10-Q 1 qtr32001.txt 3RD QUARTER 2001 10Q UNITED STATES 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, 2001. |_| 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 0-15782 CEC ENTERTAINMENT, INC. (Exact name of registrant as specified in its charter) Kansas 48-0905805 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4441 West Airport Freeway Irving, Texas 75062 (Address of principal executive offices, including zip code) (972) 258-8507 (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 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 September 30, 2001, an aggregate of 27,879,529 shares of the registrant's Common Stock, par value of $.10 each (being the registrant's only class of common stock), were outstanding. PART I - FINANCIAL INFORMATION Item 1. Financial Statements CEC ENTERTAINMENT, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Consolidated balance sheets............................................ 3 Consolidated statements of earnings and comprehensive income........... 4 Consolidated statement of shareholders' equity......................... 6 Consolidated statements of cash flows ................................. 7 Notes to consolidated financial statements............................. 8
CEC ENTERTAINMENT, INC. CONSOLIDATED BALANCE SHEETS (Thousands, except share amounts) September 30, December 31, 2001 2000 ------------- ------------ (unaudited) ASSETS Current assets: Cash and cash equivalents ............................................. $ 13,234 $ 7,300 Accounts receivable ................................................... 5,669 12,778 Inventories ........................................................... 11,407 8,436 Prepaid expenses ...................................................... 4,301 4,419 Deferred tax asset .................................................... 1,205 1,205 Assets held for resale ................................................ 4,211 --------- --------- Total current assets ................................................ 35,816 38,349 --------- --------- Property and equipment, net .............................................. 387,251 338,408 --------- --------- Assets held for resale ................................................... 2,155 --------- --------- Notes receivable from related party ...................................... 2,912 1,526 --------- --------- Other assets ............................................................. 15,293 11,092 --------- --------- $ 443,427 $ 389,375 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt ..................................... $ 116 $ 6,102 Accounts payable and accrued liabilities .............................. 41,632 38,616 --------- --------- Total current liabilities ........................................ 41,748 44,718 --------- --------- Long-term debt, less current portion ..................................... 44,224 47,030 --------- --------- Deferred rent ............................................................ 3,390 3,491 --------- --------- Deferred tax liability ................................................... 16,947 7,708 --------- --------- Other liabilities ........................................................ 1,725 1,725 --------- --------- Commitments and contingencies Redeemable preferred stock, $60 par value, redeemable for $2,888 in 2005 . 2,460 2,431 --------- --------- Shareholders' equity: Common stock, $.10 par value; authorized 100,000,000 shares; 35,267,935 and 34,585,454 shares issued, respectively ....................... 3,527 3,459 Capital in excess of par value ........................................ 191,021 177,828 Retained earnings ..................................................... 228,695 175,217 Accumulated other comprehensive loss .................................. (147) (30) Less treasury shares of 7,388,406 and 7,039,506, respectively, at cost (90,163) (74,202) --------- --------- 332,933 282,272 --------- --------- $ 443,427 $ 389,375 ========= =========
See notes to consolidated financial statements.
CEC ENTERTAINMENT, INC. CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME (Unaudited) (Thousands, except per share amounts) Three Months Ended ------------------------------- Sep. 30, 2001 Oct. 1, 2000 ------------- ------------ Food and beverage revenues................................................... $ 94,466 $ 85,450 Games and merchandise revenues............................................... 46,535 44,032 Franchise fees and royalties................................................. 747 782 Interest income, including related party income of $37 and $25, respectively.............................................................. 73 37 --------- -------- 141,821 130,301 --------- -------- Costs and expenses: Cost of sales............................................................. 62,855 57,295 Selling, general and administrative expenses.............................. 18,497 17,727 Depreciation and amortization............................................. 8,745 8,787 Interest expense.......................................................... 410 832 Other operating expenses.................................................. 24,736 20,731 --------- --------- 115,243 105,372 --------- --------- Income before income taxes................................................... 26,578 24,929 Income taxes................................................................. 10,365 9,672 --------- --------- Net income .................................................................. 16,213 15,257 Other comprehensive income, net of tax: Foreign currency translation.............................................. (63) 7 --------- --------- Comprehensive income......................................................... $ 16,150 $ 15,264 ========= ========= Earnings per share: Basic: Net income ............................................................. $ .58 $ .56 ========= ========= Weighted average shares outstanding..................................... 27,878 27,004 ========= ========= Diluted: Net income ............................................................ $ .57 $ .55 ========= ========= Weighted average shares outstanding..................................... 28,466 27,818 ========= =========
See notes to consolidated financial statements.
CEC ENTERTAINMENT, INC. CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME (Unaudited) (Thousands, except per share amounts) Nine Months Ended ------------------------------ Sep. 30, 2001 Oct. 1, 2000 ------------- ------------ Food and beverage revenues................................................... $ 290,981 $ 257,933 Games and merchandise revenues............................................... 138,891 130,062 Franchise fees and royalties................................................. 2,367 2,536 Interest income, including related party income of $120 and $74, respectively.............................................................. 207 150 --------- --------- 432,446 390,681 --------- --------- Costs and expenses: Cost of sales............................................................. 189,537 172,760 Selling, general and administrative expenses.............................. 56,982 54,662 Depreciation and amortization............................................. 25,334 25,005 Interest expense.......................................................... 1,717 2,473 Other operating expenses.................................................. 70,798 60,453 --------- --------- 344,368 315,353 --------- --------- Income before income taxes................................................... 88,078 75,328 Income taxes................................................................. 34,350 29,226 --------- --------- Net income .................................................................. 53,728 46,102 Other comprehensive income, net of tax: Foreign currency translation.............................................. (117) (56) --------- --------- Comprehensive income......................................................... $ 53,611 $ 46,046 ========= ========= Earnings per share: Basic: Net income ............................................................. $ 1.92 $ 1.71 ========= ========= Weighted average shares outstanding..................................... 27,826 26,886 ========= ========= Diluted: Net income ............................................................ $ 1.87 $ 1.66 ========= ========= Weighted average shares outstanding..................................... 28,570 27,690 ========= =========
See notes to consolidated financial statements.
CEC ENTERTAINMENT, INC. CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (Unaudited) (Thousands, except per share amounts) Amounts Shares --------- --------- Common stock and capital in excess of par value: Balance, beginning of year.............................................. $ 181,287 34,585 Stock options exercised................................................. 9,804 728 Net tax benefit from exercise of stock options.......................... 3,891 Stock issued under 401(k) plan......................................... 176 5 Treasury shares retired................................................... (610) (50) --------- --------- Balance, September 30, 2001............................................. 194,548 35,268 --------- ========= Retained earnings: Balance, beginning of year.............................................. 175,217 Net income.............................................................. 53,728 Redeemable preferred stock accretion.................................... (77) Redeemable preferred stock dividend, $3.60 per share.................... (173) --------- Balance, September 30, 2001............................................. 228,695 --------- Accumulated other comprehensive loss: Balance, beginning of year.............................................. (30) Foreign currency translation............................................ (117) --------- Balance, September 30, 2001............................................. (147) --------- Treasury shares: Balance, beginning of year.............................................. (74,202) 7,040 Treasury stock acquired................................................. (16,571) 398 Treasury shares retired................................................... 610 (50) --------- --------- Balance, September 30, 2001............................................. (90,163) 7,388 --------- ========= Total shareholder's equity................................................. $ 332,933 =========
See notes to consolidated financial statements.
CEC ENTERTAINMENT, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Thousands) Nine Months Ended ------------------------------- Sep. 30, 2001 Oct. 1, 2000 ------------- ------------ Operating activities: Net income ............................................................... $ 53,728 $ 46,102 Adjustments to reconcile net income to cash provided by operations: Depreciation and amortization............................................. 25,334 25,005 Deferred income tax expense............................................... 9,239 2,786 Tax benefit from exercise of stock options and stock grants............... 3,891 1,431 Compensation expense under stock grant plan............................... 571 Other ................................................................... 527 (842) Net change in receivables, inventories, prepaids, payables and accrued liabilities..................................................... 7,272 4,488 -------- -------- Cash provided by operations......................................... 99,991 79,541 -------- -------- Investing activities: Purchases of property and equipment....................................... (75,511) (64,492) Disposition of property and equipment..................................... 297 835 Additions to notes receivable............................................. (2,561) (1,524) Payments received on notes receivable..................................... 1,175 554 (Increase) decrease in assets held for resale and other assets............ (1,736) 4,550 --------- -------- Cash used in investing activities................................... (78,336) (60,077) --------- -------- Financing activities: Payments on debt ......................................................... (8,793) (3,849) Exercise of stock options ................................................ 9,804 3,826 Redeemable preferred stock dividends...................................... (173) (178) Purchase of treasury stock ............................................... (16,571) (5,980) Other .................................................................... 12 83 -------- -------- Cash used in financing activities................................... (15,721) (6,098) -------- -------- Increase in cash and cash equivalents ....................................... 5,934 13,366 Cash and cash equivalents, beginning of period............................... 7,300 2,731 -------- -------- Cash and cash equivalents, end of period..................................... $ 13,234 $ 16,097 ======== ========
See notes to consolidated financial statements. CEC ENTERTAINMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Interim financial statements: In the opinion of management, the accompanying financial statements for the periods ended September 30, 2001 and October 1, 2000 reflect all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the Company's financial condition, results of operations and cash flows in accordance with generally accepted accounting principles. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with generally accepted accounting principles have been omitted. The unaudited consolidated financial statements referred to above should be read in conjunction with the financial statements and notes thereto included in the Company's Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2000. Results of operations for the periods ended September 30, 2001 and October 1, 2000 are not necessarily indicative of the results for the year. 2. Earnings per common share: Earnings per common share were computed based on the weighted average number of common and potential common shares outstanding during the period. Net income available per common share has been adjusted for the items indicated below, and earnings per common and potential common share were computed as follows (thousands, except per share data):
Three Months Ended Nine Months Ended -------------------- -------------------- Sep. 30, Oct. 1, Sep. 30, Oct. 1, 2001 2000 2001 2000 -------- -------- -------- -------- Net income ................................... $ 16,213 $ 15,257 $ 53,728 $ 46,102 Accretion of redeemable preferred stock ...... (26) (27) (77) (78) Redeemable preferred stock dividends ......... (57) (59) (173) (178) -------- -------- -------- -------- Adjusted income applicable to common shares .. $ 16,130 $ 15,171 $ 53,478 $ 45,846 ======== ======== ======== ======== Basic: Weighted average common shares outstanding 27,878 27,004 27,826 26,886 ======== ======== ======== ======== Earnings per common share ................ $ .58 $ .56 $ 1.92 $ 1.71 ======== ======== ======== ======== Diluted: Weighted average common shares outstanding 27,878 27,004 27,826 26,886 Potential common shares for stock options and stock grants ..................... 588 814 744 804 -------- -------- -------- -------- Weighted average shares outstanding ...... 28,466 27,818 28,570 27,690 ======== ======== ======== ======== Earnings per common and potential common share ......................... $ .57 $ .55 $ 1.87 $ 1.66 ======== ======== ======== ========
Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Third Quarter 2001 Compared to Third Quarter 2000 A summary of the results of operations of the Company as a percentage of revenues for the third quarters of 2001 and 2000 is shown below. Three Months Ended ------------------------------ Sep. 30, 2001 Oct. 1, 2000 ------------- ------------ Revenues ............................. 100.0% 100.0% ----- ----- Costs and expenses: Cost of sales ..................... 44.3 44.0 Selling, general and administrative 13.0 13.6 Depreciation and amortization ..... 6.3 6.8 Interest expense .................. .3 .6 Other operating expenses .......... 17.4 15.9 ----- ----- 81.3 80.9 ----- ----- Income before income taxes ........... 18.7 19.1 Income tax expense ................... 7.3 7.4 ----- ----- Net income ........................... 11.4% 11.7% ===== ===== Revenues Revenues increased 8.8% to $141.8 million in the third quarter of 2001 from $130.3 million in the third quarter of 2000 due primarily to an increase in the number of Company-operated restaurants. During 2000, the Company opened 31 new restaurants and closed one restaurant. During the first nine months of 2001, the Company opened 19 new stores, acquired two restaurants from franchisees and closed three restaurants. Comparable store sales of the Company's Chuck E. Cheese's restaurants which were open during all of the third quarters of 2001 and 2000 increased .5%. Menu prices increased 3.3% between the periods. Costs and Expenses Costs and expenses as a percentage of revenues increased to 81.3% in the third quarter of 2001 from 80.9% in the third quarter of 2000. Cost of sales increased as a percentage of revenues to 44.3% in the third quarter of 2001 from 44.0% in the comparable period of 2000. Cost of food, beverage and related supplies as a percentage of revenues increased to 13.0% in the third quarter of 2001 from 12.9% in the third quarter of 2000 primarily due to higher cheese costs which were partially offset by the increase in menu prices. Cost of games and merchandise as a percentage of revenues decreased to 4.4% in the third quarter of 2001 from 4.8% in the third quarter of 2000 due primarily to adjusted prize ticket categories. Store labor expenses as a percentage of revenues increased to 26.9% in the third quarter of 2001 from 26.3% in the third quarter of 2000 primarily due to higher average wage rates. Selling, general and administrative expenses as a percentage of revenues decreased to 13.0% in the third quarter of 2001 from 13.6% in the third quarter of 2000 due primarily to a decrease in corporate overhead costs. Depreciation and amortization expenses as a percentage of revenues decreased to 6.3% in the third quarter of 2001 from 6.8% in the third quarter of 2000 primarily due to a change in selected depreciable lives. During the first quarter of 2001, the estimated remaining useful lives of certain fixed assets were changed based on a review of historical asset utilization. This change in estimate resulted in a reduction of depreciation expense of approximately $550,000 or $.01 per share after income taxes in the third quarter of 2001. Interest expense as a percentage of revenues decreased to .3% in the third quarter of 2001 from .6% in the third quarter of 2000 due to a reduction in outstanding debt and interest rates. Other operating expenses increased as a percentage of revenues to 17.4% in the third quarter of 2001 from 15.9% in the third quarter of 2000 primarily due to higher insurance costs, utility expenses and rent expense. In the third quarter of 2001 based on recent claim experience, the Company recorded additional insurance loss reserves totaling approximately $600,000. The Company's effective income tax rate was 39.0% in the third quarter of 2001 compared to 38.8% in the third quarter of 2000 primarily due to higher estimated state tax rates. Net Income The Company had net income of $16.2 million in the third quarter of 2001 compared to $15.3 million in the third quarter of 2000 due to the changes in revenues and expenses discussed above. The Company's diluted earnings per share increased to $.57 per share in the third quarter of 2001 from $.55 per share in the third quarter of 2000. First Nine Months of 2001 Compared to First Nine Months of 2000 --------------------------------------------------------------- A summary of the results of operations of the Company as a percentage of revenues for the first nine months of 2001 and 2000 is shown below. Nine Months Ended ------------------------------ Sep. 30, 2001 Oct. 1, 2000 ------------- ------------ Revenues .............................. 100.0% 100.0% ----- ----- Costs and expenses: Cost of sales ..................... 43.7 44.2 Selling, general and administrative 13.2 14.0 Depreciation and amortization ..... 5.9 6.4 Interest expense .................. .4 .6 Other operating expenses .......... 16.4 15.5 ----- ----- 79.6 80.7 ----- ----- Income before income taxes ............ 20.4 19.3 Income tax expense .................... 7.9 7.5 ----- ----- Net income ............................ 12.5% 11.8% ===== ===== Revenues Revenues increased 10.7% to $432.4 million in the first nine months of 2001 from $390.7 million in the first nine months of 2000 primarily due an increase in the number of Company-operated restaurants and an increase of 2.0% in comparable store sales of the Company's Chuck E. Cheese's restaurants which were open during all of the first nine months of both 2001 and 2000. During 2000, the Company opened 31 new restaurants and closed one restaurant. During the first nine months of 2001, the Company opened 19 new restaurants, acquired two restaurants from franchisees and closed three restaurants. Menu prices increased approximately 2.8% between the periods. Costs and Expenses Costs and expenses as a percentage of revenues decreased to 79.6% in the first nine months of 2001 from 80.7%in the first nine months of 2000. Cost of sales decreased as a percentage of revenues to 43.7% in the first nine months of 2001 from 44.2% in the comparable period of 2000. Cost of food, beverage and related supplies as a percentage of revenues increased slightly to 12.8% in the first nine months of 2001 compared to 12.7% in the first nine months of 2000. The impact of higher cheese costs was largely offset by the increase in comparable store sales and the increase in menu prices. Cost of games and merchandise decreased to 4.4% in the first nine months of 2001 from 5.1% in the first nine months of 2000 due to adjusted prize ticket categories. Store labor expenses as a percentage of revenues increased to 26.5% in the first nine months of 2001 from 26.4% in the first nine months of 2000 due to higher minimum wage requirements in several states. Selling, general and administrative expenses as a percentage of revenues decreased to 13.2% in the first nine months of 2001 from 14.0% in the first nine months of 2000 due a reduction in corporate overhead expenses. Depreciation and amortization expenses as a percentage of revenues decreased to 5.9% in the first nine months of 2001 from 6.4% in the first nine months of 2000 primarily due to a change in selected depreciable lives. During the first quarter of 2001, the estimated remaining useful lives of certain fixed assets were changed based on a review of historical asset utilization. This change in estimate resulted in a reduction of depreciation expense of approximately $1.6 million or $.03 per share after income taxes in the first nine months of 2001. Interest expense as a percentage of revenues was .4% in the first nine months of 2001 compared to .6% in the first nine months of 2000 primarily due to a reduction in debt outstanding and interest rates. Other operating expenses increased as a percentage of revenues to 16.4% in the first nine months of 2001 from 15.5% in the first nine months of 2000 primarily due to higher insurance costs, utility expenses and rent expense. The Company's effective income tax rate was 39.0% in the first nine months of 2001 compared to 38.8% in the first nine months of 2000 primarily due to higher estimated state tax rates. Net Income The Company had net income of $53.7 million in the first nine months of 2001 compared to $46.1 million in the first nine months of 2000 due to the changes in revenues and expenses discussed above. The Company's diluted earnings per share increased 12.7% to $1.87 per share in the first nine months of 2001 compared to $1.66 per share in the first nine months of 2000. Financial Condition, Liquidity and Capital Resources Cash provided by operations increased to $100.0 million in the first nine months of 2001 from $79.5 million in the comparable period of 2000. Cash outflows from investing activities for the first nine months of 2001 were $78.3 million primarily related to capital expenditures. Cash outflows from financing activities for the first nine months of 2001 were $15.7 million primarily related to repayment of borrowings on the Company's line of credit and the repurchase of the Company's common stock net of proceeds from the exercise of stock options. The Company's primary requirements for cash relate to planned capital expenditures, the repurchase of the Company's common stock and debt service. The Company expects that it will satisfy such requirements from cash provided by operations and, if necessary, funds available under its line of credit. In 2001, the Company plans to add 30 to 34 stores including new stores and acquisitions of existing stores from franchisees. The Company currently anticipates its cost of opening such new stores to average approximately $1.8 million per store, which will vary depending upon many factors including the size of the stores and whether the Company acquires land or the store is an in-line or freestanding building. In addition to such new store openings, the Company plans to expand the seating capacity of 6 to 7 high sales volume stores in 2001, including stores which will receive an enhanced showroom package. The Company also plans to complete Phase III upgrades in approximately 100 to 110 stores this year at an average cost of approximately $220,000 to $230,000 per store. A Phase III upgrade generally includes a new toddler play area, skill games and rides, kiddie games and rides, sky-tube enhancements, and prize area enhancements with ticket counting machines. During the first nine months of 2001, the Company opened 19 new restaurants, acquired two restaurants from franchisees, expanded 5 restaurants and completed Phase III upgrades in 81 restaurants. The Company currently estimates that capital expenditures in 2001, including expenditures for new store openings, existing store expansions and equipment investments, will be approximately $105 million. The Company plans to finance these expenditures through cash flow from operations and borrowings under the Company's line of credit. In 1999, the Company announced that it planned to purchase shares of the Company's common stock at an aggregate purchase price of up to $25 million. In July 2001, the Company announced completion of this plan and approval of an additional plan to purchase shares of the Company's common stock at an aggregate purchase price of up to $25 million. As of November 9, 2001, the Company has purchased shares of its common stock at an aggregate purchase price of approximately $2.5 million. The Company's credit facilities consist of a $75 million line of credit. Interest under the $75 million line of credit is dependent on earnings and debt levels of the Company and ranges from prime or, at the Company's option, LIBOR plus 1% to 1.75%. Currently, any borrowings under this line of credit would be at the prime rate or LIBOR plus 1%. As of November 9, 2001, there was $36.0 million in borrowings under this line of credit. The Company is required to comply with certain financial ratio tests during the terms of the loan agreements. Certain statements in this report, other than historical information, may be considered forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, and is subject to various risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may differ from those anticipated, estimated or expected. Among the key factors that may have a direct bearing on the Company's operating results, performance or financial condition are its ability to implement its growth strategies, national, regional and local economic conditions affecting the restaurant/entertainment industry, competition within each of the restaurants and entertainment industries, success of its franchise operations, negative publicity, fluctuations in quarterly results of operations, including seasonality and government regulations. Item 3. Quantitative and Qualitative Disclosures about Market Risk The Company is subject to market risk in the form of interest risk and foreign currency risk. Both interest risk and foreign currency risk are immaterial to the Company. PART II - OTHER INFORMATION Item 1. Legal Proceedings. On June 2, 2000, a purported class action lawsuit against the Company, entitled Freddy Gavarrete, et al. v. CEC Entertainment, Inc., dba Chuck E. Cheese's et al., Cause No., 00-08132 FMC (RZx) ("Gavarrete"), was filed in the Superior Court of the State of California of the county of Los Angeles. On July 27, 2000, the lawsuit was removed to the United States District Court for the Central District of California. The lawsuit was filed by one former restaurant manager purporting to represent restaurant managers of the Company in California from 1996 to the present. The lawsuit alleges violations of state wage and hour laws involving unpaid overtime wages and seeks an unspecified amount in damages. On July 31, 2001, the Court denied the Plaintiff's motion for class certification. On October 15, 2001, Plaintiff filed a motion to amend the complaint requesting the addition of a second party to the lawsuit. On November 2, 2001, the Court granted Plaintiff's motion to amend. The Company believes the lawsuit is without merit and intends to vigorously defend it. Item 2. Changes in Securities. None to report during the quarter for which this report is filed. Item 3. Defaults Upon Senior Securities. None to report during the quarter for which this report is filed. Item 4. Other Information. None to report during the quarter for which this report is filed. Item 5. Exhibits and Reports on Form 8-K. a) Exhibits None. b) Reports on Form 8-K None filed during the quarter for which this report is filed. 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. CEC ENTERTAINMENT, INC. Dated: November 13, 2001 By: s/ Rodney Carter ------------------------------------ Rodney Carter Executive Vice President, Chief Financial Officer and Treasurer