UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002;
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO
__________.
COMMISSION FILE NUMBER: 0-20728
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RIMAGE CORPORATION
-----------------------------------
(Exact name of Registrant as specified in its charter)
Minnesota 41-1577970
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
7725 Washington Avenue South, Edina, MN 55439
---------------------------------------------
(Address of principal executive offices)
952-944-8144
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(Registrant's telephone number, including area code)
NA
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(Former name, former address, and
former fiscal year, if changed since last report.)
Common Stock outstanding at October 29, 2002 - 8,713,111 shares
of $.01 par value Common Stock.
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes _X_ No ___
RIMAGE CORPORATION
FORM 10-Q
TABLE OF CONTENTS
FOR THE QUARTER ENDED SEPTEMBER 30, 2002
Description Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
(unaudited) as of September 30, 2002 and
December 31, 2001.................................... 3
Consolidated Statements of Operations
(unaudited) for the Three and Nine Months
Ended September 30, 2002 and 2001.................... 4
Consolidated Statements of Cash Flows
(unaudited) for the Three and Nine Months
Ended September 30, 2002 and 2001.................... 5
Condensed Notes to Consolidated
Financial Statements (unaudited)..................... 6-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations........ 8-10
Item 3. Quantitative and Qualitative Disclosures about
Market Risk.......................................... 10
Item 4. Controls and Procedures................................. 11
PART II OTHER INFORMATION.......................................... 12
Item 1-5. None
Item 6. Exhibits
SIGNATURES.............................................................. 13
CERTIFICATION........................................................... 14
2
RIMAGE CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
September 30, 2002 and December 31, 2001
(Unaudited)
September 30, December 31,
Assets 2002 2001
- --------------------------------------------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 10,549,274 $ 14,767,126
Marketable securities 23,536,536 13,343,138
Trade accounts receivable, net of allowance for doubtful accounts
and sales returns of $680,000 and $715,000, respectively 7,098,724 5,008,176
Inventories 2,965,597 3,624,701
Prepaid expenses and other current assets 269,331 211,941
Prepaid income taxes -- 764,523
Deferred income taxes-current 1,063,108 1,063,108
- --------------------------------------------------------------------------------------------------------
Total current assets 45,482,570 38,782,713
Property and equipment, net 1,373,189 1,608,197
Deferred income taxes-noncurrent 57,468 57,468
Other noncurrent assets 3,537 6,004
- --------------------------------------------------------------------------------------------------------
Total assets $ 46,916,764 $ 40,454,382
========================================================================================================
Liabilities and Stockholders' Equity
- --------------------------------------------------------------------------------------------------------
Current liabilities:
Trade accounts payable $ 2,365,302 $ 2,102,178
Accrued compensation 1,396,842 1,054,572
Accrued other 982,804 962,379
Income tax payable 490,945 --
Deferred income and customer deposits 1,297,860 1,031,862
- --------------------------------------------------------------------------------------------------------
Total current liabilities 6,533,753 5,150,991
Long-term liabilities -- 68,750
- --------------------------------------------------------------------------------------------------------
Total liabilities $ 6,533,753 $ 5,219,741
Stockholders' equity:
Common stock, $.01 par value, authorized 30,000,000 shares,
issued and outstanding 8,713,111 and 8,635,537, respectively 87,131 86,355
Additional paid-in capital 16,114,392 15,779,533
Retained earnings 24,484,503 19,670,369
Accumulated other comprehensive loss (303,015) (301,616)
- --------------------------------------------------------------------------------------------------------
Total stockholders' equity 40,383,011 35,234,641
- --------------------------------------------------------------------------------------------------------
Commitments and contingencies
Total liabilities and stockholders' equity $ 46,916,764 $ 40,454,382
========================================================================================================
See accompanying condensed notes to consolidated financial statements
3
RIMAGE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
- -----------------------------------------------------------------------------------------------------------
Revenues $ 12,555,084 $ 10,296,163 $ 34,750,982 $ 29,496,278
Cost of revenues 6,406,799 5,373,514 17,748,763 14,765,140
- -----------------------------------------------------------------------------------------------------------
Gross profit 6,148,285 4,922,649 17,002,219 14,731,138
- -----------------------------------------------------------------------------------------------------------
Operating expenses:
Research and development 851,679 741,288 2,741,926 3,090,469
Selling, general and administrative 2,502,621 2,421,806 7,303,888 7,078,926
- -----------------------------------------------------------------------------------------------------------
Total operating expenses 3,354,300 3,163,094 10,045,814 10,169,395
- -----------------------------------------------------------------------------------------------------------
Operating income 2,793,985 1,759,555 6,956,405 4,561,743
- -----------------------------------------------------------------------------------------------------------
Other income (expense):
Interest 189,330 253,384 625,152 876,913
Gain (loss) on currency exchange (29,023) 197,113 (7,865) (76,429)
Other, net 4,931 4,404 7,622 (1,984)
- -----------------------------------------------------------------------------------------------------------
Total other income, net 165,238 454,901 624,909 798,500
- -----------------------------------------------------------------------------------------------------------
Income before income taxes 2,959,223 2,214,456 7,581,314 5,360,243
Income taxes 1,080,117 819,349 2,767,180 1,983,290
- -----------------------------------------------------------------------------------------------------------
Net income $ 1,879,106 $ 1,395,107 $ 4,814,134 $ 3,376,953
===========================================================================================================
Net income per basic share $ 0.22 $ 0.16 $ 0.55 $ 0.39
===========================================================================================================
Net income per diluted share $ 0.20 $ 0.15 $ 0.51 $ 0.35
===========================================================================================================
Basic weighted average shares outstanding 8,712,285 8,734,692 8,698,020 8,720,018
===========================================================================================================
Diluted weighted average shares and
assumed conversion shares 9,521,289 9,478,563 9,495,190 9,535,091
===========================================================================================================
See accompanying condensed notes to the consolidated financial statements
4
Nine months ended
September 30,
2002 2001
- ---------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 4,814,134 $ 3,376,953
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 576,363 417,256
Provision for excess and obsolete inventories 370,172 175,000
Provision for doubtful accounts 48,562 52,134
Gain on sale of property and equipment 1,622 22,434
Changes in operating assets and liabilities:
Trade accounts receivable (2,139,110) 2,956,956
Inventories 288,932 (923,214)
Prepaid income taxes 764,523 916,404
Prepaid expenses and other current assets (57,390) 4,357
Trade accounts payable 263,124 194,230
Accrued compensation 301,288 (50,193)
Accrued other 61,407 507,962
Income taxes payable 490,945 --
Other current liabilities -- 29,717
Deferred income and customer deposits 265,998 (49,532)
- ---------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 6,050,570 7,630,464
- ---------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of marketable securities (10,193,398) (9,741,150)
Purchase of property and equipment (340,510) (1,438,709)
Other noncurrent assets (64,172) 49,180
- ---------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (10,598,080) (11,130,679)
- ---------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from stock option and warrant exercises 335,635 198,338
Cash payments for stock buyback -- (552,785)
Other noncurrent liabilities (68,750) 137,500
- ---------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities 266,885 (216,947)
- ---------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash 62,773 (18,113)
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (4,217,852) (3,735,275)
Cash and cash equivalents, beginning of period 14,767,126 21,225,452
- ---------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 10,549,274 $ 17,490,177
===============================================================================================================
Supplemental disclosures of net cash paid during the period for-
Income taxes $ 1,394,381 $ 1,003,690
============ ============
See accompanying condensed notes to the consolidated financial statements
5
RIMAGE CORPORATION AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(1) BASIS OF PRESENTATION AND NATURE OF BUSINESS
Rimage Corporation (the Company) develops, manufactures and
distributes high performance CD-Recordable (CD-R) and
DVD-Recordable (DVD-R) publishing and duplication systems.
The accompanying unaudited consolidated financial statements of the
Company have been prepared pursuant to the rules of the
Securities and Exchange Commission. These financial statements
should be read in conjunction with the more detailed financial
statements and notes thereto included in the Company's most
recent annual report on Form 10-K.
The Company extends unsecured credit to its customers as well as
credit to a limited number of authorized distributor wholesalers,
who in turn provide warehousing, distribution, and credit to a
network of authorized value added resellers. These distributors
and value added resellers sell and service a variety of hardware
and software products.
In the opinion of management, the accompanying consolidated financial
statements reflect all adjustments, consisting of only normal
recurring adjustments, necessary for a fair presentation of the
financial position and results of operations and cash flows of
the Company for the periods presented. Certain previously
reported amounts have been reclassified to conform with the
current presentation.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ
from those estimates.
(2) INVENTORIES
Inventories consist of the following as of:
September 30, December 31,
2002 2001
--------------------------------------------------------------------
Finished goods and demonstration equipment $ 901,249 $1,179,963
Work-in-process 474,144 379,215
Purchased parts and subassemblies 1,590,204 2,065,523
--------------------------------------------------------------------
$2,965,597 $3,624,701
====================================================================
(Continued)
6
(3) COMPREHENSIVE INCOME
Comprehensive income is defined as the change in equity of a business
during a period from transactions and other events from sources
other than from shareholders. The components of and changes in
other comprehensive income (loss) are as follows (in 000's):
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ---------------------
2002 2001 2002 2001
------- ------- ------- -------
Net income $ 1,879 $ 1,395 $ 4,814 $ 3,377
Other comprehensive income (loss):
Foreign currency translation adjustment (10) 44 90 (33)
Net unrealized gains (losses) on securities (19) 64 (91) 64
------- ------- ------- -------
Total comprehensive income $ 1,850 $ 1,503 $ 4,813 $ 3,408
======= ======= ======= =======
(4) FOREIGN CURRENCY CONTRACTS
The Company enters into forward foreign exchange contracts to hedge
inter-company receivables denominated in Euros arising from
sales to its subsidiary in Germany. Gains or losses on forward
foreign exchange contracts are recognized in net earnings on a
current basis over the term of the contracts.
As of September 30, 2002, the Company had thirty-nine outstanding
foreign currency contracts totaling $2,774,000. These contracts
mature in 2002 and 2003 and bear rates between .9076 and 1.0002
U.S. Dollars per Euro. As of September 30, 2002, the fair value
of foreign currency contracts is $66,000 and is recorded in
other current liabilities.
(Continued)
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following table sets forth, for the periods indicated, selected
items from the Company's consolidated statements of operations.
- ---------------------------------------------------------------------------- -------------------------------------------
Percent (%) Percent (%) Percent (%) Percent (%)
of Revenues Incr/(Decr) of Revenues Incr/(Decr)
Three Months Ended Between Nine Months Ended Between
September 30, Periods September 30, Periods
- ---------------------------------------------------------------------------- -------------------------------------------
2002 2001 2002 vs. 2001 2002 2001 2002 vs. 2001
- ---------------------------------------------------------------------------- -------------------------------------------
Revenues 100.0 100.0 21.9 100.0 100.0 17.8
Cost of revenues (51.0) (52.2) 19.2 (51.1) (50.0) 20.2
- ---------------------------------------------------------------------------- -------------------------------------------
Gross profit 49.0 47.8 24.9 48.9 50.0 15.4
Operating expenses:
Research and development (6.8) (7.2) 14.9 (7.9) (10.5) (11.3)
Selling, general and admin (19.9) (23.5) 3.3 (21.0) (24.0) 3.2
- ---------------------------------------------------------------------------- -------------------------------------------
Operating income 22.3 17.1 58.8 20.0 15.5 52.5
Other income, net 1.3 4.4 (63.7) 1.8 2.7 (21.7)
- ---------------------------------------------------------------------------- -------------------------------------------
Income before income taxes 23.6 21.5 33.6 21.8 18.2 41.4
Income tax expense (8.6) (8.0) 31.8 (7.9) (6.7) 39.5
- ---------------------------------------------------------------------------- -------------------------------------------
Net income 15.0 13.5 34.7 13.9 11.5 42.6
============================================================================ ===========================================
RESULTS OF OPERATIONS
REVENUES. Revenues increased 21.9% to $12.6 million for the three-month period
ended September 30, 2002 from $10.3 million for the same prior-year period. The
increase in revenues was primarily due to strong U.S. and European channel sales
and an increased demand for DVD-R publishing systems. Revenues increased 17.8%
to $34.8 million for the nine-month period ended September 30, 2002 from $29.5
million for the same prior-year period. The increase in revenues was primarily
due to the increase in sales within the photography industry, an increase in
U.S. and European channel sales and the positive impact of a strengthened Euro
on our European operations.
As of and for the nine months ended September 30, 2002, foreign revenues from
unaffiliated customers, operating income, and net identifiable assets were
$10,050,000, $342,000 and $4,014,000, respectively. As of and for the nine
months ended September 30, 2001, foreign revenues from unaffiliated customers,
operating earnings, and net identifiable assets were $9,218,000, $6,000 and
$3,633,000, respectively. The growth is due to increasing penetration in the
foreign markets of sales of CD-R and DVD-R products.
8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
GROSS PROFIT. Gross profit as a percent of revenues was 49.0% and 48.9% for the
three- and nine- month periods ended September 30, 2002, respectively, compared
to 47.8% and 50.0% for the same prior-year periods. The decrease in gross profit
as a percent of revenues during the nine-month period ended September 30, 2002
was primarily due to the increased sales of Desktop CD/DVD publishing systems
which carry a lower margin than our Producer Line of Products and increased
depreciation during the year 2002 related to tooling for the Everest color
printer.
OPERATING EXPENSES. Operating expenses during the three- and nine-month periods
ended September 30, 2002 were $3.4 million or 26.7% of revenues and $10.0
million or 28.9% of revenues, respectively compared to $3.2 million or 30.7% of
revenues and $10.2 million or 34.5% of revenues during the same prior year
periods. The increase during the three-month period ended September 30, 2002 was
primarily a result of an increase in research and development expenses due to
enhancements made to our Everest printer. The decrease in percent during the
nine-month period ended September 30, 2002 was primarily a result of the
increased sales volume and lower overall research and development expenses
associated with current projects. Research and development expense during the
three- and nine-month periods ended September 30, 2002 were $852,000 or 6.8% of
revenues and $2.7 million or 7.9% of revenues, respectively compared to $741,000
or 7.2% of revenues and $3.1 million or 10.5% of revenues during the same
periods of 2001.
OTHER INCOME/(EXPENSE). The Company recognized interest income on cash
investments of $189,000 and $625,000 during the three- and nine-month periods
ended September 30, 2002 compared to $253,000 and $877,000 during the same prior
year periods. Also included in other income, the Company recognized a
gain/(loss) on currency exchange of $(29,000) and $(8,000) during the three- and
nine-month periods ended September 30, 2002 compared to $197,000 and $(76,000)
during the same prior year periods.
INCOME BEFORE INCOME TAXES. Income before income taxes during the three- and
nine-month periods ended September 30, 2002 were $3.0 million or 23.6% of
revenues and $7.6 million or 21.8% of revenues, respectively compared to $2.2
million or 21.5% of revenues and $5.4 million or 18.2% of revenues during the
same prior year periods. The increase during the three-month period ended
September 30, 2002 was primarily due to increased U.S. and European channel
sales and increased demand for DVD-R publishing equipment. The increase during
the nine-month period ended September 30, 2002 is the result of the increased
sales into the wholesale photography market and increased U.S. and European
channel sales.
INCOME TAXES. The provision for income taxes represents federal, state, and
foreign income taxes on earnings before income taxes. Income tax expense for the
three- and nine-month periods ended September 30, 2002 amounted to $1.1 million
and $2.8 million, respectively or 36.5% of income before income taxes. The
Company anticipates an effective tax rate of 36.5% for the remainder of 2002.
Income tax expense for the three- and nine-month periods ended September 30,
2001 amounted to $819,000 and $2.0 million, respectively or 37% of income before
income taxes.
9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
The Company expects to fund its anticipated cash requirements (including the
anticipated cash requirements of its capital expenditures) with internally
generated funds and, if required, from the Company's existing credit agreement.
Current assets are $45.5 million as of September 30, 2002 compared to $38.8
million as of December 31, 2001. The allowance for doubtful accounts as a
percentage of receivables was 9% and 12% as of September 30, 2002 and December
31, 2001, respectively. This decrease in percentage is due to the timing of
sales in the quarter resulting in a higher accounts receivable balance as of
September 30, 2002. Current liabilities are $6.5 million as of September 30,
2002 compared to $5.2 million as of December 31, 2001. This increase primarily
reflects increased activity with our vendors.
Net cash provided by operating activities was $6.1 million and $7.6 million for
the nine months ended September 30, 2002 and 2001, respectively. This decrease
was primarily the result of timing of collection of trade accounts receivables.
Net cash used in investing activities was $6.4 million and $11.1 million for the
nine months ended September 30, 2002 and 2001, respectively. This decrease was
primarily due to increased purchases of marketable securities during the third
quarter 2001 compared to third quarter 2002 combined with payments made for
tooling associated with new products introduced during 2001. Net cash provided
by financing activities during the nine months ended September 30, 2002 was
$267,000. This amount primarily reflected proceeds from stock option and warrant
exercises. Net cash used in financing activities during the nine months ended
September 30, 2001 was $217,000. This amount primarily reflected payments to
purchase treasury stock, partially offset by proceeds from stock option and
warrant exercises.
The Company believes that inflation has not had a material impact on its
operations or liquidity to date.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has a policy of using forward exchange contracts to hedge net
exposures related to its foreign currency-denominated monetary assets and
liabilities. The primary objective of these hedging activities is to maintain an
approximately balanced position in foreign currencies so that exchange gains and
losses resulting from exchange rate changes, net of related tax effects, are
minimized. (See footnote 4.)
10
ITEM 4. CONTROLS AND PROCEDURES
Bernard P. Aldrich, the Company's Chief Executive Officer and Chief Financial
Officer, has reviewed the Company's disclosure controls and procedures within 90
days prior to the filing of this report. Based upon such review, Mr. Aldrich
believes the disclosure controls and procedures to be effective in ensuring that
material information is made known to him by others within the Company.
There were no significant changes in the Company's internal controls or in other
factors that could significantly affect these controls during the quarter
covered by this report or from the end of the reporting period to the date of
this Form 10-Q.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements that involve risks and
uncertainties. For this purpose, any statements contained in report that are not
statements of historical fact may be deemed to be forward-looking statements.
Without limiting the foregoing, words such as "may," "will," "expect,"
"believe," "anticipate," "estimate" or "continue" or comparable terminology are
intended to identify forward-looking statements. These statements by their
nature involve substantial risks and uncertainties. The Company's actual results
could differ significantly from those discussed in the forward-looking
statements. Factors that could cause or contribute to such differences include,
but are not limited to, changes in media or method used for distribution of
software, technological changes in products offered by the Company or its
competitors and changes in general conditions in the computer market, as well as
other factors not now identified. These forward-looking statements are made as
of the date of this report and the Company assumes no obligation to update such
forward-looking statements, or to update the reasons why actual results could
differ materially from those anticipated in such forward-looking statements.
11
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable.
Item 2. Change in Securities and Use of Proceeds
Not Applicable.
Item 3. Defaults Upon Senior Securities
Not Applicable.
Item 4. Submission of Matters to a Vote of Securities Holders
Not Applicable.
Item 5. Other Information
Not Applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are included herein:
11.1 Calculation of Earnings Per Share
99.1 Certificate pursuant to 18 U.S.C.ss.1350
(b) Reports on Form 8-K:
Not applicable.
12
SIGNATURES
----------
In accordance with the Exchange Act, this report has been signed below by
following persons on behalf of the registrant and on the dates indicated.
RIMAGE CORPORATION
------------------
Registrant
Date: November 12, 2002 By: /s/ Bernard P. Aldrich
----------------- ----------------------
Bernard P. Aldrich
Director, Chief Executive Officer,
and President
(Principal Executive Officer)
(Principal Financial Officer)
Date: November 12, 2002 By: /s/ Robert M. Wolf
----------------- ------------------
Robert M. Wolf
Treasurer
(Principal Accounting Officer)
13
CERTIFICATION
I, Bernard P. Aldrich, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Rimage Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. I am responsible for establishing and maintaining the disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and I have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. I have disclosed, based on my most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. I have indicated in this quarterly report whether or not there
were significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of my most recent
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: November 12, 2002 /s/ Bernard P. Aldrich
----------------- ----------------------
President, Chief
Executive Officer and
Chief Financial Officer
14