**United StatesSecurities and Exchange Commission**

**Washington,D.C.  20549**

 

**Form 10-Q**

 

**ý****  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For the Quarterly Period Ended September 30, 2003**

** **

**o****  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**CommissionFile Number 0-27024**

 

**METRO ONE TELECOMMUNICATIONS, INC.**

(Exact name ofregistrant as specified in its charter)

 

|                                                            | **OREGON**                                                       |   | **93-0995165**                        |   |
|-----------------------------------------------------------------|------------------------------------------------------------------|--------|---------------------------------------|--------|
|                                                            | (State or other  jurisdiction of  incorporation or organization) |   | (I.R.S. Employer  Identification No.) |   |
|                                                            |                                                             |   |                                  |   |
| **11200  Murray Scholls Place, Beaverton, Oregon   97007** |
| (Address of  principal executive offices) (zip code)            |
|                                                            |
| **(503)  643-9500**                                             |
| (Registrant’s  telephone number, including area code)      |
|                                                                 |                                                                  |        |                                       |        |

 

**Indicateby check mark whether the registrant has (1) filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.  Yes ****ý  No ****o**

 

**Indicateby check mark whether the registrant is an accelerated filer (as defined inRule 12b-2 of the Exchange Act)  Yes ****ý  No ****o**

 

**Numberof shares of common stock outstanding as of November  14, 2003: 24,775,341shares, no par value per share.**

 

 

----

 

**METROONE TELECOMMUNICATIONS, INC.**

 

**INDEX TO FORM 10 - Q**

** **
| Part I   | Financial Information                                                                                     |   |
|----------|-----------------------------------------------------------------------------------------------------------|--------|
|     |                                                                                                      |   |
| Item 1.  | Financial Statements  (Unaudited)                                                                         |   |
|     |                                                                                                      |   |
|     | Condensed Statements  of Operations for the three and nine months ended September 30, 2003 and  2002 |   |
|     |                                                                                                      |   |
|     | Condensed  Balance Sheets as of September 30, 2003 and December 31, 2002                        |   |
|     |                                                                                                      |   |
|     | Condensed Statements  of Cash Flows for the nine months ended September 30, 2003 and 2002            |   |
|     |                                                                                                      |   |
|     | Notes to  Condensed Financial Statements                                                                  |   |
|     |                                                                                                      |   |
| Item 2.  | Management’s Discussion and Analysis of  Financial Condition and Results of Operations               |   |
|     |                                                                                                      |   |
| Item 3.  | Quantitative and Qualitative Disclosures About  Market Risk                                               |   |
|     |                                                                                                      |   |
| Item 4.  | Controls and Procedures                                                                                   |   |
|     |                                                                                                      |   |
| Part  II | Other  Information                                                                                        |   |
|     |                                                                                                      |   |
| Item 6.  | Exhibits and Reports on Form 8-K                                                                          |   |
|     |                                                                                                      |   |
|     | Signatures                                                                                                |   |

 

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**MetroOne Telecommunications, Inc.**

**Condensed Statements of Operations****(Unaudited)**

 
|                                       |   | **Three Months Ended  September 30,** |    | **Nine Months Ended  September 30,** |   |
|--------------------------------------------|--------|--------------------------------------------|---------|-------------------------------------------|--------|
| **(In thousands, except per share  data)** |   | **2003**                                   |    | **2002**                                  |   | **2003** |   | **2002** |   |
|                                       |   |                                       |    |                                      |   |   |   |   |   |
| Revenues                                   |   | $                                          | 45,516  |                                      | $      | 66,172 |   | $ | 155,886 |   | $ | 195,789 |   |
|                                       |   |                                       |    |                                      |   |   |   |   |   |
| Costs  and expenses:                       |   |                                       |    |                                      |   |   |   |   |   |
| Direct  operating                          |   | 27,268                                     |    | 37,133                                    |   | 89,762 |   | 109,901 |   |
| Selling,  general and administrative       |   | 34,631                                     |    | 17,134                                    |   | 90,659 |   | 53,624 |   |
|                                       |   | 61,899                                     |    | 54,267                                    |   | 180,421 |   | 163,525 |   |
|                                       |   |                                       |    |                                      |   |   |   |   |   |
| (Loss)  income from operations             |   | (16,383                                    | )       | 11,905                                    |   | (24,535 | ) | 32,264 |   |
|                                       |   |                                       |    |                                      |   |   |   |   |   |
| Other  income, net                         |   | 134                                        |    | 210                                       |   | 533 |   | 661 |   |
|                                       |   |                                       |    |                                      |   |   |   |   |   |
| (Loss)  income before income taxes         |   | (16,249                                    | )       | 12,115                                    |   | (24,002 | ) | 32,925 |   |
| Income  tax (benefit) expense              |   | (5,596                                     | )       | 4,726                                     |   | (8,279 | ) | 12,633 |   |
|                                       |   |                                       |    |                                      |   |   |   |   |   |
| Net  (loss) income                         |   | $                                          | (10,653 | )                                         | $      | 7,389 |   | $ | (15,723 | ) | $ | 20,292 |   |
|                                       |   |                                       |    |                                      |   |   |   |   |   |
| Net  (loss) income per common share:       |   |                                       |    |                                      |   |   |   |   |   |
| Basic                                      |   | $                                          | (.43    | )                                         | $      | .30 |   | $ | (.64 | ) | $ | .83 |   |
| Diluted                                    |   | $                                          | (.43    | )                                         | $      | .30 |   | $ | (.64 | ) | $ | .81 |   |
|                                       |   |                                       |    |                                      |   |   |   |   |   |
| Weighted  average shares outstanding:      |   |                                       |    |                                      |   |   |   |   |   |
| Basic                                      |   | 24,698                                     |    | 24,588                                    |   | 24,696 |   | 24,544 |   |
| Diluted                                    |   | 24,698                                     |    | 24,987                                    |   | 24,696 |   | 25,112 |   |

 

The accompanyingnotes are an integral part of these condensed financial statements.

 

1

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**MetroOne Telecommunications, Inc.**

**Condensed Balance Sheets****(Unaudited)**

 
| **(In thousands)**                                                                                                                                                           |   | **September 30,  2003** |       | **December 31,  2002** |       |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|------------|-----------------------------|------------|
|                                                                                                                                                                         |   |                         | ** ** |                        | ** ** |
| **Assets**                                                                                                                                                                   |   |                         | ** ** |                        | ** ** |
|                                                                                                                                                                         |   |                         |       |                        |       |
| Current  assets:                                                                                                                                                             |   |                         |       |                        |       |
| Cash  and cash equivalents                                                                                                                                                   |   | $                            | 53,906     |                        | $          | 76,528 |   |
| Restricted  cash                                                                                                                                                             |   | 4,900                        |       | 3,348                       |       |
| Accounts  receivable                                                                                                                                                         |   | 24,654                       |       | 31,321                      |       |
| Prepaid  costs and other current assets                                                                                                                                      |   | 20,518                       |       | 6,498                       |       |
|                                                                                                                                                                         |   |                         |       |                        |       |
| Total  current assets                                                                                                                                                        |   | 103,978                      |       | 117,695                     |       |
|                                                                                                                                                                         |   |                         |       |                        |       |
| Furniture,  fixtures and equipment, net                                                                                                                                      |   | 66,626                       |       | 71,668                      |       |
| Goodwill                                                                                                                                                                     |   | 4,432                        |       | 4,432                       |       |
| Intangible  assets                                                                                                                                                           |   | 5,113                        |       | 4,316                       |       |
| Other  assets                                                                                                                                                                |   | 585                          |       | 578                         |       |
|                                                                                                                                                                         |   |                         |       |                        |       |
| Total  assets                                                                                                                                                                |   | $                            | 180,734    |                        | $          | 198,689 |   |
|                                                                                                                                                                         |   |                         |       |                        |       |
| **Liabilities and Shareholders’ Equity**                                                                                                                                |   |                         |       |                        |       |
|                                                                                                                                                                         |   |                         |       |                        |       |
| Current  liabilities:                                                                                                                                                        |   |                         |       |                        |       |
| Accounts  payable                                                                                                                                                            |   | $                            | 1,380      |                        | $          | 1,366 |   |
| Accrued  liabilities                                                                                                                                                         |   | 3,054                        |       | 1,054                       |       |
| Accrued  payroll and related costs                                                                                                                                           |   | 10,422                       |       | 11,570                      |       |
|                                                                                                                                                                         |   |                         |       |                        |       |
| Total  current liabilities                                                                                                                                                   |   | 14,856                       |       | 13,990                      |       |
|                                                                                                                                                                         |   |                         |       |                        |       |
| Deferred  tax liabilities                                                                                                                                                    |   | 5,506                        |       | 8,789                       |       |
| Other  long-term liabilities                                                                                                                                                 |   | 645                          |       | 521                         |       |
|                                                                                                                                                                         |   |                         |       |                        |       |
| Total  liabilities                                                                                                                                                           |   | 21,007                       |       | 23,300                      |       |
|                                                                                                                                                                         |   |                         |       |                        |       |
| Commitments  and contingencies                                                                                                                                               |   |                         |       |                        |       |
|                                                                                                                                                                         |   |                         |       |                        |       |
| Shareholders’  equity:                                                                                                                                                  |   |                         |       |                        |       |
| Preferred  stock, no par value; 10,000 shares authorized, no shares issued or  outstanding                                                                                   |   | —                       |       | —                      |       |
| Common  stock, no par value; 50,000 shares authorized, 24,698 and 24,682 shares  issued and outstanding at September 30, 2003 and December 31, 2002,  respectively |   | 119,486                      |       | 119,425                     |       |
| Retained  earnings                                                                                                                                                           |   | 40,241                       |       | 55,964                      |       |
|                                                                                                                                                                         |   |                         |       |                        |       |
| Total  shareholders’ equity                                                                                                                                             |   | 159,727                      |       | 175,389                     |       |
|                                                                                                                                                                         |   |                         |       |                        |       |
| Total  liabilities and shareholders’ equity                                                                                                                             |   | $                            | 180,734    |                        | $          | 198,689 |   |

 

 

The accompanyingnotes are an integral part of these condensed financial statements.

 

2

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#### **Metro OneTelecommunications, Inc.**

#### **Condensed Statements of Cash Flows**(Unaudited)

 
|                                                                                                 |   | **Nine Months Ended September 30,** |    |
|------------------------------------------------------------------------------------------------------|--------|------------------------------------------|---------|
| **(In thousands)**                                                                                   |   | **2003**                                 |    | **2002** |   |
|                                                                                                 |   |                                     |    |   |   |
| Cash  flows from operating activities:                                                               |   |                                     |    |   |   |
| Net  (loss) income                                                                                   |   | $                                        | (15,723 | ) | $ | 20,292 |   |
| Adjustments  to reconcile net (loss) income to net cash (used in) provided by operating  activities: |   |                                     |    |   |   |
| Depreciation  and amortization                                                                       |   | 15,888                                   |    | 13,817 |   |
| Loss  on disposal of fixed assets                                                                    |   | 91                                       |    | 60 |   |
| Deferred  income taxes                                                                               |   | (3,645                                   | )       | (4,375 | ) |
| Tax  benefit from stock option plans                                                                 |   | —                                   |    | 498 |   |
| Changes  in certain assets and liabilities:                                                          |   |                                     |    |   |   |
| Accounts  receivable                                                                                 |   | 6,667                                    |    | (12,314 | ) |
| Prepaid  expenses and other assets                                                                   |   | (14,854                                  | )       | 3,915 |   |
| Accounts  payable and other liabilities                                                              |   | 990                                      |    | (2,594 | ) |
|                                                                                                 |   |                                     |    |   |   |
| Net  cash (used in) provided by operating activities                                                 |   | (10,586                                  | )       | 19,299 |   |
|                                                                                                 |   |                                     |    |   |   |
| Cash  flows from investing activities:                                                               |   |                                     |    |   |   |
| Capital  expenditures                                                                                |   | (10,580                                  | )       | (18,198 | ) |
| Proceeds  from sale of assets                                                                        |   | 35                                       |    | 8 |   |
|                                                                                                 |   |                                     |    |   |   |
| Net  cash used in investing activities                                                               |   | (10,545                                  | )       | (18,190 | ) |
|                                                                                                 |   |                                     |    |   |   |
| Cash  flows from financing activities:                                                               |   |                                     |    |   |   |
| Restricted  cash to secure letter of credit                                                          |   | (1,552                                   | )       | (2,448 | ) |
| Proceeds  from exercise of stock options and employee stock purchases                                |   | 61                                       |    | 1,064 |   |
|                                                                                                 |   |                                     |    |   |   |
| Net  cash used in financing activities                                                               |   | (1,491                                   | )       | (1,384 | ) |
|                                                                                                 |   |                                     |    |   |   |
| Net  decrease in cash and cash equivalents                                                           |   | (22,622                                  | )       | (275 | ) |
|                                                                                                 |   |                                     |    |   |   |
| Cash  and cash equivalents, beginning of period                                                      |   | 76,528                                   |    | 53,692 |   |
|                                                                                                 |   |                                     |    |   |   |
| Cash  and cash equivalents, end of period                                                            |   | $                                        | 53,906  |   | $ | 53,417 |   |
|                                                                                                 |   |                                     |    |   |   |
| Supplemental  disclosure of cash flow information:                                                   |   |                                     |    |   |   |
| Cash  paid for interest                                                                              |   | $                                        | —  |   | $ | 10 |   |
| Cash  paid for income taxes                                                                          |   | $                                        | 854     |   | $ | 8,568 |   |

 

The accompanyingnotes are an integral part of these condensed financial statements.

 

3

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**MetroOne Telecommunications, Inc.**

**Notes to Condensed****Financial Statements (Unaudited)**

 

**1.  Summary of Significant Accounting Policies**

 

**Basis ofPresentation**

 

The accompanyingunaudited interim condensed financial statements have been prepared by MetroOne Telecommunications, Inc. in conformity with accounting principles generallyaccepted in the United States of America for interim financialinformation.  Accordingly, certainfinancial information and footnotes have been omitted or condensed.  In the opinion of management, the condensedfinancial statements include all adjustments, consisting only of normalrecurring adjustments, necessary for a fair presentation of the results for theinterim periods.  These condensedfinancial statements and notes thereto should be read in conjunction with ouraudited financial statements included in our Annual Report on Form 10-K for theyear ended December 31, 2002.  Theresults of operations for the interim period shown in this report are notnecessarily indicative of results for any future interim period or the entirefiscal year.  Certain balances in theprior period financial statements have been reclassified to conform to current periodpresentation.  Such reclassificationshad no effect on reported net income.

 

**Advertising**

 

Costs of advertising areexpensed as incurred except for commercial advertising production costs, whichare expensed at the time the related commercials are first run.  Advertising expense was approximately $14million and $33 million in the three and nine-month periods endedSeptember 30, 2003, respectively. In addition, as of September 30, 2003, we have committed to andpaid out approximately $9 million for future marketing and promotion of ourInfone® service which we expect to expense over the remainder of 2003 as therelated marketing and promotion activities occur.  These expenditures are included in prepaid costs and othercurrent assets on the balance sheet at September 30, 2003.  Subsequent to September 30, 2003, wealso have committed to approximately $10 million of additional advertising andpromotion funding which is expected to be expensed during the remainder of2003.

 

**Goodwill**

 

We account for goodwillin accordance with Statement of Financial Accounting Standards (“SFAS”) No.142, “Goodwill and Other Intangible Assets.” Under SFAS No. 142, we evaluate goodwill for impairment annually andwhenever events or changes in circumstances indicate the carrying amount ofgoodwill may not be recoverable.  Weperform our annual impairment test in November each year.  To perform that test, we compare thecarrying value of our business to our estimates of the fair value of ourbusiness.  If our evaluation indicatesthat the fair value of our business is less than its carrying value, we willwrite down the related goodwill to its implied fair value.  We use estimates of future cash flows,discounted to present value, market prices and other measures to estimate thefair value of our business.  When we performour evaluation of goodwill in the fourth quarter of 2003, particularly giventhe expiration of our contract with AT&T Wireless in December 2003, itis likely that our estimates of the fair value of our business will be lessthan the carrying value, which would cause us to write down goodwill at thattime.  The book value of goodwill andrelated intangibles that would be subject to such a write-down wasapproximately $4.7 million at September 30, 2003.

 

**Stock-BasedCompensation**

 

We have elected to continueto account for stock options according to Accounting Principles Bulletin No.25, “Accounting for Stock Issued to Employees,” and to furnish the pro formadisclosures required under SFAS No. 148, “Accounting for Stock-BasedCompensation - Transition and Disclosure - an amendment of FASB Statement No.123.”  No stock-based employeecompensation cost is reflected in net income, as all options granted under theMetro One Telecommunications, Inc. 1994 Stock Incentive Plan had an exerciseprice equal to the market value of the underlying common stock on the date ofthe grant.  The following tableillustrates the effect on net (loss) income and net (loss) income per share asif we had applied the fair value recognition principles of SFAS No. 123,“Accounting for Stock-Based Compensation” to stock options issued:

 

4

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|                                              |   | **Three Months Ended  September 30,**   |    | **Nine Months Ended  September 30,** |   |
|---------------------------------------------------|--------|----------------------------------------------|---------|-------------------------------------------|--------|
|                                              |   | **2003**                                     |    | **2002**                                  |   | **2003** |   | **2002** |   |
|                                              |   | **(In thousands, except per share amounts)** |    |
| Net  (loss) income, as reported                   |   | $                                            | (10,653 | )                                         | $      | 7,389 |   | $ | (15,723 | ) | $ | 20,292 |   |
| Stock-based  compensation expense                 |   | (998                                         | )       | (970                                      | )      | (2,915 | ) | (2,821 | ) |
| Net  (loss) income, pro forma                     |   | $                                            | (11,651 | )                                         | $      | 6,419 |   | $ | (18,638 | ) | $ | 17,471 |   |
|                                              |   |                                         |    |                                      |   |   |   |   |   |
| Basic  net (loss) income per share, as reported   |   | $                                            | (0.43   | )                                         | $      | 0.30 |   | $ | (0.64 | ) | $ | 0.83 |   |
| Basic  (loss) income per share, pro forma         |   | $                                            | (0.47   | )                                         | $      | 0.26 |   | $ | (0.76 | ) | $ | 0.72 |   |
|                                              |   |                                         |    |                                      |   |   |   |   |   |
| Diluted  net (loss) income per share, as reported |   | $                                            | (0.43   | )                                         | $      | 0.30 |   | $ | (0.64 | ) | $ | 0.81 |   |
| Diluted  (loss) income per share, pro forma       |   | $                                            | (0.47   | )                                         | $      | 0.26 |   | $ | (0.76 | ) | $ | 0.70 |   |

 

**2.****                                      Net(Loss) Income Per Share**

 

Basic net (loss) incomeper share is based on the weighted average number of common sharesoutstanding.  Diluted net (loss) incomeper share reflects the potential dilution that could occur if securities orother contracts to issue common stock were exercised or converted into commonstock.  There were no adjustments to net(loss) income in the calculation of both basic and diluted net (loss) incomeper share for all periods presented.

 

The calculation ofweighted average outstanding shares is as follows:

 
|                                                                                        |   | **Three Months Ended  September 30,** |       | **Nine Months Ended  September 30,** |   |
|---------------------------------------------------------------------------------------------|--------|--------------------------------------------|------------|-------------------------------------------|--------|
|                                                                                        |   | **2003**                                   |       | **2002**                                  |   | **2003** |   | **2002** |   |
|                                                                                        |   | **(in thousands)**                         | ** ** |
| Weighted  average shares outstanding used in computing basic net (loss) income per  share   |   | 24,698                                     |       | 24,588                                    |   | 24,696 |   | 24,544 |   |
| Potential  common shares resulting from the exercise of stock options                       |   | —                                     |       | 399                                       |   | — |   | 568 |   |
|                                                                                        |   |                                       |       |                                      |   |   |   |   |   |
| Weighted  average shares outstanding used in computing diluted net (loss) income per  share |   | 24,698                                     |       | 24,987                                    |   | 24,696 |   | 25,112 |   |

 

Options to purchase2,844,000 and 938,000 shares of common stock were outstanding atSeptember 30, 2003 and 2002, respectively, but were not included in thecomputation of diluted net (loss) income per share for the three months endedSeptember 30, 2003 and 2002, respectively, because their effect would beanti-dilutive.  Options to purchase2,844,000 and 906,000 shares of common stock were outstanding atSeptember 30, 2003 and 2002, respectively, but were not included in thecomputation of diluted net (loss) income per share for the nine months endedSeptember 30, 2003 and 2002, respectively, because their effect would beanti-dilutive.

 

**3.****                                      Commitmentsand Contingencies**

 

We are party to variouslegal actions and administrative proceedings arising in the ordinary course ofbusiness.  We believe the disposition ofthese matters will not have a material adverse effect on our financialposition, results of operations or cash flows.

 

5

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From time to time, in thenormal course of our business, we issue standby letters of credit and bankguarantees.  At September 30, 2003,we had one letter of credit outstanding in the amount of $4,900,000 related toour workers’ compensation program.  Theletter of credit is secured by a certificate of deposit for the same amountthat is recorded as restricted cash. This letter of credit expires in April 2004.

 

As of September 30,2003, we have committed to and paid out approximately $9 million for futuremarketing and promotion of our Infoneservice which we expect toexpense over the remainder of 2003 as the related marketing and promotionactivities occur.  These expendituresare included in prepaid costs and other current assets on the balance sheet atSeptember 30, 2003.  Subsequent toSeptember 30, 2003, we also have committed to approximately $10 million ofadditional advertising and promotion funding which is expected to be expensedduring the remainder of 2003.

 

**4.****                                      SignificantEvents**

 

Our contract withAT&T Wireless will expire on December 1, 2003, and negotiations didnot result in a new contract to replace the existing one.  During our negotiations with AT&TWireless, we were unable to reach an economic arrangement acceptable to bothparties.  AT&T Wireless accountedfor approximately 49% and 33% of our revenues in the three-month periods endedSeptember 30, 2003 and 2002, respectively, and approximately 42% and 32%of our revenues in the nine-month periods ended September 30, 2003 and2002, respectively.  While we expectthat the call volume from AT&T Wireless will transition away from ussometime after December 1, 2003, no transition arrangement has been agreedto as of the date of this filing.  Theexpiration of our contract with AT&T Wireless will have a material adverseeffect on our financial position, future operating results and cash flows, aswell as our operations, although it is not possible to determine the exactnature, magnitude or timing of the effect at this time.

 

Our contract with SprintPCS expired on December 31, 2002. We agreed to a transition arrangement with Sprint PCS, pursuant to whichwe continued to handle its subscribers’ calls subsequent to December 31,2002.  The transition began inMarch 2003 and was substantially completed by June 30, 2003.  Revenue from Sprint PCS was not significantin the three months ended September 30, 2003.  Sprint PCS accounted for approximately 32% of our revenues in thethree months ended September 30, 2002, and approximately 17% and 33% ofour revenues in the nine-month periods ended September 30, 2003 and 2002,respectively.

 

Our contract withCingular Wireless expired in May 2002. We continued to serve Cingular Wireless customers in its California, Nevadaand Washington markets until October 2002.  There were no revenues from Cingular Wireless in the first ninemonths of 2003.  Cingular Wirelessaccounted for approximately 6% of our revenues during the three and nine-monthperiods ended September 30, 2002.

 

**5.****                                      RecentAccounting Pronouncements**

 

In December 2002,the Financial Accounting Standards Board issued SFAS No. 148, which providesalternative methods of transition for a voluntary change to thefair-value-based method of accounting for stock-based employeecompensation.  In addition, SFAS No. 148amends the disclosure requirements of SFAS No. 123 to require prominentdisclosure in both annual and interim financial statements about the method ofaccounting for stock-based employee compensation and the effects of the methodused on reported results.  We adoptedthe disclosure provisions of SFAS No. 148 in our financial reports for the yearended December 31, 2002, and the interim reports in 2003 as of January 1,2003.  At present, we do not intend toadopt the fair-value-based method of accounting for our stock compensationplans.

 

6

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#### ** **

#### **ITEM2**.                  MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

#### ** **

All statements and trendanalyses contained in this item and elsewhere in this report on Form 10-Qrelative to the future constitute “forward-looking statements” within themeaning of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements may, but donot necessarily, also include words such as “believes,” “expects,”“anticipates,” “plans,” “estimates,” “may,” “will,” “should,” “could,”“continue” or similar expressions. Forward-looking statements are not guarantees.  They involve known and unknown business and economic risks,uncertainties and other factors that may cause our actual results, performanceor achievements to be materially different from any future results, performanceor achievements expressed or implied by such forward-looking statements.  These risks, uncertainties and other factorsinclude those discussed in our 2002 Annual Report on Form 10-K filed with theSecurities and Exchange Commission and our Current Report on form 8-K filedwith the Securities and Exchange Commission on May 27, 2003.  Readers are cautioned not to place unduereliance on these forward-looking statements, which speak only as of the datehereof.  We undertake no obligation to publiclyrelease any revisions to these forward-looking statements to reflect events orcircumstances after the date hereof or to reflect the occurrence ofunanticipated events.

 

Results of operations forthe periods discussed below should not be considered indicative of the resultsto be expected in any future period and fluctuations in operating results mayalso result in fluctuations in the market price of our common stock.  Our quarterly and annual operating resultshave in the past and may in the future vary significantly depending on factorssuch as changes in the telecommunications market, the addition or expiration ofcustomer contracts, increased competition, changes in pricing policies by us orour competitors, lengthy sales cycles, lack of market acceptance or delays inthe introduction of new versions of our products or features, the cost andsuccess of new growth strategies, the timing of the initiation of wirelessservices through new delivery systems or their acceptance by customers, thetiming and expense of the expansion or contraction of our national call centernetwork, the general employment environment, general economic conditions,significant world events and other factors, including but not limited to,factors discussed in our 2002 Annual Report on Form 10-K filed with theSecurities and Exchange Commission.  Inaddition, the launch of our new Infone® service to consumers subjects us to newrisks and uncertainties including, but not limited to, factors discussed in ourCurrent Report on form 8-K filed with the Securities and Exchange Commission onMay 27, 2003.

 

#### **Overview**

#### ** **

We are a leadingdeveloper and provider of Enhanced Directory Assistance® and informationservices for the telecommunications industry. In recent years, our efforts have focused on contracting with wirelesscarriers to provide our services to their subscribers.

 

Under our existingcontracts with wireless carriers, those carriers agree to route some or all oftheir directory assistance and/or alphanumeric messaging calls to us.  We typically offer our services to multiplecarriers within the same market.  When acarrier’s subscribers dial a typical directory assistance number, such as“411,” “555-1212” or “00,” the calls are answered by our operators identifyingthe service by that carrier’s brand name. We intend to provide services to additional carriers, businesses,governmental units and callers in general through alternate strategies intendedto attract calls, information queries and other transactions.

 

Each carrier establishesits own directory assistance fee structure for its subscribers.  Wireless subscribers typically pay fees tothe carrier ranging from $0.75 to $1.29 plus airtime charges for ourservices.  We charge our carriercustomers directly and, at present, bear no subscriber collection risk withrespect to carrier subscribers. However, there may be collection risk to the extent growth andprofitability in the telecommunications industry decreases and to the extent weprovide services to other types of customers, including businesses,governmental units or callers attracted through other means or affiliations.

 

We charge our carriercustomers directly on a per call basis, with prices varying in some cases basedon call volume.  In order to encourageour carrier customers to route more of their calls to us, our long-term strategyhas been based in part on reducing the price we charge them.  We expect that average revenue per call willcontinue to

 

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decrease over time as webelieve this pricing strategy better positions us to retain and expand servicewith existing carrier customers.  Pricesfor services provided to other types of customers, including businesses,governmental units or other callers may vary based on the nature of theservice, volume and other circumstances.

 

In May 2003, welaunched Infone, a new service that provides enhanced directory and personalassistant services directly to consumers. Callers may use the service from nearly any domestic telephone, wirelineor wireless, simply by dialing “888-411-1111.” Service is available immediately, and billing is handled by using amajor credit card.  Calls can beconnected nationwide and to Canada for the all-inclusive price of 89 cents forany call of up to 15 minutes, plus 5 cents per minute after that.  A number of features are offered, including“My InfoneTM,” a personal assistant service to handle contacts,calendars and personal preferences, and “TeleConcierge®,” for makingreservations and accessing other concierge services.  Infone also provides connection and transport of calls.  As of October 24, 2003, the date of ourthird quarter 2003 financial results press release, we had obtainedapproximately 35,000 Infone subscribers.

 

We expect to adjust callcenters and network capacities in order to address changes in volume demands causedby the expiration of carrier contracts and the development of our recentlylaunched Infone service.  Capacity needswill vary significantly as a result of changes in volume from existing carriercustomers, changes in usage within existing markets served, changes in ourcarrier customers and/or the number of calls they route to us or as a result ofour Infone service or alternative strategies to attract additional calls.  We will continue to opportunistically pursueadditional significant new business.

 

**SignificantEvents**

 

Our contract withAT&T Wireless will expire on December 1, 2003, and negotiations didnot result in a new contract to replace the existing one.  During our negotiations with AT&TWireless, we were unable to reach an economic arrangement acceptable to bothparties.  AT&T Wireless accountedfor approximately 49% and 33% of our revenues in the three-month periods endedSeptember 30, 2003 and 2002, respectively, and approximately 42% and 32%of our revenues in the nine-month periods ended September 30, 2003 and2002, respectively.  While we expectthat the call volume from AT&T Wireless will transition away from ussometime after December 1, 2003, no transition arrangement has been agreedto as of the date of this filing.  Theexpiration of our contract with AT&T Wireless will have a material adverseeffect on our financial position, future operating results and cash flows, aswell as our operations, although it is not possible to determine the exactnature, magnitude or timing of the effect at this time.  We expect to adjust call centers and networkcapacities in order to address varying business circumstances, including theexpiration of this contract.

 

As discussed below under“Significant Accounting Policies, *Long-livedassets and goodwill,*” we account for goodwill in accordance withStatement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill andOther Intangible Assets.”  Under SFASNo. 142, we will evaluate goodwill for impairment in the fourth quarter of2003.  When we perform that evaluationof goodwill, particularly given the expiration of our contract with AT&TWireless in December 2003, it is likely that our estimates of the fairvalue of our business will be less than the carrying value, which would causeus to write down goodwill at that time. The book value of goodwill and related intangibles was approximately$4.7 million at September 30, 2003.

 

Our contract with SprintPCS expired on December 31, 2002. We agreed to a transition arrangement with Sprint PCS, pursuant to whichwe continued to handle its subscribers’ calls subsequent to December 31,2002.  The transition began inMarch 2003 and was substantially completed by June 30, 2003.  Revenue from Sprint PCS was not significantin the three months ended September 30, 2003.  Sprint PCS accounted for approximately 32% of our revenues in thethree months ended September 30, 2002, and approximately 17% and 33% ofour revenues in the nine-month periods ended September 30, 2003 and 2002,respectively.

 

Our contract with CingularWireless expired in May 2002.  Wecontinued to serve Cingular Wireless customers in its California, Nevada andWashington markets until October 2002. There were no revenues from Cingular Wireless in the first nine monthsof 2003.  Cingular Wireless accountedfor approximately 6% of our revenues during the three and nine-month periodsended September 30, 2002.

 

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**Resultsof Operations**

 

The following table showsselected items of our statements of income data expressed as a percentage ofrevenues:

 

 
|                                       |   | **Three  Months Ended  September 30,** |   | **Nine  Months Ended  September 30,** |   |
|--------------------------------------------|--------|---------------------------------------------|--------|--------------------------------------------|--------|
|                                       |   | **2003**                                    |   | **2002**                                   |   | **2003** |   | **2002** |   |
| Revenues                                   |   | 100.0                                       | %      | 100.0                                      | %      | 100.0 | % | 100.0 | % |
| Direct  operating costs                    |   | 59.9                                        |   | 56.1                                       |   | 57.6 |   | 56.1 |   |
| Selling,  general and administrative costs |   | 76.1                                        |   | 25.9                                       |   | 58.2 |   | 27.4 |   |
| (Loss)  income from operations             |   | (36.0                                       | )      | 18.0                                       |   | (15.8 | ) | 16.5 |   |
| Other  income, net                         |   | 0.3                                         |   | 0.3                                        |   | 0.3 |   | 0.3 |   |
| (Loss)  income before income taxes         |   | (35.7                                       | )      | 18.3                                       |   | (15.5 | ) | 16.8 |   |
| Income  tax (benefit) expense              |   | (12.3                                       | )      | 7.1                                        |   | (5.3 | ) | 6.5 |   |
| Net  (loss) income                         |   | (23.4                                       | )%     | 11.2                                       | %      | (10.2 | )% | 10.3 | % |

 

*Comparisonof Third Quarter 2003 to Third Quarter 2002*

 

Revenues decreased 31.2%to $45.5 million from $66.2 million while call volume decreased toapproximately 99 million calls from approximately 141 million calls.  These decreases resulted primarily from theexpiration of our contracts with Sprint PCS and Cingular Wireless partiallyoffset by increases in call volume and revenue under other contracts.  The decrease in revenue also resulted from avolume-related decrease in our average revenue per call, primarily related to acustomer that exercised a contractual right to move to volume-based pricing.

 

Direct operating costsdecreased 26.6% to $27.3 million from $37.1 million.  This was primarily due to decreased staffing costs associatedwith reduced call volumes.  As apercentage of revenues, direct operating costs increased to 59.9% from 56.1%.  This was due primarily to increases inpersonnel-related costs associated with employee longevity and costs ofinsurance and benefits.

 

Selling, general andadministrative costs increased 102.1% to $34.6 million from $17.1 million.  As a percentage of revenues, selling,general and administrative costs increased to 76.1% from 25.9%.  These increases resulted primarily fromadvertising and promotion costs for our Infone service and from costs,including depreciation, associated with upgrading our network quality andcapacity.  We incurred approximately $14million of advertising and promotion expenses for our Infone service during thethird quarter of 2003.

 

Depreciation andamortization increased by 18.2% to $5.6 million from $4.7 million due primarilyto depreciation expense on equipment purchased for upgrades of existing callcenters, product development activities and equipment purchased for our Infoneservice.

 

Other income, net for thethree months ended September 30, 2003 and 2002 was $134,000 and $210,000,respectively.  Other income consistedprimarily of interest income in both periods. The decrease in interest income during the third quarter of 2003compared to the third quarter of 2002 resulted from lower cash balances andlower average interest rates earned on cash equivalents invested in moneymarket instruments.

 

Income tax benefit forthe three months ended September 30, 2003 was $5.6 million.  This is the estimated amount needed to bringour year-to-date tax benefit to the appropriate level.  The year-to date-tax benefit reflects theopportunity to carry back tax losses incurred in the current year to offsettaxable income in prior years and to receive refunds of income taxes paid inthose years.  Income tax expense for thethree months ended September 30, 2002 was $4.7 million, for an effectivetax rate of approximately 39.0% for the quarter which represented our estimatedcombined year-to-date federal and state effective income tax rate.

 

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*Comparisonof the First Nine Months of 2003 to the First Nine Months of 2002*

 

Revenues decreased 20.4%to $155.9 million from $195.8 million while call volume decreased toapproximately 335 million calls from approximately 411 million calls. Thesedecreases resulted primarily from the expiration of our contracts with SprintPCS and Cingular Wireless partially offset by increases in revenue and callvolume under other contracts.  Thedecrease in revenue also resulted from a volume-related decrease in our averagerevenue per call, primarily related to a customer that exercised a contractualright to move to volume-based pricing.

 

Direct operating costsdecreased 18.3% to $89.8 million from $109.9 million. This decrease wasprimarily due to decreased staffing costs associated with reduced call volumes.As a percentage of revenues, direct operating costs increased to 57.6% from56.1%. This increase was due primarily to personnel-related costs associatedwith employee longevity and costs of insurance and benefits.

 

Selling, general andadministrative costs increased 69.1% to $90.7 million from $53.6 million.  As a percentage of revenues, selling,general and administrative costs increased to 58.2% from 27.4%.  These increases resulted primarily fromadvertising and promotion costs for our Infone service and from costs,including depreciation, associated with upgrading our network quality andcapacity.  We incurred approximately $33million of advertising and promotion expenses for our Infone service in thefirst nine months of 2003.

 

Depreciation andamortization increased by 19.3% to $15.9 million from $13.3 million dueprimarily to depreciation expense on equipment purchased for upgrades ofexisting call centers, product development activities and equipment purchasedfor our Infone service.

 

Other income, net for thenine months ended September 30, 2003 and 2002 was $533,000 and $661,000,respectively.  Other income consistedprimarily of interest income in both periods. The decrease in interest income resulted from lower cash balances andlower average interest rates earned on cash equivalents invested in moneymarket instruments.

 

Income tax benefit forthe nine months ended September 30, 2003 was $8.3 million.  The year-to-date tax benefit reflects theopportunity to carry back tax losses incurred in the current year to offsettaxable income in prior years and to receive refunds of income taxes paid inthose years.  Income tax expense for thenine months ended September 30, 2002 was $12.6 million, for an effectivetax rate of approximately 38.4%, which represented our estimated combined year-to-datefederal and state effective income tax rate.

 

#### **Liquidity and Capital Resources**

#### ** **

Our cash and cashequivalents are recorded at cost, which approximates fair market value.  As of September 30, 2003, we had $53.9million in cash and cash equivalents compared to $76.5 million atDecember 31, 2002.  The netdecrease of $22.6 million resulted primarily from cash used in operations,mainly due to payments made for advertising and promotion costs related to ourInfone service, capital expenditures and an increase in cash restricted assecurity for a letter of credit.  Wehave no outstanding debt.

 

Working capital was $89.1million at September 30, 2003, compared to $103.7 million atDecember 31, 2002.  The decrease isdue primarily to working capital used in operations, primarily related toadvertising and promoting Infone and for capital expenditures.

 

*CashFlow from Operations. *Netcash used in operations was $10.6 million for the nine months endedSeptember 30, 2003, including payments of approximately $42 million madeto advertise and promote Infone.  Of the$42 million, approximately $33 million was expensed in the first nine months of2003 and approximately $9 million has been committed and paid out for futuremarketing and promotion of Infone. We expect to expense the $9 million over theremainder of 2003 as the related marketing and promotion activities occur.  These expenditures are included in prepaidcosts and other current assets on the balance sheet at September 30, 2003.

 

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*CashFlow from Investing Activities. *Cashused in investing activities was $10.5 million for the nine months endedSeptember 30, 2003 resulting primarily from capital expenditures forequipment purchased to upgrade existing call centers, for product developmentactivities and for equipment purchased related to our Infone service.

 

*CashFlow from Financing Activities. *Netcash used in financing activities was $1.5 million for the nine months endedSeptember 30, 2003 resulting primarily from additional cash used to securea letter of credit, partially offset by proceeds from the sale of common stockunder the employee stock purchase plan.

 

*FutureCapital Needs and Resources. *Theprimary uses of our capital in the near future are expected to be: formarketing and promotion activities related to Infone and other new businessinitiatives; for the development or acquisition of technologies, features andcontent complementary to our business; for the upgrade and/or maintenance ofour call center network; and for general corporate purposes.  These general corporate purposes may includepossible acquisitions, efforts to pursue and market new growth strategies andother corporate development activities and working capital.  We expect to adjust our capacity and use ofcash in order to address varying business circumstances, including changes involume demands and execution of our long-term business strategy.

 

We believe our existingcash and cash equivalents and cash from operations will be sufficient to fundour operations for the next twelve months. Although cash on hand (including restricted cash) at September 30,2003 was approximately $58.8 million, future activities, including advertisingand promotion of Infone, execution of alternative business strategies, and newproduct development and rollout, will impact the amount of available cash.  If necessary, we may attempt to establishborrowing arrangements in order to maintain adequate liquidity.  We believe we will have access to future financingsources, although we cannot provide assurance that funding will be available inamounts or on terms agreeable to us.

 

As of September 30,2003, we have committed to and paid out approximately $9 million for futurepromotion of our Infone service, which we expect to expense over the remainderof 2003 as the related advertising activities take place.  Subsequent to September 30, 2003, wealso have committed to approximately $10 million of additional advertising andpromotion funding which is expected to be expensed during 2003.

 

### **Significant Accounting Policies**

### ** **

We prepare our financialstatements in conformity with accounting principles generally accepted in theUnited States of America.  As such, weare required to make certain estimates, judgments and assumptions that webelieve are reasonable based upon the information available.  These estimates and assumptions affect thereported amounts of assets and liabilities at the date of the financialstatements and the reported amounts of revenues and expenses during the periodspresented.  We believe that of oursignificant accounting policies (see Note 1 to the financial statements in ourAnnual Report on Form 10-K for the period ended December 31, 2002), thosegoverning accounts receivable, the lives and recoverability of the carryingamount of equipment and other long-lived assets and goodwill, estimatesinvolving the levels of our liabilities for workers’ compensation and medicalself-insurance reserves and estimates of current and deferred taxes may involvea higher degree of judgment, estimation and uncertainty.

 

*Accountsreceivable. *Ourcustomer base has principally consisted of large wireless telephone carriers inthe United States.  As such, we believewe have minimal risk of uncollectibility, at any point in time, related tooutstanding accounts receivable.  Wehave not experienced significant collection issues or write-offs related tothese customers; consequently, we do not maintain an allowance for doubtfulaccounts.  Since our accounts receivableare currently concentrated in relatively few customers, a significant change inthe liquidity or financial position of any one of these customers couldadversely impact collection of our accounts receivable and therefore have amaterial adverse effect on our financial position, future operating results andcash flows.  We believe that collectionissues relating to the introduction and implementation of our Infone servicewill not be significant since billing is accomplished via a pre-validatedcredit card account.  We will monitorand evaluate our collection experience over time to determine whether or not anallowance for doubtful accounts is necessary for this product.

 

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*Long-livedassets and goodwill.* We evaluate the remaining life and recoverability of equipment and otherassets, including patents and trademarks and internally developed software,whenever events or changes in circumstances indicate that the carrying amountof the asset may not be recoverable.  Atsuch time, we estimate the future cash flows expected from their continued useand eventual disposition and, if lower than the carrying amount, adjust thecarrying amount of the asset to its estimated fair value.

 

We account for goodwillin accordance with SFAS No. 142, “Goodwill and Other Intangible Assets.”  Under SFAS No. 142, we evaluate goodwill forimpairment annually and whenever events or changes in circumstances indicatethe carrying amount of goodwill may not be recoverable.  We perform our annual impairment test inNovember each year.  To performthat test, we compare the carrying value of our business to our estimates ofthe fair value of our business.  If ourevaluation indicates that the fair value of our business is less than itscarrying value, we will write down the related goodwill to its implied fairvalue.  We use estimates of future cashflows, discounted to present value, market prices and other measures toestimate the fair value of our business. When we perform our evaluation of goodwill in the fourth quarter of2003, particularly given the expiration of our contract with AT&T Wirelessin December 2003, it is likely that our estimates of the fair value of ourbusiness will be less than the carrying value, which would cause us to writedown goodwill at that time.  The bookvalue of goodwill and related intangibles that would be subject to such awrite-down was approximately $4.7 million at September 30, 2003.

 

*Self-insurancereserves. *Weself-insure a portion of our workers’ compensation and employee medicalinsurance programs.  Depending oncircumstances, in some cases we may purchase stop loss coverage at varyinglevels in order to mitigate our potential future losses.  The nature of these liabilities, which maynot fully manifest themselves for several years, requires significantjudgment.  We evaluate pending workers’compensation and medical claims periodically to determine the reasonableness ofthe reserves we have recorded for such claims. Our evaluation includes estimates of potential incurred-but-unreportedclaims as well as factors that may cause original estimates of such claims toincrease over time, such as available claims data and historical trends andexperience, as well as future projections of ultimate losses, expenses,premiums and administrative costs.  Weadjust these reserves if events or changes in circumstances indicate thatultimate payments related to the claims will differ from the recorded reserves.  While we believe that the amounts reservedfor these obligations are sufficient, any significant increase in the number ofclaims and costs associated with claims made under these plans could have amaterial effect on our financial position, results of operations or cash flows.

 

*Incometaxes.*  Accounting forincome taxes requires us to estimate our income taxes in each jurisdiction inwhich we operate.  Due to differences inthe recognition of items included in income for accounting and tax purposes,temporary differences arise which are recorded as deferred tax assets orliabilities.  We estimate the likelihoodof recovery of these assets, which is dependent on future levels ofprofitability.  Should any amounts bedetermined not to be recoverable, or assumptions change, we would be requiredto take a charge, which could have a material effect on our financial position,results of operations or cash flows.

 

*Recentaccounting pronouncements. *InDecember 2002, the Financial Accounting Standards Board issued SFAS No.148, which provides alternative methods of transition for a voluntary change tothe fair-value-based method of accounting for stock-based employeecompensation.  In addition, SFAS No. 148amends the disclosure requirements of SFAS No. 123 to require prominentdisclosure in both annual and interim financial statements about the method ofaccounting for stock-based employee compensation and the effects of the methodused on reported results.  We adoptedthe disclosure provisions of SFAS No. 148 in our financial reports for the yearended December 31, 2002, and the interim reports in 2003 as ofJanuary 1, 2003.  At present, we donot intend to adopt the fair-value-based method of accounting for our stockcompensation plans.

 

#### **ITEM 3**.                        QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

#### ** **

Substantially all of ourliquid investments are invested in money market instruments, and therefore thefair market value of these instruments is affected by changes in marketinterest rates.  However, all of ourinvestments at September 30, 2003 were invested in overnight money marketinstruments and were redeemable on a daily basis.  All of the underlying investments in the money market fund hadmaturities of three months or less.  Asa result, we

 

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believe the market riskarising from our holdings of financial instruments is minimal.  A hypothetical 1% fluctuation in interestrates would not have a material adverse effect on our financial position,results of operations or cash flows.

 

#### **ITEM 4**.                        CONTROLSAND PROCEDURES

#### ** **

We maintain disclosurecontrols and procedures that are designed to ensure that the informationrequired to be disclosed in our Exchange Act reports is recorded, processed,summarized and reported within the time periods specified in the SEC’s rulesand forms, and that such information is accumulated and communicated to ourmanagement, including our Chief Executive Officer and Chief Financial Officer,as appropriate, to allow timely decisions regarding required disclosure basedclosely on the definition of “disclosure controls and procedures” in Rule13a-15(e).  In designing and evaluatingthe disclosure controls and procedures, our management recognized that anycontrols and procedures, no matter how well designed and operated, can provideonly reasonable assurance of achieving the desired control objectives, andmanagement necessarily was required to apply its judgment in evaluating thecost-benefit relationship of possible controls and procedures in reaching thatlevel of reasonable assurance.

 

As of the end of thefiscal quarter covered by this report, we carried out an evaluation, under thesupervision and with the participation of our management, including our ChiefExecutive Officer and Chief Financial Officer, of the effectiveness of the designand operation of our disclosure controls and procedures.  Based on the foregoing, our Chief ExecutiveOfficer and Chief Financial Officer concluded that our disclosure controls andprocedures were effective.

 

There has not been anychange in our internal control over financial reporting, that occurred duringthe fiscal quarter covered by this report, that has materially affected, or isreasonably likely to materially affect, our internal control over financialreporting.

 

#### **PART II**.                   OTHERINFORMATION

### ** **

#### **ITEM 6**.                        EXHIBITSAND REPORTS ON FORM 8-K

#### ** **

(a)          Exhibits

 

31.1                           Certificationof Timothy A. Timmins pursuant to Securities and Exchange Commission Rule 13a -14(a)

31.2                           Certificationof Dale N. Wahl pursuant to Securities and Exchange Commission Rule 13a - 14(a)

32                                    CertificationPursuant to 18 U.S.C. Section 1350, as Adopted Pursuant toSection 906 of the Sarbanes-Oxley Act Of 2002

** **

(b) Reports on Form8-K

 

On July 25, 2003, wefiled a current report on Form 8K, dated July 25, 2003, under Item 12,Results of Operations and Financial Condition (which was filed under Item 9,Regulation FD Disclosure) which furnished our second quarter 2003 financialstatements.

 

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SIGNATURES

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 

 
|                                                 | Metro One  Telecommunications, Inc. |   |
|------------------------------------------------------|-------------------------------------|--------|
|                                                 | Registrant                          |
|                                                 |                                |
|                                                 |                                |
| Date:    November 14,  2003 |                                |
|                                                 |                                |
|                                                 |                                |
|                                                 | /s/  Dale N. Wahl              |   |
|                                                 | Dale N. Wahl                        |
|                                                 | Senior Vice President,              |
|                                                 | Chief Financial Officer             |
|                                                 | (Principal Financial  Officer)      |
|                                                 |                                |
|                                                 | /s/  Duane C. Fromhart         |   |
|                                                 | Duane C. Fromhart                   |
|                                                 | Vice President, Finance             |
|                                                 | (Principal Accounting  Officer)     |
|                                                      |                                     |        |  |

 

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