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 QUARTERLY PERIOD ENDED DECEMBER 31, 2002
or
( ) Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR THE TRANSITION PERIOD FROM ________ TO _________
COMMISSION FILE NUMBER 1-9125
-----------------------------
AMERICAN TECHNICAL CERAMICS CORP.
---------------------------------
(Exact name of Registrant as specified in Its charter)
DELAWARE 11-2113382
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
17 STEPAR PLACE, HUNTINGTON STATION, NY 11746
--------------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
(631) 622-4700
--------------
(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 ( ) No ( X )
As of February 4, 2003, the Registrant had outstanding 8,075,618 shares of
Common Stock, par value $.01 per share.
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
DEC. 31, 2002 JUNE 30, 2002
--------------- ---------------
ASSETS (unaudited)
Current assets
Cash (including cash equivalents of $471 and
$3,606, respectively) $ 6,252 $ 7,129
Investments 3,013 3,025
Accounts receivable, net 5,633 6,328
Inventories 15,058 15,417
Deferred income taxes, net 2,284 2,284
Other current assets 2,835 2,564
--------------- ---------------
TOTAL CURRENT ASSETS 35,075 36,747
--------------- ---------------
Property, plant and equipment, net of accumulated depreciation
and amortization of $34,651 and $32,158, respectively 28,804 29,740
Other assets, net 47 87
--------------- ---------------
TOTAL ASSETS $ 63,926 $ 66,574
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt (including related party debt of
$337 and $205, respectively) $ 362 $ 4,276
Accounts payable 986 878
Accrued expenses 3,126 3,218
--------------- ---------------
4,474 8,372
Long-term debt, net of current portion (including related party debt of
$3,472 and $2,338, respectively) 3,490 2,368
Deferred income taxes 3,642 3,642
--------------- ---------------
TOTAL LIABILITIES 11,606 14,382
--------------- ---------------
Commitments and Contingencies
Stockholders' Equity
Common Stock -- $.01 par value; authorized 20,000
shares; issued 8,497 and 8,492 shares, respectively 85 85
Capital in excess of par value 11,415 11,380
Retained earnings 42,179 42,171
Accumulated other comprehensive loss:
Unrealized gain on investments available-for-sale, net 5 5
Cumulative foreign currency translation adjustment 52 (46)
--------------- ---------------
57 (41)
--------------- ---------------
Less: Treasury stock, at cost (421 and 418 shares, respectively) 1,408 1,403
Deferred compensation 8 ---
--------------- ---------------
TOTAL STOCKHOLDERS' EQUITY 52,320 52,192
--------------- ---------------
$ 63,926 $ 66,574
=============== ===============
See accompanying notes to unaudited consolidated financial statements.
2
AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
For the Three Months Ended Dec. 31, For the Six Months Ended Dec. 31,
2002 2001 2002 2001
------------------- -------------------- ----------------- --------------------
Net sales $ 11,561 $ 11,582 $ 24,048 $ 25,487
Cost of sales 8,132 9,246 16,533 18,790
------------------- -------------------- ----------------- --------------------
Gross profit 3,429 2,336 7,515 6,697
------------------- -------------------- ----------------- --------------------
Selling, general and administrative expenses 2,813 3,135 5,775 6,155
Research and development expenses 664 833 1,333 1,685
Other 342 (7) 291 (53)
------------------- -------------------- ----------------- --------------------
Operating expenses 3,819 3,961 7,399 7,787
------------------- -------------------- ----------------- --------------------
------------------- -------------------- ----------------- --------------------
(Loss)/ income from operations (390) (1,625) 116 (1,090)
------------------- -------------------- ----------------- --------------------
Other (income) expense:
Interest expense 104 130 164 273
Interest income (21) (76) (58) (136)
Other --- (106) --- (106)
------------------- -------------------- ----------------- -------------------
83 (52) 106 31
------------------- -------------------- ----------------- -------------------
(Loss)/ income before provision for
income taxes (473) (1,573) 10 (1,121)
(Benefit from)/ provision for income taxes (143) (535) 2 (381)
------------------- -------------------- ----------------- --------------------
Net (loss)/ income $ (330) $ (1,038) $ 8 $ (740)
=================== ==================== ================= ====================
Basic net (loss)/ income per common share $ (0.04) $ (0.13) $ 0.00 $ (0.09)
=================== ==================== ================= ====================
Diluted net (loss)/ income per common share $ (0.04) $ (0.13) $ 0.00 $ (0.09)
=================== ==================== ================= ====================
Basic weighted average common
shares outstanding 8,073 8,047 8,072 8,038
=================== ==================== ================= ====================
Diluted weighted average common
shares outstanding 8,073 8,047 8,224 8,038
=================== ==================== ================= ====================
See accompanying notes to unaudited consolidated financial statements.
3
AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended December 31,
2002 2001
-------------------- --------------------
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES: (unaudited)
Net income/(loss) $ 8 $ (740)
Adjustments to reconcile net income/(loss) to net cash
provided by operating activities:
Depreciation and amortization 2,663 2,614
Loss on disposal of fixed assets 391 19
Stock award compensation expense 8 192
Realized gain on sale of investments --- (109)
Changes in operating assets and liabilities:
Accounts receivable 695 5,872
Inventories 359 917
Other assets (226) 126
Accounts payable and accrued expenses 16 (3,636)
Income taxes payable --- (1,361)
-------------------- --------------------
Net cash provided by operating activities 3,914 3,894
-------------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (674) (1,925)
Purchase of investments (993) (1,053)
Proceeds from sale of investments 1,000 1,635
Proceeds from sale of fixed assets --- 26
-------------------- --------------------
Net cash used in investing activities (667) (1,317)
-------------------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt (4,229) (302)
Proceeds from the exercise of stock options 13 132
-------------------- --------------------
Net cash used in financing activities (4,216) (170)
-------------------- --------------------
-------------------- --------------------
Effect of exchange rate changes on cash 92 57
-------------------- --------------------
Net (decrease)/ increase in cash and cash equivalents (877) 2,464
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 7,129 1,659
-------------------- --------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 6,252 $ 4,123
==================== ====================
Supplemental cash flow information:
Interest paid $ 201 $ 294
Taxes paid $ --- $ 994
See accompanying notes to unaudited consolidated financial statements.
4
AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
(1) BASIS OF PRESENTATION:
The accompanying unaudited interim consolidated financial statements of
American Technical Ceramics Corp. and subsidiaries (the "Registrant") reflect
all adjustments (consisting of normal recurring accruals) which are, in the
opinion of management, necessary for a fair presentation of its consolidated
financial position as of December 31, 2002 and the results of its operations for
the three and six month periods ended December 31, 2002 and 2001. These
consolidated financial statements should be read in conjunction with the summary
of significant accounting policies and notes to consolidated financial
statements included in the Registrant's Annual Report on Form 10-K for the
fiscal year ended June 30, 2002. Results for the three and six month periods
ended December 31, 2002 are not necessarily indicative of results which could be
expected for the entire year.
(2) IMPACT OF NEW ACCOUNTING STANDARDS:
In June 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 146, "Accounting for Costs Associated with
Exit or Disposal Activities" ("SFAS No. 146"), which is effective for exit or
disposal activities initiated after December 31, 2002. SFAS No. 146 applies to
costs associated with an exit activity, including restructuring costs. Companies
will record a liability for exit or disposal activity as such amounts are
incurred and can be measured at fair value. The Registrant does not expect the
adoption of SFAS No. 146 to have a material impact on its consolidated results
of operations or financial position.
In December 2002, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 148, "Accounting for Stock Based
Compensation - Transition and Disclosure - an amendment of FASB Statement No.
123" ("SFAS No. 148"), which provides alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock based
employee compensation. In addition, SFAS No. 148 amends the disclosure
requirements of FASB Statement 123 to require more prominent and more frequent
disclosures in financial statements about the effects of stock-based
compensation. SFAS No. 148 is effective for interim periods beginning after
December 15, 2002 and for annual periods ending after December 15, 2002. The
Registrant plans to continue to apply the intrinsic value-based method to
account for stock options and will comply with the new disclosure requirements
beginning with the third quarter of fiscal year 2003.
In December 2002, the Registrant adopted the Financial Accounting Standards
Board issued Statement of Financial Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements of Guarantees, Including Indirect
Guarantees of Indebtedness of Others" ("FIN No. 45"). Fin No. 45 provides the
interpretation of FASB Statements No. 5, 57 and 107 and the rescission of FASB
Interpretation No. 34. The implementation of this accounting pronouncement did
not have any effect on the Registrant's results of operations, financial
position or cash flows.
Although the Registrant does not explicitly warranty its products, return
of defective product is generally accepted. The Registrant provides for
estimated sales returns when the underlying sale is made. Product returns have
not historically been significant.
5
AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
(3) SUPPLEMENTAL CASH FLOW INFORMATION:
During the six months ended December 31, 2002, the Registrant (i) granted,
on July 1, 2002, $16 in deferred compensation stock awards that vest ratably
throughout fiscal year 2003, and (ii) adjusted a capital lease relating to its
Jacksonville, Florida facility to reflect certain additions to the facility. The
adjustment increased both fixed assets and the related long-term debt by $1,437.
See Note (7).
During the six months ended December 31, 2002, the Registrant recorded a
pretax charge of $391 relating to the disposal of certain assets no longer used
in its manufacturing process.
(4) INVENTORIES:
Inventories included in the accompanying consolidated financial statements
consist of the following:
December 31, June 30,
2002 2002
------------ -----------
(unaudited)
Raw materials $ 6,899 $ 7,753
Work-in-process 4,420 3,968
Finished goods 3,739 3,696
------------ -----------
$ 15,058 $ 15,417
============ ===========
(5) EARNINGS PER SHARE:
The following represents a reconciliation of the numerators and
denominators of the basic and diluted earnings per share computation.
For the Three Months Ended December 31,
2002 2001
==== ====
(Loss)/ (Loss)/
Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ----------- ------------- ---------
Basic EPS $ (330) 8,073 $ (.04) $ (1,038) 8,047 $ (.13)
========= =========
Effect of Dilutive Securities:
Stock options --- --- --- ---
Deferred compensation
stock awards --- --- --- ---
----------- ------------- --------- ----------- ------------- ---------
Diluted EPS $ (330) 8,073 $ (.04) $ (1,038) 8,047 $ (.13)
=========== ============= ========= =========== ============= =========
6
AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
(5) EARNINGS PER SHARE (CONTINUED):
For the Six Months Ended December 31,
2002 2001
---- ----
(Loss)/
Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
------------ ------------- --------- ----------- ------------- ---------
Basic EPS $ 8 8,072 $ 0.00 $ (740) 8,038 $ (0.09)
========= =========
Effect of Dilutive Securities:
Stock options --- 145 --- ---
Deferred compensation
stock awards --- 7 --- ---
------------ ------------- --------- ----------- ------------- ---------
Diluted EPS $ 8 8,224 $ 0.00 $ (740) 8,038 $ (0.09)
============ ============= ========= =========== ============= =========
Options covering 665 and 1,300 shares, respectively, have been omitted from
the calculation of dilutive EPS for the three months ended December 31, 2002 and
2001, respectively, because their inclusion would have been antidilutive.
(6) COMPREHENSIVE INCOME/(LOSS):
The Registrant's comprehensive income/(loss) is as follows:
For The Three Months Ended
December 31,
2002 2001
=============== ==============
Net loss $ (330) $ (1,038)
--------------- --------------
Other comprehensive income/(loss):
Foreign currency translation adjustments 114 (4)
Unrealized losses on investments, net of tax (1) (138)
--------------- --------------
Other comprehensive income/(loss) 113 (142)
--------------- --------------
Comprehensive loss $ (217) $ (1,180)
=============== ==============
For The Six Months Ended
December 31,
2002 2001
=============== ==============
Net income/(loss) $ 8 $ (740)
--------------- --------------
Other comprehensive income/(loss)
Foreign currency translation adjustments 98 67
Unrealized loss on investments, net of tax --- (30)
--------------- --------------
Other comprehensive income 98 37
--------------- --------------
Comprehensive income/(loss) $ 106 $ (703)
=============== ==============
7
AMERICAN TECHNICAL CERAMICS CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
(7) INDEBTEDNESS:
Prior to August 2002, the Registrant maintained two credit facilities with
Bank of America, N.A., a revolving line of credit and an equipment facility.
Each of these facilities was subject to certain financial covenants, including a
requirement to maintain a certain level of annualized earnings before interest,
taxes, depreciation and amortization (EBITDA) to current debt plus annual
interest payments. As of June 30, 2002, due to the losses incurred by the
Registrant during fiscal year 2002, the Registrant was not in compliance with
this covenant. The Registrant held discussions with Bank of America, N.A.
concerning possible amendments to the terms of the facilities which proved to be
unsuccessful. Accordingly, in August 2002, the Registrant repaid the outstanding
balance under the equipment facility and terminated both facilities.
The Registrant leases a facility in Jacksonville, Florida from a
partnership controlled by the Registrant's President, Chief Executive Officer
and principal stockholder under a capital lease. The rental payments under this
lease have been adjusted several times, most recently as of September 2002,
primarily to reflect fair market rental adjustments as a result of certain
additions or improvements to the facility as required by the terms of the lease.
Each such adjustment has been based upon an independent appraisal of the fair
market rental of the facility giving effect to the addition or improvement at
issue. Effective September 1, 2002, the Registrant is obligated to pay
approximately $720 per annum under this lease, an increase from $461 per annum
during fiscal year 2002. The payments due over the remaining eight years of this
capital lease, including the portion related to interest, total approximately
$5,573.
(8) STOCK BASED COMPENSATION:
On January 16, 2002, the Registrant filed a Schedule TO with the Securities
and Exchange Commission, and commenced an offer to exchange outstanding options
under its existing stock option plans having an exercise price per share of
$19.50 or more for new options. The offer expired on February 13, 2002. The
Registrant accepted for exchange options to purchase an aggregate of 432 shares
of Common Stock. On August 15, 2002, the Registrant issued 407 new options in
exchange for the options tendered and accepted for exchange. The new options
were issued at the closing price of the Registrant's Common Stock on August 15,
2002, which was $2.35 per share.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(In thousands, except per share data)
The following discussion and analysis should be read in conjunction with
the consolidated financial statements, related notes and other information
included in this Quarterly Report on Form 10-Q.
Statements in this Quarterly Report on Form 10-Q that are not historical
fact may constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. All such forward-looking
statements are subject to risks and uncertainties, including, but not limited
to, market and economic conditions, the impact of competitive products, product
demand and market acceptance risks, changes in product mix, costs and
availability of raw materials, fluctuations in operating results, delays in
development of highly complex products, risks associated with international
sales and sales to the U.S. military, risk of customer contract or sales order
cancellations and other risks detailed from time to time in the Registrant's
filings with the Securities and Exchange Commission, including, without
limitation, those contained under the caption "Item 1. BUSINESS - CAUTIONARY
STATEMENTS REGARDING FORWARD - LOOKING STATEMENTS" in the Registrant's Annual
Report on Form 10-K. These risks could cause the Registrant's actual results for
future periods to differ materially from those expressed in any forward-looking
statements made by, or on behalf of, the Registrant. Any forward-looking
statement represents the Registrant's expectations or forecasts only as of the
date it was made and should not be relied upon as representing its expectations
or forecasts as of any subsequent date. The Registrant undertakes no obligation
to correct or update any forward-looking statement, whether as a result of new
information, future events or otherwise, even if its expectations or forecasts
change.
Overview
--------
The Registrant experienced a loss in the second quarter of fiscal year 2003
following the first profitable quarter in a year, demonstrating the volatile
nature of the electronic components industry. Sales declined compared to the
first quarter of this fiscal year, due in part to the annual shutdown at the end
of December resulting in a quarter with one less working week. Operating
expenses declined for the same reason, albeit at a lower rate due to the fixed
nature of certain expenses.
Despite lower sales levels, net results for the three and six months
improved from the comparable periods in the prior fiscal year due to cost
reduction and control measures put in place during the prior fiscal year.
Additionally, inventory has stabilized at levels appropriate for the current
business environment. As a result, there have been no write-downs of inventory
to net realizable value in the current fiscal year as had occurred in the
comparable periods in the prior fiscal year. These benefits were partially
offset by a pretax charge of $362 relating to the disposal of certain assets no
longer used in the Registrant's manufacturing process.
The trend of increased bookings continued during the second quarter of
fiscal year 2003 due to strong orders from the military market. Although orders
placed in recent quarters generally have required short delivery lead times,
certain orders placed in the second quarter are expected to be delivered several
quarters in the future.
The Registrant continues to add resources selectively where it sees
opportunities for current or future growth.
9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(In thousands, except per share data)
RESULTS OF OPERATIONS
-----------------------
Three Months Ended December 31, 2002 Compared with Three Months Ended December
------------------------------------------------------------------------------
31, 2001
---------
Net sales for the three months ended December 31, 2002 were $11,561,
essentially level compared to the $11,582 recorded in the comparable period in
the prior fiscal year.
Gross margin for the three months ended December 31, 2002 was 29.7% of net
sales, compared to 20.2% for the comparable period in the prior fiscal year.
The increase in gross margin was principally due to the absence of inventory
write-downs to net realizable value as occurred in the comparable period last
year. Cost of sales for the three months ended December 31, 2001 were
negatively impacted by a charge of $830 to reduce certain inventory to net
realizable value. The Registrant believes that its inventory is now at levels
appropriate for the current business environment.
Selling, general and administrative expenses for the three months ended
December 31, 2002 decreased 10% to $2,813, compared to $3,135 in the comparable
period in the prior fiscal year. The decrease was due to decreased bonuses and a
lack of expenses related to the Registrant's former sales office in England,
which was closed during the second quarter of the prior fiscal year.
Research and development expenses for the three months ended December 31,
2002 decreased 20% to $664, compared to $833 in the comparable period in the
prior fiscal year. A reduction in research and development spending (in the form
of reduced headcount and discretionary spending) was among the cost reduction
measures put into place last fiscal year.
The Registrant recorded other expense of $342 for the three months ended
December 31, 2002, compared to other income of $7 in the comparable period in
the prior fiscal year. The other expense for the current three month period
related primarily to a pretax charge of $362 due to the disposal of certain
assets no longer used in the Registrant's manufacturing process.
Interest expense for the three months ended December 31, 2002 decreased 20%
to $104, compared to $130 in the comparable period in the prior fiscal year. The
Registrant retired its bank debt during the first quarter of the current fiscal
year resulting in reduced interest expense.
Interest Income for the three months ended December 31, 2002 decreased 72%
to $21, compared to $76 in the comparable period in the prior fiscal year. The
decrease was due to a lower amount of cash available for investing due to the
retiring of the bank debt, as well as lower prevailing interest rates during the
period.
Other income was nil during the three months ended December 31, 2002. In
comparison, during the three months ended December 31, 2001, the Registrant
recorded a gain on the sale of investments of $109.
10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(In thousands, except per share data)
Bookings for the three months ended December 31, 2002 were $13,248,
compared to $9,452 for the three months ended December 31, 2001. The increase is
partly due to strong orders from the military market. Bookings have improved
significantly across all product lines. Delivery times and price are key factors
in obtaining orders. The Registrant believes its current levels of inventories
should enable it to meet customer delivery requirements in the time frames
currently required by customers.
The backlog of unfilled orders was $10,814 at December 31, 2002, compared
to $10,644 at December 31, 2001 and $9,325 at June 30, 2002. The increase in
backlog was primarily due to the increase in orders from the military market
which the Registrant expects to ship over the next several quarters. However,
the Registrant anticipates that, in general, customers will continue to place
orders with short delivery requirements for the foreseeable future resulting in
backlog becoming a less important indicator of the Registrant's business.
As a result of the foregoing, net loss for the three months ended December
31, 2002 was $330, or ($.04) per common share (($.04) per common share assuming
dilution), compared to net loss of $1,038, or ($.13) per common share (($.13)
per common share assuming dilution), for the comparable period in the prior
fiscal year.
Six Months Ended December 31, 2002 Compared with Six Months Ended December 31,
------------------------------------------------------------------------------
2001
----
Net sales for the six months ended December 31, 2002 decreased 6% to
$24,048, compared to $25,487 in the comparable period in the prior fiscal year.
The decrease in net sales was primarily the result of decreased sales volume
across all major product lines due to the economic downturn affecting the entire
electronic component industry. Sales were down in all market sectors except the
medical equipment sector.
Gross margin for the six months ended December 31, 2002 was 31.3% of net
sales, compared to 26.3% for the comparable period in the prior fiscal year.
The increase in gross margin was principally due to the absence of inventory
write-downs to net realizable value as occurred in the comparable period last
year. Cost of sales for the six months ended December 31, 2001 were negatively
impacted by a charge of $1,427 to reduce certain inventory to net realizable
value.
Selling, general and administrative expenses for the six months ended
December 31, 2002 decreased 6% to $5,775, compared to $6,155 in the comparable
period in the prior fiscal year. The decrease was due in part to decreased
stock bonus accruals as a result of a lower market price for the Registrant's
Common Stock and decreased payroll related expenses due to headcount reductions
instituted in the first and fourth quarters of fiscal year 2002. In addition,
during the comparable period in the prior fiscal year, the Registrant incurred
severance costs of $203 in connection with headcount reductions in the United
States and England, and professional fees in connection with closing the
Registrant's sales office in England during the second quarter of last fiscal
year. The effects of these non-recurring costs (plus the costs associated with
operating the sales office in England prior to its closure) were offset
partially by increased professional fees and expenses incurred during the first
six months of the current fiscal year related to opening a sales office in
China.
11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(In thousands, except per share data)
Research and development expenses for the six months ended December 31,
2002 decreased 21% to $1,333, compared to $1,685 in the comparable period in the
prior fiscal year. The decrease in research and development spending was due to
the cost reduction measures referred to above, partially offset by a pretax
charge of $29 relating to the disposal of certain internally designed equipment.
The Registrant recorded other expense of $291 for the six months ended
December 31, 2002, compared to other income of $53 in the comparable period in
the prior fiscal year. The other expense for the current six month period
related primarily to a pretax charge of $362 due to the disposal of certain
assets no longer used in the Registrant's manufacturing process.
Interest expense for the six months ended December 31, 2002 decreased 40%
to $164, compared to $273 in the comparable period in the prior fiscal year.
The Registrant retired its bank debt during the first quarter of the current
fiscal year resulting in reduced interest expense.
Interest income for the six months ended December 31, 2002 decreased 57% to
$58, compared to $136 in the comparable period in the prior fiscal year. The
decrease was due to a lower amount of cash available for investing due to the
retiring of the bank debt, as well as lower prevailing interest rates during the
period.
Other income was nil for the six months ended December 31, 2002. In
comparison, during the six months ended December 31, 2001, the Registrant
recorded a gain on the sale of investments of $109.
The Registrant was at breakeven for the six months ended December 31, 2002
despite lower sales than the comparable period last fiscal year, primarily due
to the cost reduction measures employed by the Registrant and the absence of
inventory write-downs to net realizable value as occurred in the comparable
period last year.
LIQUIDITY AND CAPITAL RESOURCES
----------------------------------
The Registrant's financial position at December 31, 2002 remains strong as
evidenced by working capital of $30,601, and stockholders' equity of $52,320.
The Registrant's current ratio at December 31, 2002 was 7.8:1, compared to a
current ratio of 4.4:1 at June 30, 2002. The Registrant's quick ratio at
December 31, 2002 was 3.3:1, compared to 2.0:1 at June 30, 2002. The improvement
in the Registrant's current and quick ratios was primarily due to the use of
available cash to pay off bank debt (all of which was recorded as current
liabilities at June 30, 2002).
Cash, cash equivalents and investments decreased by $889 to $9,265 at
December 31, 2002 from $10,154 at June 30, 2002, primarily as a result of
retiring bank debt, offset partially by positive operating cash flows in excess
of capital expenditures. Accounts receivable decreased by $695 to $5,633 at
December 31, 2002 from $6,328 at June 30, 2002, due to lower sales in the
quarter ended December 31, 2002. Inventories decreased by $359 to $15,058 at
December 31, 2002 from $15,417 at June 30, 2002. Accounts payable and accrued
expenses increased by $16 to $4,112 at December 31, 2002 from $4,096 at June 30,
2002.
12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(In thousands, except per share data)
The Registrant leases a facility in Jacksonville, Florida from a
partnership controlled by the Registrant's President, Chief Executive Officer
and principal stockholder under a capital lease. The rental payments under this
lease have been adjusted several times, most recently as of September 2002,
primarily to reflect fair market rental adjustments as a result of certain
additions or improvements to the facility as required by the terms of the lease.
Each such adjustment has been based upon an independent appraisal of the fair
market rental of the facility giving effect to the addition or improvement at
issue. Effective September 1, 2002, the Registrant is obligated to pay
approximately $720 per annum under this lease, an increase from $461 per annum
during fiscal year 2002. The payments due over the remaining eight years of this
capital lease, including the portion related to interest, total approximately
$5,573.
Capital expenditures for the six months ended December 31, 2002 totaled
$674, including expenditures for machinery and equipment and planned leasehold
improvements, but excluding the adjustment to the capital lease discussed above.
The Registrant intends to use cash on hand to finance budgeted capital
expenditures of approximately $1,400 for the remainder of fiscal year 2003,
primarily for equipment acquisitions.
Aggregate contractual obligations as of December 31, 2002 mature as follows:
Payments Due by Period (in 000's)
-----------------------------------------
Less
than 1 1- 3 4- 5 After 5
Contractual Obligations Total year years years years
----------------------------- ------ ------- ------ ------ --------
Bank Debt $ --- $ --- $ --- $ --- $ ---
Capital Lease Obligations 3,852 362 1,267 1,078 1,145
Operating Leases 2,471 519 1,234 718 ---
------ ------- ------ ------ --------
Total Contractual Obligations $6,323 $ 881 $2,501 $1,796 $ 1,145
====== ======= ====== ====== ========
As described previously, in August 2002, the Registrant repaid the
outstanding balance of its equipment line from Bank of America, N.A.
Accordingly, the Registrant currently has no outstanding long-term bank debt or
available committed lines of credit.
The Registrant routinely enters into binding and non-binding purchase
obligations in the ordinary course of business, primarily covering anticipated
purchases of inventory and equipment. The terms of these commitments generally
do not extend beyond six months. None of these obligations are individually
significant. The Registrant does not expect that these commitments will
materially adversely affect its liquidity in the foreseeable future.
13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(In thousands, except per share data)
CRITICAL ACCOUNTING POLICIES
------------------------------
The Securities and Exchange Commission (the "SEC") recently issued
disclosure guidance for "critical accounting policies." The SEC defines
"critical accounting policies" as those that require the application of
management's most difficult, subjective or complex judgments, often as a result
of the need to make estimates about the effect of matters that are inherently
uncertain and may change in subsequent periods. The Registrant's significant
accounting policies are described in Note 1 to its consolidated financial
statements contained in its Annual Report on Form 10-K for the fiscal year ended
June 30, 2002. The Registrant believes that the following accounting policies
require the application of management's most difficult, subjective or complex
judgments:
Allowances for Doubtful Accounts Receivable
-----------------------------------------------
The Registrant performs ongoing credit evaluations of its customers and
adjusts credit limits based upon payment history and customer's current
creditworthiness, as determined by its review of the customer's current credit
information. The Registrant continuously monitors collections and payments from
its customers and maintains an allowance for estimated credit losses based upon
its historical experience and any specific customer collection issues that the
Registrant has identified. While such credit losses have historically been
within the Registrant's expectations and the allowances established, the
Registrant can not guarantee that it will continue to experience the same credit
loss rates that it has in the past. Should the financial position of its
customers deteriorate resulting in an impairment of their ability to pay amounts
due, the Registrant's revised estimate of such losses may negatively impact the
Registrant's operating results in the future.
Sales Returns and Allowances
-------------------------------
In the ordinary course of business, the Registrant accepts returns of
products sold for various reasons and grants sales allowances to customers.
While the Registrant engages in extensive product quality control programs and
processes, its level of sales returns is affected by, among other things, the
quality of its manufacturing processes. The Registrant maintains an allowance
for sales returns and allowances based upon historical returns and allowances
granted. While such returns and allowances have historically been within the
Registrant's expectations, actual return and allowance rates in the future may
differ from current estimates, which could negatively impact its operating
results in the future.
Inventory Valuation
--------------------
The Registrant values inventory at the lower of aggregate cost (First-in,
First-out) or market for its finished product. When the cost of inventory is
determined by management to be in excess of its market value, inventory is
written down to its estimated net realizable value. This requires the
Registrant to make estimates and assumptions about several factors (e.g., future
sales quantities and selling prices, and percentage complete and failure rates
for work in process) based upon historical experience and its projections for
future periods. Changes in factors such as the level of order bookings, the
product mix of order bookings and the Registrant's manufacturing processes could
have a material impact on the Registrant's assessment of the net realizable
value of inventory in the future.
14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(In thousands, except per share data)
Valuation of Deferred Tax Assets
------------------------------------
The Registrant regularly evaluates its ability to recover the reported
amount of its deferred income taxes considering several factors, including its
estimate of the likelihood of the Registrant generating sufficient taxable
income in future years during the period over which temporary differences
reverse. Presently, the Registrant believes that it is more likely than not
that it will realize the benefits of its deferred tax assets based primarily on
its history of and projections for taxable income in the future, and its
intention to carry back net operating losses to generate refunds of income taxes
previously paid. In the event that actual results differ from its estimates or
the Registrant adjusts these estimates in future periods, the Registrant may
need to establish a valuation allowance against a portion or all of its deferred
tax assets, which could materially impact its financial position or results of
operations in future periods.
Valuation of Long-lived and Intangible Assets
--------------------------------------------------
The Registrant assesses the recoverability of long-lived assets whenever
the Registrant determines that events or changes in circumstances indicate that
the carrying amount may not be recoverable. Its assessment is primarily based
upon its usefulness in the manufacturing process or its estimate of future cash
flows associated with these assets. The Registrant believes that the carrying
amount of its long-lived assets are recoverable. However, should its operating
results deteriorate, or anticipated new product launches not occur or not attain
the commercial acceptance that the Registrant anticipates, the Registrant may
determine that some portion of its long-lived assets are impaired. Such
determination could result in non-cash charges to income that could materially
affect its financial position or results of operations for that period.
IMPACT OF NEW ACCOUNTING STANDARDS
--------------------------------------
In June 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 146, "Accounting for Costs Associated with
Exit or Disposal Activities" ("SFAS No. 146"), which is effective for exit or
disposal activities initiated after December 31, 2002. SFAS No. 146 applies to
costs associated with an exit activity, including restructuring costs.
Companies will record a liability for exit or disposal activity as such amounts
are incurred and can be measured at fair value. The Registrant does not expect
the adoption of SFAS No. 146 to have a material impact on its consolidated
results of operations or financial position.
15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(In thousands, except per share data)
In December 2002, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 148, "Accounting for Stock Based
Compensation - Transition and Disclosure - an amendment of FASB Statement No.
123" ("SFAS No. 148"), which provides alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, SFAS No. 148 amends the disclosure
requirements of FASB Statement 123 to require more prominent and more frequent
disclosures in financial statements about the effects of stock-based
compensation. SFAS No. 148 is effective for interim periods beginning after
December 15, 2002 and for annual periods ending after December 15, 2002. The
Registrant plans to continue to apply the intrinsic value-based method to
account for stock options and will comply with the new disclosure requirements
beginning with the third quarter of fiscal year 2003.
In December 2002, the Registrant adopted the Financial Accounting Standards
Board issued Statement of Financial Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements of Guarantees, Including Indirect
Guarantees of Indebtedness of Others" ("FIN No. 45"). Fin No. 45 provides the
interpretation of FASB Statements No. 5, 57 and 107 and the rescission of FASB
Interpretation No. 34. The implementation of this accounting pronouncement did
not have any effect on the Registrant's results of operations, financial
position or cash flows.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Registrant has identified two market risks relative to its business:
foreign currency exchange rate risk and commodity price risk. The Registrant
has managed its market risk exposures in order to minimize their potential
impact on its consolidated financial condition and results of operations.
Specifically:
a) Foreign currency exchange rate risk. With the exception of sales by the
----------------------------------------
Registrant's wholly-owned subsidiary in Sweden (which are denominated in
Krona), all transactions are, or are anticipated to be, denominated in U.S.
Dollars. The Registrant has not experienced any significant impact from
exchange rate fluctuation in the past, and does not anticipate a
significant impact due to exchange rate fluctuation in the foreseeable
future.
b) Commodity price risk. Following substantial reductions in the price of
---------------------
palladium, prices for this precious metal, which is used in the manufacture
of the Registrant's capacitors, have stabilized. The Registrant believes
that, based upon its current levels of production and inventories of
palladium, it will need to buy additional quantities of palladium later in
the fiscal year at prevailing market prices. The Registrant believes that
the price of palladium will remain stable in the near term due to the lower
demand coming from the electronics industry.
16
The Registrant had identified two other market risks in its Annual Report
on Form 10-K for the fiscal year ended June 30, 2002: interest rate risk and
security price risk. During the quarter ended September 30, 2002, the
Registrant repaid all of its outstanding bank debt. See Note 7 to Notes to
Unaudited Consolidated Financial Statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources." Consequently, at the present time, the Registrant does not
consider interest rate risk to be a market risk relative to its business. In
addition, all of the securities currently held by the Registrant for investment
are government securities with maturities of less than one year. Accordingly,
at the present time, the Registrant does not consider security price risk to be
a market risk relative to its business.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
-----------------------------------------------------
In response to the requirements of the Sarbanes-Oxley Act of 2002, the
Registrant reviewed and modified its "disclosure controls and procedures" (as
defined in Securities Exchange Act of 1934 Rules 13a-14(c) and 15(d)-4(c)).
Within 90 days prior to the date of this report (the "Evaluation Date"), the
Registrant's President and Chief Executive Officer and Vice President,
Controller carried out an evaluation of the effectiveness of these disclosure
controls and procedures. Based on that evaluation, these officers concluded
that, as of the Evaluation Date, the Registrant's disclosure controls and
procedures were adequate and designed to ensure that material information
relating to the Registrant and the Registrant's consolidated subsidiaries would
be made known to them by others within those entities.
Changes in Internal Controls
-------------------------------
Subsequent to the Evaluation Date, there were no significant changes in the
Registrant's internal controls, or to the Registrant's knowledge, in other
factors that could significantly affect these controls.
PART II - OTHER INFORMATION
ITEMS 1. THROUGH 3. Not Applicable
---------------
17
ITEM 4. Submission of Matters to a Vote of Security Holders
-----------------------------------------------------------
At the Registrant's Annual Meeting of Stockholders held on November 21,
2002 (the "Annual Meeting"), the stockholders elected the individuals named
below as directors for one-year terms. Votes were cast as follows:
For Withheld
--------------- -------------
Victor Insetta 7,659,954 61,255
Dov S. Bacharach 7,649,954 71,255
Chester E. Spence 7,649,954 71,255
O. Julian Garrard III 7,649,954 71,255
Stuart P. Litt 7,694,954 26,255
Thomas J. Volpe 7,659,954 61,255
The stockholders also ratified the appointment of KPMG LLP as the
independent public accountants to audit the Registrant's consolidated financial
statements for the fiscal year ending June 30, 2003. The holders of 7,683,184
shares of Common Stock voted to ratify the appointment, 22,205 voted against
ratification and the holders of 15,820 shares of Common Stock abstained from
voting on the issue.
ITEM 5. Not Applicable
---------------
ITEM 6. Exhibits and Reports on Form 8-K
-------------------------------------
(a) Exhibits
--------
Unless otherwise indicated, the following exhibits were filed as part of
the Registrant's Registration Statement on Form S-18 (No. 2-96925-NY) (the
"Registration Statement") and are incorporated herein by reference to the same
exhibit thereto:
EXHIBIT NO. DESCRIPTION
------------ -----------
3(a)(i) - Certificate of Incorporation of the Registrant.
3(a)(ii) - Amendment to Certificate of Incorporation. (1)
3(b)(i) - By-laws of the Registrant.
9(a)(i) - Restated Shareholders' Agreement, dated April 15, 1985, among
Victor Insetta, Joseph Mezey, Joseph Colandrea and the
Registrant.
10(b) - Lease, dated September 1, 2002, between Stepar Leasing, LLC and
the Registrant for premises at 15 Stepar Place, Huntington
Station, N.Y. (12)
10(c)(i) - Form of 1985 Employee Stock Sale Agreement between the Registrant
and various employees.
18
10(c)(ii) - Form of Employee Stock Bonus Agreement, dated as of July 1, 1993,
between the Registrant and various employees. (2)
10(c)(iii) - Form of Employee Stock Bonus Agreement, dated as of April 19,
1994, between the Registrant and various employees. (2)
10(c)(iv) - Form of Employee Stock Bonus Agreement, dated as of April 20,
1995, between the Registrant and various employees. (3)
10(e)(i) - Second Amended and Restated Lease, dated as of May 16, 2000,
between V.P.I. Properties Associates, d/b/a V.P.I. Properties
Associates, Ltd., and American Technical Ceramics (Florida), Inc.
(7)
10(f) - Purchase Agreement, dated May 31, 1989, by and among Diane LaFond
Insetta and/or Victor D. Insetta, as custodians for Danielle and
Jonathan Insetta, and American Technical Ceramics Corp., and
amendment thereto, dated July 31, 1989. (3)
10(g)(iii) - Profit Bonus Plan, dated April 19, 1995, and effective for the
fiscal years beginning July 1, 1994. (3)
10(g)(iv) - Employment Agreement, dated April 3, 1985, between the Registrant
and Victor Insetta, and Amendments No. 1 through 4 thereto. (1)
10(g)(v) - Amendment No. 5, dated as of September 11, 1998, to Employment
Agreement between the Registrant and Victor Insetta. (5)
10(g)(vi) - Managers Profit Bonus Plan, dated December 7, 1999, and effective
January 1, 2000. (6)
10(h) - Employment Agreement, dated September 1, 2000, between the
Registrant and Richard Monsorno. (8)
10(k) - Consulting Agreement, dated October 2000, between the Registrant
and Stuart P. Litt. (8)
10(m)(i) - American Technical Ceramics Corp. 1997 Stock Option Plan. (4)
10(m)(ii) - American Technical Ceramics Corp. 2000 Incentive Stock Plan. (6)
10(p) - Second Amended and Restated Employment Agreement, dated as of
December 31, 2001, between the Registrant and Judah Wolf. (10)
10(r) - Employment Agreement, dated April 10, 2001, between the
Registrant and David Ott. (9)
10(r)(i) - Amendment to Employment Agreement, dated as of January 1, 2001,
between the Registrant and David Ott. (10)
21 - Subsidiaries of the Registrant. (11)
19
1. Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the fiscal year ended June 30, 1993.
2. Incorporated by reference to the Registrant's Annual Report on Form 10-KSB
for the fiscal year ended June 30, 1994.
3. Incorporated by reference to the Registrant's Annual Report on Form 10-KSB
for the fiscal year ended June 30, 1995.
4. Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the fiscal year ended June 30, 1997.
5. Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the fiscal year ended June 30, 1998.
6. Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the fiscal year ended June 30, 2000.
7. Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
for the quarterly period ended September 30, 2000.
8. Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
for the quarterly period ended December 31, 2000.
9. Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
for the quarterly period ended March 31, 2001.
10. Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q/A for the quarterly period ended March 31, 2002.
11. Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the fiscal year ended June 30, 2002.
12. Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
for the quarterly period ended September 30, 2002.
(b) REPORTS ON FORM 8-K
----------------------
On November 13, 2002, the Registrant furnished a report on Form 8-K
together with the Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 2002. The report on Form 8-K contained the certification
required by Section 906 of the Sarbanes-Oxley Act of 2002.
20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant in
the capacities and on the dates indicated:
AMERICAN TECHNICAL CERAMICS CORP.
(Registrant)
DATE: February 13, 2002 BY: /s/ VICTOR INSETTA
------------------
Victor Insetta
President and Director
(Principal Executive Officer)
DATE: February 13, 2002 BY: /s/ ANDREW R. PERZ
------------------
Andrew R. Perz
Vice President, Controller
(Principal Accounting Officer)
21
I, Victor Insetta, certify that:
1. I have reviewed this quarterly report on Form 10-Q of American Technical
Ceramics Corp.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Registrant as of, and for, the periods presented in this
quarterly report.
4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the Registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The Registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the Registrant's auditors and the audit
committee of the Registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Registrant's ability to
record, process, summarize and report financial data and have
identified for the Registrant's auditors any material weakness in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal
controls; and
6. The Registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Dated: February 13, 2002 /s/ VICTOR INSETTA
--------------------
President and Chief Executive Officer
(Principal Executive Officer)
22
I, Andrew R. Perz, certify that:
1. I have reviewed this quarterly report on Form 10-Q of American Technical
Ceramics Corp.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Registrant as of, and for, the periods presented in this
quarterly report.
4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the Registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The Registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the Registrant's auditors and the audit
committee of the Registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Registrant's ability to
record, process, summarize and report financial data and have
identified for the Registrant's auditors any material weakness in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal
controls; and
6. The Registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Dated: February 13, 2002 /s/ ANDREW R. PERZ
--------------------
Vice President, Controller
(Principal Accounting Officer)
23