-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FIwdtnmSagfC7G4DV36r0HzIV7gbcu5zPyVtpSPTmyf0ih4QxYvBcWJHJsZIFsCX Yw9MzUUQQlT5l5Bja+53Cw== 0000950152-02-006000.txt : 20020809 0000950152-02-006000.hdr.sgml : 20020809 20020809090215 ACCESSION NUMBER: 0000950152-02-006000 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020809 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SHERWIN WILLIAMS CO CENTRAL INDEX KEY: 0000089800 STANDARD INDUSTRIAL CLASSIFICATION: PAINTS, VARNISHES, LACQUERS, ENAMELS & ALLIED PRODUCTS [2851] IRS NUMBER: 340526850 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04851 FILM NUMBER: 02723724 BUSINESS ADDRESS: STREET 1: 101 PROSPECT AVE NW CITY: CLEVELAND STATE: OH ZIP: 44115 BUSINESS PHONE: 2165662200 10-Q 1 l95428ae10vq.txt THE SHERWIN-WILLIAMS COMPANY 10-Q/QTR END 6-30-02 UNITED STATES 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 Period Ended June 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 1-4851 ------ THE SHERWIN-WILLIAMS COMPANY - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) OHIO 34-0526850 - -------------------------------------------- ---------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 101 Prospect Avenue, N.W., Cleveland, Ohio 44115-1075 - -------------------------------------------- ---------------------------- (Address of principal executive offices) (Zip Code) (216) 566-2000 - -------------------------------------------------------------------------------- (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 the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. Common Stock, $1.00 Par Value - 150,505,911 shares as of July 31, 2002. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS THE SHERWIN-WILLIAMS COMPANY AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED INCOME (LOSS) (UNAUDITED) Thousands of dollars, except per share data
Three months ended June 30, Six months ended June 30, ------------------------------ ------------------------------ 2002 2001 2002 2001 ----------- ----------- ----------- ----------- Net sales $ 1,453,198 $ 1,407,514 $ 2,602,376 $ 2,565,884 Cost of goods sold 801,388 798,977 1,458,462 1,468,324 Gross profit 651,810 608,537 1,143,914 1,097,560 Percent to net sales 44.9% 43.2% 44.0% 42.8% Selling, general and administrative expenses 465,517 444,377 887,703 866,036 Percent to net sales 32.0% 31.6% 34.1% 33.8% Operating income 186,293 164,160 256,211 231,524 Percent to net sales 12.8% 11.7% 9.8% 9.0% Interest expense 10,127 15,471 20,818 30,677 Interest and net investment income (951) (1,083) (1,740) (2,488) Other expense - net 3,688 6,153 7,600 1,107 ----------- ----------- ----------- ----------- Income before income taxes and cumulative effect of change in accounting principle 173,429 143,619 229,533 202,228 Income taxes 65,903 53,139 87,223 74,824 ----------- ----------- ----------- ----------- Income before cumulative effect of change in accounting principle 107,526 90,480 142,310 127,404 Cumulative effect of change in accounting principle - net of income taxes of $64,476 (183,136) ----------- ----------- ----------- ----------- Net income (loss) $ 107,526 $ 90,480 $ (40,826) $ 127,404 =========== =========== =========== =========== Income (loss) per share: Basic: Before cumulative effect of change in accounting principle $ 0.71 $ 0.58 $ 0.94 $ 0.81 Cumulative effect of change in accounting principle - net of income taxes (1.21) ----------- ----------- ----------- ----------- Net income (loss) $ 0.71 $ 0.58 $ (0.27) $ 0.81 =========== =========== =========== =========== Diluted: Before cumulative effect of change in accounting principle $ 0.70 $ 0.58 $ 0.93 $ 0.80 Cumulative effect of change in accounting principle - net of income taxes (1.20) ----------- ----------- ----------- ----------- Net income (loss) $ 0.70 $ 0.58 $ (0.27) $ 0.80 =========== =========== =========== ===========
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. - 2 - THE SHERWIN-WILLIAMS COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) Thousands of dollars
JUNE 30, December 31, June 30, 2002 2001 2001 ----------- ----------- ----------- ASSETS Current assets: Cash and cash equivalents $ 11,503 $ 118,814 $ 13,377 Accounts receivable, less allowance 687,259 523,278 711,601 Inventories: Finished goods 529,258 530,916 552,278 Work in process and raw materials 83,113 101,847 94,892 ----------- ----------- ----------- 612,371 632,763 647,170 Deferred income taxes 108,124 104,672 104,958 Other current assets 131,678 127,418 155,050 ----------- ----------- ----------- Total current assets 1,550,935 1,506,945 1,632,156 Goodwill 555,799 672,397 682,777 Intangible assets 197,409 304,506 304,551 Deferred pension assets 406,942 393,587 378,855 Other assets 108,695 77,802 103,029 Property, plant and equipment 1,555,341 1,564,636 1,542,996 Less allowances for depreciation 904,397 891,948 841,876 ----------- ----------- ----------- 650,944 672,688 701,120 ----------- ----------- ----------- Total assets $ 3,470,724 $ 3,627,925 $ 3,802,488 =========== =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term borrowings $ 51,996 $ 252,331 Accounts payable 530,774 $ 454,410 464,897 Compensation and taxes withheld 122,037 141,640 118,864 Current portion of long-term debt 13,481 111,852 111,052 Other accruals 302,667 326,854 293,857 Accrued taxes 175,952 106,597 145,207 ----------- ----------- ----------- Total current liabilities 1,196,907 1,141,353 1,386,208 Long-term debt 507,244 503,517 506,183 Postretirement benefits other than pensions 212,551 209,963 211,011 Other long-term liabilities 237,017 285,328 253,457 Shareholders' equity: Preferred stock - convertible, participating, no par value: 105,351, 168,305 and 215,770 shares outstanding at June 30, 2002, December 31, 2001 and June 30, 2001, respectively 105,351 168,305 215,770 Unearned ESOP compensation (105,351) (168,305) (215,770) Common stock - $1.00 par value: 151,646,746, 153,978,356 and 156,339,746 shares outstanding at June 30, 2002, December 31, 2001 and June 30, 2001, respectively 209,587 208,031 207,372 Other capital 231,049 200,643 163,014 Retained earnings 2,034,238 2,120,927 2,030,240 Treasury stock, at cost (936,525) (837,284) (764,648) Cumulative other comprehensive loss (221,344) (204,553) (190,349) ----------- ----------- ----------- Total shareholders' equity 1,317,005 1,487,764 1,445,629 ----------- ----------- ----------- Total liabilities and shareholders' equity $ 3,470,724 $ 3,627,925 $ 3,802,488 =========== =========== ===========
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. - 3 - THE SHERWIN-WILLIAMS COMPANY AND SUBSIDIARIES CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED) Thousands of dollars
Six months ended June 30, --------------------------------- 2002 2001 ------------ ------------ OPERATING ACTIVITIES Net (loss) income $ (40,826) $ 127,404 Adjustments to reconcile net (loss) income to net operating cash: Cumulative effect of change in accounting principle 183,136 Depreciation 50,572 53,761 Amortization of goodwill, intangibles, and other assets 5,781 19,753 Increase in deferred pension assets (13,355) (14,504) Net increase in postretirement liability 2,588 2,338 Other 10,306 3,099 Change in current assets and liabilities-net (52,287) (52,955) Unusual tax-related payments (65,677) Other (9,596) (12,560) ------------ ------------ Net operating cash 136,319 60,659 INVESTING ACTIVITIES Capital expenditures (53,811) (45,248) Acquisitions of businesses (26,248) Increase in other investments (13,208) (10,346) Proceeds from sale of assets 12,146 9,866 Other (1,097) (3,593) ------------ ------------ Net investing cash (82,218) (49,321) FINANCING ACTIVITIES Net increase in short-term borrowings 51,996 145,477 Increase in long-term debt 2,285 1,568 Payments of long-term debt (101,791) (20,659) Payments of cash dividends (45,864) (45,917) Proceeds from stock options exercised 32,431 5,727 Treasury stock purchased (99,241) (84,984) Other (2,745) (835) ------------ ------------ Net financing cash (162,929) 377 ------------ ------------ Effect of exchange rate changes on cash 1,517 (1,234) ------------ ------------ Net (decrease) increase in cash and cash equivalents (107,311) 10,481 Cash and cash equivalents at beginning of year 118,814 2,896 ------------ ------------ Cash and cash equivalents at end of period $ 11,503 $ 13,377 ============ ============ Income taxes paid $ 28,299 $ 80,606 Interest paid 23,650 31,467
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. - 4 - THE SHERWIN-WILLIAMS COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Periods ended June 30, 2002 and 2001 NOTE A--BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States 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 for complete financial statements. For further information, refer to the. consolidated financial statements and footnotes thereto included in the Company's Form 10-K for the fiscal year ended December 31, 2001. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The consolidated results for the second quarter and six months ended June 30, 2002 are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2002. NOTE B--DIVIDENDS Dividends paid on common stock during each of the first two quarters of 2002 and 2001 were $.15 per common share and $.145 per common share, respectively. NOTE C--OTHER EXPENSE - NET Significant items included in Other expense - net are as follows:
(Thousands of dollars) Three months ended June 30, Six months ended June 30, --------------------------------- ------------------------------ 2002 2001 2002 2001 -------------- -------------- ------------- ------------- Dividend and royalty income $ (490) $ (653) $(1,448) $(1,908) Net expense (income) from financing and investing activities 1,948 4,628 3,661 (473) Foreign currency related losses 1,909 1,289 5,493 1,876
The net expense (income) from financing and investing activities represents the realized gains or losses associated with disposing of fixed assets, the net pre-tax expense associated with the Company's investment in broad-based corporate owned life insurance and other related fees. NOTE D--COMPREHENSIVE INCOME (LOSS) Comprehensive income (loss) is summarized as follows:
(Thousands of dollars) Three months ended June 30, Six months ended June 30, ----------------------------------- --------------------------------- 2002 2001 2002 2001 --------------- --------------- --------------- -------------- Net income (loss) $ 107,526 $ 90,480 $ (40,826) $ 127,404 Foreign currency translation adjustments (14,974) (23,567) (16,791) (26,740) --------- --------- --------- --------- Comprehensive income (loss) $ 92,552 $ 66,913 $ (57,617) $ 100,664 ========= ========= ========= =========
NOTE E--RECLASSIFICATION Certain amounts in the 2001 financial statements have been reclassified to conform with the 2002 presentation. - 5 - NOTE F--INCOME PER COMMON SHARE
Three months ended June 30, Six months ended June 30, ----------------------------- ------------------------------ (Thousands of dollars, except per share data) 2002 2001 2002 2001 ------------- ------------- ------------- ------------- Income before cumulative effect of change in accounting principle $ 107,526 $ 90,480 $ 142,310 $ 127,404 Cumulative effect of change in accounting principle - net of income taxes of $64,477 (183,136) ------------- ------------- ------------- ------------- Net income (loss) $ 107,526 $ 90,480 $ (40,826) $ 127,404 ============= ============= ============= ============= Basic Average common shares outstanding 151,792,721 155,718,543 151,743,156 157,070,639 ============= ============= ============= ============= Income per common share: Income before cumulative effect of change in accounting principle $ 0.71 $ 0.58 $ 0.94 $ 0.81 Cumulative effect of change in accounting principle (1.21) ------------- ------------- ------------- ------------- Net income (loss) $ 0.71 $ 0.58 $ (0.27) $ 0.81 ============= ============= ============= ============= Diluted Average common shares outstanding 151,792,721 155,718,543 151,743,156 157,070,639 Non-vested restricted stock grants 318,400 300,000 317,067 337,800 Stock options - treasury stock method 2,222,264 459,870 1,615,653 1,184,254 ------------- ------------- ------------- ------------- Average common shares assuming dilution 154,333,385 156,478,413 153,675,876 158,592,693 ============= ============= ============= ============= Income per common share: Income before cumulative effect of change in accounting principle $ 0.70 $ 0.58 $ 0.93 $ 0.80 Cumulative effect of change in accounting principle (1.20) ------------- ------------- ------------- ------------- Net income (loss) $ 0.70 $ 0.58 $ (0.27) $ 0.80 ============= ============= ============= =============
-6- NOTE G--REPORTABLE SEGMENT INFORMATION The Company reports segment information in the same way that management internally organizes its business for assessing performance and making decisions regarding allocation of resources in accordance with Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosures about Segments of an Enterprise and Related Information."
Net External Sales/Operating Profit - ----------------------------------- 2002 2001 ------------------------------- ------------------------------- (Thousands of dollars) NET SEGMENT Net Segment EXTERNAL OPERATING External Operating SALES PROFIT Sales Profit ---------- ---------- ---------- ---------- THREE MONTHS ENDED JUNE 30: - -------------------------- Paint Stores $ 911,756 $ 123,589 $ 874,064 $ 118,937 Consumer 350,913 66,252 338,409 48,636 Automotive Finishes 123,637 17,731 124,678 14,253 International Coatings 65,393 3,018 68,666 999 Administrative 1,499 (37,161) 1,697 (39,206) ---------- ---------- ---------- ---------- Consolidated totals $1,453,198 $ 173,429 $1,407,514 $ 143,619 ========== ========== ========== ========== SIX MONTHS ENDED JUNE 30: - -------------------------- Paint Stores $1,607,654 $ 163,657 $1,567,477 $ 165,818 Consumer 629,692 109,408 616,291 74,035 Automotive Finishes 235,195 29,159 240,504 25,810 International Coatings 126,810 (5,516) 138,149 5,337 Administrative 3,025 (67,175) 3,463 (68,772) ---------- ---------- ---------- ---------- Consolidated totals $2,602,376 $ 229,533 $2,565,884 $ 202,228 ========== ========== ========== ========== =================================================================================================================================== Intersegment Transfers - ---------------------- Three months ended June 30, Six months ended June 30, ------------------------------- ------------------------------- (Thousands of dollars) 2002 2001 2002 2001 ---------- ---------- ---------- ---------- Paint Stores $ 298 $ 281 $ 711 $ 459 Consumer 277,114 266,088 487,032 462,282 Automotive Finishes 10,396 9,581 15,852 17,892 International Coatings 259 (332) 550 71 Administrative 1,096 2,657 2,141 5,309 ---------- ---------- ---------- ---------- Segment totals $ 289,163 $ 278,275 $ 506,286 $ 486,013 ========== ========== ========== ========== ====================================================================================================================================
Segment operating profit is total revenue, including intersegment transfers, less operating costs and expenses. Domestic intersegment transfers are accounted for at the approximate fully absorbed manufactured cost plus distribution costs. International intersegment transfers are accounted for at values comparable to normal unaffiliated customer sales. The Administrative Segment's expenses include interest which is unrelated to certain financing activities of the Operating Segments, certain foreign currency transaction losses related to dollar-denominated debt and other financing activities, and other adjustments. Net external sales and operating profits of all consolidated foreign subsidiaries were $131.6 million and $6.8 million, respectively, for the second quarter of 2002, and $129.9 million and $1.0 million, respectively, for the second quarter of 2001. Net external sales and operating profits of these subsidiaries were $252.3 million and $7.7 million, respectively, for the first six months of 2002, and $258.5 million and $8.4 million, respectively, for the first six months of 2001. Long-lived assets of these subsidiaries totaled $103.8 million and $220.7 million at June 30, 2002 and 2001, respectively. Domestic operations account for the remaining net external sales, operating profits and long-lived assets. The Administrative Segment's expenses do not include any significant foreign operations. No single geographic area outside the United States was significant relative to consolidated net external sales or consolidated long-lived assets. Export sales and sales to any individual customer were each less than 10% of consolidated sales to unaffiliated customers during all periods presented. - 7 - NOTE H--CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE The Company adopted SFAS No. 142, "Goodwill and Other Intangible Assets," effective January 1, 2002. Goodwill and intangible assets deemed to have indefinite lives are no longer being amortized but are subject to impairment tests in accordance with SFAS No. 142. Excluding such amortization expense of $6,147 and $12,273 from second quarter and first six months of 2001 respectively, to be comparable with 2002, diluted net income per common share would have been $.62 per share in the second quarter 2001 and $.88 per share for the first six months of 2001. During the first quarter 2002, the Company recognized a transitional impairment charge of $247,612 ($183,136 after tax or $1.21 per share) as the cumulative effect of a change in accounting principle to reduce the carrying values of certain indefinite lived intangible assets and goodwill to estimated fair values as required by SFAS No. 142. Impairment of indefinite lived intangible assets amounted to $118,220 ($77,422 after tax or $.51 per share) and impairment of goodwill amounted to $129,392 ($105,714 after tax or $.70 per share). The impairment of indefinite lived intangible assets was due primarily to a shortfall in sales from levels anticipated at the time of acquisition and related principally to trademarks in the Consumer Segment associated with the acquisition of Thompson Minwax Holding Corp. In addition, certain trademarks in the International Coatings Segment were impaired. The impairment of goodwill relates primarily to international operations in the International Coatings and Automotive Finishes Segments. Weakening foreign currency exchange rates and economic conditions, particularly in South America, have negatively impacted profit and cash flow in U.S. dollars. Fair values of indefinite lived intangible assets and goodwill were estimated using a discounted cash flow valuation model, incorporating a discount rate commensurate with the risks involved for each group of assets. SFAS No. 142 requires a review at least annually of the carrying value of indefinite lived assets and goodwill. In addition to the transitional impairment test completed in the first quarter, another impairment test will be completed in the fourth quarter 2002 and at least annually thereafter. SFAS No. 142 also requires a complete review of useful life and classification of all intangible and other assets. As a result, certain assets were reclassified from Other assets to Intangible assets on all balance sheets presented in the accompanying financial statements. A summary of changes in the Company's goodwill during the first six months by reportable operating segment is as follows:
Goodwill ----------------------------------------------------------------------------------- January 1, Other June 30, 2002 Acquisitions Impairments Adjustments 2002 ---------- ------------ ------------ ----------- ---------- Paint Stores $ 81,886 $ 12,487 $ (5,388) $ 17 $ 89,002 Consumer 450,054 (16,571) 753 434,236 Automotive Finishes 49,631 1,417 (19,009) (1,879) 30,160 International Coatings 90,826 (88,424) (1) 2,401 ---------- ---------- ---------- ---------- ---------- Consolidated totals $ 672,397 $ 13,904 $ (129,392) $ (1,110) $ 555,799 ========== ========== ========== ========== ==========
- 8 - The Company's intangible assets and related accumulated amortization is as follows:
Intangible assets subject to amortization Trademarks Total ------------------------------------------------- with indefinite Intangible Software All other Subtotal lives assets ------------- ------------- ------------ ----------------- ------------- June 30, 2001 - ----------------------------------- Gross $ 61,491 $ 122,142 $ 183,633 Accumulated amortization (8,957) (104,011) (112,968) ----------- ----------- ----------- ----------- ----------- Net value $ 52,534 $ 18,131 $ 70,665 $ 233,886 $ 304,551 =========== =========== =========== =========== =========== December 31, 2001 - ----------------------------------- Gross $ 68,917 $ 71,083 $ 140,000 Accumulated amortization (11,900) (53,775) (65,675) ----------- ----------- ----------- ----------- ----------- Net value $ 57,017 $ 17,308 $ 74,325 $ 230,181 $ 304,506 =========== =========== =========== =========== =========== June 30, 2002 - ----------------------------------- Gross $ 80,113 $ 75,146 $ 155,259 Accumulated amortization (15,296) (54,782) (70,078) ----------- ----------- ----------- ----------- ----------- Net value $ 64,817 $ 20,364 $ 85,181 $ 112,228 $ 197,409 =========== =========== =========== =========== ===========
Certain fully amortized intangible assets were written-off during the quarter-ended December 31, 2001. Based on the current amount of intangible assets subject to amortization, the estimated amortization expense for each of the five succeeding years is expected to approximate $12.0 million in 2002, $11.9 million in 2003, $11.8 million in 2004, $10.1 million in 2005 and $8.5 million in 2006. - 9 - ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CRITICAL ACCOUNTING POLICIES AND ESTIMATES - ------------------------------------------ The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The Company bases these estimates on historical results and various other assumptions believed to be reasonable, the results of which form the basis for making estimates concerning the carrying values of assets and liabilities that are not readily available from other sources. Actual results could differ from those estimates. The Company's significant accounting policies are disclosed in Note 1 of Notes to Consolidated Financial Statements in the Company's 2001 Annual Report. Management believes the following accounting policies affect the more significant estimates used in preparing the consolidated financial statements. SFAS No. 142 requires that goodwill and intangible assets deemed to have indefinite lives no longer be amortized but are subject to impairment tests. Management's judgement was used in determining which intangible assets had indefinite lives as well as determining the useful lives of remaining intangible assets. In accordance with SFAS No. 142 transitional impairment tests, fair values of indefinite lived intangible assets and goodwill were estimated using a discounted cash flow valuation model, incorporating a discount rate commensurate with the risks involved for each group of assets. Growth models were developed using both historical results and industry forecasts. Inventories are stated at the lower of cost or market with cost determined principally on the last-in, first-out (LIFO) method. Management records reductions to inventory cost based on historical experience and expected trends for obsolete and discontinued inventories. Management also records an allowance for doubtful accounts receivable based on historical experience and expected trends. Property, plant and equipment is stated on the basis of cost and depreciated principally on a straight-line method using industry standards and historical experience to estimate useful lives. Defined benefit pension plans and postretirement health care and life insurance benefits require estimating the cost of benefits to be provided well into the future and attributing that cost to the time period each covered employee works. To record these net assets and obligations, management uses estimates relating to assumed inflation, investment returns, mortality, employee turnover, rate of compensation increases, medical costs and discount rates. Management along with third-party actuaries review all of these assumptions on an ongoing basis to ensure that the most recent information available is being considered. - 10 - The Company is self-insured for certain liabilities relating to worker's compensation, employee benefits and other property and general liability claims. Self-insurance claims filed and claims incurred but not reported are accrued based upon management's estimates of the aggregate liability for uninsured claims incurred using actuarial assumptions followed in the insurance industry and historical experience. The Company is involved with environmental compliance, investigation and remediation activities at some of its current and former sites and at a number of third-party sites. The Company accrues for certain environmental remediation-related activities for which commitments or clean-up plans have been developed and for which costs can be reasonably estimated based on industry standards and historical experience. All accrued amounts are recorded on an undiscounted basis. Accrued environmental remediation-related expenses include direct costs of remediation and indirect costs related to the remediation effort, such as compensation and benefits for employees directly involved in the remediation activities and fees paid to outside engineering, consulting and law firms. The Company is continually re-evaluating its operating facilities against its long-term strategic goals. Upon commitment to a formal shutdown plan of an operating facility, provisions are made for all estimated qualified exit costs in accordance with EITF 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity" and other related accounting guidance. Qualified exit costs include primarily post-closure rent expenses, incremental post-closure costs and costs of employee terminations. Estimates of such costs are determined by contractual agreement or estimated by management based on historical experience. Concurrently, property, plant and equipment is tested for impairment in accordance with SFAS No. 144 and, if impairment exists, the carrying value is reduced to estimated net fair value using a cash flow valuation model incorporating a discount rate commensurate with the risks involved for each group of assets. RESULTS OF OPERATIONS - --------------------- Consolidated net sales for the quarter increased 3.2 percent to $1.45 billion from $1.41 billion in the second quarter last year and increased 1.4 percent for six months to $2.60 billion from $2.57 billion in the first six months of 2001. Strong domestic architectural paint sales were partially offset by continued sluggishness in domestic industrial and automotive sales. Poor economic conditions in South America and weak currency exchange rates in Argentina and Brazil continue to negatively impact international sales in U.S. dollars. Net sales in the Paint Stores Segment increased 4.3 percent to $911.8 million in the quarter and 2.6 percent to $1.61 billion for the first six months due primarily to strong architectural paint sales which continue to be partially offset by sales shortfalls in industrial maintenance and product finishes. Architectural paint sales to painting contractors and do-it-yourself customers continued to be higher in 2002 than last year. Comparable-store sales, which declined 0.5 percent in the first quarter, were up 1.8 percent in the second quarter resulting in an increase of 0.8 percent for the first six months. Net sales of the Consumer Segment increased 3.7 percent to $350.9 million in the quarter and 2.2 percent to $629.7 million in the first six months compared to last year. Sales of aerosols and other paint-related products to existing customers improved during the first six months more than offsetting - 11 - a shortfall in sales in the Cleaning Solutions Business Unit. The Automotive Finishes Segment's net sales decreased 0.8 percent to $123.6 million in the quarter and 2.2 percent to $235.2 million for the first six months. The slowly recovering domestic economy continued to adversely impact this Segment's OEM sales. Vehicle refinish sales were curtailed by lower accident rates resulting from the lingering effects of a mild winter. Net sales in the International Coatings Segment were down 4.8 percent to $65.4 million in the quarter and 8.2 percent to $126.8 million in the first six months of 2002. The sales decreases in U. S. dollars were due primarily to unfavorable currency exchange rates in the Brazilian real and Argentine peso. Excluding the effects of currency exchange fluctuations relative to last year, net sales for the Segment increased 8.2 percent and 4.1 percent for the quarter and the six months, respectively. Consolidated gross profit as a percent of sales increased to 44.9 percent in the second quarter of 2002 from 43.2 percent in the second quarter of 2001 and to 44.0 percent for the first six months of 2002 from 42.8 percent for the first six months of 2001. Second quarter and first six months gross margins in the Paint Stores and Consumer Segments were higher than last year primarily due to higher sales levels, moderating raw material costs, lower conversion costs resulting from improved overhead absorption related to volume gains and manufacturing expense reductions due to plant closures. In addition, the Paint Stores Segment's margins in the second quarter of 2002 improved due to higher architectural paint sales volume and an improved higher margin product sales mix. The Automotive Finishes Segment's margins increased in the second quarter and first six months of 2002 due to moderating raw material costs, improved manufacturing absorption and stabilizing sales declines. The International Coatings Segment's margins were higher than last year during the second quarter in spite of economic and competitive pressures. Consolidated selling, general and administrative expenses as a percent of sales were unfavorable to last year for the second quarter and first six months primarily due to higher expenses associated with additional investment in our businesses. In the Paint Stores Segment, SG&A expenses as a percent of sales were unfavorable to last year for the quarter and six months primarily due to costs incurred to launch a new color system, including an exclusive licensed color palette, and incremental increases in expenses associated with the increased number of stores. The Consumer Segment's SG&A ratio was unfavorable to last year in the second quarter primarily due to increasing expenses over the first quarter to support higher sales. For six months, the SG&A ratio in the Consumer Segment was essentially flat due to higher sales levels and related costs. Second quarter and six months SG&A expenses as a percent of sales were favorable to last year in both periods in the Automotive Finishes and International Coatings Segments primarily due to tight expense control. Decreased interest expense in the second quarter and first six months of 2002 versus 2001 occurred due to lower average outstanding short-term and long-term debt and lower average short-term borrowing rates. Other expense - net was lower for the second quarter of 2002 compared to 2001 primarily due to lower financing expenses related to lower long-term debt outstanding in 2002. For the first six months, other expense - net increased due to higher foreign currency related losses in 2002 and non-recurring gains realized from the sale of certain fixed assets in 2001. - 12 - In the second quarter of 2002, net income increased $17.0 million, or 18.8 percent and $14.9 million, or 11.7 percent for the first six months before the cumulative effect of change in accounting principle. Diluted net income per common share increased to $.70 per share in the quarter compared to $.58 per share in 2001. Before the cumulative effect of change in accounting principle for the first six months, the diluted net income per common share increased to $.94 per share from $.80 per share in 2001. Excluding amortization expense of intangible assets and goodwill in 2001 to be comparable with 2002, diluted net income per common share would have been $.62 per share for the second quarter and $.88 per share for the first six months of 2001. Effective January 1, 2002, the Company adopted SFAS No. 142, "Goodwill and Other Intangible Assets." In accordance with the requirements of that pronouncement, indefinite lived intangible assets and goodwill were reviewed for possible impairment. Due to the reduction in fair value of certain acquired trademarks and businesses, related principally to international acquisitions and the acquisition of Thompson Minwax Holding Corp., the Company recorded an after-tax transitional impairment charge of $183.1 million, or $1.21 per share, in the first quarter. The transitional impairment charge was recorded as a cumulative effect of change in accounting principle in accordance with SFAS No. 142. The net loss after cumulative effect of change in accounting principle was $40.8 million, or $.27 per common share, for the first six months of 2002. FINANCIAL CONDITION - ------------------- Cash and cash equivalents decreased $107.3 million during the first six months of 2002, primarily as a result of a maturity payment on long-term debt of $100.0 million. During the first six months of 2002, short-term borrowings increased $52.0 million. Short-term borrowings primarily relate to the Company's commercial paper program, which had unused borrowing availability of $698.6 million at June 30, 2002. This program is backed by the Company's revolving credit agreements. The proceeds from the issuance of short-term borrowings and net operating cash were used for acquisition of businesses of $26.2 million, capital expenditures of $53.8 million, treasury stock purchases of $99.2 million, and cash dividends of $45.9 million. The Company's current ratio declined to 1.30 from 1.32 at December 31, 2001. The decrease in this ratio occurred primarily due to the increased short-term borrowings. Since June 30, 2001, $637.8 million of cash generated by operations was used to reduce short-term borrowings and long-term debt by $297.0 million, support capital expenditures of $91.1 million, acquire treasury shares of $171.3 million, pay cash dividends of $90.9 million, and acquire businesses of $41.4 million. The Company expects to remain in a short-term borrowing position throughout most of 2002. Capital expenditures during the second quarter and first six months of 2002 represented primarily the costs associated with new store openings and normal equipment replacement in the Paint Stores Segment and new or upgraded information systems hardware in the Administrative and other Segments. We do not anticipate the need for any specific external financing to support our capital programs during the remainder of 2002. - 13 - During the second quarter of 2002, the Company purchased 1,479,400 shares of its common stock for treasury purposes which brings the total number of shares purchased in 2002 to 3,242,200. The Company acquires shares of its common stock for general corporate purposes and, depending upon its cash position and market conditions, the Company may acquire additional shares of its common stock in the future. The Company had remaining authorization at June 30, 2002 to purchase approximately 13.8 million shares of its common stock. The Company's past operations included the manufacture and sale of lead pigments and lead-based paints. The Company, along with other companies, is a defendant in a number of legal proceedings, including purported class actions, separate actions brought by the State of Rhode Island, and actions brought by various counties, cities, school districts and other government-related entities, arising from the manufacture and sale of lead pigments and lead-based paints. The plaintiffs are seeking recovery based upon various legal theories, including negligence, strict liability, breach of warranty, negligent misrepresentations and omissions, fraudulent misrepresentations and omissions, concert of action, civil conspiracy, violations of unfair trade practices and consumer protection laws, enterprise liability, market share liability, nuisance, unjust enrichment and other theories. The plaintiffs seek various damages and relief, including personal injury and property damage, costs relating to the detection and abatement of lead-based paint from buildings, costs associated with a public education campaign, medical monitoring costs and others. The Company believes that the litigation is without merit and is vigorously defending such litigation. The Company expects that additional lead pigment and lead-based paint litigation will be filed against the Company in the future asserting similar or different legal theories and seeking similar or different types of damages and relief. Litigation is inherently subject to many uncertainties. Adverse court rulings or determinations of liability, among other factors, could affect the lead pigment and lead-based paint litigation against the Company and encourage an increase in the number and nature of future claims and proceedings. In addition, from time to time, various legislation and administrative regulations have been enacted or proposed to impose obligations on present and former manufacturers of lead pigments and lead-based paints respecting asserted health concerns associated with such products and to overturn court decisions in which the Company and other manufacturers have been successful. Due to the uncertainties involved, management is unable to predict the outcome of the lead pigment and lead-based paint litigation, the number or nature of possible future claims and proceedings, or the affect that any legislation and/or administrative regulations may have on the litigation or against the Company. In addition, management cannot reasonably determine the scope or amount of the costs and potential liabilities related to such litigation, or any such legislation and regulations. The Company has not accrued any amounts for such litigation. Any costs that may be incurred or potential liabilities that may result from such litigation or such legislation and regulations cannot reasonably be estimated. However, based upon, among other things, the outcome of such litigation to date, management does not currently believe that the costs or potential liabilities ultimately determined to be attributable to the Company arising out of such litigation will have a material adverse effect on the Company's results of operations, liquidity or financial condition. - 14 - The operations of the Company, like those of other companies in our industry, are subject to various federal, state and local environmental laws and regulations. These laws and regulations not only govern our current operations and products, but also impose potential liability on the Company for past operations which were conducted utilizing practices and procedures that were considered acceptable under the laws and regulations existing at that time. The Company expects environmental laws and regulations to impose increasingly stringent requirements upon the Company and our industry in the future. The Company believes that it conducts its operations in compliance with applicable environmental laws and regulations and has implemented various programs designed to protect the environment and promote continued compliance. The Company is involved with environmental compliance, investigation and remediation activities at some of its current and former sites (including sites which were previously owned and/or operated by businesses acquired by the Company). The Company, together with other parties, has also been designated a potentially responsible party under federal and state environmental protection laws for the investigation and remediation of environmental contamination and hazardous waste at a number of third-party sites, primarily Superfund sites. The Company may be similarly designated with respect to additional third-party sites in the future. The Company accrues for environmental-related activities relating to its past operations and third-party sites, including Superfund sites, for which commitments or clean-up plans have been developed and for which costs can be reasonably estimated. These estimated costs are determined based on currently available facts regarding each site. The Company continuously assesses its potential liability for investigation and remediation-related activities and adjusts its environmental-related accruals as information becomes available upon which more accurate costs can be reasonably estimated and as additional accounting guidelines are issued which require changing the estimated costs or the procedure utilized in estimating such costs. Actual costs incurred may vary from these estimates due to the inherent uncertainties involved including, among others, the number and financial condition of parties involved with respect to any given site, the volumetric contribution which may be attributed to the Company relative to that attributed to other parties, the nature and magnitude of the wastes involved, the various technologies that can be used for remediation and the determination of acceptable remediation with respect to a particular site. The Company's environmental-related contingent liabilities are expected to be resolved over an extended period of time. Pursuant to a Consent Decree entered into with the United States of America in 1997, on behalf of the Environmental Protection Agency, filed in the United States District Court for the Northern District of Illinois, the Company has agreed, in part, to (i) conduct an investigation at its southeast Chicago, Illinois facility to determine the nature, extent and potential impact, if any, of environmental contamination at the facility and (ii) implement remedial action measures, if required, to address any environmental contamination identified pursuant to the investigation. While the Company continues to investigate this site, certain initial remedial actions have occurred at this site. - 15 - In 1999, the Company entered into a settlement agreement with PMC, Inc. settling a lawsuit brought by PMC regarding the Company's former manufacturing facility in Chicago, Illinois which was sold to PMC in 1985. Pursuant to the terms of the settlement agreement, the Company agreed, in part, to investigate and remediate, as necessary, certain soil and/or groundwater contamination caused by historical disposals, discharges, releases and/or events occurring at this facility. In 2000, the Company entered into a Consent Decree with the People of the State of Illinois settling an action brought by the State of Illinois against the Company regarding the PMC facility. Under the Consent Decree, the Company agreed, in part, to investigate and remediate, as necessary, certain soil and/or groundwater contamination caused by historical disposals, discharges, releases and/or events occurring at this facility. The Company is currently conducting its investigation of this facility. With respect to the Company's southeast Chicago, Illinois facility and the PMC facility, the Company has evaluated its potential liability and, based upon its investigations to date, has accrued appropriate amounts. However, due to the uncertainties surrounding these facilities, the Company's ultimate liability may result in costs that are significantly higher than currently accrued. In such event, the recording of the liability may result in a material impact on net income for the annual or interim period during which the additional costs are accrued. The Company expects the contingent liabilities related to these facilities to be resolved over an extended period of time. The Company does not believe that any potential liability ultimately attributed to the Company for its environmental-related matters will have a material adverse effect on the Company's financial condition, liquidity, cash flow or, except as set forth in the preceding paragraph, net income. CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION Certain statements contained in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this report constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are based upon management's current expectations, estimates, assumptions and beliefs concerning future events and conditions and may discuss, among other things, anticipated future performance (including sales and earnings), expected growth and future business plans. Any statement that is not historical in nature is a forward-looking statement and may be identified by the use of words and phrases such as "expects," "anticipates," "believes," "will," "will likely result," "will continue," "plans to," and similar expressions. Readers are cautioned not to place undue reliance on any forward-looking statements. Forward-looking statements are necessarily subject to risks, uncertainties and other factors, many of which are outside the control of the Company, that could cause actual results to differ materially from such statements and from the Company's historical results and experience. These risks, uncertainties and other factors include such things as: (a) general business conditions, strengths of retail and manufacturing economies and the growth in the coatings - 16 - industry; (b) competitive factors, including pricing pressures and product innovation and quality; (c) changes in raw material availability and pricing; (d) changes in the Company's relationships with customers and suppliers; (e) the ability of the Company to attain cost savings from productivity initiatives; (f) the ability of the Company to successfully integrate past and future acquisitions into its existing operations, as well as the performance of the businesses acquired; (g) changes in general domestic economic conditions such as inflation rates, interest rates and tax rates; (h) risks and uncertainties associated with the Company's expansion into and its operations in South America and other foreign markets, including inflation rates, recessions, foreign currency exchange rates, foreign investment and repatriation restrictions, unrest and other external economic and political factors; (i) the achievement of growth in developing markets, such as Mexico and South America; (j) increasingly stringent domestic and foreign governmental regulations including those affecting the environment; (k) inherent uncertainties involved in assessing the Company's potential liability for environmental remediation-related activities; (l) other changes in governmental policies, laws and regulations, including changes in accounting policies and standards and taxation requirements (such as new tax laws and new or revised tax law interpretations); (m) the nature, cost, quantity and outcome of pending and future litigation and other claims, including the lead pigment and lead-based paint litigation and the affect of any legislation and administrative regulations relating thereto; and (n) unusual weather conditions. Readers are cautioned that it is not possible to predict or identify all of the risks, uncertainties and other factors that may affect future results and that the above list should not be considered to be a complete list. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. - 17 - ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to market risk associated with interest rates and foreign currency exposure. The Company utilizes derivative instruments as part of its overall financial risk management policy, but does not use derivative instruments for speculative or trading purposes. The Company has partially hedged risks associated with fixed interest rate debt by entering into various interest rate swap agreements. The Company does not believe that any potential loss related to interest rate exposure will have a material adverse effect on the Company's financial condition, results of operations or cash flows. The Company also entered into foreign currency option and forward contracts to hedge against value changes in foreign currency. The Company believes it may experience continuing losses from foreign currency translation. However, the Company does not expect currency translation, transaction or hedging contract losses to have a material adverse effect on the Company's financial condition, results of operations or cash flows. There were no material changes in the Company's exposure to market risk since December 31, 2001. - 18 - PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders. ---------------------------------------------------- (a) The Company's 2002 Annual Meeting of Shareholders was held on April 24, 2002. (b) The following persons were nominated to serve, and were elected, as directors of the Company to serve until the next annual meeting of shareholders and until their successors are elected: J.C. Boland, J.G. Breen, D.E. Collins, C.M. Connor, D.E. Evans, R.W. Mahoney, G.E. McCullough, A.M. Mixon, III, C.E. Moll, J. M. Scaminace and R.K. Smucker. The voting results for each nominee were as follows: Name For Withheld ---- --- -------- J.C. Boland 123,784,019 6,022,751 J.G. Breen 122,708,854 7,097,916 D.E. Collins 123,918,550 5,888,220 C.M. Connor 125,740,391 4,066,379 D.E. Evans 125,714,127 4,092,643 R.W. Mahoney 124,008,929 5,797,841 G.E. McCullough 125,758,448 4,048,322 A.M. Mixon, III 125,764,269 4,042,501 C.E. Moll 123,987,162 5,819,608 J.M. Scaminace 125,708,888 4,097,882 R.K. Smucker 124,011,957 5,794,813 (c) The proposal to approve The Sherwin-Williams Company 2003 Stock Plan was adopted with 99,901,420 shares voting for, 13,351,507 shares voting against, 2,772,097 shares abstaining and 13,781,746 broker non-votes. Item 6. Exhibits and Reports on Form 8-K. --------------------------------- (a) Exhibits. (10)(a) Schedule of Certain Executive Officers who are Parties to the Severance Pay Agreements in the Forms Attached as Exhibit 10(b) to the Company's Quarterly Report on Form 10-Q For the Period Ended June 30, 1997 (filed herewith). (99)(a) Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith). - 19 - (99)(b) Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith). (b) Reports on Form 8-K. The Company filed a Current Report on Form 8-K, dated April 10, 2002, reporting under Item 5 that the Company had issued a press release regarding its adoption of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," and its earnings expectations for the first quarter of 2002 and the full year 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. THE SHERWIN-WILLIAMS COMPANY August 9, 2002 By: /s/ J.L. Ault ------------- J.L. Ault Vice President-Corporate Controller August 9, 2002 By: /s/ L.E. Stellato ----------------- L.E. Stellato Vice President, General Counsel and Secretary - 20 - INDEX TO EXHIBITS ----------------- EXHIBIT NO. EXHIBIT - ----------- ------- (10)(a) Schedule of Certain Executive Officers who are Parties to the Severance Pay Agreements in the Forms Attached as Exhibit 10(b) to the Company's Quarterly Report on Form 10-Q For the Period Ended June 30, 1997 (filed herewith). (99)(a) Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith). (99)(b) Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith). -21- EX-10.A 3 l95428aexv10wa.txt EXHIBIT 10(A) EXHIBIT 10(a) Schedule of Certain Executive Officers who are Parties to the Severance Pay Agreements in the Forms Attached as Exhibit 10(b) to the Company's Quarterly Report on Form 10-Q For the Period Ended June 30, 1997 ------------------------------ Form A of Severance Pay Agreement - --------------------------------- Christopher M. Connor Joseph M. Scaminace Form B of Severance Pay Agreement - --------------------------------- John L. Ault Sean P. Hennessy Thomas E. Hopkins Conway G. Ivy John G. Morikis Ronald P. Nandor Thomas W. Seitz Louis E. Stellato EX-99.A 4 l95428aexv99wa.txt EXHIBIT 99(A) EXHIBIT 99(a) CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report on Form 10-Q of The Sherwin-Williams Company (the "Company") for the period ending June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Christopher M. Connor, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted 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 result of operations of the Company. Dated: August 9, 2002 /s/ Christopher M. Connor ------------------------- Christopher M. Connor Chairman and Chief Executive Officer EX-99.B 5 l95428aexv99wb.txt EXHIBIT 99(B) EXHIBIT 99(b) CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report on Form 10-Q of The Sherwin-Williams Company (the "Company") for the period ending June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Sean P. Hennessy, Senior Vice President - Finance and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted 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 result of operations of the Company. Dated: August 9, 2002 /s/ Sean P. Hennessy -------------------- Sean P. Hennessy Senior Vice President - Finance and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----