SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002
--------------------
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 1-7416
VISHAY INTERTECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Delaware 38-1686453
-------- ----------
(State or other jurisdiction (IRS employer
of incorporation or organization) identification no.)
63 Lincoln Highway
Malvern, Pennsylvania 19355-2120
(Address of principal executive offices)
(610) 644-1300
--------------
(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
As of August 13, 2002 registrant had 144,279,735 shares of its Common Stock and
15,383,476 shares of its Class B Common Stock outstanding.
VISHAY INTERTECHNOLOGY, INC.
FORM 10-Q
June 30, 2002
CONTENTS
Page Number
------------
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Condensed Balance Sheets -
June 30, 2002 and December 31, 2001 3
Consolidated Condensed Statements of Operations -
Three Months Ended June 30, 2002 and 2001 5
Consolidated Condensed Statements of Operations -
Six Months Ended June 30, 2002 and 2001 6
Consolidated Condensed Statements of Cash Flows -
Six Months Ended June 30, 2002 and 2001 7
Notes to Consolidated Condensed Financial 8
Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 15
PART II. OTHER INFORMATION 23
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
VISHAY INTERTECHNOLOGY, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(Unaudited - In thousands)
June 30, December 31,
ASSETS 2002 2001
----------- -----------
CURRENT ASSETS
Cash and cash equivalents $380,317 $367,115
Accounts receivable 362,771 382,358
Inventories:
Finished goods 230,918 260,161
Work in process 139,436 136,842
Raw materials 170,098 204,454
Deferred income taxes 69,662 63,084
Prepaid expenses and other current assets 145,908 160,613
----------- -----------
TOTAL CURRENT ASSETS 1,499,110 1,574,627
PROPERTY AND EQUIPMENT - AT COST
Land 96,720 92,311
Buildings and improvements 302,009 289,672
Machinery and equipment 1,446,882 1,397,262
Construction in progress 76,911 82,269
Allowance for depreciation (763,881) (693,981)
----------- -----------
1,158,641 1,167,533
GOODWILL 1,079,562 1,077,790
OTHER INTANGIBLE ASSETS 80,033 83,337
OTHER ASSETS 58,362 48,236
----------- -----------
$3,875,708 $3,951,523
=========== ===========
See Notes to Consolidated Condensed Financial Statements.
3
June 30, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 2002 2001
------------- -------------
CURRENT LIABILITIES
Notes payable to banks $163 $11,241
Trade accounts payable 110,280 89,467
Payroll and related expenses 79,202 71,841
Other accrued expenses 257,886 292,596
Income taxes - 13,081
Current portion of long-term debt 159 367
------------- -------------
TOTAL CURRENT LIABILITIES 447,690 478,593
LONG-TERM DEBT 488,147 605,031
DEFERRED INCOME TAXES 92,728 90,340
DEFERRED INCOME 34,710 57,208
MINORITY INTEREST 71,397 66,516
OTHER LIABILITIES 143,527 139,273
ACCRUED PENSION COSTS 160,058 148,017
STOCKHOLDERS' EQUITY
Common Stock 14,417 14,380
Class B Common Stock 1,550 1,550
Capital in excess of par value 1,871,110 1,865,979
Retained earnings 634,005 615,968
Accumulated other comprehensive loss (82,980) (130,411)
Unearned compensation (651) (921)
------------- -------------
2,437,451 2,366,545
------------- -------------
$3,875,708 $3,951,523
============= =============
See Notes to Consolidated Condensed Financial Statements.
4
VISHAY INTERTECHNOLOGY, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Operations
(Unaudited - In thousands except earnings per share)
Three Months Ended
June 30,
2002 2001
------------ ------------
Net sales $457,877 $383,437
Costs of products sold 350,312 282,386
------------ ------------
GROSS PROFIT 107,565 101,051
Selling, general, and administrative expenses 75,677 64,180
Restructuring expense 1,907 29,305
Amortization of goodwill - 2,752
------------ ------------
OPERATING INCOME 29,981 4,814
Other income (expense):
Interest expense (7,081) (4,011)
Other 80 7,827
------------ ------------
(7,001) 3,816
------------ ------------
EARNINGS BEFORE INCOME TAXES AND MINORITY INTEREST 22,980 8,630
Income taxes 5,206 4,164
Minority interest 2,157 1,340
------------ ------------
NET EARNINGS $15,617 $3,126
============ ============
Basic earnings per share $0.10 $0.02
Diluted earnings per share $0.10 $0.02
Weighted average shares outstanding - basic 159,407 137,707
Weighted average shares outstanding - diluted 161,306 139,159
See Notes to Consolidated Condensed Financial Statements.
5
VISHAY INTERTECHNOLOGY, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Operations
(Unaudited - In thousands except earnings per share)
Six Months Ended
June 30,
2002 2001
------------ -------------
Net sales $892,017 $941,902
Costs of products sold 697,515 641,997
------------ -------------
GROSS PROFIT 194,502 299,905
Selling, general, and administrative expenses 150,337 136,409
Restructuring expense 4,931 35,276
Amortization of goodwill - 5,667
------------ -------------
OPERATING INCOME 39,234 122,553
Other income (expense):
Interest expense (13,990) (6,949)
Other 2,629 12,564
------------ -------------
(11,361) 5,615
------------ -------------
EARNINGS BEFORE INCOME TAXES AND MINORITY INTEREST 27,873 128,168
Income taxes 6,012 31,085
Minority interest 3,824 3,831
------------ -------------
NET EARNINGS $18,037 $93,252
============ =============
Basic earnings per share $0.11 $0.68
Diluted earnings per share $0.11 $0.67
Weighted average shares outstanding - basic 159,293 137,700
Weighted average shares outstanding - diluted 160,938 140,433
See Notes to Consolidated Condensed Financial Statements.
6
VISHAY INTERTECHNOLOGY, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(Unaudited - In thousands)
Six Months Ended
June 30,
2002 2001
---------------- ----------------
OPERATING ACTIVITIES
Net earnings $18,037 $93,252
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 89,346 81,525
Loss on disposal of property and equipment 162 456
Amortization of imputed interest 4,628 657
Writedown of inventory, machinery and equipment - 37,853
Minority interest in net earnings of consolidated subsidiaries 3,824 3,832
Other 570 13,696
Changes in operating assets and liabilities, net of effects of
businesses acquired or sold 120,081 (160,856)
---------------- ----------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 236,648 70,415
INVESTING ACTIVITIES
Purchase of property and equipment (30,241) (95,903)
Proceeds from sale of property and equipment 8,730 6,319
Purchase of businesses, net of cash acquired (81,347) (18,251)
---------------- ----------------
NET CASH USED IN INVESTING ACTIVITIES (102,858) (107,835)
FINANCING ACTIVITIES
Proceeds from long-term borrowings 153 -
Principal payments on long-term debt (1,721) (58)
Net payments on revolving credit lines (120,297) (139,755)
Issuance of convertible subordinated debentures - 303,193
Net changes in short-term borrowings (11,093) (3,337)
Common stock repurchase - (851)
Proceeds from stock options exercised 3,100 435
---------------- ----------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (129,858) 159,627
Effect of exchange rate changes on cash 9,270 (7,692)
---------------- ----------------
INCREASE IN CASH AND
CASH EQUIVALENTS 13,202 114,515
Cash and cash equivalents at beginning of period 367,115 337,213
---------------- ----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $380,317 $451,728
================ ================
See Notes to Consolidated Condensed Financial Statements.
7
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
June 30, 2002
Note 1: Basis of Presentation
The accompanying unaudited consolidated condensed financial statements
have been prepared in accordance with the instructions to Form 10-Q and
therefore do not include all information and footnotes necessary for
presentation of financial position, results of operations, and cash flows
required by accounting principles generally accepted in the United States for
complete financial statements. The information furnished reflects all
adjustments (consisting of normal recurring accruals) which are, in the opinion
of management, necessary for a fair summary of the financial position, results
of operations, and cash flows for the interim period presented. The financial
statements should be read in conjunction with the financial statements and notes
thereto filed with the Company's Form 10-K for the year ended December 31, 2001.
The results of operations for the three months and six months ended June 30,
2002 are not necessarily indicative of the results to be expected for the full
year.
Note 2: Change in Accounting
Effective January 1, 2002, amortization of goodwill is no longer
permitted in accordance with Statement of Financial Accounting Standards No. 142
"Goodwill and Other Intangible Assets". The non-amortization of goodwill in the
three months and six months ended June 30, 2001 would have resulted in increases
in net income of $2,557,000 or $0.02 per share and $5,278,000 or $0.04 per
share, respectively.
In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statements of Financial Accounting Standards No. 141, "Business Combinations"
("SFAS 141"), and No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142").
SFAS 141 requires that all business combinations be accounted for using the
purchase method of accounting and requires that intangible assets that meet
certain criteria be recognized apart from goodwill. SFAS 142 prescribes that
goodwill and intangible assets with indefinite useful lives should no longer be
amortized to earnings, but instead should be reviewed for impairment on at least
an annual basis. Intangible assets with finite lives should continue to be
amortized over their estimated useful lives.
The Company adopted SFAS 141 and SFAS 142 on January 1, 2002. The
adoption of these statements did not result in any changes to the classification
of the Company's goodwill and other intangible assets. The Company has assigned
an indefinite useful life to its trademarks and discontinued the amortization of
both its goodwill and trademarks. Completed technology is being amortized over
useful lives of seven to ten years. Estimated amortization expense for each of
the next five years is approximately $4,843,000.
SFAS 142 requires the Company to perform transitional impairment tests
of its trademarks and goodwill as of January 1, 2002, as well as perform
impairment tests on an annual basis and whenever events or circumstances occur
indicating that the trademarks or goodwill may be impaired.
8
An impairment charge will be recognized for the Company's trademarks when the
estimated fair value of the trademarks is less than the carrying amount. An
impairment charge will be recognized for the Company's goodwill when the
estimated fair value of a reporting unit, including the goodwill, is less than
its carrying amount.
The Company has completed the impairment test of its trademarks as of
January 1, 2002. The fair value of the trademarks, as determined by an
independent appraiser, was measured as the discounted cash flow savings realized
from owning such trademarks and not having to pay a royalty for their use. No
impairment of the trademarks was determined to exist at January 1, 2002.
The Company completed a transitional goodwill impairment test as of
January 1, 2002, as prescribed in SFAS 142, during the second quarter ended June
30, 2002. Fair value of reporting units was determined using comparable company
market multiples. The Company has determined that there was no goodwill
impairment to be recognized as a result of its testing.
Note 3: Earnings Per Share
The following table sets forth the computation of basic and diluted
earnings per share (in thousands, except earnings per share):
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
----------------- ------------ -------------- -------------
Numerator:
Net earnings $15,617 $3,126 $18,037 $93,252
Add: Interest expense on convertible
subordinated notes, net of tax - - - 454
----------------- ------------ -------------- -------------
$15,617 $3,126 $18,037 $93,706
Denominator:
Denominator for basic earnings per share -
weighted average shares 159,407 137,707 159,293 137,700
Effect of dilutive securities:
Employee stock options 1,790 1,283 1,539 1,174
Convertible subordinated notes - - - 1,396
Other 109 169 106 163
----------------- ------------ -------------- -------------
Dilutive potential common shares 1,899 1,452 1,645 2,733
Denominator for diluted earnings per
share - adjusted weighted average shares 161,306 139,159 160,938 140,433
Basic earnings per share $0.10 $ 0.02 $0.11 $0.68
================= ============ ============== =============
Diluted earnings per share $0.10 $ 0.02 $0.11 $0.67
================= ============ ============== =============
9
Diluted earnings per share does not reflect the assumed conversion of
subordinated convertible notes for the three and six months ended June 30, 2002
and the three months ended June 30, 2001 because the effect would be
anti-dilutive for these periods presented. It also does not assume the
conversion of the convertible notes of General Semiconductor, acquired November
2, 2001, for the three or six month periods ended June 30, 2002 because the
effect would be anti-dilutive.
Note 4: Business Segment Information
The Company designs, manufactures, and markets electronic components
that cover a wide range of products and technologies. The Company has two
reportable segments: Passive Electronic Components (Passives) and Active
Electronic Components (Actives). The Company evaluates performance and allocates
resources based on several factors, of which the primary financial measure is
business segment operating income excluding amortization of intangibles. The
corporate component of operating income represents corporate selling, general,
and administrative expenses.
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
-------------- ------------- ------------- -------------
Business Segment Information
(in thousands)
Net Sales:
Passives $187,430 $251,593 $372,002 $ 645,078
Actives 270,447 131,844 520,015 296,824
-------------- ------------- ------------- -------------
$457,877 $383,437 $892,017 $ 941,902
-------------- ------------- ------------- -------------
Operating Income:
Passives $(4,394) $ 1,137 $(20,169) $ 101,157
Actives 39,221 11,094 68,490 36,795
Corporate (4,846) (4,665) (9,087) (9,732)
Amortization of goodwill - (2,752) - (5,667)
-------------- ------------- ------------- -------------
$29,981 $ 4,814 $ 39,234 $ 122,553
-------------- ------------- ------------- -------------
Note 5: Comprehensive Income
Comprehensive income includes the following components (in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
------------- ------------ --------------- ------------
Net Earnings $15,617 $3,126 $18,037 $ 93,252
Cumulative effect of change
in accounting principle - - - 51
Other comprehensive income (loss):
Foreign currency translation adjustment 42,404 (346) 50,552 (19,080)
Unrealized gain (loss) on interest rate swap (1,627) 80 (3,207) (2,107)
Pension liability adjustment, net of tax 6,352 208 86 535
------------- ------------ --------------- ------------
Total other comprehensive income (loss) 47,129 (58) 47,431 (20,652)
------------- ------------ --------------- ------------
Comprehensive income $62,746 $3,068 $65,468 $72,651
============= ============ =============== ============
10
Note 6: Restructuring Expense
The Company recorded restructuring expense of $1,907,000 for the
quarter ended June 30, 2002. Restructuring of European and Israeli operations
included $1,243,000 of employee termination costs covering approximately 101
technical, production, administrative and support employees located in Czech
Republic, France, Hungary, Israel, Portugal, and Austria. The remaining $664,000
of restructuring expense related to termination costs for approximately 70
technical, production, administrative and support employees located in the
United States. The restructuring expense was incurred as part of the cost
reduction programs currently being implemented by the Company.
The Company incurred restructuring expense of $29,305,000 for the
quarter ended June 30, 2001. Restructuring of European and Israeli operations
included $8,505,000 of employee termination costs covering 1,709 technical,
production, administrative, and support employees located in France, Hungary,
Portugal, Austria, the Philippines, Germany, and Israel. The European operations
also recorded $2,546,000 of non-cash costs associated with the writedown of
buildings and equipment that are no longer in use. In the United States,
$4,050,000 of restructuring expense related to employee termination costs
covering 758 technical, production, administrative and support employees. The
remaining $14,204,000 of restructuring expense related to the non-cash writedown
of buildings and equipment that are no longer in use.
Restructuring expense was $4,931,000 for the six months ended June 30,
2002. Restructuring of European and Israeli operations included $2,535,000 of
employee termination costs covering approximately 335 technical, production,
administrative and support employees located in Czech Republic, France, Hungary,
Israel, Portugal, and Austria. The remaining $2,396,000 of restructuring expense
related to termination costs for approximately 266 technical, production,
administrative and support employees located in the United States. The
restructuring expense was incurred as part of the cost reduction programs
currently being implemented by the Company.
Restructuring expense was $35,276,000 for the six months ended June 30,
2001. Restructuring of European operations included $13,073,000 of employee
termination costs covering approximately 1,785 technical, production,
administrative and support employees located in France, Hungary, Portugal,
Austria, the Philippines, Germany, and Israel. The European operations also
recorded $2,546,000 of non-cash costs associated with the writedown of buildings
and equipment that are no longer in use. In the United States, $5,453,000 of
restructuring expense related to termination costs for approximately 1,101
technical, production, administrative and support employees. The remaining
$14,204,000 of restructuring expense related to the non-cash writedown of
buildings and equipment that are no longer in use.
11
As of June 30, 2002, there remained to be paid $1,815,000 of
restructuring related severance costs expensed during 2001, which is included in
accrued expenses on the Consolidated Balance Sheet. These costs are expected to
be paid by December 31, 2002.
Note 7: Acquisitions
In June 2002, the Company acquired Tedea-Huntleigh BV, a subsidiary of
Tedea Technological Development and Automation Ltd. Tedea-Huntleigh BV is
engaged in the production and sale of load cells used in digital scales by the
weighing industry. In the calendar year ended December 31, 2001, the acquired
business had sales of $35 million. The purchase price was approximately $17
million in cash. Additionally, Vishay will pay Tedea a $1 million consulting fee
over a three-year period and repaid a $9 million loan of Tedea to
Tedea-Huntleigh. Tedea-Huntleigh operates two plants in Israel, in Netanya and
Carmiel, where it employs approximately 350 people, as well as a number of
facilities outside Israel. Tedea-Huntleigh also has load cell operations in the
Peoples Republic of China. It is considered one of the largest load cell
manufacturers world-wide, with engineering and sales offices located throughout
the industrialized world. The purchase price has been preliminarily allocated,
with resulting goodwill of $13,841,000. Results of operations will be included
in the passives segment beginning July 1, 2002.
In January 2002, the Company acquired the transducer and strain gage
businesses of Sensortronics, Inc. Sensortronics is a leading manufacturer of
load cells and torque transducers for domestic and international customers in a
wide range of industries with manufacturing facilities in Covina, California,
Costa Rica, and, under a joint venture arrangement, India. The acquisition
included the wholly owned subsidiary of Sensortronics, JP Technologies, a
manufacturer of strain gages, located in San Bernardino, California. In the
calendar year ended December 31, 2001, the acquired businesses had sales of
approximately $16 million. The purchase price was $10 million in cash. The
purchase price has been preliminarily allocated, with resulting goodwill of
$3,027,000. The results of operations of Sensortronics are included in the
results of the passive segment from January 31, 2002.
On November 7, 2001, the Company acquired Yosemite Investment, Inc.
d/b/a North American Capacitor Company, also known as Mallory, for approximately
$45 million in cash. With manufacturing facilities in Greencastle, Indiana and
Glasgow, Kentucky, Mallory is a leading manufacturer of wet tantalum
electrolytic capacitors, among other businesses. Subsequently, in February 2002,
Vishay sold the audible signal business of Mallory for $4,925,000, consisting of
$3,925,000 in cash and a $1,000,000 promissory note. On April 1, 2002, the
Company sold the resale business of Mallory for $8.8 million, consisting of $7.6
million in cash and a $1.2 million subordinated promissory note.
On July 27, 2001, the Company agreed to purchase from Infineon
Technologies AG, Munich, the Infineon optoelectronic infrared components
business. This business produces optocouplers and optoelectric infrared data
components transceivers (IRDC). The total purchase price for this transaction
was approximately $116 million in cash. A partial payment of $78 million was
made on July 27, 2001. A second payment of $38 million was made on December 31,
2001.
12
Under the terms of the agreement, the Company purchased Infineon's U.S.
development, marketing, and distribution activities located in the San Jose,
California headquarters and a manufacturing facility located in Malaysia. The
results of operations of Infineon's U.S. infrared components business are
included in the results of the actives segment from July 27, 2001. The results
of operations of the Malaysia facility are included as of December 31, 2001.
The Tedea-Huntleigh, Sensortronics, Mallory and Infineon acquisitions
were funded with cash on hand and borrowings under Vishay's revolving credit
facility.
On November 2, 2001, the Company acquired General Semiconductor, Inc.,
a leading manufacturer of rectifiers and power management devices, following
approval of the transaction and related matters by stockholders of the two
companies. Stockholders of General Semiconductor received 0.563 shares of Vishay
Common Stock for each General Semiconductor share in a tax-free exchange. In the
acquisition, the Company issued 21.3 million shares of Vishay Common Stock
valued at $499.8 million and assumed General Semiconductor options that became
exercisable for 4.3 million shares of Vishay Common Stock, with a fair value of
$48 million. General Semiconductor also had outstanding $172.5 million principal
amount of 5.75% convertible notes, which as a result of the acquisition are now
convertible into approximately 6.3 million shares of Vishay Common Stock. The
Company recorded goodwill of approximately $677 million in connection with the
acquisition of General Semiconductor, based upon the allocation of the purchase
price to the fair value of assets acquired and liabilities assumed. The results
of operations of General Semiconductor were included in the results of the
actives segment from November 2, 2001.
As a result of the General Semiconductor acquisition, the Company
recorded purchase accounting liabilities of $94,643,000 in connection with an
exit plan that management began to formulate prior to the acquisition date.
Approximately $88,242,000 of these liabilities relate to employee termination
costs covering approximately 1,460 technical, production, administrative and
support employees located in the United States, Europe, and the Pacific Rim. As
of June 30, 2002, there remained to be paid $53,033,000 of costs related to the
General Semiconductor exit plan, which is included in accrued expenses on the
Consolidated Balance Sheet. These costs are expected to be paid by the first
quarter of 2003.
Had the acquisitions been made as of January 1, 2001, the Company's pro
forma unaudited results for the 2001 second quarter and six month periods would
have been (in thousands, except per share amounts):
Three Months Ended Six Months Ended
June 30, 2001 June 30, 2001
------------------------ ------------------------
Net Sales $509,896 $1,213,925
Net Earnings $5,750 $93,722
Basic Earnings per share $0.04 $0.59
Diluted earnings per share $0.04 $0.58
Pro forma results for the corresponding 2002 periods would not be materially
different from actual results.
13
Note 8 : Commitments and Contingencies
On April 15, 2002, the Company announced that it had been sued by Cabot
Corporation in the Superior Court of the Commonwealth of Massachusetts alleging
that Vishay and/or its subsidiaries breached agreements for the supply by Cabot
to Vishay of tantalum powder and wire. The action arose out of two tantalum
supply agreements entered into between Cabot and a Vishay subsidiary in July and
November 2000. These agreements require the subsidiary to purchase and Cabot to
sell certain minimum amounts of tantalum powder and tantalum wire in the years
2001 through 2005. Vishay uses tantalum products in the manufacture of its line
of tantalum capacitors.
In its lawsuit, Cabot asked the court to compel the Company to make
periodic purchases and take certain other actions under the contracts and to
award monetary damages. On June 6, 2002, Cabot and Vishay announced that they
had resolved their legal dispute by agreeing to amend the tantalum supply
agreements. Volumes and, starting in 2003, prices under the agreements have been
reduced, the term of one of the agreements has been extended by one year and
Vishay has agreed to purchase tantalum products at regular intervals over the
term of the agreements. The minimum total value of the agreements, as amended,
is approximately $425 million.
Note 9: Subsequent Events
The Company announced on July 31, 2002 that it has purchased the BLH
and Nobel businesses of Thermo Electron Corporation. BLH and Nobel are engaged
in the production and sale of load cell based process weighing systems, weighing
and batching instruments, web tension instruments, weighing scales, servo
control systems, and components relating to load cells including strain gages,
foil gages, and transducers. In the calendar year ended December 31, 2001, the
businesses acquired had sales of approximately $27 million. The purchase price
was $18.5 million in cash.
14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Overview
Vishay operates in two segments, passive components and active
components. The Company is the leading manufacturer of passive components in the
United States and Europe. These components include resistors, capacitors,
inductors, strain gages and load cells. Vishay is also one of the world's
leading manufacturers of active electronic components, also referred to as
discrete semiconductors. These include transistors, diodes, rectifiers, certain
types of integrated circuits and optoelectronic products. Historically, the
passive components business has predominated at Vishay. However, following the
acquisition of General Semiconductor in November 2001, for the first time in the
Company's history the predominance has shifted to active components. Revenues
for the six months ended June 30, 2002 were derived 58% from the Company's
active business and 42% from its passive business. Actives also represented
approximately 61% of the Company's orders at June 30, 2002.
The results for the second quarter of 2002 continued the performance
pattern of the first quarter of 2002. The passive component business remained
stagnant while the active business continued to perform well. The Company has
observed a slight slowdown in the computer markets and a continued slowdown in
mobile phones; however, automotive and consumer goods have remained fairly
stable. This follows a difficult 2001, in which the electronic components
business generally was depressed both in the United States and much of the
world. The leading recovery in actives is consistent with the Company's
experience from prior recessionary periods, in which recovery in the passive
component business has trailed the recovery in the discrete semiconductor
business. The Company's book-to-bill ratio for the second quarter was 1.02,
reflecting a book-to-bill for the active business of 1.04 and a book-to-bill
ratio for the passive business of 0.98. The Company's backlog has continued to
increase and is now at $422 million, an $84 million increase from the end of
2001 and a $25 million increase from the first quarter of 2002.
The following table shows the end-of-period backlog and the
book-to-bill ratio for Vishay's business as a whole during the five quarters
beginning with the second quarter of 2001 through the second quarter of 2002.
2nd Quarter 2001 3rd Quarter 2001 4th Quarter 2001 1st Quarter 2002 2nd Quarter 2002
---------------- ---------------- ---------------- ---------------- ----------------
End of Period $342,144,000 $302,754,000 $337,883,000 $396,900,000 $421,500,000
Backlog (1) (1) (2) (1) (2) (1) (2)
Book-to-Bill Ratio 0.59 0.77 0.89 1.14 1.02
15
(1) Includes $18,900,000, $15,600,000, $17,100,000 and $19,300,000 of backlog
attributable to Infineon's optoelectric infrared component business for the
third quarter of 2001, the fourth quarter of 2001, the first quarter of 2002 and
the second quarter of 2002, respectively.
(2) Includes $70,360,000, $93,700,000 and $100,800,000 of backlog attributable
to the business of General Semiconductor for the fourth quarter of 2001, the
first quarter of 2002 and second quarter of 2002, respectively.
The following table shows sales and book-to-bill ratios broken out by
segment for the five quarters beginning with the second quarter of 2001 through
the second quarter of 2002:
Sales ($)/
Book-to-bill 2nd Quarter 2001 3rd Quarter 2001 4th Quarter 2001 1st Quarter 2002 2nd Quarter 2002
------------ ---------------- ---------------- ---------------- ---------------- ----------------
Passive $251,593,000 $188,708,000 $178,295,000 $184,572,000 $187,430,000
Components 0.49 0.72 0.83 1.02 0.98
Active $131,844,000 $143,585, 000 $202,856,000 $249,568,000 $270,447,000
Components (1) (2) (1) (2) (1) (2)
0.79 0.84 0.94 1.22 (3) 1.04
(1) Includes $8,200,000, $16,800,000, $15,877,000, and $18,000,000 attributable
to Infineon's optoelectric infrared components business for the third quarter of
2001, the fourth quarter of 2001, the first quarter of 2002 and the second
quarter of 2002, respectively.
(2) Includes $51,274,000, $80,806,000, and $85,721,000 attributable to General
Semiconductor for the fourth quarter of 2001, the first quarter of 2002 and the
second quarter of 2002, respectively.
(3) The book-to-bill ratio for active components for the quarter ended March
31, 2002 reflected, in part, an unusual spike in orders in the month of March
2002.
The Company continued its cost control programs during the first half
of the year with an emphasis on the reduction and reallocation of headcount. A
major element of the Company's cost control strategy has been to position its
manufacturing facilities, to the extent practicable, in jurisdictions with low
labor costs. The percentage of headcount in low labor cost countries was 65% as
of June 30, 2002, a 2% increase over the prior quarter. The Company continues to
target improvement in this area. Also, the Company completed the closure of
three production facilities in the U.S., Germany and France, completed the
integration of the Infineon production facility in Malaysia and continued the
integration of the business of General Semiconductor.
16
Income statement captions as a percentage of sales, and the effective
tax rates, were as follows:
Three Months ended Six Months ended
June 30, June 30,
2002 2001 2002 2001
------------- ----------- ---------- ----------
Costs of products sold 76.5% 73.6% 78.2% 68.2%
Gross profit 23.5 26.4 21.8 31.8
Selling, general and administrative
expenses 16.5 16.7 16.9 14.5
Operating income 6.5 1.3 4.4 13.0
Earnings before income taxes and
minority interest 5.0 2.3 3.1 13.6
Net earnings 3.4 0.8 2.0 9.9
Effective tax rate 22.7 48.3 21.6 24.3
Net Sales, Gross Profits and Margins
Net sales for the quarter ended June 30, 2002 increased $74,440,000 or
19.4% as compared to the comparable prior year period. Revenues from the active
business more than doubled over the revenues from the quarter ended June 30,
2001, primarily due to the acquisition of Infineon in July 2001 and General
Semiconductor in November 2001. Excluding these acquisitions net sales decreased
$29,300,000 or 7.6%. Net sales for the six months ended June 30, 2002 were down
$49,900,000 or 5.3% as compared to the six months ended June 30, 2001. Excluding
the effect of the acquisitions of Infineon and General Semiconductor, net sales
decreased 26.6% compared to the six months ended June 30, 2001. The decrease in
revenues reflects the continuing effects of the downturn in the electronics
industry that began in 2001, particularly in the passive segment where recovery
has been historically slow. Downward pricing pressure in this segment is still
present, but eased during the quarter for the resistor and inductor product
lines. Pricing pressures still remain strong in the capacitor product line,
particularly tantalum molded and MLCC products. Active component revenues
increased for both the quarter and six months ended June 30, 2002, compared to
the comparable prior year period, even excluding the effect of acquisitions. The
increase in active sales reflects strong business development by Siliconix,
particularly in the laptop computer market.
Costs of products sold as a percentage of net sales for the quarter and
six months ended June 30, 2002 were 76.5% and 78.2%, respectively, as compared
to 73.6% and 68.2% for the comparable prior year periods. Gross profit as a
percentage of net sales, for the quarter and six months ended June 30, 2002, was
23.5% and 21.8%, respectively, as compared to 26.4% and 31.8% for the comparable
prior year periods. The erosion in profit margins, mainly from the passive
segment, reflects lower prices in 2002, partially offset by higher volume in the
active segment.
17
The following tables show sales and gross profit margins separately for
our passive and active segments.
Passive Components
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
---- ---- ---- ----
Net Sales $187,430,000 $251,593,000 $372,002,000 $645,078,000
Gross Profit
Margin 13.9% 26.3% 12.4% 33.2%
Net sales of passive components for the quarter and six months ended
June 30, 2002 decreased $64,163,000 (25.5%) and $273,076,000 (42.3%),
respectively as compared to the comparable prior year periods. Without the
acquisitions of Mallory in November 2001 and Sensortronics in January 2002, the
passive components business sales would have decreased by an additional $9.8
million or a total of 29.4% for the quarter ended June 30, 2002, and an
additional $20.9 million or a total of 45.6% for the six months ended June 30,
2002. The decrease in net sales was primarily due to strong pricing pressure
with respect to commodity products and tantalum molded capacitor products and a
reduction in the volume of these products. The price decline has slowed somewhat
for the resistor products and the broad range of specialty products have helped
to stabilize the business. The decrease in the passive components business gross
profit margin in 2002 was related to strong pricing pressure, particularly with
respect to commodity products, coupled with excess capacity. Although gross
profit percentages remain depressed as compared to 2001, they have improved 3.1%
over the previous quarter. Capacity utilization varies across product lines,
ranging from 20%-50% as of June 30, 2002. Cost reduction plans continue to be
implemented.
Active Components
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
---- ---- ---- ----
Net Sales $270,447,000 $131,844,000 $520,015,000 $296,824,000
Gross Profit
Margin 30.1% 26.5% 28.6% 29.0%
18
Net sales of the active components business for the quarter and six
months ended June 30, 2002 increased by $138,603,000 or 105.1% and $223,191,000
or 75.2%, respectively from comparable sales of the prior year period. The
increase in the active components business net sales was primarily due to the
acquisition of the infrared business of Infineon and of General Semiconductor.
Net sales for the quarter ended June 30, 2002 relating to Infineon and General
Semiconductor were $18,000,000 and $85,721,000, respectively. Net sales for the
six months ended June 30, 2002 relating to Infineon and General Semiconductor
were $33,877,000 and $166,527,000, respectively. Even excluding the effect of
the acquisitions, the active components business reflected improved sales,
mostly due to strong business development, with sales increasing 26.5% and 7.7%
for the second quarter and six month periods of 2002 over the corresponding
prior year periods. Siliconix's sales for the quarter and six months ended June
30, 2002 increased 33% and 14% respectively, as compared to the comparable prior
year periods. This reflects primarily an increase in demand for laptop computers
and game consoles. Additionally, certain of the Company's plants in the active
segment have ramped up to full capacity, with expansion being planned if current
demand continues.
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses for the quarter ended
June 30, 2002 were 16.5% of net sales, as compared to 16.7% for the comparable
prior year period. The Company continues to implement cost reduction initiatives
company-wide, with particular emphasis placed on reducing headcount in high
labor cost countries. Sixty five percent of the company's labor force is now in
low labor cost countries. Selling, general, and administrative expenses for the
six months ended June 30, 2002 were 16.9% of net sales, as compared to 14.5% of
net sales for the comparable prior year period. The increase in the percentage
of selling, general and administrative expenses is due to lower net sales in
2002. The increase in selling, general and administrative expenses in 2002 as
compared to 2001 is due to the acquisitions of Infineon and General
Semiconductor.
Restructuring Expense
The Company recorded restructuring expense of $1,907,000 for the
quarter ended June 30, 2002. Restructuring of European and Israeli operations
included $1,243,000 of employee termination costs covering approximately 101
technical, production, administrative and support employees located in Czech
Republic, France, Hungary, Israel, Portugal, and Austria. The remaining $664,000
of restructuring expense related to termination costs for approximately 70
technical, production, administrative and support employees located in the
United States. The restructuring expense was incurred as part of the cost
reduction programs currently being implemented by the Company.
Restructuring expense was $4,931,000 for the six months ended June 30,
2002. Restructuring of European and Israeli operations included $2,535,000 of
employee termination costs covering approximately 335 technical, production,
administrative and support employees located in Czech Republic, France, Hungary,
Israel, Portugal, and Austria. The remaining $2,396,000 of restructuring expense
related to termination costs for approximately 266 technical, production,
administrative and support employees located in the United States. The
restructuring expense was incurred as part of the cost reduction programs
currently being implemented by the Company.
19
Interest Expense
Interest expense for the quarter and six months ended June 30, 2002
increased by $3,070,000 and $7,041,000 as compared to the comparable prior year
periods. This increase was primarily a result of the $172,500,000 principal
amount of 5.75% convertible subordinated notes of General Semiconductor and
$85,000,000 of bank debt of General Semiconductor, which was acquired in
November 2001.
Other Income
Other income for the quarter and six months ended June 30, 2002 was
$80,000 and $2,629,000 as compared to $7,827,000 and $12,564,000 for the
comparable prior year period. Interest income of $1,796,000 and $3,526,000 for
the quarter and six months ended June 30, 2002 is down $2,439,000 and
$5,335,000, respectively when compared to the prior year due to lower interest
rates. Foreign exchange losses of $1,560,000 and $847,000 were reported for the
quarter and six months ended June 30, 2002, compared to foreign exchange gains
of $2,912,000 and $3,131,000 for the quarter and six months ended June 30, 2001,
respectively. The swing in foreign exchange effects contributed to the decline
in other income in the 2002 periods compared with the corresponding 2001
periods.
Minority Interest
Minority interest for the second quarter of 2002 increased $817,000
when compared to the second quarter of 2001, primarily due to the increase in
net earnings of Siliconix. Minority interest for the six months ended June 30,
2002 was consistent with the comparable prior year period.
Income Taxes
The effective tax rate for the six months ended June 30, 2002 was 21.6%
as compared to 24.3% for the comparable prior year period. The decline in the
effective tax rate reflects a relative increase in pretax earnings in low tax
rate jurisdictions and the incurrence of restructuring expense in high tax rate
jurisdictions. The tax rate for the year ended December 31, 2002 is currently
expected to be in the range of 22-24%.
The Company enjoys favorable Israeli tax rates, which are applied to
specific approved projects and are normally available for a period of ten or
fifteen years. The low tax rates in Israel applicable to the Company ordinarily
have resulted in increased earnings compared to what earnings would have been
had statutory United States tax rates applied. The continuing low tax rates in
Israel applicable to the Company, as compared to the statutory rate in the
United States, resulted in increases in net earnings of $2,968,000 and
$2,326,000 for the quarters ended June 30, 2002 and 2001, respectively, and
$1,924,000 and $14,326,000 for the six months ended June 30, 2002 and 2001,
respectively.
During the quarter ended June 30, 2002, the government of Israel
informed the Company that since the headcount in Vishay Israel's subsidiaries
decreased significantly over the last 18 months, the government intended to
withhold a $15 million grant receivable due to Vishay. The Company maintains
that it has complied with applicable grant conditions and is entitled to receipt
of the grant. The Company and the Israeli government are currently working to
resolve this matter. However, as a consequence of the pending dispute, the
Company did not record approximately $535,000 of grant income in the quarter
ended June 30, 2002 related to the $15 million grant. The grant is recorded on
the Company's Consolidated Balance Sheet under prepaid expenses and other
assets. Because of the current uncertainty over collections of the grant, the
Company has recorded an
20
allowance of $13 million against the grant, which was offset with a
corresponding allowance against deferred income.
Financial Condition and Liquidity
Cash flows from operations were $236,648,000 for the six months ended
June 30, 2002 as compared to $70,415,000 for the six months ended June 30, 2001.
The increase in cash generated from operations reflects improved working capital
management, including reductions in inventory and accounts receivable, partially
offset by a decrease in net earnings compared with the corresponding 2001 six
month period. The inventory reduction reflects production adjustments
implemented by the Company in response to the business slowdown, in order to
control inventory levels. Net purchases of property and equipment for the six
months ended June 30, 2002 were $30,241,000 as compared to $95,903,000 for the
comparable prior year period, reflecting the Company's efforts to control
capital spending. The Company paid down $120,297,000 on its revolving credit
lines during the first half of 2002, primarily from the cash generated from
operations. In January 2002, the Company acquired $1.5 million of General
Semiconductor's 5.75% convertible notes pursuant to an offer required to be made
by the terms of the notes following the General Semiconductor acquisition. Cash
and cash equivalents increased by $13,202,000 as compared to December 31, 2001.
The Company's financial condition at June 30, 2002 was strong, with a
current ratio of 3.35 to 1. The Company's ratio of long-term debt, less current
portion, to stockholders' equity was .20 to 1 at June 30, 2002 as compared to
..16 to 1 at June 30, 2001 and .26 to 1 at December 31, 2001.
We believe that available sources of credit, together with cash
expected to be generated from operations, will be sufficient to satisfy our
anticipated financing needs for working capital, capital expenditures, and
opportunistic acquisitions during the next twelve months.
Inflation
Normally, inflation does not have a significant impact on the Company's
operations. The Company's products are not generally sold on long-term
contracts. Consequently, selling prices, to the extent permitted by competition,
can be adjusted to reflect cost increases caused by inflation.
Safe Harbor Statement
Statements in this report that are not clearly historical are
"forward-looking statements" within the meaning of the U.S. Private Securities
Litigation Reform Act of 1995. These include, but are not limited to,
anticipated results for the rest of the 2002 year and expectations with respect
to recoveries in the economic and business climate in general and the Company's
businesses in particular. All forward-looking statements made by or on behalf of
the Company involve risks, uncertainties and contingencies, whether they are
contained in this report or other reports and documents filed with the
Securities and Exchange Commission, in press releases or in communications and
discussions with investors and analysts through meetings, web casts, phone calls
and conference calls. Many of these risks, uncertainties and contingencies are
beyond the Company's control, and they may cause actual results, performance or
achievements to differ materially from those anticipated. Please refer to the
Company's 2001 Annual Report on Form 10-K for important factors that could cause
the Company's actual results, performance or achievements to differ materially
from those in any forward-looking statements made by or on behalf of the
Company.
21
Market Risk Disclosure
The Company's cash flows and earnings are subject to fluctuations
resulting from changes in foreign currency exchange rates and interest rates.
The Company manages its exposure to these market risks through internally
established policies and procedures and, when deemed appropriate, through the
use of derivative financial instruments. The Company's policy does not allow
speculation in derivative instruments for profit or execution of derivative
instrument contracts for which there are no underlying exposures. The Company
does not use financial instruments for trading purposes and is not a party to
any leveraged derivatives. The Company monitors its underlying market risk
exposures on an ongoing basis and believes that it can modify or adapt its
hedging strategies as needed.
The Company is exposed to changes in U.S. dollar LIBOR interest rates
on its floating rate revolving credit facility. On a selective basis, the
Company from time to time enters into interest rate swap or cap agreements to
reduce the potential negative impact that increases in interest rates could have
on its outstanding variable rate debt. At June 30, 2002, a fixed rate swap
agreement with a notional amount of $100,000,000 was in place. During the six
month period ended June 30, 2002, the Company paid down $120,000,000 of its
existing credit facility and its balance as of that date was $5,000,000. The
impact of interest rate instruments on the Company's results of operations for
the quarter and six months ended June 30, 2002 was not significant.
22
VISHAY INTERTECHNOLOGY, INC.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On April 15, 2002, the Company announced that it had been sued by Cabot
Corporation in the Superior Court of the Commonwealth of Massachusetts alleging
that Vishay and/or its subsidiaries breached agreements for the supply by Cabot
to Vishay of tantalum powder and wire. The action arises out of two tantalum
supply agreements entered into between Cabot and a Vishay subsidiary in July and
November 2000. These agreements require the subsidiary to purchase and Cabot to
sell certain minimum amounts of tantalum powder and tantalum wire in the years
2001 through 2005. In its lawsuit, Cabot asked the court to compel the Company
to make periodic purchases and take certain other actions under the contracts
and to award monetary damages. On June 6, 2002, Cabot and Vishay announced that
they had resolved their legal dispute by agreeing to amend the tantalum supply
agreements. Volumes and, starting in 2003, prices under the agreements have been
reduced, the term of one of the agreements has been extended by one year and
Vishay has agreed to purchase tantalum products at regular intervals over the
term of the agreements. The minimum total value of the agreements, as amended,
is approximately $425 million.
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
(a) The Company held its Annual Meeting of Stockholders on May 23,
2002.
(b) Proxies for the meeting were solicited pursuant to Regulation 14A
of the Securities Exchange Act of 1934, as amended. There was no
solicitation in opposition to management's nominees for the
directors as listed in the definitive proxy statement of the
Company dated April 22, 2002, and all such nominees were elected.
(c) Briefly described below is each matter voted upon at the Annual
Meeting of Stockholders.
(i) Election of the following individuals to hold office as
Directors of the Company until the next Annual Meeting of
Stockholders.
Total Class A Common Stock voted was 126,951,474.
23
Broker
For Against Abstain Non-votes
--------------- --------------- --------------- -----------------
Felix Zandman 114,177,659 12,773,815 0 0
Avi D. Eden 114,211,289 12,740,185 0 0
Robert A. Freece 114,192,952 12,758,522 0 0
Richard N. Grubb 114,548,647 12,402,827 0 0
Eliyahu Hurvitz 124,704,794 2,246,680 0 0
Gerald Paul 114,149,683 12,801,791 0 0
Edward Shils 124,205,949 2,745,525 0 0
Ziv Shoshani 114,200,287 12,751,187 0 0
Mark I. Solomon 124,709,311 2,242,163 0 0
Jean-Claude Tine 124,012,925 2,938,549 0 0
Marc Zandman 113,759,417 13,192,057 0 0
Ruta Zandman 113,621,100 13,330,374 0 0
Total Class B Common Stock voted was 15,411,886 in favor, 2
against, 0 abstained and 0 broker non-votes.
(ii) Ratification of the appointment of Ernst & Young LLP,
independent certified public accountants, to audit the books
and accounts of the Company for the calendar year ending
December 31, 2002. Total Class A Common Stock voted was
122,819,726 in favor, 0 against, 455,771 abstained and 0
broker non-votes. Total Class B Common Stock voted was
15,411,886 in favor, 0 against, 0 abstained and 0 broker
non-votes.
Each share of Class A Common Stock is entitled to one vote and each share
of Class B Common Stock is entitled to 10 votes on matters voted upon by
stockholders.
Item 6. Exhibits
Exhibit 99.1 - Certification Pursuant to 18 U.S.C. Section
1350 - Dr. Felix Zandman, Chief Executive Officer
Exhibit 99.2 - Certification Pursuant to 18 U.S.C. Section
1350 - Richard N. Grubb, Chief Financial Officer
Reports on Form 8-K
On April 15, 2002, the Company filed a Report on Form 8-K to
disclose the lawsuit by Cabot. See Item 1 above.
24
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.
VISHAY INTERTECHNOLOGY, INC.
/s/ Richard N. Grubb
-------------------------------------
Richard N. Grubb
Executive Vice President, Treasurer
(Duly Authorized and Chief Financial Officer)
Date: August 14, 2002
Exhibit 99.1
CERTIFICATION 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 of Vishay Intertechnology, Inc. (the
"Company") on Form 10-Q for the period ending June 30, 2002 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Dr.
Felix Zandman, 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 results of operations
of the Company.
/s/ Dr. Felix Zandman
Dr. Felix Zandman
Chief Executive Officer
August 14, 2002
Exhibit 99.2
CERTIFICATION 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 of Vishay Intertechnology, Inc. (the
"Company") on Form 10-Q for the period ending June 30, 2002 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Richard
N. Grubb, 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 results of operations
of the Company.
/s/ Richard N. Grubb
Richard N. Grubb
Chief Financial Officer
August 14, 2002