Back to GetFilings.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the Period Ended March 31, 2004
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 1-04851
THE SHERWIN-WILLIAMS COMPANY
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
OHIO 34-0526850
- -------------------------------- ----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 Prospect Avenue, N.W., Cleveland, Ohio 44115-1075
- ------------------------------------------- ----------------------------
(Address of principal executive offices) (Zip Code)
(216)566-2000
- --------------------------------------------------------------------------------
(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 [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock, $1.00 Par Value - 143,197,105 shares as of April 30, 2004.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE SHERWIN-WILLIAMS COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED)
Thousands of dollars, except per share data
Three months ended March 31,
----------------------------
2004 2003
----------- -------------
Net sales $ 1,319,522 $ 1,148,461
Cost of goods sold 747,895 646,697
Gross profit 571,627 501,764
Percent to net sales 43.3% 43.7%
Selling, general and administrative expenses 484,546 440,450
Percent to net sales 36.7% 38.4%
Interest expense 9,387 10,091
Interest and net investment income (1,309) (1,490)
Other expense - net (179) 4,206
----------- -------------
Income before income taxes 79,182 48,507
Income taxes 27,714 17,705
----------- -------------
Net income $ 51,468 $ 30,802
=========== =============
Net income per common share:
Basic $ 0.36 $ 0.21
Diluted $ 0.35 $ 0.21
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
- 2 -
THE SHERWIN-WILLIAMS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
Thousands of dollars
MARCH 31, December 31, March 31,
2004 2003 2003
------------ ------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 103,570 $ 302,813 $ 12,834
Accounts receivable, less allowance 657,644 544,070 553,816
Inventories:
Finished goods 593,628 552,657 583,612
Work in process and raw materials 91,916 85,580 78,700
------------ ------------ ------------
685,544 638,237 662,312
Deferred income taxes 86,703 86,616 116,319
Other current assets 149,489 143,408 112,390
------------ ------------ ------------
Total current assets 1,682,950 1,715,144 1,457,671
Goodwill 566,742 563,531 551,759
Intangible assets 181,074 187,202 184,290
Deferred pension assets 422,053 420,133 414,992
Other assets 146,311 146,348 127,773
Property, plant and equipment 1,629,410 1,611,794 1,602,144
Less allowances for depreciation 977,292 961,544 930,789
------------ ------------ ------------
652,118 650,250 671,355
------------ ------------ ------------
Total assets $ 3,651,248 $ 3,682,608 $ 3,407,840
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 98,825
Accounts payable $ 630,297 $ 587,935 530,146
Compensation and taxes withheld 113,303 168,758 87,671
Current portion of long-term debt 9,967 10,596 13,907
Other accruals 278,549 297,800 278,229
Accrued taxes 102,450 89,081 109,151
------------ ------------ ------------
Total current liabilities 1,134,566 1,154,170 1,117,929
Long-term debt 503,510 502,992 506,456
Postretirement benefits other than pensions 217,874 216,853 214,536
Other long-term liabilities 343,957 349,736 289,207
Shareholders' equity:
Preferred stock - convertible, participating, no par value:
271,516, 284,657 and 6,193 shares outstanding at
March 31, 2004, December 31, 2003
and March 31, 2003, respectively 271,516 284,657 6,193
Unearned ESOP compensation (271,516) (284,657) (6,193)
Common stock - $1.00 par value:
142,982,862, 143,406,707 and 146,848,643 shares
outstanding at March 31, 2004, December 31, 2003
and March 31, 2003, respectively 213,846 212,409 210,326
Other capital 377,314 347,779 267,896
Retained earnings 2,425,781 2,398,854 2,165,469
Treasury stock, at cost (1,335,502) (1,270,917) (1,102,521)
Cumulative other comprehensive loss (230,098) (229,268) (261,458)
------------ ------------ ------------
Total shareholders' equity 1,451,341 1,458,857 1,279,712
------------ ------------ ------------
Total liabilities and shareholders' equity $ 3,651,248 $ 3,682,608 $ 3,407,840
============ ============ ============
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
- 3 -
THE SHERWIN-WILLIAMS COMPANY AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
Thousands of dollars
Three months ended March 31,
----------------------------
2004 2003
----------- ------------
OPERATING ACTIVITIES
Net income $ 51,468 $ 30,802
Adjustments to reconcile net income to net operating cash:
Depreciation 25,327 25,368
Amortization of intangibles and other assets 3,205 2,849
Provisions for qualified exit costs 2,700
Increase in deferred pension assets (1,920) (403)
Net increase in postretirement liability 1,021 787
Other 4,538 3,448
Change in working capital accounts - net (188,481) (165,503)
Costs incurred for environmental - related matters (2,357) (1,326)
Costs incurred for qualified exit costs (134) (589)
Other 1,521 (7,141)
----------- ------------
Net operating cash (103,112) (111,708)
INVESTING ACTIVITIES
Capital expenditures (25,826) (32,964)
Increase in other investments (4,865) (8,912)
Other (2,543) (2,795)
----------- ------------
Net investing cash (33,234) (44,671)
FINANCING ACTIVITIES
Net increase in short-term borrowings 98,825
Decrease in long-term debt (265)
Payments of long-term debt (629) (1,094)
Payments of cash dividends (24,541) (22,818)
Proceeds from stock options exercised 27,101 2,000
Treasury stock purchased (64,177) (72,627)
Other (246) (91)
----------- ------------
Net financing cash (62,757) 4,195
----------- ------------
Effect of exchange rate changes on cash (140) 1,006
----------- ------------
Net decrease in cash and cash equivalents (199,243) (151,178)
Cash and cash equivalents at beginning of year 302,813 164,012
----------- ------------
Cash and cash equivalents at end of period $ 103,570 $ 12,834
=========== ============
Income taxes paid $ 15,728 $ 6,749
Interest paid 18,016 18,927
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
- 4 -
THE SHERWIN-WILLIAMS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Periods ended March 31, 2004 and 2003
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States for interim financial information and the instructions to Form
10-Q. Accordingly, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United States for
complete financial statements. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's Form 10-K for the fiscal year ended December 31, 2003. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. The
consolidated results for the first quarter ended March 31, 2004 are not
necessarily indicative of the results to be expected for the fiscal year ending
December 31, 2004.
NOTE B--STOCK-BASED COMPENSATION
At March 31, 2004, the Company had two stock-based compensation plans accounted
for under the recognition and measurement principles of Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations, as more fully described in Note 1 and Note 11 to the
Consolidated Financial Statements in the Company's Annual Report on Form 10-K
for the year ended December 31, 2003. Pro-forma information regarding the impact
of stock-based compensation on net income and earnings per share is required by
Statement of Financial Accounting Standard (SFAS) No. 123, "Accounting for
Stock-Based Compensation." Such pro-forma information, determined as if the
Company had accounted for its employee stock options under the fair value method
of that statement, is illustrated in the following table:
Three months ended
(Thousands of dollars except per share data) March 31,
---------------------
2004 2003
--------- ---------
Net income, as reported $ 51,468 $ 30,802
Add: Total stock-based compensation expense
included in the determination of net income
as reported, net of related tax effects 2,516 488
Less: Total stock-based compensation expense
determined under fair value based method for
all awards, net of related tax effects (3,236) (3,381)
--------- ---------
Pro-forma net income $ 50,748 $ 27,909
========= =========
Net income per share:
Basic - as reported $ 0.36 $ 0.21
Basic - pro-forma $ 0.36 $ 0.19
Diluted - as reported $ 0.35 $ 0.21
Diluted - pro-forma $ 0.35 $ 0.19
NOTE C--DIVIDENDS
Dividends paid on common stock during the first quarters of 2004 and 2003 were
$.17 per common share and $.155 per common share, respectively.
5
NOTE D--OTHER EXPENSE - NET
Items included in Other expense - net are as follows:
Three months ended
(Thousands of dollars) March 31,
--------------------
2004 2003
------- ------
Dividend and royalty income $ (594) $ (709)
Net expense from financing
and investing activities 1,125 1,450
Foreign currency related (gains) losses (459) 2,539
Other income (588) (111)
Other expense 337 1,037
The net expense from financing and investing activities represents the realized
gains or losses associated with the disposal of fixed assets and financing fees.
Other income and other expense include miscellaneous items that are not related
to the primary business purpose of the Company.
NOTE E--DISPOSITION AND TERMINATION OF OPERATIONS
The Company is continually re-evaluating its operating facilities against its
long-term strategic goals. The Company recognizes liabilities associated with
exit or disposal activities as incurred in accordance with SFAS No. 146,
"Accounting for Costs Asssociated with Exit or Disposal Activities." Qualifying
exit costs primarily include post-closure rent expenses, incremental
post-closure costs and costs of employee terminations. Adjustments may be made
to prior provisions for qualified exit costs if information becomes available
upon which more accurate amounts can be reasonably estimated. Concurrently,
property, plant and equipment is tested for impairment in accordance with SFAS
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," and,
if impairment exists, the carrying value of the related assets is reduced to
estimated fair value. Adjustments may be made for subsequent revisions in
estimated fair value, not to exceed original asset carrying value before
impairment.
During the first quarter of 2004, a distribution facility in the Automotive
Finishes Segment and a manufacturing facility in the Consumer Segment were
closed. In accordance with SFAS No. 146, non-cancelable rent, post-closure
severance and other related costs were accrued during the quarter. The following
table summarizes the liabilities for qualified exit costs at March 31, 2004 and
the activity for the three-month period then ended:
(Thousands of dollars)
Actual
Balance at Provisions expenditures Balance at
December 31, in Cost of charged to March 31,
Exit Plan 2003 goods sold accrual 2004
- ------------------------------------------- ------------ ---------- ------------ ----------
Automotive Finishes distribution facility:
Post-closure severance costs $ 297 $ 297
Other qualified exit costs 903 903
Consumer manufacturing facility:
Other qualified exit costs 1,500 1,500
Qualified exit costs intiated prior to 2002 $ 14,912 $ (134) 14,778
-------- ------ ------- --------
Totals $ 14,912 $2,700 $ (134) $ 17,478
======== ====== ======= ========
For further details on the disposition and termination of operations, see Note 5
to the Consolidated Financial Statements in the Company's Annual Report on Form
10-K for the year ended December 31, 2003.
6
NOTE F--PRODUCT WARRANTIES
Changes in the Company's accrual for product warranty claims during the first
quarter of 2004 and 2003, including customer satisfaction settlements during the
year, were as follows:
(Thousands of dollars) 2004 2003
---------- ---------
Balance at January 1 $ 16,555 $ 15,510
Charges to expense 7,244 5,484
Settlements (5,808) (4,538)
--------- ---------
Balance at March 31 $ 17,991 $ 16,456
========= =========
For further details on the Company's accrual for product warranty claims, see
Note 1 to the Consolidated Financial Statements in the Company's Annual Report
on Form 10-K for the year ended December 31, 2003.
NOTE G--COMPREHENSIVE INCOME
Comprehensive income is summarized as follows:
(Thousands of dollars) Three months ended
March 31,
---------------------
2004 2003
--------- ---------
Net income $ 51,468 $ 30,802
Foreign currency translation adjustments (830) (286)
--------- ---------
Comprehensive income $ 50,638 $ 30,516
========= =========
NOTE H--INCOME PER COMMON SHARE
Three months ended March 31,
------------------------------
(Thousands of dollars except per share data) 2004 2003
------------- --------------
Basic
Average common shares outstanding 141,799,100 145,841,044
============= ==============
Net income $ 51,468 $ 30,802
============= ==============
Net income per common share $ 0.36 $ 0.21
============= ==============
Diluted
Average common shares outstanding 141,799,100 145,841,044
Non-vested restricted stock grants 799,000 528,667
Stock options and other contingently issuable shares 2,988,121 1,590,647
------------- --------------
Average common shares assuming dilution 145,586,221 147,960,358
============= ==============
Net income $ 51,468 $ 30,802
============= ==============
Net income per common share $ 0.35 $ 0.21
============= ==============
7
NOTE I--REPORTABLE SEGMENT INFORMATION
The Company reports segment information in the same way that management
internally organizes its business for assessing performance and making decisions
regarding allocation of resources in accordance with SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information."
Net External Sales/ Operating Profit
- ------------------------------------
(Thousands of dollars)
2004 2003
------------------------ -----------------------
NET SEGMENT Net Segment
EXTERNAL OPERATING External Operating
SALES PROFIT Sales Profit
----------- ---------- ----------- ---------
THREE MONTHS ENDED MARCH 31:
- ----------------------------
Paint Stores $ 803,715 $ 52,521 $ 716,271 $ 29,941
Consumer 317,202 49,183 266,167 39,080
Automotive Finishes 120,344 11,964 106,446 10,083
International Coatings 76,361 4,733 57,803 (259)
Administrative 1,900 (39,219) 1,774 (30,338)
----------- ---------- ----------- ---------
Consolidated totals $ 1,319,522 $ 79,182 $ 1,148,461 $ 48,507
=========== ========== =========== =========
Intersegment Transfers
- ----------------------
(Thousands of dollars)
2004 2003
----------- ----------
THREE MONTHS ENDED MARCH 31:
- ----------------------------
Paint Stores $ 164 $ 110
Consumer 232,272 212,832
Automotive Finishes 13,191 8,148
International Coatings 684 182
Administrative 1,134 1,079
----------- ----------
Segment totals $ 247,445 $ 222,351
=========== ==========
Segment operating profit is total revenue, including intersegment transfers,
less operating costs and expenses. Domestic intersegment transfers are accounted
for at the approximate fully absorbed manufactured cost plus distribution costs.
International intersegment transfers are accounted for at values comparable to
normal unaffiliated customer sales. The Administrative Segment's expenses
include interest which is unrelated to certain financing activities of the
Operating Segments, certain foreign currency transaction losses related to
dollar-denominated debt and other financing activities, and other adjustments.
Net external sales and operating profits of all consolidated foreign
subsidiaries were $148.1 million and $7.6 million, respectively, for the first
quarter of 2004, and $114.6 million and $1.6 million, respectively, for the
first quarter of 2003. Long-lived assets of these subsidiaries totaled $116.7
million and $96.0 million at March 31, 2004 and 2003, respectively. Domestic
operations account for the remaining net external sales, operating profits and
long-lived assets. The Administrative Segment's expenses do not include any
significant foreign operations. No single geographic area outside the United
States was significant relative to consolidated net external sales or
consolidated long-lived assets.
Export sales and sales to any individual customer were each less than 10% of
consolidated sales to unaffiliated customers during all periods presented.
NOTE J--HEALTH CARE, PENSION AND OTHER BENEFITS
Shown below are the components of the Company's net periodic benefit (credit)
cost for domestic defined benefit pension plans, foreign defined benefit pension
plans and postretirement benefits other than pensions:
8
(thousands of dollars)
DOMESTIC DEFINED FOREIGN DEFINED POSTRETIREMENT BENEFITS
BENEFIT PENSION PLANS BENEFIT PENSION PLANS OTHER THAN PENSIONS
--------------------- --------------------- -----------------------
2004 2003 2004 2003 2004 2003
--------- --------- -------- ------- -------- --------
THREE MONTHS ENDED MARCH 31:
- ----------------------------
NET PERIODIC BENEFIT (CREDIT) COST:
SERVICE COST $ 2,823 $ 2,703 $ 383 $ 340 $ 1,092 $ 1,084
INTEREST COST 3,177 3,017 586 490 4,344 4,197
EXPECTED RETURN ON ASSETS (9,725) (9,121) (481) (366)
RECOGNITION OF:
UNRECOGNIZED PRIOR SERVICE COST 197 240 16 74 (1,112) (971)
UNRECOGNIZED ACTUARIAL LOSS 1,632 2,775 270 277 1,112 637
--------- --------- -------- ------- -------- --------
NET PERIODIC BENEFIT (CREDIT) COST $ (1,896) $ (386) $ 774 $ 815 $ 5,436 $ 4,947
========= ========= ======== ======= ======== ========
For further details on the Company's health care, pension and other benefits,
see Note 6 to the Consolidated Financial Statements in the Company's Annual
Report on Form 10-K for the year ended December 31, 2003.
NOTE K--OTHER LONG-TERM LIABILITIES
The Company initially provides for estimated costs of environmental-related
activities relating to its past operations and third-party sites for which
commitments or clean-up plans have been developed and when such costs can be
reasonably estimated based on industry standards and historical experience.
These estimated costs are determined based on currently available facts
regarding each site. If the best estimate of costs can only be identified as a
range and no specific amount within that range can be determined more likely
than any other amount within the range, the minimum of the range is provided.
The unaccrued maximum of the estimated range of possible outcomes is $97,933
higher than the amount provided at March 31, 2004. The Company continuously
assesses its potential liability for investigation and remediation-related
activities and adjusts its environmental-related accruals as information becomes
available upon which more accurate costs can be reasonably estimated and as
additional accounting guidelines are issued. Actual costs incurred may vary from
these estimates due to the inherent uncertainties involved including, among
others, the number and financial condition of parties involved with respect to
any given site, the volumetric contribution which may be attributed to the
Company relative to that attributed to other parties, the nature and magnitude
of the wastes involved, the various technologies that can be used for
remediation and the determination of acceptable remediation with respect to a
particular site.
Included in Other long-term liabilities at March 31, 2004 and 2003 were accruals
for extended environmental-related activities of $107,170 and $104,222,
respectively. Estimated costs of current investigation and remediation
activities of $25,697 and $23,499 are included in Other accruals at March 31,
2004 and 2003, respectively.
Three of the Company's current and former manufacturing sites account for the
majority of the accrual for environmental-related activities and the unaccrued
maximum of the estimated range of possible outcomes at March 31, 2004. Included
in the accruals of $132,867 at March 31, 2004 is $70,636 related directly to
these three sites. In the aggregate unaccrued exposure of $97,933 at March 31,
2004, $41,098 relates to the three manufacturing sites. While environmental
investigations and remedial actions are in different stages at these sites,
additional investigations, remedial actions and monitoring will likely be
required at each site.
Management cannot presently estimate the potential loss contingencies related to
these sites or other less significant sites until such time as a substantial
portion of the investigation at the sites is completed and remedial action plans
are developed. In the event any future loss contingency significantly exceeds
the current amount accrued, the recording of the ultimate liability may result
in a material impact on net income for the annual or interim period during which
the additional costs are accrued. Management does not believe that any potential
liability ultimately attributed to the Company for its environmental-related
matters will have a material adverse effect on the Company's financial
condition, liquidity, or cash flow due to the extended
9
period of time during which environmental investigation and remediation takes
place. An estimate of the potential impact on the Company's operations cannot be
made due to the aforementioned uncertainties.
Management expects these contingent environmental-related liabilities to be
resolved over an extended period of time. Management is unable to provide a more
specific time frame due to the indefinite amount of time to conduct
investigation activities at any site, the indefinite amount of time to obtain
environmental agency approval, as necessary, with respect to investigation and
remediation activities, and the indefinite amount of time necessary to conduct
remediation activities.
For further details on the Company's Other long-term liabilities, see Note 8 to
the Consolidated Financial Statements in the Company's Annual Report on Form
10-K for the year ended December 31, 2003.
NOTE L--IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In December 2003, the Financial Accounting Standards Board (FASB) issued
Financial Staff Position (FSP) No. 106-1, "Accounting and Disclosure
Requirements Related to the Medicare Prescription Drug, Improvement and
Modernization Act of 2003." In accordance with FSP No. 106-1, the Company has
elected to defer recognizing the effects of the Medicare Prescription Drug,
Improvement and Modernization Act of 2003 (the Act) in the accounting for the
health care benefits under SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," and in providing disclosures
related to the health care benefits required by revised SFAS No. 132,
"Employers' Disclosures about Pensions and Other Postretirement Benefits," until
authoritative guidance on the accounting for the federal subsidy is issued.
Accordingly, any measures of the accumulated postretirement benefit obligation
or net periodic postretirement benefit cost do not reflect the effect of the Act
(see Note J). Authoritative guidance on the accounting for the federal subsidy
is pending and that guidance, when issued, could require the Company to change
previously reported information. Management has not yet determined the effect
FSP No. 106-1 will have on the Company's results of operations, financial
condition or liquidity.
NOTE M--RECLASSIFICATION
Certain amounts in the 2003 financial statements have been reclassified to
conform with the 2004 presentation.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Consolidated net sales increased $171.1 million, or 14.9 percent, to $1.320
billion in the first quarter of 2004. The sales gain in the first quarter was
due primarily to continuing strong domestic architectural paint sales and
improving sales and market conditions in domestic industrial maintenance,
product finishes and automotive markets. Also, consolidated sales for the first
quarter of 2004 compare positively to last year sales due in part to favorable
currency exchange fluctuations in 2004, the adverse impact on sales of harsh
weather conditions in parts of the United States in the first quarter of 2003
and by a soft domestic economic environment throughout most of 2003. The impact
of favorable currency exchange rates increased consolidated net sales for the
first three months of 2004 by 1.4 percent. Net income increased $20.7 million,
or 67.1 percent, to $51.5 million in the first quarter of 2004. Diluted net
income per common share for the first quarter of 2004 was $.35 per share
compared to $.21 per share in 2003.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The consolidated financial statements and accompanying footnotes included in
this report have been prepared in accordance with accounting principles
generally accepted in the United States with certain amounts based on
management's best estimates and judgments. To determine appropriate carrying
values of assets and liabilities that are not readily available from other
sources, management uses assumptions based on historical results and other
factors that they believe are reasonable. Actual results could differ from those
estimates. Also, materially different amounts may result under materially
different conditions or from using materially different assumptions. However,
management currently believes that any materially different amounts resulting
from materially different conditions or material changes in facts or
circumstances are unlikely.
There have been no significant changes in critical accounting policies or
management estimates since the year ended December 31, 2003. There have been no
significant changes in the Company's accruals for environmental
remediation-related activities or qualified exit costs since the year ended
December 31, 2003. A comprehensive discussion of the Company's critical
accounting policies and management estimates is included in Management's
Discussion and Analysis of Financial Condition and Results of Operations in the
Company's Annual Report on Form 10-K for the year ended December 31, 2003.
FINANCIAL CONDITION
Cash and cash equivalents decreased $199.2 million during the first three months
of 2004 related primarily to the seasonality of the business. Cash requirements
for normal seasonal increases in working capital of $188.5 million, capital
expenditures of $25.8 million, payments of cash dividends of $24.5 million and
treasury stock purchases of $64.2 million were partially offset by
11
net cash from operations and proceeds from the exercise of stock options of
$27.1 million. There were no short-term borrowings related to the Company's
commercial paper program outstanding at March 31, 2004. The Company had unused
maximum borrowing availability of $608.0 million at March 31, 2004 under the
commercial paper program that is backed by the Company's revolving credit
agreement. At March 31, 2004, the Company's current ratio was 1.48, essentially
unchanged from December 31, 2003.
Since March 31, 2003, cash generated by operations of $567.5 million was used
primarily for capital expenditures of $109.4 million, acquisitions of businesses
of $48.4 million, reductions in short-term borrowings of $98.8 million, treasury
stock purchases of $229.7 million and cash dividends of $92.4 million.
Capital expenditures during the first three months of 2004 primarily represented
expenditures associated with new store openings and normal equipment replacement
in the Paint Stores Segment, and capacity and service improvements in the
Consumer Group. We do not anticipate the need for any specific external
financing to support our capital expenditure programs during 2004.
During the first quarter of 2004, the Company purchased 1,850,000 shares of its
common stock for treasury purposes. The Company acquires shares of its common
stock for general corporate purposes and, depending upon its cash position and
market conditions, the Company may acquire additional shares of its common stock
in the future. The Company had remaining authorization at March 31, 2004 to
purchase approximately 15,173,000 shares of its common stock.
The Company's past operations included the manufacture and sale of lead pigments
and lead-based paints. The Company, along with other companies, is a defendant
in a number of legal proceedings, including purported class actions, separate
actions brought by the State of Rhode Island, and actions brought by various
counties, cities, school districts and other government-related entities,
arising from the manufacture and sale of lead pigments and lead-based paints.
The plaintiffs are seeking recovery based upon various legal theories, including
negligence, strict liability, breach of warranty, negligent misrepresentations
and omissions, fraudulent misrepresentations and omissions, concert of action,
civil conspiracy, violations of unfair trade practices and consumer protection
laws, enterprise liability, market share liability, nuisance, unjust enrichment
and other theories. The plaintiffs seek various damages and relief, including
personal injury and property damage, costs relating to the detection and
abatement of lead-based paint from buildings, costs associated with a public
education campaign, medical monitoring costs and others. The Company believes
that the litigation is without merit and is vigorously defending such
litigation. The Company expects that additional lead pigment and lead-based
paint litigation may be filed against the Company in the future asserting
similar or different legal theories and seeking similar or different types of
damages and relief.
During September 2002, a jury trial commenced in the first phase of the action
brought by the State of Rhode Island against the Company and the other
defendants. The sole issue before the court in this first phase was whether lead
pigment in paint constitutes a public nuisance under Rhode Island law. This
first phase did not consider the issues of liability or damages, if any, related
to the public nuisance claim. In October 2002, the court declared a mistrial as
the jury,
12
which was split four to two in favor of the defendants, was unable to reach a
unanimous decision. This was the first legal proceeding against the Company to
go to trial relating to the Company's lead pigment and lead-based paint
litigation. The State of Rhode Island has decided to retry the case and a trial
has been scheduled for April 2005. The Company believes it is possible that
additional legal proceedings could be scheduled for trial during 2004 and
subsequent years.
Litigation is inherently subject to many uncertainties. Adverse court rulings or
determinations of liability, among other factors, could affect the lead pigment
and lead-based paint litigation against the Company and encourage an increase in
the number and nature of future claims and proceedings. In addition, from time
to time, various legislation and administrative regulations have been enacted or
proposed to impose obligations on present and former manufacturers of lead
pigments and lead-based paints respecting asserted health concerns associated
with such products and to overturn court decisions in which the Company and
other manufacturers have been successful. Due to the uncertainties involved,
management is unable to predict the outcome of the lead pigment and lead-based
paint litigation, the number or nature of possible future claims and
proceedings, or the affect that any legislation and/or administrative
regulations may have on the litigation or against the Company. In addition,
management cannot reasonably determine the scope or amount of the potential
costs and liabilities related to such litigation, or any such legislation and
regulations. The Company has not accrued any amounts for such litigation. Any
potential liability that may result from such litigation or such legislation and
regulations cannot reasonably be estimated. However, based upon, among other
things, the outcome of such litigation to date, management does not currently
believe that the costs or potential liability ultimately determined to be
attributable to the Company arising out of such litigation will have a material
adverse effect on the Company's results of operations, liquidity or financial
condition.
The operations of the Company, like those of other companies in the same
industry, are subject to various federal, state and local environmental laws and
regulations. These laws and regulations not only govern current operations and
products, but also impose potential liability on the Company for past
operations. Management expects environmental laws and regulations to impose
increasingly stringent requirements upon the Company and the industry in the
future. Management believes that the Company conducts its operations in
compliance with applicable environmental laws and regulations and has
implemented various programs designed to protect the environment and promote
continued compliance.
Depreciation of capital expenditures and other expenses related to ongoing
environmental compliance measures are included in the normal operating expenses
of conducting business. The Company's capital expenditures, depreciation and
other expenses related to ongoing environmental compliance measures were not
material to the Company's financial condition, liquidity, cash flow or results
of operations during the first quarter of 2004. Management does not expect that
such capital expenditures, depreciation and other expenses will be material to
the Company's financial condition, liquidity, cash flow or results of operations
in 2004.
The Company is involved with environmental investigation and remediation
activities at some of its current and former sites (including sites which were
previously owned and/or operated by
13
businesses acquired by the Company). In addition, the Company, together with
other parties, has been designated a potentially responsible party under federal
and state environmental protection laws for the investigation and remediation of
environmental contamination and hazardous waste at a number of third-party
sites, primarily Superfund sites. The Company may be similarly designated with
respect to additional third-party sites in the future.
The Company accrues for estimated costs of investigation and remediation
activities at its current, former and third party sites for which commitments or
clean-up plans have been developed and when such costs can be reasonably
estimated based on industry standards and professional judgment. These estimated
costs are based on currently available facts regarding each site. The Company
accrues a specific estimated amount when such an amount and a time frame in
which the costs will be incurred can be reasonably determined. If the best
estimate of costs can only be identified as a range and no specific amount
within that range can be determined more likely than any other amount within the
range, the minimum of the range is accrued by the Company in accordance with
applicable accounting rules and interpretations. The Company continuously
assesses its potential liability for investigation and remediation activities
and adjusts its environmental-related accruals as information becomes available
upon which more accurate costs can be reasonably estimated. At March 31, 2004
and 2003, the Company had accruals for environmental-related activities of
$132.9 million and $127.7 million, respectively.
Due to the uncertainties surrounding environmental investigation and remediation
activities, the Company's liability may result in costs that are significantly
higher than currently accrued. If the Company's future loss contingency is
ultimately determined to be at the maximum of the range of possible outcomes for
every site for which costs can be reasonably estimated, the Company's aggregate
accruals for environmental-related activities would be $97.9 million higher than
the accruals at March 31, 2004.
Three of the Company's current and former manufacturing sites, described below,
account for the majority of the accrual for environmental-related activities and
the unaccrued maximum of the estimated range of possible outcomes at March 31,
2004. Included in the accruals of $132.9 million at March 31, 2004 is $70.6
million related directly to these three sites. In the aggregate unaccrued
exposure of $97.9 million at March 31, 2004, $41.1 million relates to the three
manufacturing sites. While environmental investigations and remedial actions are
in different stages at these sites, additional investigations, remedial actions
and monitoring will likely be required at each site.
The first of these sites is a former manufacturing facility in New Jersey that
is in the early investigative stage of the environmental-related process.
Although contamination exists at the site and adjacent areas, the extent and
magnitude of the contamination has not yet been fully quantified. Due to the
uncertainties of the scope and magnitude of contamination and the degree of
remediation that may be necessary relating to this site, it is reasonably likely
that further extensive investigation may be required and that extensive remedial
actions may be necessary not only at the former manufacturing site but along an
adjacent waterway. Depending on the extent of the additional investigation and
remedial actions necessary, the ultimate liability for
14
this site may exceed the amount currently accrued and the maximum of the range
of reasonably possible outcomes currently estimated by management.
The second site is a current manufacturing facility located in Illinois. The
environmental issues at this site have been determined to be associated with
historical operations. While the majority of the investigative work has been
completed at this site and some remedial actions taken, agreement on a proposed
remedial action plan has not been obtained from the appropriate governmental
agency. The third site is a current manufacturing facility in California.
Similar to the Illinois site noted above, the environmental issues at this site
have been determined to be associated with historical operations. The majority
of the investigative activities have been completed at this site, some remedial
actions have been taken and a proposed remedial action plan has been formulated
but currently no clean up goals have been approved by the lead governmental
agency. In both the Illinois and California sites, the potential liabilities
relate to clean-up goals that have not yet been established and the degree of
remedial actions that may be necessary to achieve these goals.
Management cannot presently estimate the potential loss contingencies related to
these sites or other less significant sites until such time as a substantial
portion of the investigation at the sites is completed and remedial action plans
are developed. In the event any future loss contingency significantly exceeds
the current amount accrued, the recording of the ultimate liability may result
in a material impact on net income for the annual or interim period during which
the additional costs are accrued. Management does not believe that any potential
liability ultimately attributed to the Company for its environmental-related
matters will have a material adverse effect on the Company's financial
condition, liquidity, or cash flow due to the extended period of time during
which environmental investigation and remediation takes place. An estimate of
the potential impact on the Company's operations cannot be made due to the
aforementioned uncertainties.
Management expects these contingent environmental-related liabilities to be
resolved over an extended period of time. Management is unable to provide a more
specific time frame due to the indefinite amount of time to conduct
investigation activities at any site, the indefinite amount of time to obtain
governmental agency approval, as necessary, with respect to investigation and
remediation activities, and the indefinite amount of time necessary to conduct
remediation activities.
There have been no significant changes to the Company's contractual obligations
and commercial commitments in the first quarter of 2004 as summarized in
Management's Discussion and Analysis of Financial Condition and Results of
Operations in the Company's Annual Report on Form 10-K for the year ended
December 31, 2003.
There have been no significant changes to the Company's accrual for product
warranty claims in the first quarter of 2004 as disclosed in Note E.
RESULTS OF OPERATIONS
15
Shown below are net sales and the percentage change for the first quarter by
reportable segment for 2004 and 2003:
(thousands of dollars) 2004 Change 2003
----------- ------ -----------
Paint Stores $ 803,715 12.2% $ 716,271
Consumer 317,202 19.2% 266,167
Automotive Finishes 120,344 13.1% 106,446
International Coatings 76,361 32.1% 57,803
Administrative 1,900 7.1% 1,774
----------- -----------
$ 1,319,522 14.9% $ 1,148,461
=========== ===========
Consolidated net sales increased in the first quarter due primarily to strong
domestic architectural paint sales and improving sales and market conditions in
domestic industrial maintenance, product finishes and automotive markets. Also,
consolidated net sales for the first quarter of 2004 compare positively to last
year's net sales due in part to favorable currency exchange fluctuations in
2004, the adverse impact on net sales in 2003 of harsh weather conditions in
parts of the United States in the first quarter of 2003 and by a soft domestic
economic environment throughout most of 2003. The impact of favorable currency
exchange rates increased consolidated net sales for the first three months of
2004 by 1.4 percent. Net sales in the Paint Stores Segment increased due
primarily to continuing strong domestic architectural paint sales to contractors
and do-it-yourself (DIY) customers. Industrial maintenance and product finishes
sales improved during the quarter as the domestic economic environment continued
to strengthen compared to a soft domestic economic environment during the first
three quarters of 2003. Comparable-store sales, which are net sales from stores
open for more than twelve calendar months, increased 11.0 from last year's first
quarter. Net sales of the Consumer Segment increased due primarily to new
product and new customer sales and acquisitions. In addition, the year-to-year
comparison includes annualizing the adverse impact on net sales in 2003 by
changes in the ordering or promotional patterns by some of the Segment's largest
retail customers, the preparation for store closings by a major retailer, the
impact of harsh weather and stringent inventory control relating to the slow
domestic economy. The Automotive Finishes Segment's first quarter net sales
increased due primarily to the impact of favorable currency exchange rates,
strength in the core collision business sector and improved original equipment
manufacturer (OEM) sales. The impact of favorable currency exchange rates
increased net sales of this Segment in the first quarter of 2004 by 3.0 percent.
Net sales in the International Coatings Segment increased due primarily to
beneficial currency exchange rates. Strengthening South American economies that
resulted in volume gains and increased volume sales in the United Kingdom helped
increase net sales. The impact of favorable currency exchange rates increased
this Segment's net sales by 21.0 percent in the first three months of 2004.
Consolidated gross profit as a percent of sales decreased to 43.3 percent in the
first quarter of 2004 from 43.7 percent in the first quarter of 2003. The
decrease in the gross profit percentage is primarily related to $2.7 million of
provisions for qualified exit costs of two closed facilities and raw material
cost increases that could not be totally offset by improved manufacturing
absorption. The Paint Stores Segment's gross profit for the first quarter was
higher than last year by $45.8 million due to strong overall sales volume. The
Consumer Segment's first quarter
16
gross profit increased $13.8 million from last year due to sales volume
increases and manufacturing absorption partially offset by raw material cost
increases. The Automotive Finishes Segment's margins increased $6.5 million
during the first quarter of 2004 due to the strong sales increase over last year
and improved manufacturing absorption. The International Coatings Segment's
first quarter gross profit was $5.7 million higher than last year due to
operating efficiencies related to higher sales volumes and favorable currency
rate fluctuations for required raw materials purchased on a U.S. dollar
denominated basis.
Consolidated selling, general and administrative expenses as a percent of sales
decreased to 36.7 percent in the first quarter of 2004 from 38.4 percent in the
first quarter of 2003. In the Paint Stores Segment, the SG&A percent of sales
ratio decreased due to the increased sales volume and tight expense control,
which included utility costs and pension expense that were essentially flat
year-over-year. The Consumer Segment's SG&A percent of sales ratio also
decreased due to larger sales volume, tight expense control and utility costs
and pension expenses that were essentially flat year-over-year offsetting some
incremental spending increases related to new product launches and new
customers. The Automotive Finishes and International Segment's SG&A expenses as
a percent of sales were also lower than last year due to increased sales volumes
and tight expense control. The Administrative's Segment's SG&A expense increased
$8.6 million in the first quarter of 2004 versus last year due to increased
information technology costs and higher employee service costs.
Shown below are operating profit and the percent change for the first quarter by
reportable segment for 2004 and 2003:
(thousands of dollars) 2004 Change 2003
--------- ------- ---------
Paint Stores $ 52,521 75.4% $ 29,941
Consumer 49,183 25.9% 39,080
Automotive Finishes 11,964 18.7% 10,083
International Coatings 4,733 1927.4% (259)
Administrative (39,219) -29.3% (30,338)
--------- ---------
$ 79,182 63.2% $ 48,507
========= =========
Income for the quarter increased $20.7 million, or 67.1 percent, to $51.5
million from $30.8 million in 2003. The increase in after-tax income was
primarily due to the increase in sales and a reduced effective tax rate. Diluted
income per common share was $.35 per share compared to $.21 per share in 2003.
Management considers a measurement that is not in accordance with accounting
principles generally accepted in the United States a useful measurement of the
operational profitability of the Company. Some investment professionals also
utilize such a measurement as an indicator of the value of profits and cash that
are generated strictly from operating activities, putting aside working capital
and certain other balance sheet changes. For this measurement, management
increases net income for significant non-operating and non-cash expense items to
arrive at an amount known as "Earnings Before Interest, Taxes, Depreciation and
Amortization" (EBITDA). The reader is cautioned that the following value for
EBITDA should not be compared to other entities unknowingly. EBITDA should not
be considered an alternative to net income or cash
17
flows from operating activities as an indicator of operating performance or as a
measure of liquidity. The reader should refer to the determination of net income
and cash flows from operating activities in accordance with accounting
principles generally accepted in the United States disclosed in the Statements
of Consolidated Income and Statements of Consolidated Cash Flows. EBITDA as used
by management is calculated as follows:
(thousands of dollars)
Three months ended March 31,
----------------------------
2004 2003
--------- --------
Net income $ 51,468 $ 30,802
Interest expense 9,387 10,091
Income taxes 27,714 17,705
Depreciation 25,327 25,368
Amortization 3,205 2,849
--------- --------
EBITDA $ 117,101 $ 86,815
========= ========
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Certain statements contained in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and elsewhere in this report
constitute "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
These forward-looking statements are based upon management's current
expectations, estimates, assumptions and beliefs concerning future events and
conditions and may discuss, among other things, anticipated future performance
(including sales and earnings), expected growth, future business plans and the
costs and potential liability for environmental-related matters and the lead
pigment and lead-based paint litigation. Any statement that is not historical in
nature is a forward-looking statement and may be identified by the use of words
and phrases such as "expects," "anticipates," "believes," "will," "will likely
result," "will continue," "plans to" and similar expressions. Readers are
cautioned not to place undue reliance on any forward-looking statements.
Forward-looking statements are necessarily subject to risks, uncertainties and
other factors, many of which are outside the control of the Company, that could
cause actual results to differ materially from such statements and from the
Company's historical results and experience.
These risks, uncertainties and other factors include such things as: (a) general
business conditions, strengths of retail and manufacturing economies and the
growth in the coatings industry; (b) competitive factors, including pricing
pressures and product innovation and quality; (c) changes in raw material
availability and pricing; (d) changes in the Company's relationships with
customers and suppliers; (e) the ability of the Company to attain cost savings
from productivity initiatives; (f) the ability of the Company to successfully
integrate past and future acquisitions into its existing operations, as well as
the performance of the businesses acquired; (g) changes in general domestic
economic conditions such as inflation rates, interest rates and tax rates; (h)
risks and uncertainties associated with the Company's expansion into and its
operations
18
in China, South America and other foreign markets, including inflation rates,
recessions, foreign currency exchange rates, foreign investment and repatriation
restrictions, unrest and other external economic and political factors; (i) the
achievement of growth in developing markets, such as China, Mexico and South
America; (j) increasingly stringent domestic and foreign governmental
regulations including those affecting the environment; (k) inherent
uncertainties involved in assessing the Company's potential liability for
environmental remediation-related activities; (l) other changes in governmental
policies, laws and regulations, including changes in accounting policies and
standards and taxation requirements (such as new tax laws and new or revised tax
law interpretations); (m) the nature, cost, quantity and outcome of pending and
future litigation and other claims, including the lead pigment and lead-based
paint litigation and the affect of any legislation and administrative
regulations relating thereto; and (n) unusual weather conditions.
Readers are cautioned that it is not possible to predict or identify all of the
risks, uncertainties and other factors that may affect future results and that
the above list should not be considered to be a complete list. Any
forward-looking statement speaks only as of the date on which such statement is
made, and the Company undertakes no obligation to update or revise any
forward-looking statement, whether as a result of new information, future events
or otherwise.
19
ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk associated with interest rates and value
changes in foreign currencies. The Company utilizes derivative instruments as
part of its overall financial risk management policy, but does not use
derivative instruments for speculative or trading purposes. The Company has
partially hedged risks associated with fixed interest rate debt by entering into
various interest rate swap agreements. The Company does not believe that any
potential loss related to interest rate exposure would have a material adverse
effect on the Company's financial condition, results of operations or cash
flows. The Company enters into foreign currency option and forward contracts to
hedge against value changes in foreign currency. The Company believes it may
experience continuing losses from foreign currency translation. However, the
Company does not expect currency translation, transaction or hedging contract
losses to have a material adverse effect on the Company's financial condition,
results of operations or cash flows. There were no material changes in the
Company's exposure to market risk since the disclosure included in Management's
Discussion and Analysis of Financial Condition and Results of Operations in the
Company's Annual Report on Form 10-K for the year ended December 31, 2003.
20
ITEM 4. CONTROLS AND PROCEDURES
As of the end of the period covered by this report, we carried out an
evaluation, under the supervision and with the participation of our Chairman and
Chief Executive Officer and our Senior Vice President -- Finance and Chief
Financial Officer, of the effectiveness of our disclosure controls and
procedures pursuant to Rule 13a-15 and Rule 15d-15 of the Securities Exchange
Act of 1934, as amended. Based upon that evaluation, our Chairman and Chief
Executive Officer and our Senior Vice President -- Finance and Chief Financial
Officer concluded that our disclosure controls and procedures are effective in
timely alerting them to material information relating to the Company (including
its consolidated subsidiaries) required to be disclosed by us in our periodic
SEC reports. There were no changes in our internal control over financial
reporting identified in connection with the evaluation that occurred during the
period covered by this report that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.
21
PART II. OTHER INFORMATION
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity
Securities
The Company has one share repurchase program in place that authorizes the
purchase of its common stock in the open market or in privately negotiated
transactions, depending on market conditions and other factors.
A summary of the repurchase activity for the Company's first quarter is as
follows:
Total Number Maximum
Total of Shares Number of Shares
Number of Average Purchased as That May Yet Be
Shares Price Paid Part of Publicly Purchased Under
Period Purchased (1) Per Share Announced Plan (1) the Plan (1)
- ------------------------ ------------- ----------- ------------------ ----------------
January 1 - January 31 17,023,000
February 1 - February 29 1,850,000 $ 34.66 (2) 1,850,000 15,173,000
March 1 - March 31 15,173,000
--------- -------- --------- ----------
Total First Quarter 1,850,000 $ 34.66 1,850,000 15,173,000
(1) All shares were purchased through the Company's 20.0 million share
repurchase program publicly announced on October 24, 2003. There is no
expiration date specified for the program. The Company intends to
repurchase stock under the program in the future.
(2) The Company purchased these shares through a private accelerated purchase
program. If the weighted average daily market price of our stock during the
valuation period times the number of shares purchased is greater than the
initial purchase price of $64.1 million, the Company has the option to pay
the difference to the counterparty in cash or shares. However, if the
weighted average daily market price times the number of shares during the
valuation period is less than the initial purchase price of $64.1 million,
the Company has the option to require the counterparty to pay the difference
in cash or shares. The settlement date will be in May 2004.
Item 5. Other Information
During the fiscal quarter ended March 31, 2004, the Audit Committee of the
Board of Directors of the Company approved certain non-audit services to be
performed by Ernst & Young LLP, the Company's independent auditors. These
non-audit services were approved within categories related to foreign tax
consulting and compliance and other foreign accounting and advisory services.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
(31)(a) Rule 13a-14(a)/15d-14(a) Certification of Chief Executive
Officer (filed herewith).
(31)(b) Rule 13a-14(a)/15d-14(a) Certification of Chief Financial
Officer (filed herewith).
(32)(a) Section 1350 Certification of Chief Executive Officer (filed
herewith).
22
(32)(b) Section 1350 Certification of Chief Financial Officer (filed
herewith).
(b) Reports on Form 8-K.
(i) The Company furnished a Current Report on Form 8-K, dated
February 5, 2004, reporting under Item 5 that the Company had
issued a press release regarding its financial results for the
full year 2003 and certain other information.
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.
THE SHERWIN-WILLIAMS COMPANY
May 7, 2004 By: /s/ J.L. Ault
-------------
J.L. Ault
Vice President-Corporate Controller
May 7, 2004 By: /s/ L.E. Stellato
-----------------
L.E. Stellato
Vice President, General Counsel and
Secretary
INDEX TO EXHIBITS
EXHIBIT NO. EXHIBIT
- ----------- -------
(31)(a) Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
(filed herewith).
(31)(b) Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
(filed herewith).
(32)(a) Section 1350 Certification of Chief Executive Officer (filed
herewith).
(32)(b) Section 1350 Certification of Chief Financial Officer (filed
herewith
23