<PAGE>
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 OF 1934
For the quarterly period ended August 24, 1997
[ ] 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: 333-26897
FSC SEMICONDUCTOR CORPORATION
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-3363001
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
333 Western Avenue, Mail Stop 01-00
South Portland, Maine 04106
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (207) 775-8100
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 [ ].
The number of shares outstanding of the issuer's classes of common stock as of
the close of business on September 30, 1997:
Title of Each Class Number of Shares
------------------------------------- ----------------
Class A Common Stock; $0.01 par value 7,195,420
Class B Common Stock; $0.01 par value 8,408,880
<PAGE>
FSC SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
INDEX
Part I. Financial Information Page
----
Item 1 Financial Statements
Condensed Consolidated Statements of Operations (Unaudited)
for the Three Months Ended August 24, 1997 and
August 25, 1996........................................... 3
Condensed Consolidated Balance Sheets as of August 24, 1997
(Unaudited) and May 25, 1997.............................. 4
Condensed Consolidated Statement of Cash Flows (Unaudited)
for the Three Months Ended August 24, 1997................ 5
Notes to Condensed Consolidated Financial Statements
(Unaudited)............................................... 6
Item 2 Management's Discussion and Analysis of Results of
Operations and Financial Condition........................ 8
Part II. Other Information
Item 1 Legal Proceedings............................................. 13
Item 6 Exhibits and Reports on Form 8-K.............................. 13
Signature.............................................................. 14
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FSC SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
----------------------
August 24, August 25,
1997 1996
---------- ----------
(In millions)
Revenue:
Net sales - trade.................................... $158.7 $132.9
Contract manufacturing - National Semiconductor...... 40.8 26.1
---------- ----------
Total revenue...................................... 199.5 159.0
Direct costs and allocated expenses:
Cost of sales - trade................................ 108.0 102.9
Cost of contract manufacturing - National
Semiconductor...................................... 30.1 26.1
Research and development............................. 7.1 4.2
Selling, general and administrative.................. 21.0 18.7
Restructuring of operations.......................... -- 5.3
---------- ----------
Total operating costs and expenses................. 166.2 157.2
---------- ----------
Operating income....................................... 33.3
Interest, net.......................................... 13.3 --
Other expense.......................................... -- 0.4
---------- ----------
Income before taxes.................................... 20.0
Revenues less direct and allocated expenses before
income taxes......................................... $ 1.4
==========
Income taxes........................................... 7.0
----------
Net income............................................. $ 13.0
==========
See accompanying Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
FSC SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
August 24, May 25,
1997 1997
----------- ---------
(In millions)
ASSETS
Current assets:
Cash............................................. $ 58.7 $ 40.7
Receivables, net................................. 95.3 79.6
Inventories...................................... 71.6 73.1
Prepaid expenses and other current assets........ 14.3 16.6
Deferred income taxes............................ 2.1 2.1
----------- ---------
Total current assets........................... 242.0 212.1
Property, plant and equipment, net................. 288.2 295.0
Deferred income taxes.............................. 14.1 18.5
Other assets....................................... 29.1 29.4
----------- ---------
Total assets................................... $ 573.4 $ 555.0
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt................ $ 11.0 $ 11.0
Accounts payable................................. 65.7 77.1
Accrued expenses and other current liabilities... 61.5 42.0
----------- ---------
Total current liabilities...................... 138.2 130.1
Long-term debt, less current portion............... 483.3 486.0
Other liabilities.................................. 0.4 0.4
----------- ---------
Total liabilities.............................. 621.9 616.5
Redeemable preferred stock......................... 73.7 71.8
Commitments and contingencies......................
Stockholders' Equity:
Class A common stock............................ 0.1 0.1
Class B common stock............................ 0.1 0.1
Additional paid-in capital...................... 7.6 7.6
Accumulated deficit............................. (130.0) (141.1)
----------- ---------
Total stockholders' equity (122.2) (133.3)
----------- ---------
Total liabilities and stockholders' equity..... $ 573.4 $ 555.0
=========== =========
See accompanying Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
FSC SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Three Months
Ended
August 24,
1997
-------------
(In millions)
Operating activities:
Net income......................................... $ 13.0
Addback non-cash adjustments to net income:
Depreciation and amortization.................... 20.0
Loss on disposal of fixed assets................. 0.2
Deferred income taxes............................ 4.4
Changes in certain assets and liabilities, net:
Accounts receivable............................... (15.7)
Inventories....................................... 1.5
Prepaid expenses and other current assets......... 2.3
Other assets...................................... (0.1)
Current liabilities............................... 8.1
-------------
Cash provided by operating activities......... 33.7
Investing activities:
Capital expenditures................................ (11.8)
Purchase of molds and tooling....................... (1.2)
-------------
Cash used by investing activities............. (13.0)
Financing activities:
Repayment of long-term debt......................... (2.7)
-------------
Cash used by financing activities............. (2.7)
-------------
Net change in cash and cash equivalents............... 18.0
Cash and cash equivalents at beginning of period...... 40.7
-------------
Cash and cash equivalents at end of period............ $ 58.7
=============
Cash paid for interest and taxes was $3.9 million and $0.3 million respectively
for the three-month period ended August 24, 1997.
For the three-month period ended August 24, 1997 the Company accumulated
dividends on the redeemable preferred stock of approximately $1.9 million. The
accumulated dividends were recorded as an increase to the carrying value of the
redeemable preferred stock and accumulated deficit.
See accompanying Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
FSC SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of Presentation
The Condensed Consolidated Balance Sheets of FSC Semiconductor Corporation
(the "Company") as of August 24, 1997 and May 25, 1997 and the Condensed
Consolidated Statements of Operations and Cash Flows for the three-month period
ended August 24, 1997 were prepared by the Company. The Combined Condensed
Statement of Operations of the Fairchild Semiconductor Business (the "Business")
for the three-month period ending August 25, 1996 includes all revenues and
costs attributable to the Business as it was operated within National
Semiconductor ("National"), including allocations for shared facilities and
overhead. In addition, National performed cash management on a centralized
basis. As a result, receivables, liabilities and cash receipts and payments
were not identifiable on a business specific basis. Given these constraints,
certain supplemental cash flow information is presented in lieu of a statement
of cash flows (Note 3). In the opinion of management, the accompanying condensed
consolidated financial statements as of and for the three-month period ended
August 24, 1997 contain all adjustments (consisting of only normal recurring
items) necessary to present fairly the financial position and results of
operations of the Company. The allocations and estimates in the Combined
Condensed Statement of Operations as of and for the three-month period ended
August 25, 1996 were based on assumptions that management believes were
reasonable under the circumstances. Interim results of operations are not
necessarily indicative of the results to be expected for the full year. This
report should be read in conjunction with the financial statements and notes
thereto included in the special financial report on Form 10-K for the fiscal
year ended May 25, 1997 and the Company's Registration Statement filed on Form
S-4 dated July 9, 1997.
Note 2 - Inventories
The components of inventories are as follows:
August 24, May 25,
1997 1997
---------- ---------
(In millions)
Raw materials................................ $ 7.7 $ 8.8
Work in process.............................. 42.0 43.4
Finished goods............................... 21.9 20.9
---------- ---------
Total inventories........................ $71.6 $73.1
========== =========
6
<PAGE>
Note 3 - Supplemental Cash Flow Information
As described in Note 1, National's cash management system was not designed
to trace centralized cash and related financing transactions to the specific
cash requirements of the Business. In addition, National's corporate
transaction systems were not designed to track receivables and certain
liabilities and cash receipts and payments on a business specific basis. Given
these constraints, the following data are presented to facilitate analysis of
key components of cash flow activity:
Three Months
Ended
August 25,
1996
-------------
(In millions)
Operating activities:
Revenues less expenses..................................... $ 1.4
Depreciation and amortization.............................. 18.1
Loss on disposal of fixed assets........................... 0.4
Decrease in inventories.................................... 5.1
Decrease in prepaid expenses and other current assets...... 4.0
Increase in other assets................................... (0.8)
Decrease in accounts payable............................... (17.7)
Increase in accrued expenses and other liabilities......... 10.8
-------------
Cash provided by operating activities.................. 21.3
Investing activities:
Capital expenditures....................................... (20.7)
Purchase of molds and tooling.............................. (1.2)
-------------
Cash used by investing activities...................... (21.9)
-------------
Net cash provided from National Semiconductor *.............. $ 0.6
=============
* Net financing provided from National Semiconductor does not necessarily
represent the cash flows of the Business, or the timing of such cash flows,
had it operated on a stand-alone basis.
Note 4 - Reclassifications
Certain amounts in the unaudited financial statements for the three-month
period ended August 25, 1996 have been reclassified to conform to the
presentation in the unaudited financial statements for the three-month period
ended August 24, 1997.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition.
Overview
FSC Semiconductor Corporation (the "Company"), through its wholly-owned
subsidiary Fairchild Semiconductor Corporation, is a leading designer,
manufacturer and supplier of high-performance logic, non-volatile memory and
discrete power and signal technology semiconductors, serving the
telecommunications, consumer, industrial, personal systems and automotive
markets. The results of operations for the first quarter of fiscal 1997
(three-month period ended August 25, 1996) reflect the operating results of the
Fairchild Semiconductor Business (the "Business") of National Semiconductor
("National"), and are not necessarily indicative of the results that would have
been obtained as a stand-alone company. This is due in part to the fact that
National allocated to the Business certain corporate and other overhead costs at
levels higher than those experienced as a stand-alone company. In addition, the
Business, prior to the establishment of the Company, provided manufacturing
services to National at cost and now provides such services at higher prices.
Results of Operations
Net income was $13.0 million for the first quarter of fiscal 1998. As a
stand-alone operation in the first quarter of fiscal 1998, the Company incurred
interest expense and income tax expense of $13.3 million and $7.0 million,
respectively, that the Business did not incur in the first quarter of fiscal
1997. Operating income was $33.3 million in the first quarter of fiscal 1998,
compared to revenues less direct and allocated expenses before taxes of $1.4
million in the first quarter of fiscal 1997. This increase is primarily
attributable to higher trade revenues as a result of improved market conditions,
higher trade gross profit due to improved factory utilization, and a one-time
restructuring charge of $5.3 million for workforce reductions in the first
quarter of fiscal 1997 which did not recur in the first quarter of fiscal 1998.
In addition, the Company generated $10.7 million of gross profit on contract
manufacturing services in the first quarter of fiscal 1998 under manufacturing
agreements with National. In the first quarter of fiscal 1997, these revenues
were recorded at cost. Excluding depreciation and amortization of $20.0 million
and $18.1 million in the first quarters of fiscal 1998 and 1997, respectively
and other expense of $0.4 million in the first quarter of fiscal 1997, earnings
before interest, taxes and depreciation and amortization ("EBITDA") were $53.3
million in the first quarter of fiscal 1998 compared to $19.9 million in the
first quarter of fiscal 1997. EBITDA is presented because the Company believes
that it is a widely accepted financial indicator of an entity's ability to incur
and service debt. EBITDA should not be considered as an alternative to net
income, operating income, or other consolidated operations and cash flow data
prepared in accordance with generally accepted accounting principles, as an
indicator of the operating performance of the Company, or as an alternative to
cash flows as a measure of liquidity.
8
<PAGE>
Revenues
The Company's revenues consist of trade sales to unaffiliated customers
(79.5% and 83.6% of total revenues in the first quarters of fiscal 1998 and
1997, respectively) and revenues from contract manufacturing services provided
to National (20.5% and 16.4% of total revenues in the first quarters of fiscal
1998 and 1997, respectively).
Trade sales increased 19.4% to $158.7 million in the first quarter of
fiscal 1998 compared to $132.9 million in the first quarter of fiscal 1997. The
increase in trade sales was across all product groups reflecting improved
industry-wide market conditions. Logic, Discrete and Memory trade sales
increased 17.6%, 33.8% and 3.9%, respectively, in the first quarter of fiscal
1998 over the first quarter of fiscal 1997. The increase in Logic trade sales
was driven by a significant increase in unit volume, which offset a slight
decrease in average selling prices. CMOS trade sales increased 15.8% and Bipolar
trade sales increased 19.4% in the first quarter of fiscal 1998 over the first
quarter of fiscal 1997. The increase in Discrete trade sales was due almost
entirely to higher average selling prices, as unit volume was flat. Power DMOS
trade sales increased 26.6% and Small Signal trade sales increased 38.9% in the
first quarter of fiscal 1998 over the first quarter of fiscal 1997. The
increase in Memory trade sales was driven by higher volume, particularly in
E2PROM, offset by lower prices impacting all product lines, particularly EPROM.
E2PROM trade sales increased 38.8%, offsetting a 50.0% decline in EPROM trade
sales in the first quarter of fiscal 1998 from the first quarter of fiscal 1997.
Geographically, 36%, 19% and 45% of trade sales were derived in North America,
Europe and Asia/Pacific, respectively in the first quarter of fiscal 1998,
compared to 40%, 20% and 40% in the first quarter of fiscal 1997. All regions
experienced increases in trade sales in the first quarter of fiscal 1998
compared to the first quarter of fiscal 1997. Trade sales increased 8%, 12% and
35% in North America, Europe and Asia/Pacific, respectively.
Contract manufacturing revenues increased 56.3% to $40.8 million in the
first quarter of fiscal 1998 compared to $26.1 million in the first quarter of
fiscal 1997, reflecting greater demand from National.
Gross Profit
Gross profit increased 104.7% to $61.4 million in the first quarter of
fiscal 1998, compared to $30.0 million in the first quarter of fiscal 1997.
Included in gross profit in the first quarter of fiscal 1998 is $10.7 million
attributable to contract manufacturing services provided to National. In the
first quarter of fiscal 1997, these revenues were recorded at cost. Gross trade
profit increased 69.0% in the first quarter of fiscal 1998 over the first
quarter of fiscal 1997. As a percentage of trade sales, gross trade profits
were 31.9% in the first quarter of fiscal 1998, compared to 22.6% in the first
quarter of fiscal 1997. The increase in gross trade profit as a percentage of
trade sales was due to higher average selling prices and increased factory
utilization due to improved market conditions.
Research and Development
Research and development expenses ("R&D") were $7.1 million, or 4.5% of
trade sales in the first quarter of fiscal 1998, compared to $4.2 million, or
3.2% of trade sales in the first quarter of fiscal 1997. The increase in R&D is
driven by higher spending to support new product development, reflecting renewed
emphasis in R&D efforts as a stand-alone company. R&D efforts are focused on
the Company's growth products: CMOS Logic, Power DMOS, and E2PROM. In the
first quarter of fiscal 1998, R&D expenditures were 8.1% of trade sales for
these growth products, and 0.9% of trade sales for the
9
<PAGE>
Company's mature products (Bipolar Logic, Small Signal Discretes and EPROM). In
the first quarter of fiscal 1997, R&D expenditures of the Business primarily
consisted of allocations from National.
Selling, General and Administrative
Selling, general and administrative expenses ("SG&A") were $21.0 million,
or 13.2% of trade sales, in the first quarter of fiscal 1998, compared to $18.7
million, or 14.1% of trade sales, in the first quarter of fiscal 1997. The
increase in SG&A is attributable to higher selling expenses commensurate with
higher revenues, partially offset by lower G&A expenses due to lower stand-alone
costs compared to the direct and allocated G&A expenses of the Business and the
effect of a charge for one-time retention and incentive bonuses in the first
quarter of fiscal 1997 which did not recur in the first quarter of fiscal 1998.
Restructuring
The first quarter of fiscal 1997 included a one-time restructuring charge
of $5.3 million for severance and other costs directly attributable to a
workforce reduction.
Interest, Net
Interest, net was $13.3 million in the first quarter of fiscal 1998, as a
result of indebtedness incurred concurrent with the Recapitalization, which
occurred in the fourth quarter of fiscal 1997. In the first quarter of fiscal
1997, the Business was allocated net interest expense from National. This
amount is included in other expense.
Other Expense
Other expense was $0.4 million in the first quarter of fiscal 1997,
consisting of net interest expense allocated to the Business from National,
partially offset by income from certain license fees. There were no comparable
amounts incurred in the first quarter of fiscal 1998.
Income Taxes
Income taxes were $7.0 million in the first quarter of fiscal 1998, an
effective tax rate of 35%. In the first quarter of fiscal 1997, the Business
did not record a tax provision or pay income taxes as it operated as a division
of National.
Liquidity and Capital Resources
As of August 24, 1997, the Company's cash balance was $58.7 million, an
increase of $18.0 million from May 25, 1997. In addition, the Company had
available a Revolving Credit Facility of $75 million, under which no amounts
were outstanding as of August 24, 1997. The Business had no cash as of August
25, 1996, as cash management was centralized by National and amounts were not
identifiable on a business specific basis.
In the first quarter of fiscal 1998, the Company generated sufficient cash
from operations to meet its research and development, capital expenditure and
debt service requirements. Research and development expenditures are made
primarily to fund new product development. Capital expenditures in the first
quarter of fiscal 1998 and for the
10
<PAGE>
remainder of the fiscal year are being made primarily to increase capacity in
the Company's manufacturing facilities and to purchase and install an
enterprise-wide information system. The Company expects that its existing cash
together with funds generated from operations will be sufficient to meet its
investing and financing requirements for the next twelve months.
The Company utilizes financial instruments to hedge its overall exposure to
the effects of foreign currency and interest rate fluctuations. The Company
utilizes short-term forward contracts to hedge currency exposure when deemed
necessary for expenses denominated in Malaysian ringgit and Philippine pesos,
as well as revenues denominated in Japanese yen and the major European
currencies. The recent devaluation of several currencies in Southeast Asia
against the U.S. dollar has not had, nor does the Company expect it to have, a
material adverse effect on the Company's results of operations or financial
condition. Deferred gains from hedging transactions were immaterial to the
financial statements in the first quarter of fiscal 1998. The Company does not
speculate in these financial instruments. In the fourth quarter of fiscal 1997,
the Company entered into an interest rate swap agreement with BankBoston in
order to reduce the impact of changes in interest rates on its long-term debt.
Outlook and Business Risks
The statements contained under this heading and in the Liquidity and
Capital Resources section of Management's Discussion and Analysis, other than
statements of historical facts, are forward looking statements based on current
expectations and management's estimates, which involve risks and uncertainties.
Actual results may differ materially from those set forth in such forward
looking statements.
The following factors may affect the Company's operating results for fiscal
1998: (i) the potential effect of the Company's substantially leveraged
financial condition on its liquidity, its ability to fund capital expenditures,
working capital and research and development and its ability to withstand
adverse general economic, market or competitive conditions and developments;
(ii) restrictive covenants contained in the Company's debt instruments that
could limit its ability to borrow additional funds, dispose of or acquire assets
or fund capital expenditures; (iii) the highly cyclical and competitive nature
of the semiconductor industry; (iv) the Company's dependence on continued demand
for the end-products such as personal computers, telecommunications, automotive,
and consumer and industrial electronic goods that incorporate the Company's
products; (v) the need to design, develop, manufacture, market and support new
products in order to remain competitive in the Company's markets; (vi) the
Company's dependence on sales to National Semiconductor; (vii) the Company's
dependence on the availability and cost of new materials used in its products
and upon key subcontractors providing it with wafer fabrication, assembly and
test services; (viii) the Company's reliance on complex manufacturing processes
and its sensitivity to maintaining yields, efficiencies and continuous
operations; (ix) uncertainties and legal risks associated with the dependence
on, and potential disputes concerning, patents and other intellectual property
rights; and (x) foreign currency and other risks associated with operating a
business internationally.
The Company relies on certain subcontractors for wafer fabrication and
assembly and test services. In particular, the Company utilizes NS Electronics
(Bangkok) Ltd. ("NS Electronics") as a subcontractor for a significant portion
of assembly and test services for its non-volatile memory products. NS
Electronics has common ownership and business and management relationships with
Alphatec Electronics Public Company Ltd. ("Alphatec"). Alphatec has recently
reported financial difficulties and its ability to continue its current
operations and the impact of such on the operations of NS Electronics
11
<PAGE>
is uncertain. The Company's contract with NS Electronics expires on November
23, 1997, and negotiations to renew the contract are currently in progress. In
addition, the Company is exploring sourcing alternatives, including other
subcontractors and expansion of internal capacity. There can be no assurance
that the Company would be able to replace any loss of assembly or test services
as a result of adverse developments affecting Alphatec and NS Electronics, nor
any assurance that such services could be replaced on terms equally favorable to
the Company. Accordingly, should NS Electronics cease or sharply curtail its
operations in the near future, there could be a material adverse effect to the
Company's results of operations in fiscal 1998.
The Financial Accounting Standards Board has issued two new Statements of
Financial Accounting Standards ("SFAS"). SFAS No. 130, Reporting Comprehensive
Income, establishes standards for reporting and display of comprehensive income
in a full set of financial statements. This Statement requires companies to (i)
classify items of other comprehensive income by their nature in a financial
statement and (ii) display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the equity
section of a balance sheet. SFAS No. 130 is effective for both interim and
annual periods beginning after December 15, 1997. Comparative financial
statements provided for earlier periods are required to be reclassified to
reflect the provisions of this statement. SFAS No. 131, Segment Reporting,
establishes standards for reporting information about operating segments in
annual and interim financial statements. This Statement also establishes
standards for related disclosures about products and services, geographic areas
and major customers. SFAS No. 131 is effective for financial statements for
periods beginning after December 15, 1997. The Company will adopt SFAS No. 130
for the quarter and fiscal year ended May 31, 1998 and does not expect its
provisions to have a material effect on the Company's presentation of its
consolidated financial statements. The Company will adopt SFAS No. 131 in
fiscal 1999 and is currently studying its provisions.
12
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
From time to time the Company is involved in legal proceedings arising in the
ordinary course of its business. Management believes there is no litigation
pending that could have a material adverse effect on its results of operations
or its financial condition.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
27 Financial Data Schedule
b) Reports on Form 8-K
FSC Semiconductor Corporation filed no reports on Form 8-K during the
quarter ended August 24, 1997.
Items 2, 3, 4 and 5 are not applicable and have been omitted.
13
<PAGE>
Signature
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.
FSC Semiconductor Corporation
Date: October 6, 1997 By: /s/ Joseph R. Martin
--------------------------
Joseph R. Martin
Executive Vice President, Finance
Chief Financial Officer
(Principal Financial and Accounting
Officer and Duly Authorized Officer)
14
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<PAGE>
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