10-Q 1 d10q.txt FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE ----- SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JULY 27, 2002. ----- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934. Commission File No. 0-20572 PATTERSON DENTAL COMPANY ------------------------------------------------------ (Exact Name of Registrant as Specified in its Charter) Minnesota 41-0886515 --------- ---------- (State of Incorporation) (IRS Employer Identification No.) 1031 Mendota Heights Road, St. Paul, Minnesota 55120 ------------------------------------------------------ (Address of Principal Executive Offices) (Zip Code) (651) 686-1600 -------------- (Registrant's Telephone Number, Including Area Code) 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 at least the past 90 days. X Yes No -------- --------- Patterson Dental Company has outstanding 68,174,282 shares of common stock as of September 3, 2002. Page 1 of 15 PATTERSON DENTAL COMPANY INDEX
Page ---- PART I - FINANCIAL INFORMATION Item 1 - Financial Statements 3-8 Consolidated Balance Sheets as of July 27, 2002 and April 27, 2002 3 Consolidated Statements of Income for the Three Months Ended July 27, 2002 and July 28, 2001 4 Consolidated Statements of Cash Flows for the Three Months Ended July 27, 2002 and July 28, 2001 5 Notes to Consolidated Financial Statements 6 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations. 9-12 Item 3 - Quantitative and Qualitative Disclosures About Market Risk 13 PART II - OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K 13 Signatures 13 Certifications 14-15
Safe Harbor Statement Under The Private Securities Litigation Reform Act Of 1995: --------------------------------------------------------------------------- This Form 10-Q for the period ended July 27, 2002, contains certain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, which may be identified by the use of forward-looking terminology such as "may", "will", "expect", "anticipate", "estimate", "believe", "goal", or "continue", or comparable terminology that involves risks and uncertainties and that are qualified in their entirety by cautionary language set forth in the Company's Form 10-K report filed July 25, 2002, and other documents filed with the Securities and Exchange Commission. See also page 12 of this Form 10-Q. 2 PART I FINANCIAL INFORMATION PATTERSON DENTAL COMPANY CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
July 27, 2002 April 27, 2002 ------------- -------------- (unaudited) ASSETS Current assets: Cash and cash equivalents $ 102,666 $ 125,986 Short-term investments 29,771 25,251 Receivables, net 218,860 222,435 Inventory 156,038 142,457 Prepaid expenses and other current assets 12,637 13,291 --------- --------- Total current assets 519,972 529,420 Property and equipment, net 56,647 57,140 Goodwill 120,483 115,079 Identifiable intangibles, net 10,529 11,149 Other 13,191 5,588 --------- --------- Total assets $ 720,822 $ 718,376 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 112,025 $ 133,637 Accrued payroll expense 17,990 28,311 Income taxes payable 19,099 7,815 Other accrued expenses 25,955 28,244 --------- --------- Total current liabilities 175,069 198,007 Non-current liabilities 2,470 2,637 --------- --------- Total liabilities 177,539 200,644 Deferred credits -- 3,372 STOCKHOLDERS' EQUITY Common stock 682 681 Additional paid-in capital 91,839 90,777 Accumulated other comprehensive loss (3,672) (3,084) Retained earnings 478,109 449,661 Notes receivable from ESOP (23,675) (23,675) --------- --------- Total stockholders' equity 543,283 514,360 --------- --------- Total liabilities and stockholders' equity $ 720,822 $ 718,376 ========= =========
See accompanying notes. 3 PATTERSON DENTAL COMPANY CONSOLIDATED STATEMENTS OF INCOME (In thousands except per share amounts) (Unaudited) Three Months Ended July 27, 2002 July 28, 2001 ------------- ------------- Net sales $ 387,739 $ 303,254 Cost of sales 254,564 196,187 --------- --------- Gross margin 133,175 107,067 Operating expenses 94,312 77,627 --------- --------- Operating income 38,863 29,440 Other income and expense: Amortization of deferred credits -- 221 Finance income, net 1,340 1,675 Interest expense (9) (37) Loss(profit) on currency exchange (9) 37 --------- --------- Income before income taxes and cumulative effect of accounting change 40,185 31,336 Income taxes 15,109 11,723 --------- --------- Income before cumulative effect of accounting change 25,076 19,613 Cumulative effect of accounting change- see Note 7 3,372 -- --------- --------- Net income $ 28,448 $ 19,613 ========= ========= Before cumulative effect of accounting change: Earnings per share - basic and diluted $ 0.37 $ 0.29 ========= ========= After cumulative effect of accounting change: Earnings per share - basic and diluted $ 0.42 $ 0.29 ========= ========= Weighted average common and dilutive potential common shares 68,506 68,012 ========= ========= See accompanying notes. 4 PATTERSON DENTAL COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited)
Three Months Ended July 27, 2002 July 28, 2001 ------------- ------------- Operating activities: Income before cumulative effect of accounting change $ 25,076 $ 19,613 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation 2,645 2,094 Amortization of deferred credits -- (221) Amortization of intangibles 620 857 Bad debt expense 304 547 Change in assets and liabilities, net of acquired (40,891) (2,444) --------- --------- Net cash (used in) provided by operating activities (12,246) 20,446 Investing activities: Additions to property and equipment, net (3,807) (3,076) Acquisitions, net (3,611) (83,819) (Purchase) sale of short-term investments (4,520) 4,972 --------- --------- Net cash used in investing activities (11,938) (81,923) Financing activities: Payments and retirement of long-term debt and obligations under capital leases (96) (136) Common stock issued, net 1,061 446 --------- --------- Net cash provided by financing activities 965 310 Effect of exchange rate changes on cash (101) 84 --------- --------- Net decrease in cash and cash equivalents (23,320) (61,083) Cash and cash equivalents at beginning of period 125,986 160,024 --------- --------- Cash and cash equivalents at end of period $ 102,666 $ 98,941 ========= =========
See accompanying notes. 5 PATTERSON DENTAL COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands except per share data) (Unaudited) July 27, 2002 1. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the financial position of the Company as of July 27, 2002, and the results of operations and the cash flows for the periods ended July 27, 2002 and July 28, 2001. Such adjustments are of a normal recurring nature. The results of operations for the quarter ended July 27, 2002 and July 28, 2001, are not necessarily indicative of the results to be expected for the full year. The balance sheet at April 27, 2002, is derived from the audited balance sheet as of that date. These financial statements should be read in conjunction with the financial statements included in the 2002 Annual Report on Form 10-K filed on July 25, 2002. 2. The fiscal year end of the Company is the last Saturday in April. The first quarter of fiscal 2003 and 2002 represent the 13 weeks ended July 27, 2002 and July 28, 2001, respectively. 3. Total comprehensive income was $27,860 for the three months ended July 27, 2002, and $19,150 for the three months ended July 28, 2001. 4. On July 9, 2002 the Company purchased Distribution Quebec Dentaire, Inc. (DQD), a full-service distributor of dental supplies and equipment serving the province of Quebec. The operating results of DQD are included in the consolidated statements of income since the date of acquisition. Pro forma results of operations have not been presented since the effect of the acquisition was not material to the Company. The Company also acquired the assets of J. A. Webster, Inc. in July 2001. The following pro forma summary presents the results of operations, as if the acquisition had occurred at the beginning of the prior fiscal year. The pro forma results of operations are not necessarily indicative of the results that would have been achieved had the two companies been combined: Three Months Ended July 28, 2001 ------------------ Net sales $336,882 Net Income 20,085 (1) Earnings per share - basic and diluted $0.29 (1) (1) Reflects the amortization of certain intangible assets. Because the transaction was consummated following the effective date specified in the recently issued Statement of the Financial Accounting Standards Board No. 142 "Goodwill and Other Intangible Assets," the Company is not amortizing goodwill for this transaction, but the goodwill becomes subject to periodic evaluations of possible impairment in its value. 6 5. The following table sets forth the denominator for the computation of basic and diluted earnings per share: Three Months Ended July 27, July 28, 2002 2001 --------- -------- Denominator: Denominator for basic earnings per share - weighted-average shares 67,865 67,566 Effect of dilutive securities: Stock Option Plans 579 375 Employee Stock Purchase Plan 9 9 Capital Accumulation Plan 53 62 ------ ------ Dilutive potential common shares 641 446 ------ ------ Denominator for diluted earnings per share - adjusted weighted-average shares and assumed conversions 68,506 68,012 ====== ====== 6. Certain financial information regarding the Company's reportable segments is as follows: Three Months Ended --------------------- July 27, July 28, 2002 2001 -------- -------- Net sales: Dental supply: Consumable dental and printed office products $212,305 $187,659 Equipment and software 97,229 79,570 Other 31,187 26,543 -------- -------- 340,721 293,772 Veterinary supply 47,018 9,482 -------- -------- Consolidated net sales $387,739 $303,254 ======== ======== Operating income: Dental supply $ 35,025 $ 28,876 Veterinary supply 3,838 564 -------- -------- Consolidated operating income $ 38,863 $ 29,440 ======== ======== 7. In July 2001, the Financial Accounting Standards Board issued Statement No. 142, "Goodwill and Other Intangible Assets", which eliminated the systematic amortization of goodwill. The statement also required that goodwill be reviewed for impairment at adoption and at least annually thereafter. 7 The Company adopted Statement No. 142 in the first quarter of fiscal 2003 and as such discontinued amortization of goodwill effective April 28, 2002. With the adoption of the statement, the Company recognized as the cumulative effect of a change in accounting principle the remaining balance of its unamortized deferred credits. The deferred credits were negative goodwill that arose from acquisitions in the 1980's and amounted to approximately $3.4 million at the time of the adoption. The Company completed the required transitional impairment tests of goodwill and determined the fair value to be in excess of the carrying value of these assets. The following table reconciles reported prior fiscal first quarter net earnings and basic and diluted net earnings per share before the cumulative effect of an accounting change had this statement been effective April 29, 2001: Three Months Ended July 28, 2001 ------------------ Net Earnings: Reported net income $19,613 Deferred credit amortization (221) Goodwill amortization, net of tax 604 ------- Adusted net earnings $19,996 ======= Earnings per share: Reported basic $ 0.29 Deferred credit amortization - Goodwill amortization, net of tax 0.01 ------- Adjusted basic earnings per share $ 0.30 ======= Reported diluted $ 0.29 Deferred credit amortization - Goodwill amortization, net of tax - ------- Adjusted diluted earnings per share $ 0.29 ======= Goodwill by operating segment is as follows: July 27, 2002 April 27, 2002 ------------- -------------- Dental Supply $ 62,421 $ 57,017 Veterinary Supply 58,062 58,062 -------- -------- Total $120,483 $115,079 ======== ======== The change in the dental supply segment goodwill is the result of the preliminary purchase price allocation for the acquisition of Distribution Quebec Dentaire in July 2002 and adjustment of the preliminary purchase price allocation associated with the purchase of Thompson Dental Supply in April 2002. The Company continues to amortize intangibles with finite lives. Identifiable intangible assets are primarily comprised of non-compete agreements arising from previous acquisitions made by the Company. 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, the percentage of net sales represented by certain operational data. Three Months Ended --------------------- July 27, July 28, 2002 2001 -------- -------- Net sales 100.0% 100.0% Cost of sales 65.7% 64.7% ------ ------ Gross profit 34.3% 35.3% Operating expenses 24.3% 25.6% ------ ------ Operating income 10.0% 9.7% Other income and expense, net 0.4% 0.6% ------ ------ Income before income taxes and cumulative effect of accounting change 10.4% 10.3% Income taxes 3.9% 3.8% ------ ------ Income before cumulative effect of accounting change 6.5% 6.5% ====== ====== QUARTER ENDED JULY 27, 2002 COMPARED TO QUARTER ENDED JULY 28, 2001. Net Sales. Net sales for the three months ended July 27, 2002 ("Current Quarter") increased 27.9% to $387.7 million from $303.3 million reported for the three months ended July 28, 2001 ("Prior Quarter"). Current Quarter results include the impact of two recent dental acquisitions, Thompson Dental Company and Distribution Quebec Dentaire ("DQD"), as well as the acquisition of J. A. Webster, Inc. in July 2001. Dental supply sales increased 16.0% to $340.7 million, which reflects the impact of one less selling day in the Current Quarter. Adjusting for the extra day in the Prior Quarter, dental supply sales increased about 17.0%. Dental acquisitions accounted for approximately 4% - 6% of the sales increase. Equipment and software sales were also a key sales growth driver in the Current Quarter increasing 22.2%. Excluding the impact of acquisitions, equipment and software sales increased approximately 15% fueled by strong growth of both new generation and basic equipment lines. Digital software sales were also robust growing 30.0% in the Current Quarter. However, total software sales were down due to lower volumes of traditional front-office 9 practice management software. Consumable and printed product sales grew 13.1% in the Current Quarter, or approximately 10% after adjusting for the estimated impact of acquisitions and the one less selling day in the Current Quarter. Sales of other services and products, consisting primarily of parts, technical service labor, software support and insurance e-claims, grew 11%, excluding the estimated impact of acquisitions. Canadian dental sales increased 16.9% in the Current Quarter paced by strong sales of equipment. Currency exchange rates had a nominal impact on results for the period. The acquisition of DQD during the Current Quarter contributed about 2% to the overall sales increase in Canada. Veterinary supply sales improved 11.0% on a pro forma basis amounting to $47.0 million in the Current Quarter. Gross Margins. Gross margins increased 24.4% over the Prior Quarter due solely to higher sales volumes. As a percent of sales, consolidated gross margins were down 1 percentage point due to the addition of the veterinary supply business in July 2001 that has historically experienced lower margins, in the mid 20's for the Current Quarter. Dental supply gross margins were the same as last year reflecting a shift in sales mix to a higher percentage of consumables and equipment due to dental acquisitions together with lower high-margin software revenues. Operating Expenses. Results for the Current Quarter include the impact of the adoption of SFAS No. 142, "Goodwill and Other Intangible Assets" resulting in the cessation of goodwill amortization. Additional information regarding the adoption of SFAS No. 142 is included in the Notes to the Consolidated Financial Statements on pages 7 and 8 of this document. That information is incorporated by reference into this section of this report. After adjusting the Prior Quarter to exclude goodwill amortization, operating expenses increased 22.8% but declined 1 percentage point as a ratio of sales. Operating expenses declined 40 basis points as a percent of sales in the dental supply business. Dental supply operating expenses in the Current Quarter benefited by $0.9 million or 30 basis points due to cessation of goodwill amortization. The remaining 10 basis point improvement is noteworthy considering the magnitude of investments being made in the business during the Current Quarter. The Company is in the process of implementing a new field service management system for its technical service operation. Additionally, the roll-out of the Company's customer hardware and networking initiative is almost complete. Management expects these programs to improve operating efficiencies and contribute to sales growth over time. In the short-term, however, investments in these programs are putting pressure on the Company's operating expense rate. The Current Quarter expense rate also reflects the impact of the acquisition of Thompson Dental, which was marginally contributory to operating earnings in the quarter. The integration of the distribution facility was completed and the administrative processes of the former Thompson entity were wrapped up during the period. Operating expenses in the veterinary business were 16.1% of sales. Operating Income. Operating income increased 32.0% and improved 30 basis points as a percent of sales. Higher sales volumes accounted for most of the increase. The improvement in operating income as a percent of sales is primarily attributable to the elimination of goodwill amortization expense in the Current Quarter due to adoption of SFAS No. 142. 10 Other Income. Other income, net of expenses, was $1.3 million for the Current Quarter compared to $1.9 million for the Prior Quarter. Lower yields on investment balances and the elimination of the amortization of deferred credits associated with the adoption of SFAS No. 142 resulted in the decrease. Income Taxes. The effective income tax rate in the Current Quarter was 37.6%, which was adjusted up from the 37.4% rate used in Prior Quarter to reflect the impact of the elimination of the amortization of the deferred credits discussed above. Income Before Cumulative Effect of Accounting Change. Income before the cumulative effect of the accounting change increased to $25.1 million, or 27.9% due to the factors discussed above. Earnings Per Share, Before Cumulative Effect of Accounting Change. Earnings per share before the cumulative effective of accounting change increased to $0.37 versus $0.29 a year ago. Had amortization of goodwill and the deferred credits ceased in the Prior Quarter, Prior Quarter earnings would have increased by $0.4 million or less than $0.01 per diluted share. LIQUIDITY AND CAPITAL RESOURCES The Company's financial condition remains strong. We consumed $12.2 million of cash in operations despite a 27.9% increase in earnings. A $32.5 million decrease in accounts payable and accrued liabilities was the primary factor leading to this reduction as we settled year-end trade payables and incentive compensation accruals. We also carried approximately $30 million of finance contracts above our normal levels at both year-end and at the end of the Current Quarter. As we increase usage of our new funding vehicle that was entered into during the Current Quarter, these balances should decrease in the second quarter. We moved slower than anticipated in using this new vehicle as we completed the implementation of a new accounting system for the customer financing aspect of our business. In the Current Quarter we used $3.6 million to purchase Distribution Quebec Dentaire, Inc. In comparison, we invested $83.8 million of cash to acquire the assets of J. A. Webster, Inc. in the Prior Quarter. The Company expects funds generated by operations and existing cash and cash equivalents to continue to be its most significant sources of liquidity. The Company currently believes funds generated from the expected results of operations and available cash and cash equivalents of $132.4 million will be sufficient to meet the Company's working capital needs and finance anticipated expansion plans and strategic initiatives for the next fiscal year. Should additional investment opportunities arise, management believes that the strength of the Company's earnings, cash flows and balance sheet will permit the Company to obtain additional debt or equity capital, if necessary. CRITICAL ACCOUNTING POLICIES There has been no material change in the Company's Critical Accounting Policies, as disclosed in its 2002 Annual Report on Form 10-K filed on July 25, 2002. 11 FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS Certain information of a non-historical nature contains forward-looking statements. Words such as "believes," "expects," "plans," "estimates," "intends" and variations of such words are intended to identify such forward-looking statements. The statements are not guaranties of future performance and are subject to certain risks, uncertainties or assumptions that are difficult to predict; therefore, the Company cautions shareholders and prospective investors that the following important factors, among others, could cause the Company's actual operating results to differ materially from those expressed in any forward-looking statements. The statements under this caption are intended to serve as cautionary statements within the meaning of the Private Securities Litigation Reform Act of 1995. The following information is not intended to limit in any way the characterization of other statements or information under other captions as cautionary statements for such purpose. The order in which such factors appear below should not be construed to indicate their relative importance or priority. o The Company's ability to meet increased competition from national, regional and local full-service distributors and mail-order distributors of dental and veterinary products, while maintaining current or improved profit margins. o The ability of the Company to retain its base of customers and to increase its market share. o The ability of the Company to maintain satisfactory relationships with qualified and motivated sales personnel. o The continued ability of the Company to maintain satisfactory relationships with key vendors and the ability of the Company to create relationships with additional manufacturers of quality, innovative products. o Changes in the economics of dentistry affecting dental practice growth and the demand for dental products, including the ability and willingness of dentists to invest in high-technology diagnostic and therapeutic products. o Reduced growth in expenditures for dental services by private dental insurance plans. o The accuracy of the Company's assumptions concerning future per capita expenditures for dental services, including assumptions as to population growth and the demand for preventive dental services such as periodontic, endodontic and orthodontic procedures. o The rate of growth in demand for infection control products currently used for prevention of the spread of communicable diseases such as AIDS, hepatitis and herpes. o Changes in the economics of the veterinary supply market, including reduced growth in per capita expenditures for veterinary services and reduced growth in the number of households owning pets. 12 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no material changes in market risk during the three months ended July 27, 2002. For additional information refer to Item 7A of the Company's 2002 Form 10-K. PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (a) None. (b) No reports on Form 8-K were filed during the quarter for which this report is filed. All other items under Part II have been omitted because they are inapplicable or the answers are negative, or, in the case of legal proceedings, were previously reported in the Annual Report on Form 10-K filed July 25, 2002. 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. PATTERSON DENTAL COMPANY (Registrant) Dated: September 9, 2002 By: /s/ R. Stephen Armstrong ------------------------------------ R. Stephen Armstrong Executive Vice President, Treasurer and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) 13 CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Peter L. Frechette, the Chief Executive Officer of Patterson Dental Company, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Patterson Dental Company; 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; and 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. Date: September 9, 2002 /s/ Peter L. Frechette ---------------------------------- Peter L. Frechette Chief Executive Officer I, R. Stephen Armstrong, the Chief Financial Officer of Patterson Dental Company, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Patterson Dental Company; 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; and 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. Date: September 9, 2002 /s/ R. Stephen Armstrong ---------------------------------- R. Stephen Armstrong Chief Financial Officer 14 CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Patterson Dental Company (the "Company") on Form 10-Q for the quarterly period ended July 27, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, in the capacity indicated below, hereby certifies pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: September 9, 2002 /s/ Peter L. Frechette ---------------------------------- Peter L. Frechette President and Chief Executive Officer In connection with the Quarterly Report of Patterson Dental Company (the "Company") on Form 10-Q for the quarterly period ended July 27, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, in the capacity indicated below, hereby certifies pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: September 9, 2002 /s/ R. Stephen Armstrong ---------------------------------- R. Stephen Armstrong Executive Vice President and Chief Financial Officer 15