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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 ACT OF 1934
For quarterly period ended DECEMBER 31, 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: 0-23335
MPW INDUSTRIAL SERVICES GROUP, INC.
(Exact name of registrant as specified in its charter)
Ohio 31-1567260
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
9711 Lancaster Road, S.E., Hebron, Ohio 43025
(Address of principal executive offices) (Zip code)
(740) 927-8790
(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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of the issuer's classes of
common stock, as of the latest practicable date.
As of January 31, 2003, 10,939,957 shares of the issuer's common stock,
without par value, were outstanding.
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MPW INDUSTRIAL SERVICES GROUP, INC.
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of December 31, 2002 (unaudited) and June 30, 2002................. 3
Consolidated Statements of Operations for the three and six months ended December 31, 2002
and 2001 (unaudited).............................................................................. 4
Consolidated Statements of Cash Flows for the six months ended December 31, 2002 and 2001
(unaudited)....................................................................................... 5
Notes to Consolidated Financial Statements (unaudited)............................................ 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............. 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk........................................ 15
Item 4. Controls and Procedures........................................................................... 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................................................. 17
Item 2. Changes in Securities and Use of Proceeds......................................................... 17
Item 3. Defaults Upon Senior Securities................................................................... 17
Item 4. Submission of Matters to a Vote of Security Holders............................................... 17
Item 5. Other Information................................................................................. 17
Item 6. Exhibits and Reports on Form 8-K.................................................................. 17
SIGNATURES.......................................................................................................... 18
CERTIFICATIONS...................................................................................................... 19
EXHIBIT INDEX....................................................................................................... 21
2
PART I. -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MPW INDUSTRIAL SERVICES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
December 31, June 30,
2002 2002
--------------- ----------------
(unaudited)
ASSETS
Cash $ 280 $ 164
Accounts receivable, net 19,299 16,390
Inventories 2,625 2,290
Deferred income taxes 1,387 1,912
Prepaid expenses 920 776
Other current assets 186 672
-------------- ----------------
Total current assets 24,697 22,204
-------------- ----------------
Property and equipment, net 37,221 37,672
Goodwill 6,766 11,508
Other intangibles, net 7,229 7,569
Investment in affiliate 6,908 6,792
Other assets 112 144
-------------- ----------------
Total assets $ 82,933 $ 85,889
============== ================
LIABILITIES
Accounts payable $ 5,401 $ 4,910
Accrued compensation and related taxes 1,705 2,665
Current maturities of long-term debt 1,310 1,382
Other accrued liabilities 5,337 5,775
-------------- ----------------
Total current liabilities 13,753 14,732
-------------- ----------------
Long-term debt 28,835 25,972
Deferred income taxes 3,312 5,424
-------------- ----------------
Total liabilities 45,900 46,128
-------------- ----------------
SHAREHOLDERS' EQUITY
Preferred stock, $0.01 par value; 5,000,000 shares authorized; no shares issued
and outstanding - -
Common stock, no par value; 30,000,000 shares authorized; 10,939,957 shares issued
and outstanding at December 31, 2002 and June 30, 2002 109 109
Additional paid-in capital 41,507 41,507
Accumulated deficit (4,193) (1,416)
Accumulated other comprehensive loss (390) (439)
-------------- ----------------
Total shareholders' equity 37,033 39,761
-------------- ----------------
Total liabilities and shareholders' equity $ 82,933 $ 85,889
============== ================
The accompanying notes are an integral part of these consolidated financial
statements.
3
MPW INDUSTRIAL SERVICES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share data)
Three Months Ended Six Months Ended
December 31, December 31,
----------------------------- -----------------------------
2002 2001 2002 2001
------------ ------------- ------------- ------------
(unaudited) (unaudited)
Revenues $ 24,345 $ 22,237 $ 48,651 $ 45,910
Cost of services (including depreciation) 18,739 15,974 37,906 33,359
----------- ------------- ------------- ------------
Gross profit 5,606 6,263 10,745 12,551
Selling, general and administrative expenses 4,370 4,351 9,298 9,063
----------- ------------- ------------- ------------
Income from operations 1,236 1,912 1,447 3,488
Interest expense, net 512 662 1,013 1,390
----------- ------------- ------------- ------------
Income from operations before income taxes
and equity in loss of affiliate 724 1,250 434 2,098
Provision for income taxes 304 550 182 923
----------- ------------- ------------- ------------
Income from operations before equity in loss
of affiliate 420 700 252 1,175
Equity in loss of affiliate (149) (176) (184) (228)
----------- ------------- ------------- ------------
Income before cumulative effect of change in accounting
principle 271 524 68 947
Cumulative effect of change in accounting principle - - (2,845) -
----------- ------------- ------------- ------------
Net income (loss) $ 271 $ 524 $ (2,777) $ 947
=========== ============= ============= ============
Net income (loss) per share:
Income before cumulative effect of change in accounting
principle $ 0.03 $ 0.05 $ 0.01 $ 0.09
Cumulative effect of change in accounting principle - - (0.26) -
----------- ------------- ------------- ------------
Net income (loss) per share $ 0.03 $ 0.05 $ (0.25) $ 0.09
=========== ============= ============= ============
Net income (loss) per share, assuming dilution:
Income before cumulative effect of change in accounting
principle $ 0.03 $ 0.05 $ 0.01 $ 0.09
Cumulative effect of change in accounting principle - - (0.26) -
----------- ------------- ------------- ------------
Net income (loss) per share, assuming dilution $ 0.03 $ 0.05 $ (0.25) $ 0.09
=========== ============= ============= ============
Weighted average shares outstanding 10,940 10,940 10,940 10,940
Weighted average shares outstanding, assuming dilution 10,958 10,944 10,976 10,944
The accompanying notes are an integral part of these consolidated financial
statements.
4
MPW INDUSTRIAL SERVICES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Six Months Ended
December 31,
--------------------------------
2002 2001
-------------- --------------
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (2,777) $ 947
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation 4,482 3,998
Amortization 340 628
Equity in loss of affiliate 184 228
Loss on disposal of assets 46 35
Change in deferred income taxes 225 (506)
Cumulative effect of change in accounting principle 2,845 -
Changes in operating assets and liabilities:
Accounts receivable (2,909) 359
Inventories (335) 54
Prepaid expenses and other assets 374 1,117
Accounts payable 478 (486)
Other accrued liabilities (1,186) (1,315)
------------- -------------
Net cash provided by operating activities 1,767 5,059
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (4,092) (3,584)
Investment in affiliate (365) -
Proceeds from the disposal of property and equipment 15 25
------------- -------------
Net cash (used in) investing activities (4,442) (3,559)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit facility 17,349 14,200
Payments on revolving credit facility (14,497) (15,574)
Issuance of notes payable 85 -
Payments on notes payable (146) (132)
------------- -------------
Net cash provided by (used in) financing activities 2,791 (1,506)
------------- -------------
Increase (decrease) in cash 116 (6)
Cash at beginning of year 164 129
------------- -------------
Cash at end of period $ 280 $ 123
============= =============
The accompanying notes are an integral part of these consolidated financial
statements
5
MPW INDUSTRIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
(UNAUDITED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS MPW Industrial
Services Group, Inc. and its subsidiaries (the "Company") provide
technically-based services, including industrial cleaning and facility
maintenance, industrial container cleaning and industrial process water
purification. Such services are primarily provided at customer facilities. The
Company serves customers in numerous industries including automotive, utility,
chemical, pulp and paper, manufacturing and steel primarily throughout the
United States and Canada.
The accompanying unaudited consolidated financial statements presented
herein have been prepared by the Company and reflect all adjustments of a normal
recurring nature that are, in the opinion of management, necessary for a fair
presentation of financial results for the three and six months ended December
31, 2002 and 2001, respectively, in accordance with generally accepted
accounting principles for interim financial reporting and pursuant to Article 10
of Regulation S-X. Certain footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. These
interim consolidated financial statements should be read in conjunction with the
Company's Annual Report on Form 10-K for the year ended June 30, 2002 ("Annual
Report"). The results of operations for the three and six months ended December
31, 2002 and 2001, respectively, are not necessarily indicative of the results
for the full year.
COMPREHENSIVE INCOME (LOSS) Statement of Financial Accounting Standards
("SFAS") No. 130, Reporting Comprehensive Income, requires that an enterprise
report the change in its equity during the period from non-owner sources as
other comprehensive income (loss). The Company has evaluated the statement and
determined that the only items in addition to net income (loss) that would be
included in comprehensive income (loss) are the foreign currency translation
adjustment, the mark-to-market adjustment on interest rate swaps and the
Company's share of the comprehensive loss of its investment in affiliate.
Comprehensive income for the three months ended December 31, 2002 and 2001 was
$0.3 million and $0.4 million, respectively. Comprehensive income (loss) for the
six months ended December 31, 2002 and 2001 was $(2.7) million and $0.6 million,
respectively.
GOODWILL AND OTHER INTANGIBLES Effective July 1, 2002, the Company
adopted SFAS No. 142, Goodwill and Other Intangible Assets. Under SFAS No. 142,
goodwill and other intangible assets deemed to have indefinite lives are no
longer amortized but are subject to annual impairment tests. Other intangible
assets with identifiable definite lives continue to be amortized over their
useful lives. SFAS No. 142 requires a two-step process for impairment testing of
goodwill. The first step identifies indications of impairment, while the second
step, if necessary, measures the amount of the impairment, if any. The Company
is required to perform a transitional impairment test of goodwill in fiscal 2003
and an annual impairment test thereafter or upon the occurrence of certain
triggering events as defined by SFAS No. 142. The Company will perform its
annual impairment test during the fourth quarter of each year.
The Company completed step one and two of the transitional impairment
test during the second quarter of fiscal 2003 for each of its reporting units.
The Company used discounted cash flow and market comparison methodologies to
determine the fair value of the Company's reporting units. As a result of step
one of the transitional impairment test, it was determined that the Industrial
Cleaning and Facility Maintenance reporting unit had no impairment in connection
with its reported goodwill; however, the fair values of the Industrial Container
Cleaning reporting unit and the medical and laboratory water purification
reporting unit of the Industrial Water Process Purification segment ("WTW") were
determined to be less than the book values of these reporting units.
Based on the results of step two of the transitional impairment test,
the Company recorded a $2.3 million, net of tax of $1.6 million, transitional
impairment loss in the Industrial Container Cleaning reporting unit and a $0.5
million, net of tax of $0.3 million, transitional impairment loss in the WTW
reporting unit. These changes were recorded as a cumulative effect of a change
in accounting principle as of July 1, 2002 and primarily reflect a decline in
operating results largely due to the economic downturn that has affected many of
the customers that these reporting units serve.
6
MPW INDUSTRIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
(UNAUDITED)
The following table presents the results of operations for the three
months ended September 30, 2002 and the accumulated deficit as of September 30,
2002 after giving effect to the goodwill impairment charge (in thousands):
As Adjusted for
As Reported Goodwill
in Form 10-Q Impairment
--------------------- --------------------
Net loss $ (203) $ (3,048)
==================== ===================
Net loss per share, basic and diluted $ (0.02) $ (0.28)
==================== ===================
Accumulated deficit $ (1,619) $ (4,464)
==================== ===================
The effects of adopting SFAS No. 142 on net income (loss) and the per
share amounts for the three and six months ended December 31, 2002 follow (in
thousands, except per share data):
Three Months Ended December 31, Six Months Ended December 31,
----------------------------------------- -----------------------------------------
2002 2001 2002 2001
------------------- ------------------- -------------------- -------------------
Net income (loss):
As reported $ 271 $ 524 $ (2,777) $ 947
Less: Impairment loss related to
the adoption of SFAS No. 142 - - (2,845) -
Add: Goodwill amortization - 109 - 219
------------------ ------------------ ------------------- ------------------
Net income excluding the
impairment loss related to
the adoption of SFAS No. 142
and goodwill amortization $ 271 $ 633 $ 68 $ 1,166
================== ================== =================== ==================
Net income (loss) per share,
basic and diluted:
As reported $ 0.03 $ 0.05 $ (0.25) $ 0.09
Less: Impairment loss related to
the adoption of SFAS No. 142 - - (0.26) -
Add: Goodwill amortization - 0.01 - 0.02
------------------ ------------------ ------------------- ------------------
Net income excluding the
impairment loss related to
the adoption of SFAS No. 142
and goodwill amortization $ 0.03 $ 0.06 $ 0.01 $ 0.11
================== ================== =================== ==================
7
MPW INDUSTRIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
(UNAUDITED)
The changes in the carrying amount of goodwill for the six months ended
December 31, 2002, by segment, are as follows (in thousands):
Industrial Industrial
Cleaning and Industrial Process
Facility Container Water
Maintenance Cleaning Purification Total
-------------------- -------------------- -------------------- --------------------
Balance as of June 30, 2002 $ 6,011 $ 3,942 $ 1,555 $ 11,508
Impairment loss related to the
adoption of SFAS No. 142,
pre-tax - (3,942) (800) (4,742)
------------------- ------------------- ------------------- -------------------
Balance as of December 31, 2002 $ 6,011 $ - $ 755 $ 6,766
=================== =================== =================== ===================
USE OF ESTIMATES The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the amounts
reported in the accompanying consolidated financial statements. Actual results
could differ from those estimates.
EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS In December 2002, the
Financial Accounting Standards Board issued SFAS No. 148, Accounting for
Stock-Based Compensation - Transition and Disclosure. This Statement amends SFAS
No. 123, Accounting for Stock-Based Compensation, to provide alternative methods
of transition to SFAS No. 123's fair value method of accounting for stock-based
employee compensation and amends the disclosure provisions of SFAS No. 123 and
Accounting Principles Board ("APB") Opinion No. 28, Interim Financial Reporting,
to require disclosure in the summary of significant accounting policies of the
effects of an entity's accounting policy with respect to stock-based employee
compensation on reported net income and earnings per share in annual and interim
financial statements. SFAS No. 148's amendment of the transition and annual
disclosure requirements of SFAS No. 123 is effective for fiscal years ending
after December 15, 2002, while SFAS No. 148's amendment of the disclosure
requirements of APB Opinion No. 28 is effective for financial reports containing
condensed consolidated financial statements for interim periods beginning after
December 15, 2002. The Company will adopt the interim disclosure requirements
beginning in the third quarter of fiscal 2003 and will adopt the annual
disclosure requirements in its annual report on Form 10-K for the year ended
June 30, 2003.
NOTE 2. OTHER INTANGIBLES
Intangibles are summarized as follows (in thousands):
As of December 31, 2002 As of June 30, 2002
------------------------------------------- -------------------------------------------
Gross Carrying Accumulated Gross Carrying Accumulated
Amount Amortization Amount Amortization
-------------------- -------------------- -------------------- --------------------
Amortized intangible assets:
Customer relationships and lists $ 8,295 $ (1,935) $ 8,295 $ (1,699)
Patents 1,393 (615) 1,393 (545)
Non-compete agreements 410 (319) 410 (285)
------------------- ------------------- ------------------- -------------------
$ 10,098 $ (2,869) $ 10,098 $ (2,529)
=================== =================== =================== ===================
8
MPW INDUSTRIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
(UNAUDITED)
Amortization expense was $0.2 million for the three months ended
December 31, 2002 and $0.3 million for the six months ended December 31, 2002.
Estimated amortization expense for the current and next five fiscal years is as
follows (in thousands):
Estimated
Amortization
Expense
--------------------
For the year ended June 30, 2003 $ 680
For the year ended June 30, 2004 605
For the year ended June 30, 2005 542
For the year ended June 30, 2006 534
For the year ended June 30, 2007 534
For the year ended June 30, 2008 534
NOTE 3. INVESTMENT IN AFFILIATE
During the first quarter of fiscal 2003, the Company invested
approximately $0.4 million in Pentagon Technologies Group, Inc. ("Pentagon") and
has a remaining investment commitment of approximately $0.1 million.
Summarized operating data for Pentagon is presented in the following
table (in thousands):
Three Months Ended December 31, Six Months Ended December 31,
------------------------------------------- -------------------------------------------
2002 2001 2002 2001
-------------------- -------------------- -------------------- --------------------
Revenues $ 8,053 $ 10,179 $ 17,785 $ 20,118
=================== =================== =================== ===================
Loss from operations $ (916) $ (102) $ (842) $ (371)
=================== =================== =================== ===================
Net loss $ (868) $ (675) $ (1,028) $ (937)
=================== =================== =================== ===================
Summarized balance sheet data for Pentagon is presented in the
following table (in thousands):
December 31, June 30,
2002 2002
------------------- -------------------
Current assets $ 9,844 $ 11,636
Noncurrent assets 46,897 46,869
Current liabilities (6,770) (9,078)
Noncurrent liabilities (20,054) (18,374)
------------------ ------------------
Equity $ 29,917 $ 31,053
================== ==================
A significant amount of Pentagon's total assets represent goodwill.
Under the equity method of accounting, the Company's recorded investment in
Pentagon would be affected if Pentagon were to record an impairment charge under
the provisions of SFAS No. 142.
9
MPW INDUSTRIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
(UNAUDITED)
NOTE 4. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings (loss) per share (in thousands, except per share data):
Three Months Ended Six Months Ended
December 31, December 31,
----------------------------- -----------------------------
2002 2001 2002 2001
-------------- ------------- -------------- -------------
Numerator for basic and diluted net income (loss)
per share:
Income before cumulative effect of change in
accounting principle $ 271 $ 524 $ 68 $ 947
Cumulative effect of change in accounting principle - - (2,845) -
------------- ------------ ------------- ------------
Net income (loss) per share $ 271 $ 524 $ (2,777) $ 947
============= ============ ============= ============
Denominator for basic net income (loss) per share:
Weighted average common shares 10,940 10,940 10,940 10,940
Effect of dilutive securities:
Dilutive employee stock options 18 4 36 4
------------- ------------ ------------- ------------
Denominator for diluted net income (loss) per share-
adjusted weighted average common shares and
assumed conversions 10,958 10,944 10,976 10,944
============= ============ ============= ============
Net income (loss) per share:
Income before cumulative effect of change in
accounting principle $ 0.03 $ 0.05 $ 0.01 $ 0.09
Cumulative effect of change in accounting principle - - (0.26) -
------------- ------------ ------------- ------------
Net income (loss) per share $ 0.03 $ 0.05 $ (0.25) $ 0.09
============= ============ ============= ============
Net income (loss) per share, assuming dilution:
Income before cumulative effect of change in
accounting principle $ 0.03 $ 0.05 $ 0.01 $ 0.09
Cumulative effect of change in accounting principle - - (0.26) -
------------- ------------ ------------- ------------
Net income (loss) per share, assuming dilution $ 0.03 $ 0.05 $ (0.25) $ 0.09
============= ============ ============= ============
Options to purchase 1,279,550 and 1,845,319 shares of common stock at a
weighted average price of $5.72 and $4.86 per share were outstanding during the
three months ended December 31, 2002 and December 31, 2001, respectively, but
were not included in the computation of diluted earnings per share because the
exercise price of the options was greater than the average market price of the
shares, therefore, the effect would be antidilutive. Options to purchase
1,278,800 and 1,845,113 shares of common stock at a weighted average price of
$5.75 and $4.86 per share were outstanding during the six months ended December
31, 2002 and 2001, respectively, but were not included in the computation of
diluted earnings per share because the options' exercise price was greater than
the average market price of the common shares, therefore, the effect would be
antidilutive.
NOTE 5. RELATED PARTY TRANSACTIONS
The Company rents certain land, property, buildings and equipment from
entities controlled by its principal shareholder and Chief Executive Officer
under long-term lease agreements and other arrangements. Total payments related
to these leases and other arrangements were $0.6 million and $0.5 million for
the three months ended December 31, 2002 and 2001, respectively, and $1.0
million for both the six months ended December 31, 2002 and 2001.
10
MPW INDUSTRIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
(UNAUDITED)
The Company provides, from time to time, certain fabrication-type
services to Pro-Kleen Industrial Services, Inc. ("Pro-Kleen"), a portable
sanitation services company wholly-owned by the Company's principal shareholder.
The Company bills Pro-Kleen for services it renders. The amount of such billings
were not significant for the three months ended December 31, 2002 and 2001 and
the six months ended December 31, 2001 and were approximately $0.2 million for
the six months ended December 31, 2002. These billings represent reimbursement
for the use of parts and supplies and the use of certain of the Company's
employees on certain projects as requested by Pro-Kleen. These reimbursements by
Pro-Kleen are generally treated as an offset to supplies and maintenance or
labor expense.
All related party transactions are reviewed by the Company's Audit
Committee of the Board of Directors, which is comprised of outside and
independent directors. Based on the Committee's review, the Company believes
these transactions are being conducted upon terms that are consistent with those
that would have been obtained from an independent third party.
NOTE 6. SEGMENT REPORTING
Summarized financial information for the Company's reportable segments
is set forth below (in thousands). Corporate expenses are fully allocated to the
segments. Corporate support services that are attributable to the operating
segments are allocated based on each segment's percentage of total revenues.
General corporate expenses are allocated to each segment equally.
Three Months Ended December 31, Six Months Ended December 31,
-------------------------------------- --------------------------------------
2002 2001 2002 2001
------------------ ------------------ ------------------ ------------------
REVENUE
Industrial Cleaning and Facility Maintenance $ 19,379 $ 17,391 $ 38,326 $ 35,884
Industrial Container Cleaning 2,749 2,530 5,510 5,104
Industrial Water Process Purification 2,217 2,316 4,815 4,922
----------------- ----------------- ----------------- -----------------
Total $ 24,345 $ 22,237 $ 48,651 $ 45,910
================= ================= ================= =================
INCOME FROM OPERATIONS
Industrial Cleaning and Facility Maintenance $ 1,027 $ 1,350 $ 886 $ 2,264
Industrial Container Cleaning 50 69 27 94
Industrial Water Process Purification 159 493 534 1,130
----------------- ----------------- ----------------- -----------------
Total $ 1,236 $ 1,912 $ 1,447 $ 3,488
================= ================= ================= =================
December 31, June 30,
2002 2002
------------------ ------------------
TOTAL ASSETS
Industrial Cleaning and Facility Maintenance $ 41,826 $ 40,542
Industrial Container Cleaning 15,659 19,785
Industrial Water Process Purification 11,632 10,677
Other (1) 13,816 14,885
----------------- -----------------
Total $ 82,933 $ 85,889
================= =================
(1) Other consists of corporate assets.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Except for historical information, certain statements in this
Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") are forward-looking. These forward-looking statements are
based on current expectations that are subject to a number of uncertainties and
risks and actual results may differ materially. The uncertainties and risks
include, but are not limited to, competitive and other market factors, customer
purchasing behavior, general economic conditions and other facets of business
operations as well as other risk factors identified in "Investment
Considerations" in the Company's Annual Report. The Company undertakes no
obligation and does not intend to update, revise or otherwise publicly release
the result of any revisions to these forward-looking statements that may be made
to reflect future events or circumstances.
The following information should be read in conjunction with the
Unaudited Consolidated Financial Statements and related notes included elsewhere
in this Form 10-Q. The following information should also be read in conjunction
with the Audited Consolidated Financial Statements and related notes and MD&A
for the year ended June 30, 2002 as contained in the Company's Annual Report.
RESULTS OF OPERATIONS
The following table sets forth revenue and income from operations by
segment for the three months ended December 31, 2002 and 2001. Corporate
expenses are fully allocated to the segments. Corporate support services that
are attributable to the operating segments are allocated based on each segment's
percentage of total revenues. General corporate expenses are allocated to each
segment equally.
Three Months Ended December 31,
-----------------------------------------------
2002 2001
--------------------- --------------------
Actual % of Revenue Actual % of Revenue
------ ------------ ------ ------------
(unaudited; in thousands)
Revenue
Industrial Cleaning and Facility Maintenance $ 19,379 79.6% $ 17,391 78.2%
Industrial Container Cleaning 2,749 11.3 2,530 11.4
Industrial Water Process Purification 2,217 9.1 2,316 10.4
---------- -------- ----------- --------
Total revenue 24,345 100.0 22,237 100.0
Cost of services (including depreciation) 18,739 77.0 15,974 71.8
---------- -------- ----------- --------
Gross profit 5,606 23.0 6,263 28.2
Selling, general and administrative expenses 4,370 17.9 4,351 19.6
---------- -------- ----------- --------
Income from operations
Industrial Cleaning and Facility Maintenance 1,027 5.3 1,350 7.8
Industrial Container Cleaning 50 1.8 69 2.7
Industrial Water Process Purification 159 7.2 493 21.3
---------- -------- ----------- --------
Total income from operations $ 1,236 5.1% $ 1,912 8.6%
========== ======== =========== ========
Six Months Ended December 31,
-----------------------------------------------
2002 2001
-------------------- --------------------
Actual % of Revenue Actual % of Revenue
------ ------------ ------ ------------
(unaudited; in thousands)
Revenue
Industrial Cleaning and Facility Maintenance $ 38,326 78.8% $ 35,884 78.2%
Industrial Container Cleaning 5,510 11.3 5,104 11.1
Industrial Water Process Purification 4,815 9.9 4,922 10.7
----------- -------- ----------- --------
Total revenue 48,651 100.0 45,910 100.0
Cost of services (including depreciation) 37,906 77.9 33,359 72.7
----------- -------- ----------- --------
Gross profit 10,745 22.1 12,551 27.3
Selling, general and administrative expenses 9,298 19.1 9,063 19.7
----------- -------- ----------- --------
Income from operations
Industrial Cleaning and Facility Maintenance 886 2.3 2,264 6.3
Industrial Container Cleaning 27 0.5 94 1.8
Industrial Water Process Purification 534 11.1 1,130 23.0
----------- -------- ----------- --------
Total income from operations $ 1,447 3.0% $ 3,488 7.6%
=========== ======== =========== ========
THREE MONTHS ENDED DECEMBER 31, 2002 COMPARED TO THREE MONTHS ENDED
DECEMBER 31, 2001
Revenues. Revenues increased 9.5% to $24.3 million in the first quarter
of fiscal 2003 from $22.2 million in the prior year period. The increase was
primarily the result of a large project performed by the Company's union
subsidiary, the start-up of new branches, as well as increased work with paper
and steel customers, primarily in the Industrial Cleaning and Facility
Maintenance segment.
12
Cost of Services. Total cost of services was $18.7 million for the
three months ended December 31, 2002 compared to $16.0 million for the three
months ended December 31, 2001. Cost of services as a percentage of revenue
increased to 77.0% in the second quarter of fiscal 2003 from 71.8% in the prior
year period. This increase was primarily driven by additional investments in the
business related to the start up of new branches, heavier reliance on
sub-contract services, increased repair, maintenance and fuel costs and
additional depreciation expense in the current year period as a result of a
change in estimate related to salvage value. Effective in the third quarter of
fiscal 2002, the Company began depreciating salvage value for all property and
equipment, except for land and buildings, over the remaining useful life of each
respective asset.
Selling, General and Administrative Expenses. Total selling, general
and administrative expenses remained flat at $4.4 million for the three months
ended December 31, 2002 and 2001, respectively. While selling, general and
administrative expenses increased due to additional sales and business
development personnel, these increased costs were offset by a decrease in
amortization expense as a result of the Company's adoption of Statement of
Financial Accounting Standard ("SFAS") No. 142, Goodwill and Other Intangible
Assets.
Income from Operations. Income from operations was $1.2 million for the
three months ended December 31, 2002 compared to $1.9 million for the three
months ended December 31, 2001. As a percentage of revenue, income from
operations decreased to 5.1% in the first quarter of fiscal 2003 from 8.6% in
the prior year period primarily related to the factors discussed above.
Interest Expense. Interest expense decreased to $0.5 million in the
first quarter of fiscal 2003 from $0.7 million in the prior year period. The
decrease was primarily due to lower average outstanding borrowings and lower
interest rates.
Provision for Income Taxes. The provision for income taxes for the
three months ended December 31, 2002 and 2001 reflects an effective rate of 42%
and 44%, respectively.
SIX MONTHS ENDED DECEMBER 31, 2002 COMPARED TO SIX MONTHS ENDED
DECEMBER 31, 2001
Revenues. Revenues increased 6.0% to $48.7 million in the first six
months of fiscal 2003 from $45.9 million in the prior year period. The increase
was primarily related to the factors discussed above.
Cost of Services. Total cost of services was $37.9 million for the six
months ended December 31, 2002 compared to $33.4 million for the six months
ended December 31, 2001. Cost of services as a percentage of revenue increased
to 77.9% in the first six months of fiscal 2003 from 72.7% in the prior year
period. The increase was primarily related to the factors discussed above.
Selling, General and Administrative Expenses. Total selling, general
and administrative expenses were $9.3 million and $9.1 million for the six
months ended December 31, 2002 and 2001, respectively. The increase was
primarily due to additional sales and business development personnel, which was
partially offset by a decrease in amortization expense as a result of the
Company's adoption of SFAS No. 142.
Income from Operations. Income from operations was $1.4 million for the
six months ended December 31, 2002 compared to $3.5 million for the six months
ended December 31, 2001. As a percentage of revenue, income from operations
decreased to 3.0% in the first six months of fiscal 2003 from 7.6% in the prior
year period primarily related to the factors discussed above.
Interest Expense. Interest expense decreased to $1.0 million in the
first six months of fiscal 2003 from $1.4 million in the prior year period. The
decrease was primarily related to the factors discussed above.
Provision for Income Taxes. The provision for income taxes for the six
months ended December 31, 2002 and 2001 reflects an effective rate of 42% and
44%, respectively.
13
RELATED PARTY TRANSACTIONS
The Company rents certain land, property, buildings and equipment from
entities controlled by its principal shareholder and Chief Executive Officer
under long-term lease agreements and other arrangements. Total payments related
to these leases and other arrangements were $0.6 million and $0.5 million for
the three months ended December 31, 2002 and 2001, respectively, and $1.0
million for both the six months ended December 31, 2002 and 2001.
The Company provides, from time to time, certain fabrication-type
services to Pro-Kleen Industrial Services, Inc. ("Pro-Kleen"), a portable
sanitation services company wholly-owned by the Company's principal shareholder.
The Company bills Pro-Kleen for services it renders. The amount of such billings
were not significant for the three months ended December 31, 2002 and 2001 and
the six months ended December 31, 2001 and were approximately $0.2 million for
the six months ended December 31, 2002. These billings represent reimbursement
for the use of parts and supplies and the use of certain of the Company's
employees on certain projects as requested by Pro-Kleen. These reimbursements by
Pro-Kleen are generally treated as an offset to supplies and maintenance or
labor expense.
All related party transactions are reviewed by the Company's Audit
Committee of the Board of Directors, which is comprised of outside and
independent directors. Based on the Committee's review, the Company believes
these transactions are being conducted upon terms that are consistent with those
that would have been obtained from an independent third party.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2002, the Company had cash of $0.3 million and
working capital of $10.9 million. Cash provided by operating activities was $1.8
million for the six months ended December 31, 2002, while cash used for
investing activities was $4.4 million. The cash used for investing activities
included an additional investment of approximately $0.4 million in Pentagon
Technologies Group, Inc. The Company has a remaining investment commitment to
Pentagon of approximately $0.1 million.
In June 2002, the Company entered into a new credit agreement with its
principal banks (the "Credit Facility"). The Credit Facility provides the
Company with $35.0 million of revolving credit availability for a three-year
period and a $6.0 million three-year term loan to be repaid in quarterly
installments of $0.3 million. The Credit Facility is subject to two one-year
extensions by the banks at the request of the Company.
The Credit Facility is secured by substantially all of the Company's
assets. Under the terms of the Credit Facility, the entire $41.0 million is
available for general corporate purposes, including working capital, capital
expenditures and acquisitions. Borrowings under the Credit Facility currently
bear interest at the Eurodollar market rate plus 2.25%. The Company also pays a
commitment fee of .45% for unused portions of the Credit Facility. The interest
rate is subject to change based on interest rate formulas tied to the ratio of
consolidated funded debt to earnings before interest, taxes, depreciation and
amortization. Availability of borrowing is subject to the maintenance of a
minimum level of tangible net worth, certain levels of debt service coverage and
maintenance of a specific ratio of funded debt to earnings before interest,
taxes, depreciation and amortization. As of December 31, 2002, outstanding
borrowings under the Credit Facility were $29.9 million.
CRITICAL ACCOUNTING POLICIES
In December 2001, the SEC issued Financial Reporting Release No. 60,
Cautionary Advice Regarding Disclosure About Critical Accounting Policies ("FR
60"), suggesting companies provide additional disclosure and commentary on those
accounting policies considered most critical. FR 60 considers an accounting
policy to be critical if it is important to the Company's financial condition
and results, and requires significant judgment and estimates on the part of
management in its application. The Company's critical accounting policies are
described in Item 7. "Management's Discussion and Analysis of Financial
Condition and Results of Operations" within the Annual Report on Form 10-K for
the year ended June 30, 2002. In addition, a summary of all of the Company's
significant accounting policies, including critical accounting policies, is
included in Note 1 of the Notes to Consolidated Financial Statements in the
Annual Report on Form 10-K for the year ended June 30, 2002. No changes were
made to the Company's critical accounting policies during the quarter ended
December 31, 2002 except as indicated in the following section.
14
EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS
Effective July 1, 2002, the Company adopted SFAS No. 142, Goodwill and
Other Intangible Assets. Under SFAS No. 142, goodwill and other intangible
assets deemed to have indefinite lives are no longer amortized but are subject
to annual impairment tests. Other intangible assets with identifiable definite
lives continue to be amortized over their useful lives. SFAS No. 142 requires a
two-step process for impairment testing of goodwill. The first step identifies
indications of impairment, while the second step, if necessary, measures the
amount of the impairment, if any. The Company is required to perform a
transitional impairment test of goodwill in fiscal 2003 and an annual impairment
test thereafter or upon the occurrence of certain triggering events as defined
by SFAS No. 142. The Company will perform its annual impairment test during the
fourth quarter of each year.
The Company completed step one and two of the transitional impairment
test during the second quarter of fiscal 2003 for each of its reporting units.
The Company used discounted cash flow and market comparison methodologies to
determine the fair value of the Company's reporting units. As a result of step
one of the transitional impairment test, it was determined that the Industrial
Cleaning and Facility Maintenance reporting unit had no impairment in connection
with its reported goodwill; however, the fair values of the Industrial Container
Cleaning reporting unit and the medical and laboratory water purification
reporting unit of the Industrial Water Process Purification segment ("WTW") were
determined to be less than the book values of these reporting units.
Based on the results of step two of the transitional impairment test,
the Company recorded a $2.3 million, net of tax of $1.6 million, transitional
impairment loss in the Industrial Container Cleaning reporting unit and a $0.5
million, net of tax of $0.3 million, transitional impairment loss in the WTW
reporting unit. These changes were recorded as a cumulative effect of a change
in accounting principle as of July 1, 2002 and primarily reflect a decline in
operating results largely due to the economic downturn that has affected many of
the customers that these reporting units serve.
In December 2002, the Financial Accounting Standards Board issued SFAS
No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure.
This Statement amends SFAS No. 123, Accounting for Stock-Based Compensation, to
provide alternative methods of transition to SFAS No. 123's fair value method of
accounting for stock-based employee compensation and amends the disclosure
provisions of SFAS No. 123 and Accounting Principles Board ("APB") Opinion No.
28, Interim Financial Reporting, to require disclosure in the summary of
significant accounting policies of the effects of an entity's accounting policy
with respect to stock-based employee compensation on reported net income and
earnings per share in annual and interim financial statements. SFAS No. 148's
amendment of the transition and annual disclosure requirements of SFAS No. 123
is effective for fiscal years ending after December 15, 2002, while SFAS No.
148's amendment of the disclosure requirements of APB Opinion No. 28 is
effective for financial reports containing condensed consolidated financial
statements for interim periods beginning after December 15, 2002. The Company
will adopt the interim disclosure requirements beginning in the third quarter of
fiscal 2003 and will adopt the annual disclosure requirements in its annual
report on Form 10-K for the year ended June 30, 2003.
INFLATION
The effects of inflation on the Company's operations were not
significant during the periods presented in the Consolidated Financial
Statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to certain market risks from transactions that
are entered into during the normal course of business. The Company has not
entered into derivative financial instruments for trading purposes. The
Company's primary market risk exposure relates to interest rate risk. The
Company's revolving credit facility, which is subject to a variable rate of
interest based on the Eurodollar rate, had a balance of $29.9 million at
December 31, 2002. The Company has hedged its exposure to changes in interest
rates by fixing its rate of interest on $20.0 million of its variable rate
revolving credit facility through an interest rate swap agreement. Assuming
borrowings at December 31, 2002, a one hundred basis point change in interest
rates would impact interest expense by approximately $0.1 million per year.
15
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures.
The Company's chief executive officer and chief financial
officer, after evaluating the effectiveness of the Company's
"disclosure controls and procedures" (as defined in the
Securities Exchange Act of 1934 Rules 13a-14(c) and 15d-14(c))
as of a date (the "Evaluation Date") within 90 days before the
filing date of this quarterly report, have concluded that as
of the Evaluation Date, the Company's disclosure controls and
procedures were effective and designed to ensure that material
information relating to the Company and the Company's
consolidated subsidiaries would be made known to them by
others within those entities.
(b) Changes in internal controls.
There were no significant changes in the Company's internal
controls or in other factors that could significantly affect
those controls subsequent to the Evaluation Date.
16
PART II. -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Various legal actions arising in the ordinary course of business are
pending against the Company. None of the litigation pending against the
Company, individually or collectively, is expected to have a material
adverse effect on the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Company held its annual meeting of the shareholders on
December 13, 2002.
(b) Each of the following nominees for election to the Board of
Directors of the Company were elected by the
shareholders who were present or represented by proxy: Monte
R. Black, Alfred Friedman, Pete A. Klisares, Timothy A. Walsh
and Luke Feck.
(c) Of the 10,045,734 shares present in person or represented by
proxy at the meeting, the number of shares voted for and the
number of shares as to which the authority to vote in the
election was withheld, were as follows with respect to each
director nominee:
Votes for Election of Authority to Vote
Name Director Withheld
Monte R. Black 9,975,707 70,027
Alfred Friedman 9,986,307 59,427
Pete A. Klisares 9,923,107 122,627
Timothy A. Walsh 9,923,107 122,627
Luke Feck 9,986,307 59,427
(d) Not Applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(e) Exhibits.
3(a) Amended and Restated Articles of Incorporation of the
Company effective November 4, 1999 (filed as Exhibit
3(a) to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1999, and
incorporated herein by reference).
3(b) Amended and Restated Code of Regulations of the
Company effective November 4, 1999 (filed as Exhibit
3(b) to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1999, and
incorporated herein by reference)
99.1 Certification of Principal Executive Officer, Monte
R. Black, Pursuant to 18 U.S.C Section 1350, as
adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
99.2 Certification of Principal Financial Officer,
Richard R. Kahle, Pursuant to 18 U.S.C Section
1350, as adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
(b) No reports on Form 8-K were filed during the period.
17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on behalf by the
undersigned thereunto duly authorized.
MPW INDUSTRIAL SERVICES GROUP, INC.,
an Ohio corporation
Dated: February 14, 2003 By: /s/ Richard R. Kahle
------------------------------ --------------------------------
Richard R. Kahle
Vice President, Chief Financial
Officer, Secretary and Treasurer
18
CERTIFICATIONS
I, Monte R. Black, certify that:
1. I have reviewed this quarterly report on Form 10-Q of MPW Industrial
Services Group, 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) pres ented 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 audit
committee of the registrant's board of directors (or persons performing
the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencie
s and material weaknesses.
Dated: February 14, 2003
--------------------------------------
/s/ Monte R. Black
---------------------------------
Monte R. Black
Chairman of the Board of Directors
and Chief Executive Officer
19
I, Richard R. Kahle, certify that:
1. I have reviewed this quarterly report on Form 10-Q of MPW Industrial
Services Group, 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 audit
committee of the registrant's board of directors (or persons performing
the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process summarize and report financial data and
have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Dated: February 14, 2003
--------------------------------------
/s/ Richard R. Kahle
-----------------------------------------
Richard R. Kahle
Vice President, Chief Financial Officer,
Secretary and Treasurer
20
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------- ----------------------
3(a) Amended and Restated Articles of Incorporation of the Company
effective November 4, 1999 (filed as Exhibit 3(a) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999, and incorporated herein by reference).
3(b) Amended and Restated Code of Regulations of the Company
effective November 4, 1999 (filed as Exhibit 3(b) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999, and incorporated herein by reference).
99.1 Certification of Principal Executive Officer, Monte R.
Black, Pursuant to 18 U.S.C Section 1350, as adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.2 Certification of Principal Financial Officer, Richard R.
Kahle, Pursuant to 18 U.S.C Section 1350, as adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
21