10-Q 1 tmk12_02q.txt TELMARK LLC 10-Q QUARTER ENDING DEC. 31, 2002 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE --- ACT OF 1934 For the quarterly period ended December 31, 2002 ----------------- 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 33-70732 -------------- TELMARK LLC* -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 16-1551523 -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 333 Butternut Drive, DeWitt, New York 13214 -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) 315-449-7935 -------------------------------------------------------------------------------- (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 ----- ------ Indicate by check mark whether the registrant is an accelerated filer. Yes No X ---- ----- Indicate the number of membership interests outstanding of each of the issuer's classes of membership interests, as of the latest practicable date. Class Outstanding at February 7, 2003 --------------------------------------- ------------------------------- Membership Certificate One * Telmark is a direct wholly owned subsidiary of Agway, Inc., which is a reporting Company under the Securities Exchange Act of 1934, and meets the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format. 1 TELMARK LLC AND CONSOLIDATED SUBSIDIARIES INDEX PART I. FINANCIAL INFORMATION

2 PART I. FINANCIAL INFORMATION TELMARK LLC AND CONSOLIDATED SUBSIDIARIES ITEM 1. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (THOUSANDS OF DOLLARS) ASSETS

See accompanying notes to condensed consolidated financial statements. 3 PART I. FINANCIAL INFORMATION (CONTINUED) TELMARK LLC AND CONSOLIDATED SUBSIDIARIES ITEM 1. CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND MEMBER'S EQUITY (UNAUDITED) (THOUSANDS OF DOLLARS)

See accompanying notes to condensed consolidated financial statements. 4 PART I. FINANCIAL INFORMATION (CONTINUED) TELMARK LLC AND CONSOLIDATED SUBSIDIARIES ITEM 1. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (THOUSANDS OF DOLLARS) INCREASE (DECREASE) IN CASH

See accompanying notes to condensed consolidated financial statements. 5 PART I. FINANCIAL INFORMATION (CONTINUED) TELMARK LLC AND CONSOLIDATED SUBSIDIARIES ITEM 1. NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (THOUSANDS OF DOLLARS) NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited condensed consolidated financial statements of Telmark have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of our management, we have included all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation. Operating results for the three-month and six-month periods ended December 31, 2002 are not necessarily indicative of the results that may be expected for the year ended June 30, 2003. For further information, refer to the consolidated financial statements and notes thereto included in the annual report on Form 10-K for the year ended June 30, 2002. Telmark is a wholly-owned subsidiary of Agway Inc. ("Agway"). Agway's membership interest in Telmark has been pledged to certain of Agway's lenders in order to secure Agway's obligations to those lenders. On March 6, 2002, Agway announced its intention to pursue the sale of Telmark to a third party as part of a plan that would have Agway focus on fewer businesses. On October 1, 2002, Agway and certain of its subsidiaries voluntarily filed petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code ("Chapter 11 Proceedings"). Although this filing did not include Telmark, the Bankruptcy Court has exclusive jurisdiction under the Bankruptcy Code over the disposition of Agway's assets, including its membership interest in Telmark. Telmark is separately financed. Other than the potential indemnification claim alleged by Agway's surety as more fully described under Legal Proceedings in Note 3, Telmark does not guarantee any debt of Agway. Telmark and Agway have certain business arrangements, including at December 31, 2002 approximately $15,800 in leases, which represents Telmark's greatest concentration with a single customer. The inability of Agway or its subsidiaries to pay those leases on time could have a material adverse effect on Telmark's operating results and liquidity. Notwithstanding Agway's Chapter 11 Proceedings discussed above, it is expected that these leases will continue to be paid in accordance with their terms. For more information concerning recent developments in Telmark's financing arrangements see Note 2 below. On December 23, 2002, Telmark, Agway and Wells Fargo Financial Leasing, Inc., ("Wells Fargo") announced the signing of a definitive agreement in which Wells Fargo would purchase substantially all $650,000 of the assets of Telmark. If the sale of assets to Wells Fargo is completed, the management of the purchased lease portfolio, and thus the operations of Telmark's business, will be conducted by Wells Fargo. Telmark will only hold any residual assets and liabilities that were not part of the sales transaction. The agreement contemplates that substantially all of the liabilities of Telmark (mainly its outstanding debt) will be retained by Telmark and it is anticipated that a substantial portion of the proceeds will be used to repay Telmark creditors. While such repayment may involve certain costs in addition to the repayment of principal and interest such as termination fees or "make whole" payments, Telmark expects to receive cash in sufficient amounts to pay these obligations and to finance its remaining operations going forward. The acquisition is subject to the satisfaction of a number of conditions and the obtaining of appropriate consents and approvals, including the approval of the U. S. Bankruptcy Court for the Northern District of New York (the "Bankruptcy Court") that is overseeing Agway's Chapter 11 Proceedings. If the sale is not completed, the business of the Company could be materially adversely affected, particularly our ability to obtain adequate financing. The agreement with Wells Fargo contemplates that the Court may order an auction of Telmark's agreement with Wells Fargo in order to determine whether another purchaser would purchase Telmark's assets for a higher amount than Wells Fargo. Pursuant to a letter agreement amongst Agway, Telmark, Wells Fargo and the unsecured creditors' committee for Agway's Chapter 11 Proceedings ("Creditors' Committee"), the parties have agreed to auction procedures and to amend certain provisions of the definitive agreement at the request of the Creditors' Committee in conjunction with Agway's Chapter 11 Proceedings. The auction procedures set forth in the definitive agreement, as amended in accordance with the letter agreement, were approved by the Bankruptcy Court on February 5, 2003. The auction is scheduled to be held on Thursday, February 27, 2003 at 2 p.m. and the hearing to confirm the successful bidder is set for 3 p.m. on that same day. 6 PART I. FINANCIAL INFORMATION (CONTINUED) TELMARK LLC AND CONSOLIDATED SUBSIDIARIES ITEM 1. NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (THOUSANDS OF DOLLARS) NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation (continued) On February 6, 2003, Agway filed a motion with the Bankruptcy Court for approval of the sale in accordance with the definitive agreement as amended by the letter agreement. The Creditors' Committee has reserved the right to object to the sale in the event it concludes the sale is not in the best interest of Agway's creditors. If the sale to Wells Fargo is uncontested, management expects the sale to close on or about March 1, 2003. A copy of the definitive agreement, as amended, along with the letter agreement reflecting changes to be made to the definitive agreement and the Bankruptcy Court order authorizing and scheduling an auction and hearing to consider approval of proposed sale resulting from the auction, were attached as exhibits to an 8-K Filing on February 6, 2003. Basis of Consolidation The consolidated financial statements include the accounts of all wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. Business Segments Telmark operates in one reportable segment of direct finance leasing of agricultural related equipment, vehicles and buildings to farmers or other rural businesses that serve the agricultural marketplace. Leases and notes outside the United States represent less than one half of 1% of the total assets of Telmark. Reclassifications Certain amounts in prior years' financial statements have been reclassified to conform to the current year's consolidated financial statement presentation. Cash and Equivalents Telmark considers all investments with a maturity of three months or less when purchased to be cash equivalents. Restricted Cash Certain cash accounts amounting to $8,298 and $6,014 at December 31 and June 30, 2002, respectively, collateralize lease-backed notes payable. This cash is held in segregated cash accounts pending distribution and is restricted in its use. Lease Accounting Completed lease contracts, which qualify as direct finance leases as defined by Statement of Financial Accounting Standards ("SFAS") No. 13 "Accounting for Leases," are accounted for by recording on the balance sheet the total future minimum lease payments receivable, plus the estimated unguaranteed residual value of leased equipment, less the unearned interest and finance charges. Unearned interest and finance charges represent the excess of the total future minimum lease payments plus the estimated unguaranteed residual value expected to be realized at the end of the lease term over the cost of the related equipment. Interest and finance charge income is recognized as revenue, by using the interest method over the term of the lease, which for most commercial and agricultural leases is 60 months or less with a maximum of 180 months for buildings. Income recognition is suspended on all leases and notes which become past due greater than 120 days. As of December 31 and June 30, 2002, the recognition of interest income was suspended on leases and notes totaling $9,763 and $7,391, respectively. Certain initial direct costs incurred in consummating a lease as defined by SFAS No. 91 "Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Costs of Leases" are capitalized and amortized over the life of the lease. This deferral of expenses has the effect of reducing the expense recorded in the period the lease is booked, and increasing the expense recognized over the remaining life of the lease. 7 PART I. FINANCIAL INFORMATION (CONTINUED) TELMARK LLC AND CONSOLIDATED SUBSIDIARIES ITEM 1. NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (THOUSANDS OF DOLLARS) NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued) Income Taxes Provisions for credit losses are charged to income in amounts sufficient to maintain the allowance at a level considered adequate to cover losses in the existing portfolio. The net investment in a lease is charged against the allowance for credit losses when determined to be uncollectible, generally within one year of becoming past due. Telmark provides for income taxes in accordance with the provisions of SFAS No. 109, "Accounting for Income Taxes" on a separate company basis. Under the liability method specified by SFAS No. 109, deferred tax assets and liabilities are based on the difference between the financial statement and tax basis of assets and liabilities as measured by the tax rates which are anticipated to be in effect when these differences reverse. The deferred tax provision generally represents the net change in the assets and liabilities for deferred tax. A valuation allowance is established when it is necessary on a separate company basis to reduce deferred tax assets to amounts for which realization is reasonably assumed. Telmark is currently included in consolidated federal and state tax returns filed by Agway. For the period July 1, 1998 through June 30, 2001, for state income tax filing purposes, Telmark is included as a business division of Agway Holdings Inc., a former subsidiary of Agway that was merged into Agway effective July 1, 2001. Effective July 1, 2001, for state income tax filing purposes, Telmark is included as a business of Agway Inc. Under Telmark's tax sharing arrangement with Agway, the provision for income taxes and related credits and carry forwards are calculated on a separate company basis and taxes currently payable are billed to Telmark as appropriate on an interim basis. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE 2 - BORROWINGS Lines of Credit and Revolving Loans As of December 31, 2002, we had credit facilities available from banks which allow us to borrow up to an aggregate of $360,600. Uncommitted short-term bank line of credit agreements permitted borrowing up to $10,600 on an unsecured basis with interest paid upon maturity. The lines bear interest at money market variable rates. A committed $350,000 partially collateralized revolving loan facility permits us to draw short-term funds bearing interest at money market rates or draw long-term debt at rates appropriate for the term of the note drawn. The revolving loan also may be used for letters of credit. As of January 31, 2003, $700 of this line was utilized to support a letter of credit. The total amount outstanding as of December 31, 2002, under the short-term bank lines of credit and the revolving loan facility was $10,000 and $254,700, respectively. The revolving loan facility of $350,000 is partially collateralized by our investment in a cooperative bank having a book value of $15,784 at December 31, 2002. Telmark borrows under its short-term line of credit agreements and its revolving term agreement from time to time to fund its operations. Short-term debt serves as interim financing between the issuances of long-term debt. On August 1, 2002, Telmark issued $100,000 of unsecured senior notes to insurance companies. Proceeds of these notes were used to pay down the revolving term loan facility, increasing the availability under the lines of credit and revolving loans. 8 PART I. FINANCIAL INFORMATION (CONTINUED) TELMARK LLC AND CONSOLIDATED SUBSIDIARIES ITEM 1. NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (THOUSANDS OF DOLLARS) NOTE 2 - BORROWINGS (continued) Lines of Credit and Revolving Loans (continued) Telmark normally renews its lines of credit annually. Due principally to the uncertainty related to the potential sale of the Company and the Agway Chapter 11 Proceedings, substantially all of the banks that had provided the $54,300 short term lines of credit as of June 30, 2002 have requested borrowings under their lines of credit be repaid. As of December 31, 2002 we had repaid $44,300 of these lines and in January 2003, the remaining $10,000 was repaid. The $350,000 revolving loan facility has been extended and is available through March 31, 2003. Telmark has financing availability as of January 31, 2003 of approximately $92,300. We believe Telmark's available financing is adequate to meet its needs through March 31, 2003. If the sale to Wells Fargo is uncontested, management expects the sale to close on or about March 1, 2003. In that event, cash realized from the sale will be sufficient to repay all Telmark outstanding debt and provide sufficient liquidity to meet Telmark's residual operating requirements. In the event the sale does not close or is delayed beyond March 31, 2003, it will be necessary for Telmark to negotiate financing to meet its needs beyond March 31, 2003. While it has not confirmed disposition with its lender, Management believes it would be able to reach agreement on such financing by March 31, 2003. However, while management has historically had good relationships with its lenders and investors, in view of the intended sale of Telmark assets and our Parent's Chapter 11 Proceedings, it is not certain what financing would be available or what the terms or cost of ongoing financing would be. See availability of financing below. Unsecured Notes Payable to Insurance Companies On December 31, 2002, we had balances outstanding on unsecured senior note private placements totaling $206,667, including the above mentioned $100,000 of unsecured senior notes issued to insurance companies on August 1, 2002. We pay interest semiannually on each senior note. We pay principal payments on both a semiannual and an annual basis. The principal bears interest at fixed rates ranging from 4.34% to 8.72% and the notes have various maturities through December 2012. The note agreements are similar to each other and each contains specific financial covenants that must be complied with by us. As of December 31, 2002, Telmark has complied with all covenants contained in its borrowing agreements. The covenants of the note agreement give the note holders the right to demand payment of outstanding principal and interest, as well as certain "make whole" interest payments if the pending sale to Wells Fargo does close. Cash from the sale would be used to meet Telmark's obligations. Lease-Backed Notes Payable to Insurance Companies We have issued lease-backed notes, through two wholly owned consolidated special purpose funding subsidiaries, totaling $39,112 at December 31, 2002. The notes are collateralized by leases which were sold to those subsidiaries, having an aggregate present value of contractual lease payments equal to or greater than the principal balance of the notes, and the notes are further collateralized by the residual values of these leases and by segregated cash accounts. The principal bears interest at fixed rates ranging from 6.54% to 9.05% and have various final scheduled maturities ending in December 2008. If the sale of assets to Wells Fargo is consummated, under the terms of the agreement with Wells Fargo, these obligations would be transferred to and assumed by Wells Fargo affiliates. Subordinated Debentures We have historically offered subordinated debentures to the public. The debentures are unsecured and are subordinate to all our senior debt. The interest on the debentures is payable quarterly on January 1, April 1, July 1, and October 1 and may, at the holder's option, be reinvested. Our subordinated debentures bear interest at a rate that is the greater of the stated rate or a rate based upon an average discount rate for U.S. Government Treasury Bills with a maturity of 26 weeks. As of December 31, 2002, $45,519 of debentures were outstanding. Those debentures have various final scheduled maturities through March 2010 and bear a weighted average interest rate of 8.53%. 9 PART I. FINANCIAL INFORMATION (CONTINUED) TELMARK LLC AND CONSOLIDATED SUBSIDIARIES ITEM 1. NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (THOUSANDS OF DOLLARS) NOTE 2 - BORROWINGS (continued) Subordinated Debentures (continued) In anticipation of the possible sale of Telmark, effective as of March 6, 2002, Telmark ceased issuing debentures to the public, other than pursuant to the interest reinvestment option of the debentures. Under that option, debenture holders may elect to receive interest on debentures either in cash or in the form of additional principal on the debentures. However, once a debenture reaches maturity, the holder will not be permitted to invest the proceeds in additional debentures. Because of the contemplated sale of assets and Agway's Chapter 11 Proceedings, the interest payment due January 1, 2003 was paid in cash in order to allow investors who had elected the interest reinvestment option at that time to reconsider their election in light of recent developments discussed above. Whether the interest reinvestment option will be applicable in the future will depend on the outcome of the contemplated sale of assets. If the sale of assets to Wells Fargo is consummated, we plan to redeem the Debentures in accordance with their terms. Pledge of Telmark Membership Interest Agway's membership interest in Telmark had been pledged as collateral in connection with certain senior debt obligations of Agway and has continued as pledged collateral under a $125,000 Debtor-in-Possession financing agreement ("DIP Facility") for Agway from the same senior lenders effective in October 2002. While the terms of the pledge generally do not restrict Telmark's operations, Telmark has acknowledged and agreed to the pledge, has agreed to cooperate with Agway's lenders in respect to their rights under the pledge, and has agreed to refrain from creating any lien or encumbrance with respect to the equity of Telmark subsidiaries. Agway has indicated to Telmark that it believes the covenants, as revised under Agway's DIP Facility, are appropriate for Agway's circumstances and while there can be no assurances, the possibility of foreclosure is considered remote. However, a foreclosure on the pledge following an event of default at Agway would result in a change of control of Telmark, giving Telmark's senior lenders rights to demand repayment of existing outstanding debt and requiring Telmark to find additional funding sources. Depending upon the financial markets and Telmark's financial circumstances at that time, if the senior lenders chose to execute those rights, it could have a material adverse effect on Telmark's results of operations, liquidity and financial position. Availability of Financing The ongoing availability of adequate financing to maintain the size of our portfolio and to permit lease portfolio growth is key to our continuing profitability and stability. Management conducts ongoing discussions and negotiations with existing and potential lenders for future financing needs. We have been successful in arranging our past financing needs and believe that our current financial arrangements are adequate to meet our operating requirements through March 31, 2003. However, as noted above, we have lost a number of short-term credit lines since June 30, 2002 and currently rely principally on a single facility for our revolving credit lines. Although we expect that substantially all of the assets of the Company will be sold prior to the expiration of the current line, we have discussed with our lender the need for a short term extension for this line in the case that the sale closing is delayed beyond March 31, 2003. It is Management's expectation that this extension would be received if requested. If, however, the sale closing were not to occur at all, the Company believes it would be required to renegotiate its complete lending terms with its lender and those renegotiated terms would likely be less favorable than the terms under its current lending arrangements. Our inability to renew or replace this financing would have a material adverse effect on our operations and our ability to timely pay our other debt. The sale of substantially all of the assets of Telmark is expected to result in changes to the operations and capital structure of Telmark. In particular, Telmark will be required by our lenders to repay outstanding debt not assumed in the sale transaction. As a result, it is expected that Telmark will redeem outstanding debentures and repay outstanding debt not assumed by Wells Fargo. Such repayment may involve certain costs in addition to the repayment of principal and interest, such as termination fees or "make whole" payments. Telmark expects to receive cash in sufficient amounts to pay these obligations and to finance its remaining operations going forward. 10 PART I. FINANCIAL INFORMATION (CONTINUED) TELMARK LLC AND CONSOLIDATED SUBSIDIARIES ITEM 1. NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (THOUSANDS OF DOLLARS) NOTE 3 - COMMITMENT AND CONTINGENCIES Commitments Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Outstanding commitments to extend lease financing at December 31, 2002 amounted to $20,864. Legal Proceedings On January 29, 2003, Telmark as well as Agway's other non-debtor companies, were served with a summons and complaint alleging $3,176 in damages due to Agway's provider of surety bonds under an indemnity agreement signed by Agway on behalf of Agway and its wholly owned subsidiaries. Under the complaint, the surety alleges that demands have been made against surety bonds related to insurance coverage of Agway and certain of its subsidiaries and further alleges that as a subsidiary of Agway, Telmark is bound to reimburse the surety for such demands. The Company intends to vigorously contest these claims. It is too early to determine the merits of such claim and/or the probability of payments that may be due. No liability has been reserved for these claims. Telmark is not a party to any other litigation or legal proceedings pending, or to the best of its knowledge threatened, which, if settled adversely, in the opinion of its management, individually or in the aggregate, would have a material adverse affect on its results of operations, financial position or liquidity. NOTE 4 - RELATED PARTY LEASES As of December 31, 2002, Telmark had entered into leases with Agway and certain of its subsidiaries representing a net investment of approximately $15,800, which represents Telmark's greatest concentration with a single customer. The inability of Agway or its subsidiaries to pay those leases on time could have a material adverse effect of Telmark's operating results and liquidity. Notwithstanding Agway's Chapter 11 Proceedings discussed above, it is expected that these leases will continue to be paid in accordance with their terms. 11 PART I. FINANCIAL INFORMATION (CONTINUED) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (IN 000'S ROUNDED TO NEAREST HUNDRED THOUSAND) CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 We are including the following cautionary statement in this Form 10-Q to make applicable and take advantage of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 for any forward-looking statement made by us, or on our behalf. Where any such forward-looking statement includes a statement of the assumptions or basis underlying such forward-looking statement, we caution that, while we believe such assumptions or basis to be reasonable and make them in good faith, assumed facts or basis almost always vary from actual results, and the differences between assumed facts or basis and actual results can be material, depending upon the circumstances. Certain factors that could cause actual results to differ materially from those projected have been discussed in this report and include the factors set forth below. Other factors that could cause actual results to differ materially include uncertainties of economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Where, in any forward-looking statement, we, or our management, express an expectation or belief as to future results, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but we cannot assure you that the statement of expectation or belief will result or be achieved or accomplished. The words "believe," "expect" and "anticipate" and similar expressions identify forward-looking statements. RESULTS OF OPERATIONS NET INCOME Our net income for the three-month and six-month periods ended December 31, 2002 compared to the corresponding periods of the prior year are as follows:

The increase was principally due to lower interest rates on the outstanding debt compared to the prior year, and a decrease in the provision for credit losses, as discussed below. These expense decreases are partially offset by declines in total revenue and increases in selling, general and administrative expenses. TOTAL REVENUES Total revenues for the three-month and six-month periods ended December 31, 2002 compared to the corresponding periods of the prior year are as follows:

The decrease in our total revenues this year is mostly due to a lower income rate on the outstanding portfolio even though there was an increase in our average net investment in leases and notes, as compared to the prior year. The lower income rate is a result of a lower average cost of funds to Telmark which is reflected in the rate charged to customers. The monthly average net investment in leases and notes for the three-months and six-months ended December 31, 2002 compared to the corresponding periods of the prior year are as follows:

INTEREST EXPENSE Total interest expense for the three-month and six-month periods ended December 31, 2002 compared to the corresponding periods of the prior year are as follows:

12 PART I. FINANCIAL INFORMATION (CONTINUED) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (IN 000'S ROUNDED TO NEAREST HUNDRED THOUSAND) RESULTS OF OPERATIONS (CONTINUED) INTEREST EXPENSE (CONTINUED) The decrease in our interest expense is due to lower interest rates on our outstanding debt compared to the prior year, which was partially offset by an increase in the six-month average amount of debt required to finance the increase in the amount of net leases and notes. Over the last three-month period, debt balances have dropped in conjunction with a decline in the outstanding portfolio of leases. Average debt for the three-month and six-month periods ended December 31, 2002 compared to the corresponding periods of the prior year are as follows:

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses for the three-month and six-month periods ended December 31, 2002 compared to the corresponding periods of the prior year are as follows:

The increase was primarily the result of additional personnel and incentive costs relating to overall profitability, retention of business, and profitability of new business. In addition, certain expenses pertaining to the sale of the Telmark business, including certain pay to stay arrangements and legal fees, are and will be borne by Telmark. PROVISION FOR CREDIT LOSSES The provision for credit losses for the three-month and six-month periods ended December 31, 2002 compared to the corresponding periods of the prior year are as follows:

This provision for credit losses is based on our analysis of the allowance required to provide for uncollectible receivables. Telmark's allowance for credit losses is based on a periodic review of the collection history of past leases, current credit practices, an analysis of delinquent accounts, and current economic conditions. At December 31, 2002 the allowance for credit losses was $36,200 compared to $35,900 at December 31, 2001. A summary of the changes in the allowance for credit losses is as follows: THIS YEAR LAST YEAR --------- --------- Balance, June 30 $ 37,100 $ 35,500 Provision for credit losses 3,400 5,000 Charge-offs (7,600) (7,800) Recoveries 3,300 3,200 --------- --------- Balance, December 31 $ 36,200 $ 35,900 ========= ========= The total amount of non-earning accounts increased from $7,400 in December 2001 to $9,800 in December 2002, which as a percentage of the lease portfolio increased from 1.0% in 2001 to 1.3% in 2002. Additionally, the average level of current accounts for the twelve-months ended December 2002 was 97.1%, which is slightly below the average level of current accounts during the twelve-months ended December 2001 of 97.3%. Charge-offs net of recoveries were $4,300 for the six-month period ended December 2002 versus $4,600 for the corresponding period of 2001. The charge-offs for both periods reflect a general softness in the transportation and forestry sectors. The allowance for credit losses is established at a level management believes is sufficient to cover estimated losses in the portfolio. 13 PART I. FINANCIAL INFORMATION (CONTINUED) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (IN 000'S ROUNDED TO NEAREST HUNDRED THOUSAND) RESULTS OF OPERATIONS (CONTINUED) PROVISION FOR INCOME TAXES The provision for income taxes of $5,100 for the six-month period ended December 31, 2002 as compared to $4,900 in the corresponding period of 2001 results in an effective tax rate of 41.0% in 2002 versus 41.4% in 2001. The provision for income taxes of $2,600 for the three-month period ended December 31, 2002 as compared to $2,700 in the corresponding period in 2002 results in an effective tax rate of 40.8% in 2002 versus 41.5% in 2001. LIQUIDITY AND CAPITAL RESOURCES The ongoing availability of adequate financing to maintain the size of our portfolio and to permit lease portfolio growth is key to our continuing profitability and stability. We have principally financed our operations, including the growth of our lease portfolio, through borrowings under our lines of credit, private placements of debt with institutional investors other term debt, subordinated debentures, lease backed notes, principal collections on leases and cash provided from operations.

Virtually all of the cash flows from operations have historically been invested in growth of the lease portfolio, repayment of debt and dividends to Agway. We have been successful in arranging our past financing needs and believe that our current financing arrangements are adequate to meet our operating requirements through March 31, 2003. However, due to the ongoing process relating to the potential sale of the Company and to Agway's Chapter 11 Proceedings, there can be no assurance, that we will be able to obtain future financing in amounts, or on terms, that are favorable. We note that we have lost substantially all of our uncommitted short term credit lines since June 30, 2002 and currently rely principally on a single facility for our revolving credit lines. As previously disclosed, we expect that the majority of the assets of the Company will be sold prior to the expiration of the current line. However, we have discussed with our lender the need for a short term extension for this line in the case that the sale closing is delayed beyond March 31, 2003. While we have not specifically confirmed this with our lender, it is Management's expectation that this extension would be received if requested. If, however, the sale closing were not to occur at all, the Company believes it would be required to replace or renegotiate its complete lending terms. While management has historically had good relationships with its lenders, those renegotiated terms would likely be less favorable than the terms under its current lending arrangements. Our inability to replace or renew that line of credit and/or obtain additional adequate financing would have a serious and material adverse effect on our operations and our ability to make timely payment on our outstanding debt. In addition, many of our financing agreements have default provisions that could be triggered by a failure to make payment under that lending arrangement or under any of our other financing arrangements. Such a default, if not cured, could result in an acceleration of amounts due under such financing arrangements, which would require us to obtain additional sources of financing. There can be no guarantee that we would be able to repay such accelerated indebtedness or obtain such replacement financing on favorable terms, if at all. 14 PART I. FINANCIAL INFORMATION (CONTINUED) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (IN 000'S ROUNDED TO NEAREST HUNDRED THOUSAND)

As of December 31, 2002, Telmark had entered into leases with Agway and certain of its subsidiaries representing a net investment of approximately $15,800, which represents Telmark's greatest concentration to a single customer. The inability of Agway or its subsidiaries to pay those leases on time could have a material adverse effect of Telmark's operating results and liquidity. Notwithstanding Agway's Chapter 11 Proceedings discussed above, it is expected that these leases will continue to be paid in accordance with their terms. See Note 2 of the Condensed Financial Statements - "Borrowings" for a full description of our financing arrangements. CRITICAL ACCOUNTING POLICIES Critical accounting policies are those accounting policies that are very important to the portrayal of the Company's financial condition and results which require management's most difficult, subjective or complex judgements, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. The Company believes the following to be critical and could result in materially different amounts being reported under different conditions or using different assumptions. Lease Accounting Completed lease contracts, which qualify as direct finance leases as defined by Statement of Financial Accounting Standards ("SFAS") No. 13 "Accounting for Leases," are accounted for by recording on the balance sheet the total future minimum lease payments receivable, plus the estimated unguaranteed residual value of leased equipment, less the unearned interest and finance charges. Unearned interest and finance charges represent the excess of the total future minimum lease payments plus the estimated unguaranteed residual value expected to be realized at the end of the lease term over the cost of the related equipment. Interest and finance charge income is recognized as revenue, by using the interest method over the term of the lease, which for most commercial and agricultural leases is 60 months or less with a maximum of 180 months for buildings. Income recognition is suspended on all leases and notes which become past due greater than 120 days. Initial direct costs incurred in consummating a lease are not expensed when the lease is originated. The expense is capitalized and amortized over the life of the lease. This deferral of expenses has the effect of reducing the expense recorded in the period the lease is booked, and increasing the expense recognized over the remaining life of the lease. 15 PART I. FINANCIAL INFORMATION (CONTINUED) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (IN 000'S ROUNDED TO NEAREST HUNDRED THOUSAND) CRITICAL ACCOUNTING POLICIES (CONTINUED) Provision for Credit Loss The provision for credit losses is based on our analysis of the allowance required to provide for uncollectible receivables. Telmark's allowance for credit losses is based on a periodic review of the collection history of past leases, current credit practices, an analysis of delinquent accounts and current economic conditions. To evaluate the adequacy of the allowance for losses, the Company utilizes certain estimates and assumptions. Management bases these estimates and assumptions on historical experience and on various other factors that we believe to be reasonable under the circumstances applying different estimates on assumptions could produce materially different results from those reported by the Company. The allowance for credit losses was $36,200 and $37,100 at December 31 and June 30, 2002, respectively. Income Taxes Telmark provides for income taxes in accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." Under the liability method specified by SFAS No. 109, deferred tax assets and liabilities are based on the difference between the financial statement and tax basis of assets and liabilities as measured by the tax rates which are anticipated to be in effect when these differences reverse. The deferred tax provision generally represents the net change in the assets and liabilities for deferred tax. A valuation allowance is established when it is necessary on a separate company basis to reduce deferred tax assets to amounts for which realization is reasonably assumed. Realization of deferred tax assets and payment of deferred tax liabilities result from interaction with Agway Inc. through the tax sharing arrangement. Telmark is currently included in consolidated federal and state tax returns filed by Agway. Under Telmark's tax sharing arrangement, the provision for income taxes and related credits and carry forwards are calculated on a separate company basis and billed to Telmark as appropriate on an interim basis. 16 PART I. FINANCIAL INFORMATION (CONTINUED) ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We do not use derivatives or other financial instruments to hedge interest rate risk in our portfolio. We try to limit the effects of changes in interest rates by matching as closely as possible, on an ongoing basis, the maturity and cost of the funds we borrow to finance our leasing activities with the maturity and repricing characteristics of our lease portfolio. However, a rise in interest rates would increase the cost of funds we borrow to finance our lease portfolio, including that portion of the debt which is not precisely matched to the characteristics of the portfolio. Telmark has a formal risk management policy which limits the short-term exposure to an amount which is immaterial to the results of operations or cash flows. During the three months ended September 30, 2002, the components of the Company's borrowings were modified as described in Note 2 to the Condensed Financial Statements. As a result, the principal cash flows of the Company's loans have changed since our disclosure in Form 10-K as of June 30, 2002. A table providing information about Telmark's debt securities and loans that are sensitive to changes in interest rates was provided in the September 30, 2002, 10-Q filing. The principal cash of our debt obligations and related weighted average interest rates key contractual maturity dates for long-term borrowings have not materially changed since September 30, 2002. ITEM 4. CONTROLS AND PROCEDURES Within the 90 day period prior to the filing date of this quarterly report, the chief executive officer and chief financial officer of Telmark LLC evaluated Telmark's disclosure controls and procedures related to the recording, processing, summarization and reporting of information in Telmark's reports that it files with the Securities and Exchange Commission (SEC). These disclosure controls and procedures have been designed to ensure that (a) material information relating to Telmark, including its consolidated subsidiaries, is made known to Telmark's management, including their officers, by other employees of Telmark and its subsidiaries, and (b) this information is recorded, processed, summarized, evaluated and reported, as applicable, within the time periods specified in the SEC's rules and forms. Based on this evaluation, these officers concluded that the design of the disclosure controls and procedures is sufficient to accomplish their purpose. There have been no significant changes in Telmark's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. 17 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On January 29, 2003, Telmark as well as Agway's other non-debtor companies, were served with a summons and complaint alleging $3,176 in damages due to Agway's provider of surety bonds under an indemnity agreement signed by Agway on behalf of Agway and its wholly owned subsidiaries. Under the complaint, the surety alleges that demands have been made against surety bonds related to insurance coverage of Agway and certain of its subsidiaries and further alleges that as a subsidiary of Agway, Telmark is bound to reimburse the surety for such demands. The Company intends to vigorously contest these claims. It is too early to determine the merits of such claim and/or the probability of payments that may be due. No liability has been reserved for these claims. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) EXHIBITS REQUIRED BY SECURITIES AND EXCHANGE COMMISSION REGULATION S-K (I) THE FOLLOWING REQUIRED EXHIBITS ARE HEREBY INCORPORATED BY REFERENCE TO PREVIOUSLY FILED REGISTRATION STATEMENTS OR THE APPLICABLE FORM S-1, 10-K, 10-Q, OR 8-K FILED ON THE DATE AS SPECIFIED. THE COMPANY UNDERTAKES TO PROVIDE TO THE COMMISSION UPON REQUEST COPIES OF ANY INSTRUMENT WITH RESPECT TO LONG-TERM DEBT NOT BEING REGISTERED WHERE THE AMOUNT OF SECURITIES AUTHORIZED THEREUNDER DOES NOT EXCEED 10 PERCENT OF THE TOTAL ASSETS OF THE COMPANY AND ITS SUBORDINATES ON A CONSOLIDATED BASIS. PLAN OF ACQUISITION, REORGANIZATION, ARRANGEMENT, LIQUIDATION, OR SUCCESSION 2(a) Asset Purchase Agreement dated as of December 20, 2002 By and Among Wells Fargo Financial Leasing, Inc., Agway Inc., Telmark, LLC, Telmark Lease Funding II, LLC, Telmark Lease Funding III, LLC and Telease Financial Services, Ltd., filed by reference to Exhibit 2(a) of the Current Report (Form 8-K) dated February 6, 2003. 2(b) Amendment To Asset Purchase Agreement dated January 8, 2003 , filed by reference to Exhibit 2(b) of the Current Report (Form 8-K) dated February 6, 2003. 2(c) Second Amendment To Asset Purchase Agreement dated January 10, 2003 , filed by reference to Exhibit 2(c) of the Current Report (Form 8-K) dated February 6, 2003. 2(d) Addendum To Asset Purchase Agreement dated January 15, 2003 , filed by reference to Exhibit 2(d) of the Current Report (Form 8-K) dated February 6, 2003. 2(e) Letter agreement amongst counsel to Agway, Telmark, Wells Fargo Financial Leasing and the Creditors' Committee regarding changes to be made to the Telmark Asset Purchase Agreement , filed by reference to Exhibit 2(e) of the Current Report (Form 8-K) dated February 6, 2003. 2(f) Bankruptcy Court Order authorizing and scheduling an auction and hearing to consider approval of proposed sale resulting from the auction , filed by reference to Exhibit 2(f) of the Current Report (Form 8-K) dated February 6, 2003. ARTICLES OF INCORPORATION 3(a) Certificate of Incorporation of Telmark Inc. (predecessor to Telmark LLC) dated June 4, 1964, as amended September 8, 1964; January 15, 1975; and June 16, 1987, filed by reference to Exhibit 3 of the Registration Statement (Form S-1), File No. 33-70732, dated October 22, 1993. BY-LAWS 3(b) By-laws of Telmark Inc. (predecessor to Telmark LLC) as amended September 19, 1995, filed by reference to Exhibit 3 of the Annual Report (Form 10-K) dated August 23, 1996. 18 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) EXHIBITS REQUIRED BY SECURITIES AND EXCHANGE COMMISSION REGULATION S-K (CONTINUED) CERTIFICATE OF FORMATION 3(c) Certificate of formation of Telmark LLC dated June 25, 1998, filed by reference to Item 14 of the Annual Report (Form 10-K) dated August 21, 1998. LIMITED LIABILITY COMPANY AGREEMENT 3(d) Operating agreement of Telmark LLC dated July 1, 1998, filed by reference to Item 14 of the Annual Report (Form 10-K) dated August 21, 1998. CERTIFICATE OF MERGER 3(e) Certificate of Merger of Telmark Inc. into Telmark LLC effective July 1, 1998, filed by reference to Item 14 of the Annual Report (Form 10-K) dated August 21, 1998. INSTRUMENT DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES 4(a) The Indenture dated as of September 30, 1993, between Telmark Inc. and OnBank & Trust Co. of Syracuse, New York, Trustee, filed by reference to Exhibit 4 of the Registration Statement (Form S-1), File No. 33- 70732, dated October 22, 1993. 4(b) Telmark Inc. Board of Directors resolutions dated as of June 21, 1995, authorizing the issuance of Debentures under the Indenture filed by reference to Exhibit 4 of the post effective Amendment No. 1 to the Registration Statement (Form S-1), File No. 33-84442, dated August 28, 1995. 4(c) Supplemental Indenture dated as of June 30, 1998 between Telmark Inc. and Manufacturers and Trust Company, filed by reference to Exhibit 4 of the Current Report (Form 8-K), File No. 33-70732, dated July 6, 1998. 4(d) Supplemental Indenture dated as of July 1, 1998 between Telmark Inc. and Telmark LLC and Manufacturers and Traders Trust Company, filed by reference to Exhibit 4 of the Current Report (Form 8-K), dated July 6, 1998. 4(e) Telmark LLC Note Agreement dated August 1, 2002, filed by reference to Exhibit 4(e) of the Annual Report (Form 10-K) dated September 30, 2002. MATERIAL CONTRACTS 10(a) Agway Inc. (Commission File Number 2-22791) Pledge Agreement with its lenders dated October 4, 2002, filed by reference to Exhibit 99.6 of Agway Inc. Form 8-K, dated October 15, 2002. 10(b) Amended and Restated Master Loan Agreement between CoBank, ACB and Telmark LLC dated June 29, 1998 and effective July 1, 1998, filed by reference to Exhibit 10(c) of the Annual Report (Form 10-K) dated September 30, 2002. 10(c) Amendment dated November 19, 2001 of the Master Loan Agreement between CoBank, ACB and Telmark LLC, filed by reference to Exhibit 10(d) of the Annual Report (Form 10-K) dated September 30, 2002. 10(d) Amendment dated July 31, 2002 of the Master Loan Agreement between CoBank, ACB and Telmark LLC, filed by reference to Exhibit 10(e) of the Annual Report (Form 10-K) dated September 30, 2002. 10(e) Amendment dated September 27, 2002 of the Master Loan Agreement between CoBank, ACB and Telmark LLC, filed by reference to Exhibit 10(n) of the Annual Report (Form 10-K) dated September 30, 2002. 19 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) EXHIBITS REQUIRED BY SECURITIES AND EXCHANGE COMMISSION REGULATION S-K MATERIAL CONTRACTS (CONTINUED) 10(f) Pay to Stay Arrangement between Daniel J. Edinger and Telmark LLC Telmark LLC, filed by reference to Exhibit 10(f) of the Annual Report (Form 10-K) dated September 30, 2002. 10(g) Annual Incentive Plan for Fiscal Year, Ending June 30, 2002 - Daniel J. Edinger, filed by reference to Exhibit 10(g) of the Annual Report (Form 10-K) dated September 30, 2002. 10(h) Annual Incentive Plan for Fiscal Year, Ending June 30, 2003 - Daniel J. Edinger, filed by reference to Exhibit 10(h) of the Annual Report (Form 10-K) dated September 30, 2002. 10(i) Pay to Stay Arrangement between Raymond G. Fuller and Telmark LLC, filed by reference to Exhibit 10(i) of the Annual Report (Form 10-K) dated September 30, 2002. 10(j) Pay to Stay Arrangement between Jennifer L. Hicks and Telmark LLC, filed by reference to Exhibit 10(j) of the Annual Report (Form 10-K) dated September 30, 2002. 10(k) Pay to Stay Arrangement between Richard A. Kalin and Telmark LLC, filed by reference to Exhibit 10(k) of the Annual Report (Form 10-K) dated September 30, 2002. 10(l) Pay to Stay Arrangement between Kipp R. Weaver and Telmark LLC, filed by reference to Exhibit 10(l) of the Annual Report (Form 10-K) dated September 30, 2002. 10(m) Telmark LLC Supplemental Severance Program, filed by reference to Exhibit 10(m) of the Annual Report (Form 10-K) dated September 30, 2002. (II) THE FOLLOWING EXHIBITS ARE FILED AS A SEPARATE SECTION OF THIS REPORT: OTHER EXHIBITS 99 Sarbanes - Oxley Act of 2002 - Certifications 99.1 Certification of Chief Executive Officer 99.2 Certification of Chief Financial Officer (B) REPORTS ON FORM 8-K The Company filed a Current Report on Form 8-K on October 11, 2002 to announce that Telmark's parent company, Agway Inc., filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code and that Telmark was not included in that Bankruptcy filing. The Company filed a Current Report on Form 8-K on December 24, 2002 to announce that Telmark, Agway Inc.and Wells Fargo Financial Leasing, Inc. ("Wells Fargo") signed a definitive agreement in which Wells Fargo would purchase substantially all of the assets of Telmark. The agreement contemplates that substantially all of the liabilities associated with the leases will be retained by Telmark and it is expected that a substantial portion of the proceeds will be used to repay Telmark creditors. The purchase is expected to close on or about March 1, 2003. The acquisition is subject to obtaining appropriate approvals, including the approval of the U.S. Bankruptcy Court. The Company filed a Current Report on Form 8-K on February 6, 2003 providing an update on the transaction with Wells Fargo and the related U.S. Bankruptcy Court Proceedings. This filing included a copy of the definitive agreement, several amendments thereto, a letter agreement reflecting changes to be made to the definitive agreement and the Bankruptcy Court Order. 20 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. TELMARK LLC (Registrant) Date February 14, 2003 By /s/ Daniel J. Edinger --------------------- ---------------------------------------- Daniel J. Edinger, President (Principal Executive Officer) Date February 14, 2003 By /s/ Peter J. O'Neill --------------------- ---------------------------------------- Peter J. O'Neill, Senior Vice President, Finance and Control (Principal Accounting Officer) 21 CERTIFICATIONS UNDER NEW EXCHANGE ACT RULES 13A-14 AND 15D-14 OF THE EXCHANGE ACT OF 1934 I, Daniel J. Edinger, certify that: 1. I have reviewed this quarterly report on Form 10-Q for the period ended December 31, 2002 of Telmark LLC; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: February 14, 2003 /s/ Daniel J. Edinger ----------------------------- Daniel J. Edinger President (Principal Executive Officer) 22 CERTIFICATIONS UNDER NEW EXCHANGE ACT RULES 13A-14 AND 15D-14 OF THE EXCHANGE ACT OF 1934 I, Peter J. O'Neill, certify that: 1. I have reviewed this quarterly report on Form 10-Q for the period ended December 31, 2002 of Telmark LLC; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: February 14, 2003 /s/ Peter J. O'Neill ------------------------------------------ Peter J. O'Neill Senior Vice President, Finance and Control Chairman of the Board and Director (Principal Financial Officer) 23 EXHIBIT 99.1 TELMARK LLC Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the quarterly report on Form 10-Q for the period ended December 31, 2002 (the "Report") of Telmark LLC (the "Registrant"), as filed with the Securities and Exchange Commission on the date hereof, I, Daniel J. Edinger, the Chief Executive Officer of the Registrant certify, to the best of my knowledge that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. /s/ Daniel J. Edinger ----------------------------------- Daniel J. Edinger President & Chief Executive Officer February 14, 2003 This certification accompanies the report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Registrant for purposes of Section 18 of the Securities Exchange Act of 1934. 24 EXHIBIT 99.2 TELMARK LLC Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the quarterly report on Form 10-Q for the period ended December 31, 2002 (the "Report") of Telmark LLC (the "Registrant"), as filed with the Securities and Exchange Commission on the date hereof, I, Peter J. O'Neill, Senior Vice President, Finance & Control of the Registrant certify, to the best of my knowledge that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. /s/ Peter J. O'Neill ---------------------------------------- Peter J. O'Neill Senior Vice President, Finance & Control February 14, 2003 This certification accompanies the report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Registrant for purposes of Section 18 of the Securities Exchange Act of 1934. 25