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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
- ----- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 24, 2002
------------------------------------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
- ----- SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------------------- ------------------------
Commission File Number 0-619
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WSI Industries, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant, as specified in its charter)
Minnesota 41-0691607
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I. R. S. Employer
incorporation of organization) Identification No.)
Osseo, Minnesota 55369
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(763) 428-4308
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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
-------- --------
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act).
Yes No X
-------- --------
2,465,229 shares of Common Stock were outstanding as of December 31,
2002.
WSI INDUSTRIES, INC.
AND SUBSIDIARIES
INDEX
Page No.
-------
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Condensed Consolidated Balance Sheets November 24, 2002 (Unaudited)
and August 25, 2002 3
Condensed Consolidated Statements of Income
Thirteen weeks ended November 24, 2002 and
November 25, 2001 (Unaudited) 4
Condensed Consolidated Statements of Cash Flows
Thirteen weeks ended November 24, 2002 and
November 25, 2001 (Unaudited) 5
Notes to Condensed Consolidated Financial Statements (Unaudited) 6, 7, 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9, 10,11
Item 4. Controls and Procedures 11
PART II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K 11
Signatures
Certifications
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
WSI INDUSTRIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS NOVEMBER 24, AUGUST 25,
2002 2002
---- ----
CURRENT ASSETS:
Cash and cash equivalents $ 1,331,462 $ 1,115,922
Accounts receivable 1,102,389 1,154,587
Inventories 821,183 763,323
Prepaid and other current assets 17,132 33,990
Deferred tax assets 182,495 184,925
--------------- ---------------
Total current assets 3,454,661 3,252,747
--------------- ---------------
Property, plant and equipment, net 2,052,539 2,201,692
--------------- ---------------
Deferred tax assets 1,956,749 1,976,254
--------------- ---------------
Intangible assets, net 2,368,452 2,368,452
--------------- ---------------
$ 9,832,401 $ 9,799,145
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable $ 404,438 $ 465,286
Accrued compensation and employee withholdings 232,457 171,025
Miscellaneous accrued expenses 128,378 90,439
Current portion of long-term debt 738,726 735,143
--------------- ---------------
Total current liabilities 1,503,999 1,461,893
--------------- ---------------
Long-term debt, less current portion 1,350,415 1,397,915
--------------- ---------------
STOCKHOLDERS' EQUITY:
Common stock, par value $.10 a share; authorized
10,000,000 shares; issued and outstanding 2,465,229 shares 246,523 246,523
Capital in excess of par value 1,640,934 1,640,934
Retained earnings 5,090,530 5,051,880
--------------- ---------------
Total stockholders' equity 6,977,987 6,939,337
--------------- ---------------
$ 9,832,401 $ 9,799,145
=============== ===============
See notes to condensed consolidated financial statements.
3
WSI INDUSTRIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
13 weeks ended
---------------------------------
November 24, November 25,
2002 2001
-------------- ---------------
Net sales $ 2,434,293 $ 3,811,208
Cost of products sold 1,972,831 3,371,017
----------- -----------
Gross margin 461,462 440,191
Selling and administrative expense 378,869 547,932
Interest and other income (18,974) (3,297)
Interest and other expense 40,982 142,559
----------- -----------
Earnings (loss) from operations
before income taxes 60,585 (247,003)
Income tax expense 21,935 -
----------- -----------
Net earnings (loss) $ 38,650 $ (247,003)
=========== ===========
Basic earnings (loss) per share $ .02 $ (.10)
=========== ===========
Diluted earnings (loss) per share $ .02 $ (.10)
=========== ===========
Weighted average number of
common shares 2,465,229 2,465,229
=========== ===========
Weighted average number of
common and dilutive potential
common shares 2,465,229 2,465,229
=========== ===========
See notes to condensed consolidated financial statements.
4
WSI INDUSTRIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
13 weeks ended
--------------------------------
November 24, November 25,
2002 2001
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ 38,650 $ (247,003)
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 158,508 489,969
Deferred taxes 21,935 -
Changes in assets and liabilities:
Decrease in accounts receivable 52,198 77,350
Increase in inventories (57,861) (13,802)
Decrease in prepaid expenses 16,859 21,939
Increase (decrease) in accounts payable and
accrued expenses 38,524 (121,289)
------------- --------------
Net cash provided by operations 268,813 207,164
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (9,356) -
-------------- -------------
Net cash used in investing activities (9,356) -
-------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term debt and revolving facility (43,917) (208,603)
-------------- --------------
Net cash used in financing activities (43,917) (208,603)
-------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 215,540 (1,439)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,115,922 8,292
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF REPORTING PERIOD $ 1,331,462 $ 6,853
============= =============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 41,217 $ 143,959
Income taxes $ - $ -
NON CASH INVESTING AND FINANCING ACTIVITIES:
Acquisition of machinery through capital lease $ - $ 606,618
See notes to condensed consolidated financial statements.
5
WSI INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
The condensed consolidated balance sheet as of November 24,
2002, the condensed consolidated statements of operations for the
thirteen weeks ended November 24, 2002 and November 25, 2001 and the
condensed consolidated statements of cash flows for the thirteen weeks
then ended, respectively, have been prepared by the Company without
audit. In the opinion of management, all adjustments (which include
normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows for all periods
presented have been made.
The condensed balance sheet at August 25, 2002 is derived from
the audited balance sheet as of that date. Certain information and
footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted. Therefore, these condensed consolidated financial
statements should be read in conjunction with the financial statements
and notes thereto included in the Company's 2002 annual report to
shareholders. The results of operations for interim periods are not
necessarily indicative of the operating results for the full year.
2. SALE OF SUBSIDIARY:
On February 22, 2002, the Company completed the asset sale of
one of its subsidiaries, Bowman Tool & Machining, Inc. ("Bowman"), to
W. Bowman Consulting Company, an affiliate of the prior owner of
Bowman. The Company received approximately $3.1 million in cash from
the sale, with the buyer also assuming another $3.4 million in
long-term debt and purchasing $1.2 million in accounts receivable and
inventory. The buyer also assumed any remaining liabilities associated
with amounts due on the non-compete and employment agreements that were
a result of the Company's original acquisition of Bowman in 1999. The
sale included substantially all of the assets of Bowman. The Company
retained approximately $629,000 in Bowman-related accounts payable and
accrued liabilities.
The Bowman sale was completed at the close of the last working
day of the second quarter of fiscal 2002. Correspondingly, the
Condensed Consolidated Statements of Income and Condensed Consolidated
Statements of Cash Flows for the 13 weeks ended November 25, 2001
reflect Bowman operations during that period.
3. DEBT AND LINE OF CREDIT:
Pursuant to the Bowman transaction, the Company paid off its
credit and security agreement with its bank. The agreement has been
terminated and no further amounts may be borrowed against it. See Note
6 for information about the Company's new loan agreement closed
subsequent to the end of the quarter ending November 24, 2002.
6
The Company issued a Subordinated Promissory Note in the
original amount of $1.7 million on February 15, 1999 in connection with
its acquisition of Taurus Numeric Tool, Inc. ("Taurus"). The note bears
interest at 7.75% payable quarterly. Principal payments are due in
three annual installments commencing February 15, 2002. During the
third quarter of fiscal 2002, the Company made the first payment of
$554,000 and correspondingly, the principal balance remaining was $1.1
million at November 24, 2002.
With the acquisition of Taurus, the seller was able to earn an
additional amount based on the profitability of Taurus for the period
February 15, 1999 to February 15, 2000. No amount was earned. The
contingent payment terms were detailed in the purchase agreement and
did not require continued employment of the former principal to be
earned.
WSI Industries also issued a Subordinated Promissory Note in
connection with the original 1999 Bowman acquisition in the amount of
$1.9 million. With the completion of the sale of Bowman to an affiliate
of the prior owner as described in Note 2, the Subordinated Promissory
Note was assumed by the affiliate of the prior owner, and no further
amounts are due.
The Company also has capitalized lease debt of approximately
$981,000, with monthly payments due of $21,000 expiring between 2005
and 2008.
4. EARNINGS PER SHARE:
In 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 128 Earnings per
Share. Statement 128 replaced the previously reported primary and fully
diluted earnings per share with basic and diluted earning per share.
Unlike primary earnings per share, basic earnings per share excludes
any dilutive effects of options, warrants and convertible securities.
Diluted earnings per share is very similar to the previously reported
fully diluted earnings per share. All earnings per share amounts for
all periods have been presented, and where necessary, restated to
conform to the Statement 128 requirements.
The following table sets forth the computation of basic and diluted
earnings per share:
Thirteen weeks ended
------------------------------------------
November 24, November 25,
2002 2001
---- ----
Numerator for basic and diluted
earnings per share:
Net Earnings (loss) $ 38,650 $ (247,003)
=========== ===========
Denominator:
Denominator for basic earnings
per share - weighted average shares 2,465,229 2,465,229
Effect of dilutive securities:
Employee and non-employee options - -
----------- -----------
Dilutive common shares
Denominator for diluted earnings
per share 2,465,229 2,465,229
=========== ===========
7
Basic earnings (loss) per share $ .02 $ (.10)
============ ===============
Diluted earnings (loss) per share $ .02 $ (.10)
============ ===============
5. GOODWILL AND INTANGIBLE ASSETS:
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,
effective for fiscal years beginning after December 15, 2001 with early
adoption permitted for companies with fiscal years beginning after
March 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.
The Company adopted the new rules on accounting for goodwill
and other intangible assets beginning in the first quarter of fiscal
2002. Effective with the August 27, 2001 adoption of FAS 142, goodwill
is no longer amortized but is instead subject to an annual impairment
test. The Company has performed its transitional impairment test in
conjunction with the adoption of FAS 142 and has determined no charge
is warranted.
Goodwill and other intangible assets resulting from
acquisitions of business and the formation of the Company consist of
the following:
November 24, November 25,
2002 2001
------------------------------
Goodwill $2,428,264 $6,329,763
Less accumulated amortization 308,595 647,609
------------------------------
$2,119,669 $5,682,154
==============================
Other identifiable intangibles:
Organization Costs $ 285,000 $ 555,000
Less accumulated amortization 36,217 63,996
------------------------------
$ 248,783 $ 491,004
==============================
6. SUBSEQUENT EVENT:
On December 4, 2002, subsequent to the quarter ending November
24, 2002, the Company closed a revolving credit agreement in the
maximum amount of $1 million with a new bank. Interest on any balance
owing is at prime plus .25%. The credit agreement is secured by all
assets of the Company. The credit agreement expires December 31, 2003.
8
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
and
RESULTS OF OPERATIONS
Critical Accounting Policies and Estimates
Management's Discussion and Analysis of Financial Condition and Results
of Operations discusses our condensed consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States. The preparation of these financial statements requires
management to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses and related disclosure of contingent
assets and liabilities.
We believe that the estimates, assumptions and judgments involved in
the accounting policies described below have the greatest potential impact on
our financial statements, so we consider these to be our critical accounting
policies. Because of the uncertainty inherent in these matters, actual results
could differ from the estimates we used in applying the critical accounting
policies. Within the context of these critical accounting policies, we are not
currently aware of any reasonably likely event that would result in materially
different amounts being reported.
Allowance for Excess and Obsolete Inventory:
Inventories, which are composed of raw materials, work in process and
finished goods, are valued at the lower of cost or market. On a periodic basis,
the Company analyzes the level of inventory on hand, its cost in relation to
market value and estimated customer requirements to determine whether
write-downs for excess or obsolete inventory are required. Actual customer
requirements in any future periods are inherently uncertain and thus may differ
from our estimates. If actual or expected requirements were significantly
greater or lower than the established reserves, we would record a reduction or
increase to the obsolescence allowance in the period in which we made such a
determination.
Goodwill Impairment:
The Company evaluates the valuation of its goodwill according to the
provisions of SFAS 142 to determine if the current value of goodwill has been
impaired. To do this the Company determines the discounted present value of
anticipated cash flows based on anticipated results of operations for the coming
years. If we have changes in events or circumstances, including reductions in
anticipated cash flows generated by our operations, goodwill could become
impaired which would result in a charge to earnings.
Deferred Taxes:
The Company accounts for income taxes using the liability method.
Deferred income taxes are provided for temporary difference between the
financial reporting and tax bases of assets and liabilities. A valuation
allowance would be set up should the realization of any deferred taxes become
less likely than not to occur. The valuation allowance is analyzed periodically
by the Company and may result in income tax expense different than statutory
rates.
9
Results of Operations:
As discussed in Note 2 of the Condensed Consolidated Financial
Statements, the Company sold substantially all of the assets of its
subsidiary, Bowman Tool & Machinery, Inc. ("Bowman"), on February 22,
2002. Correspondingly, the effects of the Bowman operation are included
in the results of operations for the first quarter of fiscal 2002, and
not included in 2003.
Net sales were $2,434,000 for the quarter ending November 24,
2002, a decrease of 36% or $1,377,000 from the same period of the prior
year. The drop was due to the absence of Bowman sales. Sales for the
Company's remaining division, Taurus Numeric Tool, Inc. ("Taurus")
increased 5% in the first quarter versus the prior year.
Gross margin increased to 19% for the quarter ending November
24, 2002 versus 12% in the year ago period. The gross margin
improvement was related partially to the absence of Bowman, but also
came from improved margins at Taurus due to increased manufacturing
efficiencies.
Selling and administrative expense of $379,000 for the quarter
ending November 24, 2002 was $169,000 lower than in the prior year
period due to the sale of Bowman, as well as positive effects from the
reduction of overhead from consolidation efforts made after the Bowman
sale. Selling and administrative expense was negatively affected by
$60,000 of costs associated with a proxy contest that the Company was
involved in. The proxy contest was resolved by the end of the quarter.
Interest expense in the first quarter of fiscal 2003 was
$41,000, which was $102,000 less than the fiscal 2002 first quarter
amount of $143,000. The decrease is attributable to the reduced levels
of debt in fiscal 2003, due to the sale of Bowman and the elimination
of the corresponding debt.
The Company recorded income tax expense at an effective tax
rate of 36% for the quarter ended November 24, 2002.
Liquidity and Capital Resources:
On November 24, 2002, working capital was $1,951,000 compared
to $1,791,000 at August 25, 2002. The ratio of current assets to
current liabilities at November 24, 2002 was 2.30 to 1.0 compared to
2.23 to 1.0 at August 25, 2002. The Company generated $269,000 in cash
from operations in the first quarter of fiscal 2003.
As discussed in the Notes to Consolidated Financial
Statements, the Company paid off and terminated its Credit and Security
Agreement after the sale of Bowman. The Company has subsequently closed
on a new $1,000,000 revolving credit facility with a new bank with
interest at prime plus .25%.
As also described in the Notes, on February 15, 1999, in
connection with the Company's acquisition of its Taurus subsidiary, the
Company issued a subordinated promissory note to the seller in an
initial amount of $1,663,000. Interest is accrued at a rate of 7.75%
paid quarterly. Principal payments are due in three equal annual
installments commencing on February 15, 2002, with a balance of
$1,109,000 at November 24, 2002.
It is the Company's belief that its internally generated
funds, as well as its line of credit, will be sufficient to enable the
Company to meet its working capital requirements during fiscal 2003.
10
Cautionary Statement:
Statements included in this Form 10-Q, in Management's
Discussion and Analysis of Financial Condition and Results of
Operations, in the Company's letters to shareholders, in future filings
by the Company with the Securities and Exchange Commission, in the
Company's press releases and in oral statements made with the approval
of an authorized executive officer which are not historical or current
facts are "forward-looking statements." These statements are made
pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 and are subject to certain risks and
uncertainties that could cause actual results to differ materially from
historical earnings and those presently anticipated or projected. The
Company wishes to caution readers not to place undue reliance on any
such forward-looking statements, which speak only as of the date made.
The following important factors, among others, in some cases have
affected and in the future could affect the Company's actual results
and could cause the Company's actual financial performance to differ
materially from that expressed in any forward-looking statement: (i)
the Company's ability to obtain additional manufacturing programs and
retain current programs; (ii) the loss of significant business from any
one of its current customers could have a material adverse effect on
the Company; and (iii) a significant downturn in the industries in
which the Company participates could have an adverse effect on the
demand for Company services. The foregoing list should not be construed
as exhaustive and the Company disclaims any obligation subsequently to
revise any forward-looking statements to reflect events or
circumstances after the date of such statements or to reflect the
occurrence of anticipated or unanticipated events.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures.
The Company's Chief Executive Officer, Michael J. Pudil, and Chief
Financial Officer, Paul D. Sheely, have reviewed the Company's disclosure
controls and procedures within 90 days prior to the filing of this report. Based
upon this review, these officers believe that the Company's disclosure controls
and procedures are effective in ensuring that material information related to
the Company is made known to them by others within the Company.
(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 during the
quarter covered by this report or from the end of the reporting period to the
date of this Form 10-Q.
PART II. OTHER INFORMATION:
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
A. The following exhibits are included herein:
Exhibit 10.1 Loan Agreement between Excel Bank Minnesota and
the Company.
Exhibit 99.1 Certificate pursuant to 18 U.S.C. Section 1350.
B. Reports on Form 8-K:
None.
11
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.
WSI INDUSTRIES, INC.
Date: January 8, 2003 /s/ Michael J. Pudil
--------------- -----------------------------------------
Michael J. Pudil, President & CEO
Date: January 8, 2003 /s/ Paul D. Sheely
--------------- -----------------------------------------
Paul D. Sheely, Vice President & CFO
CERTIFICATIONS
I, Michael J. Pudil, certify that:
1. I have reviewed this quarterly report on Form 10-Q of WSI Industries, 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:
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: January 8, 2003 /s/ Michael J. Pudil
--------------- -------------------------------------
President and Chief Executive Officer
I, Paul D. Sheely, certify that:
1. I have reviewed this quarterly report on Form 10-Q of WSI Industries, 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:
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: January 8, 2003 /s/ Paul D. Sheely
--------------- ---------------------------
Chief Financial Officer