10-Q 1 c72957e10vq.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended 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 333-14761 FIRST FORTIS LIFE INSURANCE COMPANY (Exact name of registrant as specified in its charter) NEW YORK (State or other jurisdiction of incorporation or organization) 13-2699219 (IRS Identification No.) 308 MALTBIE STREET, SUITE 200, SYRACUSE, NY 13204 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: 315-451-0066 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 1 FIRST FORTIS LIFE INSURANCE COMPANY BALANCE SHEET (In thousands, except share data)

SEPTEMBER 30, DECEMBER 31, 2002 2001 ------------------------------------------- ASSETS (UNAUDITED) Investments: Fixed maturities, at fair value (amortized cost 2002 - $166,838; $ 174,231 $ 161,583 2001 - $158,417) Preferred stock 2,962 2,640 Policy loans 17 6 Short-term investments 8,721 6,601 Real estate and other investment 426 474 ------------------------------------------- 186,357 171,304 Cash and cash equivalents 4,291 5,598 Receivables: Uncollected premiums, less allowance (2002 and 2001 - $100) 2,319 3,830 Reinsurance recoverable on unpaid and paid losses 107,283 107,443 Other 1,774 3,274 Intercompany receivables 39 1,974 ------------------------------------------- 111,415 116,521 Accrued investment income 2,572 2,488 Deferred policy acquisition costs 1,712 3,760 Property and equipment at cost, less accumulated depreciation (2002 - $1,738; 2001 - $1,729) 18 60 Deferred federal income taxes 5,082 5,953 Goodwill, less accumulated amortization (2002 and 2001 - $506) 1,949 1,949 Assets held in separate accounts 44,761 66,341 ------------------------------------------- Total assets $ 358,157 $ 373,974 ===========================================

See accompanying notes 2 FIRST FORTIS LIFE INSURANCE COMPANY BALANCE SHEET (In thousands, except share data)

SEPTEMBER 30, DECEMBER 31, 2002 2001 ----------------------------------------- (UNAUDITED) POLICY RESERVES, LIABILITIES AND SHAREHOLDER'S EQUITY Policy reserves and liabilities: Future policy benefit reserves: Life insurance $ 63,006 $ 65,123 Interest sensitive and investment products 6,205 5,010 Accident and health 86,497 81,578 ----------------------------------------- 155,708 151,711 Unearned revenues 26,093 27,048 Other policy claims and benefits payable 31,361 31,877 Income taxes payable 2,617 6,537 Other liabilities 32,429 31,160 Liabilities related to separate accounts 44,761 66,341 ----------------------------------------- Total policy reserves and liabilities 292,969 314,674 ----------------------------------------- Shareholder's equity: Common stock, $20 par value: authorized, issued and outstanding 2,000 2,000 shares --100,000 Additional paid-in capital 43,006 43,006 Retained earnings 15,575 12,047 Unrealized gain on investments 4,607 2,247 ----------------------------------------- Total shareholder's equity 65,188 59,300 ----------------------------------------- Total policy reserves, liabilities and shareholder's equity $ 358,157 $ 373,974 =========================================

See accompanying notes 3 FIRST FORTIS LIFE INSURANCE COMPANY STATEMENT OF INCOME (In thousands, except share data)

NINE MONTHS ENDED SEPTEMBER 30, 2002 2001 -------------------------------------- (UNAUDITED) (UNAUDITED) REVENUES: Insurance operations: Life insurance premiums $ 18,389 $ 15,419 Interest sensitive and investment product policy charges - 378 Accident and health insurance premiums 37,188 29,852 -------------------------------------- 55,577 45,649 Net investment income 8,363 7,154 Net realized losses on investments (1,922) (355) Other income 1,902 1,776 -------------------------------------- Total revenues 63,920 54,224 BENEFITS AND EXPENSES: Benefits to policyholders: Life insurance 14,603 10,529 Interest sensitive investment products 5 479 Accident and health claims 24,725 21,953 -------------------------------------- 39,333 32,961 Amortization of deferred policy acquisition costs 1,986 180 Insurance commissions 6,401 4,654 General and administrative expenses 10,130 9,195 -------------------------------------- Total benefits and expenses 57,850 46,990 -------------------------------------- Income before federal income taxes 6,070 7,234 Income taxes expense Current 2,942 6,760 Deferred (400) (4,228) -------------------------------------- 2,542 2,532 -------------------------------------- Net income $ 3,528 $ 4,702 ====================================== Other comprehensive income: Unrealized gain on investments 2,360 2,769 -------------------------------------- Comprehensive income $ 5,888 $ 7,471 ======================================

See accompanying notes. 4 FIRST FORTIS LIFE INSURANCE COMPANY STATEMENT OF INCOME (In thousands, except share data)

THREE MONTHS ENDED SEPTEMBER 30, 2002 2001 ------------------------------------- (UNAUDITED) (UNAUDITED) REVENUES: Insurance operations: Life insurance premiums $ 5,564 $ 5,013 Interest sensitive and investment product policy charges - - Accident and health insurance premiums 12,844 9,708 ------------------------------------- 18,408 14,721 Net investment income 2,848 2,332 Net realized losses on investments (839) 57 Other income 583 717 ------------------------------------- Total revenues 21,000 17,827 BENEFITS AND EXPENSES: Benefits to policyholders: Life insurance 4,512 3,756 Interest sensitive investment products 1 1 Accident and health claims 8,957 6,089 ------------------------------------- 13,470 9,846 Amortization of deferred policy acquisition costs (86) 15 Insurance commissions 491 1,680 General and administrative expenses 2,952 2,843 ------------------------------------- Total benefits and expenses 16,827 14,384 ------------------------------------- Income before federal income taxes 4,173 3,443 Income taxes expense Current 2,082 1,578 Deferred (204) (373) ------------------------------------- 1,878 1,205 ------------------------------------- Net income $ 2,295 $ 2,238 ===================================== Other comprehensive income: Unrealized gain on investments 3,747 2,073 ------------------------------------- Comprehensive income $ 6,042 $ 4,311 =====================================

See accompanying notes. 5 FIRST FORTIS LIFE INSURANCE COMPANY STATEMENT OF CASH FLOW (In thousands, except share data)

NINE MONTHS ENDED SEPTEMBER 30, 2002 2001 -------------------------------------- (UNAUDITED) (UNAUDITED) OPERATING ACTIVITIES Net income $ 3,528 $ 4,702 Adjustments to reconcile net income to net cash used in operating activities: Increase (decrease) in future policy benefit reserves and other policy claims and benefits 2,526 5,609 Provision for deferred federal income taxes (400) (4,228) (Increase) decrease in federal income taxes (3,919) 5,869 Decrease (increase) in other liabilities 2,954 209 Depreciation, amortization and accretion 2,090 63 Amortization of investment premiums, net (175) (146) Amortization of gain on reinsurance transaction (1,686) (1,363) Decrease in uncollected premiums, accrued investment income and other 4,862 (705) Decrease (increase) in reinsurance recoverable 160 (11,026) Net realized loss (gain) on investments 1,922 355 -------------------------------------- Cash Used in Operating Activities 11,862 (661) INVESTING ACTIVITIES Purchases of fixed maturity investments (89,230) (35,145) Sales or maturities of fixed maturity investments 77,118 49,073 Increase in equity securities and short-term investments (1,057) (25,194) Cash received pursuant to reinsurance agreement - 10,789 -------------------------------------- Net Cash Provided By Investing Activities (13,169) (477) FINANCING ACTIVITIES Activities related to investment products: Considerations received - 1,863 Surrenders and death benefits - (316) Interest credited to policyholders - 84 -------------------------------------- Net Cash Provided By Financing Activities - 1,631 (Decrease) increase in cash (1,307) 493 Cash and cash equivalents at beginning of period 5,598 1,659 -------------------------------------- Cash and cash equivalents at end of period $ 4,291 $ 2,152 ======================================

See accompanying notes. 6 FIRST FORTIS LIFE INSURANCE COMPANY STATEMENT OF CASH FLOW (In thousands, except share data)

NINE MONTHS ENDED SEPTEMBER 30, 2002 2001 ------------------------------- (Unaudited) (Unaudited) SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES Assets and liabilities transferred in reinsurance transactions: Non-cash Assets ceded: Other Assets $ - $ (1,623) Deferred acquisition costs - (3,957) --------------- -------------- Total value of assets ceded $ - $ (5,580) =============== ============== Non-cash liabilities ceded: Future policy benefits reserves $ - $ 7,125 Unearned premium reserves - (182) Other liabilities - - --------------- -------------- Total liabilities ceded $ - $ 6,943 =============== ==============

See accompanying notes 7 FIRST FORTIS LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS September 30, 2002 (In thousands, unaudited) 1. GENERAL The accompanying unaudited financial statements of First Fortis Life Insurance Company (the Company) contain all adjustments necessary to present fairly the balance sheet as of September 30, 2002 and the related statement of income for the nine months ended September 30, 2002 and 2001, and cash flow for the nine months ended September 30, 2002 and 2001. Income tax payments for the nine months ended September 30, 2002 and September 30, 2001 were $6,862 and $891 respectively. 2. INVESTMENTS The classification of fixed maturity investments is to be made at the time of purchase and, prospectively, that classification is expected to be reevaluated as of each balance sheet date. At September 30, 2002 all fixed maturity and equity securities are classified as available-for-sale and carried at fair value. The amortized cost and fair values of investments available-for-sale were as follows at September 30, 2002 (in thousands):

GROSS GROSS AMORTIZED UNREALIZED UNREALIZED FAIR COST GAINS LOSS VALUE ---------------------------------------------------------------- Fixed Income Securities: Governments $ 8,744 $ 780 $ - $ 9,524 Public utilities 14,820 1,090 402 15,508 Industrial and miscellaneous 143,274 9,471 3,546 149,199 --------------- --------------- ----------- -------------- Total $ 166,838 $ 11,341 $ 3,948 $ 174,231 =============== =============== =========== ==============

The amortized cost and fair value of available-for-sale investments in fixed maturities at September 30, 2002 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

AMORTIZED FAIR COST VALUE Due in one year or less $ 6,203 $ 6,382 Due after one year through five years 28,056 29,389 Due after five years through ten years 53,423 55,587 Due after ten years 79,156 82,873 -------------- --------------- Total $ 166,838 $ 174,231 ============== ===============

8 FIRST FORTIS LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS September 30, 2002 (In thousands, unaudited) Proceeds from sales and maturities of investments in fixed maturities in the nine-month period ended September 30, 2002 and 2001 were $74,195 and $49,073, respectively. Gross gains of $1,226 and $1,096 and gross losses of $3,148 and $1,451 were realized on sales during the nine-month period ended September 30, 2002 and 2001, respectively. Net Investment Income and Net Realized Losses on Investments: Major categories of net investment income and realized gains and losses on investments for the first nine months of each year were as follows:

INVESTMENT INCOME REALIZED GAIN (LOSS) ----------------------------------------------------------- 2002 2001 2002 2001 ----------------------------------------------------------- Fixed maturities $ 8,544 $6,622 $(1,922) $ (355) Short-term investments 50 656 ----------------------------------------------------------- 8,594 7,278 $(1,922) $ (355) ============================ Expenses (231) (124) ---------------------------- Net investment income $ 8,363 $7,154 ============================

3. BANKERS AMERICAN LIFE ASSURANCE COMPANY Effective as of November 30, 2001, the Company completed a statutory merger in which Bankers American Life Assurance Company, a New York insurance company (BALAC), merged with and into the Company (the Merger). The Merger was completed as part of an internal reorganization effected by Fortis, Inc. with respect to certain of its life and health insurance companies. 4. DISPOSAL OF FORTIS FINANCIAL GROUP (THE DIVISION) On April 1, 2001, Fortis, Inc. completed the sale (the Sale) of its Division to The Hartford Life Insurance Company (Hartford). The Division includes among other blocks of business, certain individual life insurance policies and annuity contracts written by the Company. To effect the Sale as it relates to the Company, Hartford reinsured the Insurance contracts on a 100% co-insurance basis (or 100% modified co-insurance basis for some of the blocks) and agreed to administer the Insurance Contracts going forward. The Company 9 FIRST FORTIS LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS September 30, 2002 (In thousands, unaudited) received, in connection with the Sale, aggregate cash consideration of approximately $15,000 from the Hartford. The reinsurance transaction resulted in a gain of $9,465, which was deferred and will be amortized into income at the rate that earnings from the business sold would have been expected to emerge. The amount of gain amortized during the nine months ended September 30, 2002 was $1,489. 5. ASSUMPTION OF PROTECTIVE LIFE'S DENTAL BENEFITS DIVISION In the fourth quarter of 2001, the Company entered into a reinsurance agreement with Protective Life Corporation (Protective). The agreement, which became effective December 31, 2001, provided for the assumption of Protective's Dental Benefits Division on a 100% co-insurance basis. The Company paid $2,500 for the business and recorded goodwill of $1,625 in the transactions. 10 FIRST FORTIS LIFE INSURANCE COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SEPTEMBER 30, 2002 COMPARED TO SEPTEMBER 30, 2001 On November 30, 2001, First Fortis Life Insurance Company ("FFLIC") acquired 100% of the issued and outstanding common stock of Bankers American Life Assurance Company ("BALAC") from American Bankers Insurance Group, Inc. ("ABIG") for a total purchase price of $32 million. FFLIC paid the purchase price in cash using internally generated working capital. Also on November 30, 2001, and immediately following the stock purchase described above, BALAC merged with and into FFLIC, with FFLIC as the surviving corporation (the "Merger"). Both ABIG and FFLIC are wholly owned subsidiaries of Fortis, Inc., a Nevada corporation that serves as a holding company for insurance and related business in the U.S. FFLIC is, and BALAC was immediately prior to the Merger, a New York life insurance company engaged in life and other lines of insurance business in the State of New York. Fortis, Inc. determined that it was advisable to combine the assets and operations of FFLIC and BALAC, so that it would have only one New York-domiciled life insurance company. BALAC's assets, liabilities and obligations, which have been transferred to FFLIC by operation of law as a result of the Merger, consist primarily of outstanding insurance policies written in the State of New York, and the related reserve assets, liabilities and obligations. REVENUES The Company's life insurance premium increased from September 30, 2001 to September 30, 2002 principally due to additional premium levels associated with the merger. Life premiums are composed of group life and credit life business representing 73% and 27%, respectively of premium for the nine months ended September 30, 2002; and 91% and 9% respectively of premium for the nine months ended September 30, 2001. Accident and health premiums increased during the first half of 2002 as compared to the same period in 2001 primarily due to the merger as well as a 9% increase in dental premium. Offsetting this is a decrease in disability premium due to slower sales and decreases in persistency. On December 31, 2001, the Company purchased (the "Purchase") the Dental Benefits Division of Protective Life Corporation ("Protective"). The Purchase includes group dental, group life and group disability insurance products ("Insurance Products"). The Company will reinsure these Insurance Products on a 100% co-insurance basis and perform administration of such Insurance Products. The Company paid $2.5 million for the business and recorded goodwill of $1.6 million in the transaction. On April 1, 2001 the Company entered into a coinsurance agreement with Hartford Financial Services Group ("Hartford") whereby the Company ceded the Investment Product block of 11 business to the Hartford. This business is reflected as interest sensitive and investment product policy charges of $0 and $0.4 million at September 30, 2002 and September 30, 2001, respectively. The Company continues to match investment portfolio composition to liquidity needs and capital requirements. Changes in interest rates during 2002 and 2001 resulted in recognition of realized gains and losses upon sales of securities. BENEFITS The total Company ratio of benefits to premium decreased slightly in 2002 to 71% from 72% in 2001 primarily due to lower benefit to premium ratios on the merged credit business. Group life benefit to premium ratios increased to 95% at September 30, 2002 from 69% at September 30, 2001 as this line of business experienced unusually high mortality during the first nine months of 2002. Higher group disability claim incidence and lower sales, persistency and terminations during the nine months ended September 30, 2002 as compared to the same period in 2001 have resulted in an increase in a group disability benefit to premium ratio to 84% in 2002 from 78% in 2001. EXPENSES The Company continues to monitor its commission rate structures, and, as indicated by market conditions, periodically adjusts rates paid. Rates paid vary by product type, group size and duration. The Company's general and administrative expense to premium ratio decreased to 18% in the nine months ended September 30, 2002 from 20% in the nine months ended September 30, 2001. Shifts in the mix of business are the primary reason for this decrease as the merged credit business has a relatively low expense to premium ratio. The Company continues to strive for improvements in the expense to gross revenue ratio while maintaining quality and timely services to the policyholders. The Company's federal income taxes increased to 42% for the nine months ended September 30, 2002 due to adjustments for the prior year tax return. MARKET RISK AND RISK MANAGEMENT Interest rate risk is the Company's primary market risk exposure. Substantial and sustained increases and decreases in market interest rates can affect the profitability of insurance products and market value of investments. The yield realized on new investments generally increases or decreases in direct relationship with interest rate changes. The market value of the Company's fixed maturity and mortgage loan portfolios generally increases when interest rates decrease and decreases when interest rates increase. Interest rate risk is monitored and controlled through asset/liability management. As part of the risk management process, different economic scenarios are modeled, including cash flow testing 12 required for insurance regulatory purposes, to determine that existing assets are adequate to meet projected liability cash flows. A major component of the Company's asset/liability management program is structuring the investment portfolio with cash flow characteristics consistent with the cash flow characteristics of the Company's insurance liabilities. The Company uses computer models to perform simulations of the cash flow generated from existing insurance policies under various interest rate scenarios. Information from these models is used in the determination of interest crediting strategies and investment strategies. The asset/liability management discipline includes strategies to minimize exposure to loss as market interest rates change. On the basis of these analyses, management believes there is no material solvency risk to the Company with respect to interest rate movements up or down of 100 basis points from year end levels. Equity market risk exposure is not significant. Equity investments in the general account are not material enough to threaten solvency and contract owners bear the investment risk related to the variable products. Therefore, the risks associated with the investments supporting the variable separate accounts are assumed by contract owners, not by the Company. The Company provides certain minimum death benefits that depend on the performance of the variable separate accounts. Currently the majority of these death benefit risks are reinsured which then protects the Company from adverse mortality experience and prolonged capital market decline. LIQUIDITY AND CAPITAL RESOURCES The liquidity requirements of the Company have been met by funds provided from operations, including investment income. Funds are principally used to provide for policy benefits, operating expenses, commissions and investment purchases. The impact of the declining inforce medical business has been considered in evaluating the Company's future liquidity needs. The Company expects its operating activities to continue to generate sufficient funds. The National Association of Insurance Commissioners has implemented risk-based capital standards to determine the capital requirements of a life insurance company based upon the risks inherent in its operations. These standards require the computation of a risk-based capital amount which is then compared to a company's actual total adjusted capital. Based upon current calculation using these risk-based capital standards, the Company's percentage of total adjusted capital is in excess of ratios which would require regulatory attention. The Company has no long or short term debt. As of September 30, 2002, 97.7% of the Company's fixed maturity investments consisted of investment grade bonds. The Company does not expect this percentage to change significantly in the future. REGULATION The Company is subject to the laws and regulations established by the New York State Insurance Department governing insurance business conducted in New York State. Periodic audits are conducted by the New York Insurance Department related to the Company's compliance with 13 these laws and regulations. To date, there have been no adverse findings regarding the Company's operations. PART II. OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K a. Written Statement of Chief Executive Officer (Exhibit 99.1) Written Statement of Chief Financial Officer (Exhibit 99.2) b. None 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. First Fortis Life Insurance Company (Registrant) Date: November 12, 2002 /s/ Larry M. Cains ------------------- Larry M. Cains Treasurer (on behalf of the Registrant and as its principal financial and chief accounting officer) 14 CERTIFICATION OF PERIODIC REPORT PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, the undersigned Chief Executive Officer of First Fortis Life Insurance Company (the "Company"), do hereby certify, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that: 1. I have reviewed the Quarterly Report on Form 10-Q of the Company for the period ended September 30, 2002 (this "Report"); 2. Based on my knowledge, this 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 periods covered by this Report; 3. Based on my knowledge, the financial statements, and other financial information included in the Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this Report; 4. The Company'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 Company and have: a) Designated such disclosure controls and procedures to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared; b) Evaluated the effectiveness of the Company's disclosure controls and procedures as of a date within 90 days prior to the filing date of this Report (the "Evaluation Date"); and c) Presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The Company's other certifying officers and I have disclosed, based on our most recent evaluation, to the Company's auditors and the audit committee of Company's board of directors (or persons performing the equivalent functions): a) All significant deficiencies in the design or operation of internal controls which could adversely affect the Company's ability to record, process, summarize and report financial data and have identified for the Company'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 Company's internal controls; and 6. The Company's other certifying officers and I have indicated in this Report whether there were significant changes in internal controls or in the 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. Date: November 12, 2002 /s/ Robert B. Pollock -------------------------- Robert B. Pollock Chief Executive Officer 15 CERTIFICATION OF PERIODIC REPORT PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, the undersigned Chief Financial Officer of First Fortis Life Insurance Company (the "Company"), do hereby certify, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that: 1. I have reviewed the Quarterly Report on Form 10-Q of the Company for the period ended September 30, 2002 (this "Report"); 2. Based on my knowledge, this 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 periods covered by this Report; 3. Based on my knowledge, the financial statements, and other financial information included in the Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this Report; 4. The Company'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 Company and have: a) Designated such disclosure controls and procedures to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared; b) Evaluated the effectiveness of the Company's disclosure controls and procedures as of a date within 90 days prior to the filing date of this Report (the "Evaluation Date"); and c) Presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The Company's other certifying officers and I have disclosed, based on our most recent evaluation, to the Company's auditors and the audit committee of Company's board of directors (or persons performing the equivalent functions): a) All significant deficiencies in the design or operation of internal controls which could adversely affect the Company's ability to record, process, summarize and report financial data and have identified for the Company'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 Company's internal controls; and 6. The Company's other certifying officers and I have indicated in this Report whether there were significant changes in internal controls or in the 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. Date: November 12, 2002 /s/ Larry M. Cains -------------------------- Larry M. Cains Chief Financial Officer 16