UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended July 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: 000-17468
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KUPPER PARKER COMMUNICATIONS, INCORPORATED
(Exact name of small business issuer as specified in its charter)
NEW YORK 11-2250305
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8301 Maryland Avenue, St. Louis, Missouri 63105
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (314) 290-2000
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(Former name, former address and former fiscal year, if changed
from last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by court. Yes No .
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 6,027,531 shares of Common Stock, par
value $0.01, as of September 13, 2002.
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
In reliance on Release No. 34-45589 of the Securities Exchange Act of 1934, the
unaudited financial statements contained in the Registrant's filing of its Form
10-QSB for the quarter ended April 30, 2002, had not been reviewed pursuant to
Item 310(b) of Regulation S-B. A review of these financial statements has been
subsequently completed.
KUPPER PARKER COMMUNICATIONS, INCORPORATED AND SUBSIDIARIES
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
PART I - FINANCIAL INFORMATION
Page Number
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of July 31,
2002 and October 31, 2001 3
Condensed Consolidated Statements of Operations for
the three months ended July 31, 2002 and 2001 4
Condensed Consolidated Statements of Operations for
the nine months ended July 31, 2002 and 2001 5
Condensed Consolidated Statements of Cash Flows for the
nine months ended July 31, 2002 and 2001 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition or Plan of Operation 9
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
Certifications 16
2
KUPPER PARKER COMMUNICATIONS, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
July 31, October 31,
2002 2001
---- ----
ASSETS
Current Assets
Cash and cash equivalents $ 713,876 $ 1,830,860
Accounts receivable, net of allowance for bad debts
of $399,406 and $417,876 7,378,525 10,039,151
Other current assets 908,333 1,107,867
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Total Current Assets 9,000,734 12,977,878
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Property and equipment, net of accumulated depreciation
and amortization of $1,644,924 and $1,332,045 937,279 1,202,899
Goodwill and other intangibles, net of accumulated amortization
of $620,248 and $388,323 6,040,384 6,131,108
Other assets 435,468 441,172
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Total Assets $ 16,413,865 $ 20,753,057
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt $ 411,314 $ 365,073
Short-term bank borrowings 1,849,064 1,900,328
Accounts payable 10,190,283 12,899,867
Accrued expenses 1,443,045 1,973,260
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Total Current Liabilities 13,893,706 17,138,528
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Noncurrent Liabilities
Long-term debt, less current maturities 209,080 389,224
Other long-term liabilities 529,747 634,601
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Total Noncurrent Liabilities 738,827 1,023,825
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Stockholders' Equity
Common stock, $.10 stated value, 30,000,000 shares authorized;
6,168,254 shares issued 616,825 616,825
Paid-in capital 3,454,643 3,454,643
Retained earnings (deficit) (1,709,723) (868,884)
Treasury stock, at average cost; 141,723 shares (611,958) (611,958)
Cumulative translation adjustment 31,545 78
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Total Stockholders' Equity 1,781,332 2,590,704
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Total Liabilities and Stockholders' Equity $ 16,413,865 $ 20,753,057
============ ============
See accompanying notes to condensed consolidated financial statements.
3
KUPPER PARKER COMMUNICATIONS, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THREE MONTHS ENDED JULY 31,
-------------------------------
2002 2001
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REVENUES $ 3,450,606 $ 3,076,615
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OPERATING EXPENSES:
Salaries and Benefits 2,507,487 2,473,760
Office and General 872,881 954,443
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Total Operating Expenses 3,380,368 3,428,203
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Operating Income (Loss) 70,238 (351,588)
OTHER INCOME (EXPENSE):
Interest income 2,781 5,692
Interest expense (40,825) (19,246)
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(38,044) (13,554)
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Pretax Income (Loss) 32,194 (365,142)
PROVISION FOR TAXES -- (120,829)
----------- -----------
NET INCOME (LOSS) $ 32,194 $ (244,313)
=========== ===========
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE $ 0.01 $ (0.04)
=========== ===========
See accompanying notes to condensed consolidated financial statements.
4
KUPPER PARKER COMMUNICATIONS, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR NINE MONTHS ENDED JULY 31,
------------------------------
2002 2001
---- ----
REVENUES $ 10,602,475 $ 9,955,374
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OPERATING EXPENSES:
Salaries and Benefits 8,319,805 7,683,230
Office and General 2,865,401 2,669,969
Unusual Items 162,791 --
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Total Operating Expenses 11,347,997 10,353,199
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Operating Income (Loss) (745,522) (397,825)
OTHER INCOME (EXPENSE):
Interest income 12,849 50,405
Interest expense (108,166) (51,297)
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(95,317) (892)
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Pretax Income (Loss) (840,839) (398,717)
PROVISION FOR TAXES -- (97,077)
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NET INCOME (LOSS) $ (840,839) $ (301,640)
============ ============
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE $ (0.14) $ (0.05)
============ ============
See accompanying notes to condensed consolidated financial statements.
5
KUPPER PARKER COMMUNICATIONS, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE NINE MONTHS ENDED JULY 31,
----------------------------------
2002 2001
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (840,839) $ (301,640)
Adjustments to reconcile net income (loss) to net cash provided
(used by) by operating activities
Depreciation and amortization 542,232 422,041
Provision for bad debts 54,890 114,137
Changes in assets - (increase) decrease
Accounts receivable 2,605,736 1,244,929
Other current assets 199,534 513,743
Other assets 5,704 (15,059)
Changes in liabilities - increase (decrease)
Accounts payable (2,709,584) (1,927,934)
Accrued expenses (635,069) (357,947)
Other 9,040 (67,840)
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Net Cash (Used By) Provided by Operating Activities (768,356) (375,570)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (46,454) (117,881)
Purchase of 12% interest in CiB -- (153,973)
Acquisition of RGSD assets (125,000) --
Acquisition of CGT, net of cash acquired -- (397,802)
Acquisition of Chameleon Design, Inc. -- (13,632)
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Net Cash Used By Investing Activities (171,454) (683,288)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term debt (280,144) (85,264)
Proceeds from related party loan 125,000 --
Proceeds from short-term bank borrowings 250,000 725,000
Payments of short-term bank borrowings (301,264) (550,000)
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Net Cash Provided By (Used In) Investing Activities (206,408) 89,736
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Impact of foreign currency on cash 29,234 (6,171)
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Net Increase (Decrease) in Cash and Cash Equivalents (1,116,984) (975,293)
Cash and cash equivalents, at beginning of period 1,830,860 2,177,052
----------- -----------
Cash and cash equivalents, at end of period $ 713,876 $ 1,201,759
=========== ===========
See accompanying notes to condensed consolidated financial statements.
6
KUPPER PARKER COMMUNICATIONS, INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2002
1. These unaudited interim financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or
omitted. It is therefore suggested that these unaudited interim
financial statements be read in conjunction with the Company's audited
financial statements and notes thereto for the fiscal year ended
October 31, 2001 included in the company's Form 10-KSB for the fiscal
year ended October 31, 2001. Results of operations for interim periods
are not necessarily indicative of annual results.
2. These statements reflect all adjustments consisting of normal recurring
accruals, which, in the opinion of management, are necessary for a fair
presentation of the Company's financial position and results of
operations and cash flows for the periods presented.
3. The Company classifies its other comprehensive income (loss), which is
comprised solely of foreign currency translation adjustments, as a
separate component of stockholders' equity. Total comprehensive income
(loss) for the three- and nine-month periods ended July 31, 2002 and
2001 are as follows:
Three Months Ended Nine Months Ended
July 31, July 31,
--------------------- ----------------------
2002 2001 2002 2001
--------- --------- --------- ---------
Net income (loss) $ 32,194 $(244,313) $(840,839) $(301,640)
Foreign currency translation 32,723 (7,437) 31,467 (7,437)
--------- --------- --------- ---------
Comprehensive income (loss) $ 64,917 $(251,750) $(809,372) $(309,077)
========= ========= ========= =========
4. A reconciliation of shares used in calculating basic and diluted
earnings per share is as follows:
Three Months Ended Nine Months Ended
July 31, July 31,
--------------------- ---------------------
2002 2001 2002 2001
--------- --------- --------- ---------
Basic 6,026,531 5,824,227 6,026,531 5,793,458
Effect of assumed conversion of employee
stock options 185,141 N/A N/A N/A
--------- --------- --------- ---------
Diluted 6,211,672 5,824,227 6,026,531 5,793,458
========= ========= ========= =========
7
5. Kupper Parker Communications, Incorporated ("Kupper Parker") completed
the following purchase transactions during fiscal 2001 and 2002:
- The acquisition of 100% of the outstanding stock of CGT (UK)
Limited ("CGT"), a London-based strategic marketing
communications agency, in exchange for $475,000 in cash and
70,000 shares of our Common Stock. Under the terms of the
acquisition agreement, the Company will issue up to an
additional 250,000 shares of our Common Stock to the former
CGT shareholders if CGT meets certain pretax earnings targets.
This transaction was completed on February 23, 2001 and the
results of CGT are included in the Company's consolidated
financial statements from that date.
- The acquisition of 100% of the common stock of Christopher
Thomas Associates, Inc. The price consists of an initial cash
payment of $1,450,000, eight quarterly cash payments of
$75,000, and two cash earnout payments of $550,000 and
$450,000 so long as the Christopher Thomas operations has
revenues of at least $4,500,000 for the years ended December
31, 2001 and 2002, respectively. This transaction was
completed on October 9, 2001 and the results of Christopher
Thomas are included in the Company's consolidated financial
statements from that date.
Because the acquisition of CGT occurred prior to July 1, 2001, this
business combination was accounted for as purchase transaction under
APB Opinion No. 16, "Business Combinations". Goodwill arising from this
business combination is being amortized over a twenty-year period.
Because the acquisition of Christopher Thomas occurred after July 1,
2001, this business combination has been accounted for under SFAS No.
141, "Business Combinations", and SFAS No. 142, "Goodwill and Other
Intangibles Assets", goodwill arising from this transaction will not be
amortized but will be tested for impairment at least annually.
The following information reflects unaudited pro forma operating
results for the three and nine months ended July 31, 2001 assuming that
the acquisitions of CGT and Christopher Thomas were consummated on
November 1, 2001.
THREE MONTHS NINE MONTHS
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Revenues $ 4,469,912 $ 14,009,349
Loss before taxes (206,607) (263,958)
Net loss (149,392) (222,631)
Basic and diluted net loss per share $ (0.03) $ (0.04)
The unaudited pro forma financial information has been presented for
comparative purposes only and does not purport to be indicative of the
results of operations that would have actually resulted had the
acquisitions of CGT and Christopher Thomas occurred on November 1,
2000, or which may result in the future.
6. On July 31, 2002, the Company acquired the clients of RGSD, a
Memphis-based media buying service for $125,000 in cash and a
contingent future cash payment of $125,000, dependent upon the actual
delivery of revenue from these clients. The Company financed its
purchase of the clients of RGSD by borrowing $125,000 from its Chairman
and Chief
8
Executive Officer. This loan calls for sixty monthly payments of
$2,416.65 consisting of principal and interest at a rate of 6%. The
clients purchased from RGSD secure the loan.
7. On May 29, 2002, the Company replaced its existing bank debt agreements
with a single agreement with the same bank. Under the new debt
agreement, the Company must make monthly debt repayments of $40,632
beginning on June 29, 2002 together with monthly interest payments at
the bank's prime rate. This new debt agreement is scheduled to mature
on February 28, 2003, at which time the outstanding principal will be
due. Under the terms of this loan agreement, the Company must meet
certain minimum financial targets. These targets are: (i) the Company
must have a minimum net worth of $1,800,000 as of July 31, 2002, (ii)
the Company must report after-tax net earnings of at least $180,000 for
the fiscal quarter ended July 31, 2002, (iii) the Company must have a
minimum net worth of $2,200,000 as of October 31, 2002, and (iv) the
Company must report after-tax net earnings of at least $385,000 for the
fiscal quarter ended October 31, 2002 and a net after-tax loss of no
more than $300,000 for the fiscal year ended October 31, 2002. In
connection with the new bank loan agreement, Bruce Kupper, Chairman and
Chief Executive Officer of the Company, personally guaranteed $500,000
of the bank debt. The Company did not meet the net worth and after-tax
earnings covenants at July 31, 2002, and obtained waivers from the bank
related to these loan covenants.
8. In August 2002, the Company moved substantially all of its Stamford,
Connecticut operations into its Melville, New York location. As a
result, the Company is currently exploring opportunities to sublease
its leased facilities in Stamford. Total future minimum rent payments
for this location amount to $492,557 as of August 31, 2002. Due to
market conditions for leased properties in the Stamford area, the
Company anticipates that it will record, in its fourth fiscal quarter
of 2002, a substantial lease reserve related to this event.
9
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS - THREE MONTHS ENDED JULY 31, 2002
Revenues for the three months ended July 31, 2002 were $3,450,606, a 12.2%
increase over revenues for the three months ended July 31, 2001 of $3,076,615.
Revenues from existing operations decreased $749,598 or 24.4%, resulting from
reduced demand for most advertising and marketing services in the wake of weak
economic activity in the United States and Great Britain. The acquisition of
Christopher Thomas Associates, Inc. ("Christopher Thomas") accounted for
$1,123,589 of third quarter 2002 revenues.
Salaries and benefits expense increased $33,727 or 1.4% to $2,507,487. The
acquisition of Christopher Thomas accounted for $622,220 of third quarter 2002
salaries and benefits expense. Salaries and benefits expense of existing
operations declined $588,493 or approximately 23.8% between years. During the
second and third quarters of 2002, the Company ("Kupper Parker") severed
approximately 20% of its workforce as it continued to integrate the Christopher
Thomas operations it recently acquired with its existing East Coast operations.
Office and general expenses decreased $81,562 or 8.5% between years to $872,881.
Approximately $179,000 of the total cost of this category of expenses related to
the previously mentioned acquisition. Office and general expense of existing
operations declined approximately $261,000 or 27.3% between years due to the
Company's continuing efforts to reduce overall operating expenses.
Interest income declined from $5,692 to $2,781 in the third quarter of 2002
principally due to the fact that the Company had less cash to invest in
overnight interest-bearing securities in fiscal 2002. Interest expense increased
from $19,246 in 2001 to $40,825 in 2002 as a result of debt incurred to fund the
Company's acquisition program.
RESULTS OF OPERATIONS - NINE MONTHS ENDED JULY 31, 2002
Revenues for the nine months ended July 31, 2002 were $10,602,475, a 6.5%
increase over revenues for the nine months ended July 31, 2001 of $9,955,374.
Revenues from existing operations decreased $2,840,138 or 28.5%, resulting from
reduced demand for most advertising and marketing services in the wake of weak
economic activity in the United States and Great Britain. The acquisitions of
CGT (UK) Limited ("CGT") and Christopher Thomas accounted for $3,441,578 of
fiscal 2002 revenues.
Salaries and benefits expense increased $636,575 or 8.3% to $8,319,805. The
acquisitions of CGT and Christopher Thomas accounted for $2,176,382 of fiscal
2002 salaries and benefits expense. Salaries and benefits expense of existing
operations declined $1,619,647 or approximately 21.1% between years. During the
first nine months of 2002, the Company ("Kupper Parker") severed 34 employees or
approximately 20% of its workforce as it began to integrate the Christopher
Thomas operations it recently acquired with its existing East Coast operations.
Office and general expenses increased $195,432 or 7.3% between years to
$2,865,401. Approximately $613,000 of the total cost of this category of expense
relates to the previously mentioned acquisitions. Office and general expense of
existing operations declined approximately $482,000 or 18.1% between years due
to the Company's continuing efforts to reduce overall operating expenses.
10
As previously announced, during fiscal 2001 the Company initiated a private
placement securities offering to raise capital to finance its acquisition
program. In December 2001, the Company aborted this offering due to unfavorable
market conditions. As a result, the Company recognized a pre-tax charge of
$162,791 to write off equity issuance costs capitalized at October 31, 2001.
This charge is reflected on the line item "Unusual Items".
Interest income declined from $50,405 to $12,849 in the first nine months of
2002 principally due to the fact that the Company had less cash to invest in
overnight interest-bearing securities in fiscal 2002. Interest expense increased
from $51,297 in 2001 to $108,166 in 2002 as a result of debt incurred to fund
the Company's acquisition program.
During the first nine months of 2002, the Company established a valuation
reserve of $277,792 which was equal to its expected tax benefit for the period.
LIQUIDITY AND CAPITAL RESOURCES
As of July 31, 2002, Kupper Parker's cash and cash equivalents totaled $713,876
compared to $1,830,860 at October 31, 2001. The decline in cash and cash
equivalents is principally due to the fact that the Company recorded a loss in
fiscal 2002 of $840,839 that was partially offset by improvements in collections
of accounts receivable.
Operating Activities: Kupper Parker's funds from operating activities consist
primarily of net income adjusted for non-cash items and changes in operating
assets and liabilities. Cash used by operating activities was $375,570 in the
first nine months of 2001 compared to $768,356 in 2002. The increase in cash
used by operations is principally due to the fact that the Company recorded a
loss in fiscal 2002 of $840,839 that was partially offset by improvements in
collections of accounts receivable. Operating cash flows are impacted by the
seasonal relationship of accounts receivable to accounts payable, particularly
those of acquisitions. This relationship generally changes during the first
quarter of a fiscal year, as clients slow payments by as much as one to two
weeks. Kupper Parker's policy is to bill and collect monies from its clients
prior to payments due to the media. During the first nine months of 2002, Kupper
Parker emphasized the collection of receivables particularly in its newly
acquired companies, resulting in an improved relationship of accounts receivable
to accounts payable.
Investing Activities: Cash used in investing activities was $171,454 in 2002
compared to $683,288 in 2001. On July 31, 2002, the Company acquired the clients
of RGSD, a Memphis-based media buying service for $125,000 in cash and a
contingent future cash payment of $125,000, dependent upon the actual delivery
of revenue from these clients. During the first nine months of 2001, the Company
acquired a 12% interest in a London-based agency, the Communications in Business
Group Limited, all of the outstanding stock of CGT (UK) Limited ("CGT"), a
London-based strategic marketing communications agency, and all of the
outstanding stock of Chameleon Design, Inc., a company that specializes in
interactive design and development, resulting in net cash outlays of $565,407.
Financing Activities: On May 29, 2002, the Company replaced its existing bank
debt agreements with a single agreement with the same bank. Under the new debt
agreement, the Company must make monthly debt repayments of $40,632 beginning on
June 29, 2002 together with monthly interest payments at the bank's prime rate.
This new debt agreement is scheduled to mature on February 28, 2003, at which
time the outstanding principal will be due. Under the terms of this loan
agreement, the Company must meet certain minimum financial targets. These
targets are: (i) the Company must have a minimum net worth of $1,800,000 as of
July 31, 2002, (ii) the Company must
11
report after-tax net earnings of at least $180,000 for the fiscal quarter ended
July 31, 2002, (iii) the Company must have a minimum net worth of $2,200,000 as
of October 31, 2002, and (iv) the Company must report after-tax net earnings of
at least $385,000 for the fiscal quarter ended October 31, 2002 and a net
after-tax loss of no more than $300,000 for the fiscal year ended October 31,
2002. In connection with the new bank loan agreement, Bruce Kupper, Chairman and
Chief Executive Officer of the Company, personally guaranteed $500,000 of the
bank debt. The Company did not meet the net worth and after-tax earnings
covenants at July 31, 2002, and obtained waivers from the bank related to these
loan covenants. During the first nine months of 2002, the Company reduced its
total short-term bank borrowings by $51,264 to $1,849,064. In addition, the
Company paid $280,144 in scheduled long-term debt payments. During the first
nine months of fiscal 2001, the Company increased its short-term bank borrowings
by $175,000 and paid $85,264 in scheduled long-term debt payments. During the
third quarter of fiscal 2002, the Company financed its purchase of the clients
of RGSD by borrowing $125,000 from its Chairman and Chief Executive Officer.
This loan calls for sixty monthly payments of $2,416.65 consisting of principal
and interest at a rate of 6%. The clients purchased from RGSD secure the loan.
NEW ACCOUNTING STANDARDS
In June 2001, the FASB issued Statement of Financial Accounting Standard
("SFAS") No. 141, "Business Combinations." SFAS No. 141 requires that the
purchase method of accounting be used for all business combinations initiated
after June 30, 2001. The Company has adopted SFAS No. 141 for all acquisitions
consummated subsequent to June 30, 2001.
In June 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 142 no longer permits the amortization of goodwill and
indefinite-lived intangible assets. Instead, these assets must be reviewed
annually (or more frequently under certain conditions) for impairment in
accordance with this statement. This impairment test uses a fair value approach
rather than the undiscounted cash flow approach previously required by SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed of." Intangible assets that do not have indefinite lives
will continue to be amortized over their useful lives and reviewed for
impairment in accordance with SFAS No. 121. The amortization provisions of SFAS
No. 142 apply immediately to goodwill and intangible assets acquired after June
30, 2001. Goodwill and intangible assets acquired on or prior to June 30, 2001,
are required to be accounted for under SFAS No. 142 beginning on November 1,
2002. Management is currently evaluating the effect, which may be significant,
that the adoption of the provisions of SFAS No. 142 will have on the Company's
results of operations and financial position. Goodwill included in the
accompanying condensed consolidated balance sheet amounted to $5,677,669 at July
31, 2002. Goodwill amortization for the nine months ended July 31, 2002 and 2001
was $167,925 and $130,780, respectively. Amortization of other intangibles for
the nine months ended July 31, 2002 and 2001 was $64,000 and $0, respectively.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." The new standard replaces SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of." The primary objectives of this statement were to develop one
accounting model, based on the framework established in SFAS No. 121, for
long-lived assets to be disposed of by sale and to address significant
implementation issues. SFAS No. 144 requires that all long-lived assets,
including discontinued operations, be measured at the lower of carrying amount
or fair value less cost to sell, whether reported in continuing operations or in
discontinued operations. The Company will adopt SFAS No. 144 in 2003. Adoption
of SFAS No. 144 is not expected to impact the Company's consolidated financial
position or results of operations.
12
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." The objectives of SFAS No. 146 are to address
financial accounting and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs Incurred in a Restructuring)". The
principal difference between SFAS No. 146 and Issue No. 94-3 relates to SFAS No.
146 requirements for recognition of a liability for a cost associated with an
exit or disposal activity be recognized when the liability is incurred. Under
Issue No. 94-3 a liability for an exit cost as defined in Issue No. 94-3 was
recognized at the date of an entity's commitment to an exit plan. The provisions
of SFAS No. 146 will be effective for the Company for exit or disposal
activities that are initiated after December 31, 2002. The Company is evaluating
the effect of the adoption of SFAS No. 146 and does not expect the adoption of
SFAS No. 146 to have a material impact on its financial position or results of
operations.
CERTAIN TRENDS AND UNCERTAINTIES
The following discussion highlights trends and uncertainties, in addition to
those discussed elsewhere in this Form 10-QSB, that could materially impact our
business, results of operations and financial condition.
Economic Slowdown, Terrorism, and Armed Conflict: The recent terrorist attacks
and subsequent armed conflict and related events have resulted in reduced demand
for the Company's advertising and marketing services. It is difficult to assess
the impact that these events, combined with the general economic slowdown, will
have on future operations. These events, combined with the general economic
slowdown, could result in reduced spending by customers and advertisers, which
could reduce our revenues and operating cash flow. Additionally, an economic
slowdown could affect our ability to collect accounts receivable. If the Company
continues to experience reduced operating revenues, it could negatively affect
its ability to make expected capital expenditures and could also result in its
inability to meet its obligations under its various financing agreements. These
developments could also have a negative impact on the Company's financing and
variable interest rate agreements through disruptions in the market or negative
market conditions. Terrorism and the related events may have other adverse
effects on the Company, in ways that cannot be presently predicted.
In August 2002, the Company moved substantially all of its Stamford, Connecticut
operations into its Melville, New York location. As a result, the Company is
currently exploring opportunities to sublease its leased facilities in Stamford.
Total future minimum rent payments for this location amount to $492,557 as of
August 31, 2002. Due to market conditions for leased properties in the Stamford
area, the Company anticipates that it will record, in its fourth fiscal quarter
of 2002, a substantial lease reserve related to this event.
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PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
99.1 Certification of Chief Executive Officer Pursuant To 18 U.S.C.
Section 1350, As Adopted Pursuant To Section 906 Of The
Sarbanes-Oxley Act of 2002
99.2 Certification of 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
In a Form 8-K filed on June 13, 2002 under Item 4, the Company reported
that its Board of Directors of the Registrant, upon recommendation of its
audit committee, engaged Rubin, Brown, Gornstein & Co. LLP ("RBG"),
independent accountants, as the principal accountant to audit the
Registrant's financial statements for fiscal year 2002. The Board of
Directors decided not to reengage Arthur Andersen LLP ("Arthur Andersen")
for fiscal year 2002. Arthur Andersen audited the Registrant's financial
statements for fiscal years 2000 and 2001, and served as the Registrant's
principal accountant since 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of St. Louis, State of
Missouri on September 13, 2002.
Kupper Parker Communications, Incorporated
By: /s/ John J. Rezich
-------------------------
John J. Rezich
Chief Financial Officer
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CERTIFICATIONS
I, Bruce Kupper, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Kupper Parker
Communications, Incorporated;
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; and
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.
September 13, 2002
/s/ Bruce Kupper
- ------------------
Bruce Kupper
Chairman, President and Chief Executive Officer
I, John J. Rezich, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Kupper Parker
Communications, Incorporated;
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; and
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.
September 13, 2002
/s/ John J. Rezich
- --------------------
John J. Rezich
Chief Financial Officer
16