**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

 

**FORM 10-Q**

**(Markone)**

 
| **ý** | **Quarterly Report Pursuant To Section 13 or  15(d) of the Securities Exchange Act of 1934  For the quarter period ended August 31, 2002** |
|------------|--------------------------------------------------------------------------------------------------------------------------------------------|

** **

**OR**

** **
| **o** | **Transition Report Pursuant to Section 13 or  15(d) of the Securities Exchange Act of 1934  For the transition period from                   to                    ** |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

 

**Commissionfile number: 1-7736**

 

**TAB PRODUCTS CO.**

(Exact name of Registrant as specified in itscharter)

 
| **DELAWARE**             |   | **94-1190862**                    |
|--------------------------|--------|-----------------------------------|
| (State of Incorporation) |   | (IRS Employer Identification No.) |

 

**935Lakeview Parkway, Suite 195**

**VernonHills, IL  60061**

(Address of principal executive offices)

 

**(847)968-5400**

(Registrant’s telephone number - including areacode)

 

 

**NOT APPLICABLE**

Former name, former address and former fiscal year,

if changed since last report.

 

 

Indicate by check markwhether the Registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the Registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days.  Yes  ý    No o

 

 

Indicate the number ofshares outstanding of each of the issuer’s classes of common stock, as of thelatest practicable date.  Common sharesoutstanding as of August 31, 2002 — 5,123,915

 

 

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**TABPRODUCTS CO.**

 

**INDEX**

 

**PARTI.  FINANCIAL INFORMATION**

 

 
| **ITEM 1**                     |   | **Financial Statements (Unaudited):**                                                                    |   |   |
|--------------------------------|--------|----------------------------------------------------------------------------------------------------------|--------|--------|
|                           |   |                                                                                                     |   |   |
|                           |   | Consolidated  Condensed Balance Sheets August 31, 2002 and May 31, 2002                                  |   |   |
|                           |   |                                                                                                     |   |   |
|                           |   | Consolidated  Condensed Statements of Operations Three months ended August 31, 2002 and  August 31, 2001 |   |   |
|                           |   |                                                                                                     |   |   |
|                           |   | Consolidated  Condensed Statements of Cash Flow Three months ended August 31, 2002 and  August 31, 2001  |   |   |
|                           |   |                                                                                                     |   |   |
|                           |   | Notes  to Consolidated Condensed Financial Statements                                                    |   |   |
|                           |   |                                                                                                     |   |   |
| **ITEM  2**                    |   | Management’s  Discussion and Analysis of Financial Condition and Results of Operations              |   |   |
|                           |   |                                                                                                     |   |   |
| **ITEM  3**                    |   | Quantitative  and Qualitative Disclosure About Market Risks                                              |   |   |
|                           |   |                                                                                                     |   |   |
| **ITEM 4**                     |   | Controls and Procedures                                                                                  |   |   |
|                           |   |                                                                                                     |   |   |
| **PART II. OTHER INFORMATION** |
|                           |   |                                                                                                     |   |   |
| **ITEM 6**                     |   | Exhibits and  Reports on Form 8-K                                                                        |   |   |
|                           |   |                                                                                                     |   |   |
|                           |   | Signatures                                                                                               |   |   |
|                           |   |                                                                                                     |   |   |
|                           |   | Certifications                                                                                           |   |   |

 

2

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**TAB PRODUCTS CO.**

**CONSOLIDATEDCONDENSED BALANCE SHEETS (UNAUDITED)**

**(000’somitted except share and per share data)**

 
| ** **                                                                                                                        | ** ** | **August 31,  2002** | ** ** | **May 31,  2002** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------|------------|----------------------|------------|-------------------|------------|
| **ASSETS**                                                                                                                        |       |                 |       |              |       |
| **Current  assets:**                                                                                                              |       |                 |       |              |       |
| Cash and cash  equivalents                                                                                                        |       | $                    | 8,719      |              | $          | 8,836 |   |
| Short-term  investments                                                                                                           |       | 1,799                |       | 2,313             |       |
| Accounts  receivable, less allowances for doubtful accounts of $837 and $867                                                      |       | 15,701               |       | 15,657            |       |
| Inventories                                                                                                                       |       | 5,130                |       | 4,667             |       |
| Income tax  receivable                                                                                                            |       | 141                  |       | 2,809             |       |
| Deferred income  taxes                                                                                                            |       | 1,835                |       | 1,927             |       |
| Prepaid expenses                                                                                                                  |       | 1,841                |       | 1,144             |       |
|                                                                                                                              |       |                 |       |              |       |
| **Total current assets**                                                                                                          |       | 35,166               |       | 37,353            |       |
|                                                                                                                              |       |                 |       |              |       |
| Property, plant  and equipment, net of accumulated depreciation of $27,004 and $27,927                                            |       | 5,833                |       | 5,975             |       |
| Goodwill, net                                                                                                                     |       | 2,460                |       | 2,510             |       |
| Deferred income  taxes                                                                                                            |       | 3,818                |       | 3,798             |       |
| Other assets                                                                                                                      |       | 499                  |       | 513               |       |
|                                                                                                                              |       |                 |       |              |       |
| **Total  assets**                                                                                                                 |       | $                    | 47,776     |              | $          | 50,149 |   |
|                                                                                                                              |       |                 |       |              |       |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY**                                                                                    |       |                 |       |              |       |
| **Current liabilities:**                                                                                                          |       |                 |       |              |       |
| Accounts payable                                                                                                                  |       | 7,127                |       | 7,217             |       |
| Compensation payable                                                                                                              |       | 1,543                |       | 1,738             |       |
| Other accrued  liabilities                                                                                                        |       | 4,767                |       | 5,088             |       |
|                                                                                                                              |       |                 |       |              |       |
| **Total  current liabilities**                                                                                                    |       | 13,437               |       | 14,043            |       |
|                                                                                                                              |       |                 |       |              |       |
| Other  non-current liabilities                                                                                                    |       | 1,961                |       | 2,003             |       |
|                                                                                                                              |       |                 |       |              |       |
| Commitments and  contingencies                                                                                                    |       | —               |       | —            |       |
|                                                                                                                              |       |                 |       |              |       |
| **STOCKHOLDERS’  EQUITY:**                                                                                                   |       |                 |       |              |       |
| **Preferred  stock**, $.01 par  value, authorized 500,000 shares, issued — none                                              |       | —               |       | —            |       |
| **Common  stock**, $.01 par  value, authorized 25,000,000 shares, issued — August 2002 and May 2002 —  7,802,384 shares |       | 78                   |       | 78                |       |
| Additional  paid-in capital                                                                                                       |       | 15,662               |       | 15,662            |       |
| Stock  subscription — notes receivable                                                                                       |       | (198                 | )          | (198              | )          |
| Retained  earnings                                                                                                                |       | 53,227               |       | 54,584            |       |
| Treasury stock,  August 2002 and May 2002 — 2,678,469 shares                                                                 |       | (32,452              | )          | (32,452           | )          |
| **Accumulated other comprehensive  loss:**                                                                                        |       |                 |       |              |       |
| Minimum pension  liability                                                                                                        |       | (2,920               | )          | (2,920            | )          |
| Translation  adjustment                                                                                                           |       | (1,019               | )          | (651              | )          |
|                                                                                                                              |       |                 |       |              |       |
| **Total  stockholders’ equity**                                                                                              |       | 32,378               |       | 34,103            |       |
|                                                                                                                              |       |                 |       |              |       |
| **Total  liabilities and stockholders’ equity**                                                                              |       | $                    | 47,776     |              | $          | 50,149 |   |

 

**See Notes to Unaudited Consolidated Condensed FinancialStatements.**

 

3

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**TAB PRODUCTS CO.**

**CONSOLIDATEDCONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)**

**(000’somitted except share and per share data)**

 
| ** **                                           | ** ** | **Three  Months Ended  August 31** | ** ** |
|------------------------------------------------------|------------|------------------------------------|------------|
|                                                 |       | **2002**                           |       | **2001** |   |
| **Revenues**                                         |       | $                                  | 22,744     |   | $ | 28,505 |   |
|                                                 |       |                               |       |   |   |
| **Operating  costs and expenses:**                   |       |                               |       |   |   |
| Cost of revenues                                     |       | 14,338                             |       | 17,350 |   |
| Selling, general  and administrative                 |       | 10,748                             |       | 12,506 |   |
| **Total  operating costs and expenses**              |       | 25,086                             |       | 29,856 |   |
|                                                 |       |                               |       |   |   |
| Gain on sale of  property and equipment              |       | (434                               | )          | — |   |
|                                                 |       |                               |       |   |   |
| **Operating  loss**                                  |       | (1,908                             | )          | (1,351 | ) |
|                                                 |       |                               |       |   |   |
| Interest and  other, net                             |       | 22                                 |       | 121 |   |
| Loss before  income taxes                            |       | (1,886                             | )          | (1,230 | ) |
|                                                 |       |                               |       |   |   |
| Income tax  benefit                                  |       | (529                               | )          | (431 | ) |
|                                                 |       |                               |       |   |   |
| **Net loss**                                         |       | $                                  | (1,357     | ) | $ | (799 | ) |
|                                                 |       |                               |       |   |   |
| **Basic net loss per share**                         |       | $                                  | (0.26      | ) | $ | (0.15 | ) |
|                                                 |       |                               |       |   |   |
| Shares used in  computing basic net loss per share   |       | 5,123,915                          |       | 5,196,470 |   |
|                                                 |       |                               |       |   |   |
| **Diluted net loss per share**                       |       | $                                  | (0.26      | ) | $ | (0.15 | ) |
|                                                 |       |                               |       |   |   |
| Shares used in  computing diluted net loss per share |       | 5,123,915                          |       | 5,196,470 |   |

 

**See Notes to Unaudited Consolidated Condensed FinancialStatements.**

 

4

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**TABPRODUCTS CO.**

**CONSOLIDATED CONDENSEDSTATEMENTS OF CASH FLOW****(UNAUDITED)**

**(000’somitted)**

** **
| ** **                                                    | ** ** | **Three  Months Ended  August 31,** | ** ** |
|---------------------------------------------------------------|------------|-------------------------------------|------------|
|                                                          |       | **2002**                            |       | **2001** |   |
| **OPERATING  ACTIVITIES:**                                    |       |                                |       |   |   |
|                                                          |       |                                |       |   |   |
| Net loss                                                      |       | $                                   | (1,357     | ) | $ | (799 | ) |
| **Adjustments  to reconcile net loss to net cash flows from** |       |                                |       |   |   |
| **     operating activities:**            |       |                                |       |   |   |
| Depreciation and  amortization                                |       | 426                                 |       | 753 |   |
| Deferred income  taxes                                        |       | (116                                | )          | (363 | ) |
| Gain on sale of  property and equipment                       |       | (434                                | )          | — |   |
| Issuance of  common stock to Tax Deferred Savings Plan        |       | —                              |       | 81 |   |
| Other                                                         |       | 44                                  |       | 47 |   |
| Changes in  operating assets and liabilities:                 |       |                                |       |   |   |
| Accounts  receivable, net                                     |       | (44                                 | )          | 2,370 |   |
| Inventories                                                   |       | (463                                | )          | (85 | ) |
| Income tax  receivable                                        |       | 2,668                               |       | 4,264 |   |
| Deferred income  taxes                                        |       | 188                                 |       | 118 |   |
| Prepaid expenses                                              |       | (697                                | )          | (376 | ) |
| Deferred pension  asset                                       |       | —                              |       | (210 | ) |
| Other assets                                                  |       | 14                                  |       | 88 |   |
| Accounts payable                                              |       | (90                                 | )          | (1,471 | ) |
| Compensation  payable                                         |       | (195                                | )          | 121 |   |
| Other accrued  liabilities                                    |       | (321                                | )          | (1,229 | ) |
| Other non-current  liabilities                                |       | (42                                 | )          | — |   |
| **Net  cash flows from operating activities**                 |       | (419                                | )          | 3,309 |   |
|                                                          |       |                                |       |   |   |
| **INVESTING  ACTIVITIES:**                                    |       |                                |       |   |   |
| Purchase of  property, plant and equipment                    |       | (618                                | )          | (218 | ) |
| Net proceeds  from sale of property and equipment             |       | 774                                 |       | — |   |
| Purchases of  short-term investments                          |       | (264                                | )          | — |   |
| Sales of  short-term investments                              |       | 778                                 |       | 816 |   |
| **Net  cash flows from investing activities**                 |       | 670                                 |       | 598 |   |
|                                                          |       |                                |       |   |   |
| Effect of  exchange rate changes on cash                      |       | (368                                | )          | 56 |   |
|                                                          |       |                                |       |   |   |
| Increase  (decrease) in cash and cash equivalents             |       | (117                                | )          | 3,963 |   |
|                                                          |       |                                |       |   |   |
| Cash and cash  equivalents at beginning of period             |       | 8,836                               |       | 5,872 |   |
|                                                          |       |                                |       |   |   |
| **Cash  and cash equivalents at end of period**               |       | $                                   | 8,719      |   | $ | 9,835 |   |
|                                                          |       |                                |       |   |   |
| Cash paid for:                                                |       |                                |       |   |   |
| Interest                                                      |       | $                                   | 1          |   | $ | 1 |   |
| Income taxes, net of refunds received                         |       | $                                   | (2,909     | ) | $ | (4,107 | ) |

 

**See Notes to Unaudited Consolidated Condensed FinancialStatements.**

 

5

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**TABPRODUCTS CO.**

 

**NOTES TO CONSOLIDATED CONDENSEDFINANCIAL STATEMENTS (UNAUDITED)**

 

 

**1.        Basis ofPresentation**

 

On July 29, 2002,the Company announced that it had entered into a Merger Agreement, dated as ofJuly 29, 2002, which sets forth the terms and conditions of the proposedacquisition of the Company by T Acquisition Co. and T Acquisition L.P.,affiliates of HS Morgan Limited Partnership. Under the Merger Agreement, T Acquisition Co. will be merged with andinto the Company (the “Merger”).  TheMerger Agreement provides that the stockholders of the Company will receive$5.85 in cash for each share of common stock of the Company.  The Merger is subject to the approval of thestockholders of the Company and the satisfaction of certain other closingconditions.  The stockholders’ meetingto vote on the approval and adoption of the Merger Agreement and the Merger isscheduled to be held on October 22, 2002. If the Company’s stockholders approve and adopt the Merger Agreement andthe Merger, it is expected that the Merger will be completed as soon aspracticable after the stockholders’ meeting.

**           **The Company’s unauditedconsolidated condensed financial statements have been prepared in accordancewith  accounting principles generallyaccepted in the United States of America and, in the opinion of management,reflect all adjustments (consisting only of normal recurring adjustments)considered necessary to fairly state the Company’s financial position, resultsof operations, and cash flows for the periods presented.  These unaudited consolidated condensedfinancial statements should be read in conjunction with the Company’s auditedconsolidated financial statements included in the Company’s Annual Report Form10-K for the fiscal year ended May 31, 2002. The results of operations for the three-month period ended August 31,2002 are not necessarily indicative of the results to be expected for anysubsequent quarter or for the entire fiscal year ending May 31, 2003.  The May 31, 2002 balance sheet was derivedfrom audited consolidated financial statements, but does not include alldisclosures required by accounting principles generally accepted in the United Statesof America.  Certain reclassificationshave been made to the first quarter of fiscal 2002 financial statements toconform to the first quarter of fiscal 2003 presentation.

 

**2.**             **Inventory**

 

Inventoriesconsisted of the following (in thousands):

 
|            |   | **August 31,    2002** |   | **May 31,   2002** |   |
|-----------------|--------|------------------------|--------|--------------------|--------|
| Raw materials   |   | $                      | 3,200  |               | $      | 2,867 |   |
| Work in process |   | 113                    |   | 348                |   |
| Finished goods  |   | 2,062                  |   | 1,697              |   |
| LIFO Reserve    |   | (245                   | )      | (245               | )      |
|            |   | $                      | 5,130  |               | $      | 4,667 |   |

 

**3.             SegmentReporting**

Operating segments are defined as components of anenterprise about which separate financial information is available that isevaluated regularly by the chief operating decision maker, or chief decisionmaking group, in deciding how to allocate resources and in assessingperformance.  The Chief Executive Officeris the Company’s chief decision maker. The Company operates and is managedinternally by four geographic operating segments. The operating segments arethe United States, Canada, the Netherlands and Australia. Outside the UnitedStates, each operating segment has a general manager that reports to the VicePresident, International, who reports to the Chief Executive Officer.  Within the United States, the individualsresponsible for operations, marketing and sales report directly to the ChiefExecutive Officer.

 

6

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Information about segments (in thousands):

 

 
|                                                   |   | **Three  Months Ended   August 31,** |   |
|--------------------------------------------------------|--------|--------------------------------------|--------|
|                                                   |   | **2002**                             |   | **2001** |   |
| Revenues:                                              |   |                                 |   |   |   |
|     United States                       |   | $                                    | 17,503 |   | $ | 22,944 |   |
|     Canada                              |   | 4,021                                |   | 4,598 |   |
|     Netherlands                         |   | 931                                  |   | 691 |   |
|     Australia                           |   | 793                                  |   | 1,072 |   |
|     Elimination of intersegment revenue |   | (504                                 | )      | (800 | ) |
|     Consolidated Total                  |   | $                                    | 22,744 |   | $ | 28,505 |   |
|                                                   |   |                                 |   |   |   |
| (Loss) income  before income taxes:                    |   |                                 |   |   |   |
|     United States                       |   | $                                    | (1,985 | ) | $ | (1,558 | ) |
|     Canada                              |   | (31                                  | )      | 145 |   |
|     Netherlands                         |   | 108                                  |   | 156 |   |
|     Australia                           |   | 22                                   |   | 27 |   |
|     Consolidated Total                  |   | $                                    | (1,886 | ) | $ | (1,230 | ) |
|                                                   |   |                                 |   |   |   |
| Depreciation and  amortization:                        |   |                                 |   |   |   |
|     United States                       |   | $                                    | 359    |   | $ | 645 |   |
|     Canada                              |   | 45                                   |   | 84 |   |
|     Netherlands                         |   | 13                                   |   | 13 |   |
|     Australia                           |   | 9                                    |   | 11 |   |
|     Consolidated Total                  |   | $                                    | 426    |   | $ | 753 |   |

 

                          
|                                                                  |   | **August 31,  2002** |   | **May 31, 2002** |   |
|-----------------------------------------------------------------------|--------|----------------------|--------|------------------|--------|
| Property, plant  and equipment, net of accumulated depreciation:      |   |                 |   |             |   |
|     United States                                      |   | $                    | 5,226  |             | $      | 5,357 |   |
|     Canada                                             |   | 278                  |   | 304              |   |
|     Netherlands                                        |   | 134                  |   | 110              |   |
|     Australia                                          |   | 195                  |   | 204              |   |
|     Consolidated Total                                 |   | $                    | 5,833  |             | $      | 5,975 |   |
|                                                                  |   |                 |   |             |   |
| Total assets:                                                         |   |                 |   |             |   |
|     United States                                      |   | $                    | 42,678 |             | $      | 44,402 |   |
|     Canada                                             |   | 7,580                |   | 7,799            |   |
|     Netherlands                                        |   | 6,460                |   | 6,282            |   |
|     Australia                                          |   | 1,373                |   | 1,449            |   |
|     Elimination of intersegment loans                  |   | (4,818               | )      | (3,976           | )      |
|     Elimination of intersegment investments            |   | (4,172               | )      | (4,179           | )      |
|     Elimination of intersegment receivables  and other |   | (1,325               | )      | (1,628           | )      |
|     Consolidated Total                                 |   | $                    | 47,776 |             | $      | 50,149 |   |

 

 

Geographic revenues arebased on the country from which customers are invoiced.

 

 

7

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**4.             ComprehensiveLoss**

 

Thecomponents of comprehensive loss, net of tax, are as follows (in thousands):

 
|                          |   | **Three  Months Ended** |   |
|-------------------------------|--------|-------------------------|--------|
|                          |   | **August 31,**          |   |
|                          |   | **2002**                |   | **2001** |   |
| Net loss                      |   | $                       | (1,357 | ) | $ | (799 | ) |
| Foreign currency  translation |   | (368                    | )      | 56 |   |
|                          |   |                    |   |   |   |
| Comprehensive  loss           |   | $                       | (1,725 | ) | $ | (743 | ) |

 

 

**5.**             **R****ecently Issued Accounting Pronouncements**

 

In June 2001, the Financial Accounting StandardsBoard (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No.142, “Goodwill and Other Intangible Assets” which addresses the initialrecognition and measurement of intangible assets acquired outside of a businesscombination and the accounting for goodwill and other intangible assetssubsequent to their acquisition.  SFASNo. 142 provides that intangible assets with finite useful lives be amortizedand that goodwill and intangible assets with indefinite lives will not beamortized, but will rather be tested at least annually for impairment.  The Company adopted SFAS No. 142 on June 1,2002 and stopped the amortization of goodwill that resulted from businesscombinations initiated prior to the adoption of SFAS No. 141.  The Company would have incurred $38,000 ofgoodwill amortization in the first quarter of fiscal 2003 if SFAS No. 142 hadnot been adopted.  The Company evaluatedgoodwill under the SFAS No. 142 transitional impairment test and determinedthat there was no impairment loss.

 

The Company adopted SFAS No. 144, “Accounting forthe Impairment or Disposal of Long-Lived Assets,” effective June 1, 2002.  SFAS No. 144 addresses financial accountingand reporting for the impairment or disposal of long-lived assets.  SFAS No. 144 supersedes SFAS No. 121,“Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assetsto Be Disposed Of,” and the accounting and reporting provisions of AccountingPrinciples Board (“APB”) Opinion No. 30, “Reporting the Results of Operations —Reporting the Effects of Disposal of a Segment of a Business, andExtraordinary, Unusual and Infrequently Occurring Events and Transactions,” forthe disposal of a segment of a business (as previously defined in thatOpinion).  The adoption of SFAS No. 144did not have an effect on the consolidated financial position or results ofoperations of the Company.

 

In June 2002, the FASB issued SFAS No. 146,“Accounting for Costs Associated with Exit or Disposal Activities”.  SFAS No. 146 requires the Company torecognize costs associated with exit or disposal activities when they areincurred rather than at the date of a commitment to an exit or disposal plan.  SFAS No. 146 will affect only the timing ofthe recognition of future restructuring costs and is not expected to have amaterial effect on the consolidated financial position or results of operationsof the Company.  The Company will adoptSFAS No. 146 for exit or disposal activities initiated after December 31, 2002.

 

**6.             Commitmentsand Contingencies**

 

The Company has been involved from time to time invarious litigation and product liability matters arising in the ordinary courseof business.  Although the final outcomeof any unresolved matters cannot be determined, it is management’s opinion thatthe final resolution of these matters will not have a material effect on theCompany’s financial position or results of operations.

 

**ITEM 2.     MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS**

 

This report, including without limitation thefollowing section regarding Management’s Discussion and Analysis of FinancialCondition and Results of Operations, contains forward-looking statements withinthe meaning of Section 27A of the Securities Act of 1933, as amended, andSection 21E of the Securities Exchange Act of 1934, as amended, regarding theCompany and its business, financial condition, results of operations andprospects.   Words such as “expects,”“may,” “will,” “should,” “forecasts,” “potential,” “continue,” “anticipates,”“intends,” “plans,” “projections,” “believes,” “seeks,”

 

8

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“foreseeable,” “break-even,” “estimates,” and similar expressions orvariations of such words are intended to identify forward-looking statements.  Additionally, statements concerning futurematters such as the development of new products, enhancements or technologies,possible changes in legislation and other statements regarding matters that arenot historical are forward-looking statements.

 

Although forward-lookingstatements in this report reflect the good faith judgment of the Company’smanagement, such statements can only be based on facts and factors currentlyknown by the Company.  Consequently, forward-lookingstatements are inherently subject to risks and uncertainties and actual resultsand outcomes may differ materially from the results and outcomes discussed inthe forward-looking statements.  Factorsthat could cause or contribute to such differences in results and outcomes includewithout limitation those discussed in “Business Environment and Risk Factors”as well as those discussed elsewhere in this report.  Readers are urged not to place undue reliance on theseforward-looking statements, which speak only as of the date of thisreport.  Readers are urged to carefullyreview and consider the various disclosures made by the Company in this report,which attempt to advise interested parties of the risks and factors that mayaffect the Company’s business, financial condition, results of operations andprospects.  The Company is not under anyobligation (and expressly disclaims any such obligation) to update or alter itsforward-looking statements, whether as a result of new information, futureevents or otherwise.

 

The following discussionof the Company’s financial condition and results of operations should be readin conjunction with the Unaudited Consolidated Condensed Financial Statementsof the Company.

 

# **Financial Condition**

 

                At August 31,2002, the Company had cash and short-term investments of $10.5 million, adecrease of $0.6 million from the $11.1 million at May 31, 2002.  The Company’s working capital position atAugust 31, 2002 was $21.7 million as compared with $23.3 million at May 31,2002.  The current ratio of 2.6 atAugust 31, 2002 was lower than the current ratio of 2.7 reported for May 31,2002.  A $2.8 million income tax refundreceived during the first quarter and $0.8 million received from the sale ofthe Lomira facility were more than offset by the $1.9 million operating loss, a$0.7 million increase in prepaid expenses, a $0.6 million reduction in currentliabilities, a $0.5 million increase in inventories and capital expenditures of$0.6 million.  The decrease in workingcapital is primarily due to the net loss of $1.4 million and capitalexpenditures of $0.6 million.

 

Duringthe first quarter of fiscal 2003, net cash required by operating activities was$0.4 million, versus net cash provided by operations of  $3.3 million in the first quarter of fiscal2002, a decrease in cash from operations of $3.7 million quarter over quarter.

Duringthe first quarter of fiscal 2003, the Company invested approximately $0.6million in property, plant and equipment, which primarily representedinvestments in manufacturing production equipment and a new paint lineinstalled at the Mayville, Wisconsin facility due to the sale of the Lomira,Wisconsin facility.  Capitalexpenditures for fiscal 2003 of approximately $1.5 million will consistprimarily of those investments mentioned above and manufacturing equipment andmanagement information systems.

 

At August 31, 2002 and May 31, 2002, the Company hadno outstanding debt.  The Companycurrently has a $5 million secured line of credit with a bank.  The line of credit contains covenantsrelated to cash flow and tangible effective net worth that the Company mustmaintain.  The Company was not incompliance with the tangible effective net worth covenant at August 31, 2002**. **The Companyreceived a waiver of the covenant violation from the bank on October 2, 2002.**** The Company does not anticipatethe need to utilize the line of credit prior to its expiration on October 31,2002, and will evaluate whether to renew it in the second quarter of fiscal2003.

 

The Companybelieves that its current cash, future cash flows and potential borrowingcapacity will provide sufficient working capital for at least the next twelvemonths.

 

##### **Results ofOperations**

 

*Revenues —* Total revenues for thefirst quarter of fiscal 2003 of $22.7 million were $5.8 million or 20.2% lowerthan the $28.5 million of revenues in the first quarter of fiscal 2002.  Of the $5.8 million decrease in revenues,$5.3 million was due to a decline in all product lines within the U.S exceptfor imaging services which had a 9% increase in revenues.  The Company believes that this decline wasdue to reduced volume and longer customer decision lead times largely as aresult of the economic downturn that impacted the Company in the latter part offiscal 2002 and the uncertainty regarding the future ownership of theCompany.  In addition, the Companyexperienced revenue declines in Canada of $0.4 million

 

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asa result of cutbacks by customers in technology spending and world economicevents.  Australia revenues declined$0.3 million while revenues from Europe increased $0.2 million.

*Cost ofRevenues —* Cost of revenues, as a percentage of revenues, forthe first quarter of fiscal 2003 and 2002 were 63.0% and 60.9%,respectively.   The percentage increasein the first quarter of fiscal 2003 from the first quarter of fiscal 2002 wasdue primarily to a decrease in manufacturing efficiencies due to lower thanplanned volume. The cost reduction programs implemented throughout fiscal 2002partially offset the first quarter of fiscal 2003 increase in cost of revenuepercentage.    In addition, there weresignificant improvements in the cost structure of the imaging servicesoperation, which improved from a negative 2.6% gross margin to a positive 20.7%gross margin.

*Selling,General and Administrative Expense* — Selling, general andadministrative expenses, as a percentage of revenues, for the first quarter offiscal 2003 and 2002 were 47.3% and 43.9%, respectively.  Total operating expenses for the firstquarter of fiscal 2003 were $10.7 million, a decrease of $1.8 million ascompared to total operating expenses of $12.5 million in the first quarter offiscal 2002.  The decrease in operatingexpenses was primarily attributable to lower salaries, wages, benefits andtravel due to lower headcount, lower commissions associated with the reducedrevenues from the first quarter of fiscal 2002, a reduction in sales meetingcosts, decreased bad debt expense as a result of improved collection efforts,and lower depreciation and amortization costs due to certain assets becomingfully depreciated in fiscal 2002 and to the cessation of goodwill amortizationeffective June 1, 2002.

First quarter of fiscal2003 selling, general and administrative expenses included $0.7 millionassociated with the exploration of strategic alternatives process, primarilyfinancial advisor and attorneys’ fees.  First quarter of fiscal 2002 selling, general and administrativeexpenses included $0.4 million of costs related to the fiscal 2002 proxycontest.

        *Gain on Sale*  — Gain on sale of property in first quarter of fiscal 2003 was$0.4 million.  On August 16, 2002 theCompany completed the sale of its Lomira, Wisconsin manufacturing facility fora gross sales price of $0.8 million, resulting in a gain of $0.4 million.  Operations previously conducted at theLomira facility have been transferred to the Company’s main plant in Mayville,Wisconsin.

*Interestand other, net* — Interest and other, net was $22,000 income forthe first quarter of fiscal 2003 and $121,000 income for the first quarter offiscal 2002.  Gross interest income was$44,000 and $89,000 for the first quarter of fiscal 2003 and 2002,respectively.  The decrease in interestincome was primarily due to lower interest rates on the Company’s cashbalances.  The remaining expense for thefirst quarter of fiscal 2003 and the remaining income for the first quarter offiscal 2002 included foreign currency transaction and exchange gains and lossesand other miscellaneous expenses.

*IncomeTaxes* — Income tax benefit, as a percentage of pre-tax loss, for the firstquarter of fiscal 2003 was 28.0%, an improvement of 7.0 percentage points ascompared to the effective tax rate of 35.0% in the first quarter of fiscal2002.  The change in the effective taxrate was primarily due to a limitation on loss carry-forwards for federal andcertain state income taxes.

 

### **Recently Issued Accounting Pronouncements**

In June 2001, the FASB issued SFAS No. 142,“Goodwill and Other Intangible Assets” which addresses the initial recognitionand measurement of intangible assets acquired outside of a business combinationand the accounting for goodwill and other intangible assets subsequent to theiracquisition.  SFAS No. 142 provides thatintangible assets with finite useful lives be amortized and that goodwill andintangible assets with indefinite lives will not be amortized, but will ratherbe tested at least annually for impairment. The Company adopted SFAS No. 142 on June 1, 2002 and stopped theamortization of goodwill that resulted from business combinations initiatedprior to the adoption of SFAS No. 141. The Company would have incurred $38,000 of goodwill amortization in thefirst quarter of fiscal 2003 if SFAS No. 142 had not been adopted.  The Company evaluated goodwill under theSFAS No. 142 transitional impairment test and determined that there was noimpairment loss.

 

The Company adopted SFAS No. 144, “Accounting forthe Impairment or Disposal of Long-Lived Assets,” effective June 1, 2002.  SFAS No. 144 addresses financial accountingand reporting for the impairment or disposal of long-lived assets.  SFAS No. 144 supersedes SFAS No. 121,“Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assetsto Be Disposed Of,” and the accounting and reporting provisions of APB OpinionNo. 30, “Reporting the Results of Operations — Reporting the Effects ofDisposal of a Segment of a Business, and Extraordinary, Unusual andInfrequently Occurring Events and Transactions,” for the disposal of a segmentof a business (as previously defined in that Opinion).  The adoption of SFAS No. 144 did not have aneffect on the consolidated financial position or results of operations of theCompany.

 

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In June 2002, the FASB issued SFAS No. 146,“Accounting for Costs Associated with Exit or Disposal Activities”.  SFAS No. 146 requires the Company torecognize costs associated with exit or disposal activities when they areincurred rather than at the date of a commitment to an exit or disposal plan.  SFAS No. 146 will affect only the timing ofthe recognition of future restructuring costs and is not expected to have amaterial effect on the consolidated financial position or results of operationsof the Company.  The Company will adoptSFAS No. 146 for exit or disposal activities initiated after December 31, 2002.

 

**Business Environment And Risk Factors**

TheCompany’s future operating results may be affected by various trends andfactors, which we must successfully manage in order to achieve favorableoperating results. In addition, there are trends and factors beyond ourcontrol, which affect our operations. Such trends and factors include, but are not limited to, possibleadverse changes in general economic conditions or conditions in the specificmarkets for our products, governmental regulation, fluctuations in foreignexchange rates, force majeure, and other factors, including, but not limitedto, those listed below.

*Failure to manage expenses in alignment with revenues couldadversely impact our results of operations and financial condition.*  We have implemented cost reduction programsin fiscal 2002 and these efforts continue in fiscal 2003.  If these programs do not prove to besufficient or if we fail to take additional actions that may become necessaryto align future expenses with future revenue levels, our results of operationsand financial condition could be adversely impacted.

*The continued effects of the general state of the worldeconomy could adversely impact our results of operations and financialcondition.*  The downturn in world economic conditionscould have a material adverse effect on our results of operations and financialcondition.  Our experience indicatesthat our industry lags general business trends.  Therefore, the timing of a recovery for the Company is alsouncertain.

*An accelerated move to digital technology by our customerscould weaken demand for our products and services.*  Although the use of paper by business hascontinued to increase, the use of digital records by large document-intensiveindustries may accelerate.  This could weakenthe demand for our paper-based supplies and storage products.  If we fail to respond with new digitalproducts and services to such a potential market change, our revenues, resultsof operations, financial condition and prospects could be adversely affected.

*The impact of the recent terrorist attacks in the UnitedStates may have both short-term and long-term adverse effects on our revenues,results of operations, financial condition and prospects.  *Whileit is likely that the terrorist attacks of September 11, 2001 have had animmediate impact on our business as a result of business disruption generally,including transportation disruption, deferral of customer purchasing decisionsand supply chain disruption, the long-term effects are not known at this time.

 

*We may not be able to achievehigher market penetration for sales of large document management solutionprojects. *Althoughfrom fiscal 2001 onward we have focused our selling efforts on obtaining abalanced mix of orders of varying sizes and types, large projects may beimportant to achieving revenue growth. While the Company does not know of a single large competitor with thecapability to handle these large projects, if we fail to achieve significant marketpenetration for such projects, revenue growth may be limited and our results ofoperations may be adversely impacted.

*If we cannot attract or retain keyqualified personnel, our business, results of operations and financialcondition may be adversely impacted***. **Our future performancedepends in significant part upon attracting and retaining key management,sales, manufacturing, marketing and technical support personnel.  The inability to attract, assimilate orretain highly qualified personnel in the future on a timely basis could have amaterial adverse effect on our business, results of operations and financialcondition.

*The ongoing strategic alternatives evaluation process couldhave a material adverse impact on our business, results of operations andfinancial condition.*  In October 2001, the Company announced thatit would explore strategic alternatives for maximizing stockholder value.  As of July 29, 2002, the Company enteredinto a Merger Agreement with T Acquisition Co. and T Acquisition L.P.,affiliates of HS Morgan Limited Partnership pursuant to which T Acquisition Co.will merge with and into the Company. This activity and announcement could cause uncertainty with ouremployees including management, sales and other personnel.  It may also have a negative impact on ourcustomers and suppliers.  The impact ofthese uncertainties could have a material adverse effect on our business,results of operations and financial condition.

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*Failure to consummate the proposed merger with TAcquisition Co. could have a material adverse impact on our business, resultsof operations and financial condition.*  If theCompany fails to consummate the Merger and subsequently accepts an offer for acompeting alternative strategic transaction, the Company may be required to paya break fee to T Acquisition Co. and T Acquisition L.P. under theterms of the Merger Agreement.  Inaddition, the failure to consummate the Merger could have a material adverseeffect on our business, results of operations and financial condition.

*Our operating results may fluctuate from period toperiod. *Factors affecting our operating results and grossmargins include the volume of product sales, competitive pricing pressures, theability to match supply with demand, changes in product and customer mix,changes in the channels through which our products and services aredistributed, timing of new product announcements and introductions by us andour competitors, fluctuations in product costs, variations in manufacturingcycle times, fluctuations in manufacturing utilization, our ability to achievemanufacturing volumes with our new and existing products, exchange ratefluctuations, a change in our effective tax rate and changes in generaleconomic conditions.  All of thesefactors are difficult to forecast and these or other factors can materiallyaffect our quarterly or annual operating results.

*Ourliquidity could be adversely impacted by unexpected events. *Although we believe that we have sufficient cash onhand and expected cash from operations to satisfy our working capital needs forat least the next twelve months, any significant unexpected cash requirementscould adversely impact our liquidity. In those circumstances, we may be required to seek third party financingand we cannot be certain that financing will be available on acceptable termsor at all.  Factors affecting our cashflows include net losses, the timely collection of accounts receivable fromcustomers, the willingness of suppliers to extend normal credit terms, the purchaseand sale of assets and the willingness of financial institutions to lend tous.  Although our projections of thesefactors indicate that our operational cash flows, together with our existingcash and cash equivalent balances and our borrowing capacity will adequatelyfinance anticipated operations and capital expenditures for at least the nexttwelve months, investors are cautioned that such projections inherently involverisks and uncertainties.

 

*Failure to obtain sufficientquantities of critical components could adversely impact our business,financial condition and results of operations. *We purchase several critical components from single or sole sourcevendors for which alternative sources are not currently in place.  We do not maintain long-term supplyagreements with any of these vendors. Development of alternative supply sources would require a significantamount of time to qualify in the case of certain of our components.    The inability to develop alternativesources for these single or sole source components or to obtain sufficientquantities of these components could result in delays or reductions in productshipments, which could adversely affect our business, financial condition andresults of operations.

*Failure to achieve plannedmanufacturing volumes could adversely impact our business, financial conditionand results of operations. *There can be no assurance that our manufacturingfacilities will achieve or maintain acceptable manufacturing volumes in thefuture.  The inability to achieveplanned volumes from our manufacturing facilities could have an adverse effecton our business, financial condition and results of operations.  Any problems experienced by us in ourcurrent or future transitions to new processes and products or theconsolidation of manufacturing operations could have a material adverse effecton our business, financial condition and results of operations.

*        Salesto the U.S. Government may result in fluctuations due to their budgetconstraints and new initiatives.*

Government revenues primarily expose us to risks from reductions inbudget allocations to support regulation and administrative offices.  The government may periodically undertakeinitiatives that create opportunities to help agencies streamline workflow processes,reduce paperwork and increase customer service, which may provide short-termopportunities for us.  However, thelong-term effect of a government initiative to streamline processes couldeventually have a negative impact on our business, financial condition andresults of operations.

 

*Unfavorable intellectual propertydevelopments could adversely impact our business and results ofoperations. *We rely on a combination of patents, trademarks,copyright and trade secret laws, confidentiality procedures and licensingarrangements to protect our intellectual property rights.  We have been notified in the past and may benotified in the future of claims that they may be infringing upon patents orother intellectual property rights owned by third parties.  There can be no assurance that in the futureany patents held by us will not be invalidated, that patents will be issued forany of our pending applications or that any claims allowed from existing orpending patents will be of sufficient scope or strength or be issued in theprimary countries where our products can be sold to provide meaningfulprotection or any commercial advantage to us. Additionally, our competitors may be able to design around our patents.

 

*A negative impact to our international operations couldadversely impact our business, financial condition and results of operations.*  Internationalsales accounted for approximately 25% and 22%, respectively, of ourconsolidated 

 

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total revenues for the first quarter of fiscal 2003 and 2002.  Fluctuations in currencies could adverselyaffect our business, financial condition and results of operations in thefuture.  Because sales of our productshave been denominated to date primarily in United States dollars, increases inthe value of the United States dollar could increase the price of our productsso that they become relatively more expensive to customers in the localcurrency of a particular country, leading to a reduction in sales andprofitability in that country.  We aresubject to the risks of conducting business internationally, including foreigngovernment regulation and general geopolitical risks such as political andeconomic instability, potential hostilities and changes in diplomatic and traderelationships.  Manufacturing and salesof our products may also be materially adversely affected by factors such asunexpected changes in, or imposition of, regulatory requirements, tariffs,import and export restrictions and other barriers and restrictions, longerpayment cycles, greater difficulty in accounts receivable collection,potentially adverse tax consequences, the burdens of complying with a varietyof foreign laws and other factors beyond our control.  In addition, the laws of certain foreign countries in which ourproducts are or may be developed, manufactured or sold, may not protect ourintellectual property rights to the same extent as do the laws of the UnitedStates and thus make piracy of our products a more likely possibility.  There can be no assurance that these factorswill not have a material adverse effect on our business, financial conditionand results of operations.

 

**ITEM 3.  QUANTITATIVEAND QUALITATIVE DISCLOSURE ABOUT MARKET RISK**

The Company is exposed tomarket risk related to fluctuations in interest rates and in foreign currencyexchange rates.

The Company’s exposure tomarket risk due to fluctuations in interest rates relates primarily to itsshort-term investment portfolio, which consists of corporate debt securities,which are classified as available-for-sale and were reported at an aggregatefair value of $1.8 million as of August 31, 2002.  These available-for-sale securities are subject to interest raterisk inasmuch as their fair value will fall, if market interest rates increase.  If market interest rates were to increaseimmediately and uniformly by 10% from the levels prevailing at August 31, 2002,the fair value of the portfolio would not decline by a material amount.  The Company does not use derivativefinancial instruments to mitigate the risks inherent in these securities.  However, the Company does attempt to reducesuch risks by typically limiting the maturity date of such securities to nomore than nine months, placing its investments with high credit quality issuersand limiting the amount of credit exposure with any one issuer.  In addition, the Company believes that itcurrently has the ability to hold these investments until maturity, andtherefore, believes that reductions in the value of such securitiesattributable to short-term fluctuations in interest rates would not materially affectthe financial position, results of operations or cash flows of the Company.

The Company’s exposure tomarket risk due to fluctuations in foreign currency exchange rates relatesprimarily to the intercompany receivable balance with its Netherlands subsidiary.  Such intercompany receivable balance atAugust 31, 2002 was $28,000; therefore, a hypothetical 10% adverse change inEuro against U.S. dollars would not result in a material foreign exchange loss.  Although the Company transacts business withvarious foreign countries, settlement amounts are usually based on localcurrency.  Transaction gains or losseshave not been significant in the past and there is no hedging activity on Euroor other currencies.  Consequently, theCompany does not expect that reductions in the value of such intercompanyreceivable balances or of other accounts denominated in foreign currenciesresulting from even a sudden or significant fluctuation in foreign exchangerates, would have a direct material impact on the Company’s financial position,results of operations or cash flows.

 

InJanuary 1999, certain member countries of the European Union establishedpermanent, fixed conversion rates between their existing currencies and theEuropean Union’s common currency (the Euro). The transition period forconversion to the Euro was January 1, 1999 through January 1, 2002, at whichtime all legal tender within the participating member countries converted tothe Euro.  The timing of phasing out alluses of existing currencies will comply with the legal requirements and also bescheduled to facilitate optimal coordination with the plans of our vendors,distributors and customers. Work related to the introduction of the Euro andthe phasing out of the other currencies includes converting informationtechnology systems; recalculating currency risk; and taking action, if needed,regarding continuity of contracts; and modifying our processes for preparingtax, accounting, payroll and customer records. The introduction of the Euro and the phasing out of the other currenciesdid not have a material impact on the Company’s financial condition, results ofoperations or cash flows.

Notwithstanding theforegoing analysis of the direct effects of interest rate and foreign currencyexchange rate fluctuations on the value of certain of the Company’s investmentsand accounts, the indirect effects of such fluctuations could have a materialadverse effect on the Company’s business, financial condition and results ofoperations.  For example, internationaldemand for the Company’s products could be affected by foreign currencyexchange rates.  In 

 

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addition, interestrate fluctuations may affect the buying patterns of the Company’scustomers.  Furthermore, interest rateand currency exchange rate fluctuations have broad influence on the generalcondition of the U.S., foreign and global economies, which could materially andadversely affect the Company.

 

**ITEM 4.  CONTROLS ANDPROCEDURES**

 

**               **The Company’s President and Chief Executive Officerand the Company’s Vice President, Chief Financial Officer and Treasurer haveconcluded, based on an evaluation within 90 days of the filing date of thisreport, that the Company’s disclosure controls and procedures are effective forgathering, analyzing and disclosing information required to be disclosed in theCompany’s reports filed under the Securities Exchange Act of 1934.  There have been no significant changes inthe Company’s internal controls or in other factors that could significantlyaffect these controls subsequent to the date of the foregoing evaluation.

 

**PART II: OTHER INFORMATION**

 

 

**ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K**

 

(a)     Exhibits.

 

99.1       Certification Pursuant to 18 U.S.C.Section 1350 as Adopted Pursuant to Section 906 of theSarbanes-Oxley Act of 2002

 

(b)     Reportson Form 8-K.

 

TheCompany filed a Current Report on Form 8-K dated July 29, 2002 in which itreported in Item 5 that as of July 29, 2002, the Company entered into a MergerAgreement with T Acquisition L.P., a Delaware limited partnership and TAcquisition Co., a Delaware corporation and that immediately prior to theexecution of the Merger Agreement, the Company entered into Amendment No. 2 toRights Agreement dated as of July 29, 2002, between the Company and MellonInvestor Services LLC (f/k/a ChaseMellon Shareholder Services, LLC).

 

 

 

 

 

 

 

 

 

 

 

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**SIGNATURES**

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the Registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 
|                               | TAB  PRODUCTS CO.                                                   |   |
|------------------------------------|---------------------------------------------------------------------|--------|
|                               | (Registrant)

 

 

                                 |   |
| Date:   October 11, 2002 | /s/ Donald J. Hotz                                                  |   |
|                               | Donald J. Hotz,                                                     |   |
|                               | Vice President, Chief  Financial Officer and Treasurer              |   |
|                               |                                                                |   |
|                               |                                                                |   |
|                               |                                                                |   |
| Date:   October 11, 2002 | /s/ Robert J. Crecca                                                |   |
|                               | Robert J. Crecca                                                    |   |
|                               | Corporate Controller,  Chief Accounting Officer and Asst. Secretary |   |
|                               |                                                                |   |

 

 

 

 

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**CERTIFICATION**

I, Gary W. Ampulski, President & Chief ExecutiveOfficer, certify that:

1. I have reviewed this quarterly report on Form 10-Qof Tab Products Co.;

2. Based on my knowledge, this quarterly report doesnot contain any untrue statement of a material fact or omit to state a materialfact necessary to make the statements made, in light of the circumstances underwhich such statements were made, not misleading with respect to the periodcovered by this quarterly report;

3. Based on my knowledge, the financial statements,and other financial information included in this quarterly report, fairlypresent in all material respects the financial condition, results of operationsand cash flows of the registrant as of, and for, the periods presented in thisquarterly report;

4. The registrant’s other certifying officers and Iare responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for theregistrant and have:

a) designed such disclosure controls and procedures toensure that material information relating to the registrant, including itsconsolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this quarterly report is beingprepared;

b) evaluated the effectiveness of the registrant’sdisclosure controls and procedures as of a date within 90 days prior to thefiling date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusionsabout the effectiveness of the disclosure controls and procedures based on ourevaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I havedisclosed, based on our most recent evaluation, to the registrant’s auditorsand the audit committee of registrant’s board of directors (or personsperforming the equivalent functions):

a) all significant deficiencies in the design oroperation of internal controls which could adversely affect the registrant’sability to record, process, summarize and report financial data and haveidentified for the registrant’s auditors any material weaknesses in internalcontrols; and

b) any fraud, whether or not material, that involvesmanagement or other employees who have a significant role in the registrant’sinternal controls; and

6. The registrant’s other certifying officers and Ihave indicated in this quarterly report whether there were significant changesin internal controls or in other factors that could significantly affectinternal controls subsequent to the date of our most recent evaluation,including any corrective actions with regard to significant deficiencies andmaterial weaknesses.
| Date: October 11, 2002 |
|------------------------|
|                   |
|                   | /s/ Gary W. Ampulski |
|                   | Gary W. Ampulski

President & CEO |
|                   |
|                        |  |  |

 

 

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                **CERTIFICATION**

 

I, Donald J. Hotz, Vice President, Chief FinancialOfficer & Treasurer, certify that:

1. I have reviewed this quarterly report on Form 10-Qof Tab Products Co.;

2. Based on my knowledge, this quarterly report doesnot contain any untrue statement of a material fact or omit to state a materialfact necessary to make the statements made, in light of the circumstances underwhich such statements were made, not misleading with respect to the periodcovered by this quarterly report;

3. Based on my knowledge, the financial statements,and other financial information included in this quarterly report, fairlypresent in all material respects the financial condition, results of operationsand cash flows of the registrant as of, and for, the periods presented in thisquarterly report;

4. The registrant’s other certifying officers and Iare responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for theregistrant and have:

a) designed such disclosure controls and procedures toensure that material information relating to the registrant, including itsconsolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this quarterly report is beingprepared;

b) evaluated the effectiveness of the registrant’sdisclosure controls and procedures as of a date within 90 days prior to thefiling date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusionsabout the effectiveness of the disclosure controls and procedures based on ourevaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and Ihave disclosed, based on our most recent evaluation, to the registrant’sauditors and the audit committee of registrant’s board of directors (or personsperforming the equivalent functions):

a) all significant deficiencies in the design or operationof internal controls which could adversely affect the registrant’s ability torecord, process, summarize and report financial data and have identified forthe registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involvesmanagement or other employees who have a significant role in the registrant’sinternal controls; and

6. The registrant’s other certifying officers and Ihave indicated in this quarterly report whether there were significant changesin internal controls or in other factors that could significantly affectinternal controls subsequent to the date of our most recent evaluation,including any corrective actions with regard to significant deficiencies andmaterial weaknesses.
| Date: October 11, 2002 |
|------------------------|
|                   |
|                   |   /s/ Donald  J. Hotz |
|                   | Donald J. Hotz

Vice President, Chief Financial Officer &  Treasurer |
|                   |
|                        |  |  |

 

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