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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-22010
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THOMAS GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 72-0843540
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5221 NORTH O'CONNOR BOULEVARD
SUITE 500
IRVING, TX 75039-3714
(Address of principal executive offices, including zip code)
(972) 869-3400
(Registrant's telephone number, including area code)
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NONE
(Former name, former address and former fiscal year, if changed since last
report)
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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 / /
As of May 2, 2000 the following number of shares of the registrant's stock
were outstanding:
Common stock................................................ 4,681,859
Class B common stock........................................ 3,970
---------
Total..................................................... 4,685,829
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THOMAS GROUP, INC.
PAGE NO.
--------
PART I--FINANCIAL INFORMATION
Item 1--Financial Statements (unaudited)
Consolidated Balance Sheets, March 31, 2000 and 3
December 31, 1999....................................
Consolidated Statements of Operations for the Three 4
Months Ended March 31, 2000 and 1999.................
Consolidated Statements of Cash Flows for the Three 5
Months Ended March 31, 2000 and 1999.................
Notes to Consolidated Financial Statements............ 6
Item 2--Management's Discussion and Analysis of Financial 9
Condition and Results of Operations.......................
PART II--OTHER INFORMATION
Item 6--Exhibits and Reports on Form 8-K.................... 13
2
ITEM 1--FINANCIAL STATEMENTS
THOMAS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
MARCH 31, DECEMBER 31,
2000 1999
--------- ------------
ASSETS
Current Assets
Cash and cash equivalents................................. $ 9,482 $ 9,698
Trade accounts receivable, net of allowances of $1,096 and
$546 in 2000 and 1999, respectively..................... 9,860 11,481
Unbilled receivables...................................... 1,152 200
Deferred tax asset........................................ 3,252 3,252
Other assets.............................................. 1,778 1,317
-------- --------
Total Current Assets.................................... 25,524 25,948
-------- --------
Property and equipment, net................................. 2,571 2,430
Deferred tax asset.......................................... 1,401 1,401
Other assets................................................ 3,097 3,086
-------- --------
$ 32,593 $ 32,865
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities.................. $ 4,373 $ 4,679
Income taxes payable...................................... 722 1,014
Advance payments.......................................... 35 74
Current maturities of long-term obligations............... 735 822
-------- --------
Total Current Liabilities............................... 5,865 6,589
Long-term obligations....................................... 3,516 3,422
-------- --------
Total Liabilities....................................... 9,381 10,011
-------- --------
Commitments and Contingencies
Stockholders' Equity
Common stock, $.01 par value; 25,000,000 shares authorized;
6,629,919 and 6,603,064 shares issued and 4,741,220 and
4,755,065 shares outstanding in 2000 and 1999,
respectively.............................................. 66 66
Class B common stock, $.01 par value; 1,200,000 shares
authorized; 3,970 shares issued and outstanding in 2000
and 1999, respectively.................................... -- --
Additional paid-in capital.................................. 23,988 23,658
Retained earnings........................................... 18,234 17,468
Accumulated other comprehensive loss........................ (1,491) (1,182)
Treasury stock, 1,888,699 and 1,847,999 shares in 2000 and
1999, respectively........................................ (17,585) (17,156)
-------- --------
Total Stockholders' Equity................................ 23,212 22,854
-------- --------
$ 32,593 $ 32,865
======== ========
See accompanying notes to consolidated financial statements.
3
THOMAS GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
---------------------
2000 1999
--------- ---------
Revenue..................................................... $ 16,275 $ 14,710
Cost of sales............................................... 8,906 8,859
--------- ---------
Gross profit................................................ 7,369 5,851
Selling, general and administrative......................... 6,145 4,577
--------- ---------
Operating income............................................ 1,224 1,274
Interest income, net........................................ 53 37
--------- ---------
Income before income taxes.................................. 1,277 1,311
Income taxes.............................................. 511 524
--------- ---------
Net Income.................................................. $ 766 $ 787
========= =========
Earnings per common share:
Basic....................................................... $ .16 $ .16
========= =========
Diluted..................................................... $ .16 $ .15
========= =========
Weighted average shares:
Basic....................................................... 4,762,895 5,003,797
Diluted..................................................... 4,898,001 5,083,908
See accompanying notes to consolidated financial statements.
4
THOMAS GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS
ENDED
MARCH 31,
-------------------
2000 1999
-------- --------
Cash Flows From Operating Activities:
Net income................................................ $ 766 $ 787
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation.......................................... 370 388
Amortization.......................................... 92 85
Allowance for doubtful accounts....................... 550 --
Deferred taxes........................................ -- 2,159
Amortization of stock option grants................... 73 73
Other................................................. (278) (10)
Change in operating assets and liabilities
(Increase) decrease in trade accounts receivable.... 476 2,192
(Increase) decrease in income tax receivable........ -- (1,427)
(Increase) decrease in unbilled receivables......... (731) 198
(Increase) decrease in other assets................. (447) 312
Increase (decrease) in accounts payable and accrued
liabilities....................................... (382) (314)
Increase (decrease) in advance payments............. 206 (377)
Increase (decrease) in income taxes payable......... (211) (619)
------- -------
Net Cash Provided By Operating Activities......... 484 3,447
Cash Flows From Investing Activities:
Capital expenditures.................................... (604) (151)
------- -------
Net Cash Used In Investing Activities............. (604) (151)
Cash Flows From Financing Activities:
Purchase of treasury stock.............................. (429) (92)
Proceeds from exercise of stock options................. 119 78
Other long-term obligations............................. 7 (17)
Advances--line of credit................................ 3,755 --
Repayment--line of credit............................... (3,707) --
------- -------
Net Cash Used In Financing Activities............. (255) (31)
Effect of Exchange Rate Changes on Cash..................... 159 (218)
------- -------
Net increase (decrease) in cash and cash equivalents........ (216) 3,047
Cash and Cash Equivalents:
Beginning of period..................................... 9,698 6,376
------- -------
End of period........................................... $ 9,482 $ 9,423
======= =======
See accompanying notes to consolidated financial statements.
5
THOMAS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The unaudited consolidated financial statements of Thomas Group, Inc.
(the "Company") include all adjustments, which include only normal recurring
adjustments, which are, in the opinion of management, necessary to present
fairly the results of operations of the Company for the interim periods
presented. The unaudited financial statements should be read in conjunction with
the consolidated financial statements and notes thereto in the Company's 1999
Annual Report to Stockholders. The results of operations for the three month
period ended March 31, 2000 are not necessarily indicative of the results of
operations for the entire year ending December 31, 2000.
2. EARNINGS PER SHARE--Basic earnings per share is based on the number of
weighted average shares outstanding. Diluted earnings per share includes the
effect of dilutive securities such as stock options and warrants. The following
table reconciles basic earnings per share to diluted earnings per share under
the provisions of Statement of Financial Accounting Standards No. 128, "Earnings
Per Share."
THREE MONTHS ENDED
MARCH 31,
--------------------
2000 1999
-------- --------
(IN THOUSANDS,
EXCEPT PER SHARE
DATA)
NUMERATOR:
Net income.............................................. $ 766 $ 787
====== ======
DENOMINATOR
Weighted average shares outstanding:
Basic................................................. 4,763 5,004
Effect of dilutive securities:
Common stock options.............................. 135 80
------ ------
Diluted............................................... 4,898 5,084
====== ======
EARNINGS PER SHARE:
Basic................................................... $ 0.16 $ 0.16
Diluted................................................. $ 0.16 $ 0.15
3. DEFERRED TAXES--At March 31, 2000 the Company's net deferred tax asset
was $4.7 million. Utilization of the net deferred tax asset is dependent on
future taxable income in excess of profits arising from existing taxable
temporary differences. A net deferred tax asset has been recognized because
management believes it is more likely than not that the net deferred tax asset
will be utilized in future years. This conclusion is based on the belief that
current and future levels of U.S. and foreign source taxable income will be
sufficient to realize the benefits of the net deferred tax asset.
4. SIGNIFICANT CLIENTS--The Company recorded revenue from one client of
$3.7 million or 22.8% of total revenue during the three months ended March 31,
2000. Revenues from a second client totaled $3.2 million or 19.4% of total
revenue and $5.6 million or 37.8% of total revenue for the three months ended
March 31, 2000 and 1999, respectively. Revenues from a third client totaled
$2.3 million or 13.8% of total revenue during the three months ended March 31,
2000. There was no other client from which revenue exceeded 10% of total revenue
in the three month periods ended March 31, 2000 and 1999, respectively.
6
THOMAS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
5. COMPREHENSIVE INCOME--Comprehensive income includes all changes in
equity (foreign currency translation) except those resulting from investments by
owners and distributions to owners.
THREE MONTHS
ENDED MARCH 31,
--------------------
2000 1999
-------- --------
(IN THOUSANDS OF
DOLLARS)
Net income.................................................. $ 766 $ 787
Other comprehensive loss.................................... (309) (218)
----- -----
Comprehensive income........................................ $ 457 $ 569
===== =====
6. REVOLVING CREDIT AGREEMENT--The Company previously maintained a
$20 million revolving credit agreement with Comerica Bank. Terms of the
agreement provided for a $1 million per quarter reduction in available credit
beginning in 1999. In April 1999 the Company amended the agreement to reduce the
maximum available borrowings to $15 million with no quarterly reduction. The
agreement is in place to provide funding for potential future operating cash
requirements or business expansion purposes. Loans under this agreement bear
interest at the prime rate or other similar interest options. At March 31, 2000
the Company had approximately $0.2 million outstanding on this agreement. The
Company utilized the credit line during the first quarter of 2000 to meet
working capital requirements when transferring funds between subsidiaries was
not efficient.
7. LITIGATION--The Company is subject to various claims and other legal
matters, described below, in the course of conducting its business. The Company
believes that neither such claims and other legal matters nor the cost of
prosecuting and/or defending such claims and other legal matters will have a
material adverse effect on the Company's consolidated results of operations,
financial condition or cash flows.
The Company is party to a legal action styled Philip R. Thomas and Wayne
Heirtzler Thomas v. Thomas Group, Inc., before the U.S. District Court, Middle
District of Louisiana, consolidated with another action styled Thomas Group of
Louisiana, Inc. v. Philip R. Thomas and Wayne Heirtzler Thomas. Mr. and
Mrs. Thomas sought to "enforce leases" and seized, under a writ of
sequestration, movable assets at the Company's CEO Center in Louisiana. The
second suit was filed against Mr. and Mrs. Thomas by a subsidiary of the
Company, seeking to dissolve the writ of sequestration and asserting a claim for
damages. A hearing was held on the motions of the Company and its subsidiary to
dissolve the writ of sequestration, and the court has lifted the sequestration
order. The Company has amended its complaint in this action to seek a
declaratory judgment from the Federal Court that the Company is not in default
under any of the leases relating to the Louisiana property.
The Company is party to an arbitration proceeding with the former Chairman
and CEO of the Company, styled Thomas Group, Inc. v. Philip Thomas. The Company
timely paid Mr. Thomas all benefits due him under his written employment
agreement, including a $1.8 million severance payment and full vesting of
375,000 stock options, yet Mr. Thomas has demanded additional compensation and
retirement benefits. Consequently, on December 18, 1998 the Company initiated
this proceeding before the American Arbitration Association in Dallas, Texas
pursuant to an arbitration clause in Mr. Thomas' employment agreement. In this
proceeding Mr. Thomas has asserted claims for actual damages of $9 million to
$11 million, plus damages for emotional distress and exemplary damages. The
Company believes Mr. Thomas' claims have no merit, and is seeking a
determination that Mr. Thomas is owed nothing
7
THOMAS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
further as a result of his former employment relationship with the Company. The
arbitration hearing was held the week of February 21, 2000. A ruling is expected
on or about June 1, 2000.
In the case of Thomas Group, Inc. v. Blevins, et al., filed May 19, 1997 in
the U.S. District Court for the Northern District of Texas, consolidated with
the case styled Blevins, et al. v. Thomas Group, Inc., et al., filed June 9,
1997 in the U.S. District Court for the Northern District of Ohio, each party
asserted claims arising out of the purchase agreement and consulting agreement
in connection with the Company's purchase of Interlink Technologies. In
connection with a settlement reached on October 26, 1999, the Company recorded
an additional $2.0 million after tax charge to discontinued operations. The
settlement agreement also stipulates that the Company make $0.6 million payments
in December 2000 and December 2001.
The Company is party to an arbitration proceeding with Overhead Door
Corporation ("ODC"), a former client, before the American Arbitration
Association in Dallas, Texas. The Company initiated this proceeding
December 18, 1998 to collect unpaid fees in the amount of $1,050,000. ODC had
terminated an engagement with the Company and failed to pay the full amount of
the fees under that engagement, requiring the Company to request arbitration.
ODC has moved for summary judgment in the proceeding, and that motion has been
granted. The Company has moved for reconsideration of that ruling, and the panel
will reconsider its ruling following oral argument on the motion for
reconsideration.
8. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
THREE MONTHS
ENDED
MARCH 31,
--------------------
2000 1999
-------- --------
Interest paid............................................... $ 19 $ 13
Taxes paid.................................................. $479 $116
8
ITEM 2-- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The Company derives the majority of its revenue from monthly fixed and
incentive fees for the implementation of TOTAL CYCLE TIME and other business
improvement programs. Incentive fees are tied to improvements in a variety of
client performance measures typically involving response time, asset
utilization, productivity and profitability. Due to the Company's use of
incentive fee contracts, variations in revenue levels may cause fluctuations in
quarterly results. Factors such as a client's commitment to a TOTAL CYCLE TIME
program, general economic and industry conditions, and other issues could affect
a client's business performance, thereby affecting the Company's incentive fee
revenue and quarterly earnings. Quarterly revenue and earnings of the Company
may also be impacted by the size and timing of starts and completions of
individual contracts.
The following table sets forth the percentages which items in the statement
of operations bear to revenue:
THREE MONTHS
ENDED MARCH 31,
--------------------
2000 1999
-------- --------
Revenue..................................................... 100.0% 100.0%
Cost of sales............................................... 54.7 60.2
----- -----
Gross profit................................................ 45.3 39.8
Selling, general and administrative......................... 37.8 31.1
----- -----
Operating income............................................ 7.5 8.7
Interest income, net........................................ 0.3 0.3
----- -----
Income before income taxes.................................. 7.8 9.0
Income taxes................................................ 3.1 3.6
----- -----
Net income.................................................. 4.7% 5.4%
===== =====
The following table sets forth the Company's revenue by geographic
distribution:
THREE MONTHS
ENDED MARCH 31,
-------------------
2000 1999
-------- --------
United States............................................. $ 9,095 $10,431
Europe.................................................... 5,885 2,867
Asia/Pacific.............................................. 1,295 1,412
------- -------
Total Revenue........................................... $16,275 $14,710
======= =======
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
REVENUE--Revenue increased $1.6 million or 11% in the first quarter of 2000
when compared to the first quarter of 1999. The primary reason for the increase
was revenue from fixed fee contracts increased $2.9 million, which was offset in
part by a decrease in incentive-based contracts of $1.4 million. Fixed fee
contracts accounted for 99.4% of revenue for the first quarter of 2000 and 90.1%
of revenue for the first quarter of 1999.
9
ITEM 2-- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Revenue relating to United States region operations decreased 12.8% due to
contract completions exceeding new contract start-ups. European region revenue
increased 105.3% due to revenues associated with a major contract which began
September 1, 1999. Asia/Pacific region revenue decreased 8.3% due to a slight
decrease in contracts when compared to the first quarter of 1999.
GROSS PROFIT--Gross profit was 45.3% of revenue in the first three months of
2000 compared to 39.8% of revenue in the first three months of 1999. The
improvement in gross profit is due to efficiencies related to the Company's
$1.6 million increase in revenue while maintaining relatively the same level of
cost of sales when compared to the same period in 1999.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES--Selling, general and
administrative expenses increased to $6.1 million from $4.6 million when
comparing the first quarter of 2000 to the first quarter of 1999, respectively.
The increase in selling, general and administrative expenses is due primarily to
increased sales and marketing costs relating to the Company's expansion into new
business practices. In addition, the Company recognized a $0.6 million charge
due to an adverse ruling relating to one of the Company's legal matters. (See
note 7 to the Consolidated Financial Statements of the Company.)
OTHER--The Company's effective tax rate was 40% in the first quarter of
2000, as compared to 40% in the first quarter of 1999.
As a result of restructuring charges and foreign tax credit carryovers, the
Company has a net deferred tax asset of $4.7 million at March 31, 2000.
Utilization of the net deferred tax asset is dependent on both U.S. and foreign
source taxable income. Management believes, based on the historical performance
of the Company, that current and future levels of U.S. and foreign source income
will more likely than not be realized in time to fully utilize the net deferred
tax asset.
RESULTS OF OPERATIONS--Net income in the first quarter of 2000 was
$0.8 million, or $0.16 per diluted share ($0.16 per basic share), compared to
net income of $0.8 million, or $0.15 per diluted share ($0.16 per basic share)
in the first quarter of 1999.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased by $0.2 million in the first three
months of 2000 compared to a $3.0 million increase in the first three months of
1999. The major components of these changes are discussed below:
CASH FLOWS FROM OPERATING ACTIVITIES--Operating activities provided cash of
$0.5 million in the first three months of 2000 compared to cash provided by
operations of $3.4 million in the first three months of 1999. This decrease is
attributable to higher levels of accounts receivable and other prepaid assets.
Days sales outstanding in accounts receivable was 58 days at March 31, 2000
compared to 55 days at December 31, 1999.
CASH FLOWS USED IN INVESTING ACTIVITIES--Cash flows used in investing
activities totaled $0.6 million in the first three months of 2000 and were
attributable to computer software, office and miscellaneous equipment. Capital
expenditures for the comparable period of the prior year were primarily for the
purchase of office and miscellaneous equipment.
CASH FLOWS USED IN FINANCING ACTIVITIES--Cash flows used in financing
activities were $0.3 million compared to $31,000 when comparing the first
quarter of 2000 to the first quarter of 1999, respectively. The primary reason
for the use of cash was the purchase of treasury stock.
10
ITEM 2-- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
In January and October of 1999, the Company announced two stock repurchase
plans for up to 250,000 and 500,000 shares, respectively. During 1999, the
Company purchased 289,150 shares at an average price of $8.38 per share. Through
May 3, 2000, the Company had purchased 122,700 additional shares at an average
price of $10.75 per share.
The Company previously maintained a $20 million revolving credit agreement.
Terms of the agreement provided for a $1 million per quarter reduction in
available credit beginning in the first quarter of 1999. In April 1999, the
revolving credit agreement was amended to reduce the maximum allowable
borrowings to $15 million with no quarterly reduction. Loans under this
agreement bear interest at the prime rate or other similar interest options. At
March 31, 2000 the Company had approximately $0.2 million outstanding on this
agreement. The agreement is in place to provide funding for potential future
operating cash requirements or business expansion purposes.
The Company also has a $1 million credit facility for the purchase of
computer equipment. The Company made draws of $0.9 million on this facility
during 1997 to purchase computer equipment. Loans under this facility bear
interest at 7.25%. At March 31, 2000 the Company had approximately $0.2 million
outstanding on this credit facility.
FINANCIAL CONDITION
The Company believes that its financial condition remains strong and that it
has the financial resources necessary to meet its needs. Cash provided by
operating activities and the Company's credit facility should be sufficient to
meet short and long-term operational needs.
YEAR 2000 ISSUES
The Company did not experience any significant malfunctions or errors in its
operating or business systems as a result of the Year 2000. Based on operations
since January 1, 2000, the Company does not expect any significant impact to its
ongoing business as a result of the Year 2000. It is possible the full impact of
the date change has not been fully recognized. However, the Company believes any
such problems are likely to be minor and correctable. In addition, the Company
could still be negatively affected if its customers or suppliers are adversely
affected by the Year 2000 or similar issues. The Company currently is not aware
of any significant Year 2000 or similar problems that have arisen for its
customers and suppliers.
As of March 31, 2000, the Company has not, nor does it expect to, incur any
material costs associated with the Year 2000.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT:
With the exception of historical information, the matters discussed in this
report are "forward looking statements" as that term is defined in Section 21E
of the Securities Exchange Act of 1934.
While the Company believes that its strategic plan is on target and its
business outlook remains strong, several important factors have been identified,
which could cause actual results to differ materially from those predicted,
included by way of example:
- The competitive nature of the management consulting industry, in light of
new entrants into the industry and the difficulty of differentiating the
services offered to potential clients.
- The time required by prospective clients to fully understand the value and
complexity of a typical Total Cycle Time (TCT) program may result in an
extended lead time to close new business.
11
ITEM 2-- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
- Performance-oriented fees are earned upon the achievement of improvements
in a client's business. The client's commitment to a TCT program and
general economic/industry conditions could impact a client's business
performance and consequently the Company's ability to forecast the timing
and ultimate realization of performance-oriented fees.
- The ability of the Company to productively re-deploy personnel during
program transition periods.
- The ability of the Company to create alliances and make acquisitions that
are accretive to earnings.
12
THOMAS GROUP, INC.
PART II--OTHER INFORMATION
Item 6--Exhibits and Reports on Form 8-K
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K for the Quarter Ending March 31, 2000:
None
13
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.
THOMAS GROUP, INC.
------------------
Registrant
Date May 15, 2000 /s/ J. THOMAS WILLIAMS
------------------------------- --------------------------------------------------
J. Thomas Williams
President and Chief Executive Officer
Date May 15, 2000 /s/ LELAND L. GRUBB, JR.
------------------------------- --------------------------------------------------
Leland L. Grubb, Jr.
Vice President, Chief Financial Officer and
Treasurer
(Principal Financial and Accounting Officer)
14