<PAGE>
EXHIBIT 4
20
<PAGE>
GLOBAL-TECH APPLIANCES INC.
Quarterly Report for the Three Months ended June 30, 2000
--------------------------------------------------------------------------------
Except for historical information, certain statements contained herein are
forward-looking statements that are made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. Words such as
"expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates,"
or variations of such words and similar expressions are intended to identify
such forward looking statements. These forward looking statements are subject to
risks and uncertainties, including but not limited to, the impact of competitive
products and pricing, product demand and market acceptance, new product
development, reliance on key strategic alliances, availability and cost of raw
materials, the regulatory environment, fluctuations in operating results and
other risks detailed from time to time in the Company's filings with the
Securities and Exchange Commission including its most recent Report on
Form 20-F.
--------------------------------------------------------------------------------
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GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts expressed in United States dollars)
June 30, March 31,
2000 2000
------------------------
(unaudited) (audited)
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 43,842 $ 53,647
Investment in marketable securities 12,363 20,278
Accounts receivable, net 10,204 7,167
Deposits, prepayments & other assets 4,114 3,365
Inventories, net 20,560 18,160
-------------------
Total current assets 91,083 102,617
Property, plant and equipment 29,135 29,305
Construction-in-progress 7,817 7,320
Patents 14 14
Loan to a director 461 461
-------------------
Total assets $128,510 $139,717
===================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term bank borrowings $ - $ 2
Current portion of long-term bank loans 763 1,063
Accounts payable 12,333 8,734
Advance payments from customers 72 71
Accrued expenses 3,147 3,029
Income tax provision 2,571 2,505
-------------------
Total current liabilities 18,886 15,404
Long-term bank loans 1,407 1,407
-------------------
Total liabilities 20,293 16,811
-------------------
Shareholders' equity:
Preferred stock, par value $0.01; 1,000,000
shares authorized, no shares issued - -
Common stock, par value $0.01; 50,000,000 shares
authorized; 12,830,000 shares issued; 12,136,103
shares outstanding as of June 30, 2000; 12,126,101
shares outstanding as of March 31, 2000 128 128
Additional paid-in capital 81,662 81,662
Retained earnings 31,576 46,237
Accumulated other comprehensive deficit (498) (364)
Less: Treasury stock, at cost: 693,897 shares as of
June 30, 2000; 703,899 shares as of March 31, 2000 (4,651) (4,757)
-------------------
Total shareholders' equity 108,217 122,906
-------------------
Total liabilities and shareholders' equity $128,510 $139,717
===================
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GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Amounts expressed in thousands of USD, except for per share data)
Three Months Ended
June 30,
---------------------------
2000 1999
---------------------------
(unaudited) (unaudited)
Net Sales $ 22,711 $ 18,729
Cost of goods sold (17,887) (14,234)
----------------------------
Gross profit 4,824 4,495
Selling, general and administrative expenses (3,948) (3,561)
Unusual item - (500)
----------------------------
Operating income 876 434
Other income, net 959 712
----------------------------
Income before income taxes 1,835 1,146
Provision for income tax (66) (69)
----------------------------
Net income $ 1,769 $ 1,077
============================
Net income per share $ 0.15 $ 0.09
============================
Weighted average number of shares outstanding 12,130 12,090
============================
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GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts expressed in United States dollars)
<TABLE>
<CAPTION>
Three months ended
June 30,
----------------------------
2000 1999
----------------------------
(unaudited) (unaudited)
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,769 $ 1,077
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 946 827
(Increase) decrease in accounts receivable, net (3,037) 1,051
Increase in deposits, prepayments and other assets (749) (288)
Increase in inventories (2,400) (3,810)
Increase in accounts payable 3,599 2,688
Increase in advance payments from customers 1 200
Increase in accrued expenses 118 8
Increase in income tax provision 66 69
---------- ---------
Net cash provided by operating activities 313 1,822
---------- ---------
Cash flows from investing activities:
Decrease (increase) in investments in marketable securities 7,780 (19,616)
Purchase of property, plant and equipment (776) (582)
Additions to construction-in-progress (497) (343)
---------- ---------
Net cash provided by (used in) investing activities 6,507 (20,541)
---------- ---------
Cash flows from financing activities:
Issuance of treasury shares for compensation expenses 60 -
Increase in short-term borrowings - 261
Repayment in short-term bank borrowings (2) -
Repayment of long-term bank loans (300) (231)
Dividend paid (16,383) -
---------- ---------
Net cash (used in) provided by financing activities (16,625) 30
---------- ---------
Net decrease in cash and cash equivalents (9,805) (18,689)
Cash and cash equivalents at beginning of year 53,647 56,514
---------- ---------
Cash and cash equivalents at end of year $ 43,842 $ 37,825
========== =========
</TABLE>
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GLOBAL-TECH APPLIANCES INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- UNAUDITED
(Amounts expressed in United States dollars unless otherwise stated)
Note 1 -- GENERAL
The accompanying unaudited consolidated financial statements of Global-Tech
Appliances Inc. ("Global-Tech") have been prepared as of June 30, 2000 and for
the three-month period then ended. The interim financial statements should be
read in conjunction with the annual financial statements as of March 31, 2000.
These statements reflect all adjustments which are, in the opinion of
management, necessary to fairly present Global-Tech's financial position as of
June 30, 2000 and its results of operations and cash flows for the three months
ended June 30, 2000. The results of operations for the three months ended June
30, 2000 should not be considered indicative of the results expected for the
year ending March 31, 2001.
Global-Tech, formerly known as Wing Shing International Limited, is incorporated
in the British Virgin Islands and is a holding company. Global-Tech and its
subsidiaries are collectively referred to as the "Company." The Company is a
designer and manufacturer of a wide range of small household appliances. The
Company's manufacturing operations are located in Dongguan and Shenzhen, the
People's Republic of China ("China"). The Company's products are sold to
customers primarily in the United States and Europe.
On April 14, 1998, Global-Tech issued 4,200,000 shares of common stock, par
value $0.01 per share, in connection with the initial public offering of its
common stock (the "IPO"). On May 7, 1998, the Company issued an additional
630,000 shares of common stock, par value $0.01 per share, to the underwriters
of the IPO pursuant to their exercise in full of the over-allotment option
granted by the Company.
As of June 30, 2000, Global-Tech had repurchased an aggregate of 693,897 shares
of common stock, par value $0.01 per share, held as treasury stock, in
connection with stock repurchase plans authorized by its Board of Directors.
As of June 30, 2000, Global-Tech had issued an aggregate of 46,003 shares of
common stock, par value $0.01 per share, in connection with stock grants under
an employee stock purchase plan authorized by its Board of Directors.
25
<PAGE>
Note 2 -- SUBSIDIARIES
Details of Global-Tech's principal subsidiaries as of June 30, 2000 were as
follows:
<TABLE>
<CAPTION>
Percentage
Place of of Equity
Name of Subsidiary Incorporation Interest Held
------------------ ------------- --------------
<S> <C> <C>
Pentalpha Enterprises Limited Hong Kong 100.0%
Pentalpha Hong Kong Limited Hong Kong 100.0%
Kwong Lee Shun Trading Company Limited Hong Kong 100.0%
Dongguan Wing Shing Electrical Products
Factory Company Limited China 100.0%
Wing Shing Products (BVI) Company Limited British Virgin Islands 100.0%
Wing Shing Overseas Limited British Virgin Islands 100.0%
Global-Tech USA, Inc. United States of America 100.0%
</TABLE>
Note 3 -- SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed in the preparation of these
statements are identical to those applied in preparing the latest annual
financial statements.
26
<PAGE>
GLOBAL-TECH APPLIANCES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE FIRST QUARTER ENDED JUNE 30, 2000
General
Global-Tech Appliances Inc. (the "Company") is a designer and manufacturer
of a wide range of small household appliances. The Company's products, all of
which are manufactured in China, are sold under brand names such as Black &
Decker(R), DeLonghi(R), Dirt Devil(R), Hamilton Beach(R), Krups(R), Morphy
Richards(R), Moulinex(R), Mr. Coffee(R), Proctor-Silex(R), Remington(R),
Sunbeam(R), Vidal Sassoon(R), and West Bend(R). The Company manufactures over
160 different models, primarily in six product categories: (i) kitchen
appliances such as coffeemakers, breadmakers and food processors; (ii) personal,
beauty and health care products such as hair dryers and hair setters; (iii)
garment care products such as steam and dry irons; (iv) travel products and
accessories such as travel irons and travel garment steam brushes; (v) floor
care products such as upright vacuum cleaners and hand-held steam vacuum
cleaners; and (vi) environmental care products such as humidifiers and air
cleaners.
The Company was founded in 1963 and for most of its history operated as a
contract manufacturer of products developed by its customers. In recent years,
however, the Company has emphasized original design manufacturing. As an
original design manufacturer, or ODM, the Company designs and develops
proprietary new products which it manufactures for its customers. The Company
made this shift by forming a product design and development team consisting of
engineers who focus on the development of new products. Net sales of the
Company's ODM products represented 72.4% and 65.1% of the Company's net sales
during the three months ended June 30, 1999 and June 30, 2000, respectively,
with the remaining sales generated by its contract manufacturing activities.
Sales of ODM products have decreased recently as a percentage of net sales.
This trend is expected to continue in the near term because of the anticipated
increase in sales of new floor care products which are primarily contract
manufactured products. The Company anticipates this increase in floor care
product sales will result in an overall increase in net sales. The Company
plans to continue to explore ways of expanding its business by diversifying into
new product categories with higher profit margins.
The Company is a holding company and has no business operations other than
ownership of its subsidiaries. The wholly owned subsidiaries of the Company are
Wing Shing Products (BVI) Company Limited and Wing Shing Overseas Limited, each
a British Virgin Islands corporation; Pentalpha Enterprises Limited, Pentalpha
Hong Kong Limited and Kwong Lee Shun Trading Company Limited, each a Hong Kong
corporation; Dongguan Wing Shing Electrical Products Factory Limited, a
corporation formed under the laws of the People's Republic of China; and Global-
Tech USA, Inc., a Delaware corporation.
Since most of the Company's purchases and sales are denominated in U.S.
dollars, the Company's financial statements are presented in U.S. dollars, the
functional currency of the Company. The Company's financial statements are
prepared in accordance with U.S. generally accepted accounting principles.
References to an interim period refer to the first three months of the Company's
fiscal year ended on June 30; for example, 2001 interim period refers to the
three month period ended June 30, 2000. References to a quarterly period refer
to the Company's fiscal quarter ended on June 30; for example, 2000 quarterly
period refers to the fiscal quarter ended June 30, 1999.
27
<PAGE>
Results of Operations
The following table sets forth certain statement of income data as a
percentage of net sales for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended June 30,
-------------------------------------
2000 1999
--------------- -----------------
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of goods sold 78.8 76.0
--------------- -----------------
Gross profit 21.2 24.0
Selling, general and administrative expenses 17.4 19.0
Unusual item 0.0 2.7
--------------- -----------------
Operating income 3.8 2.3
Other income (expense), net 4.2 3.8
--------------- -----------------
Income before income taxes 8.0 6.1
Provision for income taxes 0.3 0.4
--------------- -----------------
Net income 7.7% 5.7%
=============== =================
</TABLE>
Three Months ended June 30, 2000 Compared with Three Months ended June 30, 1999
Net sales. The Company's net sales consist of its gross invoiced sales
less discounts and returns. Net sales for the 2001 interim period were $22.7
million as compared to $18.7 million in the 2000 interim period. The increase
in net sales for the quarter reflects in large part the Company's successful
efforts in introducing its floor care products to the market. The Company
anticipates that the increase in net sales attributable to new sales of floor
care products will continue in the short term. The Company considers
manufacturing floor care products to be its first step in its strategy to
diversify and transform a portion of its manufacturing from relatively simple,
commodity-type personal care and other appliances to both more advanced, higher-
valued products and new product categories. The Company plans to continue and
expand the diversification program with the introduction of other new products
later in fiscal 2001. The Company anticipates utilizing its recently expanded
factory facilities for manufacturing new floor care products and other new
products. The Company believes that products in these new categories will,
because of their higher profit margins, help sustain and support further growth
and offset anticipated weakness in personal care and commodity-type product
sales.
The Company has also concentrated on forming alliances with large, brand-
name customers to supply its products which has resulted in new sales volume.
For example, new sales of a line of vacuum cleaners to a leading U.S. brand name
customer were approximately $3.2 million in the 2001 interim period.
Net sales consist primarily of sales in the Company's six major product
categories: kitchen appliances, personal, beauty and health care products,
garment care products, travel products and accessories; floor care products; and
environmental care products. Sales in each such product category for the 2001
interim period as compared to the 2000 interim period were as follows: sales of
kitchen appliances increased to $11.8 million, or 52.4% of net sales, from $10.4
million, or 55.5% of net sales; sales of personal, beauty and health care
products decreased to $1.2 million, or 5.2% of net sales, from
28
<PAGE>
$2.3 million, or 12.3% of net sales; sales of garment care products increased to
$4.4 million, or 19.6% of net sales, as compared to $3.7 million, or 19.9% of
net sales; sales of travel products decreased to $991,000, or 4.4% of net sales,
from $1.1 million, or 6.0% of net sales; sales of floor care products increased
to $3.7 million, or 16.3% of net sales, from $600,000 or 3.2% of net sales; and
sales of environmental care products decreased to $40,000, or 0.2% of net sales,
from $204,000, or 1.1% of net sales.
Gross profit. Gross profit consists of net sales less cost of goods sold,
which includes the costs of raw materials, production materials, labor,
transportation, depreciation and factory overhead. Gross profit in the 2001
interim period was $4.8 million, or 21.2% of net sales, as compared to $4.5
million, or 24.0% of net sales, in the 2000 interim period. Gross profit as a
percentage of net sales decreased in the 2001 interim period primarily due to
the significant start-up costs associated with the introduction of floor care
products, lower selling prices on breadmakers and higher charges for
consumables, transportation, depreciation, fuel oil and plastic resins.
Selling, general and administrative expenses. The primary components of
the Company's selling, general and administrative expenses ("SG&A") include
product design and development, transportation of finished goods, salaries for
the Company's marketing and administrative personnel, professional fees and
utilities. SG&A in the 2001 interim period increased to $3.9 million, or 17.4%
of net sales, from $3.5 million, or 19.0% of net sales, in the 2000 interim
period. The increase in SG&A expenses is primarily due to increased legal and
professional fees, traveling and recruitment expenses.
The primary components of the Company's design and development expenses
("development expenses") include sample design, patent fees, testing charges,
inspection fees and salaries for the Company's engineers and designers.
Development expenses were $469,000 in the 2001 interim period compared to
$482,000 in the same interim period of 2000.
Unusual item. The Company incurred approximately $500,000 in legal and
professional fees in the 2000 interim period for exploratory acquisition-related
activities. Although the Company has ceased negotiations with respect to those
particular transactions, it plans to continue to explore and pursue selected
acquisitions of complementary businesses. There can be no assurance that any of
these acquisitions will be consummated.
Other income (expense), net. Interest expense consists of interest on the
Company's short- and long-term bank credit facilities. Interest expense was
$61,000 in the 2001 interim period as compared to $76,000 in the 2000 interim
period. The lower interest expense is due to decreased borrowing requirements.
Other income (expense), net includes tooling income, interest income and non-
recurring income. Other income (expense), net was $959,000 in the 2001 interim
period as compared to $712,000 in the 2000 interim period. The increase in
other income (expense), net is primarily attributable to an increase in interest
income in the 2001 interim period as the Company invested the net proceeds
received from its initial public offering and cash generated from its operating
activities.
Income tax. The Company had taxable income in Hong Kong in the 2001 and
2000 interim periods. The financial statements include provisions for Hong Kong
profits tax of approximately $66,000 and $69,000 in the 2001 and 2000 interim
periods, respectively. The Company does not believe that its current method of
operations would subject it to material U.S. taxes because it should not be
considered to have significant income effectively connected with a trade or
business in the U.S. No income tax was payable by the Company in China during
this period because the Company's subsidiary in China had accumulated tax losses
during these periods.
Net income. Net income for the 2001 interim period was $1.8 million, or
$0.15 per share, as compared to $1.1 million, or $0.09 per share, for the 2000
interim period. Taking into account the
29
<PAGE>
$500,000 unusual item the Company incurred in the 2000 interim period and the
increase of $247,000 in other income (expense), net during the 2001 interim
period, net income actually decreased $55,000 over the 2001 interim period. This
actual decrease was due primarily to significant one-time start-up costs
associated with the introduction of floor care products and an increase in
factory overhead and SG&A expenses, but was offset by the $4.0 million increase
in net sales over the 2001 interim period due primarily to new sales of floor
care products.
Liquidity and Capital Resources
The Company's primary sources of financing have been cash from operating
activities and borrowings under credit agreements with various banks. Net cash
provided by operating activities during the 2001 interim period was
approximately $313,000 as compared to approximately $1.8 million during the 2000
interim period.
On April 7, 1998, the Securities and Exchange Commission declared effective
the Company's Registration Statement on Form F-1, File No. 333-8462, for the
registration of 4,830,000 ordinary shares of the Company, par value $0.01 per
share, including the underwriter's overallotment option, in the Company's
initial public offering. The net proceeds of the offering (including exercise
of the overallotment option), after deducting expenses, were approximately $81.0
million.
At June 30, 2000, accounts receivable were $10.2 million as compared to
$7.0 million at June 30, 1999. Receivables at June 30, 2000 represented 40.8
days of sales as compared to 33.8 days of sales at June 30, 1999. The higher
accounts receivable balance as at June 30, 2000 was attributable to the longer
payment terms offered to a new customer.
At June 30, 2000, inventories were $20.6 million compared to $23.9 million
at June 30, 1999. The decrease in inventories is primarily attributable to the
reduced inventory of finished goods.
In October 1998, the Company made a loan to a start-up U.S. corporation in
the original principal amount of $1.0 million, bearing interest at a fixed
annual rate of 7.0% and payable in quarterly installments of approximately
$81,000 commencing October 28, 2003, with any remaining balance due in full on
October 28, 2008. As of June 30, 2000, accrued interest on the loan was
approximately $123,000. As this company is in a development stage, there can be
no assurance that the loan will be repaid on a timely basis, if at all.
In October 1999, the Company made a loan to a director for the purchase of a
residence. The loan is in the original principal amount of $460,000, bearing
interest at a fixed annual rate of 6.02%, and is secured by a mortgage on the
property. The loan is payable in six years with annual installments of
approximately $77,000 of principal together with interest on the unpaid
principal balance, commencing October 21, 2000; however, such payments shall be
forgiven in arrears on each payment due date in consideration for the director's
continued service to the Company.
On May 30, 2000, the Company declared a one-time special dividend of $1.35
per share payable to stockholders of record as of June 5, 2000. Payment of the
dividend totaling approximately $16,383,739 was made on June 16, 2000.
On August 2, 2000, the Company announced that it made an investment in Lite
Array, Inc. ("Lite Array"). Lite Array is a California-based company that has
been engaged in the research and development of thin film electroluminescent
(TFEL) and organic light emitting diode (OLED or OEL) flat-panel, solid-state
displays. In connection with the investment, the Company has also entered into
an agreement with Lite Array to establish a manufacturing plant to produce OLED
displays at its Dongguan,
30
<PAGE>
China facility and to collaborate in developing and designing end-use
applications and products utilizing these displays for the Company to
manufacture and distribute.
The Company's aggregate capital expenditures during the 2001 and 2000
interim periods were approximately $1.3 million and $925,000, respectively. The
Company anticipates increasing expenditures for the acquisition of plant and
machinery during the remainder of the current fiscal year. The Company's
outstanding capital commitments of approximately $366,000 as of June 30, 2000
included commitments for the expansion of the Dongguan facility and the purchase
of machinery and equipment. The Company has nearly completed the expansion of
the physical space to 1,850,000 square feet. However, the Company does not
expect to complete the entire infrastructure or purchase all the equipment
initially anticipated until its order flow warrants the additional capacity.
The Company expects to incur an aggregate of approximately $387,000 in capital
expenses for expansion of the Dongguan facility in fiscal 2001, of which
approximately $83,000 was committed as of June 30, 2000. For the purchase of
machinery and equipment, the Company anticipates spending approximately $2.0
million in fiscal 2001, of which approximately $283,000 was committed during the
2001 interim period.
The Company finances its operations and capital expenditures primarily by
cash flows from operations, proceeds from the Company's initial public offering
and borrowings. As of June 30, 2000, the Company had bank credit facilities
with an aggregate credit line of approximately $37.0 million of which it had
outstanding $1.4 million in long-term debt (excluding the current portion) and
$763,000 in short-term debt (including the current portion of long-term debt).
The aggregate monthly payment on all such indebtedness was approximately
$100,670 as of June 30, 2000.
The Company's revolving credit facilities with Standard Chartered Bank,
HongkongBank and Citibank, N.A. have an aggregate facilities limit of
approximately $37.0 million as of June 30, 2000, bearing interest at floating
commercial bank lending rates in Hong Kong, which ranged from 9.25% to 10.50%
per annum as of June 30, 2000. The amounts payable each month on the revolving
credit facilities varies depending upon the amounts drawn at the time and were
approximately $670 at June 30, 2000. The Company's outstanding borrowings vary
according to its seasonal working capital requirements. As of June 30, 2000,
the amount utilized under its bank facilities was $5.8 million.
The Company's long-term debt consists of eleven term loans with an
aggregate outstanding amount of $2.2 million as of June 30, 2000 (including the
current portion of long-term debt), provided by various banks to finance the
purchase of machinery, equipment and motor vehicles. These loans bear interest
at rates per annum currently ranging from 7.5% to 11.75% and mature on various
dates through the year 2001. All of such loans are payable in monthly
installments which were approximately $100,000 as of June 30, 2000.
The Company anticipates that the net proceeds received from its initial
public offering, together with cash generated from operating activities, should
be adequate to satisfy its capital requirements for 18 to 24 months. The
Company has over the past several months considered potential acquisitions of
complementary businesses. Although the Company has not reached an agreement for
any such acquisitions, it plans to continue to pursue selected acquisitions of
complimentary businesses. In the event the Company should consummate such an
acquisition, its capital requirements could increase.
Inflation. During 1999 and the first three months of 2000, the rate of
inflation in Hong Kong has ranged from approximately -6.1% to 9.0% per year
(approximately -4.0% during 1999) and the average rate of inflation in China has
ranged from approximately -2.1% to 17.0% per year (approximately -1.3% during
1999). As a general matter, the effect of this inflation on the Company is
primarily limited to labor costs, which represent a small component of the
Company's total expenses. As the Company purchases most of its raw materials
outside China, inflation in China has not had a significant effect on its
overall costs.
31
<PAGE>
Currency and Exchange Rates. The functional currency of the Company is the
U.S. dollar. Nearly all of the Company's sales are denominated in U.S. dollars.
The majority of the Company's expenses, including wages and other production and
administrative costs are denominated in Hong Kong dollars and Chinese Renminbi.
Certain raw materials and other expenses are purchased using a variety of
currencies including the U.S. dollar, Chinese Renminbi, Japanese yen and German
mark. The majority of raw materials are purchased using Hong Kong dollars. The
Hong Kong dollar is pegged to the U.S. dollar. The Company has not been
significantly affected by exchange rate fluctuations and therefore has not
needed to hedge its positions.
Year 2000
The year 2000 problem is the result of computer software and hardware being
written in two-digit (rather than four-digit) formats to define the applicable
year, which could cause miscalculations or system failures due to the
recognition of a year defined as "00" as 1900 rather than 2000. The Company has
identified the year 2000 ("Y2K") problem as one of its principal information
technology objectives and has organized a committee to address any related
issues. The committee has been evaluating and resolving the potential impact of
the upcoming Y2K on its information technology and business processes.
As of June 30, 2000, the Company has spent approximately $100,000 to
address the Y2K problem. The Company's compliance programs and progress updates
regarding Y2K compliance were disclosed in the Fiscal 2000 Annual Report. The
modification and upgrading of the Company's equipment and software were
completed as planned. As of the date hereof, the operations of the Company have
not been affected by the Y2K problem and all of the Company's computer systems
functioned properly without disruption. Though contingency plans are in place
to deal with dates considered to be a risk for possible failures in systems,
there can be no assurance that the Company's systems are free of unanticipated
errors related to the Y2K problem or that the systems of the Company's
suppliers, subcontractors, vendors, shippers and customers will be fully Y2K
compliant.
32
