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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 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: 0-17458
-------
WRP CORPORATION
(Exact name of registrant as specified in its charter)
MARYLAND 73-1326131
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
500 PARK BOULEVARD, SUITE 1260
ITASCA, IL 60143
----------------
(Address of principal executive office)
(630) 285-9191
(Registrant's telephone number including area code)
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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares of the issuer's Common Stock, par value $.01 per
share, and issuer's Series A Convertible Common Stock, par value $.01 per share,
outstanding as of November 13, 2002, was 5,803,692 and 1,252,538 respectively.
WRP CORPORATION
INDEX
PART I - FINANCIAL INFORMATION
Item 1.
Condensed Consolidated Balance Sheets
September 30, 2002 (unaudited) and June 30, 2002, unaudited ................. pgs.3-4
Condensed Consolidated Statements of Operations (unaudited) for the
Three Months Ended September 30, 2002 and 2001 .............................. pg. 5
Condensed Consolidated Statements of Cash Flow (unaudited) for the
Three months ended September 30, 2002 and 2001 .............................. pg. 6
Notes to Interim Consolidated Financial Statements (unaudited) .............. pg. 7
Item 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations ....................................................... pg.15
Item 3.
Quantitative and Qualitative Disclosures About Market ....................... pg.20
PART II - OTHER INFORMATION
Items 1.-5. .......................................................................... pg.21
Item 6. .............................................................................. pg.21
2
WRP CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
September 30, 2002 June 30, 2002
------------------ -------------
CURRENT ASSETS:
Cash and cash equivalents $ 808,310 $ 451,948
Accounts receivable - trade, net of allowance for
doubtful accounts of $133,532 at Sept. 30, 2002
and $150,000 at June 30, 2002 2,573,118 4,846,396
Inventories, net 6,738,185 8,506,652
Prepaid expenses 580,991 739,944
Due from affiliate, net of allowance of $5,586,271 3,437,606 3,368,050
Deferred tax assets 2,730,124 2,752,312
Other receivables 532,053 389,242
----------- -----------
Total current assets 17,400,387 21,054,544
----------- -----------
PROPERTY, PLANT AND EQUIPMENT:
Land rights and land improvements 736,535 736,535
Construction in progress 54,571 36,084
Equipment, furniture and fixtures 16,652,004 16,534,201
Building improvements 2,313,647 2,304,128
Vehicles 90,201 90,201
----------- -----------
Total property, plant and equipment 19,846,958 19,701,149
Less - Accumulated depreciation and amortization 9,580,025 9,102,424
----------- -----------
Property, plant and equipment, net 10,266,933 10,598,725
----------- -----------
OTHER ASSETS:
Goodwill, net of accumulated amortization of $707,906
At Sept. 30, 2002 and $707,906 at June 30, 2002 1,042,094 1,042,094
Other Assets 247,455 252,132
----------- -----------
Total other assets 1,289,549 1,294,226
----------- -----------
$28,956,869 $32,947,495
=========== ===========
3
WRP CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
LIABILITIES AND SHAREHOLDERS' EQUITY
September 30, 2002 June 30, 2002
------------------ -------------
CURRENT LIABILITIES:
Accounts payable - trade $ 1,613,251 $ 1,255,515
Trade notes payable to bank 2,562,943 2,860,414
Notes payable and current portion
of long-term obligations 650,988 4,555,964
Due to affiliate 2,549,443 2,657,279
Accrued expenses 2,237,386 2,382,262
------------ ------------
Total current liabilities 9,614,011 13,711,434
------------ ------------
LONG-TERM DEBT 5,545 19,311
------------ ------------
DEFERRED TAX LIABILITY 613,615 562,728
------------ ------------
MINORITY INTEREST IN SUBSIDIARY 1,772,923 1,817,872
------------ ------------
SHAREHOLDERS' EQUITY:
Series A common stock, $.01 par value; 1,252,538 shares authorized;
1,252,538 shares issued and outstanding
in 2003 and 2002 12,525 12,525
Common stock, $.01 par value; 10,000,000 shares
authorized; 5,803,692 shares issued and
outstanding in 2003 and 2002 58,037 58,037
Additional paid-in capital 17,942,471 17,942,471
Retained earnings 566,918 441,493
Less - Common stock in treasury, at cost, 432,600 and 412,600
shares at Sept. 30, 2002 and June 30, 2002, respectively (1,629,176) (1,618,376)
------------ ------------
Total shareholders' equity 16,950,775 16,836,150
------------ ------------
$ 28,956,869 $ 32,947,495
============ ============
The accompanying notes to interim consolidated financial statements are an
integral part of these balance sheets.
4
WRP CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months
Ended September 30,
-------------------
2002 2001
---- ----
NET SALES $ 10,541,504 $ 12,324,518
COST OF GOODS SOLD 8,526,381 8,695,619
------------ ------------
GROSS PROFIT 2,015,123 3,628,899
OPERATING EXPENSES:
Selling, general and administrative 2,090,328 3,366,024
------------ ------------
(LOSS) INCOME FROM OPERATIONS (75,205) 262,875
INTEREST EXPENSE 48,725 77,849
OTHER INCOME 284,149 24,658
------------ ------------
Income from continuing operations before (benefit) provision
from income taxes and minority interest 160,219 209,684
(BENEFIT) PROVISION FROM INCOME TAXES (4,255) 303,709
------------ ------------
Income (Loss) from continuing operations before minority
interest 164,474 (95,025)
MINORITY INTEREST IN (LOSS) INCOME OF SUBSIDIARY (39,052) 73,390
------------ ------------
------------ ------------
NET INCOME (LOSS) $ 125,422 $ (20,635)
============ ============
BASIC NET INCOME (LOSS) PER COMMON SHARE
CONTINUING OPERATIONS $ 0.02 $ (0.01)
DILUTED NET INCOME (LOSS) PER COMMON SHARE
CONTINUING OPERATIONS $ 0.02 $ (0.01)
5
WRP CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2002 AND SEPTEMBER 30, 2001
Three Months Three Months
Ended Ended
Sep 30, 2002 Sep 30, 2001
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 125,422 $ (20,635)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 477,601 490,723
Amortization 0 16,808
Deferred income taxes 73,075 12,213
Loss on disposal of property, plant and 0 (397)
equipment
Changes in operating assets and liabilities-
Accounts receivable - trade, net 2,273,278 (567,897)
Inventories, net 1,768,467 (576,129)
Prepaid expenses 158,953 127,728
Other assets (138,134) (116,656)
Accounts payable - trade (2,062,469) 892,260
Accrued expenses (144,876) 560,686
Amounts due to and from affiliates (177,392) 453,304
----------- -----------
Net cash provided by operating activities 2,353,927 1,272,008
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (145,809) (168,380)
Minority interest in subsidiary (44,948) (73,390)
----------- -----------
Net cash used in investing activities (190,757) (241,770)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on trade notes payable to banks 2,122,734 109,970
Net payments on notes payable (3,918,742) (1,055,349)
Payments for treasury stock repurchases (10,800) (36,184)
----------- -----------
Net cash used in financing activities (1,806,808) (981,563)
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 356,362 48,675
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 451,948 123,742
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 808,310 $ 172,417
=========== ===========
The accompanying notes to consolidated financial statements are an
integral part of these statements.
6
WRP CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
1. DESCRIPTION OF BUSINESS:
We are a leading marketer of foodservice and medical examination gloves
in the United States through our wholly owned subsidiary, American Health
Products Corporation ("AHPC"). We are also a manufacturer of disposable latex
examination and food service gloves through our 70% owned Indonesian
manufacturing facility, PT WRP Buana Multicorpora ("PT Buana"). In 2002, we
broadened our product line to include other disposable items to be used
primarily in the foodservice industry.
2. BASIS OF PRESENTATION:
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles in the
United States of America for interim financial information and with the
instructions to Form 10-Q. 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
necessary for a fair presentation, consisting only of normal recurring
adjustments, have been included. For further information, refer to the
consolidated financial statements contained in the Annual Report on Form 10-K
for the year ended June 30, 2002, filed October 18, 2002. The results of
operations for the three-month period ended September 30, 2002, may not be
indicative of the results that may be expected for the fiscal year ended June
30, 2003.
3. PRINCIPLES OF CONSOLIDATION:
The accompanying interim consolidated financial statements include our
accounts and those of AHPC and our 70% owned subsidiary, PT Buana. All
significant intercompany transactions have been eliminated in consolidation.
4. MAJORITY SHAREHOLDER:
WRP Asia Pacific Sdn. Bhd., a Malaysian corporation ("WRP Asia"), owns
all of our outstanding Series A Common Stock and is our majority shareholder.
At September 30, 2002, WRP Asia had a 53.2% ownership interest in us.
WRP Asia is one of the world's leading manufacturers of high quality, disposable
gloves primarily for use by healthcare professionals in the acute care,
alternative care and foodservice markets, and for critical environments in the
electronics industries, scientific laboratories, pharmaceutical industries and
other related industries. AHPC purchases a majority of its powder-free latex
exam gloves from WRP Asia.
7
5. COMMON STOCK:
At September 30, 2002, we had issued 1,252,538 shares of Series A
Convertible Common Stock and 5,803,692 shares of Common Stock for a total of
7,056,230 shares. The terms of the Series A Common Stock owned by WRP Asia are
substantially the same as our Common Stock except:
a. Each share of Series A Common Stock is convertible
into one share of our Common Stock, $.01 par value.
We have reserved 1,252,538 share of Common Stock for
issuance upon conversion of the Series A Common
Stock.
b. Series A Common Stock entitles WRP Asia to elect all
Class A directors, who represent a majority of our
Board of Directors, and to vote with the holders of
Common Stock as a single class with respect to all
other matters subject to a vote of the shareholders.
In March 2000, we announced that the Board of Directors had authorized
a program to repurchase up to 10% of our public Common Stock. These purchases
may be made in the open market and in block transactions over a two-year period.
The program is subject to market conditions and its impact on share price as
well as other investment options that we may consider to enhance shareholder
value. During the three months ended September 30, 2002, we purchased 20,000
shares of our Common Stock under this program.
6. FOREIGN CURRENCY TRANSACTIONS:
Gains and losses from foreign currency exchange transactions are
included in net loss in the period in which they occur. During the quarter ended
September 30, 2002 and 2001, the foreign exchange gain/loss included in the
determination of net income was $7,188 and $(37,439), respectively. The
functional currency of PT Buana is the U.S. dollar.
7. RELATED-PARTY TRANSACTIONS:
At September 30, 2002 and 2001, amounts due from/to affiliates consist
of the following:
2002 2001
Due from Affiliate-
Current - WRP Asia $ 9,023,877 $ 9,497,495
Due to Affiliate-
Current - WRP Asia $(2,549,443) $(4,141,470)
----------- -----------
Amounts due from
Affiliate - Net* $ 6,474,434 $ 5,356,025
=========== ===========
Purchases from Affiliate - $(1,186,495) $(3,900,806)
=========== ===========
Sales to Affiliate - $ 3,017,180 $ 1,857,716
=========== ===========
* Right of set-off granted in October 2002.
8
The outstanding accounts receivable from WRP Asia results primarily
from sales of product to WRP Asia (powder-free exam gloves produced by PT
Buana), cash advances, charges for obtaining FDA approval of the gloves imported
from WRP Asia and other items. AHPC purchased virtually all of its latex
powder-free exam gloves from WRP Asia in 2002, 2001, 2000 and 1999. Management
believes transactions between operating segments are made at prevailing rates.
AHPC purchases its powdered latex gloves from its 70% subsidiary, PT Buana, as
well as from third-party suppliers other than WRP Asia.
As of September 30, 2002, we have outstanding accounts receivable from
WRP Asia of approximately $9,023,877. Subsequent to June 30, 2002, the amounts
due to PT Buana of approximately $5,586,000, were assigned to us in partial
satisfaction of intercompany amounts due from PT Buana to us. As of September
30, 2002, there were no amounts owing PT Buana from WRP Asia.
As of September 30, 2002, we have accounts payable to WRP Asia of
approximately $2,549,443, primarily resulting from the purchase of inventories
from WRP Asia.
The net amount due from WRP Asia, before allowance for doubtful
accounts at September 30, 2002, was approximately $6,474,434, against which we
have provided an allowance for doubtful accounts of approximately $5,586,000
(representing all amounts due for the sale of product from PT Buana to WRP Asia
at June 30, 2002) due to the uncertainty of the finalization of their
refinancing plan, which has been ongoing for over 18 months without completion.
Subsequent to September 30, 2002, we entered into a formal agreement
with WRP Asia to provide for the full and complete right of offset of any trade
payables due against amounts they owe to us and AHPC. We continue to purchase
gloves from WRP Asia, and believe that the unreserved amounts due from WRP Asia
to WRPC and AHPC of approximately $614,434 at September 30, 2002, are realizable
based upon the agreement granting right of offset and ongoing purchases from WRP
Asia. In management's opinion, while we have been advised by WRP Asia that it
does not currently intend to seek protection from creditors, should such action
take place, we would have to reevaluate the ability to offset payables to WRP
Asia against our receivables from them.
WRP Asia is continuing its restructuring initiative, the objective of
which is to improve cash flows and profitability and to assure longer-term
financial viability. This initiative includes a restructuring of WRP Asia's debt
facility and additional investments from strategic investors and other outside
sources. Management of WRP Asia has advised us that it believes, but cannot
guarantee, that this initiative will be successfully concluded and will generate
adequate cash flow to meet WRP Asia's needs for its ongoing and future business.
In March 2002, WRP Asia had advised us that it anticipated this initiative would
be completed by July 2002. As of November 13, 2002, this restructuring
initiative has not been completed. WRP Asia has advised us that it believes this
initiative will now be completed in December 2002 and attributes the delays to
extensive due diligence being performed by potential strategic investors. While
we are hopeful that a portion of the amount due from WRP Asia will be repaid
from the refinancing, we have established a reserve for the trade receivables
due of approximately $5,586,000 in the event that WRP Asia is ultimately unable
to complete its restructuring and financing. We are advised by WRP Asia that all
of its shares of WRPC have been pledged as collateral security to its lead
9
lender, Standard Chartered Bank. Should WRP Asia fail to effect the
restructuring or should it enter into a loan workout in which it parts with our
shares, it is possible that Standard Chartered Bank or its designees may obtain
ownership of these shares, which represent a majority of the beneficial
ownership in us.
On September 18, 2002, our Board of Directors passed a resolution that
limits the net intercompany amount due from WRP Asia exceeding the balance of
$6,200,000 on a consolidated basis. In the event that WRP Asia desires to
purchase product from PT Buana, and the effect of this sale would be to increase
the net amount due beyond $6,200,000, WRP Asia will be required to support these
purchases by payment of cash in advance or tender of an irrevocable letter of
credit to PT Buana, to cover the purchase price of the order to the extent such
amount exceeds $6,200,000.
On July 24, 2002, our Board of Directors approved a proposal submitted
by the independent directors to form a Special Evaluation Committee (the
"Committee"). The Committee is comprised of our "B" Directors, Robert J. Simmons
and Don L. Arnwine, as well the independent "A" Directors, G. Jeffery Mennen and
Richard J. Swanson. The purpose of the Committee is to examine the WRP Asia
restructuring process as well as the options and alternatives available to us.
Additionally, interest rates in many Asian-Pacific countries have been
heavily dependent upon international trade and are, accordingly, affected by
protective trade barriers and the economic conditions of their trading partner.
The enactment by the government of principal trading partners of protectionist
trade legislation, reduction of foreign investment or general declines in the
international securities markets could have a significant adverse effect upon
the economies of the Asian-Pacific countries. The financial statements do not
include any adjustment that might result from these uncertainties and any
related effects will be reported in the financial statements as they become
known and estimable.
8. NET INCOME (LOSS) PER SHARE:
We follow the Statement of Financial Accounting Standards No. 128,
"Earnings Per Share (EPS)" ("SFAS 128"), which requires dual presentation of
basic and diluted earnings per share for all periods presented. Basic EPS
amounts are based on the weighted-average number of shares of common stock
outstanding during each period while diluted EPS amounts are based on the
weighted-average number of shares of common stock outstanding during the period
and the effect of dilutive stock options and warrants. The weighted-average
number of common shares and common share equivalents outstanding for the three
months ended September 30, 2002 and 2001 is as follows:
THREE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, 2002 SEPTEMBER 30, 2001
------------------ ------------------
Basic weighted-average number of
Common shares outstanding 6,647,802 6,744,155
Dilutive effect of common share
Equivalents -- --
--------- ---------
10
At September 30, 2002, there were 7,056,230 shares of our Common Stock
and Series A Common Stock outstanding.
As approved by the Board of Directors, all outstanding stock options at
February 29, 2000 to current employees, officers and directors were repriced
effective February 29, 2000 to $2.07, the closing price on that date. All of the
stock options, which were repriced, totaling 483,600 options, originally
contained exercise prices that were significantly higher than the market price.
We are subject to variable accounting; however, the share price has not exceeded
$2.07.
9. ACCOUNTING FOR INCOME TAXES:
We record income taxes in accordance with Statement of Financial
Accounting Standards No. 109 ("SFAS 109"). SFAS 109 utilizes the liability
method and deferred taxes are determined based on the estimated future tax
effects of differences between the financial statement and tax basis of assets
and liabilities given the provisions of enacted tax laws. Deferred income tax
provisions and benefits are based on the changes in the deferred tax asset or
tax liability from period to period.
Our U.S. operations had generated net operating loss carry-forwards
("NOL's") in prior years of which approximately $1.3 million is remaining at
September 30, 2002. These NOL's are fully reserved and included as a component
of deferred tax assets. These NOL's will be available to offset future U.S.
generated taxable income and will begin expiring in 2004. In accordance with
federal tax regulations, usage of the NOL's are and have been subject to
limitations as a direct result of certain ownership changes that have occurred
in the past, and may be further limited should WRP Asia transfer ownership of
its shares of stock to another holder. Our U.S. operations have generated NOL's
subsequent to June 30, 2002, which have not been reserved and we have recorded a
tax benefit associated with the U.S. generated book and tax losses subsequent to
June 30, 2002, which are available to be carried back against previous years'
taxable income.
For the three months ended September 30, 2002 and 2001, we have
recorded a (benefit) provision from income taxes of $(4,255) and $303,709,
respectively.
10. CONTINGENCIES:
Over the last several years, numerous product liability lawsuits have
been filed against suppliers and manufacturers of latex gloves alleging, among
other things, adverse allergic reactions. We are one of numerous defendants that
have been named in such lawsuits. During the three months ended September 30,
2002, there were no additional product liability lawsuits filed, and we were
dismissed from one lawsuit. At September 30, 2002, we were involved in a total
of 64 lawsuits, either as a named defendant, third party or an indemnifier. None
of these lawsuits name us as the sole defendant in these claims.
We possessed product liability insurance coverage which covers the
defense costs and certain damage awards associated with the product liability
claims against ourselves, AHPC and PT Buana, in addition to the indemnity of
AHPC's customers to the limits of its policy, subject to deductions on each
claim, to be paid by AHPC. We believe that all legal claims are
11
adequately provided for and if not provided for, are without merit or involve
such amounts that would not materially or adversely affect us. However, there is
no assurance that AHPC's insurance will be sufficient to meet all damages for
which we may be held liable. For example, in a jury trial, even where actual
damages are somewhat limited, or where causation of liability is questionable,
the jury may choose to award a substantial verdict to the plaintiff. Likewise,
there is no assurance that the outcome of these suits will not adversely affect
our operations or financial condition. We will vigorously contest any latex
claim initiated against it, but will enter into a settlement agreement, where,
after careful consideration, management determines that our best interests will
be served by settling the matter. In addition, there can be no assurances that
product liability insurance for these claims will continue to be available to us
or, if available, that it will be available in sufficient amounts and at
affordable terms.
11. COMPREHENSIVE INCOME:
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("SFAS 130"), requires companies to report all changes in
equity during a period, except those resulting from investment by owners and
distributions to owners, in a financial statement for the period in which they
are recognized. Comprehensive profit (loss) for the three months ended September
30, 2002 and 2001 was equal to net profit (loss) and there were no accumulated
other comprehensive income items during those periods.
12. SEGMENT REPORTING:
We have two business segments: manufacturing and distribution. These
segments are managed as separate strategic business units due to the distinct
nature of their operations and customer bases. The manufacturing segment, which
represents the operations of PT Buana, manufactures latex gloves and sells them
primarily to AHPC and other customers through WRP Asia's distribution network.
All operations of the manufacturing segment are located in Indonesia. The
distribution segment involves the procurement and sale of gloves purchased from
the manufacturing segment and other glove manufacturers and then sold to
national and regional healthcare, foodservice, retail and other distributors.
The operations of the distribution segment are located entirely within the U.S.
We evaluate segment performance based on income (loss) before provision
for (benefit from) income taxes and minority interest ("Pre-tax income (loss)").
Transactions between operating segments are made at prevailing market rates.
12
The following tables provide financial data for the three months ended
September 30, 2002 and 2001 for these segments:
THREE MONTHS ENDED
SEPTEMBER 30, 2002 MANUFACTURING DISTRIBUTION ELIMINATIONS CONSOLIDATED
------------- ------------ ------------ ------------
Revenues from external customers $ 3,351,426 $ 7,190,078 -- $10,541,504
Revenues from other operating segments 1,044,074 -- $(1,044,074) --
Pre-tax income 119,430 40,789 -- 160,219
Total Assets 11,581,797 17,375,072 -- 28,956,869
THREE MONTHS ENDED
SEPTEMBER 30, 2001 MANUFACTURING DISTRIBUTION ELIMINATIONS CONSOLIDATED
------------- ------------ ------------ ------------
Revenues from external customers $ 2,039,330 $10,285,188 -- $ 12,324,518
Revenues from other operating segments 1,837,910 -- $ (1,837,910) --
Pre-tax loss 24,063 (173,747) (60,000) (209,684)
Total Assets 18,856,575 29,169,132 (10,055,447) 37,970,260
13. NEW ACCOUNTING STANDARDS AND PRONOUNCEMENTS:
In June 2001, the FASB No. 143, "Accounting for Asset Retirement
Obligations." This statement addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. The statement amends FASB statement No.19,
"Financial Accounting and Reporting by Oil and Gas Producing Companies." The
provisions in this statement are effective for financial statements issued for
fiscal years beginning after June 15, 2002. Although early adoption is
encouraged, it is not required. We will adopt the provisions in this statement
for all tangible long-lived assets retirements initiated after June 30, 2002.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." This statement addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
This statement supersedes FASB statement No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and the
accounting and reporting provisions of APB Opinion No. 30, "Reporting the
Results of Operation - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions." This statement also amends ARB No. 51, "Consolidated Financial
Statements", to eliminate the exception of consolidation for a subsidiary for
which control is likely to be temporary. The provisions of this statement are
effective for financial statements issued for fiscal years beginning after
December 15, 2001, and interim periods within those fiscal years. Although early
adoption is encouraged, it is not required. We will adopt the provisions in this
statement for fiscal years beginning after June 30, 2002.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities". This statement addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
and Disposal Activity (including Certain Costs Incurred in a Restructuring)".
The provisions of this statement are effective for exit and disposal activities
that are initiated after
13
December 31, 2002, with early adoption encouraged. We plan to adopt the
provision set forth in this statement for all exit and disposal activities
initiated after December 31, 2002.
In June 2001, the FASB issued SFAS No. 141, "Business Combinations",
FAS No. 141 addresses the accounting and reporting for business combinations and
supersedes APB Opinion No. 16, "Business Combinations" and SFAS No. 38,
"Accounting for Preacquisition Contingencies of Purchased Enterprises." We will
adopt this standard for all business combinations initiated after June 30, 2001.
Also in June 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets." This pronouncement provides guidance on financial accounting
and reporting for acquired goodwill and other intangible assets. This statement
supersedes APB Opinion No. 17, "Intangible Assets." The provisions of this
statement are required to be applied for fiscal years beginning after December
15, 2001. We anticipate that future earnings will increase without amortization
expense; however, we must assess its existing goodwill for impairment. The
Company's initial assessment of goodwill in accordance with SFAS 142 does not
require an impairment charge.
14. INVENTORIES:
Since a majority of our product is imported from Southeast Asia, it is
our practice to maintain a certain level of safety-stock inventory. Inventories
are accounted for on a first-in, first-out ("FIFO") basis and are valued at the
lower of actual cost or market. Beginning in the first quarter of 2002, we
started to capitalize the duty on our freight cost. This resulted in an increase
to inventories of approximately $21,000.
15. KEY CUSTOMERS:
Our customers include leading foodservice distributors and healthcare
product suppliers. During the three months ended September 30, 2002, three of
AHPC's national customers accounted for 64.5%, 13.5% and 7.7% of net sales. The
loss of any of these customers would have a materially adverse effect on us. Our
customers tend to limit the number of qualified vendors they purchase from, to
gain efficiencies across their product line. We, therefore, expend substantial
efforts to maintain and grow our relationships with our existing major
customers. However, our products are ultimately distributed by these three
diversified distribution companies, through their combined networks of over 100
operating companies, to thousands of foodservice organizations and medical
facilities throughout the United States. The ultimate end-users of our products
are the foodservice organizations and medical facilities, healthcare
professionals and individuals who use our gloves. During the year ended, June
30, 2002, we entered into a transition service agreement with Maxxim, whereby
Maxxim will service the vast majority of our medical customers, as we
substantially reduced our medical sales staff and presence in the medical
market. This agreement is expected to reduce sales to Maxxim.
16. CREDIT FACILITY:
On December 1, 1998, AHPC entered into a $10,000,000 three-year credit
agreement through December 1, 2001, with a major financial services company.
Subsequently, on March 31, 1999, the limit was increased to $15,000,000. The new
credit facility includes a $15,000,000
14
revolving line of credit with an $11,000,000 letter of credit subfacility. The
facility carries an interest rate of commercial paper (1.71% at September 30,
2002), plus 4.50%. The credit facility was used to repay all obligations under
the previous bank facility. On November 15, 2001, we completed the renewal and
extension of this credit facility for an additional term of three years, with
terms and conditions similar to the existing facility. In conjunction with a
waiver of the covenant violations as of June 30, 2002, the existing credit
facility agreement was amended to expire on December 1, 2003. As of September
30, 2002, we were in compliance with our covenants.
17. MEDICAL BUSINESS:
On March 1, 2002, we announced that our subsidiary, American Health
Products Corp, had entered into a Transition Services Agreement with Maxxim
Medical, Inc., (MAXXIM), whereby MAXXIM would service most of our acute-care
medical customers. As a result of this transition, we have substantially reduced
our personnel in our medical division and have transitioned the business with
respect to most of its customers in the medical division to MAXXIM.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Forward-looking statements in this Item 2, Management's Discussion and
Analysis of Financial Condition and Results of Operations, including statements
regarding new products and markets, gross margins, selling, general and
administrative expenses, liquidity and cash need and our plans and strategies,
are all based on current expectations, and we assume no obligation to update
this information. Numerous factors could cause actual results to differ from
those described in the forward-looking statements, including the factors set
forth below under the heading "Risks Affecting Forward-Looking Statements and
Stock Prices." We caution investors that our business is subject to significant
risks and uncertainties.
Our wholly owned subsidiary, American Health Products Corporation
("AHPC"), is engaged in the marketing and distribution of high-quality,
disposable, examination, foodservice and specialty gloves in the United States
and has been in the glove business since our incorporation in January 1989. For
the three months ended September 30, 2002, we recorded net sales of $10,541,504.
Our 70% owned subsidiary, PT WRP Buana Multicorpora ("PT Buana"), which
commenced operations in April 1996, owns and operates an Indonesian glove
manufacturing plant. PT Buana manufactures high-quality, disposable latex exam
and foodservice gloves.
During February 2000, our Board of Directors elected to change our
reporting period from a calendar year ending December 31 to a fiscal year ending
June 30, which corresponds to the year-end of our majority shareholder, WRP
Asia. As a result, this Form 10-Q represents the first quarter of our fiscal
year ended June 30, 2002.
15
THREE MONTHS ENDED SEPTEMBER 30, 2002, COMPARED TO THE THREE MONTHS
ENDED SEPTEMBER 30, 2001:
Our net sales are derived from the sale of finished product, net of
allowable rebates, royalties, discounts and returns. Net sales include glove
sales from AHPC's glove product line and latex exam glove sales from PT Buana,
exclusive of its sales to AHPC. Net sales totaled $10,541,504 and $12,324,518
for the three months ended September 30, 2002 and 2001, respectively. This
represents a 14.5% decline in net sales for the quarter compared to the year
earlier period. The decrease in sales of $1,783,014 was due, in part, to our
transition out of most of the medical business.
Cost of goods sold includes all costs to manufacture, purchase and
obtain the finished product, including costs such as ocean freight, customs,
duty and warehousing. Cost of goods sold decreased 1.9% from $8,695,619 for the
three-month period ended September 30, 2001, to $8,526,381 for the three months
ended September 30, 2002, due to the decline in sales caused by our transition
out of most of the acute-care medical business. As a percentage of net sales,
cost of goods sold increased from 70.6% for the three months ended September 30,
2001, to 80.9% for the three months ended September 30, 2002. The gross profit
percentage decreased to 19.1% in the quarter ended September 30, 2002 versus
29.4% in the same period of 2001. The gross profit percentage decrease is
attributed to an increase in the cost of raw latex, which increased by more than
50% versus the comparable 2001 period. The gross profit percentage was also
impacted by increases in product mix of lower-margin products and price
decreases provided to our customers. We continue to expect our gross margins to
be affected by the price of latex, changes in product mix, competition,
manufacturing capacity levels and other factors.
Selling expenses include all salaries and payroll related costs for
sales and marketing staff together with other sales related expenses such as
sales commissions, travel costs, trade shows, advertising, promotions and
delivery costs. Selling, general and administrative ("SG&A") expenses decreased
by 37.9% from $3,366,024 for the three months ended September 30, 2001, to
$2,090,328 for the three months ended September 30, 2002. The decrease of
$1,275,694 in SG&A expenses is attributable to a decrease in salaries and
salary-related expense associated with our transition out of the acute-care
medical business offset by an increase in marketing expense related to expanding
our foodservice product-line offerings.
Loss from operations was $(75,205) for the three months ended September
30, 2002, as compared to income from operations of $262,875 for the three months
ended September 30, 2001. This loss from operations reflects the reduction in
sales and increased costs of goods sold. For the three months ended September
30, 2002 and 2001, earnings before interest, taxes, depreciation and
amortization ("EBITDA") were $264,430 and $396,519, respectively.
Interest expense declined during the three months ended September 30,
2002, to $48,725 compared to $77,849 in the same quarter of 2001. This decrease
is attributable to debt reductions on our line of credit and lower interest
rates during the quarter in 2002 versus the 2001 comparable quarter.
We recorded a foreign currency exchange gain of $7,188 in the quarter
ended September 30, 2002 versus a foreign exchange loss of $37,493 in the
comparable period in 2001 from our Indonesian subsidiary, PT Buana. As currency
exchange rates fluctuate and depending upon the
16
mix of assets and liabilities in PT Buana's books in Indonesian rupiah, an
exchange gain or loss will be incurred. These foreign currency exchange gains or
losses are reported as a component of the SG&A expense category in the
consolidated statements of operations. PT Buana uses the U.S. dollar as its
functional currency. PT Buana continues to be exposed to foreign currency
exchange rate fluctuations and may incur exchange gains or losses in the future.
Indonesia continues to experience economic and political instability, which is
characterized by fluctuations in its foreign currency exchange rate, interest
rates, stock market and inflation rate. The financial statements do not include
any adjustment that might result from these uncertainties and any related
effects will be reported in the financial statements as they become known and
estimable.
Other income consists of interest income proceeds from the Transition
Services Agreement with MAXXIM ($250,000) and miscellaneous income. Other income
for the quarter ended September 30, 2002 and 2001 was $284,149 and $24,658,
respectively.
The (benefit) provision for income taxes for the three months ended
September 30, 2002 was $(4,255) and $303,709 for the comparable 2001 period.
This change in income taxes is primarily attributable to the fluctuations of the
Indonesian rupiah against the US dollar during the period. Our U.S. operations
generated net operating loss carry-forwards ("NOL's") in prior years of which
approximately $1.3 million is remaining from June 30, 2002 which can be used to
offset future U.S. generated taxable income through the year 2004.
For the three months ended September 30, 2002, our net income was
$125,422, compared to a net loss of $(20,635) in the same period of 2001.
Diluted earnings (loss) per share for the three months ended September 30, 2002
and 2001 was $0.02 and $(0.01), respectively.
LIQUIDITY AND CAPITAL RESOURCES:
THREE MONTHS ENDED SEPTEMBER 30, 2002:
Cash and cash equivalents at September 30, 2002, was $808,310, an
increase of $356,362 from $451,948 at June 30, 2002. We experienced an increase
in cash flows during the three months ended September 30, 2002, primarily from
cash provided by operating activities.
Our operations provided cash of $2,353,927 during the three months
ended September 30, 2002, primarily as a result of a decrease in accounts
receivable of $2,273,278 and a decrease in inventory of $1,768,467.
Net trade accounts receivable at September 30, 2002, decreased 46.9% to
$2,573,118 from $4,846,396 at June 30, 2002. Net inventories at September 30,
2002, were $6,738,185 and decreased from the level at June 30, 2002, of
$8,506,652 due to our transition out of the acute-care medical business, offset
by increased shipments from PT Buana, new inventory purchases from
non-affiliated parties and increases in safety stock levels. We anticipate our
inventory to continue to decrease over the near-term, as we complete our
transition out of the acute-care medical business and due to anticipated
short-term shortages caused by the West Coast dock workers' strike.
During the three months ended September 30, 2002, we used cash in
investing activities of $190,757. We spent $145,809 for capital improvement
expenditures during the three-month
17
period primarily at PT Buana, our Indonesian manufacturing plant. These
expenditures included equipment purchases and upgrades to expand our capacity to
manufacture higher-margin products, including powder-free latex gloves.
During the three months ended September 30, 2002, cash was used from
financing activities in the amount of $1,806,808. We decreased borrowings on our
line of credit facility by $3,918,742 and made stock repurchases of $10,800.
The outstanding accounts receivable from WRP Asia results primarily
from sales of product to WRP Asia (powder-free exam gloves produced by PT
Buana), cash advances, charges for obtaining FDA approval of the gloves imported
from WRP Asia and other items. AHPC purchased virtually all of its latex
powder-free exam gloves from WRP Asia in 2002, 2001, 2000 and 1999. Management
believes transactions between operating segments are made at prevailing rates.
AHPC purchases its powdered latex gloves from its 70% subsidiary, PT Buana, as
well as from third-party suppliers other than WRP Asia.
As of September 30, 2002, we have outstanding accounts receivable from
WRP Asia of approximately $9,023,877. Subsequent to June 30, 2002, the amounts
due to PT Buana of approximately $5,586,000, were assigned to us in partial
satisfaction of intercompany amounts due from PT Buana to us. As of September
30, 2002, there were no amounts owing PT Buana from WRP Asia.
As of September 30, 2002, we have accounts payable to WRP Asia of
approximately $2,549,443, primarily resulting from the purchase of inventories
from WRP Asia.
The net amount due from WRP Asia, before allowance for doubtful
accounts at September 30, 2002, was approximately $6,474,434, against which we
have provided an allowance for doubtful accounts of approximately $5,586,000
(representing all amounts due for the sale of product from PT Buana to WRP Asia
at June 30, 2002) due to the uncertainty of the finalization of their
refinancing plan, which has been ongoing for over 18 months, without completion.
Subsequent to June 30, 2002, we entered into a formal agreement with
WRP Asia to provide for the full and complete right of offset of any trade
payables due against amounts they owe to us and AHPC. We continue to purchase
gloves from WRP Asia, and believe that the unreserved amounts due from WRP Asia
to us and AHPC of approximately $614,434 at September 30, 2002, are realizable
based upon the agreement granting right of offset and ongoing purchases from WRP
Asia. In management's opinion, while we have been advised by WRP Asia that it
does not currently intend to seek protection from creditors, should such action
take place, we would have to reevaluate the ability to offset payables to WRP
Asia against our receivables from them.
WRP Asia is continuing its restructuring initiative, the objective of
which is to improve cash flows and profitability and to assure longer-term
financial viability. This initiative includes a restructuring of WRP Asia's debt
facility and additional investments from strategic investors and other outside
sources. Management of WRP Asia has advised us that it believes, but cannot
guarantee, that this initiative will be successfully concluded and will generate
adequate cash flow to meet WRP Asia's needs for its ongoing and future business.
In March 2002, WRP Asia had
18
advised us that it anticipated this initiative would be completed by July 2002.
As of October 30, 2002, this restructuring initiative has not been completed.
WRP Asia has advised us that it believes this initiative will now be completed
no later than the first quarter of 2003 and attributes the delays to extensive
due diligence being performed by potential strategic investors and the
regulatory delays associated with a Malaysian governmental agency involved with
one segment of the proposed transition. While we are hopeful that a portion of
the amount due from WRP Asia will be repaid from the refinancing, we have
established a reserve for the trade receivables due of approximately $5,586,000
in the event that WRP Asia is ultimately unable to complete its restructuring
and financing.
On September 18, 2002, our Board of Directors passed a resolution that
limits the net intercompany amount due from WRP Asia exceeding the balance of
$6,200,000 on a consolidated basis. In the event that WRP Asia desires to
purchase product from PT Buana, and the effect of this sale would be to increase
the net amount due beyond $6,200,000, the resolution requires WRP Asia to
support these purchases by payment of cash in advance or tender of an
irrevocable letter of credit to PT Buana to cover the purchase price of the
order to the extent such amount exceed $6,200,000.
On July 24, 2002, our Board of Directors approved a proposal submitted
by the independent directors to form a Special Evaluation Committee (the
"Committee"). The Committee is comprised of our "B" Directors, Robert Simmons
and Don L. Arnwine as well the independent "A" Directors, G. Jeffery Mennen and
Richard Swanson. The purpose of the Committee is to examine the WRP Asia
restructuring process as well as the options and alternatives available to us.
On December 1, 1998, we obtained a domestic three-year credit facility
from GE Capital, a large commercial credit company. This asset based lending
loan and security agreement included a $10,000,000 revolving line of credit with
a $7,000,000 letter of credit sub-facility. On March 31, 1999, we amended our
Loan and Security Agreement by increasing the maximum credit loan limit from
$10,000,000 to $15,000,000 subject to availability, based on a formula using
accounts receivable and inventory. As part of the amendment, the letter of
credit subfacility was increased from $7,000,000 to $11,000,000. The line of
credit borrowings carry an interest rate of commercial paper plus 4.5% (1.71% at
September 30, 2002). At September 30, 2002, we had outstanding $452,843 on the
revolving line of credit and $650,988 of letter of credit liabilities under the
credit facility. As of September 30, 2002, we were in compliance with all of our
covenants.
We currently expect to have cash needs during the next year and beyond
for funding the growth of the existing glove business, launch and promotion of
our SafePrep foodservice business and for other uses. These cash needs may arise
in connection with various events such as for: (i) the expansion into new
products; (ii) the expansion into new markets; (iii) funding the promotion of
our branded products; (iv) repayment of debt obligations; (v) purchasing our
Common Stock in connection with our stock repurchase program; and (vi)
manufacturing capital improvements. We believe that our cash and cash to be
generated from future operations plus our credit facility will be sufficient to
fund our ongoing operations.
19
As of September 30, 2002, we had the following contractual obligations
and commercial commitments:
PAYMENTS DUE BY PERIOD
CONTRACTUAL --------------------------------------------------
OBLIGATION TOTAL LESS THAN 1 YEAR 1-3 YEARS 4-5 YEARS
---------- ----- ---------------- --------- ---------
Operating Leases $1,341,234 $ 577,985 $763,249 -0-
Operating leases primarily represent our leases for our corporate
office and warehouse facilities. The letters of credit are issued under our
credit facility and are commercial obligations related to product purchases.
Insurance premium financing was used to finance our product liability insurance.
Short-term borrowings represent borrowings under our credit facility primarily
to finance working capital.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to the impact of interest rate changes, foreign currency
fluctuations and changes in the market value of investments. We have not entered
into interest rate caps or collars or other hedging instruments.
Exposure to changes in interest rates is limited to borrowings under
revolving credit and debt agreements, which have variable interest rates tied to
the prime and commercial paper rates. We estimate that the fair value of each
debt instrument approximated its market value at September 30, 2002.
We are subject to fluctuations in the value of the Indonesian rupiah
vis-a-vis the U.S. dollar. The investment in the Indonesian subsidiary is
remeasured into the U.S. dollar and the book value of the assets and liabilities
of this operation at September 30, 2002, approximated its fair value.
ITEM 4. CONTROLS AND PROCEDURES
Our Chief Executive Officer and Chief Financial Officer have concluded,
based on their evaluation within 90 days of the filing date of this report, that
our disclosure controls and procedures are effective for gathering, analyzing
and disclosing the information we are required to disclose in our reports filed
under the Securities Exchange Act of 1934. There have been no significant
changes in our internal controls or in other factors that could significantly
affect these controls subsequent to the date of the previously mentioned
evaluation.
20
PART II
ITEM 1-5.
No changes
ITEM 6 (a) EXHIBIT 99.1
Certification of CEO and CFO pursuant to Section 90C of the
Sarbanes-Oxley Act of 2002.
(b) REPORTS ON FORM 8-K
During the three-month period ended September 30, 2002, we did not file
any reports on Form 8-K.
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.
WRP Corporation
(Registrant)
Date: November 14, 2002 By:/s/ Alan E. Zeffer
------------------
Name: Alan E. Zeffer
Title: Chief Financial Officer
Vice President Finance/Operations
21
CERTIFICATION
PURSUANT TO SECTION 302 OF THE SARBANES OXLEY ACT OF 2002
I, Lew Kwong Ann, certify that:
1. I have reviewed this quarterly report on Form 10-Q of WRP 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 officer and I (herein the "Certifying
Officers") 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, (collectively the
"Company") is made known to the Certifying Officers by others
within the Company, 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 the conclusions of the
Certifying Officers about the effectiveness of the disclosure
controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's Certifying Officers have disclosed, based on our most
recent evaluation, to the registrant's auditors and the audit committee
of the registrant's board of directors:
a) all significant deficiencies (if any) 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 Certifying Officers have indicated in this quarterly
report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: November 14, 2002
/s/ Lew Kwong Ann
- -----------------
Lew Kwong Ann
- -----------------------
Chief Executive Officer
22
CERTIFICATION
Pursuant to Section 302 of the Sarbanes Oxley Act of 2002
I, Alan E. Zeffer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of WRP 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 officer and I (herein the "Certifying
Officers") 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, (collectively the
"Company") is made known to the Certifying Officers by others
within the Company, 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 the conclusions of the
Certifying Officers about the effectiveness of the disclosure
controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's Certifying Officers have disclosed, based on our most
recent evaluation, to the registrant's auditors and the audit committee
of the registrant's board of directors:
a) all significant deficiencies (if any) 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 Certifying Officers have indicated in this quarterly
report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: November 14, 2002
/s/ Alan E. Zeffer
- ------------------
Alan E. Zeffer
- -----------------------
Chief Financial Officer
23