<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
JUNE 27, 2000
---------------------
Date of Report
(Date of earliest event reported)
IMAGEX.COM, INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
WASHINGTON 0-26837 91-1727170
---------------------------- --------------------- -------------------
(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
10210 NE POINTS DR., SUITE 200
KIRKLAND, WASHINGTON 98033
-------------------------------------------------
(Address of principal executive offices, including zip code)
(425) 576-6500
---------------
(Registrant's telephone number, including area code)
<PAGE>
This Amendment No. 1 to the Current Report on Form 8-K filed with the Securities
and Exchange Commission on July 12, 2000 of ImageX.com, Inc. ("ImageX") relates
to ImageX's acquisition of substantially all of the assets of Howard Press
Limited Partnership, a Delaware limited partnership ("Howard Press") in
accordance with an Asset Purchase Agreement dated June 15, 2000 between ImageX,
Meadowlands Acquisition Corp., a New Jersey corporation and wholly owned
subsidiary of ImageX, Howard Press and the partners of Howard Press individually
(the "Asset Purchase Agreement"). The purpose of this amendment is to amend Item
7 to provide the financial statements of Howard Press required by Item 7(a) of
Form 8-K and the pro forma financial information required by Item 7(b) of Form
8-K, which information was impracticable to provide at the time ImageX filed the
Current Report on Form 8-K dated July 12, 2000.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) FINANCIAL STATEMENTS
(1) AUDITED FINANCIAL STATEMENTS OF HOWARD PRESS LIMITED PARTNERSHIP AS OF
DECEMBER 31, 1999 AND 1998 AND FOR THE THREE YEARS IN THE PERIOD ENDED
DECEMBER 31, 1999.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Howard Press Limited Partnership:
In our opinion, the accompanying balance sheet and the related statements of
operations and partners' deficit and of cash flows present fairly, in all
material respects, the financial position of Howard Press Limited Partnership
(the "Partnership") at December 31, 1999 and 1998, and the results of its
operations and its cash flows for the years ended December 31, 1999 and 1998, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Partnership's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
March 15, 2000
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Howard Press Limited Partnership:
In our opinion, the accompanying balance sheet and the related statements of
operations, changes in partners' deficit, and cash flows present fairly, in all
material respects, the financial position of Howard Press Limited Partnership
(the "Partnership") at December 31, 1998 and 1997, and the results of its
operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Partnership's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
March 5, 1999
<PAGE>
HOWARD PRESS LIMITED PARTNERSHIP
BALANCE SHEET
AS OF DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
ASSETS
Current assets:
Cash $ 27,994 $ 17,338
Accounts receivable, net of allowance of doubtful accounts of
$240,718 and $304,619 for 1999 and 1998, respectively 4,332,499 5,178,058
Inventories, net 5,034,915 3,735,384
Other current assets 36,457 27,641
------------ ------------
Total current assets 9,431,865 8,958,421
Property and equipment, net 4,212,283 4,760,279
Intangibles 486,866 511,838
Other assets 200,413 200,878
------------ ------------
Total assets $ 14,331,427 $ 14,431,416
============ ============
LIABILITIES AND PARTNERS' DEFICIT
Current liabilities:
Current maturities of long-term debt $ 970,320 $ 937,722
Current portion of subordinated debt-related party -- 250,000
Accounts payable 1,768,693 1,332,589
Accrued expenses 833,826 1,094,370
Accrued interest payable 144,177 119,844
------------ ------------
Total current liabilities 3,717,016 3,734,525
Long-term debt, net of current maturities 4,159,756 5,387,153
Subordinated debt - related party 10,435,931 9,401,646
------------ ------------
Total liabilities 18,312,703 18,523,324
------------ ------------
Partners' Deficit
Partner contribution 3,000,500 3,000,500
Cumulative Losses (3,372,704) (3,483,336)
Acquisition accounting adjustment (3,609,072) (3,609,072)
------------ ------------
Partners' deficit (3,981,276) (4,091,908)
------------ ------------
Total liabilities and partners' deficit $ 14,331,427 $ 14,431,416
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
HOWARD PRESS LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS AND PARTNERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Sales, net $ 29,121,308 $ 28,770,874 $ 29,764,516
Cost of goods sold 23,036,618 23,235,056 22,909,416
------------- ------------ ------------
Gross profit 6,084,690 5,535,818 6,855,100
Selling, general and administrative expenses 4,951,422 5,202,061 5,422,151
------------- ------------ ------------
Income from operations 1,133,268 333,757 1,432,949
Interest expense 1,555,972 1,579,062 1,565,121
Other income 533,336 127,144 98,963
------------- ------------ ------------
Net income/(loss) 110,632 (1,118,161) (33,209)
Partners' deficit, beginning of year (4,091,908) (2,973,747) (2,940,538)
------------- ------------ ------------
Partners' deficit, end of year $ (3,981,276) $ (4,091,908) $ (2,973,747)
============= ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
HOWARD PRESS LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income/(loss) $ 110,632 $ (1,118,161) $ (33,209)
Adjustments to reconcile net loss to net cash provided from
Operating activities:
Provision for bad debt -- 72,000 132,979
Depreciation of property and equipment 778,175 803,484 805,745
Amortization of intangible assets 24,972 24,972 24,971
Amortization of other assets refinancing costs 66,444 69,941 66,444
Loss on disposal of assets -- 568 --
Unpaid interest on subordinated debt 1,034,285 724,780 826,695
Change in assets and liabilities:
Decrease in restricted cash -- 415 11,940
Decrease in accounts receivable 845,559 51,319 1,080,941
(Increase)/decrease in inventories (1,299,531) (203,799) 98,470
(Increase)/decrease in other current assets (8,816) 129,175 (104,887)
(Increase) in other assets, net of amortization expense (65,979) (60,414) (31,739)
Increase/(decrease) in accounts payable 436,104 (116,199) (83,314)
(Decrease) in accrued expenses (260,544) (538,825) 530,519
Increase in accrued interest payable 24,333 39,039 (2,707)
(Decrease) in other current liabilities -- -- (223,721)
------------ ------------ ------------
Net cash provided/used by operating activities 1,685,634 (121,705) 3,099,127
------------ ------------ ------------
INVESTING ACTIVITIES:
Capital expenditures (230,178) (208,833) (315,641)
Proceeds from sale of property and equipment -- 1,421 --
------------ ------------ ------------
Net cash (used) for investing activities (230,178) (207,412) (315,641)
------------ ------------ ------------
FINANCING ACTIVITIES:
(Payments)/borrowings under First National Bank
of Boston revolving credit agreement, net (307,079) 1,027,124 (2,577,682)
Payments on First National Bank of Boston term note (550,000) (400,000) (300,000)
Payments on CIT loan (337,721) (307,993) (280,881)
Payments on subordinated debt (250,000) -- (250,000)
Principal payments under capital lease obligations -- -- (56,885)
------------ ------------ ------------
Net cash provided/(used) for financing activities (1,444,800) 319,131 (3,465,448)
------------ ------------ ------------
Net increase/(decrease) in cash 10,656 (9,986) (681,962)
Cash at beginning of year 17,338 27,324 709,286
------------ ------------ ------------
Cash at end of year $ 27,994 $ 17,338 $ 27,324
============ ============ =============
CASH PAID INCLUDED THE FOLLOWING
Interest $ 1,555,969 $ 820,287 $ 741,194
SIGNIFICANT NONCASH TRANSACTIONS
During the year the partnership engaged in the following
significant noncash investing and financing transactions:
Accrued interest converted to subordinated debt - related party $ 979,085 724,780 826,695
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
HOWARD PRESS LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1. THE PARTNERSHIP
The Howard Press Limited Partnership (the "Partnership") operates
principally in one industry and specializes in contractual commercial
printing, kitting, warehousing, and distribution with approximately 70% of
its volume procured by formal agreements. The customer base consists
primarily of Fortune 500 companies in various industries and geographical
areas.
Howard Press Management Corp., the General Partner of the Partnership, was
established to effect the acquisition, in July 1989, of the net assets of
the Partnership by Berkshire Partners, Ltd., a Boston based venture capital
group.
PARTNERSHIP AGREEMENT
On January 26, 1996, the Partnership amended and restated the partnership
agreement. In conjunction with this amendment and restatement, the
Berkshire Fund and certain individual partners of Berkshire assigned and
transferred certain Class A limited partnership interests in the
Partnership and 100% of the Class B limited partnership interest to Howard
Press Management Corp. There was no consideration exchanged for this
transfer. As a result of this transaction, the General Partner's share,
which now includes 100% of the Class B units, has increased to 54.7% of the
Class A units. The remaining 45.3% is owned by the Class A Limited
Partners.
Effective December 28, 1999, the Berkshire Fund sold and assigned its Class
A equity interest in the Partnership to parties related to the principal
shareholder of the General Partner. In consideration for Berkshire's
assignment of their Class A shares, the Partnership repaid the $250,000
Series B Term loan plus accrued interest of $106,000. In order for the
Partnership to repay the Series B Term Loan, the Partnership had to
increase the promissory note to the principal shareholder. Berkshire also
waived and canceled the remaining management fee of $360,000 that was
outstanding at December 28, 1999.
PUT OPTION FOR BERKSHIRE UNITS
A put option was included in the January 26, 1996 amendment and restatement
of the partnership agreement. This option states that at any time during
the period commencing on January 26, 2001 and ending on January 26, 2002,
Berkshire Partners shall have the right to cause the Partnership to
purchase all or any portion of the Berkshire units at a price per unit
equal to the fair market value of such put securities. The fair market
value shall be determined by mutual agreement of the Partnership and
Berkshire Partners. In connection with the December 28, 1999 Agreement the
put option was canceled.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
These financial statements are prepared in accordance with generally
accepted accounting principles ("GAAP").
<PAGE>
Under the terms of the partnership agreement, profits and losses are to be
allocated and distributed to partners in accordance with the methods used
by the Partnership for Federal income tax purposes, which are different in
certain respects from GAAP. The individual partners are responsible for the
taxes on their share of earnings.
As of July 1, 1989, the date of the acquisition, the purchase price was
allocated to the underlying assets and liabilities based upon their
respective estimated fair value as permitted by Emerging Issues Task Force
(EITF) 88-16 "Basis in Leveraged Buyout Transactions". Under this
pronouncement, the allocation of the excess of the purchase price over the
book value of the net assets acquired was limited to approximately 80% of
the purchase price; 80% representing the new controlling ownership
interest. The amount by which the fair market value exceeded the historical
cost of the net assets acquired attributable to the 20% continuing interest
is $3,609,072. Such amount is recorded as a reduction of Partner Capital in
the accompanying balance sheet.
USE OF ESTIMATES
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 and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
INVENTORIES
Inventory costs are determined by the use of the first-in, first-out
method. Inventories are stated at the lower of cost or net realizable
value.
PROPERTY AND EQUIPMENT
Property and equipment, acquired as part of the initial acquisition on
July 1, 1989, is stated at its estimated fair value. Subsequent
acquisitions are stated at cost. All property and equipment are depreciated
over the estimated useful lives of the related assets. Leasehold
improvements are amortized over the shorter of the estimated asset life or
the remaining term of the associated lease. Depreciation is computed on
the straight-line basis using useful lives ranging from 4 to 20 years.
Maintenance and repairs are charged to operations when incurred.
Betterments and renewals are capitalized. When property and equipment is
sold or otherwise disposed of, the asset and related accumulated
depreciation accounts are relieved and any gain or loss is included in
income.
INTANGIBLES
Intangible assets consist of the costs allocated to goodwill arising as
part of the acquisition discussed above. Goodwill is being amortized on a
straight-line basis over thirty years.
Amortization expense associated with goodwill amounted to $24,972 for each
of the years ended December 31, 1999, 1998 and 1997.
FINANCIAL INSTRUMENTS
The financial instruments of the Partnership consist of cash, restricted
cash, accounts receivable, accounts payable, accrued interest payable,
long-term debt, and subordinated debt. At December 31, 1999, the carrying
amounts of these financial instruments approximate their fair values.
<PAGE>
The following methods and assumptions were used by the Partnership in
estimating fair values for financial instruments:
CASH, RESTRICTED CASH, ACCOUNTS RECEIVABLE, ACCOUNTS PAYABLE AND ACCRUED
INTEREST PAYABLE: The carrying amount approximates fair value because of
the short maturity of these instruments.
LONG-TERM DEBT, CAPITAL LEASE OBLIGATIONS, AND SUBORDINATED DEBT: The fair
value is determined using the Partnership's current incremental borrowing
rate for similar types of borrowing arrangements.
REVENUE RECOGNITION
Sales are recognized when title passes to the purchaser at the time goods
are shipped.
3. INVENTORIES
Inventories at December 31 consisted of the following:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Raw materials $ 1,069,313 $ 883,328
Work-in-process 750,115 717,507
Finished goods 3,215,487 2,134,549
---------------- -----------------
$ 5,034,915 $ 3,735,384
================ =================
</TABLE>
Finished goods are produced only when a customer commits to purchase a
specific quantity of business forms over a given period of time. Customers
are invoiced for the merchandise when the items are shipped.
4. PROPERTY AND EQUIPMENT
Property and equipment at December 31 consisted of the following:
<PAGE>
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Machinery and equipment $ 9,276,188 $ 9,250,752
Furniture and fixtures 1,459,653 1,280,405
Leasehold improvements 792,051 792,052
Vehicles -- 23,348
---------------- -----------------
11,527,892 11,346,557
Less, accumulated depreciation and amortization 7,315,609 6,586,278
---------------- -----------------
$ 4,212,283 $ 4,760,279
================ =================
</TABLE>
Depreciation expense was $778,175, $803,484 and $805,745 for the years
ended December 31, 1999, 1998 and 1997, respectively.
5. OTHER ASSETS
Other assets at December 31 consist of the following:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Split dollar insurance (see Note 9) $ 153,594 $ 139,375
Refinancing costs, net of accumulated amortization
of $402,228 and $335,784, respectively 9,064 31,418
Security deposits 37,755 30,085
---------------- ----------------
$ 200,413 $ 200,878
================ ================
</TABLE>
During 1993, the Partnership refinanced its long-term debt, incurring
$241,748 of refinancing costs which are being amortized over five years.
During 1996, the Partnership incurred $90,454 of expenses in connection
with a refinancing which is being amortized over five years.
<PAGE>
6. LONG-TERM DEBT
Long-term debt consists of:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Revolving credit advances, bearing interest at prime
plus a variable rate, ranging from .50% to 1% based upon
the amount of advances which exceed the Partnership's
asset borrowing base, is payable monthly. Prime was
8.50% and 7.75% at December 31, 1999 and 1998,
respectively. Advances, which are not to exceed
$7,500,000, are based on a borrowing base equal to 80%
of eligible accounts receivable plus 35% of eligible
inventory. However, advances which exceed the
Partnership's asset borrowing base, bear interest at
prime plus 2.5%. The entire unpaid balance is due on
April 30, 2001 $ 3,032,302 $ 3,339,380
Term loan, bearing interest at prime plus a variable rate,
ranging from 1% to 1.5% based upon the amount of advances
which exceed the Partnership's asset borrowing base
(prime was 8.5% and 7.75% at December 31, 1999 and 1998,
respectively), is payable in quarterly installments through
April 30, 2001 1,250,000 1,800,000
The equipment loan, bearing interest at 9.25%, is
collateralized by the Six Color Offset Press. This loan
is payable monthly through February 28, 2002 847,774 1,185,495
------------ ------------
5,130,076 6,324,875
Less, current maturities 970,320 937,722
------------ ------------
$ 4,159,756 $ 5,387,153
============ ============
</TABLE>
The aggregate amount of debt, net of related party debt, maturing during
the next three years is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
<S> <C>
2000 $ 970,320
2001 4,088,365
2002 71,391
-------------
$ 5,130,076
=============
</TABLE>
The $7,500,000 revolving credit facility is with First National Bank of
Boston. This credit facility is collateralized by the Partnership's assets
and contains affirmative covenants including the maintenance of certain
levels of cash flow to interest ratio. In addition, the Partnership is
restricted as to the incurrence of additional indebtedness, discretionary
capital expenditures, interest and principal payments on subordinated debt
and certain other payments. The Partnership has $4,467,698 available under
this facility at December 31, 1999.
<PAGE>
7. LEASE OBLIGATIONS
The Partnership leases certain warehouse facilities, machinery and
equipment and vehicles under operating leases. Future minimum lease
payments for operating leases are as follows:
<TABLE>
<CAPTION>
OPERATING
YEAR ENDED DECEMBER 31, LEASES
<S> <C>
2000 $ 211,989
2001 159,190
2002 124,872
2003 1,221
-------------
$ 497,272
=============
</TABLE>
During the years ended December 31, 1999, 1998 and 1997, payments under
these leases amounted to $201,222, $189,096 and $418,573, respectively.
8. RELATED PARTY TRANSACTIONS
LEASE OBLIGATIONS
The Partnership leases some of its warehouse facilities, under operating
leases, from companies affiliated with the General Partner. During the
years ended December 31, 1999 and 1998, payments under these leases
amounted to $230,310 and $460,620, respectively.
SUBORDINATED DEBT
Subordinated debt consists of:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Series B Term Loan - Limited Partner $ -- $ 250,000
Promissory Note - Principal Shareholder
of the General Partner 10,435,930 9,401,646
------------ ------------
$ 10,435,930 $ 9,651,646
============ ============
</TABLE>
SERIES B TERM LOAN
In 1993, Berkshire Partners, Ltd. acquired a $3,000,000 Series B Term Loan
from Westinghouse Credit Corporation which bears interest at 10% and is
payable in
<PAGE>
installments of $250,000. This agreement contains certain non-financial
affirmative and negative covenants including a cross-default provision with
The First National Bank of Boston agreement. In 1999, the principal
shareholder of the General Partner paid off the remaining $250,000 plus
accrued interest on the Series B Term Loan. In turn, the Partnership owes
these monies to the principal shareholder of the General Partner at
December 31, 1999 as part of the promissory note.
PROMISSORY NOTE
At the time of the July 1989 acquisition, the Partnership issued a
$5,000,000, 10% subordinated promissory note to the principal shareholder
of the General Partner. In 1993, the Partnership restructured the
$5,000,000, 10% subordinated note to require principal payments to be
made in $1,000,000 annual installments beginning June 1, 2000. In
addition, during 1999 to 1993, the Partnership executed notes payable to
the principal shareholder of the General Partner for all unpaid interest
on the subordinated debt. Such unpaid interest aggregates $5,185,930 and
$4,401,646 at December 31, 1999 and 1998, respectively, and is payable on
June 1, 2004. The 1999 interest of $106,000 related to the repayment of
Series B Term Loan owed to the principal shareholder of the General
Partner is included in accrued interest payable. This note is
subordinated to all other long-term debt instruments (Note 6) and to the
Series B Term Loan and is subject to the provisions of these agreements.
Repayment of the promissory note principal is being made at a rate of
approximately $16,000 per month.
SPLIT DOLLAR INSURANCE
During 1999 and 1998, the Partnership paid insurance premiums of $14,219
and $26,000, respectively, for one and two shareholders of the General
Partner, respectively. The Partnership is entitled to repayment of all
premiums paid from the proceeds of the policies upon death of the policy
holder or termination of the policy. The premiums are included in other
assets at December 31, 1999 and 1998.
MANAGEMENT FEE
In connection with the 1996 refinancing, the Management Agreement and
corresponding fee was terminated, with the Partnership agreeing to pay
$540,000 of the incurred management fees. Payments are due in quarterly
installments of $45,000 beginning in 1996. The balances of unpaid
management fees at December 31, 1998 and 1997 were $360,000. This fee was
waived and terminated effective with the December 28, 1999 Agreement.
9. DEFINED CONTRIBUTION PLAN
The Partnership has a 401(k) retirement plan covering all employees who
have met certain service requirements. The Partnership is obligated to
contribute to the plan 3% of the participants' salaries. Employees may
contribute up to 15% of their compensation and the Partnership must match
25% of these voluntary contributions. The profit sharing expense for the
year ended December 31, 1999, 1998 and 1997 was $308,550, $360,942 and
$340,723, respectively.
<PAGE>
10. CONCENTRATIONS OF CREDIT RISK
The Partnership provides credit, in the normal course of business, to its
customers. The Partnership's five largest customers accounted for
approximately 46%, 41% and 46% of net sales in 1999, 1998 and 1997, and
34% and 47% of gross accounts receivable at December 31, 1999 and 1998,
respectively.
11. ALLOCATION OF PARTNERSHIP PROFITS AND LOSSES
Losses are allocated to the partners in proportion to and only to the
extent of their positive capital account balances; any excess is
allocated to the General Partner. Profits are distributed initially to
the General Partner to the extent of previously allocated excess losses
with any remaining portion being initially allocated to all partners to
the extent of, and in proportion to, previously allocated losses and then
in proportion to their positive capital account balances. At December 31,
1999 and 1998, the Partners' deficit has been allocated in total to the
General Partner.
<PAGE>
(2) UNAUDITED FINANCIAL STATEMENTS AS OF MARCH 31, 2000 AND FOR THE
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
HOWARD PRESS LIMITED PARTNERSHIP
BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, 2000
--------------
UNAUDITED
<S> <C>
ASSETS
Current assets:
Cash $ 19
Accounts receivable, net 3,965
Inventories, net 4,937
Other current assets 98
--------------
Total current assets 9,019
Property and equipment, net 4,075
Intangibles 488
Other assets 192
--------------
Total assets $ 13,774
==============
LIABILITIES AND PARTNERS' DEFICIT
Current liabilities:
Current maturities of long-term debt $ 1,470
Accounts payable 1,610
Accrued expenses 665
Other current liabilities 14
--------------
Total current liabilities 3,759
Long-term debt, net of current maturities 3,361
Subordinated debt - related party 10,760
--------------
Total liabilities 17,880
--------------
Partners' Deficit
Partner contribution 3,001
Cumulative Losses (3,497)
Acquisition accounting adjustment (3,610)
--------------
Partners' deficit (4,106)
--------------
Total liabilities and partners' deficit $ 13,774
==============
</TABLE>
The accompanying notes are integral part of the financial statements.
<PAGE>
HOWARD PRESS LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS AND PARTNERS' DEFICIT
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
2000 1999
----------------------------
(UNAUDITED)
<S> <C> <C>
Sales, net $ 6,301 $ 6,751
Cost of goods sold 4,989 5,379
--------- ---------
Gross profit 1,312 1,372
Selling, general and administrative expenses 1,156 1,096
--------- ---------
Income from operations 156 276
Interest expense 387 377
Other income 106 103
--------- ---------
Net income/(loss) (125) 2
Partners' deficit, beginning of period (3,981) (4,092)
--------- ---------
Partners' deficit, end of period $ (4,106) $ (4,090)
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
HOWARD PRESS LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
2000 1999
----------------------------
(UNAUDITED)
<S> <C> <C>
Operating activities:
Net income/(loss) $ (125) $ 2
Adjustments to reconcile net loss to net cash provided from
Operating activities:
Depreciation of property and equipment 183 186
Amortization of intangible assets 9 23
Change in assets and liabilities:
Decrease in accounts receivable 368 313
(Increase)/decrease in inventories 98 (704)
(Increase) in other current assets (61) (54)
(Increase) in other assets, net of amortization expense (39)
Increase/(decrease) in accounts payable (159) 156
(Decrease) in accrued expenses (169) (53)
Increase in current maturity on LTD 500
Decrease in other current liabilities 130
------ ------
Net cash provided/(used) by operating activities 774 (170)
Cash flows from investing activities:
Capital expenditures (45) (34)
Proceeds from sale of property and equipment 42
------ ------
Net cash (used) by investing activities (3) (34)
Cash flows from financing activities:
Borrowing of long-term debt 396
Payment on long-term debt (780) (568)
------ ------
Net cash (used) by financing activities (780) (172)
(Decrease) in cash and cash equivalents (9) (376)
Cash and cash equivalents at beginning of period 28 17
------ ------
Cash and cash equivalents at end of period $ 19 $ (359)
====== ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(UNAUDITED)
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the rules and regulations of the Securities
and Exchange Commission but do not include all of the information and
footnotes required by generally accepted accounting principles for
complete consolidated financial statements and should, therefore, be read
in conjunction with the Company's audited financial statements and
notes thereto as of December 31, 1999 and 1998 and for the three
years in the period ended December 31, 1999. The accompanying statements
include all normal recurring adjustments which the Company believes
necessary for a fair presentation of the statements. The interim operating
results are not necessarily indicative of the results for the full year.
(2) INVENTORIES
Inventories at March 31, 2000 consisted of the following (in thousands):
<TABLE>
<S> <C>
Raw materials $ 815
Work-in-process 1,111
Finished goods 3,011
----------------
$ 4,937
================
</TABLE>
Finished goods are produced only when a customer commits to purchase a
specific quantity of business forms over a given period of time.
Customers are invoiced for the merchandise when the items are shipped.
(3) PROPERTY AND EQUIPMENT
Property and equipment at March 31, 2000 consisted of the following (in
thousands):
<PAGE>
<TABLE>
<S> <C>
Machinery and equipment $ 9,269
Furniture and fixtures 1,503
Leasehold improvements 801
-----------
11,573
Less, accumulated depreciation and amortization 7,498
-----------
$ 4,075
===========
</TABLE>
Depreciation expense was $183,000 for the three months ended March 31,
2000.
(4) SUBSEQUENT EVENT
On June 27, 2000, ImageX.com, Inc. completed the acquisition of certain
assets and liabilities of Howard Press Limited Partnership. The
acquisition was recorded by ImageX.com using the purchase method of
accounting under APB Opinion No. 16. ImageX.com issued 212,623 shares of
stock and $12.6 million in cash resulting in an aggregated purchase price
of $19.3 million.
<PAGE>
(b) PRO FORMA FINANCIAL INFORMATION
On June 27, 2000, ImageX.com, Inc. completed the acquisition of certain
assets and liabilities of Howard Press Limited Partnership. The acquisition
was recorded by ImageX.com using the purchase method of accounting under APB
Opinion No. 16. ImageX.com issued 212,623 shares of stock and $12.6 million
in cash resulting in an aggregated purchase price of $19.3 million.
The unaudited pro forma condensed statements of operations are based on
individual historical results of operations of ImageX.com, Inc., Fine Arts
Engravers Company, Inc., Image Press, Inc., creativepro.com, Inc. and Howard
Press Limited Partnership for the year ended December 31, 1999 and for the
six months ended June 30, 2000, after giving effect to the acquisitions of
Fine Arts Engravers Company, Inc., Image Press, Inc., creativepro.com, Inc.
and Howard Press Limited Partnership as if they had occurred at the beginning
of each period presented.
Fine Arts Engravers Company, Inc. was acquired April 13, 1999 and Image
Press, Inc. was acquired September 21, 1999. Their operations since those
dates are included with those of ImageX.com. Financial information for Fine
Arts Engravers Company, Inc. is included in Form S-1/A filed August 24, 1999,
and financial information for Image Press, Inc. is included in Form 8-K/A
filed November 15, 1999. Creativepro.com was acquired on June 21, 2000.
Financial information for creativepro.com is included in Form 8-K/A filed
September 1, 2000.
The unaudited pro forma condensed statements of operations should be
read in conjunction with the historical financial statements and notes
thereto of ImageX.com, Inc. included in its 1999 annual report on Form 10-K
and Howard Press Limited Partnership included herein. The pro forma
adjustments and assumptions described in the accompanying notes to unaudited
pro forma condensed statements of operations are based on estimates,
evaluations, and other data currently available. The unaudited pro forma
condensed statements of operations are presented for illustrative purposes
only and are not necessarily indicative of results of operations that would
have actually occurred had the acquisitions of Fine Arts Engravers Company,
Inc., Image Press, Inc., creativepro.com, Inc. and Howard Press Limited
Partnership been effected on the dates assumed.
A pro forma balance sheet is included in ImageX.com's balance sheet as
of June 30, 2000 on Form 10-Q for 2nd quarter of 2000 filed with the
Securities and Exchange Commission on August 14, 2000 as ImageX.com's balance
sheet reflects its acquisition of Howard Press.
IMAGEX.COM, INC. AND HOWARD PRESS LIMITED PARTNERSHIP
UNAUDITED PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ImageX.com, Prior Howard Press Pro Forma
Inc. Acquisitions Limited Adjustments
(Actual) (Note 1) Partnership (Note 2) Pro Forma
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue $11,499 $28,817 $29,121 $(37) $69,400
Cost of sales 8,541 8,779 23,440 69 40,829
--------------------------------------------------------------------
Gross profit 2,958 20,038 5,681 (106) 28,571
Operating expenses
General and administrative 11,002 4,257 2,817 648 18,724
<PAGE>
Sales and marketing 6,765 12,923 1,793 21,481
Product development 3,770 3,613 7,383
Amortization of unearned compensation,
goodwill, and other intangibles 2,497 91 5,793 8,381
--------------------------------------------------------------------
Total operating expenses 24,034 20,793 4,701 6,441 55,969
Profit (Loss) from operations (21,076) (755) 980 (6,548) (27,399)
Interest income (expense) 241 (744) (870) (1,373)
Provision for income tax (33) (33)
--------------------------------------------------------------------
Net Loss (20,835) (1,532) 111 (6,548) (28,804)
Accretion of mandatorily redeemable convertible
preferred stock (84) (84)
----------- ----------
Net Loss for common stock (20,919) (28,888)
=========== ==========
Basic and diluted net loss per share (3.07) (2.73)
=========== ==========
Weighted-average shares outstanding 6,805,098 3,792,774 10,597,872
=========== ========= ==========
</TABLE>
SIX MONTHS ENDED JUNE 30, 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Howard Press
ImageX.com, Prior Limited Pro Forma
Inc. Acquisitions Partnership Adjustments
(Actual) (Note 1) (5.9 Months) (Note 2) Pro Forma
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue $12,702 $7,888 $13,185 $33,775
Cost of sales 8,950 1,340 10,774 21,064
--------------------------------------------------------------------
Gross Profit 3,752 6,548 2,411 12,711
Operating expenses
General and administrative 10,903 1,315 1,448 269 13,935
Sales and marketing 9,303 5,080 893 15,276
Product development 3,548 1,735 5,283
Amortization of unearned compensation, 1,419 17 2,657 4,093
goodwill, and other intangibles
In-process research and development 1,062 (1,062)
--------------------------------------------------------------------
Total operating expenses 26,235 8,130 2,358 1,864 38,587
Profit (loss) from Operations (22,483) (1,582) 53 (1,864) (25,876)
Interest income (expense) 2,175 (877) (565) 733
Provision for income tax (2) (2)
--------------------------------------------------------------------
Net loss $(20,308) $(2,461) $(512) $(1,864) $(25,145)
====================================================================
Basic and diluted net loss per share (0.97) (1.03)
=========== ==========
Weighted-average shares outstanding 20,888,692 3,554,574 24,443,266
=========== ========= ==========
</TABLE>
<PAGE>
Note 1 - Prior Acquisitions
The prior acquisitions column includes pro forma results of operations
for 3.5 months of Fine Arts, 8.5 months of Image Press and 12 months of
creativepro.com in 1999 and 5.7 months of creativepro.com in 2000 before they
were acquired by ImageX.com. These pro forma results of operations are
included here to reflect the impact of Fine Arts, and Image Press
acquisitions as reported on the Current Report on Form 8-K/A filed on
November 15, 1999, and creativepro.com acquisition, as reported on the
Current Report on Form 8-K/A filed on September 1, 2000.
Note 2 - Pro Forma Adjustments
The unaudited statements of operations give effect to the following pro
forma adjustments necessary to reflect the acquisitions of Fine Arts, Image
Press, creativepro.com and Howard Press as if they had occurred at the
beginning of each of the periods presented:
(a) The amortization of goodwill is over a period of 10 years, and
the amortization of other intangible assets range from 3 to 8
years. The pro forma adjustments of amortization of goodwill
and intangible assets by acquisition for the six months ended
June 30, 2000 and the year ended December 31, 1999 are as
follows (in thousands):
<TABLE>
<CAPTION>
Six months ended Year ended
June 30, 2000 December 31, 1999
----------------- -----------------
<S> <C> <C>
Fine Arts $ 49
Image Press 231
creativepro.com $ 2,044 4,301
Howard Press 613 1,212
--------- ---------
$ 2,657 $ 5,793
========= =========
</TABLE>
(b) The pro forma adjustment to general and administrative
expenses in 2000 and 1999 resulting from depreciation of
internally developed software from creativepro.com acquisition
is $269,000 and $617,000 respectively. The additional
depreciation expense adjustments to cost of sales and general
and administrative expenses in 1999 are for the increase in
the value of acquired property and equipment of Fine Arts
Engravers Company.
(c) The unaudited pro forma statements of operations exclude the
effect of the nonrecurring charge of $1,062,000 for purchased
in-process research and development recorded by ImageX.com in
second quarter of 2000 resulting from creativepro.com
acquisition.
Note 3 - Pro Forma Net Loss Per Share
Basic pro forma net loss per share is computed using the weighted
average number of ImageX.com common shares outstanding during the period plus
shares of ImageX.com Common Stock issued in connection with acquisitions of
Fine Arts, Image Press, creativepro.com and Howard Press, excluding
ImageX.com Common Stock subject to repurchase. Diluted pro forma earnings per
share is computed using the weighted average number of common and common
equivalent shares outstanding during the period plus shares of ImageX.com
Common Stock and common equivalent shares assumed in connection with
aforementioned acquisitions. ImageX.com Common Stock, options and warrants
issued in connection with the acquisitions are assumed outstanding at the
beginning of each of the periods. The combined Company had a pro forma net
loss for all periods presented
<PAGE>
herein; therefore, none of the options and warrants outstanding during the
periods presented were included in the computation of pro forma dilutive
earnings per share as they were antidilutive.
(c) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
<S> <C>
2.1 Purchase Agreement, dated June 15, 2000 among ImageX.com, Inc.,
Meadowlands Acquisition Corp., Howard Press Limited Partnership and the
partners thereof, individually.*
23.1 Consent of PricewaterhouseCoopers, LLP, Independent Accountants.
99.1 Press Release dated June 15, 2000.*
99.2 Press Release dated June 27, 2000.*
</TABLE>
*Previously filed with the Original 8-K.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
IMAGEX.COM, INC.
Dated: September 7, 2000 By: /s/ Robin L. Krueger
------------------------
Robin L. Krueger
Chief Financial Officer
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
<S> <C>
2.1 Purchase Agreement, dated June 15, 2000 among ImageX.com, Inc., Meadowlands
Acquisition Corp., Howard Press Limited Partnership and the partners thereof,
individually.*
23.1 Consent of PricewaterhouseCoopers, LLP, Independent Accountants.
99.1 Press Release dated June 15, 2000.*
99.2 Press Release dated June 27, 2000.*
</TABLE>
*Previously filed with the Original 8-K.
