital in a sufficient amount or on
acceptable terms, to enable us to service our indebtedness or to fund our other
liquidity needs.
Quarterly Fluctuations, Seasonality and Inflation
As a result of the substantial revenues associated with each new Complex, the
timing of new Complex openings will result in significant fluctuations in
quarterly results. We expect seasonality to be a factor in the operation or
results of our business in the future with anticipated lower third quarter
revenues due to the fall season. While we expect higher fourth quarter revenues
associated with the year-end holidays, the continued overall weak economy will
impact our business and comparable store revenues may be down three to three and
one-half percent in the fourth quarter. The effects of supplier price increases
are not expected to be material. We believe that low inflation rates in our
market areas have contributed to stable food and labor costs in recent years.
However, there is no assurance that low inflation rates will continue or that
the Federal minimum wage rate will not increase.
Contingencies
EBS Litigation
In March 2000, a class of former shareholders of Edison Brothers Stores, Inc.
brought a third party action against us and certain of our directors in Federal
district court in Delaware. The third-party plaintiff class consists of former
shareholders of EBS who received stock in our company following its spin-off
from EBS in 1995. Within five months after the spin-off, EBS filed for
protection under the bankrupt laws. The bankruptcy trustee of EBS (through an
entity named EBS Litigation LLC) is pursuing fraudulent conveyance claims on
behalf of unsecured creditors of EBS against a defendant class of former
shareholders arising out of the spin-off distribution of our stock. The former
shareholders' third party action against us alleges that, if it is determined
that the distribution of our stock to the former shareholders rendered EBS
insolvent and was therefore a fraudulent conveyance, then we and certain of our
directors (who were our directors at the time of the spin-off) aided and abetted
the fraud and are liable for contribution and/or indemnification. We dispute the
former shareholders' third party allegations against us and are vigorously
defending this litigation.
In March 2001, the trial court dismissed all of the third party claims against
us and rendered judgment in our favor based on a statute of limitations defense.
The third-party plaintiffs appealed this ruling. In September 2002, the Third
Circuit appellate court reversed the judgment of the district court and remanded
the case for further proceedings. In November 2002, our petition for limited
rehearing was denied by the Third Circuit.
The underlying case brought by EBS Litigation LLC against the defendant
shareholder class was tried before the district court in January 2002, but no
verdict has yet been rendered by the court. If the plaintiff in the underlying
case is successful in its case against the former shareholders and we are
ultimately unsuccessful in our defense of the shareholders third-party
litigation against us on the merits, the outcome could have a material adverse
affect on us and our operations.
Shareholder Litigation
We were served with a complaint filed purportedly on behalf of our stockholders
alleging breaches of fiduciary duty by our directors in connection with their
approval of the transactions contemplated by the Merger Agreement. The purported
class action, filed in state district court in Dallas County, Texas on May 31,
2002, purports to seek an injunction preventing consummation of the originally
proposed tender offer and merger transaction and unspecified damages. We also
were served with four similar complaints filed in the State of Missouri, one in
the circuit court of Greene County and three in the circuit court of Cole
County, each filed in June 2002. We and each member of our Board of Directors
have been named as defendants in each of the complaints. We answered the
complaint filed in Dallas County, denying all of the allegations of the
plaintiffs. We filed a motion to dismiss the complaint filed in Greene County
for improper venue. In July 2002, the plaintiffs in the Dallas County and one of
the Cole County complaints filed amended class action complaints alleging that
the cash consideration in the amended merger transaction of $13.50 per share is
inadequate and renewing the initial allegations of their complaints.
Prior to filing answers in the Cole County cases and the commencement of
discovery in any of the pending cases, we reached agreement in principle with
all plaintiffs for a standstill of all litigation activity and a tentative
settlement of all claims against us and our directors, contingent on the
consummation of the merger transaction. The Merger Agreement was terminated in
October 2002. In November 2002 we were informed by counsel for the plaintiffs
that the standstill would continue indefinitely in anticipation of the voluntary
dismissal without prejudice of all of the pending actions. Since that time, one
of the Cole County cases and the Dallas County case have been dismissed and we
are awaiting similar filings in the remaining cases.
DownCity Energy Company LLC v. Dave & Buster's, Inc.
In September 2002, we were served with a Complaint filed in the Providence,
Rhode Island Superior Court against us by DownCity Energy Company LLC, a
provider of energy services to our store in the Providence Place Mall. DownCity
is seeking damages for breach of contract, services rendered and open account in
the amount of $2.3 million, plus interest, costs and attorney's fees. The claim
relates to alleged unpaid invoices for HVAC charges for a period from
approximately January 2001 through September 2002.
We have disputed the HVAC billing from inception and believe the plaintiff's
claims to be without merit, based on our assertion that we successfully
exercised a right under our lease with Providence Place Group, L.P. in January
2001 to opt out of the alleged HVAC charges and put DownCity on notice thereof.
In addition, in the event that DownCity is successful on the merits of their
claims against us, we believe that we have meritorious third party claims
against the Landlord for damages, including potential indemnification or
contribution. However, if we are ultimately unsuccessful in our defense of
DownCity's claims and in the pursuit of our third party action against our
Landlord, the result could have a material adverse affect on us and our
operations.
Other Legal Proceedings
We are also subject to certain other legal proceedings and claims that arise in
the ordinary course of our business, none of which, in the opinion of
management, would have a material affect on the consolidated results of
operations or our financial condition if adversely determined.
"Safe Harbor" Statement Under the Private Securities Litigation Reform Act
of 1995
Certain statements in this Report on Form 10-Q are not based on historical facts
but are "forward-looking statements" that are based on numerous assumptions made
as of the date of this report. Forward looking statements are generally
identified by the words "believes", "expects", "intends", "anticipates",
"scheduled", and certain similar expressions. Such forward-looking statements
involve known and unknown risks, uncertainties, and other factors which may
cause the actual results, performance, or achievements of Dave & Buster's, Inc.
to be materially different from any future results, performance, or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following: general economic and business conditions;
competition; availability; locations and terms of sites for Complex development;
quality of management; changes in, or the failure to comply with, government
regulations; and other risks indicated in this filing and discussed under
"Risks" in our Form 10-K filed with the Securities and Exchange Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's market risk exposure relates to changes in the general level of
interest rates. The Company's earnings are affected by changes in interest rates
due to the impact those changes have on its interest expense from variable-rate
debt. The Company's agreement to fix a portion of its variable-rate debt
mitigates this exposure.
ITEM 4. CONTROLS AND PROCEDURES
Each of our Co-Chief Executive Officers, David O. Corriveau and James W. Corley,
and our Chief Financial Officer, W.C. Hammett, Jr. have reviewed and evaluated
the disclosure controls and procedures that we have in place with respect to the
accumulation and communication of information to management and the recording,
processing, summarizing and recording thereof for the purpose of preparing and
filing this Quarterly Report on Form 10-Q. Such review was conducted during the
week ended December 13, 2002. Based upon their review, these executive officers
have concluded that we have an effective system of internal controls and an
effective means for timely communication of information required to be disclosed
in this Report.
Since December 13, 2002 there have been no significant changes in our internal
controls or in other factors that could significantly affect such controls.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
EBS Litigation
In March 2000, a class of former shareholders of Edison Brothers Stores, Inc.
brought a third party action against us and certain of our directors in Federal
district court in Delaware. The third-party plaintiff class consists of former
shareholders of EBS who received stock in our company following its spin-off
from EBS in 1995. Within five months after the spin-off, EBS filed for
protection under the bankrupt laws. The bankruptcy trustee of EBS (through an
entity named EBS Litigation LLC) is pursuing fraudulent conveyance claims on
behalf of unsecured creditors of EBS against a defendant class of former
shareholders arising out of the spin-off distribution of our stock. The former
shareholders' third party action against us alleges that, if it is determined
that the distribution of our stock to the former shareholders rendered EBS
insolvent and was therefore a fraudulent conveyance, then we and certain of our
directors (who were our directors at the time of the spin-off) aided and abetted
the fraud and are liable for contribution and/or indemnification. We dispute the
former shareholders' third party allegations against us and are vigorously
defending this litigation.
In March 2001, the trial court dismissed all of the third party claims against
us and rendered judgment in our favor based on a statute of limitations defense.
The third-party plaintiffs appealed this ruling. In September 2002, the Third
Circuit appellate court reversed the judgment of the district court and remanded
the case for further proceedings. In November 2002, our petition for limited
rehearing was denied by the Third Circuit.
The underlying case brought by EBS Litigation LLC against the defendant
shareholder class was tried before the district court in January 2002, but no
verdict has yet been rendered by the court. If the plaintiff in the underlying
case is successful in its case against the former shareholders and we are
ultimately unsuccessful in our defense of the shareholders third-party
litigation against us on the merits, the outcome could have a material adverse
affect on us and our operations.
Shareholder Litigation
We were served with a complaint filed purportedly on behalf of our stockholders
alleging breaches of fiduciary duty by our directors in connection with their
approval of the transactions contemplated by the Merger Agreement. The purported
class action, filed in state district court in Dallas County, Texas on May 31,
2002, purports to seek an injunction preventing consummation of the originally
proposed tender offer and merger transaction and unspecified damages. We also
were served with four similar complaints filed in the State of Missouri, one in
the circuit court of Greene County and three in the circuit court of Cole
County, each filed in June 2002. We and each member of our Board of Directors
have been named as defendants in each of the complaints. We answered the
complaint filed in Dallas County, denying all of the allegations of the
plaintiffs. We filed a motion to dismiss the complaint filed in Greene County
for improper venue. In July 2002, the plaintiffs in the Dallas County and one of
the Cole County complaints filed amended class action complaints alleging that
the cash consideration in the amended merger transaction of $13.50 per share is
inadequate and renewing the initial allegations of their complaints.
Prior to filing answers in the Cole County cases and the commencement of
discovery in any of the pending cases, we reached agreement in principle with
all plaintiffs for a standstill of all litigation activity and a tentative
settlement of all claims against us and our directors, contingent on the
consummation of the merger transaction. The Merger Agreement was terminated in
October 2002. In November 2002, we were informed by counsel for the plaintiffs
that the standstill would continue indefinitely in anticipation of the voluntary
dismissal without prejudice of all of the pending actions. Since that time, one
of the Cole County cases and the Dallas County case have been dismissed and we
are awaiting similar filings in the remaining cases.
DownCity Energy Company LLC v. Dave & Buster's, Inc.
In September 2002, we were served with a Complaint filed in the Providence,
Rhode Island Superior Court against us by DownCity Energy Company LLC, a
provider of energy services to our store in the Providence Place Mall. DownCity
is seeking damages for breach of contract, services rendered and open account in
the amount of $2.3 million, plus interest, costs and attorney's fees. The claim
relates to alleged unpaid invoices for HVAC charges for a period from
approximately January 2001 through September 2002.
We have disputed the HVAC billing from inception and believe the plaintiff's
claims to be without merit, based on our assertion that we successfully
exercised a right under our lease with Providence Place Group, L.P. in January
2001 to opt out of the alleged HVAC charges and put DownCity on notice thereof.
In addition, in the event that DownCity is successful on the merits of their
claims against us, we believe that we have meritorious third party claims
against the Landlord for damages, including potential indemnification or
contribution. However, if we are ultimately unsuccessful in our defense of
DownCity's claims and in the pursuit of our third party action against our
Landlord, the result could have a material adverse affect on us and our
operations.
Other Legal Proceedings
We are also subject to certain other legal proceedings and claims that arise in
the ordinary course of our business, none of which, in the opinion of
management, would have a material affect on the consolidated results of
operations or our financial condition if adversely determined.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1.3 Amendment No. 3 to Revolving Credit and Term Loan Agreement
dated as of December 6, 2002 by and among the Company and its
subsidiaries, Fleet National Bank (as agent) and the financial
institutions named therein.
99.1 Certification of Co-CEO pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
99.2 Certification of Co-CEO pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
99.3 Certification of CFO pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
(b) Reports on Form 8-K
None
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.
DAVE & BUSTER'S, INC.
Date: December 17, 2002 by /s/ David O. Corriveau
----------------------
David O. Corriveau
Co-Chairman of the Board,
Co-Chief Executive Officer
and President
Date: December 17, 2002 by /s/ W. C. Hammett, Jr.
----------------------
W. C. Hammett, Jr.
Vice President,
Chief Financial Officer
CERTIFICATIONS
I, David O. Corriveau, Co-Chief Executive Officer of Dave & Buster's Inc.,
certify that:
1. I have reviewed this quarterly report on Form 10-Q of Dave & Buster's 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: December 17, 2002
/s/ David O. Corriveau
- ----------------------
David O. Corriveau
Co-Chief Executive Officer
I, James W. Corley, Co-Chief Executive Officer of Dave & Buster's Inc., certify
that:
1. I have reviewed this quarterly report on Form 10-Q of Dave & Buster's 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: December 17, 2002
/s/ James W. Corley
- -------------------
James W. Corley
Co-Chief Executive Officer
I, W. C. Hammett, Jr., Chief Financial Officer of Dave & Buster's Inc., certify
that:
1. I have reviewed this quarterly report on Form 10-Q of Dave & Buster's 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: December 17, 2002
/s/ W. C. Hammett, Jr.
- ----------------------
W. C. Hammett, Jr.
Chief Financial Officer
INDEX OF EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.1.3 Amendment No. 3 to Revolving Credit and Term Loan Agreement dated as of December 6,
2002 by and among the Company and its subsidiaries, Fleet National Bank (as agent)
and the financial institutions named therein.
99.1 Certification of Co-CEO pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
99.2 Certification of Co-CEO pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
99.3 Certification of CFO pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.