UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT TO 1934
For the quarterly period ended September 30, 2002
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to _______________
Commission file number 1-6868
SIENA HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-1043392
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
5068 West Plano Parkway, Suite 300, Plano, Texas 75093
(Address of principal executive offices) (Zip code)
(972) 381-4255
(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 |_|
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
YES |X| NO |_|
On October 10, 1995, the Registrant and certain of its subsidiaries filed
bankruptcy proceedings under Chapter 11 of the Federal Bankruptcy Code in the
District of Delaware. The Registrant's plan of reorganization was effective in
March 1997.
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of each of the issuer's classes of common stock
as of November 1, 2002: Common Stock, $.10 par value -- 6,000,000 shares.
SIENA HOLDINGS, INC. AND SUBSIDIARIES
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2002
INDEX
Page
----
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets--September 30, 2002 and June 30, 2002..... 2
Statements of Consolidated Operations and Comprehensive Income
(Loss)--Quarters Ended September 30, 2002 and 2001................. 3
Statements of Consolidated Cash Flows--Quarters Ended September 30,
2002 and 2001...................................................... 4
Notes to Consolidated Financial Statements............................ 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations................................................ 11
Liquidity and Capital Resources...................................... 14
Critical Accounting Policies......................................... 14
Item 3. Quantitative and Qualitative Disclosures About Market Risk........... 14
Item 4. Controls and Procedures.............................................. 14
PART II -- OTHER INFORMATION
Item 3. Defaults Upon Senior Securities...................................... 15
Item 6. Exhibits and Reports on Form 8-K..................................... 15
1
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements.
CONSOLIDATED BALANCE SHEETS
SIENA HOLDINGS, INC. AND SUBSIDIARIES
(in thousands, except par value)
September 30, 2002 June 30, 2002
------------------ -------------
ASSETS (unaudited)
Current Assets:
Cash and cash equivalents .................................. $ 5,673 $ 5,711
Investments in equity securities ........................... 140 197
Receivables ................................................ 98 93
Prepaid expenses ........................................... -- 28
-------- --------
5,911 6,029
-------- --------
Long Term Assets:
Investment in real estate .................................. 4,659 4,656
Deferred tax assets - net .................................. 1,908 1,908
-------- --------
6,567 6,564
-------- --------
Total Assets .......................................... $ 12,478 $ 12,593
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses ....................... $ 160 $ 160
Unearned income ............................................. -- 125
Deferred tax liabilities .................................... -- 7
-------- --------
160 292
-------- --------
Long Term Liabilities:
Accrued medical insurance premiums ......................... 378 392
Deferred compensation and fees ............................. 458 444
-------- --------
836 836
-------- --------
996 1,128
-------- --------
Stockholders' Equity:
Preferred stock--($1.00 par value, 1,000 shares authorized,
0 shares issued and outstanding) ....................... -- --
Common stock--($.10 par value, 15,000 shares authorized,
6,000 shares issued and outstanding) ................... 600 600
Additional paid-in capital ................................. 10,214 10,188
Retained earnings .......................................... 705 664
Accumulated other comprehensive income (loss), net of tax .. (37) 13
-------- --------
11,482 11,465
-------- --------
Total Liabilities and Stockholders' Equity ............ $ 12,478 $ 12,593
======== ========
See notes to consolidated financial statements.
2
STATEMENTS OF CONSOLIDATED OPERATIONS
AND COMPREHENSIVE INCOME (LOSS) (Unaudited)
SIENA HOLDINGS, INC. AND SUBSIDIARIES
(in thousands, except net earnings per share amounts)
Quarter Ended September 30
-----------------------------
2002 2001
---------- ----------
Revenues:
Commissions and fees ............................................ $ 80 $ 79
Interest ........................................................ 21 38
Trust expense reimbursement ..................................... 36 33
Other real estate income ........................................ 125 --
Other ........................................................... -- 7
---------- ----------
262 157
---------- ----------
Expenses:
Personnel ....................................................... 105 92
Other operating ................................................. 94 75
---------- ----------
199 167
---------- ----------
Income (loss) before federal income taxes .......................... 63 (10)
Federal income tax benefit (expense) ............................... (22) 4
---------- ----------
Net income (loss) .................................................. 41 (6)
---------- ----------
Other comprehensive loss, net of tax:
Unrealized losses on equity securities:
Unrealized holding losses arising during period, net of tax . (50) (20)
---------- ----------
Other comprehensive loss, net of tax ........................... (50) (20)
---------- ----------
Comprehensive loss ................................................. $ (9) $ (26)
========== ==========
Basic earnings (loss) per share:
Net income (loss) ............................................... $ 0.01 $ 0.00
Average number of shares ........................................... 6,000 6,000
Diluted earnings (loss) per share:
Net income (loss) ............................................... $ 0.01 $ 0.00
Weighted average number of shares .................................. 6,168 6,000
See notes to consolidated financial statements.
3
STATEMENTS OF CONSOLIDATED CASH FLOWS (Unaudited)
SIENA HOLDINGS, INC. AND SUBSIDIARIES
(in thousands)
Quarter Ended September 30
-----------------------------
2002 2001
---------- ----------
Operating activities:
Net income (loss) .............................................................. $ 41 $ (6)
Adjustments to reconcile net income (loss) to net cash used by operating
activities:
Federal income tax expense credited to additional paid-in capital due to the
utilization of pre-reorganization tax attributes ......................... 22 --
Federal income tax benefit charged to additional paid-in-capital due to
increase in valuation allowance for pre-reorganization deferred tax assets -- (4)
Compensation expense for stock options ...................................... 4 4
Decrease in current receivables and prepaid expenses ........................ 23 8
Decrease in current accounts payable and accrued expenses ................... -- (44)
Decrease in unearned income ................................................. (125) --
Decrease in long term accrued medical insurance premiums .................... (14) (14)
Increase in long term deferred compensation and fees ........................ 14 3
---------- ----------
Net cash used by operating activities ................................. (35) (53)
---------- ----------
Investing activities:
Purchases of equity securities ................................................. -- (5)
Increase in investment in real estate .......................................... (3) (7)
---------- ----------
Net cash used by investing activities ............................... (3) (12)
---------- ----------
Net decrease in cash and cash equivalents ............................................ (38) (65)
Cash and cash equivalents at beginning of period ..................................... 5,711 5,914
---------- ----------
Cash and cash equivalents at end of period ........................................... $ 5,673 $ 5,849
========== ==========
Cash payments for:
Interest ....................................................................... $ -- $ --
Federal income tax ............................................................. $ -- $ 21
Non-cash transactions:
Changes to additional paid-in-capital:
Federal income tax benefit charged to additional paid-in-capital due to an
increase in valuation allowance for pre-reorganization deferred tax assets .. $ -- $ (4)
Compensation expense related to stock options .................................. 4 4
Federal income tax expense credited to additional paid-in-capital due to the
utilization of pre-reorganization tax attributes ............................ 22 --
Other .......................................................................... -- (11)
---------- ----------
Net increase (decrease) in additional paid-in-capital .................. $ 26 $ (11)
========== ==========
See notes to consolidated financial statements.
4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
SIENA HOLDINGS, INC. AND SUBSIDIARIES
SEPTEMBER 30, 2002
NOTE A -- BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of Siena Holdings, Inc. ("SHI"), formerly Lomas Financial Corporation
("LFC"), and its subsidiaries (collectively, the "Company"). SHI's wholly-owned,
principal subsidiaries are Siena Housing Management Corp. and LLG Lands, Inc.
Prior to October 1, 1996, SHI's wholly-owned principal subsidiary was Lomas
Mortgage USA, Inc. ("LMUSA"), now known as Nomas Corp.("Nomas"). As a result of
the confirmation of LMUSA's Chapter 11 reorganization plan, the Company's
interest in LMUSA was extinguished effective October 1, 1996. LFC's plan of
reorganization was confirmed on October 4, 1996, but not effective until March
1997.
In accordance with the American Institute of Certified Public Accountants'
Statement of Position 90-7, "Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code", the Company adopted fresh-start accounting as of
March 31, 1997, after all material conditions required by the Plan were
satisfied. Since April 1, 1997, the Company's financial statements have been
prepared as if it was a new reporting entity. Under fresh-start accounting, all
assets and liabilities were restated to reflect their reorganization value,
which approximated fair value at the date of reorganization. The Company's
management and representatives of the creditors' committee concluded that, based
on the fact that the Company has historically incurred losses from operations
and has projected minimal future operating profits, the reorganization value of
the Company (the fair value of the Company before considering liabilities) was
equivalent to the fair value of the Company's tangible assets and that no other
intrinsic value existed. As a result, all assets and liabilities were stated at
their fair value.
The financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. They do not include all of the information and footnotes
required by accounting principles generally accepted in the United States of
America for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying notes. Actual
results could differ from those estimates. Certain reclassifications have been
made to prior quarters' financial statements to conform to the current
presentation. Operating results for the quarter are not necessarily indicative
of the results that may be expected for the fiscal year. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report on Form 10-K for the year ended
June 30, 2002.
NOTE B -- REORGANIZATION
On October 10, 1995, LFC, two subsidiaries of LFC and LMUSA (collectively
the "Debtor Corporations") filed separate voluntary petitions for reorganization
under Chapter 11 of the Federal Bankruptcy Code in the District of Delaware. The
petitioning subsidiaries were Lomas Information Systems, Inc. ("LIS") and Lomas
Administrative Services, Inc. ("LAS"). The Debtor Corporations filed two
separate plans of reorganization with the Bankruptcy Court. An order confirming
the second amended joint plan of reorganization filed on October 4, 1996 for
LFC, LIS and LAS (the "Joint Debtors") and a stipulation and order among the
Joint Debtors and the appointed statutory committee of unsecured creditors of
LFC (the "LFC Creditors' Committee") regarding technical modifications to the
plan of reorganization and confirmation order filed on January 27, 1997 together
with the second amended joint plan of reorganization filed on July 3, 1996 are
collectively referred to herein as the "Joint Plan". The Joint Plan was
confirmed on October 4, 1996, but not effective until March 7, 1997, after
certain conditions were either met or waived by the LFC Creditors' Committee.
5
The Joint Plan provided for a transfer by the Company of $3 million in
cash to partially fund a litigation trust to pursue third-party claims pursuant
to the LFC/LMUSA joint litigation trust agreement among LFC and its subsidiaries
and LMUSA, dated March 6, 1997 (the "LFC/LMUSA Litigation Trust"). Subject to
certain exceptions, the LFC Creditors' Trust (as defined herein) and the
creditors' trust established pursuant to the LMUSA Plan will receive sixty and
forty percent, respectively, of net proceeds from litigation. In March 2000, the
LFC Creditors' Trust received $7.1 million of net proceeds from the LFC/LMUSA
Litigation Trust resulting from litigation.
The Class 3 general unsecured creditors were to receive a combination of
cash and new common stock as settlement of their allowed claim, pursuant to the
Joint Plan. On August 30, 2002, the remaining assets of the Creditors' Trust
were liquidated and contingent liabilities were reserved for, resulting in a
final net distribution of $1.7 million. The total of cash distributions through
September 30, 2002 was $34 million. As provided for in the Joint Plan and a
decision of the LFC Creditors' Committee, 4,000,000 shares of the new common
stock were issued by the stock transfer agent on the initial distribution date
of November 12, 1997. For balance sheet presentation and earnings (loss) per
share, the 4,000,000 shares were considered issued as of April 1, 1997. The
process by the stock distribution agent resulted in 3,822,121 shares of common
stock actually distributed to former creditors through March 7, 1999, the
deadline for exchanging predecessor company bonds for common stock. In the
second quarter of fiscal year 2000, the stock distribution agent distributed the
final 177,879 shares, including shares held for disputed claims, to all allowed
creditors that had received prior stock distributions.
The amounts ultimately distributed to the former creditors will be solely
dependent on the success of the Company, the amounts realized from the
collection of assets and the settlement of liabilities for both the Creditors'
Trust and the LFC/LMUSA Litigation Trust. It is expected that the Creditors'
Trust will be terminated with Bankruptcy Court approval in November 2002.
On November 5, 1998, the Company received $2.2 million from the Company's
Chairman of the Board ($2.102 million net of stock offering expenses) in
exchange for 2 million shares of the Company's common stock, as approved by the
Company's Board of Directors on September 23, 1998. This transaction increased
the number of outstanding shares of common stock to 6 million. THE 6,000,000
SHARES OF THE NEW COMMON STOCK ARE RESTRICTED IF THE EFFECT OF A TRANSFER WOULD
RESULT IN AN OWNERSHIP INCREASE TO 4.5 PERCENT OR ABOVE OF THE TOTAL OUTSTANDING
SHARES OR FROM 4.5 PERCENT TO A GREATER PERCENTAGE OF THE TOTAL OUTSTANDING
SHARES, WITHOUT PRIOR APPROVAL BY THE BOARD OF DIRECTORS AS DESCRIBED IN THE
RESTATED CERTIFICATE OF INCORPORATION.
THE LFC CREDITORS TRUST AND ANY PROCEEDS FROM THE LFC/LMUSA LITIGATION
TRUST ARE SOLELY FOR THE BENEFIT OF THE FORMER CREDITORS OF THE JOINT DEBTORS.
STOCKHOLDERS WILL NOT BENEFIT FROM THESE TRUSTS UNLESS THEY HELD CLASS 3 -
GENERAL UNSECURED CLAIMS AS DEFINED IN THE JOINT PLAN. SEE "NOTE C--CREDITORS'
TRUST".
NOTE C -- CREDITORS' TRUST
The Joint Plan established a creditors' trust (the "Creditors' Trust") in
which the Company serves as trustee. The Creditors' Trust held the
non-reorganized assets of the Company in trust pending their disposition and/or
distribution to the creditors in accordance with the terms of the Joint Plan.
The Creditors' Trust was organized for the sole purpose of liquidating the
non-reorganized assets including proceeds, if any from the LFC/LMUSA Litigation
Trust. The original termination date was March 7, 2002, however, through a
series of extensions, the original termination date was extended until September
3, 2002, and the Company has requested the Bankruptcy Court to extend the
termination date through December 31, 2002. On August 30, 2002, the remaining
assets of the Creditors' Trust were liquidated and contingent liabilities were
reserved for, resulting in a final net distribution to trust beneficiaries of
$1.7 million. It is expected that the Creditors' Trust will be terminated with
Bankruptcy Court approval in November 2002.
The assets and liabilities of the Creditors' Trust are not reflected in
the accompanying Consolidated Balance Sheets as the Company is not the
beneficiary of the Trust. Accordingly, revenues and expenses related to the
Creditors' Trust assets and liabilities since April 1, 1997, are not reflected
in the accompanying Statements of Consolidated
6
Operations and Comprehensive Income (Loss). The allocation of costs between the
Creditors' Trust and the Company is based on management's estimate of each
entity's proportional share of costs. Gains and losses from the Creditors' Trust
are solely for the former creditors' benefit and the Company has no risk of loss
on the assets or liabilities. The amounts ultimately distributed to the former
creditors will be solely dependent on the success of the Company, the amounts
realized from the collection of assets and settlement of liabilities for both
the Creditors' Trust and the LFC/LMUSA Litigation Trust. Stockholders who are
not former creditors of the Joint Debtors are not beneficiaries of the
Creditors' Trust.
The Company charged to the Creditors' Trust expenses of $36,000 and
$33,000 for the quarters ended September 30, 2002 and 2001, respectively,
reported as trust expense reimbursement on the Company's Statements of
Consolidated Operations and Comprehensive Income (Loss). The expenses consisted
of an overhead allocation from the Company, based upon management's estimate of
resources used by the Creditors' Trust. The allocation of overhead to the
Creditors' Trust will cease whenever the Creditors' Trust is completely
terminated.
THE LFC CREDITORS TRUST AND ANY PROCEEDS FROM THE LFC/LMUSA LITIGATION
TRUST ARE SOLELY FOR THE BENEFIT OF THE FORMER CREDITORS OF THE JOINT DEBTORS.
STOCKHOLDERS WILL NOT BENEFIT FROM THESE TRUSTS UNLESS THEY HELD CLASS 3 -
GENERAL UNSECURED CLAIMS AS DEFINED IN THE JOINT PLAN.
NOTE D -- INVESTMENT IN REAL ESTATE
The Company's investment in real estate, owned by LLG, consists of 162.1
acres (approximately 138.0 acres net of flood plain) of unimproved land in
Allen, Texas (the "Allen property") as of September 30, 2002. The southern
boundary of the Allen property is the Exchange Parkway, which provides access to
the property from Central Expressway on the west and from Highway 5 on the east.
As of September 30, 2002, the Allen property included five tracts of land: one
tract of approximately 31.9 net acres zoned multi-family, one tract of
approximately 77.2 net acres zoned light industrial (formerly single-family),
two tracts of approximately 24.2 net acres zoned commercial and one tract of 4.6
net acres zoned residential. With a continuing view towards maximizing
shareholder value, management is attempting to have the one residential tract
re-zoned as commercial.
The acreage was increased by a total of 5.7 gross acres and 13.7 net acres
in fiscal year 2000 due to management's decision to reclaim a portion of the
flood plain acreage and the results of a new land survey that redefined the
boundaries. The Company was successful in fiscal year 1999 in re-zoning and
relocation of zoning in certain tracts. In the fourth quarter of fiscal year
2001, five acres of the multi-family property were successfully re-zoned as
light industrial. As disclosed in prior filings, the Company, with a continuing
view towards maximizing shareholder value, has undertaken an on-going program
involving the possible sale of all or part of the Allen property or its
continued development.
On October 30, 2000, the Company completed the sale of approximately 5.6
acres of one of the commercial properties to 75 Exchange Partners, LP, an
unaffiliated partnership. Net cash proceeds from the sale totaled $1.204 million
and the Company recorded a gain on sale of real estate of $828,000 in the second
quarter of fiscal year 2001, as previously reported in the Company's
Consolidated Financial Statements.
On February 23, 2001, the Company completed the sale of approximately 17.3
acres of property zoned light industrial to Crow Family Holdings Industrial
Texas, LP ("Crow Family Holdings"), an unaffiliated partnership. Net cash
proceeds from the sale totaled $1.251 million and the Company recorded a gain on
sale of real estate of $945,000 in the quarter ended March 31, 2001, as
previously reported in the Company's Consolidated Financial Statements. In
addition, Crow Family Holdings acquired outstanding options, which expire 18
months from the original sale date, to purchase substantially all the remaining
light industrial property (approximately 77.2 net acres). On January 16, 2002,
the Company received additional cash proceeds of $36,000 from the real estate
sale in February 2001, representing the final settlement and proration of
rollback taxes, reported as additional gain on the sale of real estate in the
Company's Consolidated Financial Statements.
On February 22, 2002, the Company and Crow Family Holdings agreed to the
First Amendment to Sale Contract (the "First Amendment") which extended the
closing date on the sale of 14.25 acres of property zoned light industrial to on
or before August 22, 2002. In addition, the First Amendment extended the option
period to August 22, 2002, on all outstanding options. The Company received a
$125,000 non-refundable deposit, which was included in unearned income on the
Company's Consolidated Balance Sheets as of June 30, 2002. On August 23, 2002,
the Company was informed that Crow Family Holdings would not close on the
transaction or exercise their options. Therefore, the Company recognized the
$125,000 as other real
7
estate income reported in the Company's Statements of Consolidated Operations
and Comprehensive Income (Loss) for the quarter ended September 30, 2002.
NOTE E -- ASSISTED CARE FACILITY MANAGEMENT
Siena Housing Management, Inc. ("SHM") manages and maintains an assisted
care facility in Houston, Texas under a management agreement into which it
entered on June 27, 1977 (the "Management Agreement") with Treemont, Inc.
("Treemont"). Under this agreement, SHM receives a fee based on gross revenues
and net income of Treemont. Refer to the Company's annual report on Form 10-K
for the fiscal year ended June 30, 2002, for more information on the Company's
assisted care business and management contract.
On January 4, 2001, the Company agreed to the First Amendment to
Management Agreement (the "First Amendment") with Treemont which specifies the
terms for a potential sale of the Treemont facility. SHM consented that the
owners of Treemont may sell the facility with absolute discretion and terminate
the Management Agreement in exchange for a graduated percentage of the net
proceeds (as defined) from the sale of the facility. The owners of Treemont
agreed to provide written notice of the commencement of any negotiations. During
the second quarter of fiscal year 2002, SHM was notified of the commencement of
negotiations by the Treemont owners with a prospective buyer. In the first
quarter of fiscal year 2003, SHM was informed that the owners of Treemont had
signed an agreement to sell the property. If a sale transaction is ultimately
concluded, SHM shall not be obligated to terminate the Management Agreement if
SHM does not receive at least $2 million as its share of the proceeds. Based
upon the terms of the sale agreement, the payment to SHM could be as much as
$2.5 million, if current costs of sale estimates are correct. The sales
agreement has certain significant due diligence, financing and insurance
requirements. As a result of these significant requirements, there can be no
assurance that the sale transaction will, in fact, close.
NOTE F -- INVESTMENTS IN EQUITY SECURITIES
Investments in equity securities are classified as available-for-sale and
are held by the Company's real estate subsidiary, LLG. The fair value of the
securities based on quoted market prices was $140,000 and $197,000 as of
September 30 and June 30, 2002, respectively. The cost basis of the securities
as of September 30 and June 30, 2002, was reported as $176,000 and $176,000,
respectively. The cost basis was reduced by $41,000 during fiscal year 2002 for
realized losses from other than a temporary decline in the value of the
securities. Unrealized gains and losses are included, net of tax, in accumulated
other comprehensive loss, a component of stockholders' equity as reported on the
Company's Consolidated Balance Sheets. Realized gains and losses are reported in
revenue on the Company's Statements of Consolidated Operations and Comprehensive
Income (Loss). Realized losses from other than temporary decline in value of the
securities are reported as expense on the Company's Statements of Consolidated
Operations and Comprehensive Income (Loss).
NOTE G -- STOCKHOLDERS' EQUITY
As of September 30 and June 30, 2002, the Company had 15,000,000 shares of
$.10 par value common stock authorized, with 6,000,000 shares issued and
outstanding. Pursuant to the Joint Plan and a decision by the LFC Creditors'
Committee, 4,000,000 shares of common stock were reserved for issuance on April
1, 1997 and ultimately issued by the stock transfer agent on November 12, 1997.
For balance sheet presentation and earnings (loss) per share, the 4,000,000
shares were considered issued as of April 1, 1997. The process by the stock
distribution agent resulted in 3,822,121 shares of common stock actually
distributed to former creditors through March 7, 1999, the deadline for
exchanging predecessor company bonds for common stock. In the second quarter of
fiscal year 2000, the stock distribution agent distributed the final 177,879
shares, including shares held for disputed claims, to all allowed creditors that
had received prior stock distributions. The common stock has no preemptive or
other subscription rights and there are no conversion rights, redemption or
sinking fund provisions with respect to such shares.
For the quarter ended September 30, 2002, the Company reported $22,000 of
federal income tax expense which also increased additional paid-in-capital,
resulting from the utilization of a portion of the Company's pre-reorganization
net operating loss carryforwards and deductible timing differences. The Company
also recorded $4,000 in compensation expense related to stock options which also
increase additional paid-in-capital by $4,000, resulting in a total increase to
additional paid-in-capital of $26,000 for the quarter ended September 30, 2002.
SHI and its subsidiaries increased the post-reorganization deferred tax assets
by $15,000 as a result of the federal income tax benefit reported for the
quarter ended September 30, 2001,and unrealized loss on investments in equity
securities. In addition, the Company increased the
8
valuation allowance for pre-reorganization deferred tax assets by $15,000
resulting in a decrease to additional paid-in-capital of $15,000 also for the
quarter ended September 30, 2001. The Company also recorded $4,000 in
compensation expense in the quarter ended September 30, 2001, related to stock
options which increased additional paid-in-capital by $4,000, resulting in a net
decrease to additional paid-in-capital of $11,000 for the quarter ended
September 30, 2001. Future utilization of these pre-reorganization tax
attributes on a consolidated basis will result in adjustments to additional
paid-in capital.
The Company, as of September 30 and June 30, 2002, had 1,000,000 shares of
$1.00 par value preferred stock authorized, with 0 shares issued and
outstanding.
NOTE H -- DEFERRED TAX ASSETS
SHI and its subsidiaries had no gross deferred tax liabilities and
approximately $95 million in gross deferred tax assets as of September 30 and
June 30, 2002, subject to an offsetting valuation allowance of approximately
$93.0 million. Essentially all of this valuation allowance is considered to be
attributable to pre-reorganization tax attributes. Accordingly, future
utilization of these pre-reorganization tax attributes on a consolidated basis
will result in adjustments to additional paid-in capital. The Company reported
gross deferred tax liabilities of $0 and $7,000 as of September 30 and June 30,
2002, respectively.
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of deferred
tax assets is dependent upon the generation of future taxable income during the
periods in which these temporary differences become deductible. Management
considers the reversal of any deferred tax liabilities, projected future taxable
income and tax planning strategies in making this assessment. Management
believes that it is more likely than not that the Company will realize the
benefit of these deferred tax assets, net of the existing valuation allowance as
of September 30, 2002. Therefore, the Company reported a net deferred tax asset
balance of $1.908 million as of September 30 and June 30, 2002, included in long
term assets on the Company's Consolidated Balance Sheets. Refer to the "Federal
Income Taxes" footnote as reported in the annual report on Form 10-K for the
year ended June 30, 2002, for more information.
NOTE I -- EARNINGS (LOSS) PER SHARE
Earnings (loss) per common share were determined using the weighted
average shares issued or reserved for issuance. The effects of outstanding
options are included in the calculation of diluted earnings (loss) per common
share to the extent that they are dilutive to earnings or not antidilutive to
losses. Therefore, the effect of the 119,000 options are not included in the
calculation of diluted loss per common share for the quarter ended September 30,
2001, as they are anti-dilutive.
NOTE J -- RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets, addresses the financial
accounting and reporting for the impairment of long-lived assets and for
long-lived assets to be disposed of. This statement supersedes SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed of. SFAS No. 144 requires, among other things, that impairment
losses resulting from the initial application of its provision for long-lived
assets to be held and used be reported in the period in which the recognition
criteria are initially applied and met based on the facts and circumstances
existing at that date. This statement, like SFAS No. 121, requires consideration
of the continuing effect of events or changes in circumstances that occurred
prior to initial application of SFAS No. 144. The Company adopted SFAS No. 144
on July 1, 2002, and there was no impact on its consolidated financial
statements.
9
NOTE K -- INDUSTRY SEGMENT DATA OF OPERATIONS
The Company has two reportable segments: (1) assisted care management,
which receives a fee for managing and maintaining an assisted care facility in
Houston, Texas, and (2) real estate investment and development. The accounting
policies of the segments are the same as those of the Company. Refer to the
"Significant Accounting Policies" footnote as reported in the annual report on
Form 10-K for the year ended June 30, 2002, for more information. The Company's
management evaluates performance of each segment based on profit and loss from
operations excluding allocation of corporate overhead expenses and interest
income.
The following table summarizes the Company's identifiable assets by
segment as of September 30 and June 30, 2002 (in thousands):
September 30, June 30,
2002 2002
------------- ------------
Identifiable assets:
Assisted care facility management (including receivable from
Parent company eliminated in consolidation) ................ $ 489 $ 449
Real estate .................................................... 6,747 6,798
------------ ------------
7,236 7,247
------------ ------------
Reconciling items:
Corporate cash, receivables and prepaid expenses (including
receivable from subsidiary eliminated in consolidation) . 3,696 3,768
Deferred tax assets--net .................................... 1,908 1,908
Elimination of intercompany receivables ..................... (362) (330)
------------ ------------
Total assets per Consolidated Balance Sheet ......................... $ 12,478 $ 12,593
============ ============
(remainder of page intentionally left blank)
10
The following table summarizes the Company's segment data of operations for the
quarters ended September 30, 2002 and 2001 (in thousands):
Quarter Ended September 30
-----------------------------
2002 2001
---------- ----------
Revenues:
Assisted care management ............................................ $ 80 $ 79
Real estate ......................................................... 132 12
---------- ----------
212 91
---------- ----------
Other operations:
Corporate interest income ........................................ 14 26
Trust expense reimbursement ...................................... 36 33
Other corporate revenue .......................................... -- 7
---------- ----------
50 66
---------- ----------
Total revenues per Statements of Consolidated Operations
and Comprehensive Income (Loss) .................................... $ 262 $ 157
========== ==========
Operating income:
Assisted care management ............................................ $ 52 $ 53
Real estate ......................................................... 132 11
---------- ----------
184 64
---------- ----------
Other operations:
Corporate interest income ........................................ 14 26
Trust expense reimbursement ...................................... 36 33
Unallocated corporate expenses ................................... (171) (140)
Other ............................................................ -- 7
---------- ----------
(121) (74)
---------- ----------
Income (loss) before federal income taxes per Statements of
Consolidated Operations and Comprehensive Income (Loss) ............ $ 63 $ (10)
========== ==========
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
Statements contained herein that are not purely historical are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including
but not limited to statements regarding the Company's expectations, hopes,
beliefs, intentions or strategies regarding the future. Actual results could
differ materially from those projected in any forward-looking statements as a
result of a number of factors, including those detailed in this Management's
Discussion and Analysis of Financial Condition and Results of Operations, as
well as those set forth elsewhere herein. The forward-looking statements are
made as of the date of these financial statements and the Company undertakes no
obligation to update or revise the forward-looking statements, or to update the
reasons why actual results could differ materially from those projected in the
forward-looking statements.
11
The operating results of the Company during the quarters ended September
30, 2002 and 2001 were as follows (in thousands):
Quarter Ended September 30
-----------------------------
2002 2001
---------- ----------
Operating income:
Assisted care management ................ $ 52 $ 53
Real estate ............................. 132 11
Other ................................... 50 66
---------- ----------
234 130
Expenses:
General and administrative .............. (171) (140)
---------- ----------
Income (loss) before federal income taxes .. 63 (10)
Federal income tax benefit (expense) ....... (22) 4
---------- ----------
Net income (loss) .................... $ 41 $ (6)
========== ==========
Assisted Care Management. The Company's operating income of the assisted
care management operations for the quarter ended September 30, 2002 is
consistent with the same period in the prior year. SHM manages and maintains an
assisted care facility in Houston, Texas under a management agreement into which
it entered on June 27, 1977 with Treemont, Inc. ("Treemont"). Under this
agreement, SHM receives a fee based on gross revenues and net income of
Treemont. Refer to the Company's annual report on Form 10-K for the fiscal year
ended June 30, 2002, for more information on the Company's assisted care
business and management contract. The management fee received by Siena Housing
Management, Inc. ("SHM"), a wholly-owned subsidiary of the Company, was also
consistent each period at $80,000 and $79,000 for the first quarter of fiscal
year 2003 and 2002, respectively.
On January 4, 2001, the Company agreed to the First Amendment to
Management Agreement (the "First Amendment") with Treemont which specifies the
terms for a potential sale of the Treemont facility. SHM consented that the
owners of Treemont may sell the facility with absolute discretion and terminate
the Management Agreement in exchange for a graduated percentage of the net
proceeds (as defined) from the sale of the facility. The owners of Treemont
agreed to provide written notice of the commencement of any negotiations. During
the second quarter of fiscal year 2002, SHM was notified of the commencement of
negotiations by the Treemont owners with a prospective buyer. In the first
quarter of fiscal year 2002, SHM was informed that the owners of Treemont had
signed an agreement to sell the property. If a sale transaction is ultimately
concluded, SHM shall not be obligated to terminate the Management Agreement if
SHM does not receive at least $2 million as its share of the proceeds. Based
upon the terms of the sale agreement, the payment to SHM could be as much as
$2.5 million, if current costs of sale estimates are correct. The sales
agreement has certain significant due diligence, financing and insurance
requirements. As a result of these significant requirements, there can be no
assurance that the sale transaction will, in fact, close.
Real Estate. The Company's investment in real estate, owned by LLG,
consists of 162.1 acres (approximately 138.0 acres net of flood plain) of
unimproved land in Allen, Texas (the "Allen property") as of September 30, 2002.
The southern boundary of the Allen property is the Exchange Parkway, which
provides access to the property from Central Expressway on the west and from
Highway 5 on the east. As of September 30, 2002, the Allen property included
five tracts of land: one tract of approximately 31.9 net acres zoned
multi-family, one tract of approximately 77.2 net acres zoned light industrial
(formerly single-family), two tracts of approximately 24.2 net acres zoned
commercial and one tract of 4.6 net acres zoned residential. With a continuing
view towards maximizing shareholder value, management is attempting to have the
one residential tract re-zoned as commercial.
On October 30, 2000, the Company completed the sale of approximately 5.6
acres of one of the commercial properties to 75 Exchange Partners, LP, an
unaffiliated partnership. Net cash proceeds from the sale totaled $1.204 million
and the Company recorded a gain on sale of real estate of $828,000 in the second
quarter of fiscal year 2001, as previously reported in the Company's
Consolidated Financial Statements.
12
On February 23, 2001, the Company completed the sale of approximately 17.3
acres of property zoned light industrial to Crow Family Holdings Industrial
Texas, LP ("Crow Family Holdings"), an unaffiliated partnership. Net cash
proceeds from the sale totaled $1.251 million and the Company recorded a gain on
sale of real estate of $945,000 in the quarter ended March 31, 2001, as
previously reported in the Company's Consolidated Financial Statements. In
addition, Crow Family Holdings acquired outstanding options, which expire 18
months from the original sale date, to purchase substantially all the remaining
light industrial property (approximately 77.2 acres). On January 16, 2002, the
Company received additional cash proceeds of $36,000 from the real estate sale
in February 2001, representing the final settlement and proration of rollback
taxes, reported as additional gain on the sale of real estate in the Company's
Consolidated Financial Statements.
On February 22, 2002, the Company and Crow Family Holdings agreed to the
First Amendment to Sale Contract (the "First Amendment") which extended the
closing date on the sale of 14.25 acres of property zoned light industrial to on
or before August 22, 2002. In addition, the First Amendment extended the option
period to August 22, 2002, on all outstanding options. The Company received a
$125,000 non-refundable deposit, which was included in unearned income on the
Company's Consolidated Balance Sheets as of June 30, 2002. On August 23, 2002,
the Company was informed that Crow Family Holdings would not close on the
transaction or exercise their options. Therefore, the Company recognized the
$125,000 as other real estate income reported in the Company's Statements of
Consolidated Operations and Comprehensive Income (Loss) for the quarter ended
September 30, 2002.
Based on the property sales described above, continuing negotiations on
other parcels and improved market conditions, management believes that the
Company would be able to sell the remaining Allen property for a value in excess
of the tax basis. As a result, the Company reported a net deferred tax asset
balance of $1.908 million as of September 30 and June 30, 2002, included in long
term assets on the Company's Consolidated Balance Sheets. Any tax benefits
recognized related to the valuation allowance for pre-reorganization deferred
tax assets as of September 30, 2002 will be allocated to additional paid-in
capital.
The Company is involved in discussions to sell certain parcels of land,
which it, in its best judgment, considers to be reasonable and in the interests
of its shareholders. However, there can be no assurance that these or any future
discussions and or tentative agreements may lead to any real estate
transactions, and when such transactions might occur. Any sales that might
result from these discussions would result in a gain on sale for financial
reporting purposes.
The real estate operating results for the first quarter in fiscal year
2002 were significantly higher than the same quarter in fiscal year 2001, due to
the recognition of $125,000 as other real estate income in August 2002. In the
quarter ended September 30, 2001, improvement costs of $3,000 related to
developing the property were capitalized in accordance with the Company's
capitalization policy, as compared to $7,000 of costs that were capitalized
during the quarter ended September 30, 2001. Costs related to the re-zoning,
marketing and developing the property will continue, some of which may be
capitalized.
Other Operations. The Company reported other operating income of $50,000
and $66,000 for the quarters ended September 30, 2002 and 2001, respectively.
This included an overhead allocation based upon management's estimate of
resources used by the Creditors' Trust and charged to the Creditors' Trust of
$36,000 and $33,000 for the quarters ended September 30, 2002 and 2001,
respectively. The allocation of overhead to the Creditors' Trust will cease when
the Creditors' Trust is completely terminated.
The remaining income consisted primarily of interest income of $14,000 and
$26,000 for the quarters ended September 30, 2002 and 2001, respectively, which
is lower than the prior year as a result of lower interest rates.
Expenses. General and administrative expenses were slightly higher at
$171,000 for the quarter ended September 30, 2002 as compared to $140,000 for
the quarter ended September 30, 2001. The increase is primarily attributable to:
(1) incentive bonuses totaling $15,000 paid to directors and officers pursuant
to existing compensation plans; (2) professional legal and accounting fees were
$14,000 higher than the same period in the prior year; and (3) directors' fees
were $5,000 higher due to an additional meeting held in the first quarter of
this fiscal year.
13
Accrued Medical Insurance Premiums. In connection with the reorganization
in March 1997, the Company agreed to assume the pre-petition liability to
provide certain employees of a former subsidiary and their spouses with medical
insurance. The total amount of the liability was estimated using a life
expectancy age of 90, an annual health care cost increase rate of approximately
5% and a discount rate of approximately 6.5%. As of September 30 and June 30,
2002, the Company had an accrued liability established for payments to be made
to 27 people to be used toward the payment of insurance. As of September 30 and
June 30, 2002, the current portion of the accrual for medical insurance premiums
is $93,000 and $81,000, respectively, and the long term liability amount,
included in long term liabilities on the Company's Consolidated Balance Sheets,
is $378,000 and $392,000, respectively. Medical insurance premium payments have
not been made since December 2001, but are included in current liabilities on
the Company's Consolidated Balance Sheets.
Liquidity and Capital Resources
As of September 30, 2002, the only liabilities of the Company were
accounts payable and accrued expenses which will be paid from current operating
cash available as of September 30, 2002.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Some of the assets and liabilities by
their nature are more subject to estimates and assumptions. For the Company, the
amount of the net deferred tax asset balance reported on the Company's
Consolidated Balance Sheets is based on management's most recent estimated value
of the investment in real estate in excess of the related tax basis. Such
estimate could change in the future based on the occurrence of one or more
future events.
The Company's liability for accrued medical insurance premiums was
estimated using a life expectancy age of 90, an annual health cost care increase
rate of approximately 5% and a discount rate of approximately 6.5%. Such
estimate could change in the future based on the occurrence of one or more
future events
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is subject to potential fluctuations in operations and the
fair value of certain of its assets, as well as variations in expected cash
flows due to changes in market interest rates and equity prices. On December 15,
2000, the Company's board of directors authorized the use of up to 20% of the
Company's cash for the investment in equity securities, with no more than 50%
invested in any one company. The investment in equity securities exposes the
Company to general market risks. The investments had a fair market value of
$140,000 and $197,000 as of September 30 and June 30, 2002, respectively, with
an adjusted cost basis of $176,000 for both periods. The securities are
classified as available-for-sale and reported on the Company's Consolidated
Balance Sheets at fair market value with the unrealized holding (gain) loss
included, net of tax, in accumulated other comprehensive (income) loss, a
component of stockholders' equity. Realized gains (losses) are reported as
revenue in the Company's Consolidated Statements of Consolidated Operations and
Comprehensive Income (Loss). Realized losses for other than temporary decline in
value are reported in the Company's Statements of Consolidated Operations and
Comprehensive Income (Loss).
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures. The Company's Chief
Executive Officer and Chief Financial Officer have reviewed and evaluated the
effectiveness of the Company's disclosure controls and procedures (as defined in
Exchange Act Rules 240.13a - 14 (C) and 15d - 14 (C)) as of a date within 90
days before the filing date of this quarterly report. Based on that evaluation,
the Chief Executive Officer and Chief Financial Officer have concluded that the
Company's current disclosure controls and procedures are effective and timely,
providing them with material information relating to us required to be disclosed
in the reports we file or submit under the Exchange Act.
Changes in Internal Controls. There have not been any significant changes
in our internal controls or in other factors that could significantly affect
these controls subsequent to the date of their evaluation. We are not aware of
any significant deficiencies or material weaknesses, therefore no corrective
actions were taken.
14
PART II -- OTHER INFORMATION
Item 3. Defaults Upon Senior Securities.
Refer to the Company's annual report on Form 10-K for the year ended June
30, 2002, for information regarding defaults by the Company relating to the debt
obligations of the Predecessor Company.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
Exhibit
Number
------
(99.1) Certification of Chief Executive Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
(99.2) Certification of Chief Financial Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K:
On September 11, 2002, the Company filed with the Commission a
current report on Form 8-K relating to the sale of property that is
managed by the Company's subsidiary, Siena Housing Management, Inc.,
resulting in the possible termination of the management agreement
which is discussed in greater detail under "Note E--Assisted Care
Facility Management" in this report.
15
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.
SIENA HOLDINGS, INC.
(Registrant)
Date: November 6 , 2002 By: /S/ W. JOSEPH DRYER
-----------------------
President
Date: November 6, 2002 By: /S/ W. JOSEPH DRYER
----------------------------
Principal Accounting Officer
16
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
BY THE CHIEF EXECUTIVE OFFICER
I, John P. Kneafsey, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Siena Holdings,
Inc.;
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 officer 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;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of the 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
6. The registrant's other certifying officer 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.
November 6, 2002 By: /S/ JOHN P. KNEAFSEY
---------------------------
John P. Kneafsey
Chief Executive Officer
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
BY THE CHIEF FINANCIAL OFFICER
I, W. Joseph Dryer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Siena Holdings,
Inc.;
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 officer 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;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of the 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
6. The registrant's other certifying officer 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.
November 6, 2002 By /S/ W. JOSEPH DRYER
---------------------------
W. Joseph Dryer
Chief Financial Officer