EXHBIT 99.1
The Reader's Digest Association, Inc.
Media: William Adler, (914) 244-7585 william.adler@rd.com
Investor Relations: Richard Clark, (914) 244-5425 richard.clark@rd.com
Reader's Digest Reports Improved Operating Results
and Increased Free Cash Flow for 4Q Fiscal 2002
PLEASANTVILLE, NY, July 31, 2002 -- The Reader's Digest Association, Inc.
(NYSE: RDA, RDB) today announced Fiscal 2002 fourth quarter adjusted earnings of
$0.19 per share, excluding special charges, in line with previous guidance and
significantly higher than the comparable Fiscal 2001 fourth quarter adjusted EPS
of $0.05. Segment operating profits for the quarter ended June 30, 2002, were
$33 million, up from comparable prior-year segment operating profits of $6
million. Free cash flow improved in the Fiscal 2002 quarter by nearly $100
million, to $70 million.
On a reported basis, Fiscal 2002 fourth quarter EPS was a loss of $0.03,
compared with a reported loss of $0.22 per share in the Fiscal 2001 quarter.
Reported Fiscal 2002 fourth quarter operating profits were $7 million, versus an
operating loss of $20 million in the comparable Fiscal 2001 quarter.
The chart below summarizes reported versus adjusted results for Fiscal 2001 and
2002. Adjusted results exclude special charges. Details are provided in the
appendix:
Fourth Quarter Full Year
($ in Millions) FY'02 FY'01 FY'02 FY'01
Revenue $ 545 $ 544 $2,369 $2,518
Operating Profit
- Reported $ 7 ($ 20) $ 158 $ 229
- Adjusted (segment profit) $ 33 $ 6 $ 184 $ 247
EPS
- Reported ($0.03) ($0.22) $ 0.89 $ 1.26
- Adjusted $ 0.19 $ 0.05 $ 1.12 $ 1.60
"We are pleased with the company's performance in the fourth quarter,"
said Thomas O. Ryder, Chairman and CEO. "After a difficult first three quarters,
the company closed the year more favorably with operating improvements across
all of our business segments. Especially encouraging was our continued strong
growth in free cash flow."
Adjusted earnings per share of $0.19 included six weeks of contribution
from the acquisition of Reiman Publications, the nation's leading publisher of
magazines and books about food and country lifestyles. Reiman contributed
revenues of $31 million, EBITDA of $5 million, operating profits of $1 million,
interest expense of $3.6 million and EPS dilution of $0.02. Excluding Reiman,
adjusted EPS was $0.21. For Fiscal 2003, the acquisition is expected to be
marginally accretive.
During the Fiscal 2002 fourth quarter, the company completed the Reiman
acquisition and made a number of other strategic moves to strengthen its
performance. It accelerated cost-reduction programs, closed some unprofitable
businesses and significantly restructured others. In connection with these and
other events, it took special charges totaling $34 million or $0.23 per share. A
detailed explanation of these charges appears in the appendix.
Full-year Fiscal 2002, excluding special charges, adjusted earnings were
$1.12 per share, compared with adjusted earnings per share of $1.60 in Fiscal
2001. Segment operating profits were $184 million versus $247 million in Fiscal
2001. On a reported basis, Fiscal 2002 EPS was $0.89, versus $1.26 in Fiscal
2001. Reported operating profits were $158 million, versus $229 million in
Fiscal 2001.
During Fiscal 2002, the company increased free cash flow (cash flow before
dividends, share repurchases, and acquisitions) to $160 million, an increase of
$167 million over the prior year. This was attributable primarily to
improvements in working capital. During the year, the company used the proceeds
to repurchase 3.6 million shares of its stock, pay dividends and contribute
toward the Reiman acquisition...
Analysis
Fourth quarter Fiscal 2002 segment operating profits of $33 million were
an improvement of $27 million over the comparable Fiscal 2001 results. This
increase was principally driven by stronger performances in U.S. Magazines,
International Businesses and Books Are Fun. For U.S. Magazines and International
Businesses, gains principally reflected intensified re-engineering and
cost-reduction efforts. Books Are Fun achieved growth by increasing sales. The
U.S. operations of BHE dramatically reduced operating costs by aggressively
reducing overhead, eliminating unprofitable product lines and lowering promotion
costs. Total company revenues in the fourth quarter were flat. U.S. Magazines
had higher revenues - largely reflecting the Reiman acquisition - as did Books
Are Fun, but these increases were offset by reduced mail activity in North
America BHE.
Guidance
Ryder said: "Our business has continued to improve despite
challenges in many of the market environments in which we operate. Throughout
the year, we focused on activities that we believe will produce the greatest
returns for our business and create the most viable platform for growth. This
includes our efforts to reduce the cost structures in each of our business units
through overhead reduction, re-engineering initiatives and the elimination of
unprofitable activities. We believe that we have made our enterprise stronger
and more durable. We are reducing risk in our core business. We are investing in
new customer-acquisition and marketing channels. Overall, business is looking
brighter in most product segments, and we are cautiously optimistic."
Ryder added: "We expect operating profit growth in Fiscal 2003 to
reflect: reduced losses at U.S. BHE; growth at Books Are Fun and QSP; a
full-year of contribution from Reiman; and flat results for International,
partially offset by modest declines at U.S. Reader's Digest magazine, lower
pension income and higher compensation-related expenses. We expect the first
quarter of Fiscal 2003 to be in the range of $0 to $0.05 cents per share,
slightly higher than last year. For the full fiscal year, we see stronger EPS
performance, from $1.20 to $1.30, up from the $1.12 this year."
Segment Operating Results
The company now has three business segments: North America Books and
Home Entertainment, International Businesses, and U.S. Magazines. Fiscal 2002
and prior-year segment results have been restated. Reiman Publications has been
included in U.S. Magazines, and the former New Business Development segment has
been redistributed geographically, primarily between North America BHE and
International Businesses. A description of each of the three segments appears on
the final text page.
North America Books and Home Entertainment (BHE)
For Fiscal 2002 fourth quarter, North America BHE had an operating loss of
$1 million, versus a loss of $4 million in Fiscal 2001. This improvement was
partly driven by reduced losses in U.S. operations of BHE, reflecting overhead
savings, lower promotional costs and improved response rates. After four
difficult quarters, the segment began to see improved response rates in its U.S.
business. Books Are Fun contributed to the improvement as BAF operating profits
grew 17 percent.
Fiscal 2002 fourth-quarter revenues declined to $142 million, down 6
percent from $151 million in Fiscal 2001. This was caused by lower revenues in
U.S. BHE, down 23 percent, reflecting significantly reduced mail quantities and
the elimination of unprofitable product lines, offset slightly by improved
response rates. The Canadian business had modest declines in the quarter. Books
Are Fun revenues grew by 14 percent.
Full-year Fiscal 2002 operating profits were $14 million, down 74
percent from $56 million in Fiscal 2001. This was driven by sharply lower
results in the United States, where operating profits dropped $45 million versus
the prior year. Books Are Fun had an outstanding year, as operating profits grew
by 15 percent despite the cancellation of hundreds of events following September
11. Revenues for North America BHE were $670 million, down 11 percent from $757
million in Fiscal 2001. This was caused by continued weakness in U.S. BHE, where
revenue was down 30 percent because of reduced mail volumes, lower response
rates and the elimination of unprofitable product lines. Books Are Fun revenues
were up 13 percent, reflecting improved sales across all event venues.
International Businesses
For the Fiscal 2002 fourth quarter, operating profits for
International Businesses were $29 million, up 59 percent from $18 million in
Fiscal 2001. This improvement was driven by revenue growth in Eastern Europe,
Germany and Switzerland, reduced promotional and overhead costs in Australia and
accelerated re-engineering efforts in most European markets. Much of this
improvement reflects investments made earlier in the year, including the launch
of new series products and Select Editions in newer markets. Revenues were $269
million, down 2 percent versus $273 million in Fiscal 2001. The revenue decline
was caused principally by lower sales in Latin America. European revenues were
up 1 percent, driven by continued growth in most Eastern European markets and
higher sales of BHE products in Germany and Switzerland, somewhat offset by
lower response rates in the United Kingdom and Poland.
Full-year Fiscal 2002 operating profits were $89 million, versus $114
million in Fiscal 2001, a decline of 22 percent. Adjusting for foreign currency
translation, operating profits fell by 15 percent. The decline in operating
profits reflected a number of factors: Germany, the United Kingdom and Poland
had increased promotional costs, resulting from lower response rates; most
global markets experienced advertising softness; and Mexico had weaker
performance in music mailings. The company increased its investment spending in
many countries to develop new products, promotions and marketing channels,
including the use of electronic direct mail.
Full-year Fiscal 2002 revenues were $1.07 billion, down 4 percent from
Fiscal 2001, or down 2 percent adjusting for the adverse effects of foreign
currency translation. Europe had robust gains in developing markets including
the Czech Republic, Hungary, and Russia, which together grew by 31 percent. This
was offset by softness in some developed markets, notably the United Kingdom,
Germany, and Poland. This reflected lower response rates in Germany and Poland
and softer series performance in the United Kingdom. This was partly offset by
increased revenues from new product and marketing-channel investment, including
Select Editions outside list programs, telemarketing and financial services
marketing alliances. Declines in Asia Pacific/Latin America were caused by
economic-related softness. Australia was down for the year, but improved in the
second half.
U.S. Magazines
For Fiscal 2002 fourth quarter, U.S. Magazines recorded operating
profits of $5 million, representing an increase of $13 million versus Fiscal
2001. This improvement reflected reduced overhead costs at QSP, lower promotion
costs and favorable timing of promotion costs for Reader's Digest magazine, as
well as six weeks of profit contributions from Reiman Publications. Revenues
were $134 million, up 12 percent versus $120 million in Fiscal 2001. Excluding
Reiman, revenues were $103 million in the Fiscal 2002 quarter, down as a result
of lower advertising and circulation revenues, and the absence of Walking and
New Choices magazines, which were closed during Fiscal 2002. QSP revenues grew
by 8 percent in the quarter.
Full-year Fiscal 2002 operating profits grew by 5 percent to $81
million, mostly due to improved profits at Reader's Digest magazine. Operating
profit growth reflected lower promotion costs and overhead savings, and the
closing of Walking and New Choices, offset slightly by a 2 percent decline at
QSP. Revenues for U.S. Magazines fell by 4 percent in Fiscal 2002 to $627
million, which included $31 million of revenues from Reiman. Excluding Reiman,
revenues fell by 9 percent. This decline was caused by lower advertising and
circulation sales at Reader's Digest magazine, 3 percent lower sales at QSP
(reflecting the loss of over 2,000 event launches following September 11) and
the absence of Walking and New Choices magazines.
The company has three operating segments:
- - North America Books and Home Entertainment - Select Editions, series and
general books, music, video and Young Families products in the United
States and Canada; Books Are Fun; Reader's Digest magazine in Canada; QSP
Canada; and financial services marketing alliances and other strategic
initiatives in the United States and Canada.
- - International Businesses - Products sold in more than 60 countries outside
the United States and Canada, including: Select Editions, series and
general books, music, video and Young Families products; Reader's Digest
magazine in numerous editions and languages, Special Interest magazines in
the Czech Republic, a personal finance magazine in the United Kingdom; and
financial services marketing partnerships and other strategic initiatives
in more than 30 countries.
- - U.S. Magazines - Reader's Digest magazine in the United States, plus The
Family Handyman, American Woodworker, Reader's Digest Large Type Edition,
Selecciones, and QSP, Inc.; Reiman Media Group., including magazines Taste
of Home, Light & Tasty, Quick Cooking, Birds & Blooms, Country, Country
Woman, Country Discoveries, Reminisce, Farm & Ranch and Crafting
Traditions, as well as books, cooking schools, country tours and other
enterprises.
This release may include "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
inherently involve risks and uncertainties that could cause actual future
results and occurrences to differ materially from the forward-looking
statements. The Reader's Digest Association, Inc.'s filings with the Securities
and Exchange Commission, including its reports on Forms 10-K, 10-Q and 8-K,
contain a discussion of additional factors that could affect future results and
occurrences. Reader's Digest does not undertake to update any forward-looking
statements.
[Tables follow]
###
APPENDIX
The tables and footnotes below reconcile the company's reported to adjusted
earnings for the fourth quarter and Full-Year of Fiscal 2002 and Fiscal 2001.
Selected Financial Data for FOURTH QUARTER 2002
Millions of Reconciliation from Reported to Segment Profit &
dollars, except Adjusted Earnings Adjusted Earnings
per share data Net Other
Reported Operating Other Q4 '02 vs.
Q4 2002 Items (A) (B) Q4 2002 Q4 '01
Revenues $ 545.3 -- -- $ 545.3 $ 0.8
Operating profit (C) $ 6.6 $ (26.7) -- $ 33.3 $ 26.8
Other expense $ (11.4) -- $ (7.0) $ (4.4) $ (0.9)
Net income $ (3.0) $ (17.3) $ (5.8) $ 20.1 $ 14.4
Diluted EPS $(0.03) $(0.17) $(0.06) $0.19 $0.14
(A) Net other operating items of $26.7 million is comprised of restructuring
charges of $35.6 million including $14.7 million for severance, $9.2 million
for contract terminations, and $11.7 million for asset impairments and other
items. Adjustments of $8.9 million related to accrual balances from charges
originally recorded in fiscal 2001 and prior periods.
(B) Other includes a loss of $1.0 million on the sale of Benchmark magazine, a
write-off of Schoolpop, Inc. of $2.5 million, and expenses incurred in
connection with the company's pending recapitalization of $3.5 million.
(C) Operating profit includes our consolidated results for Reiman since
acquisition (May 20, 2002), which amounted to a ($0.02) loss per share.
Selected Financial Data for FOURTH QUARTER 2001
Millions of dollars, Reconciliation from Reported to
except per share data Adjusted Earnings
Net Other Investment Segment Profit &
Reported Operating Impairments Adjusted Earnings
Q4 2001 Items (D) (E) Q4 2001
Revenues $ 544.5 -- -- $ 544.5
Operating profit (F) $ (20.0) $ (22.7) $ (3.8) $ 6.5
Other (expense) income $ (36.6) -- $ (33.1) $ (3.5)
Net income $ (21.9) $ (14.5) $ (13.1) $ 5.7
Diluted EPS $(0.22) $(0.14) $(0.13) $0.05
(D) Net other operating items of $22.7 million is comprised of charges of $31.3
million primarily for severance. Adjustments of $8.6 million related to
accrual balances from charges originally recorded in prior years.
(E) Investment Impairments includes: (i) intangible asset impairment losses of
$3.8 million (recorded in operating profit) related to Walking magazine
($0.02 per share); (ii) equity in losses (including amortization and a
write-down) associated with BrandDirect Marketing, Inc. of $12.7 million
resulting in a favorable $0.06 per share due to the tax benefit of the
write-off; and (iii) write-downs of WebMD Corporation for $10.0 million
($0.10 per share), Schoolpop, Inc. for $7.5 million ($0.05 per share), and
e-finet.com for $2.9 million ($0.02 per share).
(F) Segment operating profit for the fourth quarter 2001 includes $4.9 million
($0.04 per share) of goodwill amortization.
Selected Financial Data for FISCAL 2002
Millions of dollars, except Reconciliation from Reported to Segment Profit &
per share data Adjusted Earnings Adjusted Earnings
Net Other
Reported Operating Other Fiscal `02 vs.
Fiscal 2002 Items (G) (H) Fiscal 2002 Fiscal `01
Revenues $ 2,368.6 -- -- $ 2,368.6 $ (149.6)
Operating profit (I) $ 157.7 $ (26.7) -- $ 184.4 $ (63.0)
Other expense $ (17.1) -- $ (7.0) $ (10.1) $ (15.0)
Net income $ 91.2 $ (17.3) $ (5.8) $ 114.3 $ (53.5)
Diluted EPS $0.89 $(0.17) $(0.06) $1.12 $(0.48)
(G) Net other operating items of $26.7 million is comprised of restructuring
charges of $35.6 million including $14.7 million for severance, $9.2 million
for contract terminations, and $11.7 million for asset impairments and other
items. Adjustments of $8.9 million related to accrual balances from charges
originally recorded in fiscal 2001 and prior periods.
(H) Other includes a loss of $1.0 million on the sale of Benchmark magazine, a
write-off of Schoolpop, Inc. of $2.5 million, and expenses incurred in
connection with the company's pending recapitalization of $3.5 million.
(I) Operating profit includes our consolidated results for Reiman since
acquisition (May 20, 2002), which amounted to a ($0.02) loss per share.
Selected Financial Data for FISCAL 2001
Millions of dollars, Reconciliation from Reported to
except per share data Adjusted Earnings
Net Other Investment Segment Profit &
Reported Operating Impairments Adjusted Earnings
Fiscal 2001 Items (J) (K) Fiscal 2001
Revenues $ 2,518.2 -- -- $ 2,518.2
Operating profit (L) $ 229.0 $ (12.6) $ (5.8) $ 247.4
Other (expense) income $ (41.2) -- $ (46.1) $ 4.9
Net income $ 132.1 $ (8.6) $ (27.1) $ 167.8
Diluted EPS $1.26 $(0.08) $(0.26) $1.60
(J) Net other operating items is comprised of restructuring charges of $22.7
million primarily for severance ($28.2 million) and an adjustment to prior
accruals resulting from a favorable state tax settlement of $10.1 million.
(K) Investment Impairments includes: (i) intangible asset impairment losses of
$5.8 million (recorded in operating profit) related to Walking magazine
($0.03 per share); (ii) equity in losses (including amortization and a
write-down) associated with BrandDirect Marketing, Inc. of $24.9 million
($0.06 per share): and (iii) write-downs of WebMD Corporation for $10.0
million ($0.10 per share), Schoolpop, Inc. for $7.5 million ($0.05 per
share), and e-finet.com for $2.9 million ($0.02 per share).
(L) Segment operating profit for Fiscal 2001 includes $20.6 million ($0.19 per
share) of goodwill amortization.
Table 1 of 3
The Reader's Digest Association, Inc. and Subsidiaries
Consolidated Statements of Income
(In millions, except per share data)
(Unaudited)
Three-month periods ended Twelve-month periods ended
June 30, 2002 and 2001 (A) June 30, 2002 and 2001
Fiscal Years Better/ Fiscal Years Better/
2002 2001 (Worse) 2002 2001 (Worse)
Revenues $545.3 $ 544.5 -- $ 2,368.6 $ 2,518.2 (6%)
Product, distribution and editorial expenses (222.1) (220.0) (1%) (947.7) (971.2) 2%
Promotion, marketing and administrative expenses (B) (289.9) (318.0) 9% (1,236.5) (1,299.6) 5%
Other operating items (26.7) (26.5) -- (26.7) (18.4) (45%)
------ ------- --- --------- --------- ---
Operating profit 6.6 (20.0) 133% 157.7 229.0 (31%)
Other income (expense), net (C) (11.4) (36.6) 69% (17.1) (41.2) 58%
------ ------- --- --------- --------- ---
Income before provision for income taxes (4.8) (56.6) 92% 140.6 187.8 (25%)
Provision for income taxes 1.8 34.7 (95%) (49.4) (55.7) 11%
------ ------- --- --------- --------- ---
Net income $ (3.0) $ (21.9) 86% $ 91.2 $ 132.1 (31%)
====== ======= === ========= ========= ===
Basic earnings per share:
Weighted average common shares outstanding 99.7 102.6 100.2 102.7
Basic earnings per share $(0.03) $ (0.22) 86% $ 0.90 $ 1.27 (29%)
====== ======= === ========= ========= ===
Diluted earnings per share:
Weighted average common shares outstanding 99.9 103.1 100.6 103.7
Diluted earnings per share $(0.03) $ (0.22) 86% $ 0.89 $ 1.26 (29%)
====== ======= === ========= ========= ===
Dividends per common share $ 0.05 $ $0.05 -- $ 0.20 $ 0.20 --
(A) The company reports on a fiscal year beginning July 1. The three-month periods ended June 30, 2002 and
2001 are the fourth fiscal quarters of fiscal year 2002 and fiscal year 2001, respectively. Operating results for any interim
period are not necessarily indicative of the results for an entire year.
(B) Effective July 1, 2001, the company adopted Statement of Financial Accounting Standards (SFAS) No. 142,
Goodwill and Other Intangible Assets. Under SFAS No. 142 goodwill is no longer amortized; however, goodwill must be reviewed at
least annually for impairment. Accordingly, no goodwill amortization was recognized during fiscal 2002. For the fourth quarter of
fiscal 2001, included in operating profit was goodwill amortization of $4.9 million, or $0.04 per share. For the full fiscal year
2001, operating profit included amortization of $20.6 million or $0.19 per share.
(C) Other income (expense), net for the twelve-month period ended June 30, 2001 includes equity in losses (including goodwill
amortization of $2.7 in the fourth quarter and $10.9 for the full year) of BrandDirect Marketing, Inc. of $24.9 million. There were
no such losses in fiscal 2002.
Table 2 of 3
The Reader's Digest Association, Inc. and Subsidiaries
Revenues and Operating Profit by Operating Segments
(In millions)
(Unaudited)
Three-month periods ended Twelve-month periods ended
June 30, 2002 and 2001 (A) June 30, 2002 and 2001
Fiscal Years Fiscal Years
Restated (B) Better/ Restated (B) Better/
2002 2001 (Worse) 2002 2001 (Worse)
Revenues
North America Books and Home Entertainment $142.2 $150.9 (6%) $ 670.3 $ 756.8 (11%)
International Businesses 268.9 273.3 (2%) 1,071.7 1,108.9 (3%)
U.S. Magazines 134.2 120.3 12% 626.6 652.5 (4%)
------ ------ --- -------- -------- ---
Total Revenues $545.3 $544.5 -- $2,368.6 $2,518.2 (6%)
====== ====== === ======== ======== ===
Operating Profit (Loss)
North America Books and Home Entertainment $ (0.6) $ (4.3) 86% $ 14.3 $ 55.8 (74%)
International Businesses 28.7 18.1 59% 89.4 114.5 (22%)
U.S. Magazines 5.2 $ (7.3) 171% 80.7 77.1 5%
------ ------ --- -------- -------- ---
Total Segment Operating Profit $ 33.3 $ 6.5 412% $ 184.4 $ 247.4 (25%)
Other Operating Items (26.7) (26.5) N/M (26.7) (18.4) N/M
------ ------ --- -------- -------- ---
Total Operating Profit $ 6.6 $(20.0) 133% $ 157.7 $ 229.0 (31%)
====== ====== === ======== ======== ===
N/M - Not meaningful.
(A) The company reports on a fiscal year beginning July 1. The three-month periods ended June 30, 2002 and 2001 are the
fourth fiscal quarters of fiscal year 2002 and fiscal year 2001, respectively. Operating results for any interim period are not
necessarily indicative of the results for an entire year.
(B) The results for fiscal 2001 have been restated for the elimination of the former New Business Development
segment. This segment was redistributed geographically, primarily between North America BHE and International Businesses.
Table 3 of 3
The Reader's Digest Association, Inc. and Subsidiaries
Consolidated Condensed Balance Sheets
(In millions)
(Unaudited)
June 30,
June 30, 2001
2002 Restated (A)
Assets
Cash and cash equivalents $ 107.6 $ 35.4
Accounts receivable, net 306.0 274.8
Inventories, net 156.0 167.4
Deferred promotion costs 140.9 106.7
Prepaid expenses and other current assets 153.2 192.1
---------- ----------
Total current assets 863.7 776.4
Property, plant and equipment, net 168.1 160.2
Intangible assets, net 1,244.6 409.8
Other noncurrent assets 426.3 334.5
---------- ----------
Total assets $ 2,702.7 $ 1,680.9
========== ==========
Liabilities and Stockholder's Equity
Loans and notes payable $ 32.7 $ 160.3
Accounts payable 102.8 86.4
Accrued expenses 283.2 251.1
Income taxes payable 28.4 41.2
Unearned revenue 426.9 291.6
Other current liabilities 6.8 28.9
---------- ----------
Total current liabilities 880.8 859.5
Postretirement and postemployment benefits other than pensions $ 128.1 $ 138.7
Unearned revenues 134.8 54.1
Long-term debt 918.0 9.8
Other noncurrent liabilities 169.1 159.0
---------- ----------
Total liabilities 2,230.8 1,221.1
Capital stock 25.5 29.6
Paid-in-capital 224.6 226.1
Retained earnings 1,261.2 1,191.3
Accumulated other comprehensive loss (89.7) (84.6)
Treasury stock, at cost (949.7) (902.6)
---------- ----------
Total stockholder's equity 471.9 459.8
---------- ----------
Total liabilities and stockholder's equity $ 2,702.7 $ 1,680.9
========== ==========
(A) During the first quarter of fiscal 2002, we changed our method of accounting for inventories in the United
States, from the last-in, first-out (LIFO) method to the first-in, first-out (FIFO) method. Accordingly, the
balance sheet as of June 30, 2001, has been restated.