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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[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
or
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the transition period from _________to_________
Commission file number: 333-76331
Jupitermedia Corporation
(Exact name of Registrant as specified in its charter)
Delaware 06-1542480
------------------------------ ---------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
23 Old Kings Highway South Darien, Connecticut 06820
- ---------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(203) 662-2800
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
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 outstanding shares the Registrant's common stock, par value $.01
per share, as of November 12, 2002 was 25,340,534.
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JUPITERMEDIA CORPORATION
INDEX
PAGE
PART I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets - December 31, 2001
and September 30, 2002 3
Consolidated Statements of Operations - For the Three
and Nine Months Ended September 30, 2001 and 2002 4
Consolidated Statements of Cash Flows - For the Nine
Months Ended September 30, 2001 and 2002 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 17
Item 4. Controls and Procedures 17
PART II. Other Information
Item 1. Legal Proceedings 18
Item 2. Changes in Securities 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 20
Certifications 21
Exhibit 99.1 23
Exhibit 99.2 24
2
JUPITERMEDIA CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2001 AND SEPTEMBER 30, 2002
(in thousands, except share and per share amounts)
December 31, September 30,
2001 2002
------------ ------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 25,100 $ 24,679
Accounts receivable, net of allowances
of $1,810 and $1,221, respectively 6,527 7,038
Unbilled accounts receivable -- 1,358
Prepaid expenses and other 573 1,064
------------ ------------
Total current assets 32,200 34,139
Property and equipment, net of accumulated depreciation
of $5,516 and $7,285, respectively 3,767 2,637
Intangible assets, net 1,508 1,506
Goodwill 5,261 8,303
Investments and other assets 3,051 2,043
------------ ------------
Total assets $ 45,787 $ 48,628
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,388 $ 1,139
Accrued payroll and related expenses 1,533 1,528
Accrued expenses and other 3,772 4,265
Deferred revenues 2,581 7,096
------------ ------------
Total current liabilities 9,274 14,028
Accrued Web site acquisition payments 265 --
Deferred revenues 910 228
------------ ------------
Total liabilities 10,449 14,256
------------ ------------
Stockholders' equity:
Preferred stock, $.01 par value, 4,000,000
shares authorized, no shares issued -- --
Common stock, $.01 par value, 75,000,000 shares
authorized, 25,333,077 and 25,336,410 shares issued at
December 31, 2001 and September 30, 2002, respectively 253 253
Additional paid-in capital 175,418 175,483
Accumulated deficit (140,298) (141,267)
Treasury stock, 65,000 shares at cost -- (106)
Accumulated other comprehensive income (loss) (35) 9
------------ ------------
Total stockholders' equity 35,338 34,372
------------ ------------
Total liabilities and stockholders' equity $ 45,787 $ 48,628
============ ============
See notes to consolidated financial statements.
3
JUPITERMEDIA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2002
(unaudited)
(in thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ------------------------
2001 2002 2001 2002
---------- ---------- ---------- ----------
Revenues $ 10,282 $ 10,478 $ 33,078 $ 29,040
Cost of revenues 4,360 4,261 17,765 11,685
---------- ---------- ---------- ----------
Gross profit 5,922 6,217 15,313 17,355
---------- ---------- ---------- ----------
Operating expenses:
Advertising, promotion and selling 3,972 3,432 14,731 10,411
General and administrative 3,173 1,743 9,167 5,104
Depreciation 704 494 2,046 1,739
Amortization 10,683 226 30,509 593
Impairment of intangibles 53,897 -- 53,897 --
---------- ---------- ---------- ----------
Total operating expenses 72,429 5,895 110,350 17,847
---------- ---------- ---------- ----------
Operating income (loss) (66,507) 322 (95,037) (492)
Gain (loss) on investments and other, net (1,115) 34 (1,482) (170)
Interest income 238 90 1,213 292
---------- ---------- ---------- ----------
Income (loss) before income taxes, minority
interests and equity losses from international
and venture fund investments (67,384) 446 (95,306) (370)
Provision for income taxes -- 6 2 25
Minority interests 11 (10) 95 (11)
Equity losses from international and
venture fund investments, net (777) (186) (1,997) (563)
---------- ---------- ---------- ----------
Net income (loss) $ (68,150) $ 244 $ (97,210) $ (969)
========== ========== ========== ==========
Basic net income (loss) per share $ (2.69) $ 0.01 $ (3.84) $ (0.04)
========== ========== ========== ==========
Basic weighted average number of common
shares outstanding 25,333 25,329 25,333 25,332
========== ========== ========== ==========
Diluted net income (loss) per share $ (2.69) $ 0.01 $ (3.84) $ (0.04)
========== ========== ========== ==========
Diluted weighted average number of common
shares outstanding 25,333 25,374 25,333 25,332
========== ========== ========== ==========
See notes to consolidated financial statements.
4
JUPITERMEDIA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2002
(unaudited)
(in thousands)
Nine Months Ended
September 30,
----------------------------
2001 2002
------------ ------------
Cash flows from operating activities:
Net loss $ (97,210) $ (969)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities-
Depreciation and amortization 32,555 2,332
Impairment of intangibles 53,897 --
Non-cash barter transactions (1,955) (957)
Provision for losses on accounts receivable 2,874 (100)
Minority interests (95) 11
Equity losses from international and venture
fund investments, net 1,997 563
Loss on investments and other, net 1,482 170
Changes in assets and liabilities, net of effects
of acquisition:
Accounts receivable 2,389 810
Unbilled accounts receivable -- 94
Prepaid expenses and other 391 (256)
Accounts payable and accrued expenses (2,238) 42
Deferred revenues (84) (696)
------------ ------------
Net cash (used in) provided by operating activities (5,997) 1,044
------------ ------------
Cash flows from investing activities:
Additions to property and equipment (1,787) (158)
Acquisitions of media properties and other (26,526) (1,590)
Distribution from internet.com venture funds -- 88
Proceeds from sales of assets and other -- 296
------------ ------------
Net cash used in investing activities (28,313) (1,364)
------------ ------------
Cash flows from financing activities:
Purchase of treasury stock -- (106)
Proceeds from exercise of stock options 55 5
------------ ------------
Net cash provided by (used in)
financing activities 55 (101)
------------ ------------
Effect of foreign exchange rates on cash 1 --
------------ ------------
Net decrease in cash and cash equivalents (34,254) (421)
Cash and cash equivalents, beginning of period 59,979 25,100
------------ ------------
Cash and cash equivalents, end of period $ 25,725 $ 24,679
============ ============
Supplemental disclosures of cash flow:
Cash paid for interest $ -- $ --
============ ============
Cash paid for income taxes $ 38 $ 31
============ ============
See notes to consolidated financial statements.
5
JUPITERMEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(unaudited)
1. THE COMPANY
On August 12, 2002, INT Media Group, Incorporated received unanimous
approval from the Board of Directors to change its name to Jupitermedia
Corporation. Jupitermedia Corporation is a leading provider of global real-time
news, information, research and media resources for information technology and
Internet industry professionals. Jupitermedia includes the internet.com and
EarthWeb.com Network of over 150 Web sites and over 200 e-mail newsletters that
generate over 200 million page views monthly. Jupitermedia also includes Jupiter
Research, a leading international research advisory organization specializing in
business and technology market research in 18 business areas and 9 vertical
markets. In addition, Jupiter Events include nearly 40 offline conferences and
trade shows focused on IT and business-specific topics.
Since all of Jupitermedia's products and services relate to providing
information to information technology and Internet industry professionals, its
success is dependent on the continued growth of information technology and the
Internet.
2. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared from the books and records of Jupitermedia in accordance with
accounting principles generally accepted in the United States of America for
interim financial information and with the instructions to Form 10-Q.
Accordingly, they do not include all of the information and footnotes required
by accounting principles generally accepted in the United States of America for
complete financial statements. These unaudited consolidated financial statements
be read in conjunction with the consolidated financial statements and notes
thereto for the year ended December 31, 2001 included in Jupitermedia's Annual
Report on Form 10-K for the year ended December 31, 2001. In the opinion of
management, all adjustments considered necessary for a fair presentation of the
results for the interim periods presented have been reflected in such
consolidated financial statements.
The consolidated financial statements include the accounts of Jupitermedia
and its majority-owned and wholly-owned subsidiaries. All significant
intercompany transactions have been eliminated.
3. RECENT ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141, "Business
Combinations", and SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS
No. 141 requires that the purchase method of accounting be used for all business
combinations subsequent to June 30, 2001 and specifies criteria for recognizing
intangible assets acquired in a business combination. SFAS No. 142 requires that
goodwill and intangible assets with finite useful lives no longer be amortized,
but instead be tested for impairment at least annually. Intangible assets with
definite useful lives will continue to be amortized over their estimated useful
lives. On January 1, 2002, SFAS No. 142 became effective and as a result,
Jupitermedia ceased amortizing the remaining goodwill. Jupitermedia completed
the transitional goodwill impairment test as required by SFAS No. 142. This
impairment test is required to be performed at adoption of SFAS No. 142 and at
least annually thereafter. On an ongoing basis (absent any impairment
indicators), Jupitermedia expects to perform the impairment test during the
fourth quarter, in connection with Jupitermedia's annual budgeting process.
Based on Jupitermedia's initial impairment test, it was determined that none of
Jupitermedia's recorded goodwill was impaired. Impairment adjustments recognized
after adoption, if any, are required to be recognized as operating expenses.
6
Also in July 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations". This standard addresses the financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. The standard is effective for
fiscal years beginning after June 15, 2002. Jupitermedia's management does not
expect the adoption of SFAS No. 143 to have a material impact on Jupitermedia's
financial results.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". This standard addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
The standard is effective for fiscal years beginning after December 15, 2001.
Adoption of SFAS No. 144 did not have a material impact on Jupitermedia's
financial results.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical
Corrections". The standard is effective for fiscal years beginning after May 15,
2002. Jupitermedia's management does not expect the adoption of SFAS No. 145 to
have a material impact on Jupitermedia's financial results.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Exit or
Disposal Activities". SFAS No. 146 will be effective for Jupitermedia for
disposal activities initiated after December 31, 2002. Jupitermedia's management
does not expect the adoption of SFAS No. 146 to have a material impact on
Jupitermedia's financial results.
4. INTANGIBLE ASSETS AND GOODWILL
INTANGIBLE ASSETS
The following table sets forth the amount of intangible assets that are
subject to amortization, including the related accumulated amortization (in
thousands):
September 30, 2002
------------------------------------
Accumulated
Cost Amortization Total
---------- ---------- ----------
Amortized intangible assets
Trademarks $ 1,768 $ (686) $ 1,082
Web site development costs 1,227 (803) 424
Other 130 (130) --
---------- ---------- ----------
Total $ 3,125 $ (1,619) $ 1,506
========== ========== ==========
The following table sets forth the estimated aggregate amortization expense
for the years ending December 31, (in thousands):
2003 $839
2004 $369
2005 $76
7
GOODWILL
The changes in the carrying amount of goodwill for the nine months ended
September 30, 2002, are as follows:
Online Media Research Events Total
------------ -------- ------ ------
Balance as of December 31, 2001 $5,212 $ -- $ 49 $5,261
Goodwill acquired during period -- 3,042 -- 3,042
------ ------- ------ ------
Balance as of September 30, 2002 $5,212 $3,042 $ 49 $8,303
During the third quarter of 2001, Jupitermedia determined that certain
intangible assets associated with various acquired media properties were
impaired. As a result of this determination, Jupitermedia recorded a non-cash
charge of $53.9 million.
ADOPTION OF SFAS NO. 142
The following table sets forth the results of operations for all periods
presented excluding goodwill amortization expense (in thousands, except per
share amounts):
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ------------------------
2001 2002 2001 2002
---------- ---------- ---------- ----------
Reported net income (loss) $ (68,150) $ 244 $ (97,210) $ (969)
Add back goodwill amortization 10,442 -- 29,673 --
---------- ---------- ---------- ----------
Adjusted net income (loss) $ (57,708) $ 244 $ (67,537) $ (969)
========== ========== ========== ==========
Basic and diluted net income (loss) per share:
Reported net income (loss) $ (2.69) $ 0.01 $ (3.84) $ (0.04)
Add back goodwill amortization 0.41 -- 1.17 --
---------- ---------- ---------- ----------
Adjusted net income (loss) $ (2.28) $ 0.01 $ (2.67) $ (0.04)
========== ========== ========== ==========
5. COMPUTATION OF NET LOSS PER SHARE
Basic net income (loss) per share is computed using the weighted average
number of common shares outstanding during the period. Diluted net income (loss)
per share is computed using the weighted average number of common and dilutive
common equivalent shares outstanding during the period. Common equivalent shares
consist of the incremental common shares issuable upon the exercise of stock
options. Common equivalent shares are excluded from the calculation if their
effect is anti-dilutive.
8
Computations of basic and diluted net income (loss) per share for the three
and nine months ended September 30, 2001 and 2002 are as follows (in thousands,
except per share amounts):
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2001 2002 2001 2002
-------- -------- -------- --------
Numerator: Net income (loss) $(68,150) $ 244 $(97,210) $ (969)
Denominator: Basic weighted
average shares outstanding 25,333 25,329 25,333 25,332
-------- -------- -------- --------
Basic net income (loss) per share $ (2.69) $ 0.01 $ (3.84) $ (0.04)
======== ======== ======== ========
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2001 2002 2001 2002
-------- -------- -------- --------
Numerator: Net income (loss) $(68,150) $ 244 $(97,210) $ (969)
Denominator: Diluted weighted
average shares outstanding 25,333 25,374 25,333 25,332
-------- -------- -------- --------
Diluted net income (loss) per
share $ (2.69) $ 0.01 $ (3.84) $ (0.04)
======== ======== ======== ========
Due to the net loss for the three months ended September 30, 2001 and the
nine months ended September 30, 2001 and 2002, outstanding options to purchase
4,766,174 and 5,886,810 shares of common stock, respectively, were excluded from
the calculation of diluted earnings per share for those periods, as the result
would have been anti-dilutive.
6. SEGMENT INFORMATION
Jupitermedia has three reportable segments: Online Media, Research and
Events. The Online Media segment derives its revenues primarily from the sale of
advertising on Jupitermedia's internet.com and EarthWeb.com Network of over 150
Web sites and over 200 e-mail newsletters. Research represents the acquired
Jupiter Research division. Jupiter Research provides advisory reports in
business and technology market research in 18 business areas and 9 vertical
markets. The Events segment includes offline conferences and trade shows that
generate revenues from attendee registrations, exhibition space and from
advertiser and vendor sponsorships. Jupitermedia evaluates segment performance
based on income or loss from operations. Other includes corporate overhead,
depreciation, amortization and venture fund related activities.
9
Summary information by segment for the three and nine months ended
September 30, 2001 and 2002 is as follows (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
2001 2002 2001 2002
--------- --------- --------- ---------
Revenues:
Online Media $ 8,666 $ 6,526 $ 28,558 $ 21,488
Research -- 2,179 -- 2,179
Events 1,266 1,458 3,533 4,409
Other 350 315 987 964
--------- --------- --------- ---------
$ 10,282 $ 10,478 $ 33,078 $ 29,040
--------- --------- --------- ---------
Operating expenses:
Online Media $ 9,024 $ 4,665 $ 32,605 $ 16,623
Research -- 1,749 -- 1,749
Events 975 1,352 4,067 4,370
Other 66,790 2,390 91,443 6,790
--------- --------- --------- ---------
$ 76,789 $ 10,156 $ 128,115 $ 29,532
--------- --------- --------- ---------
Operating income (loss):
Online Media $ (358) $ 1,861 $ (4,047) $ 4,865
Research -- 430 -- 430
Events 291 106 (534) 39
Other (66,440) (2,075) (90,456) (5,826)
--------- --------- --------- ---------
$ (66,507) $ 322 $ (95,037) $ (492)
========= ========= ========= =========
7. ACQUISITION
On June 20, 2002, Jupitermedia agreed to acquire (the "Acquisition) certain
assets and to assume certain liabilities of the Jupiter Research and Events
businesses from Jupiter Media Metrix, Inc., a Delaware corporation ("Jupiter"),
pursuant to an Asset Purchase Agreement, dated as of June 20, 2002, by and
between Jupitermedia, Jupiter and Jupiter Communications, Inc., a Delaware
Corporation. The Acquisition closed on July 31, 2002.
The consideration paid in the Acquisition consisted of cash in the amount
of $250,000 plus the assumption of certain liabilities of Jupiter including
obligations to fulfill contractual commitments.
The unaudited pro forma information below presents results of operations as
if the Acquisition had occurred as of January 1, 2001. The unaudited pro forma
information is not necessarily indicative of the results of operations of the
combined companies had these events occurred at the beginning of the period
presented nor is it indicative of future results (in thousands, except per share
amounts):
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ---------------------
2001 2002 2001 2002
--------- --------- --------- ---------
Revenues $ 21,564 $ 11,568 $ 66,926 $ 38,822
========= ========= ========= =========
Net income (loss) $(364,691) $ 459 $(499,881) $ (10,787)
========= ========= ========= =========
Basic and diluted income
(loss) per share $ (14.40) $ 0.02 $ (19.73) $ (0.43)
========= ========= ========= =========
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with our financial
statements and the accompanying notes, which appear elsewhere in this filing.
Statements in this Form 10-Q, which are not historical facts, are
"forward-looking statements" that are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve risks and uncertainties that could cause
actual results to differ materially from those described in the forward-looking
statements. The potential risks and uncertainties address a variety of subjects
including, for example: the competitive environment in which Jupitermedia
competes; the unpredictability of Jupitermedia's future revenues, expenses, cash
flows and stock price; Jupitermedia's ability to integrate acquired businesses,
products and personnel into its existing businesses; Jupitermedia's investments
in international and venture investments; any material change in Jupitermedia's
intellectual property rights; and continued growth and acceptance of the
Internet and information technology. For a more detailed discussion of such
risks and uncertainties, refer to Jupitermedia's reports filed with the
Securities and Exchange Commission pursuant to the Securities Act of 1933 and
the Securities Exchange Act of 1934. The forward-looking statements included
herein are made as of the date of this Form 10-Q, and we are under no obligation
to update the forward-looking statements after the date hereof.
OVERVIEW
Jupitermedia is a leading provider of global real-time news, information,
research and media resources for information technology and Internet industry
professionals. Jupitermedia includes the internet.com and EarthWeb.com Network
of over 150 Web sites and over 200 e-mail newsletters that generate over 200
million page views monthly. Jupitermedia also includes Jupiter Research, a
leading international research advisory organization specializing in business
and technology market research in 18 business areas and 9 vertical markets. In
addition, Jupiter Events include nearly 40 offline conferences and trade shows
focused on IT and business-specific topics.
We generate revenues from the following sources:
ONLINE MEDIA
o advertising on our Web sites, e-mail newsletters, online discussion
forums and moderated e-mail discussion lists;
o e-commerce agreements and offerings;
o permission based opt-in e-mail list rentals;
o paid subscription services;
o licensing of our editorial content and brands;
o online press release distribution services;
Events
o conferences and trade shows;
Research
o research services;
Other
o venture fund management fees
We barter a portion of the unsold advertising impressions generated by our
network for advertising and promotion in media properties owned by other third
parties. In addition, we barter portions of unsold advertising impressions for
equity interests in certain of our venture funds' portfolio companies. Revenues
related to barter transactions were approximately $1.6 million and $1.2 million
and expenses were $1.1 million
11
and $867,000 for the three months ended September 30, 2001 and 2002,
respectively. Revenues related to barter transactions were approximately $4.3
million and $3.6 million and expenses were $2.4 million and $2.7 million for the
nine months ended September 30, 2001 and 2002, respectively.
ONLINE MEDIA
For the three and nine months ended September 30, 2001 and 2002, a majority
of our revenues were from the sale of advertising. We recognize advertising
revenue ratably in the period during which the advertising is displayed,
provided that we have no significant remaining obligations and collection of the
resulting receivable is probable. Such obligations typically include guarantees
of a minimum number of advertising impressions, or number of times an
advertisement is displayed. We use a direct sales force to sell advertising to
companies and advertising agencies.
Our e-commerce agreements generally include advertising on our Web sites,
bounties for new customers or revenue sharing for sales made by the e-commerce
vendors as a result of links from our network, or in some cases combinations of
advertising, bounties and revenue sharing. We recognize the advertising
component of these agreements ratably in the period the advertising is
displayed, provided that no significant company obligations remain and
collection of the remaining receivable is probable. Generally, bounties and
revenue sharing agreements require a monthly minimum fee from Jupitermedia's
customers. Revenues from these agreements are recognized in the month in which
they are earned.
We currently offer for rental our permission based opt-in e-mail list names
relating to over 230 Internet-specific topics. Members of our community of
Internet users volunteer, or "opt-in," to be included on these lists to receive
e-mail product offerings and information relevant to their Internet and
information technology interests. Subscribers to these permission based opt-in
e-mail lists receive e-mail announcements of special offers relating to each
topic subscribed. We generate revenues on a per use basis for the rental of our
list names. Revenue from permission based opt-in list rentals is recognized at
the time of use by the renter.
Paid subscription services relate to customer subscriptions to our paid
e-mail newsletters and services, SearchEngineWatch, TheCounter.com,
WinDrivers.com, WallStreetResearchNet.com, UnclaimedDomains.com, DomainBook.com,
AlertIPO.com and NanoelectronicsPlanet.com, which are sold through our network
and through affiliate relationships. Revenue from subscriptions is recognized
ratably over the subscription period. Deferred revenues relate to the portion of
collected subscription fees, which has not yet been recognized as revenue.
Our licensing agreements vary in structure, with Jupitermedia generating
fixed fees, royalties or both for access to our editorial content and brands. We
generally license our editorial content and brands to offline and online media
companies. Revenues are recognized ratably over the period of the licensing
agreements.
Online press release distribution revenues are generated through
InternetNewsBureau.com. We distribute e-mail based press releases to over 6,300
registered journalists. Revenue from this service is recorded on a per use basis
and is recognized at the time of distribution.
EVENTS
Our conferences and trade shows generate revenues from attendee
registrations, exhibition space and from advertiser and vendor sponsorships.
Proceeds from the sale of attendee registrations, exhibition space and
advertiser and vendor sponsorships are deferred and recognized as revenue at the
time the conferences and trade shows are held.
12
RESEARCH
Our research offerings are a combination of proprietary written analysis,
supporting data and access to our research analysts. We typically sell our
research products on an annual subscription basis and revenues are deferred and
then recognized over the term of the related contract as services are provided.
OTHER
Venture fund management fees relate to management fees earned for the
day-to-day operation and general management of internet.com Venture Fund I LLC,
internet.com Venture Fund II LLC and internet.com Venture Partners III LLC.
Management fees are recognized ratably over the period in which services are
rendered. In addition, Jupitermedia is entitled to 20% of the realized gains
earned from portfolio investments, which are recognized at the time of
distribution from the venture capital funds.
From July 1995 through September 30, 2002, we made 74 acquisitions of media
properties, consisting of 102 Web sites, 107 e-mail newsletters, 125 online
discussion forums and 162 moderated e-mail discussion lists. We expect to
continue to pursue strategic acquisitions to strengthen our content offerings
and services. All of Jupitermedia's acquisitions have been accounted for as
purchases.
We have sustained losses in the past, and because costs are largely fixed
in the short term, we expect to be vulnerable to significant fluctuations in
operating losses if actual revenues fall below anticipated levels. Furthermore,
given the rapidly evolving nature of our business, our operating results are
difficult to forecast and period-to-period comparison of our operating results
will not be meaningful and should not be relied upon as any indication of future
performance. Due to these and other factors, many of which are outside our
control, quarterly operating results may fluctuate significantly in the future.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2001 AND 2002
REVENUES. Revenues were $10.3 million for the three months ended September
30, 2001 and $10.5 million for the three months ended September 30, 2002,
representing an increase of 2%. This change was primarily due to the acquisition
of Jupiter Research partially offset by a reduction in advertising revenues. A
majority of our revenues relates to advertising on our network of Web sites,
e-mail newsletters, online discussion forums and moderated e-mail discussion
lists. While we anticipate that advertising revenues will continue to represent
a significant portion of our revenues for the foreseeable future, we believe
that revenues from research services, conferences and trade shows, permission
based opt-in e-mail list rentals, e-commerce agreements and offerings, paid
subscription services, licensing and online press release distribution services
will continue to expand and diversify our future revenue streams.
COST OF REVENUES. Cost of revenues primarily consists of expenses
associated with editorial, research, communications infrastructure, Web site
hosting and conferences and trade shows. Cost of revenues was $4.4 million for
the three months ended September 30, 2001 and $4.3 million for the three months
ended September 30, 2002, representing a decrease of 2%. This change was
primarily due to a reduction in freelance and professional consulting costs of
$243,000 and a reduction in various office related costs of $299,000 offset by
an increase of approximately $448,000 in salaries, benefits and other related
costs of research, technology and operations personnel due to an increase in the
number of employees resulting from the acquisition of Jupiter Research. As a
percentage of revenues, cost of revenues was 42% for the three months ended
September 30, 2001 and 41% for the three months ended September 30, 2002.
ADVERTISING, PROMOTION AND SELLING. Advertising, promotion and selling
expenses primarily consist of costs related to sales and marketing staff, sales
commissions and promotion costs. Advertising, promotion and selling expenses
were $4.0 million for the three months ended September 30, 2001 and $3.4 million
for the three months ended September 30, 2002, representing a 14% decrease. This
change was primarily due to a reduction
13
in barter advertising of approximately $281,000 and a reduction in various
office related costs of $220,000. As a percentage of revenues, advertising,
promotion and selling expenses were 39% for the three months ended September 30,
2001 and 33% for the three months ended September 30, 2002.
GENERAL AND ADMINISTRATIVE. General and administrative expenses primarily
consist of salaries, professional fees, facilities costs and provisions for
losses on accounts receivable. General and administrative expenses were $3.2
million for the three months ended September 30, 2001 and $1.7 million for the
three months ended September 30, 2002, representing a 45% decrease. This change
was primarily due to a reduction in the provision for losses on accounts
receivable of $1.5 million. As a percentage of revenues, general and
administrative expenses were 31% for the three months ended September 30, 2001
and 17% for the three months ended September 30, 2002.
DEPRECIATION. Depreciation of property and equipment was $704,000 for the
three months ended September 30, 2001 and $494,000 for the three months ended
September 30, 2002, representing a 30% decrease. This decline was a result of
reduced capital expenditures. As a percentage of revenues, depreciation of
property and equipment was 7% for the three months ended September 30, 2001 and
5% for the three months ending September 30, 2002.
AMORTIZATION. Amortization of intangibles was $10.7 million for the three
months ended September 30, 2001 and $226,000 for the three months ended
September 30, 2002, representing a 98% decrease. On January 1, 2002,
Jupitermedia ceased amortizing the remaining goodwill on acquired media
properties in accordance with SFAS No. 142. As a percentage of revenues,
amortization of intangibles was 104% for the three months ended September 30,
2001 and 2% for the three months ended September 30, 2002.
IMPAIRMENT OF INTANGIBLES. Jupitermedia recorded a non-cash charge of $53.9
million for the three months ended September 30, 2001 related to the impairment
of intangibles.
GAIN (LOSS) ON INVESTMENTS AND OTHER, NET. During the three months ended
September 30, 2001, Jupitermedia recognized losses of $1.1 million related to
investment impairment, net of a gain on the sales of assets. Jupitermedia
determined that the declines in value from Jupitermedia's accounting basis for
certain of its investments in internet.com venture fund portfolio companies was
other than temporary. During the three months ended September 30, 2002
Jupitermedia recognized a gain of $34,000 on the sale of assets.
INTEREST INCOME. Interest income was $238,000 for the three months ended
September 30, 2001 and $90,000 for the three months ended September 30, 2002.
PROVISION FOR INCOME TAXES. Jupitermedia did not record a provision for
income taxes for the three months ended September 30, 2001 and recorded a
provision for foreign income taxes of $6,000 for the three months ended
September 30, 2002 based upon estimated foreign tax rates.
MINORITY INTERESTS. Minority interests represent the minority stockholders'
proportionate share of profits or losses of Jupitermedia's majority-owned
consolidated international subsidiaries.
Equity losses from international and venture fund investments, net. Equity
losses represent Jupitermedia's net equity interests in the investments in
internet.com venture funds and international joint ventures.
NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2002
REVENUES. Revenues were $33.1 million for the nine months ended September
30, 2001 and $29.0 million for the nine months ended September 30, 2002,
representing a decrease of 12%. This change was primarily due to a reduction in
advertising revenues from our network of Web sites, e-mail newsletters, online
discussion forums and moderated e-mail discussion lists.
14
COST OF REVENUES. Cost of revenues primarily consists of expenses
associated with editorial, research, communications infrastructure, Web site
hosting and conferences and trade shows. Cost of revenues was $17.8 million for
the nine months ended September 30, 2001 and $11.7 million for the nine months
ended September 30, 2002, representing a decrease of 34%. This change was
primarily due to a reduction of approximately $3.7 million in salaries, benefits
and other related costs of editorial, technology and operations personnel due to
a reduction in the number of employees, a decrease in freelance and professional
consulting costs of $1.2 million, a decrease in Web site hosting of $503,000 and
a decrease in various office related costs of $353,000. As a percentage of
revenues, cost of revenues was 54% for the nine months ended September 30, 2001
and 40% for the nine months ended September 30, 2002.
ADVERTISING, PROMOTION AND SELLING. Advertising, promotion and selling
expenses primarily consist of costs related to sales and marketing staff, sales
commissions and promotion costs. Advertising, promotion and selling expenses
were $14.7 million for the nine months ended September 30, 2001 and $10.4
million for the nine months ended September 30, 2002, representing a 29%
decrease. This change was primarily due to a reduction in salaries, benefits and
commissions paid to advertising sales personnel of approximately $3.1 million
due to a reduction in the number of employees. As a percentage of revenues,
advertising, promotion and selling expenses were 45% for the nine months ended
September 30, 2001 and 36% for the nine months ended September 30, 2002.
GENERAL AND ADMINISTRATIVE. General and administrative expenses primarily
consist of salaries, professional fees, facilities costs and provisions for
losses on accounts receivable. General and administrative expenses were $9.2
million for the nine months ended September 30, 2001 and $5.1 million for the
nine months ended September 30, 2002, representing a 44% decrease. This change
was primarily due to a reduction in salaries and benefits paid to administrative
personnel of approximately $1.4 million due to a reduction in the number of
employees and a reduction in the provision for losses on accounts receivable of
approximately $2.7 million. As a percentage of revenues, general and
administrative expenses were 28% for the nine months ended September 30, 2001
and 18% for the nine months ended September 30, 2002.
DEPRECIATION. Depreciation of property and equipment was $2.0 million for
the nine months ended September 30, 2001 and $1.7 million for the nine months
ended September 30, 2002, representing a 15% decrease. This decline was a result
of reduced capital expenditures. As a percentage of revenues, depreciation of
property and equipment was 6% for the nine months ended September 30, 2001 and
September 30, 2002.
AMORTIZATION. Amortization of intangibles was $30.5 million for the nine
months ended September 30, 2001 and $593,000 for the nine months ended September
30, 2002, representing a 98% decrease. On January 1, 2002, Jupitermedia ceased
amortizing the remaining goodwill on acquired media properties in accordance
with SFAS No. 142. As a percentage of revenues, amortization of intangibles was
92% for the nine months ended September 30, 2001 and 2% for the nine months
ended September 30, 2002.
IMPAIRMENT OF INTANGIBLES. Jupitermedia recorded a non-cash charge of $53.9
million for the nine months ended September 30, 2001 related to the impairment
of intangibles.
GAIN (LOSS) ON INVESTMENTS AND OTHER, NET. Jupitermedia determined that the
declines in value from Jupitermedia's accounting basis for certain of its
investments in internet.com venture fund portfolio companies was other than
temporary. During the nine months ended September 30, 2001 and 2002,
Jupitermedia recognized losses of $1.5 million and $170,000, respectively,
related to investment impairment, net of a gain on the sales of assets.
INTEREST INCOME. Interest income was $1.2 million for the nine months ended
September 30, 2001 and $292,000 for the nine months ended September 30, 2002.
PROVISION FOR INCOME TAXES. Jupitermedia recorded a provision for income
taxes of $2,000 for the nine months ended September 30, 2001 and $25,000 for the
nine months ended September 30, 2002 related to foreign income taxes that were
recorded based upon estimated foreign tax rates.
15
MINORITY INTERESTS. Minority interests represent the minority stockholders'
proportionate share of profits or losses of Jupitermedia's majority-owned
consolidated international subsidiaries.
EQUITY LOSS FROM INTERNATIONAL AND VENTURE FUND INVESTMENTS, NET. Equity
losses represent Jupitermedia's net equity interests in the investments in
internet.com venture funds and international joint ventures.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have funded operations primarily with cash from our
initial and follow-on public offerings, borrowings under a line of credit and
the capital contributions of members of internet.com LLC. On June 25, 1999, we
completed our initial public offering of 3,400,000 shares of our common stock at
$14.00 per share. Net proceeds to Jupitermedia aggregated approximately $43.0
million. On June 30, 1999, Jupitermedia paid the outstanding balance under our
line of credit of approximately $5.0 million and terminated the line of credit.
On February 1, 2000, we completed our follow-on public offering of 3,750,000
shares of common stock priced at $60.00 per share, of which 1,750,000 shares
were sold by Jupitermedia and 2,000,000 shares were sold by Penton Media, Inc.
Net proceeds received by Jupitermedia from the follow-on offering were
approximately $98.3 million. Jupitermedia did not receive any of the proceeds
from the sale of shares by Penton Media, Inc.
As of September 30, 2002, Jupitermedia had total current assets of
approximately $34.1 million and total current liabilities of $14.0 million, or
working capital of approximately $20.1 million.
Net cash used in operating activities was $6.0 million for the nine months
ended September 30, 2001 and net cash provided by operating activities was $1.0
million for the nine months ended September 30, 2002. Net cash used in operating
activities for the period ended September 30, 2001 was primarily a result of our
net losses adjusted for depreciation and amortization, non-cash barter
transactions and provision for losses on accounts receivable and decreases in
accounts payable and accrued expenses offset by a decrease in accounts
receivable. Net cash provided by operating activities for the period ended
September 30, 2002 was primarily a result of our net losses adjusted for
depreciation and amortization and non-cash barter transactions as well as a
decrease in accounts receivable offset by decreases in deferred revenues.
Net cash used in investing activities was $28.3 million for the nine months
ended September 30, 2001 and $1.4 million for the nine months ended September
30, 2002. Net cash used in investing activities was primarily a result of
acquisitions of media properties and capital expenditures.
Net cash provided by financing activities was $55,000 for the nine months
ended September 30, 2001 and related to the exercise of stock options. Net cash
used in financing activities for the nine months ended September 30, 2002 was
$101,000 and was from the purchase of treasury stock offset by proceeds received
from the exercise of stock options.
Capital expenditures were $1.8 million for the nine months ended September
30, 2001 and $158,000 for the nine months ended September 30, 2002.
Jupitermedia believes the combination of cash on hand and operating cash
flow will provide sufficient liquidity for the next twelve months.
RECENT ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141, "Business
Combinations", and SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS
No. 141 requires that the purchase method of accounting be used for all business
combinations subsequent to June 30, 2001 and specifies criteria for recognizing
intangible assets acquired in a business combination. SFAS No. 142 requires that
goodwill and intangible assets with finite useful lives no longer be amortized,
but instead be tested for impairment at least annually. Intangible assets with
definite useful lives will continue to be amortized over their estimated useful
lives. On January 1, 2002, SFAS No. 142 became effective and as a result,
Jupitermedia ceased amortizing the remaining goodwill. Jupitermedia completed
16
the transitional goodwill impairment test as required by SFAS No. 142. This
impairment test is required to be performed at adoption of SFAS No. 142 and at
least annually thereafter. On an ongoing basis (absent any impairment
indicators), Jupitermedia expects to perform the impairment test during the
fourth quarter, in connection with Jupitermedia's annual budgeting process.
Based on Jupitermedia's initial impairment test, it was determined that none of
Jupitermedia's recorded goodwill was impaired. Impairment adjustments recognized
after adoption, if any, are required to be recognized as operating expenses.
Also in July 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations". This standard addresses the financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. The standard is effective for
fiscal years beginning after June 15, 2002. Jupitermedia's management does not
expect the adoption of SFAS No. 143 to have a material impact on Jupitermedia's
financial results.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". This standard addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
The standard is effective for fiscal years beginning after December 15, 2001.
Adoption of SFAS No. 144 did not have a material impact on Jupitermedia's
financial results.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical
Corrections". The standard is effective for fiscal years beginning after May 15,
2002. Jupitermedia's management does not expect the adoption of SFAS No. 145 to
have a material impact on Jupitermedia's financial results.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Exit or
Disposal Activities". SFAS No. 146 will be effective for Jupitermedia for
disposal activities initiated after December 31, 2002. Jupitermedia's management
does not expect the adoption of SFAS No. 146 to have a material impact on
Jupitermedia's financial results.
CRITICAL ACCOUNTING POLICIES
Due to the acquisition of Jupiter Research, the following are additions to
our critical accounting policies to those included in our most recent Form 10-K
for the year ended December 31, 2001.
Research Revenues. Jupiter Research revenues are deferred and then
recognized over the term of the related contract as services are provided.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
We have no derivative financial instruments or derivative commodity
instruments. We have invested our net proceeds from our public offerings in
short-term, interest-bearing, investment grade securities. Our transactions are
generally conducted, and our accounts are generally denominated, in United
States dollars. Accordingly, we are not exposed to significant foreign currency
risk.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures. Jupitermedia management,
including the Chief Executive Officer and Chief Financial Officer, have
conducted an evaluation of the effectiveness of disclosure controls and
procedures pursuant to Exchange Act Rule 13a-14. Based on that evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that the
disclosure controls and procedures are effective in ensuring that all material
information required to be filed in this quarterly report has been made known to
them in a timely fashion.
Changes in Internal Controls. There have been no significant changes in our
internal controls or in factors that could significantly affect internal
controls subsequent to the date the Chief Executive Officer and Chief Financial
Officer completed their evaluation.
17
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
For a description of material pending legal proceedings affecting the
Registrant, see "Item 3. Legal Proceedings" contained in the
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 2001.
Item 2. CHANGES IN SECURITIES
Not Applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
Item 5. OTHER INFORMATION
Not Applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following is a list of exhibits filed as part of this Report
on Form 10-Q. Where so indicated by footnote, exhibits, which
were previously filed, are incorporated by reference. For
exhibits incorporated by reference, the location of the exhibit
in the previous filing is indicated parenthetically except for in
those situations where the exhibit number was the same as set
forth below.
Exhibit Number Description
-----------------------------------------------------------------
11 Statement Regarding Computation of Per Share
Earnings (Loss) (included in notes to
consolidated financial statements)
99.1 Certification Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
99.2 Certification Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K
On July 2, 2002, Jupitermedia filed a Form 8-K announcing that it
had signed a definitive agreement to acquire the assets of the
Jupiter Research and Events businesses from Jupiter Media Metrix,
Incorporated.
On August 15, 2002, Jupitermedia filed a Form 8-K announcing its
acquisition of certain assets and the assumption of certain
liabilities of Jupiter Media Metrix, Incorporated pursuant to an
asset purchase agreement dated as of June 20, 2002, by and among
Jupitermedia, Jupiter Media Metrix, Incorporated and Jupiter
Communications, Incorporated had closed.
18
On October 15, 2002, Jupitermedia filed a Form 8-K/A disclosing
certain historical and pro forma financial information related to
its acquisition of certain assets and the assumption of certain
liabilities of Jupiter Media Metrix, Incorporated pursuant to an
asset purchase agreement dated as of June 20, 2002, by and among
Jupitermedia, Jupiter Media Metrix, Incorporated and Jupiter
Communications, Incorporated.
On November 4, 2002, Jupitermedia filed a Form 8-K announcing its
financial results for the quarter ended September 30, 2002.
19
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.
Dated: November 14, 2002 Jupitermedia Corporation
/s/ Christopher S. Cardell
---------------------------------------
Christopher S. Cardell
Director, President and Chief Operating
Officer
/s/ Christopher J. Baudouin
---------------------------------------
Christopher J. Baudouin
Chief Financial Officer
20
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Alan M. Meckler, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Jupitermedia
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 we 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 function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Registrant's ability to record,
process, summarize and report financial data and have identified for the
Registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Registrant's internal
controls; and
6. The Registrant's other certifying officers and I have indicated in this
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/ Alan M. Meckler
- -----------------------------
Alan M. Meckler
Chairman and Chief Executive Officer
November 14, 2002
21
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Christopher J. Baudouin, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Jupitermedia
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 we 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 function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Registrant's ability to record,
process, summarize and report financial data and have identified for the
Registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Registrant's internal
controls; and
6. The Registrant's other certifying officers and I have indicated in this
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/ Christopher J. Baudouin
- ---------------------------------
Christopher J. Baudouin
Chief Financial Officer
November 14, 2002
22