Back to GetFilings.com
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended Commission File
March 1, 2003 Number 1-8504
UNIFIRST CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 04-2103460
(State of Incorporation) (IRS Employer ID Number)
68 Jonspin Road
Wilmington, Massachusetts 01887
(Address of principal executive offices)
Registrant's telephone number: (978) 658-8888
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 Exchange Act Rule 12b-2).
Yes [X] No [ ]
The number of outstanding shares of UniFirst Corporation Common Stock and Class
B Common Stock as of April 7, 2003 were 8,963,254 and 10,205,144, respectively.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNIFIRST CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(In thousands, except per share data) March 1, 2003 August 31, 2002 March 2, 2002
Assets
Current assets:
Cash and cash equivalents $ 5,350 $ 4,333 $ 6,011
Receivables, less reserves of $3,429, $2,687, and $3,590, respectively 60,694 54,587 57,476
Inventories 25,208 24,807 25,929
Rental merchandise in service 56,870 56,047 51,445
Prepaid taxes and deferred tax assets 5,641 -- --
Prepaid expenses 307 315 261
--------- --------- ---------
Total current assets 154,070 140,089 141,122
--------- --------- ---------
Property and equipment:
Land, buildings and leasehold improvements 214,889 208,000 201,839
Machinery and equipment 237,516 229,692 220,365
Motor vehicles 65,076 60,925 59,728
--------- --------- ---------
517,481 498,617 481,932
Less - accumulated depreciation 246,433 229,621 214,445
--------- --------- ---------
271,048 268,996 267,487
--------- --------- ---------
Goodwill and other assets, net 84,739 85,750 83,823
--------- --------- ---------
$ 509,857 $ 494,835 $ 492,432
========= ========= =========
Liabilities and Shareholders' Equity
Current liabilities:
Current maturities of long-term obligations $ 3,049 $ 1,406 $ 1,361
Notes payable 1,350 1,195 1,359
Accounts payable 34,364 17,012 16,907
Accrued liabilities 56,370 53,331 61,291
Accrued and deferred income taxes -- 1,457 8,716
--------- --------- ---------
Total current liabilities 95,133 74,401 89,634
--------- --------- ---------
Long-term obligations, net of current maturities 73,932 83,690 81,852
Deferred income taxes 23,243 27,004 24,150
--------- --------- ---------
Shareholders' equity:
Preferred stock, $1.00 par value; 2,000,000 shares authorized; none
issued -- -- --
Common stock, $.10 par value; 30,000,000 shares authorized; shares
issued 10,558,309, 10,555,109, and 10,528,409 shares respectively 1,055 1,055 1,053
Class B Common stock, $.10 par value; 20,000,000 Shares authorized;
shares issued and outstanding 10,205,144, 10,205,144, and 10,227,344
shares, respectively 1,021 1,021 1,023
Treasury stock, 1,595,055, 1,535,055, and 1,535,055 shares, at cost
(26,005) (24,756) (24,755)
Capital surplus 12,546 12,503 12,443
Retained earnings 332,505 323,595 310,818
Accumulated other comprehensive loss (3,573) (3,678) (3,786)
--------- --------- ---------
Total shareholders' equity 317,549 309,740 296,796
--------- --------- ---------
$ 509,857 $ 494,835 $ 492,432
========= ========= =========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
UNIFIRST CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Twenty-Six Twenty-Seven Thirteen Fourteen
weeks ended weeks ended weeks ended weeks ended
(In thousands, except per share data ) March 1, 2003 March 2, 2002 March 1, 2003 March 2, 2002
Revenues $ 295,604 $ 294,148 $ 146,425 $ 151,523
--------- --------- --------- ---------
Costs and expenses:
Operating costs 182,814 180,904 94,524 94,211
Selling and administrative expenses 71,877 68,813 35,578 36,118
Depreciation and amortization 19,688 18,508 9,804 9,360
--------- --------- --------- ---------
274,379 268,225 139,906 139,689
--------- --------- --------- ---------
Income from operations 21,225 25,923 6,519 11,834
--------- --------- --------- ---------
Other expense (income):
Interest expense 2,192 5,843 1,098 4,227
Interest income (833) (825) (565) (451)
Interest rate swap expense (income) (360) 271 (151) (263)
--------- --------- --------- ---------
999 5,289 382 3,513
--------- --------- --------- ---------
Income before income taxes 20,226 20,634 6,137 8,321
Provision for income taxes 7,787 7,841 2,363 3,162
--------- --------- --------- ---------
Income before cumulative effect of accounting change 12,439 12,793 3,774 5,159
Cumulative effect of accounting change (net of income tax
benefit of $1,404 in fiscal 2003) 2,242 -- -- --
--------- --------- --------- ---------
Net income $ 10,197 $ 12,793 $ 3,774 $ 5,159
========= ========= ========= =========
Weighted average number of shares outstanding -- Basic 19,193 19,220 19,168 19,221
========= ========= ========= =========
Weighted average number of shares outstanding -- Diluted 19,240 19,265 19,208 19,276
========= ========= ========= =========
Net income per share --Basic
Income before cumulative effect of accounting change $ 0.65 $ 0.67 $ 0.20 $ 0.27
Cumulative effect of accounting change, net (0.12) -- -- --
--------- --------- --------- ---------
Net income $ 0.53 $ 0.67 $ 0.20 $ 0.27
========= ========= ========= =========
Net income per share -- Diluted
Income before cumulative effect of accounting change $ 0.65 $ 0.66 $ 0.20 $ 0.27
Cumulative effect of accounting change, net (0.12) -- -- --
--------- --------- --------- ---------
Net income $ 0.53 $ 0.66 $ 0.20 $ 0.27
========= ========= ========= =========
Cash Dividends per Share:
Common Stock $ 0.0750 $ 0.0750 $ 0.0375 $ 0.0375
========= ========= ========= =========
Class B Common Stock $ 0.0600 $ 0.0600 $ 0.0300 $ 0.0300
========= ========= ========= =========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
UNIFIRST CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Twenty-Six Twenty-Seven
weeks ended weeks ended
(In thousands) March 1, 2003 March 2, 2002
Cash flows from operating activities:
Net Income 10,197 $ 12,793
Adjustments:
Cumulative effect of accounting change, net 2,242 --
Depreciation 17,297 15,918
Amortization of other assets 2,391 2,590
Accretion on asset retirement obligations 145 --
Interest rate swap (income) expense (360) 271
Changes in assets and liabilities, net of acquisitions:
Receivables (6,107) (2,170)
Inventories (401) (3,400)
Rental merchandise in service (823) 5,109
Prepaid expenses 7 14
Accounts payable 17,352 (2,636)
Accrued liabilities (1,314) 5,808
Accrued and deferred income taxes (9,454) (2,605)
-------- --------
Net cash provided by operating activities 31,172 31,692
-------- --------
Cash flows from investing activities:
Capital expenditures (18,427) (18,046)
Increase in other assets (1,275) (501)
-------- --------
Net cash used in investing activities (19,702) (18,547)
-------- --------
Cash flows from financing activities:
Increase in debt 854 --
Reduction of debt (8,814) (11,550)
Repurchase of common stock (1,249) --
Proceeds from exercise of stock options 43 5
Cash dividends (1,287) (1,288)
-------- --------
Net cash used in financing activities (10,453) (12,833)
-------- --------
Net increase in cash and cash equivalents 1,017 312
Cash and cash equivalents at beginning of period 4,333 5,699
-------- --------
Cash and cash equivalents at end of period $ 5,350 $ 6,011
======== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
UNIFIRST CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except all share data)
FOR THE TWENTY-SIX WEEKS ENDED MARCH 1, 2003
1. Summary Of Critical and Significant Accounting Policies
Business Description
UniFirst Corporation (the "Company") is a leading company in the garment service
business. The Company designs, manufactures, personalizes, rents, cleans,
delivers and sells a variety of superior quality occupational garments, career
apparel and imagewear programs to businesses of all kinds. It also services
industrial wiper towels, floor mats and other non-garment items and provides
first aid cabinet services and other safety supplies. The Company also
decontaminates and cleans, in separate facilities, garments which may have been
exposed to radioactive materials.
Interim Financial Information
These condensed consolidated financial statements have been prepared by the
Company without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations; however, the Company believes that the information furnished
reflects all adjustments (consisting only of normal recurring adjustments) which
are, in the opinion of management, necessary to a fair statement of results for
the interim period. It is suggested that these condensed consolidated financial
statements be read in conjunction with the financial statements and the notes,
thereto, included in the Company's latest annual report on Form 10-K. Results
for an interim period are not indicative of any future interim periods or for an
entire fiscal year.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its subsidiaries, all of which are wholly-owned. Intercompany balances and
transactions are eliminated in consolidation. All assets and liabilities of
foreign subsidiaries are translated into U.S. dollars using the exchange rate
prevailing at the balance sheet date, while income and expense accounts are
translated at average exchange rates during the year.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts in the financial statements and
accompanying notes. Actual results could differ from those estimates. There have
been no changes in judgments or estimates that had a material effect on our
condensed consolidated financial statements for the periods presented.
Fiscal Year
The Company's fiscal year ends on the last Saturday in August. For financial
reporting purposes, fiscal 2003 will have 52 weeks, while fiscal 2002 had 53
weeks. The quarter and six months ended March 1, 2003 included thirteen and
twenty-six weeks, respectively, as compared to the quarter and six months ended
March 2, 2002, which included fourteen and twenty-seven weeks, respectively.
Revenue Recognition and Allowance for Doubtful Accounts
The Company recognizes revenue from rental operations in the period in which the
services are provided. Direct sale revenue is recognized in the period in which
the product is shipped. Judgments and estimates are used in determining the
collectability of accounts receivable. The Company analyzes specific accounts
receivable and historical bad debt experience, customer credit worthiness,
current economic trends and the age of outstanding balances when evaluating the
adequacy of the allowance for doubtful accounts. Management judgments and
estimates are used in connection with establishing the allowance in any
accounting period. Changes in estimates are reflected in the period they become
known. If the financial condition of the Company's customers were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required. Material differences may result in the
amount and timing of bad debt expense recognition for any given period if
management makes different judgments or utilizes different estimates.
Inventories and Rental Merchandise in Service
Inventories are stated at the lower of cost or market value, net of any reserve
for excess and obsolete inventory. Judgements and estimates are used in
determining the likelihood that new goods on hand can be sold to customers or
used in rental operations. Historical inventory usage and current revenue trends
are considered in estimating both excess and obsolete inventories. If actual
product demand and market conditions are less favorable than those projected by
management, additional inventory write-downs may be required. The Company uses
the last-in, first-out (LIFO) method to value a significant portion of its
inventories. Substantially all inventories represent finished goods.
Rental merchandise in service is being amortized on a straight-line basis over
the estimated service lives of the merchandise, which range from 6 to 24 months.
In establishing estimated lives for merchandise in service, management considers
historical experience and the intended use of the merchandise.
Material differences may result in the amount and timing of operating profit for
any period if management makes different judgments or utilizes different
estimates.
Property and Equipment
Property and equipment are recorded at cost. The Company provides for
depreciation on the straight-line method based on the following estimated useful
lives:
Buildings 30-40 years
Leasehold improvements Term of lease
Machinery and equipment 3-10 years
Motor vehicles 3-5 years
Expenditures for maintenance and repairs are expensed as incurred. Expenditures
for renewals and betterments are capitalized.
Goodwill and Other Intangible Assets
Customer contracts are amortized over their estimated useful lives which have a
weighted average life of 14.25 years. Restrictive covenants are amortized over
the terms of the respective non-competition agreements, which have a weighted
average life of 7.5 years. The Company does not amortize goodwill in accordance
with the provisions of Statement of Financial Accounting Standards "SFAS" No.
142.
Income Taxes
The Company's policy of accounting for income taxes is in accordance with SFAS
No. 109 - "Accounting for Income Taxes". Deferred income taxes are provided for
temporary differences between amounts recognized for income tax and financial
reporting purposes at currently enacted tax rates. The Company computes income
tax expense by jurisdiction based on its operations in each jurisdiction.
The Company is periodically reviewed by domestic and foreign tax authorities
regarding the amount of taxes due. These reviews include questions regarding the
timing and amount of deductions and the allocation of income among various tax
jurisdictions. In evaluating the exposure associated with various filing
positions, the Company records estimated reserves for probable exposures, in
accordance with SFAS No. 5 - "Accounting for Contingencies". Based on the
Company's evaluation of current tax positions, the Company believes it has
appropriately accrued for probable exposures.
Net Income Per Share
Basic and diluted net income per share is calculated using the weighted average
number of common and dilutive potential common shares outstanding during the
year. The following table illustrates the amounts used in the denominator of the
calculation:
Twenty-Six Twenty-Seven Thirteen Fourteen
weeks ended weeks ended weeks ended weeks ended
March 1, 2003 March 2, 2002 March 1, 2003 March 2, 2002
Weighted average number of shares outstanding
- -- Basic 19,193 19,220 19,168 19,221
Add: effect of dilutive potential common shares
- - employee common stock options 47 45 40 55
------ ------ ------ ------
Weighted average number of shares outstanding
- - Diluted 19,240 19,265 19,208 19,276
------ ------ ------ ------
Stock Based Compensation
The Company adopted an incentive stock option plan (the "Plan") in November,
1996 and reserved 150,000 shares of common stock for issue under the Plan. In
January of 2002, the Company increased to 450,000 the number of shares of common
stock reserved for issuance under the Plan. Options granted under the Plan,
through March 1, 2003, are at a price equal to the fair market value of the
Company's common stock on the date of grant and expire eight years after the
grant date. Each such option is subject to a proportional four-year vesting
schedule with no options generally being vested or exercisable until one year
from date of grant.
The Company uses the intrinsic value method to account for the Plan under
Accounting Principles Board No. 25, "Accounting for Stock Issued to Employees,"
under which no compensation cost has been recognized related to stock option
grants. Had compensation cost for this plan been determined consistent with SFAS
No. 123, "Accounting for Stock-Based Compensation", the Company's net income and
earnings per share would have been reduced to the following pro forma amounts
for the following periods:
Twenty-Six Twenty-Seven Thirteen Fourteen
weeks ended weeks ended weeks ended weeks ended
March 1, 2003 March 2, 2002 March 1, 2003 March 2, 2002
Income before cumulative effect of accounting
change, as reported $ 12,439 $ 12,793 $ 3,774 $ 5,159
Less: pro forma compensation expense, net of
tax (79) (55) (46) (32)
---------- ---------- --------- ---------
Pro forma income before cumulative effect of
accounting change 12,360 12,738 3,728 5,127
Cumulative effect of accounting change, net of tax (2,242) -- -- --
---------- ---------- --------- ---------
Pro forma net income $ 10,118 $ 12,738 $ 3,728 $ 5,127
---------- ---------- --------- ---------
Basic net income per weighted average common
share, as reported:
Income before cumulative effect of accounting
change $ 0.65 $ 0.67 $ 0.20 $ 0.27
Cumulative effect of accounting change, net of (0.12) -- -- --
tax
---------- ---------- --------- ---------
Net income per share $ 0.53 $ 0.67 $ 0.20 $ 0.27
---------- ---------- --------- ---------
Basic net income per weighted average common
share, pro forma:
Pro forma income before cumulative effect of
accounting change $ 0.64 $ 0.66 $ 0.19 $ 0.27
Cumulative effect of accounting change, net of
tax (0.12) -- -- --
---------- ---------- --------- ---------
Pro forma net income per share $ 0.52 $ 0.66 $ 0.19 $ 0.27
---------- ---------- --------- ---------
Diluted net income per weighted average common
share, as reported:
Income before cumulative effect of accounting
change $ 0.65 $ 0.66 $ 0.20 $ 0.27
Cumulative effect of accounting change, net of
tax (0.12) -- -- --
---------- ---------- --------- ---------
Net income per share $ 0.53 $ 0.66 $ 0.20 $ 0.27
---------- ---------- --------- ---------
Diluted net income per weighted average common
share, pro forma:
Pro forma income before cumulative effect of
accounting change $ 0.64 $ 0.66 $ 0.19 $ 0.27
Cumulative effect of accounting change, net of
tax (0.12) -- -- --
---------- ---------- --------- ---------
Pro forma net income per share $ 0.52 $ 0.66 $ 0.19 $ 0.27
---------- ---------- --------- ---------
Cash and Cash Equivalents
Cash and cash equivalents include cash in banks and bank short-term investments
with maturities of less than ninety days.
Financial Instruments
The Company's financial instruments, which may expose the Company to
concentrations of credit risk, include cash and cash equivalents, receivables,
accounts payable and accrued liabilities. Each of these financial instruments is
recorded at cost, which approximates its fair value.
Insurance
The Company self-insures for certain obligations related to health and workers'
compensation programs. The Company also purchases stop-loss insurance policies
to protect it from catastrophic losses. Judgements and estimates are used in
determining the potential value associated with reported claims and for losses
that have occurred, but have not been reported. The Company's estimates consider
historical claims experience and other factors. The Company's liabilities are
based on estimates, and, while the Company believes that the accrual for loss is
adequate, the ultimate liability may be in excess of or less than the amounts
recorded. Changes in claim experience, the Company's ability to settle claims or
other estimates and judgments used by management could have a material impact on
the amount and timing of expense for any period.
Environmental and Other Contingencies
The Company is subject to legal proceedings and claims related to environmental
matters arising from the conduct of their business operations, including
personal injury, customer contract matters, employment claims, and environmental
matters. Accounting principles generally accepted in the United States require
that a liability for contingencies be recorded when it is probable that a
liability has occurred and the amount of the liability can be reasonably
estimated. Significant judgment is required to determine the existence of a
liability, as well as the amount to be recorded. The Company regularly consults
with attorneys and outside consultants to ensure that all of the relevant facts
and circumstances are considered, before a contingent liability is recorded. The
Company records accruals for environmental and other contingencies based on
enacted laws, regulatory orders or decrees, the Company's estimates of costs,
insurance proceeds, participation by other parties and the timing of payments,
and the input of outside consultants and attorneys. Changes in enacted laws,
regulatory orders or decrees, management's estimates of costs, insurance
proceeds, participation by other parties and the timing of payments, and the
input of outside consultants and attorneys could have a material impact on the
amounts recorded for environmental and other contingent liabilities.
Reclassifications
Certain prior year amounts have been reclassified to conform with current year
presentation.
Comprehensive Income
The components of comprehensive income for the twenty-six and thirteen week
periods ended March 1, 2003 and the twenty-seven and fourteen week periods ended
March 2, 2002 were as follows:
Twenty-Six Twenty-Seven Thirteen Fourteen
weeks ended weeks ended weeks ended weeks ended
(in thousands) March 1, 2003 March 2, 2002 March 1, 2003 March 2, 2002
Net income $ 10,197 $ 12,793 $ 3,774 $ 5,159
Other comprehensive income (loss):
Foreign currency translation adjustments 190 (171) 203 444
Change in fair value of derivative instruments, net (60) (88) (119) 126
-------- -------- -------- --------
Comprehensive income $ 10,327 $ 12,534 $ 3,858 $ 5,729
======== ======== ======== ========
2. Asset Retirement Obligations
Effective September 1, 2002, the Company adopted the provisions of SFAS No. 143,
"Accounting for Asset Retirement Obligations." SFAS No. 143 generally applies to
legal obligations associated with the retirement of long-lived assets that
result from the acquisition, construction, development and/or the normal
operation of a long-lived asset. Under the new accounting method, the Company
now recognizes asset retirement obligations in the period in which they are
incurred if a reasonable estimate of fair value can be made. The associated
asset retirement costs are capitalized as part of the carrying amount of the
long-lived asset.
As of September 1, 2002, the Company recognized as a liability the present value
of the estimated future costs to decommission its nuclear laundry facilities in
accordance with the provisions of SFAS No. 143. The adoption of SFAS No. 143
resulted in a cumulative charge of $2.2 million, net of tax benefit of $1.4
million, related to the change in accounting principle, the recognition of a
discounted asset retirement obligation of $5.3 million, and an increase of $2.4
million to the carrying value of the related long-lived assets. The Company will
depreciate, on a straight-line basis, the amount added to property and equipment
and recognize accretion expense in connection with the discounted liability over
the various remaining lives which range from approximately one to thirty years.
The estimated liability has been based on historical experience in
decommissioning nuclear laundry facilities, estimated useful lives of the
underlying assets, external vendor estimates as to the cost to decommission
these assets in the future and federal and state regulatory requirements. The
estimated current costs have been adjusted for the estimated impact of inflation
at 3% per year. The liability has been discounted using credit-adjusted
risk-free rates that range from approximately 3.00% - 7.25% over one to thirty
years. Revisions to the liability could occur due to changes in the Company's
estimated dates of decommissioning, changes in decommissioning costs, changes in
federal or state regulatory guidance on the decommissioning of such facilities,
or other changes in estimates. Changes due to revised estimates will be
recognized by increasing or decreasing the carrying amount of the liability and
the carrying amount of the related long-lived asset. The Company has not revised
its estimates of this liability in the current quarter.
The pro forma effects of the application of SFAS No. 143 as if the Statement had
been adopted on August 26, 2001 (instead of September 1, 2002) are not material
and, therefore, have not been presented.
A reconciliation of the Company's liability for the twenty-six weeks ended March
1, 2003, is as follows:
Upon adoption at September 1, 2002 $ 5,310
Accretion expense 145
----------
Balance at March 1, 2003 $ 5,455
==========
As of March 1, 2003, the $5.5 million asset retirement obligation is included in
accrued liabilities in the accompanying condensed consolidated balance sheet.
3. Derivative Instruments and Hedging Activities
The Company has entered into interest rate swap agreements to manage its
exposure to movements in interest rates on its variable rate debt. The Company
accounts for these agreements in accordance with SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities". The swap agreements are cash
flow hedges and are used to manage exposure to interest rate movement by
effectively changing the variable rate to a fixed rate. Such instruments are
matched with the underlying borrowings. SFAS No. 133 eliminates special hedge
accounting if a swap agreement does not meet certain criteria, thus requiring
the Company to reflect all changes in the fair value of the swap agreement in
earnings in the period of change.
In October 1999, the Company entered into an interest rate swap agreement,
notional amount $40,000 ("the $40,000 SWAP "), maturing October 13, 2004. The
Company pays a fixed rate of 6.38% and receives a variable rate tied to the
three month LIBOR rate. As of March 1, 2003, the applicable variable rate was
1.38%. On October 15, 2002, the bank had the option to terminate the $40,000
SWAP without further obligation to make payments to the Company. The bank did
not exercise this option. Because of the existence of this termination option,
the $40,000 SWAP did not meet the required criteria to qualify as a cash flow
hedge and use special hedge accounting, under SFAS No.133. Accordingly, the
Company has recorded, in the interest rate swap expense (income) line item of
its consolidated statement of income, income of $360 and expenses of $271 for
the twenty-six weeks ended March 1, 2003 and twenty-seven weeks ended and March
2, 2002, respectively and income of $151
and $263 for the thirteen weeks ended March 1, 2003 and fourteen weeks ended
March 1, 2002, respectively, for the changes in the fair value of the $40,000
SWAP.
In June 2001, the Company entered into a second interest rate swap agreement
with a notional amount of $20,000 ("the $20,000 SWAP"), maturing June 5, 2003.
The Company pays a fixed rate of 4.69% and receives a variable rate tied to the
three month LIBOR rate. As of March 1, 2003, the applicable variable rate was
1.38%. The $20,000 SWAP meets the required criteria as defined in SFAS No. 133
to use special hedge accounting. Accordingly, the Company has recorded, through
the other comprehensive income (loss) section of shareholders' equity, expense
of $60, net of tax of $38 for the twenty-six weeks ended March 1, 2003 and
expense of $88, net of tax of $35 for the twenty-seven weeks ended March 2,
2002, respectively and expense of $119, net of tax of $74 for the thirteen
weeks ended March 1, 2003 and income of $126, net of tax of $50 for the
fourteen weeks ended March 1, 2002, respectively, for the change in the
$20,000 SWAP .
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
UNIFIRST CORPORATION AND SUBSIDIARIES
FOR THE TWENTY-SIX WEEKS ENDED MARCH 1, 2003
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
The Company believes the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our consolidated
financial statements.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts in the financial statements and
accompanying notes. Actual results could differ from those estimates. There have
been no changes in judgments or estimates that had a material effect on our
condensed consolidated financial statements for the periods presented.
Revenue Recognition and Allowance for Doubtful Accounts
The Company recognizes revenue from rental operations in the period in which the
services are provided. Direct sale revenue is recognized in the period in which
the product is shipped. Judgments and estimates are used in determining the
collectability of accounts receivable. The Company analyzes specific accounts
receivable and historical bad debt experience, customer credit worthiness,
current economic trends and the age of outstanding balances when evaluating the
adequacy of the allowance for doubtful accounts. Management judgments and
estimates are used in connection with establishing the allowance in any
accounting period. Changes in estimates are reflected in the period they become
known. If the financial condition of the Company's customers were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required. Material differences may result in the
amount and timing of bad debt expense recognition for any given period if
management makes different judgments or utilizes different estimates.
Inventories and Rental Merchandise in Service
Inventories are stated at the lower of cost or market value, net of any reserve
for excess and obsolete inventory. Judgments and estimates are used in
determining the likelihood that new goods on hand can be sold to customers or
used in rental operations. Historical inventory usage and current revenue trends
are considered in estimating both excess and obsolete inventories. If actual
product demand and market conditions are less favorable than those projected by
management, additional inventory write-downs may be required. The Company uses
the last-in, first-out (LIFO) method to value a significant portion of its
inventories. Substantially all inventories represent finished goods.
Rental merchandise in service is being amortized on a straight-line basis over
the estimated service lives of the merchandise, which range from 6 to 24 months.
In establishing estimated lives for merchandise in service, management considers
historical experience and the intended use of the merchandise. Material
differences may result in the amount and timing of operating profit for any
period if management makes different judgments or utilizes different estimates.
Insurance
The Company self-insures for certain obligations related to health and workers'
compensation programs. The Company also purchases stop-loss insurance policies
to protect it from catastrophic losses. Judgments and estimates are used in
determining the potential value associated with reported claims and for losses
that have occurred, but have not been reported. The Company's estimates consider
historical claim experience and other factors. The Company's liabilities are
based on estimates, and, while the Company believes that the accrual for loss is
adequate, the ultimate liability may be in excess of or less than the amounts
recorded. Changes in claim experience, the Company's ability to settle claims or
other estimates and judgments used by management could have a material impact on
the amount and timing of expense for any period.
Environmental and Other Contingencies
The Company is subject to legal proceedings and claims related to environmental
matters arising from the conduct of their business operations, including
personal injury claims, customer contract matters, employment claims, and
environmental matters. Accounting principles generally accepted in the United
States require that a liability for contingencies be recorded when it is
probable that a liability has occurred and the amount of the liability can be
reasonably estimated. Significant judgment is required to determine the
existence of a
liability, as well as the amount to be recorded. The Company regularly consults
with attorneys and outside consultants to ensure that all of the relevant facts
and circumstances are considered, before a contingent liability is recorded. The
Company records accruals for environmental and other contingencies based on
enacted laws, regulatory orders or decrees, the Company's estimates of costs,
insurance proceeds, participation by other parties and the timing of payments,
and the input of outside consultants and attorneys. Changes in enacted laws,
regulatory orders or decrees, management's estimates of costs, insurance
proceeds, participation by other parties and the timing of payments, and the
input of outside consultants and attorneys could have a material impact on the
amounts recorded for environmental and other contingent liabilities.
Income Taxes
The Company's policy of accounting for income taxes is in accordance with SFAS
No. 109 - "Accounting for Income Taxes". Deferred income taxes are provided for
temporary differences between amounts recognized for income tax and financial
reporting purposes at currently enacted tax rates. The Company computes income
tax expense by jurisdiction based on its operations in each jurisdiction.
The Company is periodically reviewed by domestic and foreign tax authorities
regarding the amount of taxes due. These reviews include questions regarding the
timing and amount of deductions and the allocation of income among various tax
jurisdictions. In evaluating the exposure associated with various filing
positions, the Company records estimated reserves for probable exposures, in
accordance with SFAS No. 5 - "Accounting for Contingencies". Based on the
Company's evaluation of current tax positions, the Company believes it has
appropriately accrued for probable exposures.
Asset Retirement Obligations
Effective September 1, 2002, the Company adopted the provisions of SFAS No. 143,
"Accounting for Asset Retirement Obligations." SFAS No. 143 generally applies to
legal obligations associated with the retirement of long-lived assets that
result from the acquisition, construction, development and/or the normal
operation of a long-lived asset. Under the new accounting method, the Company
now recognizes asset retirement obligations in the period in which they are
incurred if a reasonable estimate of fair value can be made. The associated
asset retirement costs are capitalized as part of the carrying amount of the
long-lived asset.
As of September 1, 2002, the Company recognized as a liability the present value
of the estimated future costs to decommission its nuclear laundry facilities in
accordance with the provisions of SFAS No. 143. The adoption of SFAS No. 143
resulted in a cumulative charge of $2.2 million, net of tax benefit of $1.4
million, related to the change in accounting principle, the recognition of a
discounted asset retirement obligation of $5.3 million, and an increase of $2.4
million to the carrying value of the related long-lived assets. The Company will
depreciate, on a straight-line basis, the amount added to property and equipment
and recognize accretion expense in connection with the discounted liability over
the various remaining lives which range from approximately one to thirty years.
The estimated liability is based on historical experience in decommissioning
nuclear laundry facilities, estimated useful lives of the underlying assets,
external vendor estimates as to the cost to decommission these assets in the
future and federal and state regulatory requirements. The estimated current
costs have been adjusted for the estimated impact of inflation at 3% per year.
The liability has been discounted using credit-adjusted risk-free rates that
range from approximately 3.00% - 7.25% over one to thirty years. Revisions to
the liability could occur due to changes in the Company's estimated dates of
decommissioning, changes in decommissioning costs, changes in federal or state
regulatory guidance on the decommissioning of such facilities, or other changes
in estimates. Changes due to revised estimates will be recognized by increasing
or decreasing the carrying amount of the liability and the carrying amount of
the related long-lived asset. The Company has not revised its estimates of this
liability in the current quarter.
RESULTS OF OPERATIONS
Twenty-Six Weeks Ended March 1, 2003 Compared with Twenty-Seven Weeks Ended
March 2, 2002
Revenues. Revenues for the twenty-six weeks ended March 1, 2003 increased $1.5
million or 0.5% to $295.6 million as compared with $294.1 million for the
twenty-seven weeks ended March 2, 2002. On a comparative twenty-six week basis,
revenues increased by 4.4%. This increase can be attributed to growth from
existing operations, acquisitions, and price increases in the core uniform
rental business (2.8%) and increased revenue from the UniTech garment services
business (1.6%).
Operating Costs. Operating costs increased to $182.8 million for the twenty-six
weeks ended March 1, 2003 as compared with $180.9 million for the twenty-seven
weeks ended March 2, 2002. As a percentage of revenues, operating costs
increased to 61.8% from 61.5% for these periods, primarily due to higher energy
costs and increased non-garment merchandise costs,
primarily mats and facility service products, offset by a reduction in
merchandise costs resulting from improved garment utilization and the Company's
transition of its manufacturing operations to Mexico.
Selling and Administrative Expenses. The Company's selling and administrative
expenses increased to $71.9 million, or 24.3% of revenues, for the twenty-six
weeks ended March 1, 2003 as compared with $68.8 million, or 23.4% of revenues,
for the twenty-seven weeks ended March 2, 2002. The increase is attributable to
increases in healthcare costs and increased sales and marketing costs due to
sales force expansion.
Depreciation and Amortization. The Company's depreciation and amortization
expense increased to $19.7 million, or 6.7% of revenues, for the twenty-six
weeks ended March 1, 2003 as compared with $18.5 million, or 6.3% of revenues,
for the twenty-seven weeks ended March 2, 2002. The increase was due primarily
to additional capital expenditures and the completion and placement into service
of the Company's second manufacturing plant in Mexico.
Other expense (income). Net other expense (interest and interest rate swap
(income) expense less interest income) was $1.0 million, or 0.3% of revenues,
for the twenty-six weeks ended March 1, 2003 as compared with $5.3 million, or
1.8% of revenues, for the twenty-seven weeks ended March 2, 2002. During the
second quarter of fiscal 2002 the Company recorded a $2.3 million interest
charge which was an estimate of the interest due from settling a revenue agent
review with the IRS. Excluding this charge, net other expense would have been
$3.0 million, or 1.0% of revenues, for the twenty-seven weeks ended March 2,
2002. The decrease in net other expense was also a result of lower interest
rates and continued debt reduction, as well as changes in the fair value of the
$40,000 SWAP, which were $0.4 million of income for the twenty-six weeks ended
March 1, 2003 as compared with $0.3 million of expense for the twenty-seven
weeks ended March 2, 2002.
Provision for Income Taxes. The Company's effective income tax rate was 38.5%
for the twenty-six weeks ended March 1, 2003 as compared to 38.0% for the
twenty-seven weeks ended March 2, 2002. The primary reason for the increase is
higher state income taxes.
Thirteen Weeks Ended March 1, 2003 Compared with Fourteen Weeks Ended March 2,
2002
Revenues. Revenues for the thirteen weeks ended March 1, 2003 decreased $5.1
million or 3.4% to $146.4 million as compared with $151.5 million for the
fourteen weeks ended March 2, 2002. On a comparative thirteen week basis,
revenues increased by 4.1%. This increase can be attributed to growth from
existing operations, acquisitions, and price increases in the core uniform
rental business (3.8%) and increased revenue from the UniTech garment services
business (0.3%).
Operating Costs. Operating costs increased to $94.5 million for the thirteen
weeks ended March 1, 2003 as compared with $94.2 million for the fourteen weeks
ended March 2, 2002. As a percentage of revenues, operating costs increased to
64.6% from 62.2% for these periods, primarily due to higher energy costs and
increased non-garment merchandise costs, primarily mats and facility service
products, offset by a reduction in merchandise costs resulting from improved
garment utilization and the Company's transition of its manufacturing operations
to Mexico.
Selling and Administrative Expenses. The Company's selling and administrative
expenses decreased to $35.6 million, or 24.3% of revenues, for the thirteen
weeks ended March 1, 2003 as compared with $36.1 million, or 23.8% of revenues,
for the fourteen weeks ended March 2, 2002. The increase as a percentage of
revenues is attributable to increases in healthcare costs and increased sales
and marketing costs due to sales force expansion.
Depreciation and Amortization. The Company's depreciation and amortization
expense increased to $9.8 million, or 6.7% of revenues, for the thirteen weeks
ended March 1, 2003 as compared with $9.4 million, or 6.2% of revenues, for the
fourteen weeks ended March 2, 2002. The increase was due primarily to additional
capital expenditures and the completion and placement into service of the
Company's second manufacturing plant in Mexico.
Other expense (income). Net other expense (interest and interest rate swap
(income) expense less interest income) was $0.4 million, or 0.3% of revenues,
for the thirteen weeks ended March 1, 2003 as compared with $3.5 million, or
2.3% of revenues, for the fourteen weeks ended March 2, 2002. During the second
quarter of fiscal 2002, the Company recorded a $2.3 million interest charge
which was an estimate of the interest due from settling a revenue agent review
with the IRS. Excluding this charge, net other expense would have been $1.2
million, or 0.8% of revenues, for the fourteen weeks ended March 2, 2002. The
decrease in net other expense was also a result of lower interest rates and
continued debt reduction.
Provision for Income Taxes. The Company's effective income tax rate was 38.5%
for the thirteen weeks ended March 1, 2003 as compared to 38.0% for the fourteen
weeks ended March 2, 2002. The primary reason for the increase is higher state
income taxes.
LIQUIDITY AND CAPITAL RESOURCES
Shareholders' equity at March 1, 2003 was $317.5 million, or 80.5% of total
capitalization.
During the twenty-six weeks ended March 1, 2003, net cash provided by operating
activities ($31.2 million) was primarily used for capital expenditures ($18.4
million), net debt repayment ($8.0 million), common stock repurchases ($1.3
million), and payment of cash dividends ($1.3 million).
As of March 1, 2003, the Company had $5.4 million in cash and cash equivalents
and $32.9 million available on its $125.0 million unsecured line of credit with
a syndicate of banks. The Company believes its generated cash from operations
and its borrowing capacity will adequately cover its foreseeable capital
requirements.
SEASONALITY
Historically, the Company's revenues and operating results have varied from
quarter to quarter and are expected to continue to fluctuate in the future.
These fluctuations have been due to a number of factors, including: general
economic conditions in the Company's markets; the timing of acquisitions and of
commencing start-up operations and related costs; the effectiveness of
integrating acquired businesses and start-up operations; the timing of nuclear
plant outages; capital expenditures; seasonal rental and purchasing patterns of
the Company's customers; and price changes in response to competitive factors.
In addition, the Company's operating results historically have been lower during
the second and fourth fiscal quarters than during the other quarters of the
fiscal year. The operating results for any historical quarter are not
necessarily indicative of the results to be expected for an entire fiscal year
or any other interim periods.
EFFECTS OF INFLATION
Inflation has had the effect of increasing the reported amounts of the Company's
revenues and costs. The Company uses the last-in, first-out (LIFO) method to
value a significant portion of inventories. This method tends to reduce the
amount of income due to inflation included in the Company's results of
operations. The Company believes that, through increases in its prices and
productivity improvements, it has been able to recover increases in costs and
expenses attributable to inflation.
SAFE HARBOR FOR FORWARD LOOKING STATEMENTS
Forward looking statements contained in this quarterly report are subject to the
safe harbor created by the Private Securities Litigation Reform Act of 1995 and
are highly dependent upon a variety of important factors that could cause actual
results to differ materially from those reflected in such forward looking
statements. Such factors include uncertainties regarding the transfer of the
Company's manufacturing operations to new facilities in Mexico, the Company's
ability to consummate and successfully integrate acquired businesses,
uncertainties regarding any existing or newly-discovered expenses and
liabilities related to environmental compliance and remediation, the Company's
ability to compete successfully without any significant degradation in its
margin rates, seasonal fluctuations in business levels, uncertainties regarding
the price levels of natural gas, electricity and fuel, the impact of negative
economic conditions on the Company's customers and such customer's workforce,
the continuing increase in domestic healthcare costs, the impact of interest
rate variability upon the Company's interest rate swap arrangements, the
Company's efforts to evaluate and potentially reduce internal costs, economic
and other developments associated with the war with Iraq, the uncertainties
arising from the war on terrorism and its impact on the economy and general
economic conditions. When used in this quarterly report, the words "intend,"
"anticipate," "believe," "estimate," and "expect" and similar expressions as
they relate to the Company are included to identify such forward looking
statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Foreign Currency Exchange Risk
Management has determined that all of the Company's foreign subsidiaries operate
primarily in local currencies that represent the functional currencies of the
subsidiaries. All assets and liabilities of foreign subsidiaries are translated
into U.S. dollars using the exchange rate prevailing at the balance sheet date,
while income and expense accounts are translated at average exchange rates
during the year. As such, the Company's operating results are affected by
fluctuations in the value of the U.S. dollar as compared to currencies in
foreign countries, as a result of the Company's transactions in these foreign
markets. The Company does not operate a hedging program to mitigate the effect
of a significant rapid change in the value of the Canadian Dollar, Euro or
Mexican Peso as compared to the U.S. dollar. If such a change did occur, the
Company would have to take into account a currency exchange gain or loss in the
amount of the change in the U.S. dollar denominated balance of the amounts
outstanding at the time of such change. While the Company does not believe such
a gain or loss is likely, and would not likely be material, there can be no
assurance that such a loss would not have an adverse material effect on the
Company's results of operations or financial condition.
Interest Rate Risk
The Company is exposed to market risk from changes in interest rates which may
adversely affect its financial position, results of operations and cash flows.
In seeking to minimize the risks from interest rate fluctuations, the Company
manages exposures through its regular operating and financing activities. The
Company is exposed to interest rate risk primarily through its borrowings under
its $125 million unsecured line of credit with a syndicate of banks. Under the
line of credit, the Company may borrow funds at variable interest rates based on
the Eurodollar rate or the bank's money market rate, as selected by the Company.
As of March 1, 2003, the Company's outstanding debt approximates its carrying
value.
The Company has entered into interest rate swap agreements to manage its
exposure to movements in interest rates on its variable rate debt. The swap
agreements are cash flow hedges and are used to manage exposure to interest rate
movement by effectively changing the variable rate to a fixed rate. Such
instruments are matched with the underlying borrowings. The effective portion of
the cash flow hedge is recorded within the other comprehensive income (loss)
section of shareholders' equity in the period of change in fair value. The
ineffective portion of the cash flow hedge is charged to the Company's
consolidated statement of income in the period of change in fair value.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures
As required by the new Rule 13a-15 under the Securities Exchange Act of 1934,
the Company carried out an evaluation under the supervision and with the
participation of the Company's management, including the Company's Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of the Company's disclosure controls and procedures as of a
date within 90 days prior to the filing of this report (the "Evaluation Date").
Based upon that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that the Company's disclosure controls and procedures are
effective to ensure that material information relating to the Company required
to be included in this Quarterly Report on Form 10-Q is made known to them by
others within the Company on a timely basis. In connection with the new rules,
the Company currently is in the process of further reviewing and documenting its
disclosure controls and procedures, including its internal controls and
procedures for financial reporting, and may from time to time make changes aimed
at enhancing their effectiveness and to ensure that our systems evolve with our
business.
(b) Changes in internal controls
Subsequent to the Evaluation Date, there were no significant changes in internal
controls or other factors that could significantly affect internal controls.
Part II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders:
The Company's Annual Meeting of Shareholders was held on January 14, 2003.
Albert Cohen and Anthony F. DiFillippo were reelected to the Board of Directors.
With respect to Mr. Cohen, 7,848,709 shares of Common Stock were voted for his
election and 215,330 shares of Common Stock were withheld from voting for his
election. With respect to Mr. DiFillippo, 7,991,109 shares of Common Stock and
9,793,752 shares of Class B Common Stock were voted for his election and 72,930
shares of Common Stock and 60,000 shares of Class B Common Stock were withheld
from voting for his election. The terms of office of Mr. Ronald D. Croatti, Ms.
Cynthia Croatti, Mr. Donald J. Evans, and Mr. Phillip L. Cohen continued after
the Annual Meeting of Shareholders.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: None
(b) Reports on Form 8-K: None
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 of the
undersigned thereunto duly authorized.
UniFirst Corporation
Date: April 15, 2003 By: /s/ Ronald D. Croatti
------------------------------
Ronald D. Croatti
President and Chief Executive Officer
Date: April 15, 2003 By: /s/ John B. Bartlett
-----------------------------
John B. Bartlett
Senior Vice President
and Chief Financial Officer
CERTIFICATION
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Ronald D. Croatti, certify that:
1. I have reviewed this quarterly report on Form 10-Q of UniFirst 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. The registrant'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 registrant and 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. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant'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 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. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in 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: April 15, 2003
By: /s/ Ronald D. Croatti
------------------------------
Chief Executive Officer
(Principal Executive Officer)
CERTIFICATION
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, John B. Bartlett, certify that:
1. I have reviewed this quarterly report on Form 10-Q of UniFirst 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. The registrant'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 registrant and 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. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant'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 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. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in 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: April 15, 2003
By: /s/ John B. Bartlett
------------------------------
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)