- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------------------- FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 2, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file Number 1-10585 CHURCH & DWIGHT CO., INC. (Exact name of registrant as specified in its charter) Delaware 13-4996950 (State of incorporation) (I.R.S. Employer Identification No.) 469 North Harrison Street, Princeton, N.J. 08543-5297 (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code: (609) 683-5900 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 As of August 10, 1999, there were 19,442,222 shares of Common Stock outstanding. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1 of 12 PART I - FINANCIAL INFORMATION CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS Three Months Ended Six Months Ended ------------------------------ ----------------------------- July 2, June 26, July 2, June 26, (In thousands, except per share data) 1999 1998 1999 1998 ------------------------------------------------------------------------------------------------------------------------- Net Sales $186,365 $173,534 $361,073 $325,545 Cost of sales 102,453 94,944 200,043 179,337 ----------------------------- ------------------------------ Gross profit 83,912 78,590 161,030 146,208 Advertising, consumer and trade promotion expenses 47,296 48,707 91,868 89,502 Selling, general and administrative expenses 21,205 22,046 42,229 40,415 Gain on sale of mineral rights - - (11,772) - Impairment and other items 435 - 5,755 - Sale of Technology - (3,500) - (3,500) ----------------------------- ------------------------------ Income from Operations 14,976 11,337 32,950 19,791 Equity in earnings of affiliates 1,929 1,739 3,949 2,963 Investment income 343 281 715 590 Other income/(expense) 65 (169) 167 (135) Interest expense (689) (600) (1,294) (1,172) ----------------------------- ------------------------------ Income before taxes 16,624 12,588 36,487 22,037 Income taxes 5,959 4,715 13,457 8,268 Minority Interest 209 - 209 - ----------------------------- ------------------------------ Net Income 10,456 7,873 22,821 13,769 Retained earnings at beginning of period 228,662 201,192 218,618 197,622 ----------------------------- ------------------------------ 239,118 209,065 241,439 211,391 Dividends paid 2,328 2,329 4,649 4,655 ----------------------------- ------------------------------ Retained earnings at end of period $236,790 $206,736 $236,790 $206,736 ------------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------------- Weighted average shares outstanding - Basic 19,397 19,398 19,375 19,397 Weighted average shares outstanding - Diluted 20,424 20,064 20,392 19,990 ------------------------------------------------------------------------------------------------------------------------- Earnings Per Share: Net income per share - Basic $.54 $.41 $1.18 $.71 Net income per share - Diluted $.51 $.39 $1.12 $.69 ------------------------------------------------------------------------------------------------------------------------- Dividends Per Share: $.12 $.12 $.24 $.24 ------------------------------------------------------------------------------------------------------------------------- 2 of 12 CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands) July 2, 1999 Dec. 31, 1998 - ----------------------------------------------------------------------------------------------------------------- Assets - ----------------------------------------------------------------------------------------------------------------- Current Assets Cash and cash equivalents $17,945 $16,189 Short-term investments 5,000 2,042 Accounts receivable, less allowances of $1,573 and $1,579 67,406 65,014 Inventories (Note 2) 71,824 60,285 Current portion of note receivable 7,673 7,485 Deferred income taxes 10,324 10,535 Prepaid expenses 6,460 5,258 --------------- --------------- Total Current Assets 186,632 166,808 - ------------------------------------------------------------------------------------------------------------------ Property, Plant and Equipment (Note 3) 171,975 161,712 Note Receivable from Joint Venture - 2,384 Equity Investment in Affiliates 18,452 27,751 Long-Term Supply Contracts 4,511 4,918 Intangibles 33,175 25,142 Other Assets 5,879 2,723 - ------------------------------------------------------------------------------------------------------------------ Total Assets $420,624 $391,438 - ------------------------------------------------------------------------------------------------------------------ Liabilities and Stockholders' Equity - ------------------------------------------------------------------------------------------------------------------ Current Liabilities Short-term borrowings $18,928 $ 18,500 Accounts payable and accrued expenses 100,388 98,069 Current portion of long-term debt 1,027 685 Income taxes payable 9,178 6,983 --------------- --------------- Total Current Liabilities 129,521 124,237 - ------------------------------------------------------------------------------------------------------------------ Long-Term Debt 31,758 29,630 Deferred Income Taxes 20,061 21,178 Deferred Liabilities 9,714 6,785 Nonpension Postretirement and Postemployment Benefits 15,401 14,770 Minority Interest 3,133 - Commitments and Contingencies (Note 12) Stockholders' Equity Preferred Stock - $1 par value Authorized 2,500,000 shares, none issued - - Common Stock - $1 par value Authorized 100,000,000 shares, issued 23,330,494 shares 23,330 23,330 Additional paid-in capital 39,968 36,502 Retained earnings 236,790 218,618 Accumulated other comprehensive income (loss) (4,578) (782) --------------- --------------- 295,510 277,668 Less common stock in treasury, at cost - 3,904,738 shares in 1999 and 4,019,505 shares in 1998 (83,925) (82,281) Due from officer (549) (549) - ------------------------------------------------------------------------------------------------------------------ Total Stockholders' Equity 211,036 194,838 - ------------------------------------------------------------------------------------------------------------------ Total Liabilities and Stockholders' Equity $420,624 $391,438 - ------------------------------------------------------------------------------------------------------------------ 3 of 12 CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW Six Months Ended -------------------------------------- (Dollars in thousands) July 2, 1999 June 26, 1998 - -------------------------------------------------------------------------------------------------------------------- Cash Flow From Operating Activities - -------------------------------------------------------------------------------------------------------------------- Net Income $22,821 $13,769 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 9,530 8,265 Deferred income taxes (553) 313 Equity in income from affiliates (3,949) (2,963) Gain on sale of mineral rights (11,772) - Disposal of fixed assets 4,600 - Other 159 56 Change in assets and liabilities: (Increase)/decrease in short-term investments (2,958) 996 (Increase) in accounts receivable (284) (26,090) (Increase) in inventories (8,277) (2,608) (Increase) in prepaid expenses (1,080) (242) (Decrease)/increase in accounts payable (720) 8,961 Increase in income taxes payable 3,441 1,918 Increase in other liabilities 3,770 2,055 - -------------------------------------------------------------------------------------------------------------------- Net Cash Provided By Operating Activities 14,728 4,430 Cash Flow From Investing Activities - -------------------------------------------------------------------------------------------------------------------- Additions to property, plant and equipment (13,514) (13,206) Proceeds from sale of mineral rights 16,762 - Purchase of new product lines - (7,035) Investment in affiliates (9,184) - Distributions from unconsolidated affiliates 2,302 2,689 Purchase of other assets (3,002) (1,526) Proceeds from repayment of notes receivable 2,196 2,023 - -------------------------------------------------------------------------------------------------------------------- Net Cash (Used In) Investing Activities (4,440) (17,055) Cash Flow From Financing Activities - -------------------------------------------------------------------------------------------------------------------- Short-term debt (repayments) borrowing (1,326) 1,500 Long-term debt (repayments) borrowing (2,622) 18,500 Payment of cash dividends (4,649) (4,655) Proceeds from stock options exercised 4,487 2,026 Purchase of treasury stock (4,422) (4,456) - -------------------------------------------------------------------------------------------------------------------- Net Cash (Used In) Provided By Financing Activities (8,532) 12,915 Net Change In Cash and Cash Equivalents 1,756 290 Cash And Cash Equivalents At Beginning Of Year 16,189 14,949 - -------------------------------------------------------------------------------------------------------------------- Cash And Cash Equivalents At End Of Period $17,945 $15,239 - -------------------------------------------------------------------------------------------------------------------- 4 of 12 CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The consolidated balance sheet as of July 2, 1999, the consolidated statements of income and retained earnings for the three and six months ended July 2, 1999 and June 26, 1998, and the consolidated statements of cash flow for the six months ended July 2, 1999 and June 26, 1998 have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments, except for the item in Note 7) necessary to present fairly the financial position, results of operations and cash flow at July 2, 1999 and for all periods presented have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 1998 annual report to shareholders. The results of operations for the period ended July 2, 1999 are not necessarily indicative of the operating results for the full year. 2. Inventories consist of the following: July 2, Dec. 31, (in thousands) 1999 1998 - --------------------------------------------------------------------------------------------------------- Raw materials and supplies $21,280 $16,278 Work in process 77 160 Finished goods 50,467 43,847 --------------- -------------- $71,824 $60,285 - ---------------------------------------------------------------------------------------------------------- 3. Property, Plant and Equipment consist of the following: July 2, Dec. 31, (in thousands) 1999 1998 - ------------------------------------------------------------------------------------------------------------- Land $ 5,758 $ 4,896 Buildings and improvements 78,783 73,529 Machinery and equipment 173,556 173,595 Office equipment and other assets 14,719 14,347 Software 5,421 5,311 Mineral rights 438 5,931 Construction in progress 27,030 14,148 --------------- -------------- 305,705 291,757 Less accumulated depreciation and amortization 133,730 130,045 --------------- -------------- Net Property, Plant and Equipment $171,975 $161,712 - ------------------------------------------------------------------------------------------------------------- 5 of 12 CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. Equity Investment In Joint Venture The following table reflects summarized financial information for the Armand Products Company joint venture. The Company accounts for its 50 percent interest in the joint venture under the equity method. Product and services are provided to the Armand Products Company by the joint venture partners at cost. As a result, the following information would not be indicative of the financial position or results of operation had the joint venture operated on a stand-alone basis. Three Months Ended Six Months Ended --------------------- ------------------ July 2, June 26, July 2, June 26, (in thousands) 1999 1998 1999 1998 - --------------------------------------------------------------------------------------------------------------- Net sales $9,436 $10,653 $19,327 $19,895 Gross profit 3,420 3,894 7,129 7,108 Net income 2,736 3,147 5,714 5,571 Company's share in net income 1,368 1,573 2,857 2,785 Elimination of Company's share of intercompany interest expense 61 100 130 210 ----------------------- -------------------------- Equity in joint venture income $1,429 $1,673 $2,987 $2,995 - --------------------------------------------------------------------------------------------------------------- 5. Earnings Per Share Basic EPS is calculated based on income available to common shareholders and the weighted-average number of shares outstanding during the reported period. Diluted EPS includes additional dilution from potential common stock issuable pursuant to the exercise of stock options outstanding. 6. Gain on Sale of Mineral Rights As previously announced, the Company sold most of its trona mineral leases in Wyoming for approximately $22.5 million to Solvay Minerals, Inc., resulting in a gain of approximately $11.8 million. The terms of the note recorded as part of the sale included annual payments beginning on January 5, 1999 and concluding on January 5, 2011. The Company received its initial payment of $3.0 million and assigned and sold the note to an insurance company for the present value of the remaining payments for approximately $13.9 million. 7. Impairment and Other Items As previously announced, the Company recorded a pre-tax charge of $5.8 million for impairment and certain other items relating to a planned plant shutdown late in 1999 which includes the rationalization of both toothpaste and powder laundry detergent production. Components of the impairment charge and the outstanding reserve balances included in accounts payable and accrued expenses consist of the following: Impairment Adjustment Reserves at (In thousands) Charge (Disposals/Payments) July 2, 1999 - --------------------------------------------------------------------------------------------------- Fixed asset impairment $4,612 $(4,612) $ - Severance and other charges 1,143 180 1,323 ----------------------------------------------------- $5,755 $(4,432) $1,323 6 of 12 8. Segment Information Segment sales and operating profit for the second quarter and year to date 1999 and 1998 are as follows: Unconsolidated (In thousands) Consumer Specialty Affiliates Corporate Total - ---------------------------------------------------------------------------------------------------------------------- Net Sales Second quarter 1999 $148,755 $43,857 $(6,247) - $186,365 Second quarter 1998 142,590 36,271 (5,327) - 173,534 Year to date 1999 291,863 81,767 (12,557) - 361,073 Year to date 1998 266,957 68,536 (9,948) - 325,545 Operating Profit Second quarter 1999 9,341 8,021 (1,951) (435) 14,976 Second quarter 1998 7,704 5,343 (1,710) - 11,337 Year to date 1999 16,862 13,988 (3,917) 6,017 32,950 Year to date 1998 12,930 9,771 (2,910) - 19,791 Product line net sales data for the second quarter and year to date periods are as follows: - ---------------------------------------------------------------------------------------------------------------------- Laundry and Oral and Uncon- Household Personal Deodor- Specialty Animal Specialty solidated Cleaners Care izing Chemicals Nutrition Cleaners Affiliates Total - ---------------------------------------------------------------------------------------------------------------------- 2nd Qtr 1999 $68,588 $40,950 $39,217 $26,460 $15,165 $2,232 $(6,247) $186,365 2nd Qtr 1998 67,382 41,776 33,432 21,240 11,930 3,101 (5,327) 173,534 YTD 1999 137,618 81,801 72,444 47,128 30,169 4,470 (12,557) 361,073 YTD 1998 131,208 75,708 60,041 40,324 22,224 5,988 (9,948) 325,545 - ---------------------------------------------------------------------------------------------------------------------- 9. Comprehensive Income The following table presents the Company's Comprehensive Income for the three and six months ending July 2, 1999 and June 26, 1998. Three Months Ended Six Months Ended ------------------ ---------------- July 2, June 26, July 2, June 26, (in thousands) 1999 1998 1999 1998 - ---------------------------------------------------------------------------------------------------------- Net Income $10,456 $7,873 $22,821 $13,769 Other Comprehensive Income, net of tax: Foreign exchange translation adjustments (3,683) (163) (3,796) (62) --------------------- ------------------------- Comprehensive Income $6,773 $7,710 $19,025 $13,707 - ---------------------------------------------------------------------------------------------------------- 10. Acquisition On May 7, 1999, the Company exercised its option and purchased an additional 35% interest in two Brazilian bicarbonate/carbonate-related chemical companies. This brings the Company's total ownership to 75%. The acquisition, costing approximately $9.1 million, had approximately $4.8 million allocated to Goodwill and was financed by short-term borrowing. An additional amount of approximately $2.0 million may be payable in March, 2001, contingent upon the performance of the two Brazilian companies. 7 of 12 11. Subsequent Events Fluid Note Receivable - --------------------- In conjunction with the July 1998 purchase of the Lakewood, New Jersey, manufacturing facility, the Company loaned Fluid Packaging Co., Inc. $3.0 million at an interest rate of 8% per annum. The note was payable no later than July 15, 1999 and is secured by a pledge of and security interest in 65% of the capital stock of Allied Mexico, S.A. de C.V., a wholly-owned subsidiary of Fluid Packaging. The note was not paid by its maturity date. The Company is proceeding toward the resolution of the matter, leading to the collection of the note. After reviewing the value of the collateral, the Company believes the carrying value of the note is fully recoverable. Stock Split - ----------- On July 29, 1999, the Company announced a 2 for 1 stock split. The shares resulting from the stock split will be distributed on September 1, 1999, to stockholders of record at close of business on August 10, 1999. Pro forma earnings and dividends per share, giving retroactive effect to the 2 for 1 split for the three and six month periods ending July 1, 1999 and June 26, 1998, are as follows: Three Months Ended Six Months Ended -------------------- -------------------- July 2, June 26, July 2, June 26, (In thousands, except per share data) 1999 1998 1999 1998 - ------------------------------------------------------------------------------------------------------------------- Weighted average shares outstanding - Basic 38,794 38,796 38,750 38,794 Weighted average shares outstanding - Diluted 40,828 40,128 40,784 39,980 - ------------------------------------------------------------------------------------------------------------------- Earnings Per Share: Net income per share - Basic $.270 $.205 $.590 $.355 Net income per share - Diluted $.255 $.195 $.560 $.345 - ------------------------------------------------------------------------------------------------------------------- Dividends Per Share: $.060 $.060 $.120 $.120 - ------------------------------------------------------------------------------------------------------------------- Financial information contained elsewhere in these financial statements has not been adjusted to reflect the impact of the stock split. 12. Contingencies The Company, in the ordinary course of its business, is the subject of, or a party to, various pending or threatened legal actions. The Company believes that any ultimate liability arising from these actions will not have a material adverse effect on its consolidated financial statements. 13. Reclassification Certain prior year amounts have been reclassified in order to conform with the current year presentation. 8 of 12 MANAGEMENT'S DISCUSSION AND ANALYSIS Results of Operations - --------------------- For the quarter ended July 2, 1999, net income was $10.5 million, equivalent to basic earnings of $.54 per share, from $7.9 million or $.41 per share, in last year's second quarter. Diluted earnings were $.51 per share compared to $.39 per share last year. This year's second quarter included a $.4 million impairment charge and last year's included a $3.5 million gain from the sale of technology; excluding these one time items, diluted earnings would have been $.52 per share compared to $.28 per share last year. For the first six months of 1999, net income was $22.8 million or basic earnings of $1.18 per share compared to $13.8 million or $.71 per share last year. Diluted earnings were $1.12 per share compared to $.69 per share last year. The current year results include a net pre-tax gain of $6.0 million or $.18 per share from two previously announced events - the sale of Trona mineral reserves in January, less an impairment charge related to a planned plant shutdown later in 1999. Excluding the one-time items in both years, diluted earnings would have been $.94 per share this year compared to $.58 per share last year. Net sales for the quarter increased by 7.4% to $186.4 million from $173.5 million in the same period last year. Consumer product sales increased 4.3%, led by higher sales of the Deodorizing product line. Last year's results reflected a 27% increase in consumer product sales relating to pipeline shipments of two major new products introduced in late 1997 and early 1998 - ARM & HAMMER(R) SUPER SCOOP(TM) Cat Litter and ARM & HAMMER DENTAL CARE Gum. Specialty products sales were higher due to strong sales of animal nutrition products and the inclusion of QGN - the Company's Brazilian subsidiary, whose results are now consolidated. Net sales for the first six months of 1999 were $361.1 million as compared to $325.5 million last year, a 10.9% increase. This increase is due to the same factors as the current quarter. The Company's gross margin was 45.0% and 44.6% for the quarter and six month period, respectively. This compares with 45.3% and 44.9% for the same periods last year. The primary reasons for the decline were the use of co-packers to meet higher than expected order requirements and the shift in the high margin specialty cleaning business from having its results fully consolidated in 1998 to being accounted for as an equity investment in 1999. These items were partially offset by a favorable product sales mix. Advertising, consumer and trade promotion expenses were lower by $1.4 million in the current quarter but $2.4 million higher in the six month period. The reduction in the current quarter is due to lower expenses in support of ARM & HAMMER DENTAL CARE Gum, which was introduced in 1998, partially offset by higher expenses associated with the Laundry and Household Cleaner and Deodorizing product lines. The six month increase is due to the higher promotion expenses in support of Deodorizing products and Laundry and Household Cleaners, partially offset by lower Oral and Personal Care expenses. Selling, general and administrative expenses decreased $.8 million in the current quarter but increased $1.8 million for the six month period. The current quarter reduction is primarily due to the reorganization of the specialty cleaning business and lower outside service costs, particularly in information systems, partially offset by lower software capitalization. The increase for the six month period is primarily due to higher personnel-related costs, outside service costs, and lower software capitalization. These increases were partially offset by the reorganization of the specialty cleaning business. Earnings from affiliates increased due to the formation of the ArmaKleen Company as a 50% owned affiliate, which product lines prior to this year were fully consolidated. Both investment income and interest expense increased slightly in both the three and six month periods. The effective tax rate for the first half was 36.9%, down from 37.5% from last year. The decrease in the rate is a result of a lower effective tax rate associated with the Company's Brazilian subsidiary. Minority interest represents 25% of the net income associated with the Company's Brazilian subsidiary. 9 of 12 Liquidity and Capital Resources - ------------------------------- The Company considers cash and short-term investments as the principal measurement of its liquidity. At July 2, 1999, cash, including cash equivalents and short-term investments totaled $22.9 million as compared to $18.2 million at December 31, 1998. During the first half of 1999, the Company generated $14.7 million of cash flow from operating activities, received $16.8 million from the sale of mineral rights and received $4.5 million from stock options exercised. Significant expenditures include additions to property, plant and equipment of $13.5 million, additional investments in subsidiaries of $9.2 million, the payment of cash dividends of $4.6 million, the purchase of treasury stock of $4.4 million and the partial repayment of debt of $3.9 million. Year 2000 Update - ---------------- As outlined in the 10-K for the year ended December 31, 1998, the Company has developed plans to address the possible exposures related to the impact on its computer systems of the Year 2000. These plans have not changed materially in terms of scope or estimated costs to complete, and are progressing according to previously identified time schedules. Total expenditures incurred on Y2K-related projects through the first half of 1999 are estimated at approximately $12.0 million. While the costs of the remaining required changes is not yet fully known, we expect the total estimated costs of the Y2K-related projects to be approximately $13.5 million. Fluid Note Receivable - --------------------- In conjunction with the July 1998 purchase of the Lakewood, New Jersey, manufacturing facility, the Company loaned Fluid Packaging Co., Inc. $3.0 million at an interest rate of 8% per annum. The note was payable no later than July 15, 1999 and is secured by a pledge of and security interest in 65% of the capital stock of Allied Mexico, S.A. de C.V., a wholly-owned subsidiary of Fluid Packaging. The note was not paid by its maturity date. The Company is proceeding toward the resolution of the matter, leading to the collection of the note. After reviewing the value of the collateral, the Company believes the carrying value of the note is fully recoverable. PART II - Other Information Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits (11) Computation of earnings per share (27) Financial Data Schedule (b) No reports on Form 8-K were filed for the three months ended July 2, 1999. 10 of 12 CHURCH & DWIGHT CO., INC. AND SUBSIDIARIES EXHIBIT 11 - Computation of Earnings Per Share (In thousands except per share amounts) Three Months Ended Six Months Ended ------------------------- -------------------------- July 2, June 26, July 2, June 26, 1999 1998 1999 1998 ------------ ------------ ------------ ------------ BASIC: Net Income $10,456 $7,873 $22,821 $13,769 Weighted average shares outstanding 19,397 19,398 19,375 19,397 Basic earnings per share $.54 $.41 $1.18 $.71 DILUTED: Net Income $10,456 $7,873 $22,821 $13,769 Weighted average shares outstanding 19,397 19,398 19,375 19,397 Incremental shares under stock option plans 1,027 666 1,017 593 ------------ ------------ ------------ ------------ Adjusted weighted average shares outstanding 20,424 20,064 20,392 19,990 ------------ ------------ ------------ ------------ Diluted earnings per share $.51 $.39 $1.12 $.69 11 of 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CHURCH & DWIGHT CO., INC. ------------------------ (REGISTRANT) DATE: August 11, 1999 Zvi Eiref --------------- --------- ZVI EIREF VICE PRESIDENT FINANCE AND CHIEF FINANCIAL OFFICER DATE: August 11, 1999 Gary P. Halker --------------- -------------- GARY P. HALKER VICE PRESIDENT, CONTROLLER AND CHIEF INFORMATION OFFICER 12 of 12