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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934.
For the quarterly period ended September 30, 2002
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
Commission file number 0-11428
INFORMATION RESOURCES, INC.
---------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-2947987
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 North Clinton Street, Chicago, Illinois 60661
-------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 726-1221
--------------
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 [ ]
The number of shares of the registrant's common stock, $.01 par value per
share outstanding, as of October 31, 2002 was 29,562,978.
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
INDEX
-----
PAGE
NUMBER
------
PART I. FINANCIAL INFORMATION
----------------------------------
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Operations 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 15
Item 4 - Controls and Procedures 22
PART II. OTHER INFORMATION
------------------------------
Item 6 - Exhibits and Reports on Form 8-K 23
Signatures 24
Certification of Chief Executive Officer 25
Certification of Chief Financial Officer 26
2
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS SEPTEMBER 30, 2002 DECEMBER 31, 2001
- ------ ------------------ -----------------
(UNAUDITED)
CURRENT ASSETS
Cash and cash equivalents $ 5,359 $ 13,708
Accounts receivable, net 76,036 74,669
Prepaid expenses and other 10,893 11,283
-------- ---------
Total Current Assets 92,288 99,660
-------- ---------
Property and equipment, at cost 230,046 214,392
Accumulated depreciation (164,635) (144,461)
-------- ---------
Net property and equipment 65,411 69,931
Investments 13,386 14,573
Deferred income taxes 6,137 7,465
Other assets 167,003 161,794
-------- ---------
$344,225 $ 353,423
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Current maturities of long-term debt $ 3,344 $ 3,549
Accounts payable 55,092 59,708
Accrued compensation and benefits 17,559 20,368
Accrued property, payroll and other taxes 4,068 1,949
Accrued expenses 5,483 5,851
Accrued restructuring costs 250 2,904
Deferred revenue 33,421 32,464
-------- ---------
Total Current Liabilities 119,217 126,793
-------- ---------
Long-term debt 6,003 2,234
Other liabilities 11,675 13,565
STOCKHOLDERS' EQUITY
Preferred stock-authorized, 1,000,000 shares,
$.01 par value; none issued -- --
Common stock - authorized 60,000,000 shares,
$.01 par value; 29,562,978 and
29,397,373 shares issued and
outstanding, respectively 299 297
Additional paid-in capital 201,727 200,826
Retained earnings 11,731 19,945
Accumulated other comprehensive loss (6,427) (10,237)
-------- ---------
Total Stockholders' Equity 207,330 210,831
-------- ---------
$344,225 $ 353,423
======== =========
The accompanying notes are an integral part of these statements.
3
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------- -------------
2002 2001 2002 2001
---- ---- ---- ----
Information services revenues $ 140,561 $ 138,166 $ 413,512 $ 415,380
Costs and expenses:
Information services sold (127,190) (123,074) (373,321) (369,145)
Selling, general and administrative expenses (11,931) (11,807) (34,938) (39,144)
Restructuring and other charges -- (4,209) (7,152) (12,408)
--------- --------- --------- ---------
(139,121) (139,090) (415,411) (420,697)
--------- --------- --------- ---------
Operating profit (loss) 1,440 (924) (1,899) (5,317)
Interest expense (241) (392) (584) (1,737)
Other, net 46 38 189 (1,014)
Equity in earnings (losses) of affiliated companies 246 5 512 (171)
Minority interest benefit -- 770 395 2,147
--------- --------- --------- ---------
Income (loss) before income taxes 1,491 (503) (1,387) (6,092)
Income tax (expense) benefit (641) 15 239 1,889
--------- --------- --------- ---------
Income (loss) before cumulative
Effect of accounting change 850 (488) (1,148) (4,203)
Cumulative effect of accounting change -
Impairment of goodwill -- -- (7,065) --
--------- --------- --------- ---------
Net income (loss) $ 850 $ (488) $ (8,213) $ (4,203)
========= ========= ========= =========
Net income (loss) per common share before cumulative
Effect of accounting change - basic $ .03 $ (.02) $ (.04) $ (.14)
========= ========= ========= =========
Net income (loss) per common share - basic $ .03 $ (.02) $ (.28) $ (.14)
========= ========= ========= =========
Net income (loss) per common and common equivalent share
Before cumulative effect of accounting change - diluted $ .03 $ (.02) $ (.04) $ (.14)
========= ========= ========= =========
Net income (loss) per common and
Common equivalent share - diluted $ .03 $ (.02) $ (.28) $ (.14)
========= ========= ========= =========
Weighted average common shares - basic 29,579 29,310 29,534 29,150
========= ========= ========= =========
Weighted average common and
Common equivalent shares - diluted 29,920 29,310 29,534 29,150
========= ========= ========= =========
The accompanying notes are an integral part of these statements.
4
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
NINE MONTHS ENDED
SEPTEMBER 30,
2002 2001
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (8,213) $ (4,203)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Amortization of deferred data procurement costs 98,637 93,045
Depreciation 20,380 21,649
Amortization of capitalized software costs and intangibles 2,352 4,487
Restructuring and other charges, net of cash payments (1,922) 1,530
Deferred income tax benefit (239) (1,889)
Equity in earnings of affiliated companies and minority interests (907) (1,976)
Impairment of goodwill 7,065 --
Other 625 558
Change in assets and liabilities:
Accounts receivable (2,031) 3,573
Prepaid expenses and other 390 3,095
Accounts payable and accrued liabilities (5,696) (7,597)
Deferred revenue 957 11,558
Other, net (1,303) 6,067
--------- ---------
Net cash provided by operating activities 110,095 129,897
CASH FLOWS FROM INVESTING ACTIVITIES:
Deferred data procurement costs (105,905) (96,200)
Purchase of property, equipment and software (10,972) (14,568)
Capitalized software costs (1,435) (1,793)
Investment in joint ventures -- (2,751)
Other, net 193 460
--------- ---------
Net cash used by investing activities (118,119) (114,852)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net bank borrowings (repayments) 1,779 (16,000)
Purchases of Common Stock (1,196) (110)
Proceeds from issuance of stock and exercise of stock options 1,840 927
Net repayments of capitalized leases (3,177) (1,747)
--------- ---------
Net cash used by financing activities (754) (16,930)
EFFECT OF EXCHANGE RATE CHANGES ON CASH 429 (159)
--------- ---------
Net decrease in cash and cash equivalents (8,349) (2,044)
Cash and cash equivalents at beginning of period 13,708 11,914
--------- ---------
Cash and cash equivalents at end of period $ 5,359 $ 9,870
========= =========
The accompanying notes are an integral part of these statements.
5
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
Principles of consolidation: The condensed consolidated financial statements
include the accounts of Information Resources, Inc. and all wholly or majority
owned subsidiaries and affiliates (collectively the "Company"). Minority
interests reflect the non-Company owned stockholder interests in international
operations. The equity method of accounting is used for investments in which the
Company has a 20% to 50% ownership interest because it exercises significant
influence over operating and financial policies. All significant intercompany
accounts and transactions have been eliminated in consolidation.
Interim financial statements: The interim financial statements are
unaudited, but include all adjustments (consisting of normal recurring
adjustments) necessary, in the opinion of management, for a fair statement of
financial position and results of operations for the period presented. The
preparation of interim financial statements necessarily relies on estimates,
requiring the use of caution in estimating results for the full year based on
interim results of operations.
Earnings (loss) per common and common equivalent share: Net earnings (loss)
per share is based upon the weighted average number of shares of common stock
outstanding during each period. Net earnings (loss) per common and common
equivalent share diluted is based upon the weighted average number of shares of
common stock and common stock equivalents, entirely comprised of stock options,
outstanding during each period. For the first three quarters of 2002 and 2001,
all stock options aggregating 8,909,924 shares and 9,384,855 shares,
respectively, were excluded from the weighted average shares outstanding
calculation because they were anti-dilutive. For the third quarter of 2002 and
2001, stock options aggregating 6,238,930 shares and 8,909,924 shares,
respectively, were excluded from the weighted average shares outstanding
calculation because they were anti-dilutive.
NOTE 2 - SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest and income taxes during the period was as follows (in
thousands):
NINE MONTHS ENDED
SEPTEMBER 30,
-------------
2002 2001
---- ----
Interest $ 572 $1,775
Income taxes 340 224
Non-cash investing and financing activities are excluded from the
consolidated statement of cash flows. During the nine months ended September 30,
2002, the Company acquired computer and data collection equipment for $4.8
million in exchange for capital leases. During the nine months ended September
30, 2001, the Company acquired computer software licenses for $3.0 million in
exchange for a financing obligation.
6
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONT'D.
(UNAUDITED)
NOTE 3 - ACCOUNTS RECEIVABLE
Accounts receivable were as follows (in thousands):
SEPTEMBER 30, 2002 DECEMBER 31, 2001
------------------ -----------------
Billed $ 59,466 $ 66,065
Unbilled 20,801 12,555
-------- --------
80,267 78,620
Reserve for accounts receivable (4,231) (3,951)
-------- --------
$ 76,036 $ 74,669
======== ========
NOTE 4 - INVESTMENTS AND OTHER ASSETS
Investments were as follows (in thousands):
SEPTEMBER 30, 2002 DECEMBER 31, 2001
------------------ -----------------
Mosaic InfoForce, L.P., at cost plus equity in
undistributed earnings $ 4,983 $ 5,273
Datos Information Resources, at cost plus equity in
undistributed earnings 4,088 4,341
GfK Panel Services Benelux B.V., at cost 1,315 1,315
Middle East Market Research Bureau ("MEMRB"),
at cost 2,772 2,781
Other 228 863
------- -------
$13,386 $14,573
======= =======
In the second quarter of 2002, the Company wrote off its U.K. subsidiary's
40% investment in the Radar Retail Research ("Radar") joint venture. In June
2002, the Company and its partner in Radar, Taylor Nelson Sofres, decided to
cease Radar's operations. Accordingly, operating expenses for the nine months of
2002 include a charge of $966,000 relating to the write-off of the investment
and the accrual of the Company's share of Radar's closing costs.
7
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONT'D.
(UNAUDITED)
Other assets were as follows (in thousands):
SEPTEMBER 30, 2002 DECEMBER 31, 2001
------------------ -----------------
Deferred data procurement costs -
net of accumulated amortization of
$145,017 in 2002 and $138,046 in 2001 $157,235 $144,500
Goodwill - net of accumulated
amortization of $8,319 in 2001 -- 7,059
Capitalized software costs - net of
accumulated amortization of $4,219
in 2002 and $4,665 in 2001 3,961 4,412
Other - net of accumulated amortization of
$6,273 in 2002 and $5,520 in 2001 5,807 5,823
-------- --------
$167,003 $161,794
======== ========
Effective January 1, 2002, the Company adopted Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets." Under the
new rules, goodwill, the excess of the carrying value over the net book value of
investments accounted for using the equity method and intangible assets deemed
to have indefinite lives, are no longer amortized but are subject to annual
impairment tests. Other intangible assets continue to be amortized over their
useful lives.
During the second quarter of 2002, the Company performed a goodwill
impairment test as required by Statement No. 142 to determine the implied fair
value of the goodwill recorded on its books as of January 1, 2002. As the
goodwill related entirely to previous international transactions, the fair value
was estimated by discounting the estimated future cash flows of the
international reporting unit. Based on this analysis, the Company recognized a
goodwill impairment charge of $7.1 million. In accordance with Statement No.
142, the charge has been reflected as a change in accounting principle in the
Statement of Operations. As required by Statement of Accounting Standards No. 3,
"Reporting Accounting Changes in Interim Financial Statements," the first
quarter 2002 financial statements have been restated to reflect the goodwill
impairment charge.
8
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONT'D.
(UNAUDITED)
Proforma results for the third quarter and the first nine months of 2001 are
summarized below, assuming the provisions of Statement 142 had been adopted
effective January 1, 2001 and assuming no goodwill impairment was required in
2001 or 2002 (in thousands, except per share data):
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------- --------------------
2002 2001 2002 2001
---- ---- ---- ----
Reported net income (loss) $ 850 $ (488) $ (8,213) $(4,203)
Add:
Goodwill amortization -- 139 -- 417
Amortization of Mosaic
InfoForce, L.P. investment -- 79 -- 237
Cumulative effect of accounting change -
impairment of goodwill -- -- 7,065 --
------- ------- --------- -------
Adjusted net income (loss) $ 850 $ (270) $ (1,148) $(3,549)
======= ======= ========= =======
Basic and diluted earnings per share:
Reported net income (loss) $ .03 $ (.02) $ (.28) $ (.14)
Goodwill amortization and amortization
of Mosaic InfoForce, L.P. investment -- .01 -- .03
Cumulative effect of accounting change -
impairment of goodwill -- -- .24 --
------- ------- --------- -------
Adjusted net income (loss) $ .03 $ (.01) $ (.04) $ (.11)
======= ======= ========= =======
NOTE 5 - LONG TERM DEBT
Long-term debt was as follows (in thousands):
SEPTEMBER 30, 2002 DECEMBER 31, 2001
------------------ -----------------
Bank borrowings $ 1,779 $ --
Capitalized leases and other 7,568 5,783
------- -------
9,347 5,783
Less current maturities (3,344) (3,549)
------- -------
$ 6,003 $ 2,234
======= =======
9
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONT'D.
(UNAUDITED)
On July 12, 2002, the Company replaced its existing $35 million credit
facility, which was scheduled to expire in October 2002, with a new $40 million
credit facility. The new facility has floating rate interest options that range
between 2.25% and 3.00% over LIBOR and commitment fees of up to 0.50% payable on
the unused portion. The new credit facility expires in July 2005. Under the new
credit facility, the maximum commitment of funds available for borrowings is
limited by a defined borrowing base formula related to eligible accounts
receivable, which fluctuates during the quarter. Borrowings under the facility
are secured by the Company's assets. As of September 30, 2002, the Company had
$18.4 million of borrowing availability, net of outstanding borrowings and
letters of credit, under the new revolving credit facility.
The financial covenants in the new credit agreement, as well as in the lease
agreement for the Company's Chicago headquarters, require the Company to
maintain a minimum tangible net worth and to meet certain cash flow coverage and
leverage ratios. The agreements also limit the Company's ability to declare
dividends or make distributions to holders of capital stock, or redeem or
otherwise acquire shares of the Company. The new bank credit agreement contains
covenants which restrict the Company's ability to incur additional indebtedness.
As of September 30, 2002, the Company was in compliance with all covenants.
NOTE 6 - COMPREHENSIVE INCOME (LOSS)
The comprehensive income (loss) summary shown below sets forth certain items
that affect stockholders' equity but are excluded from the presentation of net
earnings. The components of comprehensive income (loss) were as follows (in
thousands):
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -----------------
2002 2001 2002 2001
---- ---- ---- ----
Net income (loss) $ 850 $ (488) $(8,213) $(4,203)
Foreign currency translation
Adjustment 173 3,154 3,809 627
------- ------- ------- -------
Comprehensive income (loss) $ 1,023 $ 2,666 $(4,404) $(3,576)
======= ======= ======= =======
NOTE 7 - STOCK REPURCHASE
In June 2002, the Company sold 51,005 shares of newly issued Common Stock
for $.4 million to employees participating in the Company's 2000 Employee Stock
Purchase Plan ("ESPP"). The Company purchased 210,000 shares of Common Stock
aggregating $1.2 million in July 2002 in connection with the stock repurchase
program announced in August 2000 that was established principally to acquire
shares to fund the ESPP.
10
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONT'D.
(UNAUDITED)
NOTE 8 - SEGMENT INFORMATION
The Company's business information services are conducted almost exclusively
in the United States and Europe. The Company's operations in other markets
account for approximately 1% of consolidated revenues. The Company considers
revenues from third parties and the aggregation of operating profit (loss),
equity earnings (losses) and minority interests ("Operating Results") on a
geographic basis to be the most meaningful measure of the operating performance
of each respective geographic segment and of the Company as a whole.
The following table presents certain information regarding the operations of
the Company by geographic segments (in thousands):
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -----------------
2002 2001 2002 2001
---- ---- ---- ----
Revenues:
U.S. Services $ 104,202 $ 105,036 $ 309,009 $ 315,302
International Services 36,359 33,130 104,503 100,078
--------- --------- --------- ---------
Total Revenue $ 140,561 $ 138,166 $ 413,512 $ 415,380
========= ========= ========= =========
Operating Results:
U.S. Services $ 5,221 $ 6,813 $ 17,762 $ 19,961
International Services:
Operating loss (2,020) (743) (7,976) (3,332)
Equity in earnings (losses) of
Affiliated companies -- 23 (78) 149
Minority interest benefit -- 770 395 2,147
--------- --------- --------- ---------
Subtotal--International Services (2,020) 50 (7,659) (1,036)
Corporate and other expenses including
equity in affiliated companies (1,515) (2,803) (3,943) (9,858)
Restructuring and other items (a) -- (4,209) (7,152) (12,408)
--------- --------- --------- ---------
Operating Results 1,686 (149) (992) (3,341)
Interest expense and other, net (195) (354) (395) (2,751)
--------- --------- --------- ---------
Income (loss) before income taxes $ 1,491 $ (503) $ (1,387) $ (6,092)
========= ========= ========= =========
(a) Restructuring and other charges for the U.S. Services and International
Services were $2.0 million and $2.2 million, respectively, for the three
months ended September 30, 2001. Restructuring and other charges for the
U.S. Services and International Services were $6.0 million and $1.1 million,
respectively, for the nine months ended September 30, 2002 and $6.0 million
and $6.4 million, respectively, for the nine months ended September 30,
2001.
11
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONT'D.
(UNAUDITED)
NOTE 9 - RESTRUCTURING AND OTHER CHARGES
Since 1999, the Company has undertaken three major initiatives as described
below resulting in incremental, one-time expenditures that have been classified
as restructuring expenses in the Statement of Operations.
Project Delta: In the third quarter of 1999, the Company initiated a
comprehensive program named Project Delta. The objective of Project Delta was to
improve productivity and operating efficiencies to reduce the Company's ongoing
cost structure in its U.S. operations. The work outlined as part of Project
Delta was completed during the third quarter of 2001. A restructuring accrual
was established in 1999 to reflect certain of the outstanding obligations
related to 1999 restructuring charges. Certain restructuring costs were not
eligible for accrual in 1999 and were recorded during 2000 and 2001.
Transition of German Production to U.S. Facility: The Company made the
decision in the fourth quarter of 1999 to transfer production services for
IRI/GfK Retail from an external vendor in Germany to the Company's U.S.
headquarters facility in order to enhance its InfoScan offering in Germany and
to reduce future production costs. The transition of German production to the
U.S. facility began in the first quarter of 2000 and was completed in the first
quarter of 2002.
Information Technology Assessment: During the fourth quarter of 2001, the
Company began a review of its information technology operations to assess
potential restructuring costs and benefits. The review included initial
assessments of database design, transition planning and cost and savings
estimates and was completed in the second quarter of 2002. This project resulted
in cost savings, process efficiencies and a plan for continuous improvement of
the technology infrastructure.
Other Items: During the fourth quarter of 2001, the Company settled a
dispute with Manugistics, Inc. Manugistics agreed to pay IRI a total of $8.625
million, resulting in a gain of $2.0 million which was reflected as other income
in Restructuring and Other Items. The Company received the settlement proceeds
during the first quarter of 2002.
12
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONT'D.
(UNAUDITED)
The following tables reflect restructuring and other items incurred and cash
payments made during the periods ended September 30, 2002 and 2001 (in
thousands):
2002 ACTIVITY
---------------------------------
LIABILITY
(RECEIVABLE) AT LIABILITY AT
DECEMBER 31, 2001 PROVISION CASH NON-CASH SEPTEMBER 30, 2002
------------------ --------- ---- -------- ------------------
RESTRUCTURING CHARGES
Project Delta
Termination benefits $ 634 $ (240) $ (394) $ -- $ --
Discontinued activities 265 -- (15) -- 250
Transition of German production
to U.S. facility 592 1,131 (1,723) -- --
Information technology
assessment 1,413 6,261 (7,674) -- --
OTHER ITEMS (1,036) -- 1,036 -- --
------- ------- ------- ------- ------
$ 1,868 $ 7,152 $(8,770) $ -- $ 250
======= ======= ======= ======= ======
2001 ACTIVITY
---------------------------------
LIABILITY AT LIABILITY AT
DECEMBER 31, 2000 PROVISION CASH NON-CASH SEPTEMBER 30, 2001
----------------- --------- ---- -------- ------------------
RESTRUCTURING CHARGES
Project Delta
Termination benefits $ 2,029 $ 1,362 $ (2,292) $ -- $ 1,099
Disposition of excess office space -- 24 (24) -- --
Discontinued activities 541 2,025 (135) (2,025) 406
Other costs -- 2,927 (2,927) -- --
Transition of German production to
U.S. facility -- 6,070 (5,616) -- 454
-------- -------- -------- -------- --------
$ 2,570 $ 12,408 $(10,994) $ (2,025) $ 1,959
======== ======== ======== ======== ========
Termination Benefits: As of the end of 2001, 397 employees had been
terminated under various Project Delta initiatives. The accrual balance
remaining as of December 31, 2001 represented the unpaid severance costs
associated with employees previously terminated.
Discontinued Activities: During 2000, it was determined that certain
equipment used in the Company's U.S. operations to collect retail information
would no longer be utilized after the second quarter of 2001. Accordingly, the
Company recognized a non-cash charge of $2.0 million in the first half of 2001
relating to accelerated depreciation on this equipment.
13
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONT'D.
(UNAUDITED)
Disposition of Excess Office Space: In the first nine months of 2001, the
Company recorded $.02 million of charges relating to lease buyouts for
unutilized office space.
Transition of German Production to U.S. Facility: During the first quarter
of 2002 and the first nine months of 2001, charges of approximately $1.1 million
and $6.1 million, respectively, were recorded related to the transition of
German production to the U.S. facility. These costs consisted primarily of
parallel processing and temporary workforce expenses. The transition was
completed in the first quarter of 2002.
Information Technology Assessment: These costs related primarily to
consulting fees paid to a third party in connection with the technology project.
Other Restructuring Costs: Other restructuring costs in the first nine
months of 2001 related primarily to consulting fees paid to a third party for
assistance in the identification of process improvements and efficiencies within
the U.S. operations.
14
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following narrative discusses the results of operations, liquidity and
capital resources for the Company on a consolidated basis. This section should
be read in conjunction with IRI's Annual Report on Form 10-K for the fiscal year
ended December 31, 2001. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained therein.
RESULTS OF OPERATIONS
The Company's consolidated net income was $.9 million or $.03 per diluted
share for the third quarter of 2002 compared to a consolidated net loss of $.5
million or $.02 per diluted share for the corresponding 2001 quarter. The
Company's consolidated net loss was $8.2 million or $.28 per diluted share for
the nine months ended September 30, 2002 compared to a consolidated net loss of
$4.2 million or $.14 per diluted share for the corresponding 2001 period.
Restructuring and other charges for the third quarter of 2002 were $0 compared
to $4.2 million or $.09 per diluted share for the third quarter of 2001. For
year to date 2002, restructuring and other charges and the cumulative effect of
an accounting change for goodwill were $14.2 million or $.39 per diluted share
compared to $12.4 million or $.26 per diluted share for the corresponding 2001
period.
Third Quarter Versus Prior Year
Consolidated revenues for the quarter ended September 30, 2002 were $140.6
million, an increase of 2% over the corresponding quarter in 2001. U.S. revenues
were $104.2 million, a decrease of 1% compared to the prior year. This decrease
was primarily due to a 5% decline in retail tracking revenue that was partially
offset by an 18% increase in revenue from panel and analytics products and
services. The decline in retail tracking revenue is primarily the result of the
delayed impact of customer losses in 2001 that were not completely offset by
revenues generated from new customers and increased spending by existing
customers during the period. International revenues were $36.4 million for the
third quarter of 2002, an increase of 10% compared to the prior year. Excluding
foreign currency exchange effects, international revenues were flat over the
prior year.
Consolidated costs of information services sold increased 3% to $127.2
million for the three months ended September 30, 2002 compared to $123.1 million
for the third quarter of 2001. This increase is primarily the result of foreign
currency exchange effects. While the Company incurred additional costs
associated with the growth of its analytics business, these costs were generally
offset by savings in a number of other areas as a result of the Company's
ongoing cost saving efforts.
Consolidated selling, general and administrative expenses increased 1% to
$11.9 million for the three months ended September 30, 2002 compared to $11.8
million for the third quarter of 2001.
Earnings before interest and taxes were $1.7 million for the third quarter
of 2002 compared to a loss of $.1 million in the prior year. This improvement is
due to a decline in restructuring and other charges of $4.2 million and lower
corporate expenses which were partially offset by a lower U.S. contribution and
increased international losses, primarily resulting from the Company's German
operation which is further discussed below.
15
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D.
Restructuring and other charges are discussed below. Interest and other
expenses were $.2 million for the third quarter of 2002, a decrease of $.2
million over the prior year due to lower bank debt in 2002.
The Company adopted Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets" in the first quarter of 2002. Proforma
results for the third quarter of 2001, had the provisions of Statement No. 142
been applied and no goodwill impairment recorded, would have been a net loss of
$.3 million or $.01 per diluted share compared to a reported net loss of $.5
million or $.02 per diluted share.
Third Quarter Year to Date Versus Prior Year
Consolidated revenues were $413.5 million for the nine months ended
September 30, 2002, a decrease of $1.9 million over the corresponding period of
2001. U.S. revenues decreased 2% to $309.0 million for the nine months ended
September 30, 2002 compared to the prior year. This decline was primarily due to
a 5% decline in retail tracking revenue that was partially offset by an 11%
increase in revenue from panel and analytics products and services. The decline
in retail tracking revenue is primarily due to the delayed impact of customer
losses in 2001 that were not completely offset by revenues generated from new
customers and increased spending by existing customers during the period.
International revenues increased 4% to $104.5 million compared to the prior
year. Excluding the impact of foreign currency exchange effects, international
revenues for the first nine months of 2002 increased 1% over the prior year.
Consolidated costs of information services sold increased 1% to $373.3
million for the nine months ended September 30, 2002 compared to costs of $369.1
million for the corresponding period of 2001. This increase is primarily the
result of foreign currency exchange effects. While the Company incurred
additional costs associated with the growth of its analytics business, these
costs were generally offset by savings in a number of other areas as a result of
the Company's ongoing cost saving efforts and by the elimination of goodwill
amortization.
Consolidated selling, general and administrative expenses decreased 11% to
$34.9 million for the nine months ended September 30, 2002 compared to $39.1
million for the prior year. This decrease is primarily due to lower recruiting
and relocation costs, reduced incentive accruals and lower marketing costs.
For the first nine months of 2002, the Company's loss before interest and
taxes and the cumulative effect of an accounting change for goodwill was $.8
million compared to a loss of $4.4 million in the prior year. This improvement
is the result of a decline in restructuring and other charges of $5.3 million
and lower corporate expenses which were partially offset by a lower U.S.
contribution and increased international losses, primarily resulting from the
Company's German operation which is further discussed below.
Restructuring and other charges are discussed below. Interest and other
expenses were $.4 million for the nine months ended September 30, 2002, a
decrease of $2.4 million over the prior year.
16
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D.
The decline was due to lower bank debt and foreign exchange gains resulting from
the strength of European currencies against the U.S. dollar during 2002.
Proforma results for the first nine months of 2001, had the provisions of
Statement No. 142 been applied and no goodwill impairment recorded, would have
been a net loss of $3.5 million or $.11 per diluted share compared to a reported
net loss of $4.2 million or $.14 per diluted share.
During the second quarter of 2002, the Company performed a goodwill
impairment test as required by Statement No. 142 to determine the implied fair
value of the goodwill recorded on its books as of January 1, 2002. As the
goodwill related entirely to previous international transactions, the fair value
was estimated by discounting the estimated future cash flows of the
international reporting unit. Based on this analysis, the Company recognized a
goodwill impairment charge of $7.1 million. In accordance with Statement No.
142, the charge has been reflected as a change in accounting principle in the
Statement of Operations. As required by Statement of Accounting Standards No. 3,
"Reporting Accounting Changes in Interim Financial Statements," the first
quarter 2002 financial statements have been restated to reflect the goodwill
impairment charge.
Losses from the German operation have increased over the prior year as a
result of the Company's transition to a new service in that country. As
discussed below in restructuring and other charges, German production was
transitioned to the U.S. in the first quarter of 2002. However, the German
operation has also been transitioning customers to a new scan-based service
during 2002 and has experienced difficulty meeting client expectations during
this transition. This has resulted in lower revenues due to lost customers and
credits to existing customers. Losses for the Company's International operations
were $2.0 million for the third quarter of 2002. Absent the losses attributable
to the Company's German business, the Company's International operations would
have reflected a profit in the third quarter of 2002. The Company is currently
evaluating various options relating to the German business.
As a result of certain trends and general economic conditions, the industry
is facing a number of challenges. Specifically, increasing customer
consolidation among consumer packaged goods manufacturers has caused the overall
market for retail tracking services to contract. In addition, retail tracking
services offered by the Company and its competitors, particularly in the U.S.,
now cover less of the total marketplace than in prior years as a result of the
decision by Wal-Mart in 2001 to discontinue providing its point-of-sale data to
third party data suppliers, including the Company and ACNielsen, and the
emergence and growth of new channels of trade that do not release point of sale
data for inclusion in retail tracking services. Further, general global economic
conditions in 2002 have resulted in pricing pressure and reductions in overall
customer spending on retail tracking services. The Company expects these
conditions to continue to impact the consumer packaged goods industry and the
demand for retail tracking services for the foreseeable future. Notwithstanding
these conditions, however, the Company has been experiencing increasing demand
for its panel and analytics services and anticipates continued growth in these
segments of its business. In part in response to the reduced spending on retail
tracking services, the Company continues to focus on cost containment and cost
reduction measures.
17
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D.
LIQUIDITY AND CAPITAL RESOURCES
The Company's current cash resources include its $5.4 million consolidated
cash balance and $18.4 million available as of September 30, 2002 under the
Company's new bank revolving credit facility discussed below. The Company
anticipates that it will have sufficient funds from these sources and internally
generated funds from its U.S. operations to satisfy its cash needs for the
foreseeable future. The Company's bank credit agreement contains covenants which
restrict the Company's ability to incur additional indebtedness.
Financings
On July 12, 2002, the Company replaced its existing $35 million credit
facility, which was scheduled to expire in October 2002, with a new $40 million
credit facility. The new facility has floating rate interest options that range
between 2.25% and 3.00% over LIBOR and commitment fees of up to 0.50% payable on
the unused portion. The new credit facility expires in July 2005. Under the new
credit facility, the maximum commitment of funds available for borrowings is
limited by a defined borrowing base formula related to eligible accounts
receivable, which fluctuates during the quarter. Borrowings under the facility
are secured by the Company's assets.
The financial covenants in the new credit agreement, as well as in the lease
agreement for the Company's Chicago headquarters, require the Company to
maintain a minimum tangible net worth and to meet certain cash flow coverage and
leverage ratios. The agreements also limit the Company's ability to declare
dividends or make distributions to holders of capital stock, or redeem or
otherwise acquire shares of the Company. The new bank credit agreement contains
covenants which restrict the Company's ability to incur additional indebtedness.
As of September 30, 2002, the Company was in compliance with all covenants.
Cash Flow
Consolidated net cash provided by operating activities during the first nine
months of 2002 was $110.1 million compared to $129.9 million for the same period
in 2001. This decrease was attributable to changes in accounts receivable,
accounts payable and prepaid assets resulting from the timing of collections and
payments. Additionally, in the second quarter of 2001, the Company received a
$10.9 million cash payment as an early termination fee on a client contract that
was to expire in 2005.
Consolidated cash used in net investing activities increased $3.3 million to
$118.1 million in 2002 reflecting higher expenditures for data procurement that
were partially offset by lower expenditures for capital. Additionally, investing
activity in 2001 included payments made in connection with the formation of
Mosaic InfoForce, L.P.
Net cash used before financing activities was $8.0 million for the nine
months ended September 30, 2002 compared to net cash provided before financing
activities of $15.0 million for the same period in 2001. For the first nine
months of 2002, consolidated cash flow used by net financing activities was
18
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D.
$.8 million compared to $16.9 million for the same period in 2001. 2001
financing activities included $16.0 million of repayments of borrowings under
the revolving line of credit.
Other Deferred Costs and Capital Expenditures
Consolidated deferred data procurement expenditures were $105.9 million for
the nine months ended September 30, 2002 and $96.2 million for the same period
in 2001. These expenditures are amortized over a period of 28 months and include
payments and services to retailers for point-of-sale data and other costs
related to collecting, reviewing and verifying panel, causal and other data
which are an essential part of the Company's database. Such expenditures were
$61.8 million and $56.3 million for the periods ended September 30, 2002 and
2001, respectively, for the Company's U.S. services business and $44.1 million
and $39.9 million, respectively, for the Company's International services
business. U.S. data procurement expenditures increased in 2002 due primarily to
increased causal collection costs associated with InfoScan product enhancements.
International expenditures increased due to the impact of currency as well as
increased retailer payments.
Consolidated capital expenditures were $11.0 million and $14.6 million for
the nine months ended September 30, 2002 and 2001, respectively. Capital
expenditures for the Company's U.S. services business were $7.7 million and
$11.3 million, while depreciation expense was $16.9 million and $18.4 million
for the nine months ended September 30, 2002 and 2001, respectively. The
Company's international capital expenditures were $3.3 million for each of the
nine months ended September 30, 2002 and 2001 while depreciation expense was
$3.5 million and $3.3 million for the nine months ended September 30, 2002 and
2001, respectively.
Consolidated capitalized software development costs, primarily in the U.S.,
were $1.4 million for the first three quarters of 2002 and $1.8 million for the
corresponding period in 2001.
Impact of Inflation
Inflation has slowed in recent years, however the Company's results of
operations are impacted by rising prices given the labor intensive nature of the
business. The Company passes increased costs on to customers with multi-year
contracts by adjusting sales prices through consumer price index increases to
the extent provided for in such contracts.
RESTRUCTURING AND OTHER CHARGES
Since 1999, the Company has undertaken three major initiatives as described
below resulting in incremental, one-time expenditures that have been classified
as restructuring expenses in the Statement of Operations.
Project Delta: In the third quarter of 1999, the Company initiated a
comprehensive program named Project Delta. The objective of Project Delta was to
improve productivity and operating efficiencies to reduce the Company's ongoing
cost structure in its U.S. operations. The
19
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D.
work outlined as part of Project Delta was completed during the third quarter of
2001. A restructuring accrual was established in 1999 to reflect certain of the
outstanding obligations related to 1999 restructuring charges. Certain
restructuring costs were not eligible for accrual in 1999 and were recorded
during 2000 and 2001.
Transition of German Production to U.S. Facility: The Company made the
decision in the fourth quarter of 1999 to transfer production services for
IRI/GfK Retail from an external vendor in Germany to the Company's U.S.
headquarters facility in order to enhance its InfoScan offering in Germany and
to reduce future production costs. The transition of German production to the
U.S. facility began in the first quarter of 2000 and was completed in the first
quarter of 2002.
Information Technology Assessment: During the fourth quarter of 2001, the
Company began a review of its information technology operations to assess
potential restructuring costs and benefits. The review included initial
assessments of database design, transition planning and cost and savings
estimates and was completed in the second quarter of 2002. This project resulted
in cost savings, process efficiencies and a plan for continuous improvement of
the technology infrastructure.
Other Items: During the fourth quarter of 2001, the Company settled a
dispute with Manugistics, Inc. Manugistics agreed to pay IRI a total of $8.625
million, resulting in a gain of $2.0 million which was reflected as other income
in Restructuring and Other Items. The Company received the settlement proceeds
during the first quarter of 2002.
The following tables reflect restructuring and other items incurred and cash
payments made during the periods ended September 30, 2002 and 2001 (in
thousands):
2002 ACTIVITY
-----------------------------
LIABILITY
(RECEIVABLE) AT LIABILITY AT
DECEMBER 31, 2001 PROVISION CASH NON-CASH SEPTEMBER 30, 2002
----------------- --------- ------- -------- ------------------
RESTRUCTURING CHARGES
Project Delta
Termination benefits $ 634 $ (240) $ (394) $ -- $ --
Discontinued activities 265 -- (15) -- 250
Transition of German production
to U.S. facility 592 1,131 (1,723) -- --
Information technology
assessment 1,413 6,261 (7,674) --
OTHER ITEMS (1,036) -- 1,036 -- --
------- ------- ------- ------- -------
$ 1,868 $ 7,152 $(8,770) $ -- $ 250
======= ======= ======= ======= =======
20
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D.
2001 ACTIVITY
---------------------------------
LIABILITY AT LIABILITY AT
DECEMBER 31, 2000 PROVISION CASH NON-CASH SEPTEMBER 30, 2001
----------------- --------- ---- -------- ------------------
RESTRUCTURING CHARGES
Project Delta
Termination benefits $ 2,029 $ 1,362 $ (2,292) $ -- $ 1,099
Disposition of excess office space -- 24 (24) -- --
Discontinued activities 541 2,025 (135) (2,025) 406
Other costs -- 2,927 (2,927) -- --
Transition of German production to
U.S. facility -- 6,070 (5,616) -- 454
-------- -------- -------- -------- --------
$ 2,570 $ 12,408 $(10,994) $ (2,025) $ 1,959
======== ======== ======== ======== ========
Termination Benefits: As of the end of 2001, 397 employees had been
terminated under various Project Delta initiatives. The accrual balance
remaining as of December 31, 2001 represented the unpaid severance costs
associated with employees previously terminated.
Discontinued Activities: During 2000, it was determined that certain
equipment used in the Company's U.S. operations to collect retail information
would no longer be utilized after the second quarter of 2001. Accordingly, the
Company recognized a non-cash charge of $2.0 million in the first half of 2001
relating to accelerated depreciation on this equipment.
Disposition of Excess Office Space: In the first nine months of 2001, the
Company recorded $.02 million of charges relating to lease buyouts for
unutilized office space.
Transition of German Production to U.S. Facility: During the first quarter
of 2002 and the first nine months of 2001, charges of approximately $1.1 million
and $6.1 million, respectively, were recorded related to the transition of
German production to the U.S. facility. These costs consisted primarily of
parallel processing and temporary workforce expenses. The transition was
completed in the first quarter of 2002.
Information Technology Assessment: These costs related primarily to
consulting fees paid to a third party in connection with the technology project.
Other Restructuring Costs: Other restructuring costs in the first nine
months of 2001 related primarily to consulting fees paid to a third party for
assistance in the identification of process improvements and efficiencies within
the U.S. operations.
Future Restructuring Charges: The Company's restructuring programs were
completed as of June 30, 2002 and management has no immediate plans for future
restructuring projects.
21
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D.
FORWARD LOOKING INFORMATION
Certain matters discussed in this Quarterly Report on Form 10-Q are
forward-looking statements that are subject to risks and uncertainties that
could cause actual results to differ materially from those anticipated. These
risks and uncertainties are described in reports and other documents filed by
the Company with the Securities and Exchange Commission including the Company's
Annual Report on Form 10-K for the year 2001.
ITEM 4. CONTROLS AND PROCEDURES
As of September 30, 2002, an evaluation was performed under the supervision
and with the participation of the Company's management, including the Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of the Company's disclosure controls and procedures. Based
on that evaluation, the Company's management, including the Chief Executive
Officer and Chief Financial Officer, concluded that the Company's disclosure
controls and procedures were effective as of September 30, 2002. There have been
no significant changes in the Company's internal controls or in other factors
that could significantly affect internal controls subsequent to September 30,
2002.
22
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
Exhibit No. Description of Exhibit
----------- ----------------------
99.1 Chief Executive Officer Certification of Periodic Report
99.2 Chief Financial Officer Certification of Periodic Report
b. Reports on Form 8-K.
None.
23
INFORMATION RESOURCES, INC. and Subsidiaries
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.
INFORMATION RESOURCES, INC.
----------------------------------
(Registrant)
/s/Andrew G. Balbirer
----------------------------------
Andrew G. Balbirer
Executive Vice President
and Chief Financial Officer
(Authorized Officer of Registrant)
/s/ Mary K. Sinclair
----------------------------------
Mary K. Sinclair
Controller
(Principal Accounting Officer)
November 13, 2002
24
CERTIFICATIONS
I, Joseph P. Durrett, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Information
Resources, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statements 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 or not 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.
/s/ Joseph P. Durrett
- -------------------------------
Joseph P. Durrett
Chief Executive Officer
November 13, 2002
25
CERTIFICATIONS
I, Andrew G. Balbirer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Information
Resources, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statements 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 or not 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.
/s/ Andrew G. Balbirer
- -------------------------------
Andrew G. Balbirer
Chief Financial Officer
November 13, 2002
26