TELEFLEX INC — Interim / Quarterly Report 2003

Aug 12, 2003

10-Q 1 w88975e10vq.htm FORM 10-Q TELEFLEX INCORPORATED e10vq PAGEBREAK

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 29, 2003

OR

o 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 1-5353

TELEFLEX INCORPORATED

(Exact Name of Registrant as Specified in its Charter)

| Delaware (State of Incorporation) | 23-1147939 (IRS Employer Identification
Number) |
| --- | --- |
| 630 West Germantown Pike,
Suite 450 Plymouth Meeting, PA (Address of Principal Executive
Office) | 19462 (Zip Code) |

(610) 834-6301

(Telephone Number Including Area Code)

None

(Former Name, Former Address and Former Fiscal Year,

If Changed Since Last Report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

þ Yes o No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

þ Yes o No

Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock as of the latest practicable date.

Class	Outstanding at June 29, 2003
Common Stock, $1.00 Par Value	39,557,139

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link1 "TELEFLEX INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEET (Dollars in Thousands)"

TELEFLEX INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEET

(Dollars in Thousands)

	June 29,	Dec. 29,
	2003	2002
ASSETS
Current assets
Cash and cash equivalents	$ 59,586	$ 44,494
Accounts receivable less allowance for doubtful
accounts	449,829	401,888
Inventories	395,523	365,535
Prepaid expenses	24,571	25,978
	929,509	837,895
Property, plant and equipment, at cost, less
accumulated depreciation	622,625	604,241
Goodwill	281,805	257,999
Intangibles and other assets	75,223	68,810
Investments in affiliates	38,418	44,439
	$ 1,947,580	$ 1,813,384
LIABILITIES AND SHAREHOLDERS’
EQUITY
Current liabilities
Current portion of borrowings and demand loans	$ 207,032	$ 182,776
Accounts payable and accrued expenses	293,636	276,938
Income taxes payable	46,712	38,769
	547,380	498,483
Long-term borrowings	226,053	240,123
Deferred income taxes and other	177,000	162,497
	950,433	901,103
Shareholders’ equity	997,147	912,281
	$ 1,947,580	$ 1,813,384

The accompanying notes are an integral part of the condensed consolidated financial statements.

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TELEFLEX INCORPORATED

link1 "CONDENSED CONSOLIDATED STATEMENT OF INCOME"

CONDENSED CONSOLIDATED STATEMENT OF INCOME

(Dollars and Shares in Thousands, Except Per Share)

	Three Months Ended — June 29,	June 30,	Six Months Ended — June 29,	June 30,
	2003	2002	2003	2002
Revenues	$ 577,945	$ 546,306	$ 1,124,166	$	1,054,702
Cost of sales	423,339	397,390	827,281		770,680
Operating expenses	103,166	94,563	200,413		179,739
Interest expense	6,610	6,239	13,175		12,275
Non-operating gain	—	—	(3,068	)	—
	533,115	498,192	1,037,801		962,694
Income before taxes	44,830	48,114	86,365		92,008
Provision for taxes on income	12,995	14,578	25,289		28,054
Net income	$ 31,835	$ 33,536	$ 61,076	$	63,954
Earnings per share
Basic	$ 0.81	$ 0.85	$ 1.55	$	1.63
Diluted	$ 0.80	$ 0.84	$ 1.54	$	1.61
Dividends per share	$ 0.20	$ 0.18	$ 0.38	$	0.35
Average number of common and common equivalent
shares outstanding
Basic	39,539	39,241	39,493		39,140
Diluted	39,837	39,968	39,769		39,803

The accompanying notes are an integral part of the condensed consolidated financial statements.

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TELEFLEX INCORPORATED

link1 "CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS"

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Dollars in Thousands)

	Six Months Ended — June 29,	June 30,
	2003	2002
Cash flows from operating activities:
Net income	$ 61,076	$	63,954
Adjustments to reconcile net income to cash flows
from operating activities:
Depreciation expense	48,552		42,286
Amortization expense	3,477		2,596
(Increase) in accounts receivable	(28,446	)	(26,626	)
(Increase) in inventory	(8,024	)	(21,234	)
Decrease in prepaid expenses	3,801		428
Increase in accounts payable and accrued expenses	14,156		14,159
Increase in income taxes payable	7,583		9,655
	102,175		85,218
Cash flows from financing activities:
Reduction in long-term borrowings	(11,621	)	(14,910	)
Increase in current borrowings and demand loans	2,461		2,490
Proceeds from stock compensation plans	1,051		8,120
Dividends	(15,007	)	(13,690	)
	(23,116	)	(17,990	)
Cash flows from investing activities:
Expenditures for plant assets	(44,462	)	(42,687	)
Payments for businesses acquired	(22,916	)	(27,807	)
Proceeds from sale of businesses and assets	4,728		—
Investments in affiliates	(1,357	)	(337	)
Other	40		2,465
	(63,967	)	(68,366	)
Net increase (decrease) in cash and cash
equivalents	15,092		(1,138	)
Cash and cash equivalents at the beginning of the
period	44,494		46,900
Cash and cash equivalents at the end of the period	$ 59,586	$	45,762

The accompanying notes are an integral part of the condensed consolidated financial statements.

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TELEFLEX INCORPORATED

STATEMENT OF COMPREHENSIVE INCOME

(Dollars in Thousands)

	Three Months Ended — June 29,	June 30,	Six Months Ended — June 29,	June 30,
	2003	2002	2003	2002
Net income	$ 31,835	$ 33,536	$ 61,076	$ 63,954
Financial instruments marked to market	1,288	1,443	1,742	1,956
Cumulative translation adjustment	19,520	21,849	31,383	19,123
Comprehensive income	$ 52,643	$ 56,828	$ 94,201	$ 85,033

The accompanying notes are an integral part of the condensed consolidated financial statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1

The accompanying unaudited condensed consolidated financial statements for the three and six months ended June 29, 2003 and June 30, 2002 contain all adjustments, consisting only of normal recurring adjustments, which in the opinion of management are necessary to present fairly the financial position, results of operations and cash flows for the periods then ended in accordance with the current requirements for Form 10-Q. At June 29, 2003, 5,316,832 shares of common stock were reserved for issuance under the Company’s stock compensation plans.

Note 2

In November 2002, the Financial Accounting Standards Board issued FASB Interpretation No. 45 (FIN 45), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” FIN 45 requires that certain guarantees be recognized as liabilities at fair value at their inception date and requires certain disclosures by the guarantor in its financial statements about its obligations. In the ordinary course of business, the Company provides routine letters of credit, indemnifications and other guarantees whose terms range in duration and often are not explicitly defined. Adoption of FIN 45 did not have a material impact on the results of operations or financial condition of the Company.

Note 3

In May 2003, the FASB issued Statement No. 150 (FAS 150), “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity”. FAS 150 establishes standards for how an issuer classifies and measures in its statement of financial position certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances) because that financial instrument embodies an obligation of the issuer. This Statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The Company does not believe adoption of FAS 150 will have a material impact on the results of operations or financial condition of the Company.

Note 4

The Company has stock-based compensation plans that provide for the granting of incentive and non-qualified options to officers and key employees to purchase shares of common stock at the market price of the stock on the dates options are granted. No stock-based employee compensation cost is reflected in net income.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 4 — (continued)

The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of FASB Statement No. 123, “Accounting for Stock-Based Compensation”:

	Three Months Ended — June 29,	June 30,		June 29,		June 30,
	2003	2002		2003		2002
Net income, as reported	$ 31,835	$	33,536	$	61,076	$	63,954
Deduct: Stock-based employee compensation expense
using a fair value method	(1,064	)	(892	)	(2,151	)	(1,752	)
Pro forma net income	$ 30,771	$	32,644	$	58,925	$	62,202
Earnings per share:
Basic
As reported	$ 0.81	$	0.85	$	1.55	$	1.63
Pro forma	$ 0.78	$	0.82	$	1.49	$	1.58
Diluted
As reported	$ 0.80	$	0.84	$	1.54	$	1.61
Pro forma	$ 0.78	$	0.82	$	1.49	$	1.57

Note 5

Changes in the carrying amount of goodwill for the six months ended June 29, 2003, by operating segment, are as follows:

	Commercial	Medical	Aerospace	Total
Goodwill, net at December 29, 2002	$ 94,566	$ 137,272	$ 26,161	$ 257,999
Goodwill acquired	15,917	—	—	15,917
Translation adjustment	6,065	1,702	122	7,889
Goodwill, net at June 29, 2003	$ 116,548	$ 138,974	$ 26,283	$ 281,805

The following table reflects the components of intangible assets:

	June 29, 2003 — Gross Carrying	Accumulated	Dec. 29, 2002 — Gross Carrying	Accumulated
	Amount	Amortization	Amount	Amortization
Intellectual property	$ 40,275	$ 8,198	$ 33,378	$ 6,211
Customer lists	24,697	1,999	21,000	1,580
Distribution rights	21,313	8,516	19,646	6,595

Amortization expense related to those intangible assets was $3,477 for the six months ended June 29, 2003. Amortization expense is estimated to be $7,265 in 2003, $7,138 in 2004, $6,398 in 2005, $5,579 in 2006 and $4,701 in 2007.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 6

Inventories consisted of the following:

	June 29,	Dec. 29,
	2003	2002
Raw materials	$ 172,764	$ 154,552
Work-in-process	73,057	59,596
Finished goods	149,702	151,387
	$ 395,523	$ 365,535

Note 7

Business segment information:

	Three Months Ended — June 29,	June 30,	Percent		Six Months Ended — June 29,	June 30,	Percent
	2003	2002	Change		2003	2002	Change
Sales
Commercial	$ 318,205	$ 291,648	9	%	$ 618,016	$	557,400	11	%
Medical	129,679	113,473	14	%	247,824		220,776	12	%
Aerospace	130,061	141,185	(8	%)	258,326		276,526	(7	%)
Total	$ 577,945	$ 546,306	6	%	$ 1,124,166	$	1,054,702	7	%
Operating profit
Commercial	$ 32,905	$ 29,684	11	%	$ 62,032	$	55,388	12	%
Medical	21,576	18,394	17	%	40,623		35,761	14	%
Aerospace	1,940	10,888	(82	%)	3,853		22,317	(83	%)
	56,421	58,966	(4	%)	106,508		113,466	(6	%)
Less:
Interest expense	6,610	6,239	6	%	13,175		12,275	7	%
Corporate expenses	4,981	4,613	8	%	10,036		9,183	9	%
Non-operating gain	—	—	—		(3,068	)	—	—
Income before taxes	44,830	48,114	(7	%)	86,365		92,008	(6	%)
Taxes on income	12,995	14,578	(11	%)	25,289		28,054	(10	%)
Net income	$ 31,835	$ 33,536	(5	%)	$ 61,076	$	63,954	(5	%)

MANAGEMENT’S ANALYSIS OF QUARTERLY FINANCIAL DATA

Results of Operations:

Revenues increased 6% in the second quarter of 2003 to $577.9 million from $546.3 million in 2002. The 6% increase in revenues resulted from currency gains, as a 3% gain from acquisitions was negated by a 3% decline in core business. The Commercial and Medical segments each reported gains, which were offset in part by a decline in the Aerospace Segment. The Commercial, Medical and Aerospace segments comprised 55%, 22% and 23% of the Company’s net sales, respectively.

The gross profit margin declined to 26.8% in 2003 from 27.3% in 2002, largely as a result of a quarter-over-quarter decline in the Aerospace Segment, particularly Industrial Gas Turbine (IGT) Services. Medical Segment gross margin improved slightly, while Commercial Segment gross margin declined slightly and

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Aerospace Segment gross margin declined sharply. Operating expenses as a percentage of sales increased to 17.9% in 2003 compared with 17.3% in 2002. The Commercial and Medical segments declined while Aerospace Segment operating expenses increased relative to sales.

Operating profit declined 4% in the second quarter to $56.4 million in 2003 from $59.0 million in 2002 resulting from a decline in the Aerospace Segment, which more than compensated for gains in the Commercial and Medical segments. Operating margin declined to 9.8% in 2003 from 10.8% in 2002 due to a decline in the Aerospace Segment. Commercial and Medical segment operating margins improved. The Commercial, Medical and Aerospace segments comprised 58%, 38% and 4% of the Company’s operating profit, respectively.

Interest expense increased in 2003 as a result of changes in exchange rates. The effective income tax rate was 29.0% in the second quarter of 2003 compared with 30.3% in 2002. The decline resulted from a higher proportion of income in 2003 earned in countries with relatively lower tax rates. Net income and diluted earnings per share for the quarter were $31.8 million and $0.80, a 5% decline.

Industry Segment Review:

Sales in the Commercial Segment gained 9% from $291.6 million in 2002 to $318.2 million in the second quarter of 2003 as all three product lines, Automotive, Marine and Industrial reported gains. Currency and acquisitions contributed to the top line gain. Core product sales declined slightly in the quarter, primarily a result of lower automotive cable and marine aftermarket sales. Automotive sales improved due to new platforms in North America for the adjustable pedal system, a new transmission guide control program in Europe and a positive contribution from currencies. Sales of non-marine products, including goods for military application, and new products such as the SmartCast TM bank fishfinder helped offset a weather related weaker marine aftermarket. Acquisitions, including the 2003 purchase of a designer and manufacturer of electronic and electromechanical products for the automotive, marine and industrial markets, helped drive Industrial product line sales higher. Commercial Segment operating profit improved from $29.7 million in 2002 to $32.9 million in 2003. Operating margin for the Commercial Segment increased to 10.3% from 10.2%. Automotive operating profit gained on increased volume in Europe, currency and the second quarter 2002 costs incurred to curtail a North American facility. Marine operating profit fell due to adverse product mix and the unfavorable impact of a stronger Canadian dollar. Acquisitions and core improvement in fluid handling systems helped boost Industrial product line operating profit.

Medical Segment sales increased 14% from $113.5 million in 2002 to $129.7 million in 2003. Both product lines, Health Care Supply and Surgical Devices, improved. Stronger foreign currencies accounted for nearly two-thirds of the growth. Also contributing to growth was the acquisition of an orthopedic instrument manufacturer in September 2002 and increased volume of urology products. Operating profit increased to $21.6 million in 2003 from $18.4 million in 2002, and operating margin improved from 16.2% in 2002 to 16.6% in 2003. In Health Care Supply, volume improvement and increased reliance on production in low cost countries led to higher operating profit. In Surgical Devices, operating profit improved due largely to the acquisition and a reduction in operating expenses, which was partially offset by costs related to the closure of an off-site service facility.

Aerospace Segment sales decreased 8% to $130.1 million in 2003 from $141.2 million in 2002. Results in this quarter continue to reflect price erosion and weaker power generation and commercial aerospace markets. The sales decrease was primarily due to a nearly 20% drop in IGT Services, with lesser declines in Manufactured Components and Cargo Systems, while Repair Services sales increased slightly. Operating profit declined 82% due largely to the weaker performance in IGT Services, particularly the engineering services and replacement parts businesses. These items, coupled with currency pressure and SARS, served to lower operating profit. Cargo Systems, Manufactured Components, and Repair Services all generated mid-single digit returns. Operating margin declined to 1.5% in 2003 from 7.7% in 2002.

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Cash Flows from Operations and Liquidity:

Cash flows from operating activities in the first six months of 2003 increased to $102.2 million from the prior year period of $85.2 million. The primary reason was reduced working capital requirements in the Aerospace Segment. Total borrowings increased by $10.2 million to $433.1 million at June 29, 2003 as compared to $422.9 million at December 29, 2002. The increase was due to borrowings incurred to finance the acquisition and from currency exchange rate changes offset by repayments. The ratio of total debt to total capitalization decreased to 30% at June 29, 2003 from 32% at December 29, 2002 as equity increased in 2003 at a higher rate relative to debt.

Forward-Looking Statements:

This quarterly report includes the Company’s current plans and expectations and is based on information available to it. It relies on a number of assumptions and estimates which could be inaccurate and which are subject to risks and uncertainties.

The Company’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports will be made available free of charge through the Investor Relations section of the Company’s Internet website (http://www.teleflex.com) as soon as practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission.

ITEM 4. Controls and Procedures

As of a date within 90 days prior to the date of the filing of this report, our Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of our disclosure controls and procedures, which included inquiries made to certain other of our employees. Based on their evaluation, our Chief Executive Officer and Chief Financial Officer have each concluded that our disclosure controls and procedures provide reasonable assurance that we record, process, summarize, and report information required to be disclosed by us in our periodic reports filed under the Securities Exchange Act within the time periods specified by the Securities and Exchange Commission’s rules and forms. Subsequent to the date of their evaluation, there have not been any significant changes in our internal controls or in other factors that could significantly affect these controls, including any corrective actions with regard to significant deficiencies and material weaknesses.

PART II OTHER INFORMATION

ITEM 4. Submission of Matters to a Vote of Security Holders

At the Company’s 2003 Annual Meeting of Shareholders held on April 25, 2003, the following were elected to the Board of Directors of the Company for a term expiring in 2006:

Name — Jeffrey P. Black	35,404,703	250,418
Sigismundus W.W. Lubsen	35,457,878	197,243
Judith M. von Seldeneck	35,427,679	227,442
Harold L. Yoh, III	35,432,352	222,769

The Shareholders approved the appointment of PricewaterhouseCoopers LLP as independent accountants of the Company for the fiscal year ending December 28, 2003, as follows:

For	25,626,168
Against	9,971,556
Abstain	54,273

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ITEM 6. Exhibits and Reports on Form 8-K

1. During the quarter ended June 29, 2003, the Company filed the following reports on Form 8-K:

| On April 22, 2003 Teleflex Incorporated
filed a report on Form 8-K dated April 22, 2003, to
file as an exhibit a press release announcing earnings for the
quarter ended March 30, 2003 and a summary of the
conference call related thereto. |
| --- |
| On May 13, 2003 Teleflex Incorporated filed
a report on Form 8-K dated May 13, 2003, to file as an
exhibit the certifications of the Company’s Chief Executive
Officer and Chief Financial Officer required pursuant to
18 U.S.C Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002. |

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link1 "TELEFLEX INCORPORATED"

TELEFLEX INCORPORATED

link1 "SIGNATURES"

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.

TELEFLEX INCORPORATED
/s/ HAROLD L. ZUBER, JR.
Harold L. Zuber, Jr.
Executive Vice President and Chief Financial
Officer
(principal financial officer) and duly
authorized officer

August 12, 2003

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TELEFLEX INCORPORATED

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Jeffrey P. Black, Chief Executive Officer and President of Teleflex Incorporated, certify that:

| 1. I have reviewed this quarterly report on
Form 10-Q of Teleflex Incorporated; |
| --- |
| 2. Based on my knowledge, this quarterly
report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period
covered by this quarterly report; |
| 3. Based on my knowledge, the financial
statements, and other financial information included in this
quarterly report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
quarterly report; |
| 4. The registrant’s other certifying
officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and we have: |

| a) designed such disclosure controls and
procedures to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during
the period in which this quarterly report is being prepared; |
| --- |
| b) evaluated the effectiveness of the
registrant’s disclosure controls and procedures as of a
date within 90 days prior to the filing date of this
quarterly report (the “Evaluation Date”); and |
| c) presented in this quarterly report our
conclusions about the effectiveness of the disclosure controls
and procedures based on our evaluation as of the Evaluation Date; |

1. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

| a) all significant deficiencies in the
design or operation of internal controls which could adversely
affect the registrant’s ability to record, process,
summarize and report financial data and have identified for the
registrant’s auditors any material weaknesses in internal
controls; and |
| --- |
| b) any fraud, whether or not material, that
involves management or other employees who have a significant
role in the registrant’s internal controls; and |

1. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

/s/ JEFFREY P. BLACK
Jeffrey P. Black
Chief Executive Officer and
President

Date: August 12, 2003

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TELEFLEX INCORPORATED

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Harold L. Zuber, Jr., Chief Financial Officer and Executive Vice President of Teleflex Incorporated, certify that:

| 1. I have reviewed this quarterly report on
Form 10-Q of Teleflex Incorporated; |
| --- |
| 2. Based on my knowledge, this quarterly
report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period
covered by this quarterly report; |
| 3. Based on my knowledge, the financial
statements, and other financial information included in this
quarterly report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
quarterly report; |
| 4. The registrant’s other certifying
officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and we have: |

| a) designed such disclosure controls and
procedures to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during
the period in which this quarterly report is being prepared; |
| --- |
| b) evaluated the effectiveness of the
registrant’s disclosure controls and procedures as of a
date within 90 days prior to the filing date of this
quarterly report (the “Evaluation Date”); and |
| c) presented in this quarterly report our
conclusions about the effectiveness of the disclosure controls
and procedures based on our evaluation as of the Evaluation Date; |

1. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

| a) all significant deficiencies in the
design or operation of internal controls which could adversely
affect the registrant’s ability to record, process,
summarize and report financial data and have identified for the
registrant’s auditors any material weaknesses in internal
controls; and |
| --- |
| b) any fraud, whether or not material, that
involves management or other employees who have a significant
role in the registrant’s internal controls; and |

1. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

/s/ HAROLD L. ZUBER, JR.
Harold L. Zuber, Jr.
Chief Financial Officer and Executive Vice
President

Date: August 12, 2003

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