SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549
FORM 10-Q
For the Quarterly Period Ended September 30, 2002
OR
For the Transition Period from to
Commission File Number 0-24612
ADTRAN, INC. (Exact name of Registrant as specified in its charter)
901 Explorer Boulevard, Huntsville, Alabama 35806-2807(Address of principal executive offices, including zip code)
(256) 963-8000(Registrant’s telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve 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 o
Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock as of the latest practicable date:
ADTRAN, INC.
Quarterly Report on Form 10-QFor the Quarter Ended September 30, 2002
Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATMENTS
ADTRAN, INC.CONDENSED BALANCE SHEETS
See notes to condensed financial statements
ADTRAN, INC.CONDENSED STATEMENTS OF INCOME(Unaudited)
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ADTRAN, INC.CONDENSED STATEMENTS OF CASH FLOWS(Unaudited)
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ADTRAN, INC.NOTES TO CONDENSED FINANCIAL STATEMENTS(Unaudited)
1. BASIS OF PRESENTATION
The interim condensed balance sheet of ADTRAN, Inc. (“ADTRAN”) at December 31, 2001 has been derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. The accompanying unaudited condensed financial statements of ADTRAN have been prepared pursuant to the rules and regulations for reporting on Quarterly Reports on Form 10-Q. Accordingly, certain information and notes required by generally accepted accounting principles for complete financial statements are not included herein. In the opinion of management, all adjustments necessary for a fair presentation of these interim statements have been included and are of a normal and recurring nature. Operating results for the three and nine months ended September 30, 2002 are not necessarily indicative of the results that may be expected to occur for the year ending December 31, 2002. The interim statements should be read in conjunction with the financial statements and notes thereto included in ADTRAN’s latest Annual Report on Form 10-K.
2. INVENTORY
At September 30, 2002 and December 31, 2001, inventory consisted of the following:
3. COMPREHENSIVE INCOME
Comprehensive income consists of net income and unrealized gains and losses on marketable securities, net of deferred taxes. Comprehensive income of $4,596,102 for the nine months ended September 30, 2002, consists of net income of $12,665,728 and unrealized losses on marketable securities of $8,069,626 (net of deferred tax). Comprehensive income of $6,832,630 for the year ended December 31, 2001, consists of net income of $17,328,529 and unrealized losses on marketable securities of $10,495,899 (net of deferred tax).
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4. EARNINGS PER SHARE
A summary of the calculation of basic and diluted earnings per share (EPS) for the three and nine months ended September 30, 2002 and 2001 is as follows:
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5. SEGMENT INFORMATION
ADTRAN operates two reportable segments – (1) the Carrier Network Division and (2) the Enterprise Network Division. We evaluate the performance of our segments based on gross profit; therefore, selling, general and administrative costs, as well as research and development, interest income/expense, and provision for income taxes are reported on an entity wide basis only. There are no inter-segment revenues.
The table below presents information about the reported sales and gross profit of ADTRAN’s segments for the three and nine months ended September 30, 2002 and 2001. Asset information by reportable segment is not reported, since ADTRAN does not produce such information internally.
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The tables below present sales information by product and geographic area for the three and nine months ended September 30, 2002 and 2001.
Sales by Product
Sales by Geographic Region
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6. RECENTLY ISSUED ACCOUNTING STANDARDS
In October 2001, the Financial Accounting Standards Board issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which has an effective date for financial statements for fiscal years beginning after December 15, 2001. This statement, which supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, requires that long-lived assets that are to be disposed of by sale be measured at the lower of book value or fair value less cost to sell. Additionally, this statement expands the scope of discontinued operations to include all components of an entity with operations that (1) can be distinguished from the rest of the entity and (2) will be eliminated from the ongoing operations of the entity in a disposal transaction. ADTRAN adopted SFAS No. 144 effective January 1, 2002, and the impact was not material to ADTRAN’s September 30, 2002 financial statements.
In May 2002, the Financial Accounting Standards Board issued SFAS No. 145, Rescission of FAS Nos. 4, 44, and 64, Amendment of FAS 13, and Technical Corrections as of April 2002. This statement rescinds FASB Statement No.4, Reporting Gains and Losses from Extinguishment of Debt, and an amendment of that statement, FASB Statement No. 64, Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. The statement also rescinds FASB Statement No. 44, Accounting for Intangible Assets of Motor Carriers, and amends FASB Statement No. 13, Accounting for Leases, to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. This statement also amends other existing authoritative pronouncements to make various technical corrections, clarify meetings, or describe their applicability under changed conditions. SFAS No. 145 does not currently impact ADTRAN.
In July 2002, the Financial Accounting Standards Board issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal, which is effective for disposal or exit activities that are initiated after December 31, 2002. This statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring). The statement requires that a liability for a cost associated with an exit or disposal activity shall be recognized and measured initially at its fair value in the period in which liability is incurred, except for liabilities for one-time termination benefits that are incurred over time. In the unusual circumstance in which fair value cannot be reasonably estimated, the liability shall be recognized initially in the period in which fair value can be reasonably estimated. The impact of SFAS No. 146 on ADTRAN’s financial statements is not expected to be material.
7. LIABILITY FOR WARRANTY RETURNS
ADTRAN’s products generally include warranties of five or ten years for product defects. ADTRAN accrues for warranty returns at cost to repair or replace products. This liability is included in accrued expenses in the accompanying balance sheets. The liability for warranty returns totaled approximately $1,277,000 as of September 30, 2002 and December 31, 2001.
8. FINANCIAL INSTRUMENTS
ADTRAN evaluates its available-for-sale and held-to-maturity investments for related events or changes in circumstances that indicate a decline in value that is other-than-temporary. An impairment charge is recognized in the period in which an other-than-temporary decline is identified in an amount equal to the excess of the carrying value over the fair value. ADTRAN recorded $10,290,366 and $11,626,608 of other-than-temporary investment impairment charges related to marketable equity securities and private securities during the three and nine months ended September 30, 2002, respectively.
9. TREASURY STOCK
In July 2001, the Board of Directors approved the re-purchase of 2,000,000 shares of ADTRAN common stock. Under this program, the company re-purchased 966,135 and 1,340,135 shares of our common stock in the three and nine months ended September 30, 2002, at a total cost of $17,830,734 and $25,206,524, respectively.
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OVERVIEW
ADTRAN designs, develops, manufactures, markets and services a broad range of high speed network access products utilized by providers of telecommunications services (serviced by ADTRAN’s Carrier Networks Division or CN) and corporate end-users (serviced by ADTRAN’s Enterprise Networks Division or EN). We currently sell our products to a large number of carriers, including all RBOCs (Regional Bell Operating Companies), and to private and public enterprises worldwide.
Sales decreased this year compared to last year due to an overall downturn in the telecommunications market. However, we believe we have protected our sources of revenue by maintaining our strategy of increasing unit volume and market share through the introduction of succeeding generations of products having lower selling prices and increased functionality as compared both to the prior generation of a product and to the products of competitors. An important part of ADTRAN’s strategy is to engineer the reduction of the product cost of each succeeding product generation and then to lower the product’s price based on the cost savings achieved. As a part of this strategy, we seek in most instances to be a low-cost, high-quality provider of products in our markets. ADTRAN’s success to-date is attributable in large measure to our ability to design our products initially with a view to their subsequent re-design, allowing both increased functionality and reduced manufacturing costs in each succeeding product generation. This strategy enables ADTRAN to sell succeeding generations of products to existing customers while increasing our market share by selling these enhanced products to new customers.
Our operating results have fluctuated on a quarterly basis in the past, and operating results may vary significantly in future periods due to a number of factors. We operate with very little order backlog. A substantial majority of our sales in each quarter results from orders booked in that quarter and firm purchase orders released in that quarter by customers under agreements containing non-binding purchase commitments. Furthermore, a majority of customers typically require prompt delivery of products. This results in a limited backlog of orders for these products and requires us to maintain sufficient inventory levels to satisfy anticipated customer demand. If near-term demand for ADTRAN’s products declines, or if potential sales in any quarter do not occur as anticipated, our financial results could be adversely affected.
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Operating expenses are relatively fixed in the short term; therefore, a shortfall in quarterly revenues could impact ADTRAN’s financial results significantly in a given quarter. Further, maintaining sufficient inventory levels to assure prompt delivery of our products increases the amount of inventory that may become obsolete and increases the risk that the obsolescence of such inventory may have an adverse effect on our business and operating results.
ADTRAN’s operating results may also fluctuate as a result of a number of other factors, including increased competition, customer order patterns, changes in product mix, product warranty returns and announcements of new products by ADTRAN or our competitors. Accordingly, our historical financial performance is not necessarily a meaningful indicator of future results, and, in general, we expect that our financial results may vary from period to period.
CRITICAL ACCOUNTING POLICIES
We believe the following critical accounting policies, among others, affect our more significant judgments and estimates used in the preparation of our financial statements:
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RESULTS OF OPERATIONS – THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001
SALES
ADTRAN’s sales decreased 7.7% from $95,513,062 in the three months ended September 30, 2001 to $88,180,461 in the three months ended September 30, 2002. Sales decreased 13.7% from $297,986,682 in the nine months ended September 30, 2001 to $257,306,809 in the nine months ended September 30, 2002. The decrease was primarily the result of decreased spending by our customers, which we believe to be a result of both economic and industry-wide factors. Carrier Network sales decreased from $55,813,387 in the three months ended September 30, 2001 to $55,308,020 in the three months ended September 30, 2002 and decreased from $185,283,724 in the nine months ended September 30, 2001 to $161,705,301 in the nine months ended September 30, 2002. Carrier Network sales as a percentage of total sales increased from 58.4% in the three months ended September 30, 2001 to 62.7% in the three months ended September 30, 2002 and increased from 62.2% for the nine months ended September 30, 2001 to 62.8% in the nine months ended September 30, 2002. Enterprise Network sales decreased from $39,699,675 in the three months ended September 30, 2001 to $32,872,441 for the three months ended September 30, 2002 and decreased from $112,702,958 in the nine months ended September 30, 2001 to $95,601,508 in the nine months ended September 30, 2002. Enterprise Network sales as a percentage of total sales decreased from 41.6% for the three months ended September 30, 2001 to 37.3% for the three months ended September 30, 2002 and decreased from 37.8% in the nine months ended September 30, 2001 to 37.2% in the nine months ended September 30, 2002. Foreign sales decreased 43.1% from $6,850,648 in the three months ended September 30, 2001 to $3,899,252 in the three months ended September 30, 2002 and increased 7.5% from $12,618,169 in the nine months ended September 30, 2001 to $13,557,779 in the nine months ended September 30, 2002.
COST OF SALES
Cost of sales decreased 19.7% from $53,114,239 in the three months ended September 30, 2001 to $42,655,272 in the three months ended September 30, 2002 and decreased 20.5% from $164,594,872 in the nine months ended September 30, 2001 to $130,799,553 in the nine months ended September 30, 2002. The cost of sales decrease quarter over quarter is primarily related to the decrease in revenues in each respective period and timing differences between the recognition of cost reductions and the lowering of product selling prices. As a percentage of sales, cost of sales decreased from 55.6% in the three months ended September 30, 2001 to 48.4% in the three months ended September 30, 2002 and decreased from 55.2% in the nine months ended September 30, 2001 to 50.8% in the nine months ended September 30, 2002. An important part of ADTRAN’s strategy is to reduce the product cost of each succeeding product generation and then to lower the product’s price based on the cost savings achieved. This strategy, as described above, sometimes results in variations in ADTRAN’s gross profit margin due to timing differences between the recognition of cost reductions and the lowering of product selling prices. In view of
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the rapid pace of new product introductions by ADTRAN, this strategy may result in variations in gross profit margins that, for any particular financial period, can be difficult to predict.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses decreased 11.5% from $22,120,077 in the three months ended September 30, 2001 to $19,587,128 in the three months ended September 30, 2002 and decreased 16.9% from $73,022,848 in the nine months ended September 30, 2001 to $60,652,858 in the nine months ended September 30, 2002. This decrease is a result of a reduction in force, mandatory salary reductions, and other cost reductions implemented in the second half of 2001. The mandatory salary reductions were rescinded effective September 1, 2002. Selling, general and administrative expenses as a percentage of sales decreased from 23.2% in the three months ended September 30, 2001 to 22.2% in the three months ended September 30, 2002 and decreased from 24.5% in the nine months ended September 30, 2001 to 23.6% in the nine months ended September 30, 2002. Bad debt expense increased from $62,999 in the three months ended September 30, 2001 to $810,000 in the three months ended September 30, 2002 and increased from $148,938 in the nine months ended September 30, 2001 to $1,511,250 in the nine months ended September 30, 2002. This increase in bad debt expense is a result of financial difficulties of certain telecom customers. Selling, general and administrative expenses as a percent of sales will generally fluctuate whenever there is significant fluctuation in revenues during the periods being compared.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses decreased 7.7% from $15,180,334 in the three months ended September 30, 2001 to $14,008,528 in the three months ended September 30, 2002 and decreased 5.5% from $44,954,097 in the nine months ended September 30, 2001 to $42,480,292 in the nine months ended September 30, 2002. ADTRAN continually evaluates new product opportunities and engages in intensive research and product development efforts. To date, ADTRAN has expensed all product research and development costs as incurred. As a result, ADTRAN may incur significant research and development expenses prior to the receipt of revenues from a major new product group. As a percentage of sales, research and development expenses remained relatively constant at 15.9% in the three months ended September 30, 2001 and 2002, and increased from 15.1% in the nine months ended September 30, 2001 to 16.5% in the nine months ended September 30, 2002. ADTRAN will continue to incur research and development expenses in connection with its new products and its expansion into international markets. Research and development expenses as a percent of sales will fluctuate whenever there is a significant fluctuation in revenues during the periods being compared.
INTEREST EXPENSE
Interest expense increased 40.0% from $461,458 in the three months ended September 30, 2001 to $645,834 in the three months ended September 30, 2002 and increased 35.8% from $1,443,654 in the nine months ended September 30, 2001 to $1,960,842 in the nine months ended September 30, 2002. This increase is primarily related to an increase in the interest rate on our $50,000,000 revenue bond.
NET REALIZED INVESTMENT LOSS
Net realized investment loss increased from $52,298 in the three months ended September 30, 2001 to $10,555,321 in the three months ended September 30, 2002 and increased from $146,923 in the nine months ended September 30, 2001 to $11,918,535 in the nine months ended September 30, 2002. This increase is primarily related to the other-than-temporary investment impairment that was recognized in the third quarter of 2002. We recorded $8,280,184 of other-than-temporary investment impairment charges during the third quarter of 2002 related to fifteen equity security investments. The remaining $2,275,137 of net realized investment loss was related to write downs of private securities and realized transactional losses in the three months ended September 30, 2002.
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OTHER INCOME, NET (PRIMARILY INTEREST)
Other income increased 44.0% from $1,810,323 in the three months ended September 30, 2001 to $2,607,647 in the three months ended September 30, 2002 and increased 19.0% from $5,593,959 in the nine months ended September 30, 2001 to $6,656,694 in the nine months ended September 30, 2002. This increase is primarily related to an increase in fixed income investments and related investment income and an increase in the interest rate earned on the collateral deposit associated with the $50,000,000 revenue bond.
INCOME TAXES
Our effective tax rate decreased from 30.2% for the nine months ended September 30, 2001 to 21.6% for the nine months ended September 30, 2002. Pre-tax income for financial reporting purposes was substantially lower through September 30, 2002 due to the other-than-temporary declines in the market value of certain investments. The higher mix of non-taxable income and higher research and development tax credits as a percent of taxable income resulted in a substantially lower effective tax rate. Additionally, economic incentive credits of $1,025,622 for the nine months ended September 30, 2002 were recorded as a reduction on income tax expense. As a result of the revision of the estimated effective tax rate for the year based on these factors, the effective tax rate for the three months ended September 30, 2002 was (0.7%).
NET INCOME
As a result of the above factors, net income decreased 32.2% from $4,949,714 in the three months ended September 30, 2001 to $3,358,467 in the three months ended September 30, 2002. Net income decreased 6.5% from $13,545,071 in the nine months ended September 30, 2001 to $12,665,728 in the nine months ended September 30, 2002. As a percentage of sales, net income decreased from 5.2% in the three months ended September 30, 2001 to 3.8% in the three months ended September 30, 2002 and increased from 4.6% in the nine months ended September 30, 2001 to 4.9% in the nine months ended September 30, 2002.
LIQUIDITY AND CAPITAL RESOURCES
Fifty million dollars of the expansion of Phase III of our corporate headquarters was approved for participation in an incentive program offered by the Alabama State Industrial Development Authority (the “Authority”). The incentive program enables participating companies to generate Alabama corporate income tax credits that can be used to reduce the amount of Alabama corporate income taxes that would otherwise be payable. We cannot be certain that the State of Alabama will continue to make these corporate income tax credits available in the future, and therefore, we may not realize the full benefit of these incentives. Through September 30, 2002, the Authority had issued $50,000,000 of its taxable revenue bonds pursuant to the incentive program and loaned the proceeds from the sale of the bonds to ADTRAN. We are required to make payments to the Authority in the amounts necessary to pay the principal of and interest on the Authority’s Taxable Revenue Bond, Series 1995, as amended, currently outstanding in the aggregate principal amount of $50,000,000. The bond matures on January 1, 2020, and bears interest at the rate of 20 basis points over the money market account-based rate of First Union National Bank. Included in long-term investments is $50,000,000 of restricted funds, which is a collateral deposit against the principal of this bond.
ADTRAN’s working capital position decreased 14.7% from $217,386,994 as of December 31, 2001 to $185,413,188 as of September 30, 2002. The quick ratio decreased from 6.32 as of December 31, 2001 to 3.82 as of September 30, 2002 and the current ratio decreased from 9.16 as of December 31, 2001 to 5.16 as of September 30, 2002. The decrease in working capital and related ratios is primarily a result of shifting investments from short-term to long-term and our share repurchase program.
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Accounts receivable and other receivables decreased 24.6% and 2.1%, respectively, from December 31, 2001 to September 30, 2002 due to reduced sales volumes and improved collections. Quarterly accounts receivable days sales outstanding improved 14 days from 62 days as of December 31, 2001 to 48 days as of September 30, 2002.
ADTRAN has used, and expects to continue to use, the cash generated from operations for working capital and other general corporate purposes, including (i) product development activities to enhance its existing products and develop new products and (ii) expansion of sales and marketing activities.
Inventory decreased 27.1% from $56,849,470 as of December 31, 2001 to $41,446,326 as of September 30, 2002. Annualized inventory turnover increased from 2.92 turns as of December 31, 2001 to 3.55 turns as of September 30, 2002. The decrease in inventory is attributable to our continued efforts to streamline our production process and increase manufacturing velocity.
Accounts payable increased 66.9% from December 31, 2001 to September 30, 2002. This increase is primarily related to obtaining more favorable payment terms with a significant supplier and a shift in sales mix towards products produced by subcontract manufacturers. Accrued expenses increased 28.6% from December 31, 2001 to September 30, 2002. This increase is primarily related to the rescission of salary reductions and the variations of payments for salaries and property taxes.
In July 2001, the Board of Directors approved the re-purchase of 2,000,000 shares of ADTRAN common stock. As of September 30, 2002, we had re-purchased 1,555,135 shares of our common stock at a total cost of $29,288,013. Of this amount, 966,135 shares of our common stock were purchased in the three months ended September 30, 2002, at a total cost of $17,830,734.
Capital expenditures totaling approximately $13,216,000 for the year ended December 31, 2001 were used to expand our headquarters and purchase equipment. Capital expenditures totaling $1,787,510 for the nine months ended September 30, 2002 were used to purchase equipment.
At September 30, 2002, ADTRAN’s cash on hand of $84,917,178 and short-term investments of $39,769,165 placed our short-term cash availability at $124,686,343. At December 31, 2001, cash on hand was $81,280,409 and short-term investments were $26,282,961, which placed our short-term cash availability at $107,563,370.
At September 30, 2002, ADTRAN’s long-term investments increased by 9.0% to $172,126,523 from $157,901,718 at December 31, 2001. This increase was attributable to ADTRAN’s ability to generate cash from operations during the first nine months of 2002 and our transfer of cash in excess of operational requirements to long-term investments. Long-term investments at September 30, 2002 and December 31, 2001 include a restricted balance of $50,000,000 related to the revenue bonds as discussed above.
INVESTMENT POLICY
The objective of our short-term investment policy is to preserve principal and maintain adequate liquidity with appropriate diversification, while emphasizing market returns on our monetary assets.
The objective of our long-term investment policy is to emphasize total return; that is, the aggregate return from capital appreciation, dividend income and interest income. This is achieved through investments with appropriate diversification in fixed and variable rate income, public equity, and private equity portfolios.
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We review our investment portfolio for potential “other-than-temporary” declines in value on an individual investment basis. We assess on a quarterly basis significant declines in value which may be considered other-than-temporary and, if necessary, recognize and record the appropriate charge to write down the carrying value of such investments. In making this assessment, we take into consideration a wide range of objective and subjective information, including but not limited to the following: the magnitude and duration of historical decline in market prices, credit rating activity, assessments of liquidity, public filings and statements made by the issuer. Actual losses, if any, could ultimately differ from these estimates.
We intend to finance our operations in the future with cash flow from operations and our remaining borrowed taxable revenue bond proceeds. We believe these available sources of funds to be adequate to meet our operating and capital needs for the foreseeable future.
FORWARD LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 (the “Reform Act”) provides a safe harbor for forward-looking statements made by or on behalf of ADTRAN. ADTRAN and its representatives may from time to time make written or verbal forward-looking statements, including statements contained in this report and our other filings with the Securities and Exchange Commission and in our reports to our stockholders. Generally, the words, “believe,” “expect,” “intend,” “estimate,” “anticipate,” “will,” “may,” “could” and similar expressions identify forward-looking statements. We caution you that any forward-looking statements made by or on our behalf are subject to uncertainties and other factors that could cause such statements to be wrong. Some of these uncertainties and other factors are listed below. They have been discussed in our most recent Form 10-K filed on March 29, 2002 with the SEC as well as in prior SEC filings. Though we have attempted to list comprehensively these important factors, we caution investors that other factors may prove to be important in the future in affecting our operating results. New factors emerge from time to time, and it is not possible for us to predict all of these factors, nor can we assess the impact each factor or combination of factors may have on our business. You are further cautioned not to place undue reliance on those forward-looking statements because they speak only of our views as of the date the statements were made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
The following are some of the risks that could affect our financial performance or could cause actual results to differ materially from those expressed or implied in our forward-looking statements:
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The foregoing list of risks is not exclusive.
ADTRAN has not conducted transactions, established commitments or entered into relationships requiring disclosures beyond those provided elsewhere in this Form 10-Q.
(a) Evaluation of disclosure controls and procedures. Our chief executive officer and chief financial officer are responsible for establishing and maintaining “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 Rules 13a-14(c) and 15d-14(c)) for the company. Our disclosure controls and procedures include our “internal controls,” as that term is used in Section 302 of the Sarbanes-Oxley Act of 2002 and described in the Securities and Exchange Commission’s Release No. 34-46427 (August 29, 2002). Our chief executive officer and chief financial officer, after evaluating the effectiveness of our disclosure controls and procedures as of a date within 90 days before the filing date of this quarterly report, have concluded that our disclosure controls and procedures are adequate and effective in timely alerting them to material information relating to us (including our consolidated subsidiaries)required to be included in our periodic SEC filings.
(b) Changes in internal controls. There were no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of the evaluation. As a result, there were no corrective actions to be taken.
PART II. OTHER INFORMATION
(b) No reports on Form 8-K were filed during the quarter ended September 30, 2002.
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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.
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CERTIFICATIONS
I, Mark C. Smith, Chairman of the Board and Chief Executive Officer, certify that:
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I, James E. Matthews, Senior Vice President – Finance and Chief Financial Officer, certify that:
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