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United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 29, 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 0-31983
----------------
GARMIN LTD.
(Exact name of Company as specified in its charter)
Cayman Islands 98-0229227
(State or other jurisdiction (I.R.S. Employer identification no.)
of incorporation or organization)
5th Floor, Harbour Place, P.O. Box 30464 SMB, N/A
103 South Church Street (Zip Code)
George Town, Grand Cayman, Cayman Islands
(Address of principal executive offices)
Company's telephone number, including area code: (345) 946-5203*
No Changes
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the Company (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 Company was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [x] NO [ ]
Number of shares outstanding of the Company's common shares as of
August 7,2002:
Common Shares, $.01 par value - 107,798,768
*The executive offices of the Registrant's principal United States subsidiary
are located at 1200 East 151st Street, Olathe, Kansas 66062.
The telephone number there is (913) 397-8200.
Garmin Ltd.
Form 10-Q
Quarter Ended June 29, 2002
Table of Contents
Part I - Financial Information Page
Item 1. Condensed Consolidated Financial Statements
(unaudited)
Introductory Comments 3
Condensed Consolidated Balance Sheets at June 29,
2002 and December 29, 2001 4
Condensed Consolidated Statements of Income for the
13 and 26-weeks ended June 29, 2002 and June 30, 2001 5
Condensed Consolidated Statements of Cash Flows for
the 26-weeks ended June 29, 2002 and June 30, 2001 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 20
Part II - Other Information
Item 1. Legal Proceedings 22
Item 2. Changes in Securities and Use of Proceeds 22
Item 3. Defaults Upon Senior Securities 22
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 5. Other Information 22
Item 6. Exhibits and Reports on Form 8-K 23
Signature Page 24
Garmin Ltd.
Form 10-Q
Quarter Ended June 29, 2002
Part I - Financial Information
Item 1. Condensed Consolidated Financial Statements (unaudited)
Introductory Comments
The Condensed Consolidated Financial Statements of Garmin Ltd. ("Garmin" or
the "Company") included herein have been prepared by the Company, without audit,
pursuant to the rules and regulations of the United States Securities and
Exchange Commission. Certain information and note disclosures normally included
in financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or
omitted pursuant to such rules and regulations, although the Company believes
that the disclosures are adequate to enable a reasonable understanding of the
information presented. These Condensed Consolidated Financial Statements should
be read in conjunction with the audited financial statements and the notes
thereto for the year ended December 29, 2001. Additionally, the Condensed
Consolidated Financial Statements should be read in conjunction with Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations included in this Form 10-Q.
The results of operations for the 13 and 26-week periods ended June 29,
2002 are not necessarily indicative of the results to be expected for the full
year 2002.
Garmin Ltd. And Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except share information)
---------------------------------------
(Unaudited)
June 29, December 29,
2002 2001
---------------------------------------
Assets
Current Assets:
Cash and cash equivalents $146,575 $192,842
Marketable securities 156,752 40,835
Accounts receivable, net 53,169 47,998
Inventories 46,371 61,132
Deferred income taxes 8,535 7,007
Prepaid expenses and other current assets 4,743 2,921
------------------ ---------------
Total current assets 416,145 352,735
Property and equipment, net 73,102 70,086
Marketable securities 77,413 90,749
Restricted cash 1,600 1,600
Other assets, net 28,448 16,985
------------------ ---------------
Total assets $596,708 $532,155
================== ===============
Liabilities and Stockholder's Equity
Current liabilities:
Accounts payable $18,000 $18,837
Salaries and benfits payable 3,566 3,308
Warranty reserve 4,138 4,777
Other accrued expenses 10,172 5,485
Income taxes payable 11,064 12,444
Current portion of long-term debt 1,334 4,177
------------------ ---------------
Total current liabilities 48,274 49,028
Long-term debt, less current portion 18,666 28,011
Deferred income taxes 1,700 1,147
Stockholders' equity:
Preferred stock, $1.00 par value, 1,000,000 authorized, none issued - -
Common stock, $0.01 par value, 500,000,000, share authorized:
Issued and outstanding shares-107,774,918 in 2001 and 107,777,796 in 2002 1,078 1,078
Additional paid-in capital 127,294 127,131
Retained earnings 423,994 365,087
Accumulated other comprehensive loss (24,298) (39,327)
------------------ ---------------
Total stockholders' equity 528,068 453,969
------------------ ---------------
Total liabilities and stockholders' equity $596,708 $532,155
================== ===============
The accompanying notes are an integral part of these financial statements.
Garmin Ltd. And Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
(In thousands, except per share information)
13-Weeks Ended 26-Weeks Ended
------------------------------- ------------------------------
June 29, June 30, June 29, June 30,
2002 2001 2002 2001
------------------------------- ------------------------------
Net sales $122,838 $103,634 $223,694 $189,168
Cost of goods sold 55,176 48,584 101,540 88,200
------------ ------------ ------------ -----------
Gross profit 67,662 55,050 122,154 100,968
Selling, general and
administrative expenses 11,099 9,801 22,338 19,060
Research and development
expense 7,476 6,765 15,449 13,061
------------ ------------ ------------ -----------
18,575 16,566 37,787 32,121
------------ ------------ ------------ -----------
Operating income 49,087 38,484 84,367 68,847
Other income (expense):
Interest income 1,755 2,644 3,380 5,930
Interest expense (346) (459) (717) (1,227)
Foreign currency (9,005) 8,419 (9,737) 7,316
Other 94 (22) 165 101
------------ ------------ ------------ -----------
(7,501) 10,582 (6,909) 12,120
------------ ------------ ------------ -----------
Income before income taxes 41,586 49,066 77,458 80,967
Income tax provision 9,440 12,463 18,551 20,565
------------ ------------ ------------ -----------
Net income $32,146 $36,603 $58,906 $60,402
============ ============ ============ ===========
Net income per share
Basic $0.30 $0.34 $0.55 $0.56
Diluted $0.30 $0.34 $0.54 $0.56
Weighted average common
shares outstanding:
Basic 107,788 108,242 107,782 108,242
Diluted 108,215 108,648 108,172 108,629
The accompanying notes are an integral part of these financial statements.
Garmin Ltd. And Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
26-Weeks Ended
-------------------------------------------
June 29, June 30,
2002 2001
Operating Activities:
Net income $58,906 $60,402
Depreciation & amortization 6,339 5,038
Provision for doubtful accounts 377 148
Deferred income taxes (324) (685)
Foreign currency transaction (gains) losses 610 (4,550)
Change in operating assets and liabilities:
Accounts receivable (5,009) (22,398)
Inventories 16,700 15,451
Other current assets (1,798) (3,086)
Accounts payable (1,515) (9,122)
Other current liabilities 4,173 1,083
Income taxes 187 5,774
------------------ ------------------
Net cash provided by operating activities 78,646 48,055
Investing activities:
Purchases of property and equipment (5,448) (8,842)
Purchase of intangible assets (12,876) -
Purchase of marketable securities, net (102,581) -
Change in restricted cash - 5,471
Other (177) (3,158)
------------------ ------------------
Net cash used in investing activities (121,082) (6,529)
Financing activities:
Payments on long term debt (12,231) (8,617)
------------------ ------------------
Net cash provided by (used in) financing activities (12,231) (8,617)
Effect of exchange rate changes on cash 8,400 (5,863)
------------------ ------------------
Net increase in cash (46,267) 27,046
Cash at beginning of period 192,842 251,731
------------------ ------------------
Cash at end of period $146,575 $278,777
================== ==================
The accompanying notes are an integral part of these financial statements.
Garmin Ltd.
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 29, 2002
(In thousands, except share and per share information)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the 13 and 26-week periods ended June 29,
2002 are not necessarily indicative of the results that may be expected for the
year ended December 28, 2002.
The condensed consolidated balance sheet at December 29, 2001 has been derived
from the audited financial statements at that date but does not include all of
the information and footnotes required by generally accepted accounting
principles for completed financial statements. For further information, refer to
the condensed consolidated financial statements and footnotes thereto included
in the Company's Annual Report on Form 10-K for the year ended December 29,
2001.
The company's fiscal year is based on a 52-53 week period ending on the last
Saturday of the calendar year. Therefore the financial results of certain fiscal
years, and the associated 14-week quarters, will not be exactly comparable to
the prior and subsequent 52-week fiscal years and the associated quarters having
only 13 weeks. The quarters ended June 29, 2002 and June 30, 2001 both contain
operating results for 13 weeks.
2. Recent Pronouncements
In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, which addresses financial accounting and
reporting for the impairment or disposal of long-lived assets and supersedes
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of, and the accounting and reporting provisions
of APB Opinion No. 30, Reporting the Results of Operations, for a disposal of a
segment of a business. SFAS No. 144 is effective for fiscal years beginning
after December 15, 2001, with earlier application encouraged. The Company
adopted SFAS No. 144 as of December 30, 2001, and the adoption of the statement
has not had any impact on the Company's financial position and results of
operations.
In June 2001, the FASB issued SFAS No. 141, Business Combinations, and SFAS No.
142, Goodwill and Other Intangible Assets. SFAS No. 141 supercedes APB Opinion
No. 16, Business Combinations, and FASB Statement No. 28, Accounting for
Preacquisition Contingencies of Purchased Enterprises. This statement requires
accounting for all business combination using the purchase method, and changes
the criteria for recognizing intangible assets apart from goodwill. This
statement is effective for all business combinations initiated after June 30,
2001. SFAS No. 142 supercedes APB Opinion No. 17, Intangible Assets, and
addresses how purchased intangibles should be accounted for upon acquisition.
The statement also addresses how goodwill and other intangible assets should be
accounted for after they have been initially recognized in the financial
statements. All intangibles will be subject to periodic impairment testing and
will be adjusted to fair value.
The Company adopted SFAS No. 142 beginning in the first quarter of 2002.
Application of the nonamortization and impairment provisions of the statement
has not had a significant impact to the financial position and results of
operations.
3. Inventories
The components of inventory consist of the following:
June 29, 2002 December 29, 2001
---------------------- -----------------------
Raw materials $23,845 $26,381
Work-in-process 9,256 9,582
Finished goods 18,788 34,723
Inventory reserves (5,518) (9,554)
------- -------
Inventory, net of reserves $46,371 $61,132
======= =======
4. Long-Term Debt
On January 1, 1995, Garmin International, Inc. completed a $9.5 million 30-year
tax-exempt Industrial Revenue Bond issuance for the construction of its
corporate headquarters located in Olathe, Kansas. Upon completion of the project
in 1996, Garmin International retired bonds totaling $0.2 million. As of May 1,
2002, Garmin International, Inc. purchased all $9.3 million of its outstanding
1995 Series tax-exempt Industrial Revenue Bonds to further decrease its
long-term debt. At June 29, 2002 and June 30, 2001, outstanding principal under
the Bonds totaled $0.0 million and $9.3 million, respectively. Interest on the
Bonds is payable monthly at a variable interest rate (1.95% and 3.9% at June 29,
2002 and June 30, 2001, respectively), which is adjusted weekly to the current
market rate as determined by the remarketing agent for the Bonds with principal
due upon maturity on January 1, 2025.
5. Stock Repurchase Plan
On September 24, 2001, Garmin announced that its Board of Directors approved a
share repurchase program authorizing Garmin to purchase up to five million
common shares of Garmin Ltd. as market and business conditions warrant. The
purchases may be made from time to time on the open market or in negotiated
transactions in compliance with Rule 10b-18 promulgated by the Securities and
Exchange Commission. The timing and amounts of any purchases will be determined
by Garmin's management depending on market conditions and other factors deemed
relevant. The share repurchase authorization expires on December 31, 2002. As of
June 29, 2002, Garmin had purchased a total of 595,200 shares pursuant to this
share repurchase authorization at a total cost of $9.8 million. All such
purchased shares have been cancelled and now form part of the authorized but
unissued capital of Garmin, since Cayman Islands law does not permit a company
to hold its own shares. There were no shares repurchased during the 13 and
26-week periods ended June 29, 2002.
6. Initial Public Offering
On December 8, 2000, the Company completed an underwritten initial public
offering of 12,075,000 shares (including shares sold pursuant to the
underwriters' over-allotment option) of its common shares, of which 8,242,111
shares were offered by the Company and 3,832,889 were offered by selling
shareholders (the Offering) at an offering price of $14.00 per share. Prior to,
but in connection with the Offering, the Board of Directors approved a
1.12379256-for-1 stock split of the Company's common shares, effected through a
stock dividend on November 6, 2000.
7. Earnings Per Share
The following table sets forth the computation of basic and diluted net income
per share (in thousands, except per share information):
13-Weeks Ended
---------------------------
June 29, June 30,
2002 2001
---------------------------
Numerator:
Numerator for basic and diluted net income
per share - net income $32,146 $36,603
===========================
Denominator (in thousands):
Denominator for basic net income per share -
weighted-average common shares 107,788 108,242
Effect of dilutive securities - employee
stock options 427 406
---------------------------
Denominator for diluted net income per
share - adjusted weighted-average common
shares 108,215 108,648
===========================
Basic net income per share $0.30 $0.34
===========================
Diluted net income per share $0.30 $0.34
===========================
26-Weeks Ended
--------------------------
June 29, June 30,
2002 2001
---------------------------
Numerator:
Numerator for basic and diluted net income
per share - net income $58,906 $60,402
===========================
Denominator (in thousands):
Denominator for basic net income per share -
weighted-average common shares 107,782 108,242
Effect of dilutive securities - employee
stock options 390 387
---------------------------
Denominator for diluted net income per
share - adjusted weighted-average common
shares 108,172 108,629
===========================
Basic net income per share $0.55 $0.56
===========================
Diluted net income per share $0.54 $0.56
===========================
Certain options to purchase shares of common stock were outstanding during 2002
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 and, therefore, the effect would be antidilutive.
8. Comprehensive Income
Comprehensive income is comprised of the following:
13-Weeks Ended
----------------------------------
June 29, 2002 June 30, 2001
----------------------------------
(in thousands)
Net income $32,145 $36,603
Translation adjustment 14,162 (12,582)
Change in fair value of effective portion
of cash flow hedges, net of deferred taxes
of $39 (58) ---
Comprehensive income $46,249 $24,021
======= =======
----------------------------------
26-Weeks Ended
----------------------------------
June 29, 2002 June 30, 2001
----------------------------------
(in thousands)
Net income $58,906 $60,402
Translation adjustment 15,124 (11,642)
Change in fair value of effective portion
of cash flow hedges, net of deferred taxes
of $64 (95) ---
Comprehensive income $73,935 $48,760
======= =======
----------------------------------
9. Segment Information
Revenues and income before income taxes for each of the Company's reportable
segments are presented below:
13-Weeks Ended
--------------------------------------------------------
June 29, 2002 June 30, 2001
--------------------------------------------------------
Consumer Aviation Consumer Aviation
(in thousands)
Sales to external
Customers $93,745 $29,093 $70,827 $32,807
Income before
Income taxes $29,566 $12,020 $31,729 $17,337
--------------------------------------------------------
26-Weeks Ended
--------------------------------------------------------
June 29, 2002 June 30, 2001
--------------------------------------------------------
Consumer Aviation Consumer Aviation
(in thousands)
Sales to external
Customers $168,492 $55,202 $129,351 $59,817
Income before
Income taxes $54,714 $22,744 $51,735 $29,232
--------------------------------------------------------
Revenues and long-lived assets (property and equipment) by geographic area are
as follows as of and for the 26-week periods ended June 29, 2002 and June 30,
2001:
North America Asia Europe Total
--------------------------------------------------
June 29, 2002
Sales to external customers $161,377 $9,103 $53,214 $223,694
Long-lived assets 40,332 32,277 493 73,102
June 30, 2001
Sales to external customers $140,941 $6,682 $41,545 $189,168
Long-lived assets 38,379 29,663 499 68,541
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The discussion set forth below, as well as other portions of this Quarterly
Report, contains statements concerning potential future events. Such
forward-looking statements are based upon assumptions by our management, as of
the date of this Quarterly Report, including assumptions about risks and
uncertainties faced by the Company. Readers can identify these forward-looking
statements by their use of such verbs as expects, anticipates, believes or
similar verbs or conjugations of such verbs. If any of our assumptions prove
incorrect or should unanticipated circumstances arise, our actual results could
materially differ from those anticipated by such forward-looking statements. The
differences could be caused by a number of factors or combination of factors
including, but not limited to, those factors identified in the Company's Annual
Report on Form 10-K for the year ended December 29, 2001. This report has been
filed with the Securities and Exchange Commission (the "SEC" or the
"Commission") in Washington, D.C. and can be obtained by contacting the SEC's
public reference operations or obtaining it through the SEC's web site on the
World Wide Web at http://www.sec.gov. Readers are strongly encouraged to
consider those factors when evaluating any forward-looking statement concerning
the Company. The Company will not update any forward-looking statements in this
Quarterly Report to reflect future events or developments.
The information contained in this Management's Discussion and Analysis of
Financial Condition and Results of Operations should be read in conjunction with
the Condensed Consolidated Financial Statements and Notes thereto included in
this Form 10-Q and the audited financial statements and notes thereto in the
Company's Annual Report on Form 10-K for the year ended December 29, 2001.
The Company is a leading worldwide provider of navigation, communications
and information devices, most of which are enabled by Global Positioning System,
or GPS, technology. We operate in two business segments, the consumer and
aviation markets. Both of our segments offer products through our network of
independent dealers and distributors. However, the nature of products and types
of customers for the two segments vary significantly. As such, the segments are
managed separately. Our consumer segment includes portable GPS receivers and
accessories for marine, recreation, land and automotive use sold primarily to
retail outlets. Our aviation products are portable and panel-mount avionics for
Visual Flight Rules and Instrument Flight Rules navigation and are sold
primarily to retail outlets and certain aircraft manufacturers.
Results of Operations
The following table sets forth our results of operations as a percentage of
net sales during the periods shown:
13-Weeks Ended
-----------------------------------
June 29, 2002 June 30, 2001
-----------------------------------
Net sales 100.0% 100.0%
Cost of goods sold 44.9% 46.9%
----- -----
Gross profit 55.1% 53.1%
Selling, general and 9.0% 9.5%
administrative
Research and development 6.1% 6.5%
---- ----
Total operating expenses 15.1% 16.0%
----- -----
Operating income 40.0% 37.1%
Other income (expense), net (6.1%) 10.2%
------ -----
Income before income taxes 33.9% 47.3%
Provision for income taxes 7.7% 12.0%
---- -----
Net income 26.2% 35.3%
===== =====
-----------------------------------
26-Weeks Ended
-----------------------------------
June 29, 2002 June 30, 2001
-----------------------------------
Net sales 100.0% 100.0%
Cost of goods sold 45.4% 46.6%
----- -----
Gross profit 54.6% 53.4%
Selling, general and 10.0% 10.1%
administrative
Research and development 6.9% 6.9%
---- ----
Total operating expenses 16.9% 17.0%
----- -----
Operating income 37.7% 36.4%
Other income (expense), net (3.1%) 6.4%
------ ----
Income before income taxes 34.6% 42.8%
Provision for income taxes 8.3% 10.9%
---- -----
Net income 26.3% 31.9%
===== =====
-----------------------------------
The following table sets forth our results of operations for each of our
two segments through income before income taxes during the periods shown. For
each line item in the table, the total of the consumer and aviation segments'
amounts equals the amount in the consolidated statements of income included in
Item 1.
13-Weeks Ended
----------------------------------------------------------
June 29, 2002 June 30, 2001
----------------------------------------------------------
Consumer Aviation Consumer Aviation
(in thousands)
Net sales $93,745 $29,093 $70,827 $32,807
Cost of goods sold 44,053 11,123 36,714 11,870
------ ------ ------ ------
Gross profit 49,692 17,970 34,113 20,937
Operating expenses:
Selling, general and
administrative 8,590 2,509 7,080 2,721
Research and 4,247 3,229 4,374 2,391
----- ----- ----- -----
development
Total operating expenses 12,837 5,738 11,454 5,112
------ ----- ------ -----
Operating income 36,855 12,232 22,659 15,825
Other income (expense), net (7,289) (212) 9,070 1,512
Income before
income taxes $29,566 $12,020 $31,729 $17,337
======= ======= ======= =======
---------------------------------------------------------
26-Weeks Ended
---------------------------------------------------------
June 29, 2002 June 30, 2001
---------------------------------------------------------
Consumer Aviation Consumer Aviation
(in thousands)
Net sales $168,492 $55,202 $129,351 $59,817
Cost of goods sold 80,134 21,406 65,265 22,935
------ ------ ------ ------
Gross profit 88,358 33,796 64,086 36,882
Operating expenses:
Selling, general and
administrative 17,490 4,848 13,737 5,323
Research and 9,222 6,227 8,609 4,452
development ----- ----- ----- -----
Total operating expenses 26,712 11,075 22,346 9,775
------ ------ ------ -----
Operating income 61,646 22,721 41,740 27,107
Other income (expense), net (6,932) 23 9,995 2,125
------- ---- ----- -----
Income before
income taxes $54,714 $22,744 $51,735 $29,232
======= ======= ======= =======
--------------------------------------------------------
Comparison of 13-Weeks Ended June 29, 2002 and June 30, 2001
Net Sales
Net sales increased $19.2 million, or 18.5%, to $122.8 million for the
13-week period ended June 29, 2002, from $103.6 million for the 13-week period
ended June 30, 2001. The increase for the 13-week period ended June 29, 2002 was
primarily due to the success of the new marine and automotive products that were
introduced during the last 18 months and overall demand for our consumer
products associated with a strong marine selling season during the quarter.
Sales from our consumer products accounted for 76.3% of net sales for the first
quarter of 2002 compared to 68.3% during the first quarter of 2001. Sales from
our aviation products accounted for 23.7% for the first quarter of 2002 compared
to 31.7% during the first quarter of 2001. Total consumer and aviation units
increased 8.7% to 388,623 in 2002 from 357,454 in 2001.
Net sales for the consumer segment increased $22.9 million, or 32.4%, to
$93.7 million for the 13-week period ended June 29, 2002, from $70.8 million for
the 13-week period ended June 30, 2001. The increase for the 13-week period
ended June 29, 2002 was primarily due to the success of the new marine and
automotive products introduced during the last 18 months and overall demand for
our consumer products associated with a strong marine selling season during the
quarter.
Net sales for the aviation segment decreased $3.7 million, or 11.3%, to
$29.1 million for the 13-week period ended June 29, 2002, from $32.8 million for
the 13-week period ended June 30, 2001. The decrease for the 13-week period
ended June 29, 2002 was primarily due to the remaining economic effects of the
terrorist attacks that occurred on September 11, 2001. The aviation segment
exhibited a sequential revenue increase of $3.0 million, or 11.4%, to $29.1
million during the quarter compared to $26.1 million during the first quarter of
fiscal year 2002. We believe that this sequential revenue increase in our
aviation segment is a signal of a continued slow economic recovery occurring in
the general aviation market.
Gross Profit
Gross profit increased $12.6 million, or 22.9%, to $67.7 million for the
13-week period ended June 29, 2002, from $55.1 million for the 13-week period
ended June 30, 2001. This increase was primarily attributable to an increase in
revenues due to the success of the new products that were introduced during the
last 18 months, improved manufacturing efficiencies, and a reduction of raw
material costs. Gross profit as a percentage of net sales increased 200 basis
points to 55.1% for the 13-week period ended June 29, 2002 compared to 53.1% for
the 13-week period ended June 30, 2001.
Gross profit for the consumer segment increased $15.6 million, or 45.6%, to
$49.7 million for the 13-week period ended June 29, 2002, from $34.1 million for
the 13-week period ended June 30, 2001. This increase is primarily attributable
to the increase in consumer segment revenue, improved manufacturing efficiencies
on many of our new products introduced during the last 18 months, and a
reduction of raw material costs. Gross profit as a percentage of net sales
increased 480 basis points to 53.0% for the 13-week period ended June 29, 2002
compared to 48.2% for the 13-week period ended June 30, 2001.
Gross profit for the aviation segment decreased $2.9 million, or 14.2%, to
$18.0 million for the 13-week period ended June 29, 2002, from $20.9 million for
the 13-week period ended June 30, 2001. This decrease is associated with the
decline in revenues in our aviation segment during the quarter. Gross profit as
a percentage of net sales decreased to 61.8% for the 13-week period ended June
29, 2002 from 63.8% for the 13-week period ended June 30, 2001. This decrease as
a percentage of net sales was primarily due to product mix as we sold fewer of
our higher margin aviation handheld units during 2002 when compared to 2001.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $1.3 million, or
13.2%, to $11.1 million (9.0% of net sales) for the 13-week period ended June
29, 2002, from $9.8 million (9.5% of net sales) for the 13-week period ended
June 30, 2001. Selling, general and administrative expenses increased $1.5
million, or 21.3%, in the consumer segment and decreased $0.2 million, or 7.8%,
in the aviation segment. The increase in expense was primarily attributable to
increases in employment generally across the organization, increased advertising
costs (up 11%) associated with new product releases, increased administrative
expenses due to marketing support and airport infrastructure expenses associated
with our 25,000 sq.ft. flight test and certification facility located at New
Century Airport near our Olathe, Kansas facility. Increased selling, general and
administrative expenses within the aviation segment were offset by a general
decrease due to lower revenue within the segment.
Research and Development Expense
Research and development expenses increased $0.7 million, or 10.5%, to $7.5
million (6.1% of net sales) for the 13-week period ended June 29, 2002, from
$6.8 million (6.5% of net sales) for the 13-week period ended June 30, 2001.
Research and development expenses decreased $0.1 million, or 2.9%, in the
consumer segment and increased $0.8 million, or 35.0%, in the aviation segment.
The decrease in our consumer segment research and development was due to the
timing of program costs (non-staff expense) across several products in
development. The increase in our aviation segment research and development was
primarily attributable to continued costs associated with our future integrated
cockpit project. We added 27 new engineering personnel to our staff during the
quarter as a result of our continued emphasis on product innovation.
Operating Income
Operating income for the 13-week period ended June 29, 2002 increased to
$49.1 million, or 27.6% from $38.5 million for the 13-week period ended June 30,
2001. Operating income as a percentage of net sales increased to 40.0% for the
13-week period ended June 29, 2002, from 37.1% for the 13-week period ended June
30, 2001 as a result of strong consumer sales and increased gross profits,
primarily within the consumer segment.
Other Income (Expense)
Other income (expense) principally consists of interest income, interest
expense and foreign currency exchange gains and losses. Other income for the
13-week period ended June 29, 2002 amounted to a $7.5 million loss compared to
other income of $10.6 million for the 13-week period ended June 30, 2001.
Interest income for the 13-week period ended June 29, 2002 amounted to $1.8
million compared to $2.6 million for the 13-week period ended June 30, 2001, the
decrease being attributable to the reduction in interest rates during the last
12 months. The average taxable equivalent interest rate return on invested cash
during the quarter was 2.2% compared to 4.0% during the second fiscal quarter of
2001. Interest expense decreased to $0.3 million for the 13-week period ended
June 29, 2002 from $0.5 million for the 13-week period ended June 30, 2001 due
to the retirement of debt associated with our Taiwan facility, the purchase of
our 1995 Olathe industrial revenue bonds, and a lower interest rate environment
during the second quarter of fiscal 2002.
We recognized a foreign currency exchange loss of $9.0 million for the
13-week period ended June 29, 2002 compared to a gain of $8.4 million for the
13-week period ended June 30, 2001. The $9.0 million loss was due to the
weakness of the U.S. Dollar compared to the Taiwan Dollar during the second
quarter of fiscal 2002, when the exchange rate decreased to 33.56 TD/USD at June
29, 2002 from 35.00 TD/USD at March 30, 2002. The $8.4 million gain was due to
the strength of the U.S. Dollar compared to the Taiwan Dollar during the second
quarter of fiscal 2001, when the exchange rate increased to 34.50 TD/USD at June
30, 2001 from 32.84 TD/USD at March 31, 2001.
Income Tax Provision
Income tax expense decreased by $3.1 million, to $9.4 million, for the
13-week period ended June 29, 2002 from $12.5 million for the 13-week period
ended June 30, 2001 due to our lower taxable income. The effective tax rate
decreased to 22.7% during the 13-week period ended June 29, 2002 from 25.4%
during 13-week period ended June 30, 2001 due to additional tax incentives
within our Taiwan subsidiary during fiscal 2002.
Net Income
As a result of the above, net income decreased 12.2% for the 13-week period
ended June 29, 2002 to $32.1 million compared to $36.6 million for the 13-week
period ended June 30, 2001.
Comparison of 26-Weeks Ended June 29, 2002 and June 30, 2001
Net Sales
Net sales increased $34.5 million, or 18.3%, to $223.7 million for the
26-week period ended June 29, 2002, from $189.2 million for the 26-week period
ended June 30, 2001. The increase for the 26-week period ended June 29, 2002 was
primarily due to the success of the new marine and automotive products that were
introduced during the last 18 months and overall demand for our consumer
products associated with a strong marine selling season during the first half of
fiscal 2002. Sales from our consumer products accounted for 75.3% of net sales
for the first half of 2002 compared to 68.4% during the first half of 2001.
Sales from our aviation products accounted for 24.7% for the first half of 2002
compared to 31.7% during the first quarter of 2001. Total consumer and aviation
units increased 3.0% to 701,651 in 2002 from 681,546 in 2001.
Net sales for the consumer segment increased $39.1 million, or 30.3%, to
$168.5 million for the 26-week period ended June 29, 2002, from $129.4 million
for the 26-week period ended June 30, 2001. The increase for the 26-week period
ended June 29, 2002 was primarily due to the success of the new marine and
automotive products introduced during the last 18 months and overall demand for
our consumer products associated with a strong marine selling season during the
first half of fiscal 2002.
Net sales for the aviation segment decreased $4.6 million, or 7.7%, to
$55.2 million for the 26-week period ended June 29, 2002, from $59.8 million for
the 26-week period ended June 30, 2001. The decrease for the 26-week period
ended June 29, 2002 was primarily due to the remaining economic effects of the
terrorist attacks that occurred on September 11, 2001.
Gross Profit
Gross profit increased $21.2 million, or 21.0%, to $122.2 million for the
26-week period ended June 29, 2002, from $101.0 million for the 26-week period
ended June 30, 2001. This increase was primarily attributable to an increase in
revenues due to the success of the new products that were introduced during the
last 18 months, improved manufacturing efficiencies, and a reduction of raw
material costs. Gross profit as a percentage of net sales increased 120 basis
points to 54.6% for the 26-week period ended June 29, 2002 compared to 53.4% for
the 26-week period ended June 30, 2001.
Gross profit for the consumer segment increased $24.3 million, or 37.9%, to
$88.4 million for the 26-week period ended June 29, 2002, from $64.1 million for
the 26-week period ended June 30, 2001. This increase is primarily attributable
to the increase in consumer segment revenue, improved manufacturing efficiencies
on many of our new products introduced during the last 18 months, and a
reduction of raw material costs. Gross profit as a percentage of net sales
increased 290 basis points to 52.4% for the 26-week period ended June 29, 2002
compared to 49.5% for the 26-week period ended June 30, 2001.
Gross profit for the aviation segment decreased $3.1 million, or 8.4%, to
$33.8 million for the 26-week period ended June 29, 2002, from $36.9 million for
the 26-week period ended June 30, 2001. This decrease is associated with the
decline in revenues in our aviation segment during the quarter. Gross profit as
a percentage of net sales decreased 50 basis points to 61.2% for the 26-week
period ended June 29, 2002 from 61.7% for the 26-week period ended June 30,
2001. This decrease as a percentage of net sales was primarily due to product
mix as we sold fewer of our higher margin aviation handheld units during 2002
when compared to 2001.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $3.3 million, or
17.2%, to $22.3 million (10.0% of net sales) for the 26-week period ended June
29, 2002, from $19.1 million (10.1% of net sales) for the 26-week period ended
June 30, 2001. Selling, general and administrative expenses increased $3.8
million, or 27.3%, in the consumer segment and decreased $0.5 million, or 8.9%,
in the aviation segment. The increase in expense was primarily attributable to
increases in employment generally across the organization, increased advertising
costs (up 19%) associated with new product releases, increased administrative
expenses due to marketing support and airport infrastructure expenses associated
with our 25,000 sq.ft. flight test and certification facility located at New
Century Airport near our Olathe, Kansas facility. Increased selling, general and
administrative expenses within the aviation segment were offset by a general
decrease due to lower revenue within the segment.
Research and Development Expense
Research and development expenses increased $2.4 million, or 18.3%, to
$15.4 million (6.9% of net sales) for the 26-week period ended June 29, 2002,
from $13.1 million (6.9% of net sales) for the 26-week period ended June 30,
2001. Research and development expenses increased $0.6 million, or 7.1%, in the
consumer segment and $1.8 million, or 39.9%, in the aviation segment. The
increase in expense was primarily due to the continued development of our future
integrated cockpit within our aviation segment and the addition of 56 new
engineering personnel to our staff within the last 12 months as a result of our
continued emphasis on product innovation.
Operating Income
Operating income for the 26-week period ended June 29, 2002 increased to
$84.4 million, or 22.5% from $68.8 million for the 26-week period ended June 30,
2001. Operating income as a percentage of net sales increased to 37.7% for the
26-week period ended June 29, 2002, from 36.4% for the 26-week period ended June
30, 2001 as a result of strong consumer sales and increased gross profits,
primarily within the consumer segment.
Other Income (Expense)
Other income for the 26-week period ended June 29, 2002 amounted to a $6.9
million loss compared to other income of $12.1 million for the 26-week period
ended June 30, 2001. Interest income for the 26-week period ended June 29, 2002
amounted to $3.4 million compared to $5.9 million for the 26-week period ended
June 30, 2001, the decrease being attributable to the reduction in interest
rates during the last 12 months. The average taxable equivalent interest rate
return on invested cash during the 26-week period ended June 29, 2002 was 2.2%
compared to 4.5% during the 26-week period ended June 30, 200l. Interest expense
decreased to $0.7 million for the 26-week period ended June 29, 2002 from $1.2
million for the 26-week period ended June 30, 2001, due to the retirement of
debt associated with our Taiwan facility, the purchase of our 1995 Olathe
industrial revenue bonds, and a lower interest rate environment during the last
12 months.
We recognized a foreign currency exchange loss of $9.7 million for the
26-week period ended June 29, 2002 compared to a gain of $7.3 million for the
26-week period ended June 30, 2001. The $9.7 million loss was due to the
weakness of the U.S. Dollar compared to the Taiwan Dollar during the 26-week
period ended June 29, 2002, when the exchange rate decreased to 33.56 TD/USD at
June 29, 2002 from
35.17 TD/USD at December 29, 2001. The $7.3 million gains was due to the
strength of the U.S. Dollar compared to the Taiwan Dollar during the 26-week
period ended June 30, 2001, when the exchange rate increased to 34.50 TD/USD at
June 30, 2001 from 33.01 TD/USD at December 30, 2000.
Income Tax Provision
Income tax expense decreased by $2.0 million, to $18.6 million, for the
26-week period ended June 29, 2002 from $20.6 million for the 26-week period
ended June 30, 2001 due to our lower taxable income. The effective tax rate
decreased to 24.0% during the 26-week period ended June 29, 2002 from 25.4%
during the 26-week period ended June 30, 2001 due to additional tax incentives
within our Taiwan subsidiary during fiscal 2002.
Net Income
As a result of the above, net income decreased 2.5% for the 26-week period
ended June 29, 2002 to $58.9 million compared to $60.4 million for the 26-week
period ended June 30, 2001.
Liquidity and Capital Resources
Net cash generated by operating activities was $78.6 million for the
26-week period ended June 29, 2002 compared to $48.1 million for the 26-week
period ended June 30, 2001. We operate with a strong customer driven approach
and therefore carry sufficient inventory to meet customer demand. Because we
desire to respond quickly to our customers and minimize order fulfillment time,
our inventory levels are generally adequate to meet most demand. We also attempt
to carry sufficient inventory levels on key components so that potential
supplier shortages have as minimal an impact as possible on our ability to
deliver our finished products. We did experience a $16.7 million further
reduction in inventory at June 29, 2002 when compared to fiscal year-end
December 29, 2001 due to reduction in finished goods inventory associated with
strong customer demand during the quarter. We increased inventory levels at the
end of fiscal year 2000 due partially to industry shortages of certain raw
materials. These raw material shortages have since normalized and we believe
that it is not necessary at this time to carry an unusual level of raw material
inventory.
Cash flow from investing activities during the 26-week period ending June
29, 2002 was a $121.1 million use of cash. Cash flow used in investing
activities principally relates to $5.4 million in capital expenditures, the
purchase of $12.9 million of intangible assets, and the net purchase of $102.6
million of fixed income securities associated with the investment of our on-hand
cash balances. It is management's goal to invest the on-hand cash consistent
with the Company's investment policy, which has been approved by the Board of
Directors. The investment policy's primary purpose is to preserve capital,
maintain an acceptable degree of liquidity, and maximize yield within the
constraint of maximum safety. The Company's average taxable equivalent return on
its investments during the 26-week period ended June 29, 2002 was approximately
2.2%.
Cash flow from financing activities during the period was a $12.2 million
use of cash due to the retirement of debt associated with our Taiwan facility
and our 1995 industrial revenue bond issuance.
We currently use cash flow from operations to fund our capital
expenditures, to repay debt and to support our working capital requirements. We
expect that future cash requirements will principally be for capital
expenditures, repayment of indebtedness and working capital requirements.
We believe that our existing cash balances and cash flow from operations
will be sufficient to meet our projected capital expenditures, working capital
and other cash requirements at least through the next 12 months.
Contractual Obligations and Commercial Commitments
On March 23, 2000, Garmin International, Inc. completed a $20.0 million
20-year Taxable Industrial Revenue Bond issuance for the expansion of its
Olathe, Kansas facility. At June 29, 2002 and June 30, 2001, outstanding
principal under the 2000 Bonds totaled $20.0 million. Interest on the 2000 Bonds
is payable monthly at a variable interest rate (1.95% and 3.9% at June 29, 2002
and June 30, 2001, respectively), which is adjusted weekly to the current market
rate as determined by the remarketing agent of the 2000 Bonds with principal due
upon maturity on April 15, 2020.
The 2000 Bonds are secured by an irrevocable letter of credit totaling
$20.3 million with facility fees of 0.75%. This renewable letter of credit
initially expires on September 20, 2004. The bank has the option of requiring
Garmin International, Inc. to establish a sinking fund related to the principal
balance outstanding on the Bonds, which it had not exercised through June 29,
2002. The letter of credit is secured by a mortgage on all assets financed with
the proceeds of the Bonds.
On January 1, 1995, Garmin International, Inc. completed a $9.5 million
30-year tax-exempt Industrial Revenue Bond issuance for the construction of its
corporate headquarters located in Olathe, Kansas. Upon completion of the project
in 1996, Garmin International retired bonds totaling $0.2 million. As of May 1,
2002, Garmin International, Inc. purchased all $9.3 million of its outstanding
1995 Series tax-exempt Industrial Revenue Bonds to further decrease its
long-term debt. At June 29, 2002 and June 30, 2001, outstanding principal under
the Bonds totaled $0.0 million and $9.3 million, respectively. Interest on the
Bonds is payable monthly at a variable interest rate (1.95% and 3.9% at June 29,
2002 and June 30, 2001, respectively), which is adjusted weekly to the current
market rate as determined by the remarketing agent for the Bonds with principal
due upon maturity on January 1, 2025.
Our reimbursement agreements contain restrictive covenants, which include,
among other things, financial covenants requiring minimum cash flow leverage,
maximum capitalization, minimum tangible net worth, and other affirmative and
negative covenants. We do not expect these limitations to have a material effect
on our business or results of operations. We are in compliance with all
covenants contained in the reimbursement agreements.
During 1999, Garmin Corporation borrowed $18.0 million to finance the
purchase of land and a new manufacturing facility in Shijr, Taiwan. The
remaining debt associated with this facility was retired during the first
quarter of fiscal 2002.
We utilize interest rate swap agreements to manage interest rate exposure.
The principal objective of such financial derivative contracts is to moderate
the effect of fluctuations in interest rates. We, as a matter of policy, do not
speculate in financial markets and therefore do not hold these contracts for
trading purposes. We utilize what are considered simple instruments, such as
non-leveraged interest rate swaps, to accomplish our objectives.
The company has the option at any time during the year to retire a portion
or all of its long-term debt.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Market Sensitivity
We have market risk primarily in connection with the pricing of our
products and services and the purchase of raw materials. Product pricing and raw
material costs are both significantly influenced by semiconductor market
conditions. Historically, during cyclical industry downturns, we have been able
to
offset pricing declines for our products through a combination of improved
product mix and success in obtaining price reductions in raw material costs.
Inflation
We do not believe that inflation has had a material effect on our business,
financial condition or results of operations. If our costs were to become
subject to significant inflationary pressures, we may not be able to fully
offset such higher costs through price increases. Our inability or failure to do
so could adversely affect our business, financial condition and results of
operations.
Foreign Currency Exchange Rate Risk
The operation of the Company's subsidiaries in international markets
results in exposure to movements in currency exchange rates. We generally have
not been significantly affected by foreign exchange fluctuations because, until
recently, the exchange rate between the Taiwan Dollar and the U.S. Dollar has
proven to be relatively stable. However, within the last two years we have
experienced significant foreign currency gains and losses due to fluctuations in
the value of the U.S. dollar. The potential of volatile foreign exchange rate
fluctuations in the future could have a significant effect on our results of
operations.
The principal foreign currency resulting in foreign currency exchange rate
risk is the Taiwan Dollar. Garmin Corporation, located in Shijr, Taiwan uses the
local currency as the functional currency. The Company translates all assets and
liabilities at year-end exchange rates and income and expense accounts at
average rates during the year. In order to minimize the effect of the currency
exchange fluctuations on our operations, we have elected to retain most of our
cash at our Taiwan subsidiary in U.S. dollars. As discussed above, the exchange
rate decreased 4.1% during the second quarter of fiscal 2002 and resulted in a
foreign currency loss of $9.0 million. If the exchange rate increased by a
similar percentage, a comparable foreign currency gain would be recognized.
Interest Rate Risk
As of June 29, 2002, we have interest rate risk in connection with our
industrial revenue bonds that bear interest at a floating rate. Garmin
International, Inc. entered into two interest rate swap agreements, one on July
1, 2000 ($10.0 million) and another on February 6, 2001 ($5.0 million), totaling
$15.0 million to modify the characteristics of its outstanding long-term debt
from a floating rate to a fixed rate basis. These agreements involve the receipt
of floating rate amounts in exchange for fixed rate interest payments over the
life of the agreements without an exchange of the underlying principal amount.
The estimated fair value of the interest swap agreements of $0.8 million is the
amount we would be required to pay to terminate the swap agreements at June 29,
2002. A 10% positive or negative change in the floating counterparty interest
rates associated with the swaps would change the estimated fair value of the
interest rate swap agreements to $0.7 million (positive 10% change) or $0.9
million (negative 10% change), respectively.
The Company's average outstanding debt during the 13-week period ended June
29, 2002 was approximately $23.1 million. The average interest rate on debt
during the quarter was approximately 4.6%. A 10% positive or negative change in
the average interest rate during the quarter would have resulted in interest
expense of $0.4 million (positive 10% change) or $0.2 million (negative 10%
change), respectively. This compares to the actual interest expense of $0.3
million during the second quarter of fiscal 2002.
Part II - Other Information
Item 1. Legal Proceedings
- -----------------------------------------
From time to time the Company may be involved in litigation arising in
the course of its operations. As of August 12, 2002, the Company was
not a party to any material legal proceedings.
Item 2. Changes in Securities and Use of Proceeds
- -----------------------------------------
None
Item 3. Defaults Upon Senior Securities
- -----------------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------
The Company held its Annual General Meeting of Shareholders on June 7,
2002. Proxies for the meeting were solicited pursuant to Regulation
14A. There was no solicitation in opposition to the Board of Directors'
nominees for election as directors as listed in the Proxy Statement and
all such nominees were elected. Listed below is each matter voted on at
the Company's Annual General Meeting. All such matters were approved. A
total of 106,299,859 common shares or approximately 99% of the common
shares outstanding on the record date, were present in person or by
proxy at the Annual General Meeting. These shares were voted as
follows:
1) Election of Two Directors of the Company:
Nominee For Withheld
------- --- --------
Donald H. Eller 106,227,360 72,499
Ruey-Jeng Kao 106,196,587 103,272
The terms of office of Directors Gary L. Burrell and Min H. Kao will
continue until the Annual General Meeting of Shareholders in 2003. The
terms of office of Directors Gene M. Betts and Thomas A. McDonnell will
continue until the Annual General Meeting of Shareholders in 2004. The
terms of office of Directors Donald H. Eller and Ruey-Jeng Kao will
continue until the Annual General Meeting of Shareholders in 2005.
2) Appointment of Ernst & Young LLP as Independent Auditors
for the 2002 Fiscal Year at Remuneration to be Approved
by the Board of Directors:
For Against Abstain Broker non-votes
--- ------- ------- ----------------
106,156,330 136,062 7,467 N/A
Item 5. Other Information
- -----------------------------------------
Not applicable
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
a. Exhibits
Exhibit 99.1 Certification Pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (filed herewith)
b. Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended June 29, 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GARMIN LTD.
By /s/ Kevin Rauckman
Kevin Rauckman
Chief Financial Officer
(Principal Financial Officer
and Principal Accounting Officer)
Dated: August 12, 2002
Exhibit 99.1
Certification
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18,
United States Code)
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a)
and (b) of Section 1350, Chapter 63 of Title 18, United States Code), each of
the undersigned officers of Garmin Ltd. (the "Company") does hereby certify
that:
(1) The Quarterly Report on Form 10-Q for the quarter ended June 29,
2002 (the "Form 10-Q") of the Company fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and
(2) The information contained in the Form 10-Q fairly presents, in
all material respects, the financial condition and results of
operations of the Company.
Dated: August 12, 2002 /s/ Gary L. Burrell
Gary L. Burrell
Co-Chairman and Co-Chief Executive Officer
Dated: August 12, 2002 /s/ Min H. Kao
Min H. Kao
Co-Chairman and Co-Chief Executive Officer
Dated: August 12, 2002 /s/ Kevin Rauckman
Kevin Rauckman
Chief Financial Officer
This certification accompanies the Form 10-Q pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the
Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended.