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IMPSA S.A. Audit Report / Information 2002
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Download source fileIMPSA INTERNATIONAL, INC.
AND SUBSIDIARIES
Consolidated Financial Statements
January 31, 2002 and January 31, 2001
INDEPENDENT AUDITOR’S REPORT
To the Board of Directors
IMPSA International, Inc.
Pittsburgh, Pennsylvania
We have audited the accompanying consolidated balance sheets of IMPSA International, Inc. and Subsidiaries as of January 31, 2002 and January 31, 2001 and the related consolidated statements of income, stockholder’s equity and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of IMPSA International, Inc. and Subsidiaries at January 31, 2002 and January 31, 2001 and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Certified Public Accountants
Pittsburgh, Pennsylvania
February 15, 2002
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IMPSA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 31, 2002 AND JANUARY 31, 2001
| NOTES | SCHEDULES | 2002 | 2001 | ||||
| ASSETS: | |||||||
| Current Assets: | |||||||
| Cash | 1 | $ | 261,582 | $ | 179,699 | ||
| Trade receivables | 1 and 3 | 3,723,608 | 3,775,834 | ||||
| Prepaid expenses | 9,660 | 156,565 | |||||
| Refundable federal income taxes | 259,000 | - | |||||
| Total Current Assets | 4,253,850 | 4,112,098 | |||||
| Non-Current Assets: | |||||||
| Deferred income tax benefit | 5 | 288,000 | - | ||||
| Fixed assets | 1 and 2 | A | 3,772 | 6,747 | |||
| Total Non-Current Assets | 291,772 | 6,747 | |||||
| Total Assets | $ | 4,545,622 | $ | 4,118,845 | |||
| LIABILITIES: | |||||||
| Current Liabilities: | |||||||
| Accounts payable | 6 | $ | 812,532 | $ | 598,640 | ||
| Other | 6 | 1,000,000 | - | ||||
| Total Current Liabilities | 1,812,532 | 598,640 | |||||
| Stockholder's Equity (as per corresponding statement) | 2,733,090 | 3,520,205 | |||||
| Total Liabilities and Equity | $ | 4,545,622 | $ | 4,118,845 |
The attached notes are an integral part of this statement.
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IMPSA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE FISCAL YEARS ENDED JANUARY 31, 2002 AND JANUARY 31, 2001
| NOTES | SCHEDULES | 2002 | 2001 | ||||||
| Net sales of goods and services | 1 and 3 | $ | 385,246 | $ | 779,797 | ||||
| Expenses: | |||||||||
| Selling | 1 and 4 | B | 273,593 | 409,699 | |||||
| Administrative | 1 and 4 | B | 250,433 | 410,226 | |||||
| 524,026 | 819,925 | ||||||||
| Subtotal - Profit (Loss) | (138,780 | ) | (40,128 | ) | |||||
| Other income (expenses) | 1 and 6 | (1,176,335 | ) | 269,318 | |||||
| Profit (loss) before income taxes | (1,315,115 | ) | 229,190 | ||||||
| Income taxes (credit) | 1 and 5 | (528,000 | ) | 78,000 | |||||
| Net Income (Loss) For The Year | $ | (787,115 | ) | $ | 151,190 |
The attached notes are an integral part of this statement.
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| IMPSA INTERNATIONAL, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY |
| FOR THE FISCAL YEARS ENDED JANUARY 31, 2002 AND JANUARY 31, 2001 |
| Owner’s Contribution | Reserves | |||||||||||||||||||||||||||||
| Subscribed Capital Note | Adjustment to Capital | Capital Surplus | Irrevocable Contributions | Total | Statutory | Others | Total | Unappropriated Retained Earnings | Total of Shareholder’s Equity | |||||||||||||||||||||
| Balance as of January 31, 2000 | $ 250 | $ | - | $ 234,750 | $ | - | 235,000 | $ | - | $ | - | $ | - | $ 3,134,015 | $ 3,369,015 | |||||||||||||||
| Net income for fiscal year as perstatement of income | - | - | - | - | - | - | - | - | 151,190 | 151,190 | ||||||||||||||||||||
| Balance as of January 31, 2001 | 250 | - | 234,750 | - | 235,000 | - | - | - | 3,285,205 | 3,520,205 | ||||||||||||||||||||
| Net loss for fiscal year as per statement of income | - | - | - | - | - | - | - | - | (787,115) | (787,115) | ||||||||||||||||||||
| Balance as of January 31, 2002 | $ 250 | $ | - | $ 234,750 | $ | - | $ 235,000 | $ | - | $ | - | $ | - | $ 2,498,090 | $ 2,733,090 | |||||||||||||||
| * Par Value - $1 per share | ||||||||||||||||||||||||||||||
| Authorized – 1,000 shares | ||||||||||||||||||||||||||||||
| Issued – 250 shares | ||||||||||||||||||||||||||||||
The attached notes are an integral part of this statement.
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IMPSA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED JANUARY 31, 2002 AND JANUARY 31, 2001
| 2002 | 2001 | ||
| OPERATING ACTIVITIES: | |||
| Net income (loss) for the year | $ (787,115) | $ 151,190 | |
| Add: | |||
| Items not representing source of cash: | |||
| Depreciation | 2,200 | 4,521 | |
| Gain on sale of fixed assets | (925) | - | |
| Deferred income taxes | (288,000) | ||
| Sources: | |||
| Decrease in trade receivables | 52,226 | 882,764 | |
| Decrease in prepaid expenses | 146,905 | - | |
| Increase in accounts payable | 213,892 | - | |
| Increase in other liabilities | 1,000,000 | - | |
| Use: | |||
| Increase in prepaid expenses | - | (65,428) | |
| Decrease in accounts payable | - | (1,465,930) | |
| Decrease in other liabilities | - | (14,900) | |
| Increase in refundable federal income taxes | (259,000) | - | |
| Net Cash Provided (Used) By Operating Activities | 80,183 | (507,783) | |
| INVESTING ACTIVITIES: | |||
| Sources: | |||
| Proceeds from sale of fixed assets | 1,700 | - | |
| Net Cash Provided By Investing Activities | 1,700 | - | |
| Net Increase (Decrease) In Cash | $ 81,883 | $ (507,783) | |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR | 179,699 | 687,482 | |
| NET CHANGE IN CASH FOR THE YEAR | 81,883 | (507,783) | |
| CASH AND CASH EQUIVALENTS AT END OF YEAR | $ 261,582 | $ 179,699 |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |||
| Interest Paid | $ 14,677 | $ 3,635 | |
| Income Taxes Paid (Refunded) | $ (121,766) | $ 136,642 |
The attached notes are an integral part of this statement.
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IMPSA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2002 AND JANUARY 31, 2001
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation – The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, IMPSA International of Delaware, Inc. and Henry LaGarde, Inc. Effective January 31, 2002, IMPSA International of Delaware, Inc. was merged into its parent, IMPSA International, Inc. Effective January 31, 2001 Henry LaGarde, Inc. was liquidated. This merger and liquidation had no effect on the consolidated financial statements. All inter-company accounts and transactions have been eliminated in consolidation.
IMPSA International, Inc. is a wholly owned subsidiary of Industries Metalurgicas Pescarmona S.A.I.C.F., an Argentine based company. IMPSA International, Inc. acquires material requisitioned by the parent and affiliated companies on a commission basis. The Company also receives a commission from the parent company for sales of equipment manufactured in Argentina.
Use of Estimates in the Preparation of Financial Statements – The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Concentrations of Credit Risk – Financial instruments potentially subject to concentrations of credit risk consist of cash in excess of federally insured limits and receivables. The Company maintains part of its cash in money market savings accounts and checking accounts, which at times exceeds federally insured limits. Receivables are due from the parent company and affiliates.
Cash Flows – The Company considers all temporary investments with maturity of six months or less to be cash equivalents.
Commission income is recognized at the time that a purchase order is placed for the parent company or affiliates or at the time cash is received for a sale when the Company successfully bids on a project for the parent company or affiliates.
Depreciation – Depreciation is computed under an accelerated method (MACRS) for both income tax and financial reporting purposes, except for certain fixed assets, which are being depreciated under IRC section 179 for income tax purposes and MACRS for financial reporting purposes. Depreciation expense amounted to $2,200 for 2002 and $4,521 for 2001.
Interest - Interest expense consists of interest on accounts payable. Interest expense amount to $3,635 and $14,677 for 2002 and 2001 respectively.
Income Taxes – Income tax expense is based on reported income adjusted for differences of a permanent nature.
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NOTE 2 – FIXED ASSETS:
A summary of fixed assets follows:
| January 31, | |||
| 2002 | 2001 | ||
| Office Equipment | $ 180,612 | $ 180,612 | |
| Furniture and fixtures | 27,486 | 27,486 | |
| Automobile | - | 10,851 | |
| 208,098 | 218,949 | ||
| Less: Accumulated depreciation | 204,326 | 212,202 | |
| Total Fixed Assets | $ 3,772 | $ 6,747 |
NOTE 3 – RELATED PARTY TRANSACTIONS:
All advances, as well as accounts receivable and notes receivable from the parent company and affiliates, are made in U.S. dollars, and the exchange rate costs are accounted for by the parent company and/or affiliates.
Commissions earned amounted to $385,246 and $779,797 for 2002 and 2001 respectively.
Trade receivables are as follows:
| January 31, | |||
| 2002 | 2001 | ||
| Accounts receivable from parent company and affiliates | $ 3,723,608 | $ 1,375,834 | |
| Notes receivable from parent company | - | 2,400,000 | |
| $ 3,723,608 | $ 3,775,834 |
NOTE 4 – LEASE COMMITMENT:
The Company has a long-term lease with HFT Holdings covering its present office space in Scott Township, Pennsylvania. The lease extends from September 1, 2000 thru August 31, 2005. The first 24 monthly lease payments are $3,496 and the next 36 payments are $3,605 with an escalation provision for real estate tax increases. The new lease can be terminated by the Company upon 180 days written notice.
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NOTE 4 – LEASE COMMITMENT (CONTINUED):
Minimum lease payments under the previously described operating leases are as follows:
| Year Ending January 31, | Amount | |
| 2003 | $ 43,790 | |
| 2004 | 44,553 | |
| 2005 | 44.553 | |
| 2006 | 25,990 | |
| $ 158,886 |
Rent expense amounted to $49,936 for 2002 and $59,232 for 2001.
NOTE 5 – TAXES ON INCOME:
Taxes (credits) on income are as follows:
| January 31, | ||||
| 2002 | 2001 | |||
| CURRENTLY PAYABLE (REFUNDABLE): | ||||
| Federal income tax | $ (240,000) | $ 76,000 | ||
| State income tax | - | 2,000 | ||
| (240,000) | 78,000 | |||
| DERERRED: | ||||
| Federal income tax | (154,000) | - | ||
| State income tax | (134,000) | - | ||
| (288,000) | - | |||
| Total | $ (528,000) | $ 78,000 |
The deferred income tax benefit results from the Company's available net operating loss carryforwards.
At January 31, 2002 the Company had federal and state net operating loss carryforwards of approximately $489,000 and $1,343,000, respectively, which will be available to reduce future taxable income. The federal and state net operating loss carryforwards expire in 2022 and 2012, respectively. Although realization is not assured, management believes it is more likely than not that the entire deferred income tax benefit relating to the net operating loss carryforwards will be realized. Accordingly, no valuation allowance is required.
NOTE 6 - ARBITRATION AWARD
An arbitration claim was filed against the Company by a subcontractor under a subcontract agreement with the Company for the erection of three container cranes at two United States Naval facilities. The claim ultimately sought $6,538,466 for various direct cost claims, delay and disruption and extra work. On December 12, 2001, a modified arbitration award allowed a claim against the Company of $3,096,314. The award also allowed the Company's counter claim of $286,555 leaving the net sum of $2,809,764 owed by the
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NOTE 6 - ARBITRATION AWARD (CONTINUED):
Company to the subcontractor. On December 20, 2001 the Company filed a Petition to Vacate and/or Modify the Arbitration Award in the United States District Court for the Western District of Pennsylvania. The Petition claims among other things that $990,680 of the award relating to extended overhead and loss of productivity is not permitted under the subcontract agreement and is in complete disregard of the law. The Petition also claims that the modification on December 12, 2001, increasing the original award by $396,464 was improper and should be vacated. The Company previously recorded a liability totaling $325,968 for extra work performed under this subcontract. In January 2002, the Company recorded a liability of $1,000,000 relating to this claim. This amount represents management's best estimate of the probable loss relating to this claim. While it is not possible to predict with certainty the outcome of this matter; accordingly, if this matter is resolved in a manner different from the estimated liability recorded, it could have a material effect on the Company's future financial position, operating results and cash flows. The charge relating to this claim plus professional fees of $268,971 relating to the Company's defense against this claim are included in Other Income (Expenses) in the Consolidated Statement of Income.
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INDEPENDENT AUDITOR’S REPORT
ON ADDITIONAL INFORMATION
To the Board of Directors
IMPSA International, Inc.
Pittsburgh, Pennsylvania
Our report on our audit of the basic financial statements of IMPSA International, Inc. and Subsidiaries for 2002 and 2001 appears on page 1. Those audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information on pages 11 and 12 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
Certified Public Accountants
Pittsburgh, Pennsylvania
February 15, 2002
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| IMPSA INTERNATIONAL, INC. AND SUBSIDIARIES (SCHEDULE A) |
| FIXED ASSETS |
| JANUARY 31, 2002 AND JANUARY 31, 2001 |
| Depreciation | Net Residual Value | |||||||||||||||||||||||||||
| Account | Balance at Beginning of Year | Increases | Decreases | Balance at End of Year | Accumulated Balance at Beginning of Year | Retirements | Current Rate | Year Amount | Accumulated Balance at End of Year | 2002 | 2001 | |||||||||||||||||
| Machinery and Equipment | $ 180,612 | $ | - | $ | - | $ 180,612 | $ 175,740 | $ | - | Various | $ 1,100 | $ 176,840 | $ 3,772 | $ 4,872 | ||||||||||||||
| Furniture and Equipment | 27,486 | - | - | 27,486 | 27,486 | - | Various | - | 27,486 | - | - | |||||||||||||||||
| Vehicles | 10,851 | - | 10,851 | - | 8,976 | 10,076 | Various | 1,100 | - | - | 1,875 | |||||||||||||||||
| TOTALS OF PRESENT YEAR | $ 218,949 | $ | - | $ 10,851 | $ 208,098 | $ 212,202 | $ 10,076 | $ 2,200 | $ 204,326 | $ 3,772 | $ 6,747 | |||||||||||||||||
| TOTALS OF PREVIOUS YEAR | $ 218,949 | $ | - | $ | - | $ 218,949 | $ 207,681 | $ | - | $ 4,521 | $ 212,202 | $ 6,747 | $ 11,268 |
See Accountant’s Report on Additional Information.
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| IMPSA INTERNATIONAL, INC. AND SUBSIDIARIES (SCHEDULE B) CONSOLIDATED SCHEDULE OF SELLING AND ADMINISTRATIVE EXPENSES FOR THE FISCAL YEARS ENDED JANUARY 31, 2002 AND JANUARY 31, 2001 |
| Cost of | Cost of | ||||||||||||
| Total | Production | Fixed Assets | Selling | Administrative | Total | ||||||||
| Items | 01/31/01 | Inventories | Construction | Expenses | Expenses | 01/31/02 | |||||||
| Salaries and wages | $ | 429,725 | $ | - | $ | - | $ | 153,901 | $ | 158,271 | $ | 312,172 | |
| Rentals | 59,232 | - | - | 24,968 | 24,968 | 49,936 | |||||||
| Telephone | 21,438 | - | - | 11,018 | 2,754 | 13,772 | |||||||
| Travel and entertainment | 33,475 | - | - | 14,901 | - | 14,901 | |||||||
| Dues and membership | 8,321 | - | - | 2,969 | 742 | 3,711 | |||||||
| Office expense | 37,416 | - | - | 19,835 | 4,959 | 24,794 | |||||||
| Depreciation of fixed assets | 4,521 | - | - | - | 2,200 | 2,200 | |||||||
| Fees and remunerations for services | 25,222 | - | - | 4,745 | 18,980 | 23,725 | |||||||
| Advertising expenses and credit publications | 1,471 | - | - | 940 | - | 940 | |||||||
| Payroll taxes | 29,519 | - | - | 12,888 | 13,212 | 26,100 | |||||||
| Other taxes | 7,190 | - | - | - | 4,074 | 4,074 | |||||||
| Employee benefits | 39,858 | - | - | 26,032 | 10,063 | 36,095 | |||||||
| Insurance | 9,360 | - | - | - | 6,676 | 6,676 | |||||||
| Bidding expense | 345 | - | - | 414 | - | 414 | |||||||
| Sales expense | 517 | - | - | 430 | - | 430 | |||||||
| Repairs and maintenance | 468 | - | - | - | 1,048 | 1048 | |||||||
| Contributions | 50 | - | - | - | - | - | |||||||
| Bank fees | 230 | - | - | - | 274 | 274 | |||||||
| Royalties and technical services fees | 29,000 | - | - | - | - | - | |||||||
| Astra jet expense | 76,000 | - | - | - | - | - | |||||||
| Other expense | 6,567 | - | - | 552 | 2,212 | 2,764 | |||||||
| Totals as of 01/31/02 | $ | - | $ | - | $ | - | $ | 273,593 | $ | 250,433 | $ | 524,026 | |
| Totals as of 01/31/01 | $ | 819,925 | $ | - | $ | - | $ | 409,699 | $ | 410,226 | $ | - |
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