ENCORE WIRE CORP /DE/ - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

FOR THE 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: 0-20278

ENCORE WIRE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 75-2274963
(State of incorporation) (I.R.S. employer identification number)

1410 MILLWOOD ROAD
MCKINNEY, TEXAS 75069
(Address of principal executive offices) (Zip code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (972) 562-9473

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 [X] No[ ]

Number of shares of Common Stock outstanding as of April 30, 2003: 15,119,065

Page 1 of 33 Sequentially Numbered Pages
Index to Exhibits on Page 21

FORM 10-Q

ENCORE WIRE CORPORATION

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003

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FORM 10-Q

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

ENCORE WIRE CORPORATION

CONSOLIDATED BALANCE SHEETS
(Unaudited)

See accompanying notes

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FORM 10-Q

ENCORE WIRE CORPORATION

CONSOLIDATED BALANCE SHEETS (continued)
(Unaudited)

Note: The consolidated balance sheet at December 31, 2002, as presented, is
derived from the audited Consolidated Financial statements at that
date.

See accompanying notes

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FORM 10-Q

ENCORE WIRE CORPORATION

CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

See accompanying notes

5

FORM 10-Q

ENCORE WIRE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

See accompanying notes

6

FORM 10-Q

ENCORE WIRE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1 - BASIS OF PRESENTATION

The unaudited consolidated financial statements of Encore Wire
Corporation have been prepared in accordance with generally accepted accounting
principles for interim financial information and the instructions to Form 10-Q
and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments considered
necessary for a fair presentation, have been included. Results of operations for
interim periods presented do not necessarily indicate the results that may be
expected for the entire year. These financial statements should be read in
conjunction with the audited consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2002.

NOTE 2 - STOCK BASED EMPLOYEE COMPENSATION

The Company has a stock option plan for employees that provides for the
granting of stock options. The Company accounts for stock-based compensation
utilizing the intrinsic value method in accordance with the provisions of
Accounting Principles Board Opinion No. 25 (APB 25), "Accounting for Stock
Issued to Employees" and related interpretations. Accordingly, no compensation
expense is recognized for fixed option plans because the exercise prices of
Employee stock options equal or exceed the market prices of the underlying stock
on the dates of grant.

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FORM 10-Q

The following table represents the effect on net income (loss) and
earnings per share if the Company had applied the fair value based method and
recognition provisions of Statement of Financial Accounting Standards (SFAS) No.
123, "Accounting for Stock-Based Compensation," to stock-based Employee
compensation: ($'s in thousands except per share amounts)

As required, the pro forma disclosures above include options granted since
January 1, 1995. Consequently, the effects of applying SFAS 123 for providing
pro forma disclosures may not be representative of the effects on reported net
income for future years until all options outstanding are included in the pro
forma disclosures. For purposes of pro forma disclosures, the estimated fair
value of stock-based compensation plans and other options is amortized to
expense primarily over the vesting period.

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FORM 10-Q

NOTE 3 - INVENTORIES

Inventories are stated at the lower of cost, determined by the last-in,
first-out (LIFO) method, or market.

Inventories (in thousands) consisted of the following:

An actual valuation of inventory under the LIFO method can be made only
at the end of each year based on the inventory levels and costs at that time.
Accordingly, interim LIFO calculations must necessarily be based on management's
estimates of expected year-end inventory levels and costs. Because these are
subject to many forces beyond management's control, interim results are subject
to the final year-end LIFO inventory valuation. The Company reduced the lower of
cost or market reserve by $615,000 in the quarter, leaving $3,374,000 in the
reserve to reflect the fact that the LIFO cost basis as currently calculated,
exceeded the current market value by that amount at the end of the first quarter
of 2003.

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FORM 10-Q

NOTE 4 - INCOME PER SHARE

Income (loss) per common and common equivalent share is computed using
the weighted average number of shares of common stock and common stock
equivalents outstanding during each period. If dilutive, the effect of stock
options, treated as common stock equivalents, is calculated using the treasury
stock method.

The following table sets forth the computation of basic and diluted earnings per
share:

NOTE 5 - LONG TERM NOTE PAYABLE

Effective August 31, 1999, the Company through its indirectly wholly
owned subsidiary, Encore Wire Limited, a Texas limited partnership, completed an
unsecured loan facility with a group of banks (the "Financing Agreement"). The
Financing Agreement replaced the Company's existing credit facility, and the
Company is a guarantor of the indebtedness. The Financing Agreement has been
amended three times since August 31, 1999. The first two amendments extended the
term to May 31, 2003 and then again to May 31, 2005. The third amendment was
made effective March 31, 2003, to amend certain provisions, including financial
covenants, of the Financing Agreement. The Financing Agreement provides for
maximum borrowings of the lesser of $65.0 million or the amount of eligible
accounts receivable plus the amount of eligible finished goods and raw
materials, less any available reserves established by the banks. The calculated
maximum borrowing amount available at March 31, 2003, as computed under the
Financing Agreement, was $65.0 million. The Financing Agreement is unsecured and
contains customary covenants and events of default. The Company was in
compliance with these covenants, as amended, as of March 31, 2003. Pursuant to
the Financing Agreement, the Company is prohibited from declaring, paying or
issuing cash dividends. At March 31, 2003, the balance outstanding under the
Financing Agreement was $54.24 million. Amounts outstanding under the Financing
Agreement are payable on May 31, 2005 with interest due quarterly based on the
bank's prime rate or LIBOR rate options, at the Company's election.

In December 2001, the Company entered into an interest rate swap agreement on
$24.0 million of its variable rate debt in order to hedge against an increase in
variable interest rates. The terms of

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FORM 10-Q

the agreement fix the interest rate on $24.0 million of the Company's variable
rate, long-term note payable to 4.6% per annum plus a variable increment that is
based on certain financial ratios contained in the loan covenants. This
three-year agreement expires in December 2004. For the quarter ended March 31,
2003, the Company recorded an unrealized gain of $40,625, netting to an
unrealized loss of $1,278,149, as reflected in the accumulated other
comprehensive income line in the equity section of the balance sheet.

NOTE 6 - STOCK REPURCHASE AUTHORIZATION

On November 6, 2001, the Board of Directors of the Company approved a
stock repurchase program covering the purchase of up to 300,000 shares of its
common stock dependent upon market conditions. Common stock purchases under this
program were authorized through December 31, 2002 on the open market or through
privately negotiated transactions at prices determined by the Chairman of the
Board or the President of the Company. As of December 31, 2002, 150,200 shares
had been purchased under this authorization. Early in 2003, the Board of
Directors extended this program through December 31, 2003 for the remaining
149,800 shares. As of March 31, 2003, there had been no shares purchased under
the extended authorization.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

GENERAL

The Company is a low-cost manufacturer of copper electrical building
wire and cable. The Company is a significant supplier of residential wire for
interior wiring in homes, apartments and manufactured housing and commercial
wire for commercial and industrial buildings.

Price competition for electrical wire and cable is intense, and the
Company sells its products in accordance with prevailing market prices. Copper
is the principal raw material used by the Company in manufacturing its products.
Copper accounted for approximately 63.9%, 66.6% and 63.9% of the Company's cost
of goods sold during fiscal 2002, 2001 and 2000, respectively. The price of
copper fluctuates, depending on general economic conditions and in relation to
supply and demand and other factors, which has caused monthly variations in the
cost of copper purchased by the Company. The Company cannot predict copper
prices in the future or the effect of fluctuations in the cost of copper on the
Company's future operating results.

The following discussion and analysis relates to factors that have
affected the operating results of the Company for the quarterly periods ended
March 31, 2003 and 2002. Reference should also be made to the audited financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 2002.

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FORM 10-Q

RESULTS OF OPERATIONS

Net sales for the first quarter of 2003 amounted to $67.2 million
compared with net sales of $64.2 million for the first quarter of 2002. This
dollar increase was the result of an increase in the volume of product shipped,
offset somewhat by a decrease in the price of wire sold. The average sales price
per copper pound of product sold was down in the first quarter of 2003, compared
to the first quarter of 2002. Fluctuations in sales prices are primarily a
result of changing copper raw material prices and product price competition.

Cost of goods sold increased to $61.5 million in the first quarter of
2003, compared to $54.4 million in the first quarter of 2002. Gross profit
decreased to $5.7 million, or 8.4% of net sales, in the first quarter of 2003
versus $9.8 million, or 15.2% of net sales, in the first quarter of 2002. The
gross profit percentage decrease was attributable primarily to the cost of
copper increasing year over year, while the selling price for finished wire
decreased due to severe price competition in a declining industry market. This
decrease in wire prices and increase in copper raw material costs compressed
margins from the top and bottom resulting in the dramatic decrease in gross
profit margin percentage.

Inventories are stated at the lower of cost, using the last-in,
first-out (LIFO) method, or market. The Company maintains only one inventory
pool for LIFO purposes as all inventories held by the Company generally relate
to the Company's only business segment, the manufacture and sale of copper
building wire products. As permitted by accounting principles generally accepted
in the United States, the Company maintains its inventory costs and cost of
goods sold on a first-in, first-out (FIFO) basis and makes a quarterly
adjustment to adjust total inventory and cost of goods sold from FIFO to LIFO.
The Company applies the lower of cost or market (LCM) test by comparing the LIFO
cost of its raw materials, work-in-process and finished goods inventories to
estimated market values, which are based primarily upon the most recent quoted
market price of copper, in pound quantities, as of the end of each reporting
period. Additionally, future reductions in the quantity of inventory on hand
could cause copper that is carried in inventory at costs different from the cost
of copper in the period in which the reduction occurs to be included in costs of
goods sold for that period at the different price.

As a result of increasing copper costs during the first quarter of 2003,
a LIFO adjustment was recorded increasing cost of sales by $1.9 million during
the quarter. At March 31, 2003, the LIFO cost basis of the inventory exceeded
the market value by $3.4 million. Thus, at March 31, 2003 a $.6 million
reduction was made to the LCM reserve, which decreased cost of sales by $.6
million. Future reductions in the price of copper could require the Company to
record a lower of cost or market adjustment against the related inventory
balance, which would result in a negative impact on net income.

Selling expenses for the first quarter of 2003 were $4.4 million, or
6.5% of net sales, compared to $4.0 million, or 6.2% of net sales, in the first
quarter of 2002. The percentage increase was due to an increase in freight costs
as a percentage of net sales. General and administrative expenses decreased to
$1.6 million, or 2.3% of net sales, in the first quarter of 2003 compared to
$1.7 million, or 2.7% of net sales, in the first quarter of 2002. The provision
for bad debts was $45,000 in the first quarter of 2003 versus $45,000 in the
first quarter of 2002.

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FORM 10-Q

Net interest expense was $511,000 in the first quarter of 2003 compared
to $327,000 in the first quarter of 2002. The increase was due to the higher
average debt balance during the first quarter of 2003 than the comparable period
during 2002.

As a result of the foregoing factors, the Company's net income decreased
to a loss of $.5 million in the first quarter of 2003 from net income of $2.4
million in the first quarter of 2002.

LIQUIDITY AND CAPITAL RESOURCES

The Company maintains a substantial inventory of finished products to
satisfy customers' prompt delivery requirements. As is customary in the
industry, the Company provides payment terms to most of its customers that
exceed terms that it receives from its suppliers. Therefore, the Company's
liquidity needs have generally consisted of operating capital necessary to
finance these receivables and inventory. Capital expenditures have historically
been necessary to expand the production capacity of the Company's manufacturing
operations, including most recently capital expenditures for the Plant 3
expansion project that was completed in the fourth quarter of 2002. The Company
has historically satisfied its liquidity and capital expenditure needs with cash
generated from operations, borrowings under its revolving credit facilities and
sales of its common stock.

Effective August 31, 1999, the Company through its indirectly wholly
owned subsidiary, Encore Wire Limited, a Texas limited partnership, completed
the Financing Agreement. The Financing Agreement replaced the Company's existing
credit facility, and the Company is a guarantor of the indebtedness. Obligations
under the Financing Agreement are the only material contractual obligations or
commercial commitments of the Company. The Financing Agreement has been amended
three times since August 31, 1999. The first two amendments extended the term,
to May 31, 2003 and then again to May 31, 2005. The third amendment was made
effective March 31, 2003, to amend certain provisions, including financial
covenants, of the Financing Agreement. The Financing Agreement provides for
maximum borrowings of the lesser of $65.0 million or the amount of eligible
accounts receivable plus the amount of eligible finished goods and raw
materials, less any available reserves established by the banks. The calculated
maximum borrowing amount available at March 31, 2003, as computed under the
Financing Agreement, was $65.0 million. The Financing Agreement is unsecured and
contains customary covenants and events of default. The Company was in
compliance with these covenants, as amended, as of March 31, 2003. Pursuant to
the Financing Agreement, the Company is prohibited from declaring, paying or
issuing cash dividends. At March 31, 2003, the balance outstanding under the
Financing Agreement was $54.24 million. Amounts outstanding under the Financing
Agreement are payable on May 31, 2005 with interest due quarterly based on the
bank's prime rate or LIBOR rate options, at the Company's election.

In December 2001, the Company entered into an interest rate swap agreement on
$24.0 million of its variable rate debt in order to hedge against an increase in
variable interest rates. The terms of the agreement fix the interest rate on
$24.0 million of the Company's variable rate, long-term note payable to 4.6% per
annum plus a variable increment that is based on certain financial ratios
contained in the loan covenants. This three-year agreement expires in December
2004. For the quarter ended March 31, 2003, the Company recorded an unrealized
gain of $40,625, netting to an unrealized loss of $1,278,149, as reflected in
the accumulated other comprehensive income line in the equity section of the
balance sheet.

13

FORM 10-Q

Cash used in operations was $4.7 million in the first quarter of 2003
compared to $3.9 million of cash used in operations in the first quarter of
2002. This increase in cash used in operations resulted from an increase in
working capital primarily due to an increase in accounts receivable of $2.8
million and a decrease in accounts payable and accrued liabilities of $4.8
million in the first quarter of 2003. Cash used in investing activities
decreased to $2.1 million in the first quarter of 2003 from $5.4 million in the
first quarter of 2002. In 2003, capital expenditures are returning to a lower
maintenance level after the completion of the Plant 3 expansion project in the
fourth quarter of 2002. The $6.7 million of cash provided by financing
activities in the first quarter of 2003 was used to fund the working capital
increase and the capital expenditures described above.

During the remainder of 2003, the Company expects its capital
expenditures will consist of additional equipment for its residential and
commercial wire operations as required to maintain production capability and to
enhance efficiencies. The Company will continue to manage its working capital
requirements. These requirements may increase as a result of expected continued
sales increases and will be impacted by the price of copper. The Company
believes that the cash flow from operations and the financing that it expects to
receive from its banks under the Financing Agreement will satisfy capital
expenditure and working capital requirements for the next twelve months.

INFORMATION REGARDING FORWARD LOOKING STATEMENTS

This report on Form 10-Q contains various "forward-looking statements"
(within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934) and information that are based on
management's belief as well as assumptions made by and information currently
available to management. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, it can give no
assurance that such expectations will prove to have been correct. Such
statements are subject to certain risks, uncertainties and assumptions. Should
one or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
expected. Among the key factors that may have a direct bearing on the Company's
operating results are fluctuations in the economy and in the level of activity
in the building and construction industry, demand for the Company's products,
the impact of price competition and fluctuations in the price of copper.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes from the information provided in
Item 7.A. of the Company's Annual Report on Form 10-K for the year ended
December 31, 2002.

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FORM 10-Q

ITEM 4. CONTROLS AND PROCEDURES

Within the 90 days prior to the date of this report, an evaluation was
performed under the supervision and with the participation of the Company's
management, including the Chief Executive Officer (the "CEO") and the Chief
Financial Officer (the "CFO"), of the effectiveness of the design and operation
of the Company's disclosure controls and procedures. Based on that evaluation,
the Company's management, including the CEO and CFO, concluded that the
Company's disclosure controls and procedures are adequately designed to ensure
that the information that we are required to disclose in this report has been
accumulated and communicated to our management, including our CEO and CFO, as
appropriate, to allow timely decisions regarding such required disclosure.

There have been no significant changes in the Company's internal
controls or in other factors that could significantly affect internal controls
subsequent to March 31, 2003.

PART II. OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) The information required by this Item 6(a) is set forth in the
Index to Exhibits accompanying this Form 10-Q.

(b) On April 29, 2003, the Company filed a report on Form 8-K to
furnish, pursuant to Items 7(c), 9 and 12, a copy of the
company's earnings release for the first quarter of 2003. The
Company filed no other reports on Form 8-K during the three
months ended March 31, 2003.

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FORM 10-Q

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.

ENCORE WIRE CORPORATION
--------------------------------------------------
(Registrant)

Date: May 14, 2003 /s/ VINCENT A. REGO
--------------------------------------------------
Vincent A. Rego, Chairman of the Board and
Chief Executive Officer

Date: May 14, 2003 /s/ DANIEL L. JONES
--------------------------------------------------
Daniel L. Jones, President and
Chief Operating Officer

Date: May 14, 2003 /s/ Frank J. Bilban
--------------------------------------------------
Frank J. Bilban, Vice President - Finance,
Treasurer and Secretary
(Principal Financial Officer)

16

FORM 10-Q

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

ENCORE WIRE CORPORATION

I, Vincent A. Rego, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Encore
Wire Corporation;

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 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 are 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 functions):

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

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FORM 10-Q

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 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

/s/ VINCENT A. REGO
----------------------------------------------
Vincent A. Rego
Chairman of the Board and
Chief Executive Officer

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FORM 10-Q

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

ENCORE WIRE CORPORATION

I, Frank J. Bilban, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Encore
Wire Corporation;

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 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 are 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 functions):

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

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FORM 10-Q

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 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

/s/ FRANK J. BILBAN
----------------------------------------------
Frank J. Bilban
Vice President - Finance, Chief Financial
Officer, Treasurer and Secretary

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FORM 10-Q

INDEX TO EXHIBITS

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FORM 10-Q

INDEX TO EXHIBITS (continued)

* Management contract or compensatory plan.

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