-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Cv9mTTivHSX2pPWn9Pwxc7EFTn/DDdhjWFhwWlH17j+PkTS0izgJkPbKoL4gDv6x FEjVyXdG+j6ln8WIOs9YwA== 0000950134-03-005771.txt : 20030414 0000950134-03-005771.hdr.sgml : 20030414 20030414145417 ACCESSION NUMBER: 0000950134-03-005771 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20030228 FILED AS OF DATE: 20030414 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IMPRESO INC CENTRAL INDEX KEY: 0001108345 STANDARD INDUSTRIAL CLASSIFICATION: MANIFOLD BUSINESS FORMS [2761] IRS NUMBER: 752849585 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-29883 FILM NUMBER: 03648464 BUSINESS ADDRESS: STREET 1: 652 SOUTHWESTERN BLVD CITY: COPPELL STATE: TX ZIP: 75019 BUSINESS PHONE: 9724620100 MAIL ADDRESS: STREET 1: 652 SOUTHWESTERN BLVD CITY: COPPELL STATE: TX ZIP: 75019 FORMER COMPANY: FORMER CONFORMED NAME: IMPRESO COM INC DATE OF NAME CHANGE: 20000302 10-Q 1 d04862e10vq.txt FORM 10-Q 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 February 28, 2003 OR Transition report pursuant to Section 13 or 15(d) of the Securities - --- Exchange Act of 1934 For the transition period _______________________ to _____________________ Commission File Number 000-29883 Impreso, Inc. (Exact name of registrant as specified in its charter) Delaware 75-20849585 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 652 Southwestern Boulevard Coppell, Texas 75019 (Address of principal executive offices) (972) 462-0100 (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 the number of shares outstanding of each of the issuer's classes of Common Stock as of the latest practicable date. Class of Common Stock Shares outstanding at April 11, 2003 --------------------- ------------------------------------ $0.01 Par Value 5,278,780 IMPRESO, INC. AND SUBSIDIARIES FORM 10-Q February 28, 2003 INDEX
PART I. FINANCIAL INFORMATION Page Number ----------- Item 1. Interim Consolidated Financial Statements: Interim Consolidated Balance Sheets at February 28, 2003 (Unaudited) and August 31, 2002 1 Interim Consolidated Statements of Operations for the Three and Six Months Ended February 28, 2003 and February 28, 2002 (Unaudited) 3 Interim Consolidated Statements of Cash Flows for the Six Months Ended February 28, 2003 and February 28, 2002 (Unaudited) 4 Notes to Interim Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Item 3. Quantitative and Qualitative Disclosures about Market Risk 13 Item 4. Controls and Procedures 14 PART II. OTHER INFORMATION 15 Item 6. Exhibits and Reports on Form 8-K 15 SIGNATURES 16 INDEX TO EXHIBITS 19
IMPRESO, INC. AND SUBSIDIARIES INTERIM CONSOLIDATED BALANCE SHEETS ASSETS
February 28, August 31, 2003 2002 ------------ ------------ (Unaudited) Current assets: Cash and cash equivalents $ 131,865 $ 202,809 Trade accounts receivable, net of allowance for doubtful accounts of $515,010 at February 28, 2003 and August 31, 2002 13,561,814 15,863,549 Inventories 34,317,609 34,111,015 Prepaid expenses and other 270,808 226,065 Deferred income tax assets 534,350 513,950 ------------ ------------ Total current assets 48,816,446 50,917,388 ------------ ------------ Property, plant and equipment, at cost 27,906,222 27,712,994 Less-Accumulated depreciation (12,495,082) (11,773,895) ------------ ------------ Net property, plant and equipment 15,411,140 15,939,099 ------------ ------------ Other assets 100,051 115,377 ------------ ------------ Total assets $ 64,327,637 $ 66,971,864 ============ ============
The accompanying notes are an integral part of these consolidated financial statements. 1 IMPRESO, INC. AND SUBSIDIARIES INTERIM CONSOLIDATED BALANCE SHEETS (CONTINUED) LIABILITIES AND STOCKHOLDERS' EQUITY
February 28, August 31, 2003 2002 --------------- --------------- (Unaudited) Current liabilities: Accounts payable $ 11,605,905 $ 16,301,801 Accrued liabilities 2,595,687 3,702,838 Current maturities of long-term debt 1,127,269 1,122,614 Line of credit 20,857,337 17,861,824 Current maturities of prepetition debt 7,934 7,784 -------------- -------------- Total current liabilities 36,194,132 38,996,861 Deferred income tax liability 978,531 948,601 Long-term debt, net of current maturities 9,977,588 10,372,474 Long-term portion of prepetition debt, net of current maturities 233,312 237,316 --------------- --------------- Total liabilities 47,383,563 50,555,252 --------------- --------------- Commitments and contingencies Stockholders' equity: Preferred Stock, $.01 par value; 5,000,000 shares authorized; 0 shares issued and outstanding -- -- Common Stock, $.01 par value; 15,000,000 shares authorized; 5,292,780 shares issued and 5,278,780 shares outstanding at February 28, 2003 and August 31, 2002 52,928 52,928 Treasury Stock (14,000 shares, at cost) (38,892) (38,892) Additional paid-in capital 6,353,656 6,347,209 Retained earnings 10,576,382 10,055,367 --------------- ------------ Total stockholders' equity 16,944,074 16,416,612 --------------- ------------ Total liabilities and stockholders' equity $ 64,327,637 $ 66,971,864 =============== ============
The accompanying notes are an integral part of these consolidated financial statements. 2 IMPRESO, INC. AND SUBSIDIARIES INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Six Months Ended February 28, February 28, February 28, February 28, 2003 2002 2003 2002 -------------- -------------- -------------- -------------- Net Sales $ 31,639,782 $ 26,374,635 $ 63,511,763 $ 51,796,450 Cost of sales 28,464,078 23,516,287 57,062,425 46,322,989 -------------- -------------- -------------- -------------- Gross profit 3,175,704 2,858,348 6,449,338 5,473,461 Selling, General and administrative expense 2,414,558 2,122,827 4,784,648 4,221,601 -------------- -------------- -------------- -------------- Operating income 761,146 735,521 1,664,690 1,251,860 Other (income) expenses: Interest expense 474,098 378,578 957,737 831,072 Miscellaneous (income) expenses (79,647) 71,018 (157,093) (1,065,914) -------------- -------------- -------------- -------------- Income before income tax expense 366,695 285,925 864,046 1,486,702 Income tax expense: Current 144,927 122,961 333,501 555,721 Deferred 5,373 (45) 9,530 2,043 -------------- -------------- -------------- -------------- Total Income Tax Expense 150,300 122,916 343,031 557,764 Net income $ 216,395 $ 163,009 $ 521,015 $ 928,938 ============== ============== ============== ============== Net income per common share (basic and diluted) $ 0.04 $ 0.03 $ 0.10 $ 0.18 ============== ============== ============== ============== Weighted average shares outstanding 5,278,780 5,278,780 5,278,780 5,278,780
The accompanying notes are an integral part of these consolidated financial statements. 3 IMPRESO, INC. AND SUBSIDIARIES INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended ---------------------------------- February 28, February 28, 2003 2002 -------------- -------------- Cash Flows From Operating Activities Net income $ 521,015 $ 928,938 Adjustments to reconcile net income to net cash used in operating activities- Depreciation and amortization 721,187 576,565 Loss sale of property, plant, and equipment -- 833 Deferred income taxes 9,530 2,043 Decrease in accounts receivable, net 2,301,735 230,737 (Increase) Decrease in inventories (206,594) 2,408,517 Increase in prepaid expenses and other (29,417) (86,368) Decrease in accounts payable (4,695,896) (1,645,985) (Decrease) Increase in accrued liabilities (1,107,151) 104,639 -------------- -------------- Net cash (used in) provided by operating activities (2,485,591) 2,519,919 -------------- -------------- Cash Flows From Investing Activities: Additions to property, plant, and equipment (193,228) (105,315) -------------- -------------- Net Cash used in investing activities (193,228) (105,315) Cash Flows From Financing Activities: Net borrowings (payments) on line of credit 2,995,513 (1,306,998) Payments on prepetition debt (3,854) (3,728) Warrants issued 6,447 21,079 Net payments on postpetition debt, net (390,231) (1,060,746) -------------- -------------- Net cash provided by (used) in financing activities 2,607,875 (2,350,393) -------------- -------------- Net (decrease) increase in cash and cash equivalents (70,944) 64,211 Cash and cash equivalents, beginning of period 202,809 211,352 -------------- -------------- Cash and cash equivalents, end of period $ 131,865 $ 275,563 ============== ==============
The accompanying notes are an integral part of these consolidated financial statements. 4 IMPRESO, INC. AND SUBSIDIARIES NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. ORGANIZATION AND NATURE OF BUSINESS: Impreso, Inc., a Delaware corporation (referred to collectively with its subsidiaries as the "Company"), is the parent holding company of TST/Impreso, Inc. ("TST"), a manufacturer and distributor to dealers and other resellers of paper and film products for commercial and home use in domestic and international markets, and Hotsheet.com, Inc., the owner and operator of the Hotsheet.com web portal. TST's product line consists of standard continuous computer stock business forms; thermal facsimile paper; cut sheet products such as copy paper, ink jet paper, digital photo paper and transparencies; fine business stationary; point of sale and cash register machine rolls; high speed laser roll paper; wide format engineering rolls; wide format ink jet media; and processed laser cut sheets. TST has one wholly owned subsidiary, TST/Impreso of California, Inc., which was formed to support the activities of the paper converting segment of the Company's business. 2. INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS: In the opinion of management, the unaudited Interim Consolidated Financial Statements of the Company include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company's financial position as of February 28, 2003, and its results of operations for the three and six months ended February 28, 2003 and February 28, 2002. Results of the Company's operations for the interim period ended February 28, 2003, may not be indicative of results for the full fiscal year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations promulgated by the Securities and Exchange Commission (the "SEC"). The unaudited Interim Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and accompanying notes of the Company and its subsidiaries, included in the Company's Form 10-K, as amended (the "Company's Form 10-K"), for the fiscal year ended August 31, 2002 ("Fiscal 2002"). Accounting policies used in the preparation of the unaudited Interim Consolidated Financial Statements are consistent in all material respects with the accounting policies described in the Notes to Consolidated Financial Statements in the Company's Form 10-K. 3. INVENTORIES: Inventories are stated at the lower of cost (principally on a first-in, first-out basis) or market and include material, labor and factory overhead. 5 Inventories consisted of the following:
February 28, August 31, 2003 2002 -------------- -------------- Finished goods $ 18,421,687 $ 19,059,199 Raw materials 15,553,879 14,684,869 Supplies 996,161 1,011,967 Work-in-process 58,250 108,695 Allowance for obsolete inventory (712,368) (753,715) -------------- -------------- Total inventories $ 34,317,609 $ 34,111,015 ============== ==============
4. LONG -TERM DEBT AND LINE OF CREDIT:
The following is a summary of long-term debt and line of credit: FEBRUARY 28, AUGUST 31, 2003 2002 ------------- ------------- Line of Credit with a commercial financial corporation under revolving credit line, maturing May 2004, secured by inventories, trade accounts receivable, equipment, goodwill associated with TST'S trademark "IMPRESO" (no value on financial statements), and a personal guarantee by the trustee of a trust which is a principal stockholder of the Company, interest payable monthly at prime plus .25% (4.5% at February 28, 2003). $ 20,857,337 $ 17,861,824 Note payable to a commercial financial corporation, secured by real property, payable in monthly installments of $15,151 (including interest at 7.75%, or 4.5% above the 11th District cost of funds rate, whichever is greater; 7.75% at February 28, 2003), maturing August 2008. 1,647,310 1,657,436 Note payable to a commercial financial corporation, secured by real property and equipment, payable in monthly installments of $4,457 (including interest at 8.50%), maturing December 2009. 270,041 284,546 Note payable to a commercial financial corporation, secured by real property and equipment, payable in monthly installments of $10,843 (including interest at 8.50%), maturing August 2010. Revolving lender's blanket lien subordinated to note's collateral. 716,979 749,987 Note payable to a commercial financial corporation, secured by real property, payable in monthly installments of $2,834 (including interest at 5.5%), maturing November 2010. 211,210 222,213 Notes payable to various commercial financial corporations, secured by equipment, interest rates ranging from 1.9% to 11.17%, maturing at various dates from December 2002 through July 2005. 387,067 449,858
6 Notes payable to a commercial financial corporation, secured by real property and a personal guarantee by the trustee of a trust which is a principal stockholder of the Company, payable in monthly installments of $21,407 (including interest at 8%), maturing May 2011. 2,086,982 2,130,905 Acquisition note payable, unsecured, payable in quarterly installments of $15,000 (including interest at 8%), maturing April 2006. 225,000 225,000 Acquisition note payable, secured by equipment, payable in monthly installments of $16,024, no interest, maturing May 2003. 352,145 368,169 Note payable to a commercial financial corporation, secured by real property and a personal guarantee by the trustee of a trust which is a principal stockholder of the Company, payable in monthly installments of $22,827 (including a fixed schedule for interest, 7.0% at February 28, 2003), maturing March 2007. 3,161,103 3,184,468 Note payable to a commercial financial corporation, secured by equipment, payable in monthly installments of $17,857 (including interest at a variable rate equal to 30 day Commercial Paper plus 350 basis points, 4.84% at February 28, 2003, maturing February 2009. 1,315,811 1,410,714 Acquisition notes payable, unsecured, payable in monthly installments of $16,666, maturing February 2007. 731,209 811,792 Prepetition- Note payable to a commercial financial corporation, secured by real property and equipment and a personal guarantee by the trustee of a trust which is a principal stockholder of the Company, payable in monthly installments of $1,461 (including interest at 4%), maturing June 2023. 241,246 245,100 ------------ ------------ Total 32,203,440 29,602,012 ------------ ------------ Less Current Maturities (21,992,540) (18,992,222) ------------ ------------ Long-Term Debt $ 10,210,900 $ 10,609,790 ============ ============
Prepetition amount listed above represents the renegotiated amounts and terms under the 1993 plan of reorganization. In April 2002, TST amended its revolving line of credit to increase the line from $22 million to $25 million. The amended revolving credit line is limited to the lesser of $25 million or a percentage of eligible trade accounts receivable and inventories, as defined. The remaining borrowing capacity under the revolving credit line was $4.0 million as of February 28, 2003. 7 The line of credit, as amended, has restrictive covenants requiring the maintenance of a minimum tangible net worth and working capital requirements, as defined in the agreement. One of the notes payable contains restrictive covenants on current and debt to worth ratios, and the payment of cash dividends. As of February 28, 2003, the Company was in compliance with all covenants. 5. SUPPLEMENTAL CASH FLOW INFORMATION:
Six Months Ended February 28 February 28 2003 2002 -------------- -------------- Cash paid during the period for: Interest $ 957,737 $ 831,072 Income taxes $ 568,314 $ 545,446 Noncash Investing Activities: Issuance of Warrant to Vendor $ 6,447 $ 21,079
6. RECLASSIFICATIONS: For comparability, the 2002 financial statements reflect reclassifications where appropriate to conform to the financial statement presentation used in 2003. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CRITICAL ACCOUNTING POLICIES The accounting policies described below are those the Company considers critical in preparing its consolidated financial statements . These policies require the application of significant judgement by management in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgements are subject to an inherent degree of uncertainty. These judgements are based on historical experience, the Company's observation of trends in the industry, information provided by customers and information available from other outside sources, as appropriate and available at the time the estimates are made. However, as described below, these estimates could change materially if different information or assumptions were used. The Company believes that of its significant accounting policies, the following may involve a higher degree of judgment or estimation than other accounting policies. The descriptions below are summarized, have been simplified for clarity, and should be read in conjunction with the notes to the Consolidated Financial Statements. Property and Equipment Property and equipment are recorded at cost. Depreciation is provided for financial reporting purposes using the straight-line method over estimated useful lives ranging from 5 to 7 years for furniture, fixtures and equipment and up to 30 years for facilities. These estimates require 8 assumptions that are believed to be reasonable. Long-lived assets are evaluated for impairment annually and when an event occurs that indicates an impairment may exist. Accounts Receivable (doubtful accounts) Reserves The Company provides for losses on accounts receivable based upon their current status, historical experience and management's evaluation of existing economic conditions. Significant changes in customer profitability or general economic conditions may have a significant effect on the Company's allowance for doubtful accounts. Revenue Recognition TST's sales are recorded when products are shipped to customers. TST is reasonably assured a majority of the sales are collectible upon shipment due to it's credit policies and collection methods. For those accounts TST is not reasonably assured of collection the Company reserves against doubtful accounts based upon historical experience and management's evaluation of existing economic conditions. Hotsheet.com, Inc. generates its revenue by click through fee advertising revenues and commissions earned. Click through fees are generated when traffic is sent from the Hotsheet.com website, via a link, to a vendors website. Commissions are generated when the linked traffic makes purchases. The revenue is recognized upon receipt. Inventories Inventories are valued at the lower of cost or market, cost being determined on the first-in, first-out method. Reserves for slow moving, obsolete products, or bad (damaged) products are based on historical experience, acquisition activities, and secured lender policies. The Company evaluates, and if necessary, adjusts reserves quarterly. Historically, the Company has not reserved for slow moving, obsolete or bad inventories. Substantially all of the slow moving products can be repackaged into different formats or labels. Demand for products that are associated with obsolete technology slowly decline as sales of new hardware requiring new or different consumables increase. The reduced demand for products which are becoming obsolete is easily monitored and scheduled production of these items is adjusted accordingly. If damage is caused to a product it is most often minor in value and expensed as damage occurs. Deferred Taxes The Company accounts for income taxes under the liability method. Deferred tax assets and liabilities are recognized based on differences between financial statement and tax basis of assets and liabilities using presently enacted tax rates. Returns and Allowances The Company records reductions in revenue when product are returned. Returns and allowances are monitored based on a historical percentage of sales. All returns must be approved by the Company prior to the product being returned, and in some instances a restocking fee is charged to the customer. The Company also monitors reasons for return, such as quality, shipping errors or ordering errors. 9 Commissions and Rebates The Company reserves commissions and rebates paid to certain customers based on specific contractual agreements. These reserves are calculated based upon sales by customer, and adjusted quarterly to reflect increases and decreases in each customer's sales and payments of commissions and rebates. RESULTS OF OPERATIONS FOR THE INTERIM PERIODS ENDED FEBRUARY 28, 2003 AND FEBRUARY 28, 2002. Net Sales---Net sales increased from $26.4 million in the three months ended February 28, 2002 to $31.6 million in the same period for the year ending February 28, 2003 ("Fiscal 2003"), an increase of $5.2 million or 20%. Net sales increased from $51.8 million in the six months ended February 28, 2002, to $63.5 million in the same period in Fiscal 2003, an increase of $11.7 million, or 22.6%. Net sales increased in the first and second quarters of Fiscal 2003, as compared to the corresponding period of the prior year, as a result of the acquisition of United Computer Supplies, Inc. and United Computer Supplies - East ("United") in April, 2002. Gross Profit---Gross profit increased from $2.8 million in the three months ended February 28, 2002, to $3.2 million in the three months ended February 28, 2003, an increase of 11.1%. Gross profit increased from $5.5 million in the six months ended February 28, 2002, to $6.4 million in the same period in 2003, an increase of $1 million, or 17.8%. Gross profit as a percentage of net sales decreased from 10.8%, in the second quarter of Fiscal 2002, to 10.0% in the corresponding period of Fiscal 2003. Gross profit as a percentage of net sales decreased from 10.6% in the six month period ended February 28, 2002, to 10.2% in the same period in Fiscal 2003. Gross profit as a percentage of net sales decreased in the three and six month periods ended February 28, 2003, as compared to the corresponding periods of the prior year, resulting from the acquisition of a commodity product producer, United, which increased sales of lower margin products as a percentage of net sales. Selling, General, and Administrative Expenses----SG&A expenses increased from $2.1 million in the three months ended February 28, 2002, to $2.4 million in the corresponding period of Fiscal 2003, an increase of $292,000, or 13.7%. SG&A as a percentage of net sales decreased from 8.0% in the second quarter of Fiscal 2002, to 7.6% in the corresponding period of Fiscal 2003. SG&A expenses increased from $4.2 million, or 8.2% of net sales for the six months ended February 28, 2002, to $4.8 million, or 7.5% of net sales in the same period of Fiscal 2003. The increase in SG&A as a dollar amount for the three and six month periods ended February 28, 2003, resulted primarily from the addition of United. Interest Expense----Interest expense increased from $379,000 in the three months ended February 28, 2002, to $474,000 in the same period of Fiscal 2003, an increase of 25.2%. Interest expense increased from $831,000 in the six months ended February 28, 2002, to $958,000 in the corresponding period of Fiscal 2003, an increase of 15.2%. The increase in interest expense for the three and six months ended February 28, 2003, was primarily attributable to increased borrowings incurred to finance TST's acquisition of United. 10 Income Taxes---Income tax expense increased from $123,000 for the three months ended February 28, 2002, to $150,000 in the second quarter of Fiscal 2003. Income tax expense decreased from $558,000 for the six months ended February 28, 2002, to $343,000 in the six months ended February 28, 2003. The increase in income tax expense for the three months ended February 28, 2003, was attributable to an increase in profit. The decrease in income tax expense for the six months ended February 28, 2003, was due to a decrease in taxable income, resulting from a litigation settlement received in the first quarter fiscal 2002. Liquidity and Capital Resources Working capital increased to $12.6 million at February 28, 2003, from $11.9 million at August 31, 2002. This represented an increase of 5.9%. Borrowings under TST's line of credit increased from $18 million at August 31, 2003, to $21 million at February 28, 2003, an increase of $3 million, or 16.8%. The increased borrowing primarily resulted from the decrease in accounts payable. In April 2002, TST entered into an agreement with a bank for a two-year renewal of its revolving line of credit. The new agreement increases the line from $22 million to $25 million. The loan is secured by, among other things, inventory, trade receivables, equipment and a personal guarantee of Marshall Sorokwasz, our Chairman of the Board and President, and Trustee of a trust which is a principal shareholder of our Company. Available borrowings under this line of credit, which accrues interest at the prime rate of interest plus .25% (4.5% at February 28, 2003), are based upon specified percentages of eligible accounts receivable and inventories. As of February 28, 2003, there was a $4 million borrowing capacity remaining under the $25 million revolving line of credit. The revolving credit line will mature in May 2004. In the third quarter fiscal 2003, TST intends to begin construction on a 34,500 square foot expansion of the Itasca, Illinois facility. TST has been approved for a construction and takeout loan with the current lender on the building. The cost of construction is currently estimated to be approximately $1.37 million. We believe that the funds available under the loans encumbering our California, Texas, Pennsylvania, Illinois and West Virginia plants, the approved construction and take out loan, the revolving credit facility, cash and cash equivalents, trade credit and internally generated funds will be sufficient to satisfy our requirements for working capital and capital expenditures for at least the next twelve months. Such belief is based on certain assumptions, including the continuation of current operations and no extraordinary adverse events, and there can be no assurance that such assumptions are correct. In addition, expansion of our operations due to an increased demand for products TST manufactures or significant growth of Hotsheet.com, Inc. may require us to obtain additional capital to add new operations or manufacturing facilities. If that should occur, we anticipate that the funds required would be generated through securities offerings or additional debt. There can be no assurance that any additional financing will be available if needed, or, if available, will be on acceptable terms. As of February 28, 2003, we did not own derivative or other financial instruments for trading or speculative purposes. We do not use financial instruments and, therefore, the implementation of 11 Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" did not have a material impact on our financial position or results operations. Inventory Management; Raw Materials of TST We believe that it is necessary for TST to maintain a large inventory of finished goods and raw materials to adequately service its customers. In recent years inventory levels had been increased to facilitate the introduction of new brands and expanded product lines. At the beginning of Fiscal 2002, management implemented a program to reduce inventory. From August 31, 2001 to August 31, 2002, TST reduced its inventory levels by $4.35 million. This is in addition to the depletion of $3 million of inventory acquired in the purchase of the assets of United. Although inventories rose in the First Quarter 2003, management reduced it by the corresponding amount in the second quarter of fiscal 2003, and intends to continue reducing inventory levels through the remainder of Fiscal 2003. However, downward pressures on raw material prices could compress the market for our existing inventory and have a material adverse effect on the results of operations of TST, or restrain management's attempts at reducing inventory. For the six month period ended February 28, 2003, the price of raw materials has remained relatively stable. Management believes raw material prices will start to increase in the third quarter of fiscal 2003. TST bears the risk of increases in the prices charged by its suppliers and decreases in the prices of raw materials held in its inventory. If prices for products held in its finished goods inventory decline, if prices for raw materials required by it increase, or if new technology is developed that renders obsolete products distributed and held in inventory by TST, the Company's business could be materially adversely affected. TST purchases raw paper, coated thermal facsimile paper, coated technical paper, carbon and carbonless paper (consisting of a wide variety of weights, widths, colors, sizes and qualities), transparency film, packaging and other supplies in the open market from a number of different companies around the world. We believe that TST has adequate sources of raw material supplies to meet the requirements of its business. We believe that TST has a good relationship with all of its current suppliers. Market Conditions of TST The primary product produced by the Company's acquisitions in fiscal 2001 and 2002, are continuous feed business forms. Management believes that the market for business forms, which declined in 2002, will continue to decline in 2003. However, the acquisitions also resulted in fewer competitors in this product category, thereby increasing the Company's market share and partially offsetting a reduction of sales. Management believes that the slowed economy will also effect the Fiscal 2003 results of operations. If selling prices for products manufactured by us cannot increase in relation to raw material cost increases, or if prices for products manufactured by us decline as a result of market pressures, our results of operations could be materially adversely affected. 12 Although TST has specialized in select markets and has emphasized service and long-term relationships to meet customer needs more effectively, there are no long-term contractual relationships between it and any of its customers. There can be no assurance that purchases by these customers will remain at significant levels. TST may in the future be dependent on these or other significant customers. The loss of any other significant customer could materially adversely affect our financial position, results of operations and cash flows. Seasonality TST may be subject to certain seasonal fluctuations in that orders for products may decline over the summer months. If the market for finished goods decreases, then the adverse impact of the seasonal fluctuations on the Company will be greater. Hotsheet.com revenues are partially generated by retail sales which are typically stronger during the Christmas holiday season. Forward-Looking Statements Management's Discussion and Analysis of Financial Condition and Results of Operations and other sections of this Form 10-Q contain "forward-looking statements" about our prospects for the future, including but not limited to our ability to generate sufficient working capital, our ability to continue to maintain sales to justify capital expenditures, and our ability to generate additional sales to meet business expansion. Such statements are subject to certain risks and uncertainties which could cause actual results to differ materially from those projected, including availability of raw materials, availability of thermal facsimile, computer, laser and color ink jet paper, to the cyclical nature of the industry in which we operate, the potential of technological changes which would adversely affect the need for our products, price fluctuations which could adversely impact the large inventory we require, loss of any significant customer, and termination of contracts essential to our business. Parties are cautioned not to rely on any such forward-looking statements or judgments in making investment decisions. Item 3. Quantitative and Qualitative Disclosures about Market Risk We are not exposed to market risks such as foreign currency exchange rates, but are exposed to risks such as variable interest rates. Market risk is the potential loss arising from adverse changes in market prices and rates. Our subsidiaries do not have supply contracts with any of their foreign vendors. All foreign vendors are paid in United States currency. In addition, TST's international sales of finished goods is insignificant. Accordingly, there are not sufficient factors to create a material foreign exchange rate risk; therefore, we do not use exchange commitments to minimize the negative impact of foreign currency fluctuations. We had both fixed-rate and variable-rate debts as of February 28, 2003. The fair market value of long-term variable interest rate debt is subject to interest rate risk. Generally the fair market value of variable interest rate debt will decrease as interest rates fall and increase as interest rates rise. The estimated fair value of our total long-term fixed rate and floating rate debt approximates carrying value. Based upon our market risk sensitive debt outstanding at February 28, 2003, there was no material exposure to our financial position or results of operations. 13 Item 4. Controls and Procedures Within the 90 days prior to the date of this report, the company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company's periodic SEC filings. There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation. 14 PART II: OTHER INFORMATION Item 6: Exhibits and Reports on Form 8-K (a) Exhibits
Exhibit No. Description of Exhibits ----------- ----------------------- 99 Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K and 8-K /A On April 3, 2002, we filed a Current Report on Form 8-K, dated March 19, 2002, to report the acquisition of substantially all of the personal property assets of United Computer Supplies, Inc. and United Computer Supplies-East, Inc. On June 3, 2002, we filed an amendment to the Current Report on Form 8-K, dated March 19, 2002, to include the financial statements of United Computer Supplies, Inc. and United Computer Supplies-East, Inc., and certain pro forma financial data. On April 2, 2003, we filed an Amendment No. 2 to the Current Report on Form 8-K, dated March 19, 2002, to include Audited Combined Financial Statements of United Computer Supplies, Inc. And United Computer Supplies-East, Inc. For the Years Ended December 31, 2000 and 1999. The following exhibits were filed with the Form 8-k, as amended:
Exhibit No. Description of Exhibits ----------- ----------------------- 2.1 Asset Purchase Agreement by and between Tst/Impreso, Inc. and Bank of America, N.A., and Consented to by United Computer Supplies, Inc., United Computer Supplies-East, Inc. and John R. Zimmerman dated as of March 19, 2002 99.1 Impreso, Inc. Press Release issued March 20, 2002 announcing the closing of the purchase 99.2(a) Audited Combined Financial Statements of United Computer Supplies, Inc. and United Computer Supplies-East, Inc. for the Year Ended December 31, 2001 and the Six Months ended February 28, 2002 (unaudited) listed in Item 7 (a) 99.2(b) Audited Combined Financial Statements of United Computer Supplies, Inc. and United Computer Supplies-East, Inc. for the Years Ended December 31, 2000 and 1999 listed in Item 7 (a) 99.3 Unaudited Pro Forma Financial Statements of Impreso, Inc. and Subsidiaries listed On Item 7 (b)
15 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. Dated: April 14, 2003 Impreso, Inc. (Registrant) /s/ Marshall D. Sorokwasz ----------------------------- Marshall D. Sorokwasz Chairman of the Board, Chief Executive Officer, President, and Director /s/ Susan M. Atkins ----------------------------- Susan M. Atkins Chief Financial Officer and Vice President 16 CERTIFICATION Pursuant to Rule 13a-14(b) and 15d-14 I, Marshall D. Sorokwasz, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Impreso, Inc.; 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 the registrant's Board of Directors (or persons performing the equivalent function): (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 or not 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: April 14, 2003 Signature: /s/ Marshall D. Sorokwasz --------------------------- Marshall D. Sorokwasz Chief Executive Officer 17 CERTIFICATION Pursuant to Rule 13a-14(b) and 15d-14 I, Susan M. Atkins, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Impreso, Inc.; 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 the registrant's Board of Directors (or persons performing the equivalent function): (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 or not 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: April 14, 2003 Signature: /s/ Susan M. Atkins --------------------------- Susan M. Atkins Chief Financial Officer 18 INDEX TO EXHIBITS
Exhibit No. Description of Exhibits - ----------- ----------------------- 99 Certification
19 EX-99 3 d04862exv99.txt CERTIFICATION EXHIBIT 99 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 of Impreso, Inc. (the "Company") on Form 10-Q for the period ending February 28, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Marshall D. Sorokwasz, Chief Executive Officer of the Company, certify, pursuant to U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002 that: 1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly represents, in all material respects, the financial condition and results of operations of the Company. Date: April 14, 2003 Signature: /s/ Marshall D. Sorokwasz --------------------------- Marshall D. Sorokwasz Chief Executive Officer 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 of Impreso, Inc. (the "Company"), on Form 10-Q for the period ending February 28, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Susan M. Atkins, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: April 14, 2003 Signature: /s/ Susan M. Atkins ---------------------------- Susan M. Atkins Chief Financial Officer 20 -----END PRIVACY-ENHANCED MESSAGE-----