FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 (As last amended in Rel. No. 34-26589, eff. 4/12/89) UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20459 Form 10-Q (Mark One) (X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the period ended January 31, 1997 ------------------------------------------------------- ( ) 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: 0-7928 ---------------------------------------------------- COMTECH TELECOMMUNICATIONS CORP. ---------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) <TABLE> <S> <C> Delaware 11-2139466 ------------------------------------------------------------------------------------------------------------- (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number) 105 Baylis Road, Melville, New York 11747 ------------------------------------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (516) 777-8900 ------------------------------------------------------------------------------------------------------------- (Registrant's telephone number, including area code) ------------------------------------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) </TABLE> 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. (X) Yes ( ) No APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDING DURING THE PRECEDING FIVE YEARS Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. ( ) Yes ( ) No APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, Par Value $.10 Per Share - 2,642,404 shares outstanding as of - --------------------------------------------------------------------------- 1/31/97. - -------- 1
INDEX ----- Page No. ---- PART I FINANCIAL INFORMATION Consolidated Balance Sheets - 3 January 31, 1997 (unaudited) and July 31, 1996 Consolidated Statements of Operations - 4 Three Months and Six Months Ended January 31, 1997 and 1996 (unaudited) Consolidated Statements of Cash Flows - 5 Six Months Ended January 31, 1997 and 1996 (unaudited) Notes to Consolidated Financial Statements 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 8-10 PART II OTHER INFORMATION 11 Exhibit 11.0 Computation of Earnings (Loss) Per Common Share 12 Signature Page 13 2
PART I ------ FINANCIAL INFORMATION --------------------- COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES ------------------------------------------------- CONSOLIDATED BALANCE SHEETS --------------------------- <TABLE> <CAPTION> January 31, 1997 July 31, 1996 ---------------- ------------- (unaudited) <S> <C> <C> ASSETS: Current assets: Cash and cash equivalents $ 1,629,000 $ 1,840,000 Restricted cash 90,000 220,000 Accounts receivable, less allowance for doubtful accounts of $68,000 at January 31, 1997 and $28,000 at July 31, 1996 3,893,000 3,467,000 Inventories, net 6,646,000 6,527,000 Prepaid expenses and other current assets 187,000 196,000 ------------ ------------ Total current assets 12,445,000 12,250,000 ------------ ------------ Property, plant and equipment, net 3,699,000 3,996,000 Other assets 351,000 383,000 ------------ ------------ Total assets $ 16,495,000 $ 16,629,000 ------------ ------------ LIABILITIES AND STOCKHOLDERS' EQUITY: Current liabilities: Current installments of long-term debt (including payable to related party of $368,000 at January 31, 1997 and $351,000 at July 31, 1996) $ 620,000 $ 642,000 Accounts payable 2,105,000 2,037,000 Accrued expenses and other current liabilities 1,583,000 1,774,000 ------------ ------------ Total current liabilities 4,308,000 4,453,000 ------------ ------------ Long-term debt, less current installments (including payable to related party of $1,324,000 at January 31, 1997 and $1,512,000 at July 31, 1996) 1,619,000 1,875,000 ------------ ------------ Total liabilities 5,927,000 6,328,000 ------------ ------------ Stockholders' equity: Preferred stock, par value $.10 per share; shares authorized and unissued 2,000,000 -- -- Common stock, par value $.10 per share; authorized 10,000,000 shares; issued and outstanding 2,642,404 shares at January 31, 1997 and 2,607,344 at July 31, 1996 264,000 261,000 Additional paid-in capital 22,267,000 22,235,000 Accumulated deficit (11,370,000) (11,599,000) ------------ ------------ 11,161,000 10,897,000 Less: Treasury stock (55,000 shares at January 31, 1997 and 15,000 shares at July 31, 1996) (184,000) (180,000) Deferred compensation expense (409,000) (416,000) ------------ ------------ 10,568,000 10,301,000 Total liabilities and stockholders' equity $ 16,495,000 $ 16,629,000 ------------ ------------ </TABLE> See accompanying notes to consolidated financial statements. 3
COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES ------------------------------------------------- CONSOLIDATED STATEMENTS OF OPERATIONS ------------------------------------- <TABLE> <CAPTION> Three Months Ended Six Months Ended January 31 January 31, ------------------ ---------------- 1997 1996 1997 1996 ---- ---- ---- ---- Unaudited Unaudited Unaudited Unaudited --------- --------- --------- --------- <S> <C> <C> <C> <C> Net sales $ 6,048,000 $ 4,747,000 $ 11,236,000 $ 9,203,000 Operating costs and expenses: Cost of sales 4,426,000 3,313,000 8,233,000 6,455,000 Selling, general and administrative 1,212,000 1,163,000 2,283,000 2,367,000 Research and development 229,000 157,000 458,000 392,000 ----------- ----------- ------------ ----------- Total operating costs and expenses 5,867,000 4,633,000 10,974,000 9,214,000 ----------- ----------- ------------ ----------- Operating earnings (loss) 181,000 114,000 262,000 (11,000) Other (expenses) income: Interest expense (72,000) (86,000) (148,000) (157,000) Interest income 4,000 20,000 13,000 37,000 Other income 45,000 -- 117,000 -- ----------- ----------- ------------ ----------- Earnings (loss) from operations before provision for income taxes 158,000 48,000 244,000 (131,000) Provision for income taxes 10,000 3,000 15,000 10,000 ----------- ----------- ------------ ----------- Net income (loss) $ 148,000 $ 45,000 $ 229,000 $ (141,000) ----------- ----------- ------------ ----------- Earnings (loss) per share $ .06 $ .02 $ .09 $ (.05) ----------- ----------- ------------ ----------- Weighted average number of common and common equivalent shares outstanding 2,582,384 2,590,344 2,582,384 2,590,344 ----------- ----------- ------------ ----------- </TABLE> See accompanying notes to consolidated financial statements 4
COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES ------------------------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS ------------------------------------- <TABLE> <CAPTION> Six Months Ended January 31, ------------------------- (unaudited) 1997 1996 ---- ---- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 229,000 $ (141,000) Adjustments to reconcile net income (loss) to net cash used in operating activities: Gain on sale of property (72,000) Depreciation and amortization 526,000 482,000 Amortization (reversal) of deferred compensation expense net (46,000) 72,000 Changes in assets and liabilities: Accounts receivable (426,000) (166,000) Inventories (119,000) (970,000) Prepaid expenses and other current assets 9,000 (67,000) Other assets (8,000) (17,000) Accounts payable 68,000 (155,000) Accrued expenses and other current liabilities (191,000) 521,000 ----------- ----------- Net cash used in operating activities (30,000) (441,000) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment (200,000) (148,000) Sale of property, plant and equipment 127,000 -- Net proceeds of sales of marketable securities -- 278,000 ----------- ----------- Net cash (used in) provided by investing activities (73,000) 130,000 ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on long-term debt (322,000) (349,000) Proceeds from exercise of stock options 88,000 -- Purchase of treasury stock (4,000) -- ----------- ----------- Net cash used in financing activities (238,000) (349,000) Net decrease in cash and cash equivalents (341,000) (660,000) Cash and cash equivalents at beginning of period 2,060,000 2,044,000 ----------- ----------- Cash and cash equivalents at end of period $ 1,719,000 $ 1,384,000 ----------- ----------- Supplemental cash flow disclosure: - --------------------------------- Cash paid during the period for: Interest $ 148,000 $ 157,000 Income taxes $ 15,000 $ 10,000 </TABLE> See accompanying notes to consolidated financial statements 5
COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES ------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ (1) General The accompanying consolidated financial statements for the six months ended January 31, 1997 and 1996 are unaudited. In the opinion of management, the information furnished reflects all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the unaudited interim periods. The results of operations for the six months ended January 31, 1997 are not necessarily indicative of the results of operations to be expected for the full year. (2) Accounts Receivable Accounts receivable consist of the following: <TABLE> <CAPTION> January 31, 1997 July 31, 1996 ---------------- ------------- <S> <C> <C> Accounts receivable from commercial customers $ 3,336,000 $ 2,079,000 Unbilled receivables (including retainages) on contracts-in-progress 376,000 689,000 Amounts receivable from the United States Government and its agencies 249,000 727,000 ----------- ----------- 3,961,000 3,495,000 Less allowance for doubtful accounts 68,000 28,000 ----------- ----------- Accounts receivable, net $ 3,893,000 $3,467,000 ----------- ----------- </TABLE> (3) Inventories Inventories consist of the following: <TABLE> <CAPTION> January 31, 1997 July 31, 1996 ---------------- ------------- <S> <C> <C> Raw materials and components $ 1,816,000 $1,754,000 Work-in-process 6,372,000 5,414,000 ----------- ----------- 8,188,000 7,168,000 Less: Progress payments 865,000 151,000 Inventory reserves 677,000 490,000 ----------- ----------- Inventories - net $ 6,646,000 $6,527,000 ----------- ----------- </TABLE> (4) Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consist of the following: <TABLE> <CAPTION> January 31, 1997 July 31, 1996 ---------------- ------------- <S> <C> <C> Customer advances and deposits $ 276,000 $ 208,000 Accrued wages and benefits 564,000 680,000 Accrued commissions 299,000 355,000 Other 444,000 531,000 ----------- ----------- $ 1,583,000 $1,774,000 ----------- ----------- </TABLE> 6
(5) Long-Term Debt Long-term debt consists of the following: <TABLE> <CAPTION> January 31, 1997 July 31, 1996 ---------------- ------------- <S> <C> <C> Obligations under capital leases $ 2,239,000 $ 2,517,000 Less current installments 620,000 642,000 ------------------ ------------------ $ 1,619 000 $ 1,875,000 ------------------ ------------------ </TABLE> (6) Income Taxes For the six months ended January 31, 1997 and 1996, the provision for income taxes was $15,000 and $10,000, respectively. The provision for income taxes included in the accompanying consolidated financial statements of operations consisted entirely of estimated state and local income tax. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets at July 31, 1996 are presented below. There are no temporary differences that give rise to deferred tax liabilities. Deferred tax asset: 1996 ---- Allowances for doubtful accounts receivable $ 10,000 Inventories, principally due to additional costs inventoried for tax purposes pursuant to the Tax Reform act of 1986 374,000 Plant and equipment, principally due to capitalized interest and differences in depreciation 156,000 Compensated absences, principally due to accrual for financial reporting purposes 213,000 Deferred compensation 144,000 Net operating loss carryforwards 4,294,000 Investment tax credit carryforwards 440,000 Alternative minimum tax credit carryforwards 87,000 ----------- Total gross deferred tax assets 5,718,000 Less valuation allowance (5,718,000) ----------- Net deferred tax assets $ -- ----------- The valuation allowance for deferred tax assets as of July 31, 1996 was $5,718,000. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers projected future taxable income and tax planning strategies in making this assessment. In order to fully realize the deferred tax asset, the Company will need to generate future taxable income of approximately $16,500,000. Based upon the level of historical taxable income and projections for future taxable income over the periods which the deferred tax assets are deductible, management believes it is more likely than not the Company will not realize the benefits of these deferred tax assets and has fully reserved the deferred asset. (7) Earnings Per Share Earnings per share are based on the weighted average number of common and common equivalent shares (if dilutive) outstanding during each year. 7
COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES ------------------------------------------------- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL --------------------------------------------------------- CONDITION AND RESULTS OF OPERATIONS ----------------------------------- Forward-Looking Statements -------------------------- Certain information contained in this Quarterly Report on Form 10-Q, including, without limitation, information appearing under Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations," are forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). Factors set forth in the Company's Annual Report on Form 10-K, filed October 31, 1996, or in the Company's other Securities and Exchange Commission filings, could affect the Company's actual results and could cause the Company's actual results to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company in this Quarterly Report on Form 10-Q. COMPARISON OF THE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JANUARY 31, - ------------------------------------------------------------------------------ 1997 AND JANUARY 31, 1996 - ------------------------- Net Sales. Net sales were $6,048,000 and $4,747,000 for the three months ended January 31, 1997 and 1996, respectively, representing an increase of $1,301,000, or 27.4%. This increase was due primarily to a higher level of sales of solid state amplifiers and satellite frequency converter products at the Company's Comtech PST Corp., and Comtech Communications Corp. subsidiaries, respectively. Gross Margin. Gross profit was $1,622,000 or 26.8% of net sales for the three months ended January 31, 1997 compared to $1,434,000 or 30.2% of net sales for the same period in fiscal 1996. Higher gross profits in the fiscal 1997 period were due primarily to the higher sales volume. Lower gross profit margins, as a percentage of sales, in the 1997 period were due primarily to lower gross margins at Comtech Systems, Inc. and to a lesser extent lower gross margins at Comtech Communications Corp. Selling, General and Administrative. Selling, general and administrative expenses were $1,212,000 or 20.0% of net sales for the three months ended January 31, 1997 compared to $1,163,000 or 24.5% of net sales for the same period in fiscal 1996. The increased expense was primarily due to the addition to the allowance for bad debts expense. Research and Development. Research and development expenses were $229,000 and $157,000 for the three months ended January 31, 1997 and 1996, respectively, representing a $72,000, or 45.9% increase. This increase was due primarily to expenses for product improvements at the Company's Comtech PST Corp. and Comtech Systems Inc. subsidiaries, respectively, which was partially offset by a decrease in these expenses at Comtech Antenna Systems Inc. Results from Operations. As a result of the foregoing factors, the Company had operating earnings of $181,000 for the three months ended January 31, 1997 compared to operating earnings of $114,000 for the comparable prior year period. Interest Expense. Interest expense was $72,000 and $86,000 for the three months ended January 31, 1997 and 1996, respectively. Interest expense for both periods was attributable largely to interest associated with the Company's capital lease obligations. Interest Income. Interest income was $4,000 and $20,000 for the three months ended January 31, 1997 and 1996, respectively. This decrease was due primarily to the decrease in the amount of cash available to invest in the fiscal 1997 period. Other Income. Other income in the fiscal 1997 period is primarily due to a finders fee the Company earned relating to an agreement with a foreign original equipment manufacturer. 8
Provision for Income Taxes. The provision for income taxes was $10,000 and $3,000 for the three months ended January 31, 1997 and 1996, respectively, which principally relates to state income taxes. The Company files on a consolidated basis for federal income tax purposes and is not expected to incur federal taxes for these periods due to the previous losses incurred. The Company believes its tax benefits are subject to a 100% valuation allowance due to earnings fluctuations inherent in the Company's operations and the potential limitations on utilization of loss and credit carryforwards pursuant to Sections 382 and 383 of the Internal Revenue Code of 1986. COMPARISON OF THE RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JANUARY 31, - ---------------------------------------------------------------------------- 1996 AND JANUARY 31, 1996 - ------------------------- Net Sales. Net sales were $11,236,000 and $9,203,000 for the six months ended January 31, 1997 and 1996, respectively, representing an increase of $2,033,000 or 22.1%. The increase in sales was due primarily to a higher level of sales of solid state amplifiers and satellite frequency converters at Comtech PST Corp. and Comtech Communications Corp., respectively. Gross Margin. Gross profit was $3,003,000 or 26.7% of net sales for the six months ended January 31, 1997 compared to $2,748,000 or 29.9% of net sales for the same period in fiscal 1996. Higher gross profits in the fiscal 1997 period were due primarily to the higher sales volume. Lower gross profit margins, as a percentage of net sales, in the 1997 period were due primarily to lower gross margins at Comtech Systems, Inc. and Comtech Communications Corp. Selling, General and Administrative. Selling, general and administrative expenses were $2,283,000 or 20.3% for the six months ended January 31, 1997 compared to $2,367,000 or 25.7% of net sales for the same period in fiscal 1996. This reduction was due primarily to the forfeiture of certain benefits by a former employee relating to a restricted stock purchase agreement, which resulted in a reduction of $79,000 to administrative expenses. Research and Development. Research and development expenses were $458,000 and $392,000 for the six months ended January 31, 1997 and 1996, respectively, representing a $66,000 or 16.8% increase. This increase was due primarily to expenses for product improvements at the Company's Comtech PST Corp. and Comtech Systems, Inc. subsidiaries which was partially offset by a decrease in these expenses at Comtech Antenna Systems, Inc. Results From Operations. As a result of the foregoing factors, the Company had operating earnings of $262,000 for the six months ended January 31, 1997 compared to an operating loss of $11,000 for the comparable prior year period. Interest Expense. Interest expense was $148,000 and $157,000 for the six months ended January 31, 1997 and 1996, respectively. Interest expense for both periods was attributable largely to interest associated with the Company's capital lease obligations. Interest Income. Interest income was $13,000 and $37,000 for the six months ended January 31, 1997 and 1996, respectively. This decrease was due primarily to the decrease in the amount of cash available to invest in the fiscal 1997 period. Other Income. Other income in the fiscal 1997 period was primarily the result of the gain on the sale of a storage facility and a finders fee the Company earned relating to an agreement with a foreign original equipment manufacturer. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- For the six month period ended January 31, 1997, the Company's cash and cash equivalent position decreased by $341,000 from $2,060,000 at July 31, 1996 to $1,719,000 at January 31, 1997. 9
Operating activities used a net of $30,000. Accounts receivable were $3,893,000 at January 31, 1997 as compared to $3,467,000 at July 31, 1996, representing an increase of $426,000. This increase was primarily the result of the increase in sales. Included in these balances were $376,000 and $689,000 for January 31, 1997 and 1996, respectively for unbilled accounts receivable for sales recorded on a percentage-of-completion basis. The portion of accounts receivable that are accounted for on a percentage-of-completion basis will vary at any time as a function of the volume of contracts being performed by the Company that are accounted for on a percentage-of-completion basis. The Company believes that its allowance for doubtful accounts is sufficient based on past experience and the Company's credit standards. The Company generally requires international customers to secure their obligations by letter of credit. Inventory levels of materials and components and work-in-process, net of progress payments and reserves were $6,646,000 at January 31, 1997 and $6,527,000 at July 31, 1996, representing an increase of $119,000. This increase was due primarily to the additional inventory required to address the increased backlog at January 31, 1997. The Company generally operates on a job-order cost basis, that is, costs are incurred as work-in-process inventory for specific contracts or "jobs" and, accordingly, inventory levels will vary as a function of the status of the Company's order backlog. The Company does have some product lines which require a more competitive response to customers requirements and require the Company to provide for a level of "off-the-shelf" equipment. The only other general inventory that the Company maintains is for basic components which are common for most of its products. Accounts payable increased by $68,000, from July 31, 1996 to January 31, 1997 primarily as a result of the increased sales volume requiring increased inventory purchases. Accrued expenses and other current liabilities decreased by $191,000 as a result of decreases in accrued wages and benefits, accrued commissions and other expenses, partially offset by an increase in customer advance payments. Investing activities used $73,000 of cash. The Company used $200,000 of cash for purchases of equipment. It received $127,000 as proceeds from the sale of a storage facility it previously owned and recognized a $72,000 profit from the sale which is included as other income. Financing activities used $238,000. The Company received $88,000 as proceeds from the exercise of employee incentive stock options. Principal payments on long term debt were $322,000. Additionally, the Company purchased forfeited restricted employee stock which has been added to the Company's treasury stock. In December 1996 the Company obtained a new $5,000,000 secured credit facility from Republic National Bank of New York. The line of credit which is to be used for working capital requirements is for a term of one year and bears interest on borrowings of 1/2% over the bank's Reference Rate. There were no borrowings outstanding at January 31, 1997. A component of this facility is the administration by Republic of $1,000,000 of loans under the Working Capital Guarantee Program of the Export-Import Bank of the United States. This program provides the lender a 90% guarantee on qualifying loans made to the Company for export related contracts. The Company has not utilized this program to date. The Company believes that its current cash position, funds generated from operations and funds available from its credit facility, collectively, would be adequate to meet the Company's cash requirements. 10
PART II ------- OTHER INFORMATION ----------------- Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibit 11.0 The following exhibit is annexed hereto: Computation of Earnings (Loss) per Common Share - Page 14 11
<TABLE> <CAPTION> Exhibit 11.0 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES ------------------------------------------------- COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE ----------------------------------------------- (Unaudited) Three Months Ended Six Months Ended January 31, January 31, --------------------- --------------------- 1997 1996 1997 1996 ---- ---- ---- ---- <S> <C> <C> <C> <C> Net earnings (loss) $ 148,000 $ 45,000 $ 229,000 $ (141,000) ----------- ----------- ----------- ------------ Computation of weighted average number of common equivalent shares outstanding during the period: Weighted average number of common shares 2,637,384 2,605,344 2,637,384 2,605,344 Weighted average shares assumed to be issued upon exercise of common stock options -- -- -- -- Less Treasury Stock (55,000) (15,000) (55,000) (15,000) ------------ ------------ ------------ ------------ Weighted average number of common and common equivalent shares outstanding during the period 2,582,384 2,590,344 2,582,344 2,590,344 ----------- ----------- ----------- ----------- Earnings (loss) per share: $ .06 $ .02 $ .09 $ (.05) ----------- ----------- ----------- ------------ </TABLE> 12
SIGNATURE --------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. COMTECH TELECOMMUNICATIONS CORP. -------------------------------- (Registrant) Date: March 14, 1997 By: -------------------------- Fred Kornberg Chairman of the Board Chief Executive Officer and President Date: March 14, 1997 By: -------------------------- J. Preston Windus, Jr. Vice President, Chief Financial Officer and Secretary 13