FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
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 0-22462
Gibraltar Steel Corporation
(Exact name of Registrant as specified in its charter)
Delaware 16-1445150
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3556 Lake Shore Road, P.O. Box 2028, Buffalo, NY 14219-0228
(Address of principal executive offices)
(716) 826-6500
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X . No .
As of March 31, 2001, the number of common shares outstanding was:
12,579,147.
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GIBRALTAR STEEL CORPORATION
INDEX
PAGE NUMBER
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
March 31, 2001 (unaudited) and
December 31, 2000 (audited) 3
Condensed Consolidated Statements of Income
Three months ended
March 31, 2001 and 2000 (unaudited) 4
Condensed Consolidated Statements of Cash Flows
Three months ended March 31, 2001 and 2000
(unaudited) 5
Notes to Condensed Consolidated Financial
Statements (unaudited) 6 - 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9 - 10
PART II. OTHER INFORMATION 11
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
GIBRALTAR STEEL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)
March 31, December 31,
2001 2000
(unaudited) (audited)
Assets
Current assets:
Cash and cash equivalents $ 3,161 $ 1,701
Accounts receivable 92,395 78,358
Inventories 92,316 100,987
Other current assets 7,271 6,548
________ ________
Total current assets 195,143 187,594
________ ________
Property, plant and equipment, net 234,150 229,159
Goodwill 135,839 130,368
Other assets 9,200 8,925
________ ________
574,332 $ 556,046
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 48,973 $ 39,285
Accrued expenses 14,073 15,575
Current maturities of long-term debt 327 327
________ ________
Total current liabilities 63,373 55,187
________ ________
Long-term debt 261,730 255,526
Deferred income taxes 34,807 34,325
Other non-current liabilities 4,277 2,660
Shareholders' equity
Preferred shares - -
Common shares 126 126
Additional paid-in capital 68,673 68,475
Retained earnings 142,255 139,747
Accumulated comprehensive loss (909) -
________ ________
Total shareholders' equity 210,145 208,348
________ ________
$ 574,332 $ 556,046
======== ========
See accompanying notes to financial statements
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GIBRALTAR STEEL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share data)
Three Months Ended
March 31,
2001 2000
(unaudited)
Net sales $ 150,550 $ 167,634
Cost of sales 122,065 133,086
________ ________
Gross profit 28,485 34,548
Selling, general and
administrative expense 18,743 20,230
________ ________
Income from operations 9,742 14,318
Interest expense 4,892 4,208
________ ________
Income before taxes 4,850 10,110
Provision for income taxes 1,964 4,095
________ ________
Net income $ 2,886 $ 6,015
======== ========
Net income per share-Basic $ .23 $ .48
======== ========
Weighted average shares
outstanding-Basic 12,577 12,579
======== ========
Net income per share-Diluted $ .23 $ .47
======== ========
Weighted average shares
outstanding-Diluted 12,681 12,717
======== ========
See accompanying notes to financial statements
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GIBRALTAR STEEL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Three Months Ended
March 31,
2001 2000
(unaudited)
Cash flows from operating activities
Net income $ 2,886 $ 6,015
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization 5,670 5,116
Provision for deferred income taxes 1,241 81
Undistributed equity investment income 138 (318)
Other noncash adjustments 29 29
Increase (decrease) in cash resulting from
changes in (net of acquisitions):
Accounts receivable (13,409) (14,974)
Inventories 8,671 (3,185)
Other current assets (1,153) (165)
Accounts payable and accrued expenses 6,946 5,431
Other assets (503) (329)
_______ _______
Net cash provided by (used in)
operating activities 10,516 (2,299)
_______ _______
Cash flows from investing activities
Acquisitions, net of cash acquired (10,832) -
Purchases of property, plant and equipment (5,372) (5,302)
Net proceeds from sale of property and
equipment 152 7,114
_______ _______
Net cash (used in) provided by
investing activities (16,052) 1,812
_______ _______
Cash flows from financing activities
Long-term debt reduction (9,699) (14,771)
Proceeds from long-term debt 16,903 13,872
Payment of dividends (377) (314)
Net proceeds from issuance of common stock 169 35
_______ _______
Net cash provided by (used in)
financing activities 6,996 (1,178)
_______ _______
Net increase (decrease) in cash and cash
equivalents 1,460 (1,665)
Cash and cash equivalents at beginning of year 1,701 4,687
_______ _______
Cash and cash equivalents at end of period $ 3,161 $ 3,022
======= =======
See accompanying notes to financial statements
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GIBRALTAR STEEL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements as of
March 31, 2001 and 2000 have been prepared by the Company without
audit. In the opinion of management, all adjustments necessary to
present fairly the financial position, results of operations and
cash flows at March 31, 2001 and 2000 have been included.
Certain information and footnote disclosures including significant
accounting policies normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that
these condensed financial statements be read in conjunction with
the financial statements included in the Company's Annual Report to
Shareholders for the year ended December 31, 2000.
The results of operations for the three month period ended March
31, 2001 are not necessarily indicative of the results to be
expected for the full year.
2. INVENTORIES
Inventories consist of the following:
(in thousands)
March 31, December 31,
2001 2000
(unaudited) (audited)
Raw material $ 45,688 $ 54,640
Finished goods and work-in-process 46,628 46,347
_______ _______
Total inventories $ 92,316 $100,987
======= =======
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3. SHAREHOLDERS' EQUITY
The changes in shareholders' equity consist of:
(in thousands)
Additional Accumulated
Common Shares Paid-in Retained Comprehensive
Shares Amount Capital Earnings Loss
December 31, 2000 12,567 $ 126 $ 68,475 $139,747 $ -
Implementation of
FAS 133 - - - - (191)
Net Income - - - 2,886
Stock options
exercised 12 - 169 - -
Earned portion of
Restricted Stock - - 29 - -
Cash dividends-
$.03 per share - - - (378) -
Interest rate
swap adjustments - - - - (718)
March 31, 2001 12,579 $ 126 $ 68,673 $142,255 $ (909)
===========================================
On January 1, 2001, the Company implemented the provisions of Statement
of Financial Accounting Standards No. 133 Accounting for Derivative
Instruments and Hedging Activities (FAS 133) and recognized the fair
value of its interest rate swap agreements as other non-current
liabilities. Gains or losses from changes in the fair value of the
swap agreements are recorded, net of taxes, as components of
Accumulated Comprehensive Loss.
4. EARNINGS PER SHARE
Basic net income per share equals net income divided by the weighted
average shares outstanding for the three months ended March 31, 2001
and 2000. The computation of diluted net income per share includes
all dilutive common stock equivalents in the weighted average shares
outstanding.
Options to purchase 1,139,344 shares of the Company's common stock are
outstanding as of March 31, 2001 and are exercisable at prices ranging
from $10.00 to $22.50 per share. Included in diluted shares are
common stock equivalents relating to options of 103,461 and 137,719
for 2001 and 2000, respectively.
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5. ACQUISITIONS
On February 13, 2001, the Company purchased all the outstanding
capital stock of Pennsylvania Industrial Heat Treaters, Inc. (PIHT)
for approximately $11 million, net of cash acquired. PIHT provides
metallurgical heat treating services and specializes in heat
treating powdered metal parts.
On July 17, 2000, the Company purchased all the outstanding capital
stock of Milcor Limited Partnership (Milcor) for approximately $43
million in cash. Milcor manufactures a complete line of metal
building products, including registers, vents, bath cabinets,
access doors, roof hatches and telescoping doors.
These acquisitions have been accounted for under the purchase
method with the results of their operations consolidated with the
Company's results of operations from the respective acquisition
dates. The aggregate excess of the purchase prices of these
acquisitions over the fair market values of the net assets of the
acquired companies is being amortized over 35 years from the
acquisition dates using the straight-line method.
The following information presents the pro forma consolidated
condensed results of operations as if the acquisitions had occurred
on January 1, 2000. The pro forma amounts may not be indicative of
the results that actually would have been achieved had the
acquisitions occurred as of January 1, 2000 and are not necessarily
indicative of future results of the combined companies.
(in thousands, except per share data)
Three Months Ended
March 31
2001 2000
(unaudited)
Net sales $ 151,210 $ 181,251
========= ==========
Income before taxes $ 1,988 $ 10,563
========= ==========
Net income $ 2,921 $ 6,284
========= ==========
Net income per share-Basic .23 .50
========= ==========
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Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Net sales of $150.6 million for the first quarter ended March 31,
2001, which included net sales of Milcor (acquired July 17, 2000)
and PIHT (acquired February 13, 2001)(collectively, the
Acquisitions), decreased 10.2% from net sales of $167.6 million for
the prior year's first quarter. This decrease was due to economic
conditions, primarily automotive industry related.
Cost of sales as a percentage of net sales increased to 81.1% for
the quarter ended March 31, 2001 from 79.4% for the prior year's
quarter, primarily due to higher labor, fringe and utility costs.
Selling, general and administrative expenses decreased by
approximately $1.5 million for the first quarter of 2001 primarily
due to decreases in incentive based compensation offset by
increases from the Acquisitions.
Interest expense for the first quarter ended March 31, 2001
increased by $.7 million from the same period in 2000 primarily due
to higher interest rates in effect and higher average borrowings
during 2001 to finance the Acquisitions and capital expenditures.
As a result of the above, income before taxes decreased by $5.3
million for the first quarter ended March 31, 2001 from the same
period of 2000.
Income taxes for the first quarter ended March 31, 2001
approximated $2.0 million and were based on a 40.5% effective tax
rate.
Liquidity and Capital Resources
Shareholders' equity increased by approximately $2 million at March
31, 2001 to $210 million. During the first three months of 2001,
the Company's working capital remained constant at approximately
$132 million.
The Company's principal capital requirements are to fund its
operations, including working capital, the purchase and funding of
improvements to its facilities, machinery and equipment and to fund
acquisitions.
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Net cash provided by operations of $10.5 million resulted primarily
from net income of $2.9 million, depreciation and amortization of
$5.7 million, and decreases in inventories of $8.7 million and
increases in accounts payable and accrued expenses of $6.9 million
offset by increases in accounts receivable of $13.4 million due to
increased sales in March 2001 compared to December 2000.
The $10.5 million of net cash provided by operations and the $7.2
million in net borrowings under the Company's revolving credit
facility were used to fund the $10.8 million acquisition of PIHT,
capital expenditures of $5.4 million and cash dividends of $.4
million.
At March 31, 2001 the Company's revolving credit facility available
approximated $310 million, with borrowings of approximately $256
million and an additional availability of approximately $54
million.
The Company believes that availability of funds under its credit
facilities together with cash generated from operations will be
sufficient to provide the Company with the liquidity and capital
resources necessary to support its existing operations.
Safe Harbor Statement
The Company wishes to take advantage of the Safe Harbor provisions
included in the Private Securities Litigation Reform Act of 1995
(the "Act"). Statements by the Company, other than historical
information, constitute "forward looking statements" within the
meaning of the Act and may be subject to a number of risk factors.
Factors that could affect these statements include, but are not
limited to, the following: the impact of changing steel prices on
the Company's results of operations; changing demand for the
Company's products and services; and changes in interest or tax
rates.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
1. Exhibits
a. Exhibit 10.1 - First Amendment Dated March 30,
2001 to Third Amended and Restated
Credit Agreement Dated September 29, 2000
among Gibraltar Steel Corporation,
Gibraltar Steel Corporation of New York,
Chase Manhattan Bank, N.A., as
Administrative Agent, and various
Financial Institutions that are
signatories thereto
2. Reports on Form 8-K. There were no reports on Form 8-K
during the three months ended March 31, 2001.
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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.
GIBRALTAR STEEL CORPORATION
(Registrant)
By /s/ Brian J. Lipke
Brian J. Lipke
Chief Executive Officer and
Chairman of the Board
By /s/ Walter T. Erazmus
Walter T. Erazmus
President
By /s/ John E. Flint
John E. Flint
Vice President and
Chief Financial Officer
(Principal Financial and Chief
Accounting Officer)
Date: May 11, 2001
Exhibit 10.1
FIRST AMENDMENT TO THIRD AMENDED
AND RESTATED CREDIT AGREEMENT
This First Amendment dated as of March 30, 2001 to Third Amended and
Restated Credit Agreement dated as of September 29, 2000 ("Credit
Agreement") by and among GIBRALTAR STEEL CORPORATION OF NEW YORK
("Borrower"); GIBRALTAR STEEL CORPORATION ("Company"); and THE
CHASE MANHATTAN BANK, as administrative agent ("Administrative
Agent") for THE CHASE MANHATTAN BANK ("Chase"); FLEET NATIONAL BANK;
MELLON BANK, N.A., KEYBANK NATIONAL ASSOCIATION ("Key"); HSBC BANK USA;
PNC BANK, N.A.; MANUFACTURERS AND TRADERS TRUST COMPANY; NATIONAL
CITY BANK OF PENNSYLVANIA; FIFTH THIRD BANK, NORTHEASTERN OHIO; FIRSTAR
BANK, N.A.; SUNTRUST BANK; and COMERICA BANK (collectively, "Banks").
A. Preliminary Statement
WHEREAS, the Borrower, the Company, the Administrative Agent and the
Banks are parties to the Credit Agreement; and
WHEREAS, the Borrower, the Company and the Banks wish to amend certain
terms of the Credit Agreement;
WHEREAS, unless otherwise defined herein, terms used in the Credit
Agreement shall have such defined meanings when used herein;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, receipt of which is hereby acknowledged, and
upon satisfaction of the conditions set forth in Section C, below, the
Banks, the Borrower, the Company, and the Administrative Agent,
hereby agree as follows:
B. Amendment
1. Section 1.1 of the Credit Agreement is amended so that in the
definition of "Credit Pricing Agreement", the phrase "Third Amended
Credit Pricing Agreement dated as of July 17, 2000" is deleted and
the phrase "Fourth Amended and Restated Credit Pricing Agreement
dated as of March 30, 2001" is substituted in its place.
2. Section 2.1(c) of the Credit Agreement is amended so that the
second paragraph thereof is deleted and the following is substituted
in its place:
"If and when the Borrower wishes Chase to make a Swingloan,
the Borrower shall, not later than 12:00 noon (New York time) on
the Business Day on which the Swingloan is to be made, notify
Chase of the amount of the Swingloan desired, which amount shall
be at least $50,000.00. Chase shall determine and advise the
Borrower promptly thereafter of the rate option applicable to the
Swingloan, which rate shall be the overnight moneymarket rate
offered by Chase plus the Swingloan Rate Increment determined in
accordance with the Credit Pricing Agreement ("Swingloan Rate").
The Borrower shall immediately notify Chase if the Swingloan is
to bear interest at the Swingloan Rate or the Prime Rate, which
notice shall be irrevocable. Each Swingloan, together with the
interest accrued thereon, shall be repaid by the Borrower to the
Administrative Agent for the account of Chase prior to the close
of business on the Business Day immediately following the
Business Day on which such Swingloan is made."
3. Section 6.15 of the Credit Agreement (Interest Coverage Ratio) is
deleted in its entirety and the following is substituted in its place:
"6.15 Interest Coverage Ratio. Permit, in the case of the
Company on a Consolidated Basis, the ratio of Earnings Before Taxes
and Interest plus Depreciation and Amortization minus Capital
Expenditures (excluding Capital Expenditures made in connection
with permitted acquisitions) to interest payable on Total
Liabilities, calculated on an annual rolling basis of four fiscal
quarters to be less than: 2.75 to 1.00 as of the last day of the
fiscal quarter ending March 31, 2001; 2.75 to 1.00 as of the last
day of the fiscal quarter ending June 30, 2001; or 3.00 to 1.00
as of the last day of the fiscal quarter ending September 30,
2001 and for every fiscal quarter thereafter."
4. Section 6.17 of the Credit Agreement (Funded Debt/EBITDA) is
amended so that Section 6.17 is deleted in its entirety and the
following is substituted in its place:
"6.17 Funded Debt/EBITDA. Permit, in the case of the Company on
a Consolidated bases, the ratio of Funded Debt (as defined below)
to Earnings Before Interest and Taxes plus Depreciation and
Amortization ("EBITDA") as of the last day of any fiscal quarter,
to be greater than 3.50 to 1.0 as of the last day of the fiscal
quarter ending March 31, 2001; 3.50 to 1.0 as of the last day of
the fiscal quarter ending June 30, 2001; 3.25 to 1.0 as of the
last day of the fiscal quarter ending September 30, 2001; 3.25
to 1.0 as of the last day of the fiscal quarter ending December
31, 2001; or 3.00 to 1.0 as of the last day of the fiscal quarter
ending March 31, 2002 and for each fiscal quarter thereafter,
such calculations to be based on annual rolling basis of four
fiscal quarters.
"Funded Debt" means debt for money borrowed which is bearing
interest. For the purposes of calculating this covenant, upon the
consummation of a permitted acquisition, up to 12 month historical
EBITDA of the acquired entity shall be included in the
calculation of the ratio, subject to the Banks' review and
approval, in their discretion, of such acquired entity's financial
information provided, however, such historical EBITDA shall only
be included in the calculation of Funded Debt if the applicable
acquired entity's EBITDA is not included in the Consolidated
EBITDA of the Company for the applicable month."
5. Schedule 3.1.d of the Credit Agreement (Subsidiaries Required
to Execute and Deliver Guaranties) is amended by inserting "Pennsylvania
Heat Treaters, Inc." and "Pennsylvania" after "Milcor, Inc." and
"Delaware".
C. Conditions. The effectiveness of this Agreement shall be
conditioned upon the satisfaction of the following conditions:
1. Each Guarantor Subsidiary shall have executed and delivered to the
Administrative Agent, for the benefit of the Banks, a Reaffirmation
Agreement, in form acceptable to the Administrative Agent and the
Banks, reaffirming and ratifying the unlimited continuing
guaranties and security agreements previously given by each Guarantor
Subsidiary to the Administrative Agent for the benefit of the Banks.
2. Borrower and Company shall execute and deliver to Administrative
Agent, for the benefit of the Banks, a Fourth Amended and Restated
Credit Pricing Agreement in form acceptable to the Administrative
Agent and the Banks.
3. The Company and/or the Borrower shall have paid to each Bank
signing below an amendment fee in the amount of $15,000.
4. The Borrower and/or the Company shall have paid all costs and
expenses incurred by the Administrative Agent and the Banks in
connection with the transactions contemplated by this Agreement
including, without limitation, reasonable attorney's fees.
D. Other Provisions
1. Except as specifically set forth herein, the Credit Agreement
shall remain in full force and effect and is hereby reaffirmed. The
Borrower and the Company acknowledge that they are bound by all of
the terms, covenants and conditions set forth in the Credit
Agreement, and that, if there has occurred any Default or Event of
Default, the Agent and the Banks shall have no obligation to make any
Advances or Swingloans or to issue any Letters of Credit. If there has
occurred a Default or an Event of Default, Agent and the Banks may
condition the making of any subsequent Advances or Swingloans or the
issuance of any Letters of Credit upon the execution and delivery by
Borrower and Company of an amendment to the Credit Agreement which may
include, without limitation, additional or revised covenants, an
increased rate of interest on the Revolving Credit, increased Letter
of Credit or other fees and such other terms, conditions and covenants
as the Agent and the Banks may require.
2. The terms "Administrative Agent" and "Banks" as used herein shall
include the successors and assigns of those parties and all of the
entities listed on Schedule 1 hereto.
3. This Agreement shall be construed under, and governed by, the
internal laws of the State of New York without regard to its conflict
of laws and rules which would make the laws of another jurisdiction
applicable.
4. This Agreement may be executed in any number of counterparts,
each of which when so executed and delivered shall be an original, but
all such counterparts shall together constitute one and the same
Agreement.
[This Space Intentionally Left Blank]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed by their duly authorized officers, all on the date hereof.
Borrower:
GIBRALTAR STEEL CORPORATION OF NEW YORK
By: /s/ John E. Flint
John E. Flint
Vice President
Company:
GIBRALTAR STEEL CORPORATION
By: /s/ John E. Flint
John E. Flint
Vice President
THE CHASE MANHATTAN BANK,
as Administrative Agent
By: /s/ Robert J. McArdle
Robert J. McArdle
Vice President
Consented to this 30 day of March, 2001
THE CHASE MANHATTAN BANK
By: /s/ Robert J. McArdle
Robert J. McArdle
Vice President
Consented to this 30 day of March 2001
FLEET NATIONAL BANK
By: /s/ John C. Wright
John C. Wright
Vice President
Consented to this 30 day of March, 2001
MELLON BANK, N.A.
By: /s/ Brian Ciaverella
Brian Ciaverella
Vice President
Consented to this 30 day of March, 2001
KEYBANK NATIONAL ASSOCIATION
By: /s/ Mark F. Wachowiak
Mark F. Wachowiak
Assistant Vice President
Consented to this 30 day of March, 2001
HSBC BANK USA
By: /s/ William H. Graser
William H. Graser
Vice President
Consented to this 30 day of March, 2001
PNC BANK, N.A.
By: /s/ David B. Gookin
David B. Gookin
Vice President
Consented to this 30 day of March, 2001
MANUFACTURERS AND TRADERS
TRUST COMPANY
By: /s/ Wayne N. Keller
Wayne N. Keller
Vice President
Consented to this 30 day of March, 2001
NATIONAL CITY BANK OF PENNSYLVANIA
By: /s/ William A. Feldmann
William A. Feldmann
Vice President
Consented to this 30 day of March, 2001
FIFTH THIRD BANK, NORTHEASTERN OHIO
By: /s/ James P. Byrnes
James P. Byrnes
Vice President
Consented to this 30 day of March, 2001
FIRSTAR BANK, N.A.
By: /s/ David J. Dannemiller
David J. Dannemiller
Vice President
Consented to this 30 day of March, 2001
SUNTRUST BANK
By:/s/ W. David Wisdom
W. David Wisdom
Vice President
Consented to this 30 day of March, 2001
COMERICA BANK
By: /s/ Joel S. Gordon
Joel S. Gordon
Account Officer
Consented to this 30 day of March, 2001
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