U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------
FORM 10-QSB
(Mark One)
|X| Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of
1934
For the quarterly period ended May 31, 1998
___ Transition report under Section 13 or 15(d) of the Securities Exchange Act
For the transition period from __________ to __________
Commission file number 0-27664
UNIDIGITAL INC.
-----------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 13-3856672
- ------------------------------- ------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
229 West 28th Street, New York, New York 10001
(Address of Principal Executive Offices)
(212) 244-7820
(Issuer's Telephone Number,
Including Area Code)
Check whether the Issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the Issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes: X No:
State the number of shares outstanding of each of the Issuer's classes of common
stock, as of June 30, 1998:
Class Number of Shares
- ----- ----------------
Common Stock, $.01 par value 3,902,634
Transitional Small Business Disclosure Format (check one):
Yes: No: X
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UNIDIGITAL INC. AND SUBSIDIARIES
TABLE OF CONTENTS
-----------------
Page
----
PART I FINANCIAL INFORMATION
Item 1. Financial Statements...........................1
CONSOLIDATED BALANCE SHEETS
as at May 31, 1998 (unaudited)
and August 31, 1997 (audited)........................2
CONSOLIDATED INCOME STATEMENTS
For the Three Months and Nine
Months Ended May 31, 1998 and May 31, 1997
(unaudited)..........................................3
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended
May 31, 1998 and May 31, 1997
(unaudited)..........................................4
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (unaudited)...............................5
Item 2. Management's Discussion and Analysis or
Plan of Operation..............................11
General..............................................11
Results of Operations................................11
Liquidity, Capital Resources and Other Matters.......15
PART II OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds......17
Item 5. Other Information..............................17
Item 6. Exhibits and Reports on Form 8-K...............17
SIGNATURES...........................................................21
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<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
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<TABLE>
<CAPTION>
UNIDIGITAL INC. AND SUBSIDIARIES
--------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
May 31, August 31,
1998 1997
-------- ------
(unaudited)
ASSETS
------
<S> <C> <C>
Current assets:
Cash and cash equivalents ....................................................... $ 162,098 $ 3,202,766
Accounts receivable (less allowance for doubtful
accounts of $553,499 and $266,000 at
May 31, 1998 and August 31, 1997, respectively) ............................... 14,546,337 9,752,807
Deferred financing costs, net ................................................... 1,107,204 463,931
Prepaid expenses ................................................................ 3,201,952 1,529,664
Other current assets ............................................................ 3,645,179 765,760
------------ ------------
Total current assets ........................................................ 22,662,770 15,714,928
Property and equipment, net ........................................................ 13,807,594 11,899,475
Intangible assets, net ............................................................. 27,252,774 5,330,923
Other assets ....................................................................... 342,123 87,964
------------ ------------
Total assets ................................................................ $ 64,065,261 $ 33,033,290
============ ============
LIABILITIES
-----------
Current liabilities:
Accounts payable and accrued expenses ........................................... $ 7,258,029 $ 5,181,684
Current portion of capital lease obligations .................................... 2,230,281 1,998,443
Current portion of long-term debt ............................................... 2,942,775 10,018,332
Income taxes payable ............................................................ 1,050,412 551,235
Loans and notes payable to stockholders ......................................... 168,906 154,591
------------ ------------
Total current liabilities ................................................... 13,650,403 17,904,285
Capital lease obligations, net of current portion .................................. 3,275,900 2,875,577
Long-term debt, net of current portion ............................................. 32,393,333 2,127,796
Deferred income taxes .............................................................. 543,970 445,000
Loans and notes payable to stockholders, net of current portion .................... 207,495 207,496
------------ ------------
Total liabilities ........................................................... 50,071,101 23,560,154
------------ ------------
STOCKHOLDERS' EQUITY
--------------------
Preferred stock -- authorized 5,000,000 shares,
$.01 par value each; none issued or outstanding ................................. -- --
Common stock -- authorized 10,000,000 shares,
$.01 par value each; 3,902,634 and 3,243,243 shares
issued and outstanding at May 31, 1998 and
August 31, 1997, respectively ................................................... 39,206 32,432
Additional paid-in capital ......................................................... 9,814,625 6,291,613
Retained earnings .................................................................. 4,404,005 3,237,984
Cumulative foreign translation adjustment .......................................... (263,676) (88,893)
------------ ------------
Total stockholders' equity .................................................. 13,994,160 9,473,136
------------ ------------
Total liabilities and stockholders' equity .................................. $ 64,065,261 $ 33,033,290
============ ============
The Notes to Consolidated Financial Statements are made a part hereof.
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<TABLE>
<CAPTION>
UNIDIGITAL INC. AND SUBSIDIARIES
--------------------------------
CONSOLIDATED INCOME STATEMENTS
------------------------------
(unaudited)
-----------
Three Months Ended, Nine Months Ended,
------------------- ------------------
May 31, May 31, May 31, May 31,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
Net sales ................................................... $ 13,994,679 $ 7,664,033 $ 32,845,094 $ 18,157,668
------------ ------------ ------------ ------------
Expenses
Cost of sales ............................................... 7,692,922 4,239,289 17,597,651 9,624,915
Selling, general and
administrative expenses .................................. 4,203,955 2,273,727 10,943,509 6,018,091
------------ ------------ ------------ ------------
Total operating expenses .................................... 11,896,877 6,513,016 28,541,160 15,643,006
------------ ------------ ------------ ------------
Income from operations ...................................... 2,097,802 1,151,017 4,303,934 2,514,662
Interest expense ............................................ 793,208 396,921 1,341,359 695,660
Interest expense - deferred financing costs ................. 219,583 -- 695,721 --
Interest and other expenses (income) ........................ 40,670 (67,175) 126,604 (60,792)
Expenses incurred due to restructuring ...................... 246,930 -- 246,930 --
------------ ------------ ------------ ------------
Income before income taxes .................................. 797,411 821,271 1,893,320 1,879,794
Provision for income taxes .................................. 329,815 281,162 727,299 634,378
------------ ------------ ------------ ------------
Net income ..................................................... $ 467,596 $ 540,109 $ 1,166,021 $ 1,245,416
============ ============ ============ ============
Net income per share available to common stockholders:
Basic ....................................................... $ 0.13 $ 0.17 $ 0.34 $ 0.39
============ ============ ============ ============
Diluted ..................................................... $ 0.12 $ 0.17 $ 0.32 $ 0.39
============ ============ ============ ============
Shares used to compute net income per share:
Basic ....................................................... 3,724,459 3,228,083 3,403,721 3,203,121
============ ============ ============ ============
Diluted ..................................................... 4,036,427 3,253,163 3,640,752 3,217,789
============ ============ ============ ============
The Notes to Consolidated Financial Statements are made a part hereof.
</TABLE>
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<TABLE>
<CAPTION>
UNIDIGITAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended,
--------------------------
May 31, May 31,
1998 1997
---- ----
Operating Activities
<S> <C> <C>
Net income ............................................................................... $ 1,166,021 $ 1,245,416
Adjustments to reconcile net income to net cash provided by (used in) operating
activities:
Depreciation and amortization ..................................................... 2,684,088 1,346,217
Provision for deferred income taxes ............................................... 91,069 (73,530)
Provision for bad debts ........................................................... 31,600 77,182
Net changes in assets and liabilities net of effects of businesses acquired:
Accounts receivable ............................................................... (3,272,035) (1,376,573)
Prepaid expenses and other current assets ......................................... (3,493,771) (1,841,527)
Other assets ...................................................................... (91,550) (6,184)
Accounts payable and accrued expenses ............................................. 449,256 2,004,481
Income taxes payable .............................................................. 476,976 181,743
------------ ------------
Net cash (used in) provided by operating activities ...................................... (1,958,346) 1,557,225
------------ ------------
Investing activities
Additions to property and equipment ...................................................... (836,694) (959,996)
Business acquisitions .................................................................... (21,245,349) (5,320,902)
------------ ------------
Net cash used in investing activities .................................................... (22,082,043) (6,280,898)
------------ ------------
Financing activities
Net proceeds from bank borrowings ........................................................ 22,386,042 5,721,404
Payments of capital lease obligations .................................................... (1,421,939) (1,493,261)
Payments of notes for cancellation of options
and acquisition of business ........................................................... -- (177,893)
IPO issuance costs ....................................................................... -- (4,214)
Stockholder loans ........................................................................ -- 687
Common stock issued ...................................................................... 20,134 460
------------ ------------
Net cash provided by financing activities ................................................ 20,984,237 4,047,183
------------ ------------
Effect of foreign exchange rates on cash ................................................. 15,484 6,152
------------ ------------
Net decrease in cash and cash equivalents ................................................ (3,040,668) (670,338)
Cash and cash equivalents at beginning of period ......................................... 3,202,766 4,145,514
------------ ------------
Cash and cash equivalents at end of period ............................................... $ 162,098 $ 3,475,176
============ ============
Supplemental disclosures
Interest paid ............................................................................ $ 406,943 $ 685,467
============ ============
Income taxes paid ........................................................................ $ 159,443 $ 706,879
============ ============
Noncash transactions:
Equipment acquired under capital lease obligations ....................................... $ 1,310,243 $ 2,025,673
============ ============
The Notes to Consolidated Financial Statements are made a part hereof.
</TABLE>
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UNIDIGITAL INC. AND SUBSIDIARIES
--------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)
-----------
Note A - Basis of Presentation:
- -------------------------------
The information presented for May 31, 1998, and for the three-month and
the nine-month periods ended May 31, 1998 and May 31, 1997, is unaudited, but,
in the opinion of the management of Unidigital Inc., its wholly-owned
subsidiaries and its and their subsidiaries, affiliated companies and
predecessors (collectively, the "Company"), the accompanying unaudited
consolidated financial statements contain all adjustments (consisting only of
normal recurring accruals) which the Company considers necessary for the fair
presentation of the Company's financial position as of May 31, 1998, the results
of their operations for the three-month and the nine-month periods ended May 31,
1998 and May 31, 1997 and their cash flows for the nine-month periods ended May
31, 1998 and May 31, 1997.
The consolidated financial statements included herein have been
prepared by the Company in accordance with generally accepted accounting
principles for interim financial information and the instructions to Form 10-QSB
and Item 310 of Regulation S-B. Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted.
These consolidated financial statements should be read in conjunction with the
Company's audited financial statements for the year ended August 31, 1997, which
were included as part of the Company's Annual Report on Form 10-KSB.
The consolidated financial statements include the accounts of
Unidigital Inc. and its direct and indirect subsidiaries. All significant
intercompany balances have been eliminated.
Interim results are not necessarily indicative of results that may be
expected for the full fiscal year.
Note B - Summary of Significant Accounting Policies:
- ----------------------------------------------------
Organization and Business:
Unidigital Inc., a Delaware corporation, is the parent holding company
of five wholly-owned operating subsidiaries, Unidigital Elements (NY), Inc.,
formerly known as LinoGraphics Corporation ("Elements (NY)"), Elements (UK)
Limited ("Elements (UK)"), Unidigital Elements (SF), Inc., formerly known as
LinoGraphics (Delaware) Corporation ("Elements (SF)"), Unison (NY), Inc.,
formerly known as Unidigital/Cardinal Corporation ("Unison (NY)") and Unison
(MA), Inc., formerly known as Unidigital/Boris Corporation ("Unison (MA)").
Elements (NY) engages in the on-demand print and digital prepress business in
New York City. Elements (UK) engages in the on-demand print and digital prepress
business in London. In addition, Elements (UK) through its wholly-owned
subsidiary, Regent Group Limited, operates a financial digital print business in
London. Elements (SF) owns and operates the San Francisco on-demand prepress
business and retouching studio. Unison (NY) engages in the digital prepress and
digital printing business, and provides general printing, color separation and
large format printing
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UNIDIGITAL INC. AND SUBSIDIARIES
--------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)
-----------
services to advertising agencies and corporations primarily in the New York City
area. Unison (MA) engages in the business of digital imaging and photographic
processing in the Boston area.
Foreign Currency Translation:
The portion of the Company's financial statements relating to the
Company's United Kingdom operations are translated into United States Dollars
using period-end exchange rates ((pound)1.00 = $1.62 at August 31, 1997 and
$1.67 at May 31, 1998, respectively, for balance sheet accounts) and average
exchange rates ((pound)1.00 = $1.64 for the year ended August 31, 1997; and
$1.68 and $1.64 for the three month periods ended May 31, 1998 and May 31, 1997,
respectively; and $1.68 and $1.64 for the nine month periods ended May 31, 1998
and May 31, 1997, respectively, for income statement accounts). The translation
difference is reflected as a separate component of stockholders' equity.
Earnings Per Share:
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share," which
is required to be adopted for years ending after December 15, 1997. Accordingly,
the Company has adopted the provisions of the new statement.
The following table sets forth the computation of basic and dilutive
earnings per share:
<TABLE>
<CAPTION>
Three Months Ended, Nine Months Ended,
------------------------------ -------------------------------
May 31, May 31,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Numerator for basic and diluted earnings per
share-net income available for common
stockholders............................... $ 467,596 $ 540,109 $ 1,166,021 $ 1,245,416
============ ============ ============ ============
Denominator:
Denominator for basic earnings per share-
weighted average shares.................... 3,724,459 3,228,083 3,403,721 3,203,121
Effect of dilutive securities:
Stock options.............................. 109,555 17,128 64,896 11,978
Warrants................................... 202,413 7,953 172,135 2,690
----------- ----------- ----------- -----------
Denominator for diluted earnings per
share-adjusted weighted-average shares and
assumed conversions........................ 4,036,427 3,253,163 3,640,752 3,217,789
=========== =========== =========== ===========
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UNIDIGITAL INC. AND SUBSIDIARIES
--------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)
-----------
The following securities have been excluded from the dilutive per share
computation as they are antidilutive:
Three Months Ended, Nine Months Ended,
----------------------------------------------------
May 31, May 31,
1998 1997 1998 1997
----------------------------------------------------
Stock options..............11,000 153,500 11,000 153,500
Warrants...................25,000 92,000 117,000 92,000
Note C - Stockholders' Equity:
- ------------------------------
Common Stock:
As at June 30, 1998, 3,902,634 shares of common stock, $0.01 par value
(the "Common Stock"), were issued and outstanding.
Preferred Stock:
As at June 30, 1998, there were no shares of preferred stock, $0.01
par value, issued or approved for issuance.
Note D - Stock Option Plans:
- ----------------------------
Pursuant to the 1997 Equity Incentive Plan, as amended (the "Plan"),
the Company granted options to purchase an aggregate of 222,599 shares of its
Common Stock during the nine months ended May 31, 1998. All options were granted
at their fair market value.
Subsequent to the end of the quarter, on July 13, 1998, the Company
granted options to purchase 40,000 shares of its Common Stock to Nicholas P.
Gill in connection with his employment as the Company's Vice President, Chief
Financial Officer and Secretary. Such options were granted at their fair market
value under the Plan.
-7-
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UNIDIGITAL INC. AND SUBSIDIARIES
--------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)
-----------
Note E - Long Term Debt and Notes Payable:
- -----------------------------------------
At May 31, 1998, the Company's debt consisted of the following:
<TABLE>
<CAPTION>
Facility Amount Outstanding
Amount ------------------------------------
August 31, May 31, August 31,
1997 1998 1997
---------------- ----------------- ------------------
<S> <C> <C> <C>
Credit facilities in the United Kingdom; interest at the bank's
overdraft rate plus 3%; facility amount is approximately
(pound)1,145,000 ($1,969,400) $ 1,969,400 $ -- $ 1,784,150
Credit facilities in the United Kingdom; interest at the bank's
overdraft rate plus 2%; facility amount is approximately
(pound)2,300,000 ($3,841,000) -- 2,557,358 --
Revolving line of credit; matures April 30, 2000, interest at
Alternate Base Rate or Adjusted LIBO Rate, as defined, plus
1/4% in the United States and 2.25% in the United Kingdom 4,500,000 -- 1,725,000
Lines of credit; interest at Alternate Base Rate or Adjusted
LIBO Rate, as defined, plus 1/4% in the United States and
2.25% in the United Kingdom 5,250,000 -- 4,110,110
Term loan; matures March 31, 2003, payable in sixteen (16)
quarterly installments ranging from $750,000 to $1,500,000,
commencing June 30, 1999, together with a balloon payment of
$7,000,000 at March 31, 2003, plus interest at the Base Rate
or at the Eurodollar Rate, as defined, plus an Applicable
Margin, as defined, ranging from 0.75% to 3.0%; facility
amount is $25,000,000 -- 25,000,000 --
Revolving line of credit; matures March 24, 2003, interest at the
Base Rate or at the Eurodollar Rate, as defined, plus an
Applicable Margin, as defined, ranging from 0.75% to 3.0%;
facility amount is $10,000,000 -- 6,935,000 --
Acquisition line of credit; matures March 31, 2003, payable in
eleven (11) quarterly installments of 5.0% of the outstanding
balance at March 24, 2000 commencing June 30, 2000 and one (1)
installment of 45.0% of the outstanding balance at March 24,
2000, plus interest at the Base Rate or at the Eurodollar
Rate, as defined, plus an Applicable Margin, as defined,
ranging from 0.75% to 3.0%; facility amount is $5,000,000 -- -- --
SBA loan; matures December 1, 2014, monthly payments of $3,665,
interest at prime rate plus 2.74% 350,000 -- 334,368
Installment note due seller of Elements (SF); payable in eight
(8) quarterly installments of $11,600 including interest at 6% 85,000 21,250 42,500
Loans from private investors, beginning May 1997, maturing
between May 2002 and August 2002; interest at 10% for first
six months, 11% for second six months and 12% thereafter 4,000,000 -- 4,000,000
Installment note due seller of Unison (MA); matures January 15,
1999, payable in two (2) annual installments of $75,000
including interest at 8.0% 150,000 114,167 150,000
Installment note due Kwik International; matures April 15, 2001,
payable in thirty-five (35) monthly installments of $20,833.33
and one (1) installment of $20,833.45 including interest at
5.7% -- 708,333 --
----------------------------------
35,336,108 12,146,128
Less current portion 2,942,775 10,018,332
----------------------------------
$ 32,393,333 $ 2,127,796
==================================
</TABLE>
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UNIDIGITAL INC. AND SUBSIDIARIES
--------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)
-----------
The Company has borrowing arrangements with commercial banks in both
New York and London. On March 24, 1998, the Company terminated its financing
facilities with its former New York bank and entered into borrowing arrangements
with its current New York bank (the "Bank") in the aggregate amount of
$40,000,000, which consist of a: (i) $25,000,000 term loan; (ii) $10,000,000
revolving line of credit facility which is available for working capital
purposes; and (iii) $5,000,000 credit facility which is available for corporate
acquisition purposes. Such borrowings are guaranteed by the Company's United
States subsidiaries. In addition, the Company pledged all of its equity
interests in its United States subsidiaries and two-thirds of its equity
interests in its wholly-owned United Kingdom subsidiary as collateral for such
credit facilities. Interest under such credit facilities is, at the Company's
option, at the Base Rate or at the Eurodollar Rate, as defined, plus an
Applicable Margin, as defined, ranging from 0.75% to 3.0% depending on the
Company's consolidated debt to earnings ratio and the type of loan. As of May
31, 1998, the Company had an outstanding balance of $25,000,000 under the term
loan and $6,935,000 under the revolving credit facility. A portion of the
proceeds of such loans was used to repay in full promissory notes previously
issued by the Company in 1997 to certain private investors in the aggregate
principal amount of $4,000,000.
The credit facilities contain covenants which require the Company to
maintain certain earnings and debt to earnings ratio requirements based on the
combined operations of the Company and its subsidiaries. The credit facilities
are secured by a first priority lien on all of the assets of the Company and its
subsidiaries, a mortgage on the Company's facilities located at 545 West 45th
Street, New York, New York and a leasehold mortgage on the Company's facilities
acquired as part of the Kwik Acquisition (as defined below) located at 229 West
28th Street, New York, New York. The Company, the Bank and Richard J. Sirota
("Sirota"), the sole shareholder of Kwik (as defined below), entered into an
intercreditor subordination agreement with respect to the Bank's and Sirota's
relative interests in the Company.
The Company's agreement with the Bank restricts the Company's ability
to pay certain dividends without the Bank's prior written consent.
The Company's credit facility with its London bank provides for
combined lines of credit of (pound)2,300,000 (approximately $3,841,000) for
working capital for its United Kingdom operations. Such credit facility was
increased from (pound)1,400,000 (approximately $2,338,000) on May 13, 1998.
These lines of credit renew annually and bear interest at 2.0% over the Bank's
Base Rate, as defined. In addition, the Company is required to pay a service
charge equal to 0.2% of invoice value. These lines of credit contain covenants
which require the Company's United Kingdom subsidiaries to maintain a minimum
net worth of (pound)500,000, limit borrowings up to specified amounts of
accounts receivable aged 120 days or less and are guaranteed by the Company for
the principal amount of up to (pound)500,000. Amounts outstanding are
collateralized by substantially all of the Company's United Kingdom assets. As
of May 31, 1998, the Company had an outstanding balance of $2,557,358 under its
United Kingdom credit facility.
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UNIDIGITAL INC. AND SUBSIDIARIES
--------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)
-----------
Note F - Acquisition:
- ---------------------
On March 25, 1998, the Company, through its wholly-owned subsidiary,
Unison (NY), consummated the acquisition of substantially all of the assets of
Kwik International Color, Ltd. ("Kwik") located in New York City (the "Kwik
Acquisition"). Kwik provided general printing, color separation and large format
printing services. The Company intends to continue such line of business. The
assets purchased included Kwik's entire customer list, inventory, equipment,
cash, accounts receivable and trade name. The purchase price included cash
payments of $20,590,349, issuance of a 5.7% subordinated promissory note in the
principal amount of $750,000 (payable in 36 monthly installments commencing
April 15, 1998), issuance of 649,841 shares of restricted Common Stock of the
Company and the assumption of certain trade obligations of Kwik. Of the purchase
price, $1,000,000 in cash and $1,000,000 of restricted Common Stock of the
Company (190,589 shares) is being held in escrow for a period of two years to
satisfy any indemnification claims.
The Company funded the cash portion of the purchase price from proceeds
of a $25,000,000 term loan and a $10,000,000 revolving credit loan from the
Bank. See "Note E - Bank Credit Facilities."
The following supplemental pro forma information is presented as if the
Company had completed the Kwik Acquisition as of September 1, 1997 and 1996,
respectively:
Nine Months Ended May 31,
-------------------------
------------------------------------
1998 1997
------------------------------------
Net sales.......................... 41,675,406 36,257,283
Income from operations............. 4,883,428 3,216,370
Net income......................... 761,383 1,778,271
Net income per share - basic....... 0.20 0.46
Net income per share - diluted..... 0.18 0.46
-10-
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
- ------- ----------------------------------------------------------
General
- -------
The Company provides a full range of digital prepress, four color
digital offset printing, wide format and financial printing products and
services to the New York City, San Francisco, London and Boston markets. Using
advanced computer technology, the Company provides the imaging and reproduction
services required by graphic artists and marketing professionals in connection
with the creation of printed and photographic materials for their clients. The
Company's clients include advertising agencies, publishers, corporations,
government agencies, retailers, marketing communications firms and financial
institutions. The Company's services are designed to afford graphic artists and
marketing professionals the ability to make numerous changes and enhancements in
the design and content of printed materials throughout the design and approval
process, with shorter turnaround times and at reduced costs as compared to
traditional industry methods.
The statements contained in this Quarterly Report on Form 10-QSB that
are not historical facts are forward-looking statements (as such term is defined
in the Private Securities Litigation Reform Act of 1995) that involve risks and
uncertainties. Such forward-looking statements may be identified by, among other
things, the use of forward-looking terminology such as "believes," "expects,"
"may," "will," "should" or "anticipates" or the negative thereof or other
variations thereon or comparable terminology, or by discussions of strategy that
involve risks and uncertainties. From time to time, the Company or its
representatives have made or may make forward-looking statements, orally or in
writing. Such forward-looking statements may be included in various filings made
by the Company with the Securities and Exchange Commission, or press releases or
oral statements made by or with the approval of an authorized executive officer
of the Company. These forward-looking statements, such as statements regarding
anticipated future revenues, capital expenditures, and other statements
regarding matters that are not historical facts, involve predictions. The
Company's actual results, performance or achievements could differ materially
from the results expressed in, or implied by, these forward-looking statements.
Potential risks and uncertainties that could affect the Company's future
operating results include, but are not limited to: (i) economic conditions,
including economic conditions related to the digital print industry; (ii) the
availability of equipment from the Company's vendors at current prices and
levels; (iii) the intense competition in the markets for the Company's products
and services; (iv) the Company's ability to integrate acquired companies and
businesses in a cost-effective manner; (v) the Company's ability to effectively
implement its branding strategy; and (vi) the Company's ability to develop,
market, provide, and achieve market acceptance of new service offerings to new
and existing clients.
Results of Operations
- ---------------------
The consolidated financial information includes both the Company's
United States operations and its United Kingdom operations. On April 4, 1997,
the Company consummated the acquisition of Boris Image Group, Inc. (the "Boris
Acquisition") and, on May 22, 1997, the Company consummated the acquisition of
Libra City Corporate Printing Limited (the "Libra
-11-
<PAGE>
Acquisition"). In addition, on March 25, 1998, the Company consummated the Kwik
Acquisition.
Three Months Ended May 31, 1998 and May 31, 1997
------------------------------------------------
Net Sales. Net sales for the three months ended May 31, 1998 ("Third
Quarter of Fiscal 1998") increased by 83%, or $6,330,646, to $13,994,679 from
$7,664,033 for the three months ended May 31, 1997 ("Third Quarter of Fiscal
1997"). Net sales for the Company's United States operations increased by 98%,
or $4,767,168, from $4,844,565 in the Third Quarter of Fiscal 1997 to $9,611,733
in the Third Quarter of Fiscal 1998. This increase was attributable primarily to
an increase in net sales resulting from the Kwik Acquisition, a full three
months of net sales resulting from the Boris Acquisition and, to a lesser
extent, an increase in net sales in each of the Company's two other United
States subsidiaries. Net sales for the Company's United Kingdom operations
increased by 55%, or $1,563,478, from $2,819,468 in the Third Quarter of Fiscal
1997 to $4,382,946 in the Third Quarter of Fiscal 1998. This increase was
attributable primarily to a full three months of net sales resulting from the
Libra Acquisition and, to a lesser extent, increases in the Company's prepress
operations.
Cost of Sales. Cost of sales for the Third Quarter of Fiscal 1998
increased by 81%, or $3,453,633, to $7,692,922 from $4,239,289 for the Third
Quarter of Fiscal 1997. As a percentage of net sales, cost of sales remained
constant at 55% for the Third Quarter of Fiscal 1997 and the Third Quarter of
Fiscal 1998. Cost of sales for the Company's United States operations decreased
as a percentage of net sales from 55% for the Third Quarter of Fiscal 1997 to
51% for the Third Quarter of Fiscal 1998. Such decrease was attributable
primarily to the change in product mix in the Company's United States operations
to include more digital prepress services as a result of the Kwik Acquisition.
Cost of sales for the Company's United Kingdom operations increased as a
percentage of net sales from 56% for the Third Quarter of Fiscal 1997 to 63% for
the Third Quarter of Fiscal 1998. Such increase was attributable primarily to
the change in product mix in the Company's United Kingdom operations to include
more digital print and financial print services. Digital print and financial
print services have higher costs compared to digital prepress services.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses ("SG&A") increased by 85%, or $1,930,228, from
$2,273,727 for the Third Quarter of Fiscal 1997 to $4,203,955 for the Third
Quarter of Fiscal 1998. Such increase was attributable primarily to the
increased level of operations which resulted from the Kwik Acquisition and a
full three months of operations which resulted from each of the Boris
Acquisition and the Libra Acquisition. As a percentage of net sales, SG&A
remained constant at 30% for the Third Quarter of Fiscal 1997 and the Third
Quarter of Fiscal 1998.
Income from Operations. Income from operations for the Third Quarter of
Fiscal 1998 increased by 82%, or $946,785, to $2,097,802 from $1,151,017 for the
Third Quarter of Fiscal 1997. Of this amount, $1,549,418 was contributed by the
Company's United States operations and $548,384 by the Company's United Kingdom
operations. This increase resulted from higher net sales in both the Company's
United States and United Kingdom operations.
-12-
<PAGE>
Net Interest Expense. Net interest expense for the Third Quarter of
Fiscal 1998 increased by 219%, or $723,715, to $1,053,461 from $329,746 for the
Third Quarter of Fiscal 1997. This increase resulted from increased borrowings
under the Company's credit facilities and capital leases assumed by the Company
as part of the Kwik Acquisition, the Boris Acquisition and the Libra
Acquisition. In addition, the Company incurred deferred financing costs of
$219,583, and of such deferred financing costs, $138,000 are non-cash,
non-recurring expenses.
Restructuring Expenses. In connection with the Kwik Acquisition, the
Company has consolidated its New York operations. As a result of such
consolidation, the Company incurred restructing expenses of $246,930.
Income Taxes. Income taxes for the Third Quarter of Fiscal 1998
increased by 17%, or $48,653, to $329,815 from $281,162 for the Third Quarter of
Fiscal 1997.
Net Income. As a result of the factors described above, net income for
the Third Quarter of Fiscal 1998 decreased by 13%, or $72,513, to $467,596 as
compared to a net income of $540,109 for the Third Quarter of Fiscal 1997.
Nine Months Ended May 31, 1998 and May 31, 1997
-----------------------------------------------
Net Sales. Net sales for the nine months ended May 31, 1998 increased
by 81%, or $14,687,426, to $32,845,094 from $18,157,668 for the nine months
ended May 31, 1997. Net sales for the Company's United States operations
increased by 78%, or $8,621,664, from $11,089,871 in the nine months ended May
31, 1997 to $19,711,535 in the nine months ended May 31, 1998. This increase was
attributable primarily to an increase in net sales resulting from the Boris
Acquisition, the Kwik Acquisition and, to a lesser extent, an increase in net
sales in each of the Company's two other United States subsidiaries. Net sales
for the Company's United Kingdom operations increased by 86%, or $6,065,762,
from $7,067,797 in the nine months ended May 31, 1997 to $13,133,559 in the nine
months ended May 31, 1998. This increase was attributable primarily to the
inclusion of net sales from the Libra Acquisition and, to a lesser extent,
increases in the Company's prepress operations.
Cost of Sales. Cost of sales for the nine months ended May 31, 1998
increased by 83%, or $7,972,736, to 17,597,651 from $9,624,915 for the nine
months ended May 31, 1997. As a percentage of net sales, cost of sales increased
slightly from 53% for the nine months ended May 31, 1997 to 54% for the nine
months ended May 31, 1998. Cost of sales for the Company's United States
operations decreased as a percentage of net sales from 51% for the nine months
ended May 31, 1997 to 49% for the nine months ended May 31, 1998. Such decrease
was attributable primarily to the change in product mix in the Company's United
States operations to include more digital prepress services as a result of the
Kwik Acquisition and, to a lesser extent, to the Company's renegotiation of its
vendor contracts resulting in reduced supply costs to the
-13-
<PAGE>
Company. Cost of sales for the Company's United Kingdom operations increased as
a percentage of net sales from 57% for the nine months ended May 31, 1997 to 61%
for the nine months ended May 31, 1998. Such increase was attributable primarily
to the change in product mix in the Company's United Kingdom operations to
include more digital print and financial print services. Digital print and
financial print services have higher costs compared to digital prepress
services.
Selling, General and Administrative Expenses. SG&A increased by 82%, or
$4,925,418, from $6,018,091 for the nine months ended May 31, 1997 to
$10,943,509 for the nine months ended May 31, 1998. Such increase was
attributable primarily to the increased level of operations which resulted from
the Kwik Acquisition, the Boris Acquisition and the Libra Acquisition, and, to a
lesser extent, the hiring of additional management and administrative personnel
and costs associated with the Company's acquisitions. As a percentage of net
sales, SG&A remained constant at 33% for the nine months ended May 31, 1997 and
for the nine months ended May 31, 1998.
Income from Operations. Income from operations for the nine months
ended May 31, 1998 increased by 71%, or $1,789,272, to $4,303,934 from
$2,514,662 for the nine months ended May 31, 1997. Of this amount, $2,554,649
was contributed by the Company's United States operations and $1,749,285 by the
Company's United Kingdom operations. This increase resulted from higher net
sales and reduced supply costs offset in part by higher production costs
associated with the changing product mix of the Company's operations to include
more digital print and financial print services.
Net Interest Expense. Net interest expense for the nine months ended
May 31, 1998 increased by 241%, or $1,528,816, to $2,163,684 from $634,868 for
the nine months ended May 31, 1997. This increase resulted from increased
borrowings under the Company's credit facilities and capital leases assumed by
the Company as part of the Kwik Acquisition, the Boris Acquisition and the Libra
Acquisition. In addition, the Company incurred deferred financing costs of
$695,721 and of such deferred financing costs, $414,000 are non-cash,
non-recurring expenses.
Restructuring Expenses. In connection with the Kwik Acquisition, the
Company has consolidated its New York operations. As a result of such
consolidation, the Company incurred restructing expenses of $246,930.
Income Taxes. Income taxes for the nine months ended May 31, 1998
increased by 15%, or $92,921, to $727,299 from $634,378 for the nine months
ended May 31, 1997.
Net Income. As a result of the factors described above, net income for
the nine months ended May 31, 1998 decreased by 6%, or $79,395, to $1,166,021 as
compared to a net income of $1,245,416 for the nine months ended May 31, 1997.
-14-
<PAGE>
Liquidity, Capital Resources and Other Matters
- ----------------------------------------------
Cash Flow. Net cash used in operations was $1,958,346 for the first
nine months of fiscal 1998. Net cash provided by operations was $1,557,225 for
the first nine months of fiscal 1997. Net cash used in investing activities for
the acquisition of property and equipment was $836,694 for the first nine months
of fiscal 1998 and $959,996 for the first nine months of fiscal 1997. For the
first nine months of fiscal 1998 and fiscal 1997, the Company acquired equipment
under capital leases of $1,310,243 and $2,025,673, respectively, and made
payments under capital leases of $1,421,939 and $1,493,261, respectively. Net
bank borrowings provided funds of $22,386,042 and $5,721,404 for the first nine
months of fiscal 1998 and fiscal 1997, respectively.
Bank Credit Facilities. The Company has borrowing arrangements with
commercial banks in both New York and London. On March 24, 1998, the Company
terminated its financing facilities with its former New York bank and entered
into borrowing arrangements with the Bank in the aggregate amount of
$40,000,000, which consist of a: (i) $25,000,000 term loan; (ii) $10,000,000
revolving line of credit facility which is available for working capital
purposes; and (iii) $5,000,000 credit facility which is available for corporate
acquisition purposes. Such borrowings are guaranteed by the Company's United
States subsidiaries. In addition, the Company pledged all of its equity
interests in its United States subsidiaries and two-thirds of its equity
interests in its wholly-owned United Kingdom subsidiary as collateral for such
credit facilities. Interest under such credit facilities is, at the Company's
option, at the Base Rate or at the Eurodollar Rate, as defined, plus an
Applicable Margin, as defined, ranging from 0.75% to 3.0% depending on the
Company's consolidated debt to earnings ratio and the type of loan. As of May
31, 1998, the Company had an outstanding balance of $25,000,000 under the term
loan and $6,935,000 under the revolving credit facility. A portion of the
proceeds of such loans was used to repay in full promissory notes previously
issued by the Company in 1997 to certain private investors in the aggregate
principal amount of $4,000,000.
The credit facilities contain covenants which require the Company to
maintain certain earnings and debt to earnings ratio requirements based on the
combined operations of the Company and its subsidiaries. The credit facilities
are secured by a first priority lien on all of the assets of the Company and its
subsidiaries, a mortgage on the Company's facilities located at 545 West 45th
Street, New York, New York and a leasehold mortgage on the Company's facilities
acquired as part of the Kwik Acquisition located at 229 West 28th Street, New
York, New York. The Company, the Bank and Sirota entered into an intercreditor
subordination agreement with respect to the Bank's and Sirota's relative
interests in the Company.
The Company's agreement with the Bank restricts the Company's ability
to pay certain dividends without the Bank's prior written consent.
The Company's credit facility with its London bank provides for
combined lines of credit of (pound)2,300,000 (approximately $3,841,000) for
working capital for its United Kingdom operations. Such credit facility was
increased from (pound)1,400,000 (approximately $2,338,000) on May 13, 1998.
These lines of credit renew annually and bear interest at 2.0% over the Bank's
-15-
<PAGE>
Base Rate, as defined. In addition, the Company is required to pay a service
charge equal to 0.2% of invoice value. These lines of credit contain covenants
which require the Company's United Kingdom subsidiaries to maintain a minimum
net worth of (pound)500,000, limit borrowings up to specified amounts of
accounts receivable aged 120 days or less and are guaranteed by Unidigital for
the principal amount of up to (pound)500,000. Amounts outstanding are
collateralized by substantially all of the Company's United Kingdom assets. As
of May 31, 1998, the Company had an outstanding balance of $2,557,358 under its
United Kingdom credit facility.
The Company expects that anticipated cash flow from operations and
available borrowings will be sufficient to fund its capital lease obligations,
debt service payments, potential earn-outs, capital expenditures and operations
for at least 12 months. The Company may require additional financing to
consummate future acquisitions. There can be no assurance that the Company will
be able to secure such additional financing on terms favorable to the Company.
Working Capital. The Company's working capital at May 31, 1998 was
$9,012,367 compared to a working capital deficit of 2,189,357 at August 31,
1997.
Acquisition. On March 25, 1998, the Company, through its wholly-owned
subsidiary, Unison (NY), consummated the Kwik Acquisition. The purchase price
included cash payments of $20,590,349, issuance of a 5.7% subordinated
promissory note in the principal amount of $750,000 (payable in 36 monthly
installments commencing April 15, 1998), issuance of 649,841 shares of
restricted Common Stock of the Company and the assumption of certain trade
obligations of Kwik. Of the purchase price, $1,000,000 in cash and $1,000,000 of
restricted Common Stock of the Company (190,589 shares) is being held in escrow
for a period of two years to satisfy any indemnification claims.
The Company funded the cash portion of the purchase price from proceeds
of a $25,000,000 term loan and a $10,000,000 revolving credit loan from the
Bank.
Inflation, Foreign Currency Fluctuations and Interest Rate Changes.
Although the Company cannot accurately determine the precise effect thereof on
its operations, it does not believe inflation, currency fluctuations or interest
rate changes have historically had a material effect on revenues, sales or
results of operations. Inflation, currency fluctuations and changes in interest
rates have, however, at various times, had significant effects on the economies
of the United States and the United Kingdom and could adversely impact the
Company's revenues, sales and results of operations in the future. If there is a
material adverse change in the relationship between the Pound Sterling and the
United States Dollar, such change would adversely affect the results of the
Company's United Kingdom operations as reflected in the Company's financial
statements. The Company has not hedged its exposure with respect to this
currency risk, and does not expect to do so in the future, since it does not
believe that it is practicable for it to do so at a reasonable cost.
-16-
<PAGE>
PART II
-------
OTHER INFORMATION
-----------------
Item 2. Changes in Securities and Use of Proceeds.
- ------- ------------------------------------------
On March 25, 1998, the Company issued 649,841 shares of
restricted Common Stock of the Company (with an aggregate value of $3,409,651)
to Sirota as partial consideration for the Kwik Acquisition.
No underwriter was employed by the Company in connection with
the issuance and sale of the securities described above. The Company believes
that the issuance and sale of the foregoing securities were exempt from
registration under Section 4(2) of the Securities Act of 1933, as amended, as a
transaction not involving a public offering. No public offering was involved and
the securities were acquired for investment and not with a view to distribution.
Appropriate legends have been affixed to the stock certificates issued to
Sirota. Sirota had adequate access to information about the Company.
Item 5. Other Information
- ------- -----------------
Subsequent to the end of the quarter, on July 13, 1998,
Nicholas P. Gill was elected to the offices of Vice President, Chief Financial
Officer and Secretary of the Company.
Subsequent to the end of the quarter, on July 1, 1998, the
Company moved its principal executive offices to 229 West 28th Street, New York,
New York 10001.
Item 6. Exhibits and Reports on Form 8-K.
- ------- ---------------------------------
(a) Exhibits.
4.1 Stockholders' Agreement dated as of March
25, 1998 by and among Unidigital Inc.,
William E. Dye and Richard J. Sirota
(included as an exhibit to the Current
Report on Form 8-K of the Company dated
April 8, 1998 and incorporated by reference
herein).
10.1 Asset Purchase Agreement dated as of March
25, 1998 by and among Unidigital Inc.,
Unison (NY), Inc., Kwik International Color,
Ltd. and Richard J. Sirota (included as an
exhibit to the Current Report on Form 8-K of
the Company dated April 8, 1998 and
incorporated by reference herein).
10.2 Subordinated Promissory Note dated March 25,
1998 of Unidigital Inc. payable to Kwik
International Color, Ltd. in the principal
amount of $750,000 (included as an exhibit
to the Current Report on Form 8-K of the
Company dated April 8, 1998 and incorporated
by reference herein).
-17-
<PAGE>
10.3 Employment Agreement dated as of March 25,
1998 by and between Unidigital Inc. and
Richard J. Sirota (included as an exhibit to
the Current Report on Form 8-K of the
Company dated April 8, 1998 and incorporated
by reference herein).
10.4 Loft Lease dated March 1, 1997 between
S.N.Y., Inc. and Kwik International Color,
Ltd. for the property located at 229 W. 28th
Street, New York, New York, on the fourth
floor, known as Room 401-405 (included as an
exhibit to the Current Report on Form 8-K of
the Company dated April 8, 1998 and
incorporated by reference herein).
10.5 Loft Lease dated March 1, 1997 between
S.N.Y., Inc. and Kwik International Color,
Ltd. for the property located at 229 W. 28th
Street, New York, New York, on the seventh
floor, known as Room 706-714 and 707-713
(included as an exhibit to the Current
Report on Form 8-K of the Company dated
April 8, 1998 and incorporated by reference
herein).
10.6 Loft Lease dated March 1, 1997 between
S.N.Y., Inc. and Kwik International Color,
Ltd. for the property located at 229 W. 28th
Street, New York, New York, on the eighth
floor (included as an exhibit to the Current
Report on Form 8-K of the Company dated
April 8, 1998 and incorporated by reference
herein).
10.7 Loft Lease dated March 1, 1997 between
S.N.Y., Inc. and Kwik International Color,
Ltd. for the property located at 229 W. 28th
Street, New York, New York, on the ninth
floor (included as an exhibit to the Current
Report on Form 8-K of the Company dated
April 8, 1998 and incorporated by reference
herein).
10.8 Credit Agreement dated as of March 24, 1998
by and among Unidigital Inc., the lenders
from time to time parties thereto and
Canadian Imperial Bank of Commerce (included
as an exhibit to the Current Report on Form
8-K of the Company dated April 8, 1998 and
incorporated by reference herein).
10.9 Term Note dated March 24, 1998 of Unidigital
Inc. payable to Canadian Imperial Bank of
Commerce in the principal amount of
$25,000,000 (included as an exhibit to the
Current Report on Form 8-K of the Company
dated April 8, 1998 and incorporated by
reference herein).
10.10 Acquisition Note dated March 24, 1998 of
Unidigital Inc. payable to Canadian Imperial
Bank of Commerce in the principal amount of
$5,000,000 (included as an exhibit to the
Current Report on Form 8-K of the Company
dated April 8, 1998 and incorporated by
reference herein).
-18-
<PAGE>
10.11 Revolving Credit Note dated March 24, 1998
of Unidigital Inc. payable to Canadian
Imperial Bank of Commerce in the principal
amount of $10,000,000 (included as an
exhibit to the Current Report on Form 8-K of
the Company dated April 8, 1998 and
incorporated by reference herein).
10.12 Stock Pledge Agreement (U.S.) dated as of
March 24, 1998 made by Unidigital Inc. in
favor of Canadian Imperial Bank of Commerce
(included as an exhibit to the Current
Report on Form 8-K of the Company dated
April 8, 1998 and incorporated by reference
herein).
10.13 Mortgage dated as of March 24, 1998 made by
Unidigital Inc. in favor of Canadian
Imperial Bank of Commerce (included as an
exhibit to the Current Report on Form 8-K of
the Company dated April 8, 1998 and
incorporated by reference herein).
10.14 Security Agreement dated as of March 24,
1998 made by Unidigital Inc. in favor of
Canadian Imperial Bank of Commerce (included
as an exhibit to the Current Report on Form
8-K of the Company dated April 8, 1998 and
incorporated by reference herein).
10.15 Subsidiaries Guarantee dated as of March 24,
1998 made by each of Unidigital Elements
(NY), Inc., Unidigital Elements (SF), Inc.,
Unison (NY), Inc. and Unison (MA), Inc., in
favor of Canadian Imperial Bank of Commerce
(included as an exhibit to the Current
Report on Form 8-K of the Company dated
April 8, 1998 and incorporated by reference
herein).
10.16 Intercreditor and Subordination Agreement
dated as of March 25, 1998 by and among Kwik
International Color, Ltd., Unidigital Inc.
and Canadian Imperial Bank of Commerce
(included as an exhibit to the Current
Report on Form 8-K of the Company dated
April 8, 1998 and incorporated by reference
herein).
10.17 Mortgage, Assignment of Leases and Rents and
Security Agreement dated as of March 24,
1998 between Unidigital Inc. and Canadian
Imperial Bank of Commerce (included as an
exhibit to the Current Report on Form 8-K of
the Company dated April 8, 1998 and
incorporated by reference herein).
27.1 Financial Data Schedule for the period ended
May 31, 1998.
-19-
<PAGE>
27.2 Financial Data Schedule for the period ended
November 30, 1997.
27.3 Financial Data Schedule for the year ended
August 31, 1997.
27.4 Financial Data Schedule for the period ended
May 31, 1997.
27.5 Financial Data Schedule for the period ended
February 28, 1997.
27.6 Financial Data Schedule for the period ended
November 30, 1996.
27.7 Financial Data Schedule for the year ended
August 31, 1996.
(b) Reports on Form 8-K.
On April 8, 1998, the Company filed a Current Report
on Form 8-K with the Securities and Exchange Commission
relating to the Kwik Acquisition. Such Form 8-K also disclosed
the terms of certain loans made to the Company, the proceeds
of which the Company used to fund the purchase price of the
Kwik Acquisition.
Subsequent to the end of the quarter, on June 8,
1998, the Company filed a Current Report on Form 8-K/A
containing required financial statements and pro forma
information relating to the Kwik Acquisition disclosed in its
Current Report on Form 8-K filed on April 8, 1998.
-20-
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the Issuer caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
UNIDIGITAL INC.
DATE: July 15, 1998 By:/s/William E. Dye
-------------------------
William E. Dye,
Chief Executive Officer
(Principal Executive, Financial
and Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited consolidated financial statements at May 31, 1998 and for the nine
month period ended May 31, 1998 and is qualified in its entirety by reference to
such financial statements. Earnings per share information has been restated to
conform with the requirements of SFAS No. 128, Earnings Per Share.
</LEGEND>
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<NAME> Unidigital Inc.
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<PERIOD-END> MAY-31-1998
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<CASH> 162,098
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<ALLOWANCES> (553,499)
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<PP&E> 24,125,494
<DEPRECIATION> (10,317,899)
<TOTAL-ASSETS> 64,065,261
<CURRENT-LIABILITIES> 13,650,403
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<COMMON> 39,206
<OTHER-SE> 9,814,625
<TOTAL-LIABILITY-AND-EQUITY> 64,065,261
<SALES> 32,845,094
<TOTAL-REVENUES> 32,845,094
<CGS> 17,597,651
<TOTAL-COSTS> 17,597,651
<OTHER-EXPENSES> 10,943,509
<LOSS-PROVISION> 95,384
<INTEREST-EXPENSE> 2,126,757
<INCOME-PRETAX> 1,893,320
<INCOME-TAX> 727,299
<INCOME-CONTINUING> 1,166,021
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,166,021
<EPS-PRIMARY> 0.34<F1>
<EPS-DILUTED> 0.32<F2>
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<F1> Represents basic earnings per share in accordance with SAFAS No. 128,
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<F2> Represents diluted earnigns per share in accordance with SFAS No. 128,
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</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited consolidated fiancial statements at November 30, 1997 and is qualified
in its entirety by reference to such financial statements. Earnings per share
information has been restated to conform with the requirements of SFAS No. 128,
Earnings Per Share.
</LEGEND>
<CIK> 0001003934
<NAME> Unidigital Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> NOV-30-1997
<EXCHANGE-RATE> 1
<CASH> 2,193,854
<SECURITIES> 0
<RECEIVABLES> 11,942,691
<ALLOWANCES> (278,236)
<INVENTORY> 0
<CURRENT-ASSETS> 18,104,020
<PP&E> 17,057,443
<DEPRECIATION> (5,028,231)
<TOTAL-ASSETS> 35,575,472
<CURRENT-LIABILITIES> 19,980,958
<BONDS> 0
0
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<COMMON> 32,432
<OTHER-SE> 10,146,805
<TOTAL-LIABILITY-AND-EQUITY> 35,575,472
<SALES> 9,726,178
<TOTAL-REVENUES> 9,726,178
<CGS> 5,041,243
<TOTAL-COSTS> 5,041,243
<OTHER-EXPENSES> 3,419,649
<LOSS-PROVISION> 22,404
<INTEREST-EXPENSE> 561,557
<INCOME-PRETAX> 783,380
<INCOME-TAX> 275,507
<INCOME-CONTINUING> 507,873
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 570,873
<EPS-PRIMARY> 0.18<F1>
<EPS-DILUTED> 0.17<F2>
<FN>
<F1> Represents basic earnings per share in accordance with SAFAS No. 128,
Earnings Per Share.
<F2> Represents diluted earnigns per share in accordance with SFAS No. 128,
Earnings Per Share.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the audited
consolidated financial statements at August 31, 1997 and for the twelve month
period ended August 31, 1997 and is qualified in its entirety by reference to
such financial statements. Earnings per share information has been restated to
conform with the requirements of SFAS No. 128, Earnings Per Share.
</LEGEND>
<CIK> 0001003934
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<MULTIPLIER> 1
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<PERIOD-START> SEP-01-1996
<PERIOD-END> AUG-31-1997
<EXCHANGE-RATE> 1
<CASH> 3,202,766
<SECURITIES> 0
<RECEIVABLES> 10,018,807
<ALLOWANCES> (266,000)
<INVENTORY> 0
<CURRENT-ASSETS> 15,714,928
<PP&E> 16,160,836
<DEPRECIATION> (4,261,361)
<TOTAL-ASSETS> 33,033,290
<CURRENT-LIABILITIES> 17,904,285
<BONDS> 0
0
0
<COMMON> 32,432
<OTHER-SE> 9,440,704
<TOTAL-LIABILITY-AND-EQUITY> 33,033,290
<SALES> 27,261,856
<TOTAL-REVENUES> 27,289,443
<CGS> 14,449,663
<TOTAL-COSTS> 14,449,663
<OTHER-EXPENSES> 9,570,659
<LOSS-PROVISION> 102,412
<INTEREST-EXPENSE> 1,094,625
<INCOME-PRETAX> 1,934,012
<INCOME-TAX> 593,280
<INCOME-CONTINUING> 1,340,732
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,340,732
<EPS-PRIMARY> 0.42<F1>
<EPS-DILUTED> 0.41<F2>
<FN>
<F1> Represents basic earnings per share in accordance with SAFAS No. 128,
Earnings Per Share.
<F2> Represents diluted earnigns per share in accordance with SFAS No. 128,
Earnings Per Share.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited consolidated fiancial statements at May 31, 1997 and for the nine
month period ended May 31, 1997 is qualified in its entirety by reference to
such financial statements. Earnings per share information has been restated to
conform with the requirements of SFAS No. 128, Earnings Per Share.
</LEGEND>
<CIK> 0001003934
<NAME> Unidigital Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1996
<PERIOD-END> MAY-31-1997
<EXCHANGE-RATE> 1
<CASH> 3,475,176
<SECURITIES> 0
<RECEIVABLES> 7,891,478
<ALLOWANCES> 389,288
<INVENTORY> 0
<CURRENT-ASSETS> 14,165,043
<PP&E> 12,623,927
<DEPRECIATION> 1,346,217
<TOTAL-ASSETS> 31,929,039
<CURRENT-LIABILITIES> 12,167,925
<BONDS> 0
0
0
<COMMON> 32,243
<OTHER-SE> 9,380,251
<TOTAL-LIABILITY-AND-EQUITY> 31,929,039
<SALES> 18,157,668
<TOTAL-REVENUES> 18,157,668
<CGS> 9,624,915
<TOTAL-COSTS> 9,624,915
<OTHER-EXPENSES> 6,018,091
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 695,660
<INCOME-PRETAX> 1,879,794
<INCOME-TAX> 634,378
<INCOME-CONTINUING> 1,245,416
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,245,416
<EPS-PRIMARY> 0.39<F1>
<EPS-DILUTED> 0.39<F2>
<FN>
<F1> Represents basic earnings per share in accordance with SAFAS No. 128,
Earnings Per Share.
<F2> Represents diluted earnigns per share in accordance with SFAS No. 128,
Earnings Per Share.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited consolidated fiancial statements at February 28, 1997 and for the six
month perid ended February 28, 1997 is qualified in its entirety by reference to
such financial statements. Earnings per share information has been restated to
conform with the requirements of SFAS No. 128, Earnings Per Share.
</LEGEND>
<CIK> 0001003934
<NAME> Unidigital Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> FEB-28-1997
<EXCHANGE-RATE> 1
<CASH> 2,458,704
<SECURITIES> 0
<RECEIVABLES> 5,555,531
<ALLOWANCES> 233,058
<INVENTORY> 0
<CURRENT-ASSETS> 9,567,703
<PP&E> 12,719,714
<DEPRECIATION> 2,903,946
<TOTAL-ASSETS> 20,389,012
<CURRENT-LIABILITIES> 7,217,102
<BONDS> 0
0
0
<COMMON> 31,978
<OTHER-SE> 8,086,486
<TOTAL-LIABILITY-AND-EQUITY> 20,389,012
<SALES> 10,493,635
<TOTAL-REVENUES> 10,571,811
<CGS> 5,385,626
<TOTAL-COSTS> 5,385,626
<OTHER-EXPENSES> 3,744,364
<LOSS-PROVISION> 10,112
<INTEREST-EXPENSE> 298,739
<INCOME-PRETAX> 1,058,523
<INCOME-TAX> 353,216
<INCOME-CONTINUING> 705,307
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 705,307
<EPS-PRIMARY> 0.22<F1>
<EPS-DILUTED> 0.22<F2>
<FN>
<F1> Represents basic earnings per share in accordance with SAFAS No. 128,
Earnings Per Share.
<F2> Represents diluted earnigns per share in accordance with SFAS No. 128,
Earnings Per Share.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited consolidated fiancial statements at November 30, 1996 and for the
three month perid ended November 30, 1996 is qualified in its entirety by
reference to such financial statements. Earnings per share information has been
restated to conform with the requirements of SFAS No. 128, Earnings Per Share.
</LEGEND>
<CIK> 0001003934
<NAME> Unidigital Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> NOV-30-1996
<EXCHANGE-RATE> 1
<CASH> 2,953,914
<SECURITIES> 0
<RECEIVABLES> 5,390,535
<ALLOWANCES> (210,926)
<INVENTORY> 0
<CURRENT-ASSETS> 9,320,694
<PP&E> 11,775,109
<DEPRECIATION> (2,502,857)
<TOTAL-ASSETS> 19,530,733
<CURRENT-LIABILITIES> 6,842,722
<BONDS> 0
0
0
<COMMON> 31,892
<OTHER-SE> 7,889,782
<TOTAL-LIABILITY-AND-EQUITY> 19,530,733
<SALES> 5,227,719
<TOTAL-REVENUES> 5,268,413
<CGS> 2,650,103
<TOTAL-COSTS> 2,650,103
<OTHER-EXPENSES> 1,799,626
<LOSS-PROVISION> 10,112
<INTEREST-EXPENSE> 134,277
<INCOME-PRETAX> 674,295
<INCOME-TAX> 212,475
<INCOME-CONTINUING> 461,820
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 461,820
<EPS-PRIMARY> 0.16<F1>
<EPS-DILUTED> 0.16<F2>
<FN>
<F1> Represents basic earnings per share in accordance with SAFAS No. 128,
Earnings Per Share.
<F2> Represents diluted earnigns per share in accordance with SFAS No. 128,
Earnings Per Share.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
audited consolidated fiancial statements at August 31, 1996 and for the twelve
month perid ended August 31, 1996 is qualified in its entirety by reference to
such financial statements. Earnings per share information has been restated to
conform with the requirements of SFAS No. 128, Earnings Per Share.
</LEGEND>
<CIK> 0001003934
<NAME> Unidigital Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> AUG-31-1996
<EXCHANGE-RATE> 1
<CASH> 4,145,514
<SECURITIES> 0
<RECEIVABLES> 3,408,671
<ALLOWANCES> (200,814)
<INVENTORY> 0
<CURRENT-ASSETS> 8,188,500
<PP&E> 10,542,291
<DEPRECIATION> (1,947,306)
<TOTAL-ASSETS> 17,623,326
<CURRENT-LIABILITIES> 5,869,157
<BONDS> 0
0
0
<COMMON> 31,892
<OTHER-SE> 7,332,783
<TOTAL-LIABILITY-AND-EQUITY> 17,623,326
<SALES> 11,659,818
<TOTAL-REVENUES> 11,892,215
<CGS> 5,621,668
<TOTAL-COSTS> 5,621,668
<OTHER-EXPENSES> 3,945,625
<LOSS-PROVISION> 103,849
<INTEREST-EXPENSE> 326,805
<INCOME-PRETAX> 1,894,268
<INCOME-TAX> 1,064,327
<INCOME-CONTINUING> 829,941
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 829,941
<EPS-PRIMARY> 0.31<F1>
<EPS-DILUTED> 0.31<F2>
<FN>
<F1> Represents basic earnings per share in accordance with SAFAS No. 128,
Earnings Per Share.
<F2> Represents diluted earnigns per share in accordance with SFAS No. 128,
Earnings Per Share.
</FN>
</TABLE>
