SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2003
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 33-46620
FORTIS BENEFITS INSURANCE COMPANY
(Exact name of registrant as specified in its charter)
MINNESOTA
(State or other jurisdiction of
incorporation or organization)
81-0170040
(IRS Identification No.)
576 BIELENBERG DRIVE, WOODBURY, MN 55125
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: 651-361-4000
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
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act). Yes No X
FORTIS BENEFITS INSURANCE COMPANY
BALANCE SHEETS
(In thousands, except share data)
- --------------------------------------------------------------------------------
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<Table>
<Caption>
MARCH 31, DECEMBER 31,
2003 2002
----------- --------------
(UNAUDITED)
ASSETS
Investments:
Fixed maturities, at fair value (amortized cost 2003 - $3,056,046;
2002 - $2,884,670 $ 3,253,722 $ 3,044,689
Equity securities, at fair value (cost 2002 - $167,241;
2002 - $108,002) 168,760 102,214
Mortgage loans on real estate, less allowance for possible losses
(2003-- $12,955, 2002--$13,228) 584,317 578,517
Policy loans 10,352 10,301
Short-term investments 116,466 282,383
Real estate and other investments 63,466 62,248
----------- --------------
4,197,083 4,080,352
Cash and cash equivalents 7,255 9,660
Receivables:
Uncollected premiums 61,943 62,480
Reinsurance recoverable on unpaid and paid losses 1,151,021 1,151,186
Other 23,736 16,183
----------- --------------
1,236,700 1,229,849
Accrued investment income 51,932 45,584
Deferred policy acquisition costs 128,695 123,813
Property and equipment at cost, less accumulated depreciation 3,478 3,796
Federal income tax recoverable 5,068 8,258
Deferred federal income taxes 102,900 125,317
Other assets 7,560 7,746
Identifiable intangible assets, less accumulated amortization (2003 - $1,751; 25,749 27,400
2002 - $1,400)
Goodwill 156,006 156,006
Assets held in separate accounts 3,676,204 3,126,978
----------- --------------
Total assets $ 9,598,630 $ 8,944,759
=========== ==============
</Table>
The accompanying notes are an integral part of the financial statements.
2
FORTIS BENEFITS INSURANCE COMPANY
BALANCE SHEETS
(In thousands, except share data)
- --------------------------------------------------------------------------------
<Table>
<Caption>
MARCH 31, DECEMBER 31,
2003 2002
----------- --------------
(UNAUDITED)
POLICY RESERVES AND LIABILITIES AND SHAREHOLDER'S EQUITY
Policy reserves and liabilities:
Future policy benefit reserves:
Traditional and pre-need life insurance $ 1,909,076 $ 1,881,137
Interest sensitive and investment products 1,036,017 1,020,724
Accident and health 1,303,392 1,264,565
----------- --------------
4,248,485 4,166,426
Unearned revenues 50,561 50,145
Other policy claims and benefits payable 243,829 257,880
Policyholder dividends payable 1,856 1,876
----------- --------------
4,544,731 4,476,327
Accrued expenses 87,335 96,099
Other liabilities 107,270 99,120
Deferred gain on reinsurance ceded 292,864 308,167
Due to affiliates 5,807 3,842
Liabilities related to separate accounts 3,676,204 3,126,978
----------- --------------
Total policy reserves and liabilities 8,714,211 8,110,533
----------- --------------
Shareholder's equity:
Common stock, $5 par value: authorized, issued and outstanding
shares - 1,000,000 5,000 5,000
Additional paid-in capital 516,570 516,570
Retained earnings 228,981 211,459
Accumulated other comprehensive income 133,868 101,197
----------- --------------
Total shareholder's equity 884,419 834,226
----------- --------------
Total policy reserves and liabilities and shareholder's equity $ 9,598,630 $ 8,944,759
=========== ==============
</Table>
The accompanying notes are an integral part of the financial statements.
3
FORTIS BENEFITS INSURANCE COMPANY
STATEMENTS OF INCOME
(In thousands)
- --------------------------------------------------------------------------------
<Table>
<Caption>
THREE MONTHS ENDED MARCH 31,
2003 2002
------------ ------------
(UNAUDITED) (UNAUDITED)
Revenues:
Insurance operations:
Traditional and pre-need life insurance premiums $ 122,777 $ 128,459
Interest sensitive and investment product
policy charges 441 648
Accident and health insurance premiums 307,830 289,726
------------ ------------
431,048 418,833
Net investment income 62,099 66,018
Net realized (losses) gains on investments (4,557) 454
Amortization of gain on reinsured business 15,303 15,478
Other income 2,939 2,950
------------ ------------
Total revenues 506,832 503,733
Benefits and expenses:
Benefits to policyholders:
Traditional and pre-need life insurance 116,718 117,059
Interest sensitive investment products 387 1,892
Accident and health claims 226,309 221,693
------------ ------------
343,414 340,644
Policyholder dividends 54 69
Amortization of deferred policy acquisition costs 12,925 10,210
Insurance commissions 39,801 34,833
General and administrative expenses 82,576 80,925
------------ ------------
Total benefits and expenses 478,770 466,681
------------ ------------
Income before income taxes 28,062 37,052
Federal income taxes 9,762 11,868
------------ ------------
Net income $ 18,300 $ 25,184
------------ ------------
Other comprehensive income (loss):
Unrealized gain (loss) on investments 32,671 (43,191)
------------ ------------
Comprehensive income (loss) $ 50,971 $ (18,007)
============ ============
</Table>
The accompanying notes are an integral part of the financial statements.
4
FORTIS BENEFITS INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
(In thousands)
- --------------------------------------------------------------------------------
<Table>
<Caption>
THREE MONTHS ENDED MARCH 31,
2003 2002
------------- -------------
(UNAUDITED) (UNAUDITED)
Cash flows from operating activities:
Net income $ 18,300 $ 25,184
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for depreciation and amortization of goodwill 211 132
Amortization of gain on reinsured business (15,303) (15,478)
Amortization of investment premiums (discounts), net 192 (1,168)
Net realized losses (gains) on sold investments 4,557 (454)
Policy acquisition costs deferred (15,946) (13,238)
Amortization of deferred policy acquisition costs 12,925 10,210
Provision for deferred federal income taxes 7,423 16,473
Decrease (Increase) in income taxes recoverable 3,326 (92,731)
Change in receivables, accrued investment income, unearned
premiums, accrued expenses, other assets, due to and
from affiliates and other liabilities (9,647) (33,208)
Increase in future policy benefit reserves for traditional,
interest sensitive and accident and health policies 71,576 84,938
Decrease in other policy claims and benefits and
policyholder dividends payable (14,076) (1,193)
------------- -------------
Net cash (provided by) used in operating activities 63,538 (20,533)
------------- -------------
Cash flows from investing activities:
Purchases of fixed maturity investments (370,950) (706,820)
Sales and repayments of fixed maturity investments 199,564 482,302
Purchases of short-term investments (750,471) --
Sales and repayments of short-term investments 916,398 252,860
Purchases of other investments (86,581) (84,596)
Sales of other investments 24,059 68,654
Purchases of property and equipment -- (33)
Sales and repayments of property and equipment 106 --
------------- -------------
Net cash used in (provided by) investing activities (67,875) 12,367
------------- -------------
Cash flows from financing activities:
Change in foreign exchange rate 1,932 (34)
------------- -------------
Net cash (used in) provided by financing activities 1,932 (34)
------------- -------------
Decrease in cash and cash equivalents (2,405) (8,200)
Cash and cash equivalents at beginning of year 9,660 11,704
------------- -------------
Cash and cash equivalents at end of year $ 7,255 $ 3,504
============= =============
</Table>
The accompanying notes are an integral part of the financial statements.
5
FORTIS BENEFITS INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
(In thousands)
- --------------------------------------------------------------------------------
General: The accompanying unaudited financial statements of Fortis
Benefits Insurance Company contain all adjustments necessary to present
fairly the balance sheet as of March 31, 2003 and the related statement
of income for the three months ended March 31, 2003 and 2002, and cash
flows for the three months ended March 31, 2003 and 2002.
Income tax receipts (payments) were $998 and $(88,134) for the three
months ended March 31, 2003 and 2002, respectively.
The classification of fixed maturity investments is to be made at the
time of purchase and, prospectively, that classification is expected to
be reevaluated as of each balance sheet date. At March 31, 2003, all
fixed maturity and equity securities are classified as available-for-sale
and carried at fair value.
The amortized cost and fair values of investments available-for sale were
as follows at March 31, 2003:
<Table>
<Caption>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------- ---------- ---------- ----------
Fixed maturities:
Governments $ 177,963 $ 11,457 $ 170 $ 189,250
Public utilities 203,046 19,161 1,247 220,960
Industrial and miscellaneous 2,136,179 161,734 12,467 2,285,446
Other 538,858 24,272 5,064 558,066
---------- ---------- ---------- ----------
Total fixed maturities 3,056,046 216,624 18,948 3,253,722
Equity securities 167,241 3,731 2,212 168,760
---------- ---------- ---------- ----------
Total $3,223,287 $ 220,355 $ 21,160 $3,422,482
========== ========== ========== ==========
</Table>
The amortized cost and fair value in fixed maturities at March 31, 2003,
by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties.
6
FORTIS BENEFITS INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
(In thousands)
- --------------------------------------------------------------------------------
<Table>
<Caption>
AMORTIZED FAIR
COST VALUE
---------- ----------
Due in one year or less $ 37,965 $ 44,711
Due after one year through five years 413,438 440,862
Due after five years through ten years 977,190 1,037,742
Due after ten years 1,627,453 1,730,407
---------- ----------
Total $3,056,046 $3,253,722
========== ==========
</Table>
Proceeds from sales of investments in fixed maturities in the three-month
period ended March 31, 2003 and March 31, 2002 were $199,564 and $482,302
respectively. Gross gains of $4,264 and $9,484 and gross losses of $8,583
and $11,606 were realized on sales during the three month periods ended
March 31, 2003 and 2002, respectively.
Mortgage Loans
The Company has issued commercial mortgage loans on properties located
throughout the United States. Approximately 36% of outstanding principal
is concentrated in the states of New York, California and Florida, at
March 31, 2003. The Company has a diversified loan portfolio with a small
average size, which greatly reduces any loss exposure. The Company has
established a reserve for mortgage loans.
Net Investment Income and Net Realized (Losses) Gains on Investments:
Major categories of net investment income and realized (losses) gains on
investments for the first three months of each year were as follows:
<Table>
<Caption>
REALIZED GAIN (LOSS)
INVESTMENT INCOME ON INVESTMENTS
2003 2002 2003 2002
---------- ---------- ---------- ----------
Fixed maturities $ 48,001 $ 50,117 $ (4,319) $ (2,122)
Preferred stocks 1,948 1,451 (248) 32
Common stocks 42 1,543 -- 1,593
Mortgage loans on real estate 12,150 13,494 -- 1,029
Policy loans 138 129 -- --
Short-term investments 745 65 10 (78)
Real estate and other investments 1,203 1,188 -- --
---------- ---------- ---------- ----------
64,227 67,987 $ (4,557) $ 454
---------- ----------
Expenses (2,128) (1,969)
---------- ----------
$ 62,099 $ 66,018
---------- ----------
</Table>
Other than temporary impairments (OTTI) are included in realized gain and
losses and consist of $7,511 and $0 for fixed maturities in 2003 and
2002, respectively. OTTI write-downs are recorded at the end of each
quarter based on the fair value of the security as of the reporting date.
7
FORTIS BENEFITS INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
(In thousands)
- --------------------------------------------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
MARCH 31, 2003 COMPARED TO MARCH 31, 2002
REVENUES
Fortis Benefits Insurance Company (the "Company") distributes its products
through a network of independent agents, brokers and financial institutions. The
Company's major products offered are group disability, group dental, group life,
group medical, pre-need annuity and life and accidental death coverages.
The Company's increase in accident and health premium is primarily due to the
Company's increase in disability premium assumed. Accidental death premium in
the accident and health line increased as a result of increases in new business
sales. Offsetting the disability and accidental death premium increases is a
decrease in the group medical line due to higher lapse rates.
The group life products experienced slower sales and lower persistency during
the first quarter of 2003, reflecting lower life premium levels when compared to
the first quarter of 2002.
The Company continues to match investment portfolio composition to liquidity
needs and capital requirements. Investment income decreased from $66 million
during the three months ended March 31, 2002 to $62 million during the three
months ended March 31, 2003 due to lower yielding investment markets. Changes in
interest rates during the first quarter of 2002 and 2003 resulted in recognition
of realized gains and losses upon sales of securities. The Company had more
capital losses from fixed maturity investments in 2003 as compared to 2002.
BENEFITS
The total year-to-date policyholder benefit to premium ratio decreased from
81.3% to 79.7% for the three months ended March 31, 2002 to March 31, 2003,
respectively. The group disability, group dental, group life, group medical,
pre-need and accidental death benefit to premium ratios for the three months
ended March 31, were 89%, 67%, 84%, 69%, 106% and 40% respectively in 2003 and
89%, 72%, 84%, 69%, 102% and 67% respectively in 2002. The decrease in the
dental loss ratio was due to favorable claim experience.
EXPENSES
Commission rates have increased from levels in 2002. This is primarily due to
changes in the mix of business by product lines as well as the change in first
year versus renewal premiums.
8
FORTIS BENEFITS INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
(In thousands)
- --------------------------------------------------------------------------------
The Company's general and administrative expense to premium ratio remained flat
at 19% at the end of the first quarter of 2003 and 2002. The Company continues
to monitor expenses, striving to improve the expense to premium ratio, while
maintaining quality and timely services to policyholders.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
MARKET RISK AND RISK MANAGEMENT
Interest rate risk is the Company's primary market risk exposure. Substantial
and sustained increases and decreases in market interest rates can affect the
profitability of insurance products and market value of investments. The yield
realized on new investments generally increases or decreases in direct
relationship with interest rate changes. The market value of the Company's fixed
maturity and mortgage loan portfolios generally increases when interest rates
decrease and decreases when interest rates increase.
Interest rate risk is monitored and controlled through asset/liability
management. As part of the risk management process, different economic scenarios
are modeled, including cash flow testing required for insurance regulatory
purposes, to determine that existing assets are adequate to meet projected
liability cash flows. A major component of the Company's asset/liability
management program is structuring the investment portfolio with cash flow
characteristics consistent with the cash flow characteristics of the Company's
insurance liabilities. The Company uses computer models to perform simulations
of the cash flow generated from existing insurance policies under various
interest rate scenarios. Information from these models is used in the
determination of interest crediting strategies and investment strategies. The
asset/liability management discipline includes strategies to minimize exposure
to loss as market interest rates change. On the basis of these analyses,
management believes there is no material solvency risk to the Company with
respect to interest rate movements up or down of 100 basis points from year-end
levels.
Equity market risk exposure is not significant. Equity investments in the
general account are not material enough to threaten solvency and contract owners
bear the investment risk related to the variable products. Therefore, the risks
associated with the investments supporting the variable separate accounts are
assumed by contract owners, not by the Company. The Company provides certain
minimum death benefits that depend on the performance of the variable separate
accounts. Currently the majority of these death benefit risks are reinsured
which then protects the Company from adverse mortality experience and prolonged
capital market decline.
LIQUIDITY AND CAPITAL RESOURCES
The liquidity requirements of the Company have been met by funds provided from
operations, including investment income. Funds are principally used to provide
for policy benefits, operating expenses, commissions and investment purchases.
The impact of the declining inforce medical business has been considered in
evaluating the Company's future liquidity needs. The Company expects its
operating activities to continue to generate sufficient funds.
9
FORTIS BENEFITS INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
(In thousands)
- --------------------------------------------------------------------------------
The National Association of Insurance Commissioners has implemented risk-based
capital standards to determine the capital requirements of a life insurance
company based upon the risks inherent in its operations. These standards require
the computation of a risk-based capital amount which is then compared to a
company's actual total adjusted capital. Based upon current calculations using
these risk-based capital standards, the Company's percentage of total adjusted
capital is in excess of ratios, which would require regulatory attention.
The Company's fixed maturity investments consisted of 93% investment grade bonds
as of March 31, 2003 and the Company does not expect this percentage to change
significantly in the future.
REGULATION
The Company is subject to the laws and regulations established by the Minnesota
State Insurance Department governing insurance business conducted in Minnesota
State. Periodic audits are conducted by the Minnesota Insurance Department
related to the Company's compliance with these laws and regulations. To date,
there have been no adverse findings regarding the Company's operations.
ITEM 4. CONTROLS AND PROCEDURES.
The Company, under the direction of the Chief Executive Officer and the Chief
Financial Officer, has established disclosure controls and procedures that are
designed to ensure that information required to be disclosed by the Company in
the reports that it files or submits under the Securities Exchange Act of 1934
is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms. The
disclosure controls and procedures are also intended to ensure that such
information is accumulated and communicated to the Company's management,
including the Chief Executive Officer and the Chief Financial Officer, as
appropriate to allow timely decisions regarding required disclosures.
Within 45 days of the filing of this report, the Chief Executive Officer and the
Chief Financial Officer have reviewed and evaluated the Company's disclosure
controls and procedures. Based on, and as of the date of, that review and
evaluation, the Chief Executive Officer and the Chief Financial Officer have
concluded that the Company's disclosure controls and procedures are effectively
serving the stated purposes. During the review and evaluation an internal
control issue was noted. It was determined that the preparation of certain cash
and suspense account reconciliations had been delayed and that reconciling items
had not been resolved on a timely basis. The Company promptly developed written
guidelines with regard to account reconciliation controls and implemented those
controls during first quarter of 2003.
In addition, there have been no significant changes in the Company's internal
controls or in other factors that could significantly affect these controls
subsequent to the date of their most recent evaluation. Other than as noted
above no significant deficiencies or material weaknesses in the internal
controls were identified during the evaluation and, as a consequence, no further
corrective action is required to be taken.
10
FORTIS BENEFITS INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
(In thousands)
- --------------------------------------------------------------------------------
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a. Written Statement of Chief Executive Officer (Exhibit 99.1)
Written Statement of Chief Financial Officer (Exhibit 99.2)
b. None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on it's behalf by the
undersigned thereunto duly authorized.
Fortis Benefits Insurance Company
(Registrant)
Date: May 13, 2003
Larry Cains
Controller and Treasurer
(on behalf of the Registrant and as its
principal financial and chief
accounting officer)
11
FORTIS BENEFITS INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
(In thousands)
- --------------------------------------------------------------------------------
CERTIFICATION OF PERIODIC REPORT
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, the undersigned Chief Executive Officer of Fortis Benefits Insurance
Company (the "Company"), do hereby certify, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:
1. I have reviewed the Quarterly Report on Form 10-Q of the Company for
the period ended March 31, 2003 (this "Report");
2. Based on my knowledge, this 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 periods covered by this Report;
3. Based on my knowledge, the financial statements, and other financial
information included in the Report, fairly present in all material respects the
financial condition, results of operations and cash flows of the Company as of,
and for, the periods presented in this Report;
4. The Company's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Company and have:
a) Designated such disclosure controls and procedures to ensure
that material information relating to the Company, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this Report is being prepared;
b) Evaluated the effectiveness of the Company's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this Report (the "Evaluation Date"); and
c) Presented in this Report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The Company's other certifying officers and I have disclosed, based
on our most recent evaluation, to the Company's auditors and the audit committee
of Company's board of directors (or persons performing the equivalent
functions):
a) All significant deficiencies in the design or operation of
internal controls which could adversely affect the Company's
ability to record, process, summarize and report financial
data and have identified for the Company'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
Company's internal controls; and
6. The Company's other certifying officers and I have indicated in this
Report whether there were significant changes in internal controls or in the
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May 13, 2003
/s/ ROBERT B. POLLOCK
--------------------------
Robert B. Pollock
Chief Executive Officer
12
FORTIS BENEFITS INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
(In thousands)
- --------------------------------------------------------------------------------
CERTIFICATION OF PERIODIC REPORT
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, the undersigned Chief Financial Officer of Fortis Benefits Insurance
Company (the "Company"), do hereby certify, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:
1. I have reviewed the Quarterly Report on Form 10-Q of the Company for
the period ended March 31, 2003 (this "Report");
2. Based on my knowledge, this 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 periods covered by this Report;
3. Based on my knowledge, the financial statements, and other financial
information included in the Report, fairly present in all material respects the
financial condition, results of operations and cash flows of the Company as of,
and for, the periods presented in this Report;
4. The Company's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Company and have:
a) Designated such disclosure controls and procedures to ensure
that material information relating to the Company, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this Report is being prepared;
b) Evaluated the effectiveness of the Company's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this Report (the "Evaluation Date"); and
c) Presented in this Report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The Company's other certifying officers and I have disclosed, based
on our most recent evaluation, to the Company's auditors and the audit committee
of Company's board of directors (or persons performing the equivalent
functions):
a) All significant deficiencies in the design or operation of
internal controls which could adversely affect the Company's
ability to record, process, summarize and report financial
data and have identified for the Company'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
Company's internal controls; and
6. The Company's other certifying officers and I have indicated in this
Report whether there were significant changes in internal controls or in the
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May 13, 2003
/s/ LARRY M. CAINS
--------------------------
Larry M. Cains
Chief Financial Officer
13