On December 22nd, I did a “first post” about Florida Reprographics filing for Chapter 11 Bankruptcy, so this post, today, is simply a follow-up post.
Years ago, when there was a legal controversy surrounding the demise (Chapter 7 Bankruptcy) of the Louis Frey Company, a long-time, large reprographer based in NYC, and one of the pioneers in the FM (OnSite) business, I got a subscription to “Pacer”, the government-run web-site that contains information about all U.S. bankruptcies. Bankruptcy information (filings and proceedings) are a matter of “public record.” If you want your own account with Pacer, go to http://www.pacer.gov and sign up. I’ve just reactivated my Pacer account, so that I could do some research on the Florida Reprographics bankruptcy case. And, last night, I went through (and PDF’d and saved on my laptop) a whole host of the documents that have been filed in conjunction with the FR BK case.
First, a bit of background information….. for those of you who enjoy history…..
Florida Reprographics was founded sometime around 1984/5, after the owner, Chris Charles, relocated to sunny Tampa from New York City. When he was in NYC, Chris was with National Reprographics (NRI), and he was the VP of Sales (or the “Sales Manager”), for several years, at NRI under Sol Magid, the then President of NRI. In other words, prior to opening FR in Tampa, Chris had already had a lot of experience in the reprographics business, at least on the “sales side” of the business. When FR was first founded, Chris had partners, Martha and Nick Korman [who had relocated to Tampa from New Jersey, both having worked at Trukmann’s, Nick’s family’s reprographics business (and still owned by Paul Korman, Nick’s brother.)] However, soon after FR came into being, Nick and Martha pulled out, returned to New Jersey (or NYC) and, later on, in 1986, returned to Tampa and, literally on a shoe-string, founded (with Greg Williams as their partner) Bay Reprographics (which later, through a name change, became National Graphic Imaging (NGI.) So, by 1986, when Bay (NGI) was founded, FR was already about 1 or 2 years old. And, of course, the companies, FR and Bay (NGI), became “heated” competitors. Around that same time, Jack Dunn founded TRS (Tampa Reprographics Services. Jack also owned Dunn Blueprint (Detroit area.) Tampa has better weather than Detroit, I guess. Together with The Huey Company of Chicago, Dunn joint-ventured Orlando Reprographics, but, not long after that, Jack (Dunn) pulled out of the Orlando Reprographics deal (left it to Huey) and that’s when Jack decided to found TRS in Tampa. So, by 1986, there were at least 3 Tampa-based reprographers, founded by “northern folks”, operating in the Tampa Bay market.
Well, over the many years that followed, the Tampa Bay Area real estate development market “took off”, and, for years, there was plenty of business for everyone …. until the proverbial “rock hit a hard place” and the market for reprographics began to trend down during 2007. I joined NGI when NGI’s sales were around $5.2 million (1997 Sales, adjusted for inter-company sales) and “retired” from NGI in December 2007, when NGI was sold to ARC. One of the reports issued when ARC purchased NGI indicated that NGI’s sales were around $23 million. I’m only mentioning that to give my readers a bit more perspective. Of course, it is not fair to compare NGI’s Sales to Florida Reprographics’ Sales, because, by 2007, NGI was operating in Tampa, Orlando, Jacksonville, Ocala and Atlanta and, by comparison, FR only had operations in Tampa (well, maybe it was around that time that FR opened a location down near Sarasota?) Anyway, I’ve said all this simply to make this point: “sounds like” Chris Charles would have been better off if Martha and Nick Korman had remained his partners in FR. NGI grew MUCH larger than FR and NGI was sold for a lot of money. FR remained a “small company” (still certified by City of Tampa Gov as a “small business” enterprise as late as 2010-11) and is now in Chapter 11. Oh well, “they say that” ….. “success in business is a matter of making more right decisions than wrong decisions.” Note that a few years ago, we (NGI) did have informal discussions with Chris about buying FR, but nothing came of that.
Second, okay, now to the point of todays post; to share with my blog-readers some of the information that’s contained in the documents already filed in FR’s Chapter 11 BK case …..
(1) Sales Revenues:
One of the questions asked on one of the BK forms pertains to recent years’ sales revenues. Actually, the form refers to it as “gross income”. But, I think that means that the BK court wants to know “gross sales” or maybe it’s “gross receipts” (the latter would be the case with a “cash-basis” business); here’s the response to that question:
- 2010 YTD – $490,000 (apparently, this is YTD through Nov 30, 2010)
- 2009 – $843,784
- 2008 – 1,388,967
- There was no requirement to reveal 2007 Sales, but, since NGI had a healthy year in 2007, I’m going to guess that FR did as well and that FR’s Sales for 2007 were around $2,000,000, if not somewhat greater than that. If I’m fairly accurate with that guess, then that would mean that FR’s sales have fallen by approximately 74% since “peak” times. As I’ve said in other blog posts, this kind of fall-off in Sales is evidence that Florida’s reprographers have been dealing with a depression, not a recession. The only other comment I can make about FR’s sales decline, WOW, OMG!
(2) Location:
Evidently, FR relocated its business to a new location (under a 5-year lease) the day the BK filing took place. New location (4614 Eagle Falls Place) appears to be in southeastern Tampa, not exactly a “quick” commute to downtown Tampa and well away from the WestShore business district (where NGI’s main branch is located.) FR had been located, for many, many years, at 655 N. Franklin Street in the “heart” of downtown Tampa.
At one point, FR opened a branch location in the Lakewood Ranch area of Sarasota. I don’t know if that FR location is still open. That location is not mentioned in the BK filings. It may be a separate corporation not subject to FR’s recent BK filing. Or, that location may have been closed previously.
(3) Unsecured Creditors:
One of the things that you have to do when you go Chapter 11 BK is file a list of your top 20 unsecured creditors. I looked at that list, but decided not to publish the list that was initially filed on Nov 30th, because a subsequent filing added to that initial list, and that subsequent filing (on Dec 14th) contained a few creditors that the initial filing did not include. The most remarkable difference between the first list and the second list. On the second list (Dec 14th), Chris Charles is listed as an unsecured creditor in the amount of $600,000! That debt did not appear on the original list. Here’s the complete list of unsecured creditors, per the Dec 14th filing:
- Christopher Charles (who is the 100% shareholder of FR) $600,000
- OCE USA $46,491
- TWC Fifty-Eight Inc. $41,601
- Wells Fargo $30,560
- US Bank, NA $24,000
- BB&T Financial $16,699
- Xerox Capital Services $12,755
- A1 Contract Staffing $11,496
- Inquest Technologies $7,770
- Staples Credit Plan $6,918
- Derrick Guenther $6,491
- Precision Paper $5,108
- Accurate Laminating $3,215
- Zeno Office Solutions $2,977
- General Binding Corp $2,804
- KIP America $2,410
- Citrus Computer $2,078
- Mall Office Products $1,800
- American Express $1,753
- ABC Imaging $1,728
- BP Oil $1,706
- NuKote $1,573
- Pitney Bowes $1,120
- Steven Enterprises $1,050
- Technical Image Products $1,017
- Thoroughbred Software $981
- CitCards $898
- Idearc Media (a) $781
- Lightyear Network Solutions $779
- Idearc Media (b) $720
- Stephen Fossler $615
- Sign-It-Quick $483
- Konica Minolta $460
- Uline Supply $113
- Communication Technologies $110
- UPS $63
- Fedex $16
- Approximate total of unsecured creditor debt $841,139
Apparently, one creditor, ABC Imaging, has a “set-off” against the debt that it is owed by FR. I think that means that ABC Imaging must owe at least that amount to FR for work FR did for ABC Imaging.
(4) Secured Creditors:
One secured creditor is GMAC/Ally Financial, and it says that the gross amount of this debt is $4,600. It also says that there is collateral assigned to this debt and that the value of the collateral (I think a 2007 GMC Sierra) is $2,000. [If I interpreted this information accurately, then I’d like to buy a 2007 GMC Sierra for $2,000, if it’s undamaged!]
The major (and apparently the only other “secured”) creditor is PNC Bank (Philadelphia), and I think this was an SBA Loan, since the SBA is mentioned in conjunction with this loan. About PNC Bank loan to FR, it says this:
Total Amount Owed $540,000
Less: Estimated Value of Collateral $(212,282)
Estimated Unsecured Portion $327,718
PNC Bank filed UCC-1, Blanket Lien on A/R, BBT checking account, chairs, furnishings, lateral files. Comment: apparently, the collateral pledged against this loan did not include any “equipment” assets, and I kind of wonder “what was the bank thinking?”
On one of the schedules, Chris Charles is listed as a “co-debtor” on the loan from PNC Bank. I think that means (but, certainly, I am not 100% sure) that he must have personally guaranteed that loan.
To the extent that the liquidated value of the collateral (estimated to be $212,282) does not satisfy the total ($540,000) loan amount, the remaining debt becomes part of the “unsecured” debt (at least that’s my understanding of how that works.)
(5) Priority Claims (debts):
- Florida Dept of Revenue – Sales Taxes $3,000
- Hillsborough County Tax Collector – Personal Property Taxes $6,100
(6) Pending Lawsuits:
The BK filings reveal two pending lawsuits:
- OCE North America vs. Florida Reprographics; Re: Breach of Contract
- TWC Fifty-Eight vs. Florida Reprographics; Re: Breach of Contract (landlord of location vacated on or before November 30th, 2010)
(7) Equity Ownership of FR:
The BK filings indicate that “Chris Charles” is the 100% shareholder of FR, and that he has been the 100% shareholder for at least one year before the BK filing date.
(8) “Insider Compensation” Disclosure:
One of the questions (or, call it “disclosures”) that FR had to respond to in the BK paperwork was this:
“Withdrawals from a partnership or distribution by a corporation: If the debtor is a partnership or corporation, list all withdrawals or distributions credited or given to an insider, including compensation in any form, bonuses, loans, stock redemptions, options exercised and any other perquisite during one year immediately preceding the commencement of this case.”
This was the response to the above disclosure requirement:
- Nancy Turon; ex-wife of Chris Charles and employee of the debtor (FR); purpose: compensation $12,500
- Jennifer Charles; relation, daughter of Chris Charles and employee of the debtor (FR); purpose: compensation $14,625
- Chris Charles, relation: President/Owner; purpose: compensation $100,000
- Chris Charles, relation: President/Owner: purpose: repayment of shareholder loan $19,629
(9) Assets of Florida Reprographics:
As per one of the schedules filed on December 14th, were….
From Schedule B – Personal Property (Assets)
- Petty Cash Fund $275
- BB&T Checking Account $635
- Accounts Receivable $123,229
- 2007 Mercedes SL550, leased from US Bank $35,000
- 2007 GMC Sierra $2,000
- a) Chairs, furnishings, lateral files, storage cabinets, desks, tables, etc. $15,000
- b) Computers and plotter system equipment $63,143
- c) Drymount, binding machine, standard cutter, four punch system, OCE TCS 400 color 2-roll plotter with scanner, canon digtial imagepress, Rioch color printer/copier, Canon b/w printing press, Canon b&w production printer, KIP large–format printer $175,000
-
- Paper, toner, supplies $10,000
- Total Estimated Value of Assets, per schedule filed $424,282
I found the “groupings” of the equipment assets to be interesting and found myself wondering why each piece of equipment is not listed and valued separately.
(10) Interim Use of Cash Collateral:
On December 21, 2010, the Court approved a motion to let FR use the “cash collateral” for conducting its business operations, but, apparently, there will be another hearing on this matter on Jan 5, 2011. I think this means that FR is allowed to use its A/R collections to fund business operations, in spite of the fact that PNC has secured interest in the cash collected from A/R.
(11) Interim Order Granting Motion for Authority to Pay Affiliate Officer Salary:
On December 1st, FR filed a “Motion” regarding on-going compensation for Chris Charles, President of the Debtor (FR):
Case8:10-bk-28642-MGW Doc6 Filed12/01/10 Page1of6 In re: FLORIDA REPROGRAPHICS, INC.,
Debtor. Case No.: 8:10-bk-28642-MGW Chapter 11
UNITED STATES BANKRUPTCY COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION
MOTION FOR AUTHORITY TO PAY AFFILIATE OFFICER SALARY
(Expedited Relief Requested)
FLORIDA REPROGRAPHICS, INC. (the “Debtor”), by and through the undersigned counsel, pursuant to Administrative Order TPA-2005-2, hereby files this Motion for Authority to Pay Affiliate Officer Salary (the “Motion”) and, in support thereof, respectfully state as follows:
Background
- 1. The Debtor filed a voluntary petition for relief under Chapter 11, title 11 of the United States Code (the “Bankruptcy Code”) on November 29, 2010 (the “Petition Date”).
- 2. Since the Petition Date, the Debtor has continued to operate its business as debtor in possession pursuant to §§1007 and 1008 of the Bankruptcy Code. No unsecured creditors committees have been appointed in these cases.
- 3. The Debtor operates a document reproduction and management company with a specific emphasis on the reproduction of blueprints and construction documents located at 633 N. Franklin Street, Tampa, Florida 33602.
- 4. The Debtor is owned by Christopher W. Charles (“Mr. Charles”) who qualifies as an “affiliate” under §101(2) of the Bankruptcy Code.
- 5. Mr. Charles has successfully managed the debtor’s business for over twenty-five years. Mr. Charles has been intimately involved in every major decision regarding the Debtor’s business operations.
Relief Requested:
- 6. The Debtor requests authority to pay a postpetition biweekly salary of $4,000.00 to Mr. Charles as well as reimbursement of reasonable business expenses to Mr. Charles.
- 7. Mr. Charles will continue to serve as the President of the Debtor postpetition and, in this role, he will be responsible for providing the following services:
- a. serving as the Debtor’s chief executive officer with responsibility for all day- to-day activities and employee personnel and for implementing strategies designed to maximize the short and long-term profitability of the Debtor;
- b. leading and directing the Debtor’s managers, employees and agents;
- c. working with the Debtor’s counsel in the administration of the Debtor’s businesses under the protection of Chapter 11;
- d. representing the Debtor in the Bankruptcy Court and in meetings with any committees, the United States Trustee, local government and regulatory authorities, the media, and thegeneral public;
- e. representing the Debtor in their negotiations with vendors, suppliers, landlords and other general creditors; and
- f. working with counsel, any creditors’ committees, and other creditors in formulating and confirming the Debtor’s plan of reorganization.
- 8. Although Chapter 11 provides a debtor with certain benefits in its attempt to reorganize its financial affairs, there are also burdens and obstacles inherent in any Chapter 11 case that must be addressed by management. As a result of a Chapter 11 case, a debtor’s management is faced with new obstacles in conducting its business affairs and substantial additional reporting and paperwork requirements. Mr. Charles will be required to assume additional duties, some of which did not exist prior to the Petition Date and others of which are greatly expanded subsequent to the Petition Date. Specifically, Mr. Charles will have to spend significant time and effort to ensure that the Debtor’s business remain viable during the pendency of these Chapter 11 cases.
- 9. During the one year prior to the Petition Date, Mr. Charles received the same compensation requested herein from the Debtor.
- 10. The Debtor believes that payment of reasonable postpetition compensation to Mr. Charles is necessary to allow the Debtor’s businesses to operate postpetition. Mr. Charles will not be providing any services to any third-parties postpetition and, other than the compensation proposed herein, Mr. Charles will not be receiving any postpetition compensation from third-parties.
- 11. All applicable payroll taxes related to Mr. Charles’s compensation will be paid concurrently with the payment of such compensation.
- 12. In accordance with Administrative Order TPA-2005-2, the Debtor requests that an expedited hearing be set on the Motion within three (3) business days.
WHEREFORE, the Debtor requests that this Court enter an order (a) granting the Motion, (b) authorizing the Debtor to pay reasonable postpetition compensation to Mr. Charles and (c) grant such other and further relief as is just and appropriate. Dated: Tampa, Florida December 1, 2010
Responding to the above “Motion”, this was the subsequent decision issued by the Court:
On December 21st, the US Bankruptcy Judge “GRANTED” a Motion (filed by FR) to pay Chris Charles (as President of the Debtor) an “interim salary” of $4,000 on a bi-weekly basis. The court will hold a “continued preliminary hearing” on the “Motion” on January 5th at 11:00 a.m. The “granted” motion contains this provision: “no compensation shall be paid to the officers or insiders unless, at the time of such payment, the Debtor (FR) is current with and has made payment of all operating expenses, including any adequate protection payments to be paid to PNC Bank. The “granted motion” contains a further provision: “in the event the compensation authorized to be paid herein (that refers to the $4,000 bi-weekly amount) is not paid because the Debtor (FR) is not current with its operating expenses, any unpaid compensation shall not accrue as a cost of administration herein.”
(12) Notice of (and date set for) Creditor’s Meeting:
PLEASE NOTE: IF YOU ARE A CREDITOR OF FR, DO NOT RELY ON MY BLOG FOR THE DATE OF THE CREDITOR’S MEETING OR THE FILING DEADLINE FOR FILING YOUR CLAIMS. TO PROTECT YOUR INTERESTS, REFER TO THE PAPERWORK SENT TO YOU BY THE COURT OR CHECK THE COURT’S RECORDS FOR THE MOST RECENT, RELEVANT INFORMATION!!!
The paperwork filed in the FR BK case reveals this information:
“Notice of Chapter 11 Bankruptcy Case, Meeting of Creditors, & Deadlines A chapter 11 bankruptcy case concerning the debtor Corporation listed below was filed on November 30, 2010.”
“You may be a creditor of the debtor. This notice lists important deadlines. You may want to consult an attorney to protect your rights. All documents filed in the case may be inspected at the bankruptcy clerk’s office at the address listed below. NOTE: The staff of the bankruptcy clerk’s office cannot give legal advice.”
Meeting of Creditors –
Debtor(s) must present Photo ID and acceptable proof of Social Security Number at § 341 meeting. You are reminded that Local Rule 5073−1 restricts the entry of cellular telephones into the Courthouse.
Date: January 7, 2011
Time: 01:30 PM
Location: Room 100−B, 501 East Polk St., (Timberlake Annex), Tampa, FL 33602
Deadlines to File a Proof of Claim –
Proof of claim must be received by the bankruptcy clerk’s office by the following deadline:
For all creditors (except a governmental unit): February 14, 2011
For a governmental unit: 180 days from the date of filing
– – – – – – – – – – – – – – – –
Joel’s additional comments:
(1) It will be interesting to see if any of the creditors, secured or unsecured, protest the inclusion of the $600,000 “shareholder debt” as an unsecured debt of FR. One of my BK-knowledgeable friends said that debt could be “construed” as equity in FR, rather than debt.
(2) It is sad that Chris Charles had to take his company, Florida Reprographics, into bankruptcy, after a 26 (or so) year run. Like I said in my first post about FR’s bankruptcy, I guess it is simply “a sign of the times.”
Reprographics 101 