Form 10-Q
Securities and Exchange Commission
Washington, D. C. 20549
X Quarterly Report pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 1995
Commission file number 1-1043
Brunswick Corporation
(Exact name of registrant as specified in its charter)
Delaware 36-0848180
(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1 N. Field Ct., Lake Forest, Illinois 60045-4811
(Address of principal executive offices) (Zip Code)
(708) 735-4700
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
At August 4, 1995, there were 95,798,923 shares of the Company's Common Stock
($.75 par value) outstanding.
Part I- Financial Information
Item I-Financial Statements
Brunswick Corporation
Consolidated Results Of Operations
for the periods ended June 30
(dollars in millions, except per share data)
Quarter Six Months
ended June 30 ended June 30
1995 1994 1995 1994
(unaudited)
Net sales $ 839.2 $ 748.2 $1,613.4 $ 1,383.1
Cost of sales 594.3 522.8 1,153.1 981.4
Selling, general and administrative 147.4 137.0 289.2 268.6
Restructuring charges and management
transition expenses 40.0 - 40.0 -
Operating earnings 57.5 88.4 131.1 133.1
Interest expense (7.9) (6.9) (15.9) (13.3)
Interest income and other items, net 7.8 6.2 6.5 9.7
Earnings before income taxes 57.4 87.7 121.7 129.5
Income tax provision 20.3 32.5 44.4 47.9
Earnings from continuing operations 37.1 55.2 77.3 81.6
Loss on disposition of Technical segment (7.0) - (7.0) -
Net earnings $ 30.1 $ 55.2 $ 70.3 $ 81.6
Earnings (loss) per common share
Earnings from continuing operations $ 0.38 $ 0.58 $ 0.80 $ 0.85
Loss on disposition of Technical segment (0.07) - (0.07) -
Net earnings per common share $ 0.31 $ 0.58 $ 0.73 $ 0.85
Cash dividends declared per common share $ 0.125 $ 0.11 $ 0.250 $ 0.22
The notes are an integral part of these consolidated statements.
The 1995 earnings from continuing operations (and related per share amounts)
have been reduced by a $40 million pre-tax provision for the divestitures of
certain businesses and certain management transition expenses.
Brunswick Corporation
Consolidated Balance Sheets
As of June 30, 1995 and December 31, 1994
(dollars in millions)
June 30 December 31,
Assets 1995 1994
Current assets (unaudited)
Cash and cash equivalents, at cost, which
approximates market $ 204.2 $ 185.2
Marketable securities 4.7 18.2
Accounts and notes receivable, less allowances
of $19.5 and $19.5 325.3 218.9
Inventories 435.2 409.0
Prepaid income taxes 206.0 175.0
Prepaid expenses 28.3 33.9
Income tax refunds receivable 4.0 17.3
Current assets 1,207.7 1,057.5
Property
Land 61.1 61.0
Buildings 374.3 367.8
Equipment 819.2 779.9
1,254.6 1,208.7
Accumulated depreciation (682.0) (643.3)
Property 572.6 565.4
Other assets
Dealer networks 129.2 140.9
Trademarks and other 148.5 136.0
Excess of cost over net assets of businesses acquired 112.3 117.8
Investments 86.3 76.1
Other assets 476.3 470.8
Assets of continuing operations 2,256.6 2,093.7
Net assets of discontinued operations - 28.6
Total assets $ 2,256.6 $ 2,122.3
Liabilities And Shareholders' Equity
Current liabilities
Short-term debt, including current maturities $ 5.7 $ 8.2
Accounts payable 157.6 157.3
Accrued expenses 506.1 455.8
Current liabilities 669.4 621.3
Long-term debt
Notes, mortgages and debentures 315.9 318.8
Deferred items
Income taxes 136.8 133.8
Postretirement and postemployment benefits 133.7 114.0
Compensation and other 27.0 23.7
Deferred items 297.5 271.5
Common shareholders' equity
Common stock; authorized: 200,000,000 shares,
$.75 par value; issued: 100,687,992 shares
at June 30, 1995 and December 31, 1994 75.5 75.5
Additional paid-in capital 263.4 261.5
Retained earnings 781.9 735.5
Treasury stock, at cost: 4,900,862 shares at June
30, 1995 and 5,236,856 shares at December 31, 1994 (90.7) (98.3)
Minimum pension liability adjustment (0.7) (0.7)
Unearned portion of restricted stock
issued for future services (2.4) (2.4)
Cumulative translation adjustments 16.4 11.8
Unamortized ESOP expense (69.6) (72.2)
Common shareholders' equity 973.8 910.7
Total liabilities and shareholders' equity $ 2,256.6 $ 2,122.3
The notes are an integral part of these consolidated statements.
Brunswick Corporation
Consolidated Statements Of Cash Flows
for the six months ended June 30
(dollars in millions)
1995 1994
(unaudited
Cash flows from operating activities
Net earnings $ 70.3 $ 81.6
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization by continuing operations 55.1 58.6
Changes in noncash current assets and current
liabilities of continuing operations (144.3) (99.1)
Increase in deferred items 24.4 23.7
Stock issued for employee benefit plans 9.4 3.0
Other, net 8.3 0.9
Restructuring charge 40.0 -
Loss on disposal of discontinued operations 11.5 -
Decrease in net assets of discontinued operations 7.1 1.7
Net cash provided by operating activities 81.8 70.4
Cash flows from investing activities
Capital expenditures (50.3) (39.1)
Investment in marketable securities 13.6 (29.3)
Investment in unconsolidated affiliates (9.6) (0.3)
Proceeds from sales of property 3.2 3.6
Investments (10.5) -
Other, net (1.4) (2.1)
Proceeds from disposal of discontinued operations 22.0 -
Net investing activities of discontinued operations (0.5) (0.5)
Net cash used for investing activities (33.5) (67.7)
Cash flows from financing activities
Payments of long-term debt, including current maturities (2.7) (3.1)
Cash dividends paid (23.9) (21.0)
Other, net (2.7) 0.1
Net cash used for financing activities (29.3) (24.0)
Net increase (decrease) in cash and cash equivalents 19.0 (21.3)
Cash and cash equivalents at January 1 185.2 248.8
Cash and cash equivalents at June 30 $ 204.2 $ 227.5
Supplemental cash flow disclosures:
Interest paid $ 27.0 $ 12.2
Income taxes paid, net of refunds 30.6 79.8
The notes are an integral part of these consolidated statements.
Brunswick Corporation
Notes To Consolidated Financial Statements
June 30, 1995, December 31, 1994 and June 30, 1994
(unaudited)
Note 1 - Accounting policies
This financial data has been prepared pursuant to the rules and regulations of
the Securities and Exchange Commission. Accordingly, certain information and
disclosures, normally included in financial statements and footnotes prepared
in accordance with generally accepted accounting principles, have been
condensed or omitted. Brunswick Corporation (the "Company") believes that the
disclosures in these statements are adequate to make the information presented
not misleading.
These financial statements should be read in conjunction with, and have been
prepared in conformity with, the accounting principles reflected in the
consolidated financial statements and related notes included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1994. These interim
results include, in the opinion of the Company, all normal and recurring
adjustments necessary to present fairly the results of operations for the
quarter and six-month periods ended June 30, 1995 and 1994. The 1995 interim
results are not necessarily indicative of the results which may be expected for
the remainder of the year.
The financial statements segregate the results of the Company's discontinued
Technical segment. The 1995 and 1994 operating results of the Technical Group
have been charged against a reserve established at the time the decision to
discontinue the segment was announced. See Note 4 for additional discussion on
the Technical Group disposition.
Note 2 - Earnings per common share
Earnings (loss) per common share are based on the weighted average number of
common and common equivalent shares outstanding during each period. Such
average shares were 96.0 million and 95.8 million for the quarters ended June
30, 1995 and 1994, respectively, and 96.0 and 95.7 million for the six-month
periods ended June 30, 1995 and 1994, respectively.
Note 3 - Inventories
Inventories, of which approximately sixty percent were valued using the LIFO
method, consisted of the following at June 30, 1995 and December 31, 1994
(dollars in millions):
June 30 December 31
1995 1994
Finished goods $259.5 $233.4
Work in process 98.7 105.2
Raw materials 77.0 70.4
Inventories $435.2 $409.0
Note 4 - Disposition of the Technical segment
On April 28, 1995, the Company completed the sale of substantially all the
assets of its Technical Group to Technical Products Group, Inc, a recently
formed company controlled by TPG Holdings in Atlanta, Georgia. Included in the
sale were Brunswick operations in Marion, Virginia: Lincoln, Nebraska; Camden,
Arkansas; and Deland, Florida. Excluded were the assets associated with the
unit's facility in Costa Mesa, California, which are fully reserved as of June
30, 1995 and for which the Company continues to seek a buyer. Also in the
second quarter of 1995, the Company recorded a provision of $11.5 million ($7.0
million after-tax) reflecting lower than anticipated selling prices for those
businesses.
Note 5 - Restructuring charges and management transition expenses
In the second quarter of 1995, the Company recorded restructuring and
management transition expenses of $40.0 million($24.4 million after-tax). The
charge consists of anticipated losses on the planned divestitures of the golf
club shaft business and Circus World Pizza operations, management transition
expenses and the costs of an early retirement and selective separation program
at the Company's corporate office.
Note 6 - Investments
On January 20, 1995, the Company and Orbital Engine Corporation Ltd. of Perth,
Australia, formed a joint venture to design, manufacture and market fuel
systems for low-emission two-stoke engines. The Company contributed $6.6
million for its 50% share of this joint venture.
Note 7 - Consolidated common shareholders' equity
Minimum
Additional pension Unearned Cumulative Unamortized
Common stock paid-in Retained Treasury stoc liability restrictedtranslation ESOP
(in millions) Shares Amount capital earnings Shares Amount adjustment stock adjustments Expense
Balance, January 1, 1995 100.7 $75.5 $261.5 $735.5 (5.2) ($98.3) ($0.7) ($2.4) $11.8 ($72.2)
Net Earnings - - - 70.3 - - - - - -
Dividends declared ($.25 per
common share) - - - (23.9) - - - - - -
Compensation plans and other - - 1.9 - 0.3 7.6 - - - -
Deferred Compensation-ESOP - - - - - - - - - 2.6
Currency translation - - - - - - - - 4.6 -
Balance, June 30, 1995 100.7 $75.5 $263.4 $781.9 (4.9) ($90.7) ($0.7) ($2.4) $16.4 ($69.6)
Note 8 - Debt
Long-term debt at June 30, 1995 and December 31, 1994 consisted of the
following (dollars in millions):
June 30 December 31
1995 1994
Notes, 8.125%, due 1997 (net of discount
of $0.1.) $ 99.9 $ 99.9
Mortgage notes and other, 3% to 10%,
payable through 1999 27.1 27.3
Debentures, 7.375%, due 2023,
(net of discount of $0.9) 124.1 124.1
Guaranteed ESOP debt, 8.13%, payable through 2004 70.5 73.1
321.6 324.4
Current maturities (5.7) (5.6)
Long-term debt $315.9 $318.8
Note 8 - Debt(Cont.)
As of June 30, 1995, the Company and seventeen banks had a short-term credit
agreement for $100 million and a long-term credit agreement for $300 million.
On November 7, 1994, both agreements were amended to reduce facility fees,
extend maturities and reduce spreads on borrowing options. The termination date
of the short-term agreement was extended to November 6, 1995 and the long-term
agreement was extended to December 31, 1999. With mutual agreement between the
Company and the banks, the short-term agreement may be extended.
Under terms of the amended agreements, the Company has multiple borrowing
options, including borrowings at a corporate base rate, as announced by The
First National Bank of Chicago, or a rate tied to the Eurodollar rate.
Currently, the Company must pay a facility fee of 0.10% on the short-term
agreement and 0.15% on the long-term agreement.
Under the agreements, the Company is subject to interest coverage, net worth
and leverage tests as well as a restriction on secured debt, as defined. On
the interest coverage test, the Company is required to maintain a ratio of
consolidated income before interest and taxes, as defined, to consolidated
interest expense of not less than 2.0 to 1.0 on a cumulative twelve-month
basis. The ratio, on a cumulative twelve-month basis, was 8.7 to 1.0 at June
30, 1995. The leverage ratio of consolidated total debt to capitalization, as
defined, may not exceed 0.55 to 1.00, and at June 30, 1995, this ratio was 0.25
to 1.00.
The Company is also required to maintain shareholders' equity of least $776.0
million, with the required level of shareholders' equity at December 31 of each
year being increased by 50% of net earnings for that year. The Company has
complied with this limitation and the secured debt limitation as of June 30,
1995. There were no borrowings under the agreements at June 30, 1995.
Note 9 - Litigation
The Company is subject to certain legal proceedings and claims which have
arisen in the ordinary course of its business and have not been finally
adjudicated. In light of existing reserves, the Company's litigation and
claims, when finally resolved, will not, in the opinion of management, have a
material adverse effect on the Company's consolidated financial position and
results of operations.
The Company is involved in certain legal and administrative proceedings under
the Comprehensive Environmental Response, Compensation and Liability Act of
1980 and other federal and state legislation governing the generation and
disposition of certain hazardous wastes. These proceedings, which involve both
on and off site waste disposal, in many instances seek compensation from the
Company as a waste generator under Superfund legislation which authorizes
action regardless of fault, legality of original disposition or ownership of a
disposal site.
On February 3, 1995, the Company announced a series of agreements with Genmar
Industries, Inc., including settlement of an antitrust lawsuit brought by
Genmar against the Company. Agreements were entered to supply Genmar with
marine engines manufactured by the Company and to acquire certain investments
in another boat manufacturer from Genmar. The Company's total cash payment
relating to these agreements was $22.5 million and had no material impact on
the results of operations of the Company.
Note 9 - Litigation(Cont.)
The Federal Trade Commission is conducting an investigation of whether the
formation or operations of Tracker Marine L.P. and the Company's contracts with
Tracker Marine L.P. violate the antitrust laws. The Company has received and
responded to a subpoena seeking information relating to the Company's outboard
motor sales. The Company understands that other marine companies have received
similar subpoenas from the Federal Trade Commission.
Note 10 - Income Taxes
In January 1994, the Company reached an agreement with the U.S. Internal
Revenue Service ("IRS") regarding its examination of the Company for the years
1985 and 1986. The issues of this examination dealt primarily with the
deductibility of approximately $500 million of acquired intangible assets,
which the IRS proposed to reclassify to non-deductible intangible assets. Under
the terms of the agreement, the IRS agreed to allow amortization deductions for
virtually all of the acquired intangible assets, and the Company agreed to
increase the amortizable lives of most of the acquired intangible assets.
The revised lives created a temporary difference which resulted in an initial
obligation by the Company to pay the IRS approximately $55 million during the
first quarter of 1994, representing taxes and interest, net of taxes, for the
years 1986 through 1993. This initial $55 million obligation will subsequently
be reduced by the future tax benefits of the temporary difference created by
the agreeement. Since the interest was charged to existing reserves and the
taxes paid represent temporary differences which created, and have been
recorded as deferred tax assets, this agreement had no impact on the Company's
consolidated results of operations.
Note 11 - Segment Data
The following table sets forth net sales and operating earnings of each of the
Company's industry segments for the quarter and six-month periods ended June
30, 1995 and 1994.
Quarter Ended June 30
Net Operating Net Operating
Sales Earnings(Loss) Sales Earnings
Marine $ 645.3 $ 89.7 $ 563.0 $ 79.0
Recreation 193.9 ( 7.8) 185.2 22.0
Segments 839.2 81.9 748.2 101.0
Corporate - (24.4) - (12.6)
Consolidated $ 839.2 $ 57.5 $ 748.2 $ 88.4
Six-Months Ended June 30
Sales Earnings Sales Earnings
Marine $1,221.0 $ 150.5 $1,020.5 $ 108.3
Recreation 392.4 16.2 362.6 48.5
Segments 1,613.4 166.7 1,383.1 156.8
Corporate - (35.6) - (23.7)
Consolidated $1,613.4 $131.1 $1,383.1 $ 133.1
Note 11 - Segment Data(Cont.)
The operating earnings (loss) of the Recreation segment for the quarter and six
months ended June 30, 1995 include a $25.8 million charge for the anticipated
losses on the planned divestitiures of the golf club shaft business and Circus
World Pizza operations.
The Corporate operating expenses for the quarter and six months periods ended
June 30, 1995 include $14.2 million in management transition expenses and costs
associated with an early retirement and selective separation program at the
Company's corporate office.
Management's Discussion and Anaysis
Cash Flow, Liquidity and Capital Resources
For the six months ended June 30, 1995, cash and cash equivalents increased
$19.0 million versus a decrease of $21.3 million in the comparable period of
1994. Net cash provided by operating activities rose to $81.8 million from the
$70.4 million for the six months ended June 30, 1994. The net cash provided by
operating activities increased, despite a decline in net earnings, as the
provisions for the restructuring charge and loss on the disposal of
discontinued operations did not effect cash in the period. These items were
partially offset by increased non-cash working capital requirements, primarily
for inventory and receivables.
Net cash used for investing activities for the first six months of 1995 was
$33.5 million compared to $67.7 million for the same period of 1994. The
decrease resulted primarily from the receipt of proceeds from the disposal of
the Company's Technical Group and the net redemption of marketable securities
with maturities of more than ninety days in 1995 compared to a net investment
in such securities in 1994, partially offset by increased capital expenditures
and investments in unconsolidated affiliates.
Net cash used for financing activities was $29.3 million for the first six
months of 1995 compared to $24.0 million in the same period of 1994. The change
resulted primarily from an increase in cash dividends paid to 25 cents per
share in 1995 versus 22 cents per share in 1994.
Working capital at June 30, 1995 was $538.3 million compared to $436.2
million at December 31, 1994. The Company's current ratio was 1.8 at June 30,
1995 and 1.7 at December 31, 1994.
Total debt at June 30, 1995 was $321.6 million and $327.0 million at December
31, 1994. The Company's debt-to-capitalization ratio was 24.8% at June 30,
1995 compared to 26.4% at December 31, 1994.
The Company maintains a $100 million short-term and a $300 million long-term
line of credit agreement with a group of banks. For an explanation of the
agreement and a discussion of the specific covenant restrictions, see page 6,
Note 6 - Debt.
Capital expenditures for the first six months of 1995 were $50.3 million
compared to $39.1 million for the comparable period of 1994. The Company
believes that operating cash flows and existing cash balances, supplemented
when necessary with short and/or long-term borrowings, will continue to provide
the financial resources necessary for capital expenditures and working capital
requirements.
Management's Discussion and Analysis
Results of Operations
Second Quarter and the First Six Months of 1995 vs. 1994
Net Sales
Consolidated net sales for the second quarter of 1995 increased 12% to $839.2
million from $748.2 million in the second quarter of 1994. For the six months
ended June 30, 1995, net sales rose to $1,613.4 million, or 17%, from the
comparable period of 1994. The Marine and Recreation segments contributed to
the improvements in both reporting periods.
The Marine segment net sales for the second quarter of 1995 increased 15% to
$645.3 million compared to $563.0 million in the 1994 period. The improvement
resulted from a 24% increase in international sales and a 12% increase in
domestic sales. For the six months ended June 30, 1995, net sales rose 17% to
$1,613.4 million from the $1,383.1 million in the comparable period of 1994.
International sales rose 25% while domestic sales improved 18% in the six month
period. The increases in both reporting periods were led by strong demand for
boats in Europe while demand for marine engines showed a moderate increase.
The Recreation segment's second quarter net sales increased 5%, to $193.9
million, from $185.2 million for the same period of 1994. For the six months
ended June 30, 1995, net sales increased to $392.4 million, or 8%, from the
$362.6 million for the same period of 1994. The second quarter net sales
improvement resulted primarily from strong East Asian demand for the Brunswick
Division's bowling capital equipment and increased international demand for the
products of the Zebco Division. For the six months, the Zebco Division's sales
increased both domestically and internationally, while the Brunswick Division
experienced stronger domestic demand for consumer products and billiards, and
the international bowling capital equipment sales increase mentioned above. The
BRC Division's sales increased approximately 4%, primarily due to price
increases.
Operating Earnings
For the second quarter, 1995 operating earnings declined to $57.5 million from
$88.4 million in 1994. For the six months ended June 30, 1995, operating
earnings were $131.1 million compared to $133.1 million for the same period of
1994. The declines in both reporting periods resulted from a $40.0 million
provision for restructuring charges and management transition expenses. Absent
these charges, operating earnings for the second quarter would have been $97.5
million, or 10% higher than the prior year, and for the six months operating
earnings would have been $171.1 million, or 29% higher than 1994.
The Marine segment reported operating earnings of $89.7 million for the second
quarter of 1995 compared to $79.0 million for the same period of 1994. For the
six months ended June 30, 1995, operating earnings were $150.5 million versus
$108.3 million for the comparable period of 1994. The previously discussed
domestic and international sales increases accounted for the improvement,
offset in part by increased manufacturing and product research and development
expenses.
Operating Earnings(Cont.)
The Recreation segment reported an operating loss of $7.8 million for the
second quarter of 1995, which includes a $25.8 million restructuring charge for
the planned divestitures of the golf shaft business and Circus World Pizza
operations. Absent the restructuring charges, operating earnings were $18.0
million for the second quarter of 1995 versus $22.0 million in 1994. The
decline resulted primarily from delays in shipping the Brunswick Division's new
Frameworx scoring system. Shipments of Frameworx began in the third quarter of
1995. For the six months ended June 30, 1995, operating earnings were $16.2
million compared to $48.5 million in the 1994 period. Excluding the
restructuring charge, operating earnings were $42.0 million for 1995. Operating
earnings declined, despite the sales increases discussed previously, because of
the Brunswick Division's higher operating expenses associated with the
introduction of a new product line of capital equipment and lower margins on
sales of German-manufactured pinsetters due to currency fluctuations.
Corporate expenses for the second quarter of 1995 rose to $24.4 milliom from
the $12.6 million in the second quarter of 1994. For the six months ended June
30, 1995, corporate expenses were $35.6 million compared to $23.7 million in
the comparable period of 1994. Both 1995 reporting periods include a provision
of $14.2 million for management transition expenses and the costs of an early
retirement and selective separation program at the Company's corporate office.
Excluding the provision, second quarter corporate expenses were $10.2 million
versus $12.6 million for the same period of 1994. For the six months ended June
30, 1995, corporate expenses, excluding the provision, were $21.4 million
compared to $23.7 million for 1994.
Interest Expense and Other Items, Net
Interest expense for the second quarter of 1995 increased to $7.9 million from
$6.9 million the same period of 1994. For the six months ended June 30, 1995,
interest expense rose to $15.9 million from the $13.3 million reported for the
1994 period. The increase for both reporting periods resulted primarily from
increased interest rate swap expenses. Interest income and other items, net for
the second quarter of 1995 was $7.8 million versus $6.2 million for the
comparable period of 1994. The increase was primarily due to increased earnings
of unconsolidated affiliates. For the six months ended June 30, 1995, interest
income and other items, net declined to $6.5 million from $9.7 million for the
same period of 1994. The decline was primarily due to increased foreign
currency losses in the first quarter of 1995.
Income Taxes
The effective tax rate from continuing operations for the first six months of
1995 was 36.5% compared to 37% for the same period of 1994. The effective tax
rate for both periods exceeds the statutory rate due to the impact of
non-deductible permanent differences and the effect of higher foreign tax
rates. The effective tax rate from continuing operations for the second quarter
of 1995 was 35% compared to 37% for the same period of 1994. The 1995 second
quarter rate reflects the adjustment to an effective tax rate of 36.5% at June
30, 1995 from the 37.5% effective tax rate used for the three months ended
March 31, 1995.
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
10. Employment agreement dated April 1, 1995 by and between
the Company and Peter N. Larson.
(b) Reports on Form 8-K.
The Company filed no reports on Form 8-K during the three
months ended June 30, 1995.
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.
BRUNSWICK CORPORATION
August 10, 1995 By /s/ Thomas K. Erwin
Thomas K. Erwin, Controller*
*Mr. Erwin is signing this report both as a duly authorized officer and as the
chief accounting officer.