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U.S. Securities and Exchange Commission

UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF 1934
Release No. 47861 / May 14, 2003

ADMINISTRATIVE PROCEEDING
File No. 3-11124


 

In the Matter of

Zimmerman Sign Company,

Respondent.

 


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ORDER INSTITUTING PROCEEDING, MAKING FINDINGS, AND REVOKING REGISTRATION OF SECURITIES PURSUANT TO SECTION 12(j) OF THE SECURITIES EXCHANGE ACT OF 1934

I.

The Securities and Exchange Commission ("Commission") deems it appropriate for the protection of investors that a public administrative proceeding be, and hereby is, instituted pursuant to Section 12(j) of the Securities Exchange Act of 1934 ("Exchange Act") against Zimmerman Sign Company ("Zimmerman" or "Respondent").

II.

In anticipation of the institution of this proceeding, the Respondent has submitted an Offer of Settlement ("Offer") that the Commission has determined to accept. Solely for the purpose of this proceeding and any other proceeding brought by or on behalf of the Commission, or to which the Commission is a party, the Respondent, by its Offer, admits the jurisdiction of the Commission over it and over the subject matter of this proceeding, and consents to the entry of this Order Instituting Proceeding, Making Findings, and Revoking Registration of Securities Pursuant to Section 12(j) of the Securities and Exchange Act of 1934 ("Order"), without admitting or denying the Commission's findings contained in this Order.

III.

On the basis of this Order and Respondent's Offer, the Commission makes the following findings:

A. Zimmerman Sign Company("Zimmerman" or the "Company") is a Texas corporation formerly based in Tyler, Texas, now in Jacksonville, Texas. The Company's securities have been registered with the Commission, pursuant to Section 12(g) of the Exchange Act, from December 1996 to the present. Zimmerman was founded in 1901, and became a public reporting company in December 1996. From its two manufacturing plants, Zimmerman produces and sells commercial signage.

B. From December 1996 though June 2001 ("the relevant period"), Zimmerman materially understated its production costs, causing it to overstate assets and earnings. During the relevant period, Zimmerman deferred certain production costs related to long-term contracts to future reporting periods. Those deferred costs grew continually as inventory on the Company's balance sheet. Because Zimmerman failed to ultimately recognize these deferred costs, the Company materially understated by $5.5 million its costs-of-goods sold, and overstated by $5.5 million both its earnings and inventory, in its financial statements over the approximate five year period ended June 30, 2001. For each year-end computation between 1997 and 2000, the average understatement of the costs-of-goods sold in the Company's financial statements was $1.375 million, ranging in percentage each year between 3% and 4%. Likewise, for each year-end computation between 1997 and 2000, the average overstatement of earnings and inventory in the Company's financial statements was $1.375 million, ranging in percentage each year between 44% and 193% (earnings) and 8% and 10% (inventory).

C. The Company discovered the $5.5 million accounting discrepancy after conducting a complete physical count of its inventory as of June 30, 2001. Since then, the Company has been unable to apportion the cost-of-goods sold understatement and corresponding inventory and earnings overstatement to any particular reporting period, because it did not adequately maintain the books and records necessary to make that determination. As a result, Zimmerman has been unable to restate its prior financial statements.

D. At all relevant times, Zimmerman was required, pursuant to Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13 thereunder, to file, timely and in proper form, its annual reports on Forms 10-K and its quarterly reports on Forms 10-Q. Zimmerman has not filed such required reports since it filed its Form 10-Q for the quarter ended March 31, 2001 in May 2001. As a result of the foregoing, Zimmerman failed to comply with Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13 thereunder.

E. In a related proceeding, In re Zimmerman Sign Company and Jeffrey P. Johnson, Admin. Proceeding File No.3-11124, Zimmerman consented to entry by the Commission of a cease-and-desist order ("Cease-and-Desist Order"), which includes the findings set forth in paragraphs III. A., B. and C. of this Order, and pursuant to which Zimmerman must cease and desist from committing or causing any violation or any future violation of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, and Rules 12b-20, 13a-1 and 13a-13 thereunder. Zimmerman neither admitted nor denied the Commission's findings set forth in the Cease-and-Desist Order.

F. Notwithstanding the foregoing, Zimmerman's stock is still listed in the "Pink Sheets" published by Pink Sheets, LLC under the symbol "ZSCO."

G. Since the filing of the Form 10-Q in May 2001, Zimmerman has failed to comply with Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13 thereunder, by failing to file any quarterly or annual reports with the Commission.

H. Zimmerman has failed to comply with Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, and Rule 12b-20 thereunder, by i) failing to maintain accurate books and records, ii) failing to maintain an adequate system of internal accounting controls, and iii) failing to provide in its periodic reports such further material information necessary to make the required statements not misleading.

IV.

Section 12(j) of the Exchange Act provides as follows:

The Commission is authorized, by order, as it deems necessary or appropriate for the protection of investors to deny, to suspend the effective date of, to suspend for a period not exceeding twelve months, or to revoke the registration of a security, if the Commission finds, on the record after notice and opportunity for a hearing, that the issuer of such security has failed to comply with any provision of this title or the rules and regulations thereunder.

V.

In view of the foregoing, the Commission deems it necessary and appropriate for the protection of investors to impose the sanction specified in Respondent Zimmerman's Offer.

ACCORDINGLY, IT IS HEREBY ORDERED that the registration of the securities of Zimmerman Sign Company be, and hereby is, revoked pursuant to Section 12(j) of the Exchange Act.

By the Commission.

Jonathan G. Katz
Secretary

 

http://www.sec.gov/litigation/admin/34-47861.htm


Modified: 05/22/2003