U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 1999
Commission file number 1-14126
UNIDIGITAL INC.
-----------------------------------------------------------
(Exact Name of Registrant 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
---------------------------
(Registrant's Telephone Number,
Including Area Code)
Check whether the Registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant 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 Registrant's classes
of common stock, as of December 31, 1999:
Class Number of Shares
- ----- ----------------
Common Stock, $.01 par value 6,087,067
<PAGE>
UNIDIGITAL INC. AND SUBSIDIARIES
TABLE OF CONTENTS
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Page
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements...........................................1
CONSOLIDATED BALANCE SHEETS
as at November 30, 1999 (unaudited) and
August 31, 1999 (audited)...........................................2
CONSOLIDATED INCOME STATEMENTS
For the Three Months Ended November 30, 1999 and
November 30, 1998 (unaudited).......................................3
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Three Months Ended November 30, 1999 and
November 30, 1998 (unaudited).......................................4
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (unaudited)..............................................5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................13
General.............................................................13
Results of Operations...............................................13
Liquidity, Capital Resources and Other Matters......................16
Item 3. Quantitative and Qualitative Disclosures About
Market Risk....................................................18
PART II OTHER INFORMATION
Item 1. Legal Proceedings..............................................20
Item 2. Changes in Securities and Use of Proceeds......................20
Item 6. Exhibits and Reports on Form 8-K...............................21
SIGNATURES....................................................................23
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<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<PAGE>
UNIDIGITAL INC. AND SUBSIDIARIES
--------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
NOVEMBER 30, AUGUST 31,
1999 1999
---------- ----------
(UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents...................................... $ 1,082,000 $ 734,000
Accounts receivable (net of allowance
of $811,000 and $744,000 at
November 30, 1999 and August 31, 1999, respectively)......... 23,922,000 16,788,000
Building available for sale.................................... -- 1,488,000
Prepaid expenses............................................... 3,495,000 2,600,000
Other current assets........................................... 3,075,000 2,356,000
Deferred tax asset............................................. 1,730,000 2,000,000
---------------- -------------
Total current assets....................................... 33,304,000 25,966,000
Property and equipment, net....................................... 15,039,000 15,920,000
Deferred tax asset................................................ 5,730,000 5,606,000
Deferred financing costs, net..................................... 5,040,000 1,550,000
Intangible assets, net............................................ 66,856,000 67,672,000
Other assets...................................................... 1,994,000 1,922,000
---------------- -------------
Total assets............................................... $ 127,963,000 $ 118,636,000
================ =============
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses.......................... $ 14,289,000 $ 16,198,000
Current portion of capital lease obligations................... 2,877,000 3,157,000
Current portion of long-term debt.............................. 1,222,000 1,384,000
Income taxes payable........................................... 593,000 1,065,000
Loans and notes payable to stockholders........................ 100,000 619,000
Other current liabilities...................................... -- 34,000
---------------- -------------
Total current liabilities.................................. 19,081,000 22,457,000
Capital lease obligations, net of current portion................. 2,863,000 2,898,000
Long-term debt, net of current portion............................ 84,716,000 76,263,000
Other non-current liabilities..................................... 696,000 707,000
---------------- -------------
Total liabilities.......................................... 107,356,000 102,325,000
---------------- -------------
STOCKHOLDERS' EQUITY
Preferred stock -- authorized 10,000,000 shares at November 30,
1999 and 5,000,000 shares at November 30, 1998, $.01 par value
each; none issued or outstanding............................... -- --
Common stock -- authorized 25,000,000 shares at November 30,
1999 and 10,000,000 shares at November 30, 1998, $.01 par value
each; 5,987,067 shares and 5,926,618 shares issued and outstanding
at November 30, 1999 and August 31, 1999, respectively......... 60,000 59,000
Issuable common stock............................................. 1,450,000 1,450,000
Additional paid-in capital........................................ 25,505,000 21,729,000
Accumulated deficit............................................... (6,002,000) (6,585,000)
Accumulated other comprehensive loss.............................. (406,000) (342,000)
---------------- -------------
Total stockholders' equity................................. 20,607,000 16,311,000
---------------- -------------
Total liabilities and stockholders' equity................. $ 127,963,000 $ 118,636,000
================ =============
</TABLE>
The Notes to Consolidated Financial Statements are made a part hereof.
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<PAGE>
UNIDIGITAL INC. AND SUBSIDIARIES
--------------------------------
CONSOLIDATED INCOME STATEMENTS
------------------------------
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED,
------------------------------------------
NOVEMBER 30, NOVEMBER 30,
1999 1998
----------------- ----------------
<S> <C> <C>
REVENUES
Net sales.......................................................... $ 24,002,000 $ 12,362,000
EXPENSES
Cost of sales...................................................... 13,275,000 6,418,000
Selling, general and administrative expenses ...................... 7,209,000 4,324,000
Expenses incurred due to restructuring............................. -- 198,000
----------------- --------------
Total operating expenses........................................... 20,484,000 10,940,000
----------------- --------------
Income from continuing operations.................................. 3,518,000 1,422,000
Interest expense................................................... (2,358,000) (991,000)
Interest expense-deferred financing costs.......................... (102,000) (56,000)
Interest and other (expense) income................................ (178,000) 303,000
----------------- --------------
Income from continuing operations before income taxes.............. 880,000 678,000
Provision for income taxes......................................... 297,000 298,000
----------------- --------------
Net income from continuing operations.............................. 583,000 380,000
Loss from operations of discontinued segment (net of tax
benefit of $18,000)............................................. -- 9,000
----------------- --------------
Net income......................................................... $ 583,000 $ 371,000
================= ==============
Basic earnings per common share:
Earnings from continuing operations............................. $ 0.10 $ 0.08
Loss from discontinued operations............................... -- --
----------------- --------------
Net income......................................................... $ 0.10 $ 0.08
================= ==============
Diluted earnings per common share:
Earnings from continuing operations............................. $ 0.09 $ 0.08
Loss from discontinued operations............................... -- --
----------------- --------------
Net income......................................................... $ 0.09 $ 0.08
================= ==============
Shares used to compute net income per share:
Basic........................................................... 5,956,525 4,798,731
================= ==============
Diluted......................................................... 6,192,279 4,885,905
================= ==============
</TABLE>
The Notes to Consolidated Financial Statements are made a part hereof.
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<PAGE>
UNIDIGITAL INC. AND SUBSIDIARIES
--------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED,
-------------------------------
NOVEMBER 30, NOVEMBER 30,
1999 1998
-------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income.............................................................. $ 583,000 $ 371,000
Adjustments to reconcile net income to net cash (used in) provided by
operating activities:
Depreciation and amortization..................................... 2,201,000 1,481,000
Gain (loss) on sale of property and equipment..................... 184,000 (315,000)
Provision for deferred income taxes............................... 146,000 17,000
Provision for bad debts........................................... 66,000 74,000
Changes in assets and liabilities net of effects of businesses acquired:
Accounts receivable.................................................. (7,272,000) (1,634,000)
Prepaid expenses and other current assets............................ (2,274,000) 130,000
Other assets......................................................... (80,000) (204,000)
Accounts payable and accrued expenses................................ (2,664,000) (2,154,000)
Income taxes payable................................................. (479,000) 230,000
------------- -----------
Net cash used in operating activities................................... (9,589,000) (2,004,000)
------------- -----------
INVESTING ACTIVITIES
Additions to property and equipment..................................... (832,000) (396,000)
Proceeds from sale of property and equipment............................ 1,820,000 800,000
Business acquisitions................................................... (44,000) (24,521,000)
------------- -----------
Net cash provided by (used in) investing activities..................... 944,000 (24,117,000)
------------- -----------
FINANCING ACTIVITIES
Payments of capital lease obligations................................... (491,000) (617,000)
Proceeds from long-term debt............................................ 22,602,000 27,471,000
Payments of long-term debt.............................................. (12,796,000) (132,000)
Stockholder repayments.................................................. (518,000) (50,000)
Warrants exercised...................................................... 242,000 --
Proceeds from sale of common stock, net of issuance costs............... -- 92,000
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Net cash provided by financing activities............................... 9,039,000 26,764,000
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Effect of foreign exchange rates on cash................................ (46,000) (44,000)
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Net increase in cash and cash equivalents............................... 348,000 599,000
Cash and cash equivalents at beginning of period........................ 734,000 287,000
------------- -----------
Cash and cash equivalents at end of period.............................. $ 1,082,000 $ 886,000
============= ===========
SUPPLEMENTAL DISCLOSURES
Interest paid........................................................... $ 193,000 $ 1,317,000
============= ===========
Income taxes paid....................................................... $ 618,000 $ 20,000
============= ===========
Non-cash transactions:
Equipment acquired under capital lease obligations...................... $ 183,000 $ 2,032,000
============= ===========
Stock issued for business acquisitions.................................. $ -- $ 7,886,000
============= ===========
Warrants issued for business acquisition................................ $ -- $ 931,000
============= ===========
Warrants issued for additional financing................................ $ 2,500,000 $ 380,000
============= ===========
Warrants issued in lieu of cash interest payments....................... $ 1,035,000 $ --
============= ===========
</TABLE>
The Notes to Consolidated Financial Statements are made a part hereof.
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<PAGE>
UNIDIGITAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)
NOTE A - BASIS OF PRESENTATION:
The information presented for November 30, 1999, and for the three-month
periods ended November 30, 1999 and November 30, 1998, is unaudited, but, in the
opinion of the management of Unidigital Inc., its wholly-owned subsidiaries 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 November 30, 1999 and the results of its operations and its cash
flows for the three-month periods ended November 30, 1999 and November 30, 1998.
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-Q and Rule 10-01
of Regulation S-X. 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 consolidated financial statements for the year ended August
31, 1999, which were included as part of the Company's Annual Report on Form
10-K.
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:
The Company is a media services company that provides large and grand
format digital image solutions combined with a full suite of digital "premedia"
(previously referred to as prepress) services to advertising agencies,
retailers, publishers, graphic design firms, consumer product companies,
government agencies and marketing and communications firms in both the United
States, the United Kingdom and Germany. During 1999, the Company began
delivering its services through two principal business divisions: (i) the Media
Solutions division creates and produces large and grand format images for
out-of-home advertising and develops new media concepts; and (ii) the Premedia
Services division provides digital premedia, including retouching and short-run
digital printing services. During 1999, the various operating subsidiaries of
the Company were grouped into the aforementioned business divisions and the
Company discontinued its on-demand print and prepress business segment.
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<PAGE>
UNIDIGITAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)
FOREIGN CURRENCY TRANSLATION:
Balance sheet accounts of the Company's United Kingdom and Germany
subsidiaries are translated using year-end exchange rates. Statements of
operations accounts are translated at monthly average exchange rates. The
resulting translation adjustment is recorded in a separate component of
stockholders equity called "Accumulated other comprehensive income (loss)" and
is included in determining comprehensive income (loss).
EARNINGS PER SHARE:
The following table sets forth the computation of basic and dilutive
earnings per share:
THREE MONTHS ENDED,
----------------------
NOVEMBER 30,
1999 1998
----------------------
Numerator for basic and diluted earnings per share-net
income available for common stockholders............ $ 583,000 $ 371,000
========== ==========
Denominator:
Denominator for basic earnings per share-
weighted average shares.......................... 5,956,525 4,798,731
Effect of dilutive securities:
Stock options.................................... 15,248 9,515
Warrants......................................... 220,506 77,659
---------- ----------
Denominator for diluted earnings per share-adjusted
weighted-average shares and assumed conversions.. 6,192,279 4,885,905
========== ==========
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<PAGE>
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,
----------------------------------
NOVEMBER 30,
1999 1998
----------------------------------
Stock Options................................ 583,764 563,066
Warrants..................................... 1,032,134 342,000
DERIVATIVE FINANCIAL INSTRUMENTS:
The Company has an interest rate collar agreement to modify the interest
characteristics of certain of its outstanding long-term debt. The interest rate
collar agreement is designated with all or a portion of the principal balance
and a term that does not coincide with the specific debt obligation.
NOTE C - STOCK OPTION PLANS AND WARRANTS:
ISSUANCE OF OPTIONS AND WARRANTS:
During the first quarter of fiscal 2000, the Company granted options to
purchase 64,000 shares of its Common Stock to certain of its employees, at an
exercise price of $4.00 per share. In connection with the Subordinated Loan (see
Note D), on September 14, 1999, the Company issued seven-year warrants to the
lender to purchase 690,134 shares of the Company's Common Stock at an exercise
price of $5.425 per share. In addition, the Company issued warrants to purchase
208,150 shares of the Company's Common Stock at an exercise price of $0.01 per
share to another lender in lieu of cash interest payments of $1,035,000.
Subsequent to the end of the quarter, on January 3, 2000, the Company
granted options to purchase 2,500 shares of its Common Stock to each of David
Wachsman and Harvey Silverman, at an exercise price of $4.0625 per share.
IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("Statement 133"). Statement 133 must first be applied
in the first quarter of fiscal years that begin after June 15, 2000. Statement
133 will require the Company to recognize all derivatives on the consolidated
balance sheets at fair value. Derivatives that are not hedges must be adjusted
to fair value through income. If the derivative is a hedge, depending on the
nature of the hedge, changes in the fair value of derivatives will either be
offset against the change in fair value of the hedged assets, liabilities or
firm commitments through earnings or recognized in other
-7-
<PAGE>
UNIDIGITAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivatives change in fair value will immediately be
recognized in earnings. Management has determined that Statement 133 will not
have a significant effect on the earnings and financial position of the Company.
NOTE D - LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
FACILITY
AMOUNT AMOUNT OUTSTANDING
NOVEMBER 30, NOVEMBER 30, AUGUST 31,
1999 1999 1999
-------------------------------------------------
<S> <C> <C> <C>
Revolving line of credit, interest at the prime rate or at the
eurodollar rate, as defined, plus an applicable margin, all as
defined, ranging from 1.0% to 3.25%. $80,000,000 $64,265,000 $64,375,000
Credit facility in the United Kingdom interest at the bank's overdraft
rate plus 2.75%. Facility is secured by the assets of Interface
Graphics. 241,000 181,000 241,000
Credit facilities in the United Kingdom; interest at the bank's
overdraft rate plus 1.85%. Facility is secured by the accounts
receivable of Pre-Press. 642,000 640,000 621,000
Credit facilities in the United Kingdom; interest at the bank's
overdraft rate plus 2.00%. Facility is secured by the accounts
receivable of Big Bills. 321,000 320,000 236,000
Subordinated loan matures in March 2004; base interest of 12 1/2% plus
0.25% the first day after the first anniversary of the Note; plus
0.25% following the last day of each 90 day period until payment in
full. -- -- 10,000,000
Subordinated loan matures in August 2006; base interest of 14%. 20,000,000 20,000,000 --
Notes payable for certain equipment, maturing on dates between October
1998 and September 2003, payable in monthly installments of $22,000
until October 1998 and $14,000 thereafter, including interest at
8.54% and 8.4%, respectively. -- 420,000 454,000
Senior subordinated note investment fee, due May 2001. -- -- 1,500,000
Other 312,000 112,000 220,000
-------------------------------------------------
85,938,000 77,647,000
Less: current portion of long-term debt 1,222,000 1,384,000
-------------------------------------------------
Long-term debt $84,716,000 $76,263,000
=================================================
</TABLE>
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<PAGE>
UNIDIGITAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)
BANK CREDIT FACILITIES. In May 1999, the Company terminated its existing
financing facilities and entered into a new borrowing arrangement consisting of
a $65,000,000 revolving line of credit facility. On September 30, 1999, the
revolving line of credit facility was increased to $80,000,000. The borrowings
are guaranteed by the Company's subsidiaries and the Company pledged all of its
equity interests in its United States subsidiaries and 65% of its equity
interests in its United Kingdom subsidiaries as collateral for such credit
facility. Interest under such credit facility is, at the Company's option, at
the Prime Rate or at the Eurodollar Rate, as defined, plus an Applicable Margin,
as defined, ranging from 1.0% to 3.25% depending on the Company's consolidated
debt to earnings ratio and the type of loan. As of November 30, 1999, the
Company had an outstanding balance of $64,265,000 under the revolving credit
facility.
The credit facility contains covenants that 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 facility is secured
by a first priority lien on all of the assets of the Company and its
subsidiaries and restricts the Company's ability to pay certain dividends
without the bank's prior written consent.
In November 1998, the Company borrowed a principal amount of $10,000,000
pursuant to a subordinated unsecured loan. In connection with such subordinated
loan, the Company issued ten-year warrants to the lender to purchase 440,000
shares of the Company's Common Stock at an exercise price of $4.50 per share.
These warrants were deemed to have a value of approximately $308,000, were
recorded as deferred financing costs, and were being amortized on a
straight-line basis over approximately five years. Such amount was recorded as
an extraordinary item as of August 31, 1999 in conjunction with the termination
of the Company's existing credit facility. In September 1999, upon prepayment of
such loan, the lender opted to have the interest of such loan paid in warrants
to purchase Common Stock of the Company. As a result, the Company issued
warrants to purchase 208,150 shares of the Company's Common Stock at an exercise
price of $0.01 per share to such lender. Such amount approximated the fair
market value of the related accrued interest. Subject to certain limitations,
the Company has granted registration rights, including "demand" registration
rights, to such lender.
On September 14, 1999, the Company borrowed a principal amount of
$20,000,000 pursuant to another subordinated unsecured loan (the "Subordinated
Loan"). A portion of the proceeds of such subordinated loan was used to prepay
the Company's outstanding $10,000,000 subordinated loan. The Subordinated Loan
matures on August 31, 2006 and bears interest at 14% per annum. The Company is
permitted to defer the payment of up to 2/14ths of the amount of interest due on
any regularly scheduled interest payment date. Any such deferred interest shall
be deemed to be included in the principal amount of the Subordinated Loan. The
Company is obligated to prepay without premium the greater of (i) $10,000,000 or
(ii) one-half of the then outstanding principal amount of the Subordinated Loan
on August 31, 2005. In addition, on any
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<PAGE>
UNIDIGITAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)
prepayments of the Subordinated Loan made prior September 1, 2002, the Company
will incur an additional premium equal to the Make Whole Amount, as defined. For
prepayments made after September 1, 2002, such additional premium shall be 3.0%.
Such additional premium shall be reduced by 100 basis points on each September 1
thereafter until September 1, 2005. In connection with the Subordinated Loan,
the Company issued seven-year warrants to the lender to purchase 690,134 shares
of the Company's Common Stock at an exercise price of $5.425 per share. Subject
to certain limitations, the Company granted registration rights, including
"demand" registration rights, to such lender. The warrants issued to the lender,
which were deemed to have a value of approximately $2,500,000, subject to an
independent appraisal, have been recorded as deferred financing costs, and are
being amortized on a straight-line basis over approximately seven years.
On October 29, 1999, the Company entered into an interest rate collar
agreement on $35,000,000 of variable rate bank debt. Under this interest rate
collar agreement, the Company is required to pay interest at the higher of 6.12%
or the Company's current rate (6.04% at November 30, 1999), to a maximum of
7.80% per annum, as defined. The interest rate collar agreement terminates on
October 29, 2001. The Company's estimated credit exposure related to the
interest rate collar agreement is summarized as follows:
Notional Credit
Amount Exposure
------ --------
Interest rate collar agreement $35,000,000 $30,000
The notional amount of the derivative does not represent the amount
exchanged by the parties, and is not a measure of the exposure of the Company
through its use of derivatives. The amounts exchanged are calculated on the
basis of the notional amounts and the other terms of the derivatives, which
relate to interest rates.
The Company is exposed to credit losses in the event of nonperformance by
counterparties to financial instruments, but it does not expect any
counterparties to fail to meet their obligations given their current credit
ratings.
NOTE E - SEGMENT INFORMATION:
The Company's reportable segments are divisions that offer different
products and services. The reportable segments are each managed separately
because they produce and distribute distinct products with different production
processes. The Company has two reportable segments: the media solutions division
and premedia services division. The segment information for the three month
ended November 30, 1998 has been restated to conform to the 1999 segment
reporting format.
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<PAGE>
UNIDIGITAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)
The Company evaluates performance and allocates resources based on profit
or loss from operations before income taxes. The accounting policies of the
reportable segments are the same as those described in the summary of
significant accounting policies. Intersegment sales and transfers are recorded
at the Company's cost; there is no intercompany profit or loss on intersegment
sales or transfers.
The following summarizes the operations by geographic segment for the three
months ended November 30, 1999 and 1998:
NOVEMBER 30,
--------------------------------------------------
1999 1998
--------------------------------------------------
UNITED UNITED
STATES EUROPE STATES EUROPE
--------------------------------------------------
Net sales $ 15,427,000 $ 8,575,000 $ 8,877,000 $ 3,485,000
Income from operations 2,549,000 969,000 1,293,000 129,000
Identifiable assets 107,801,000 20,162,000 92,719,000 10,322,000
The following summarizes operations by industry segment for the three
months ended November 30, 1999 and 1998:
November 30,
------------------------------------------------
1999 1998
------------------------------------------------
MEDIA PREMEDIA MEDIA PREMEDIA
SOLUTIONS SERVICES SOLUTIONS SERVICES
------------------------------------------------
Net sales $13,300,000 $10,702,000 $ 3,744,000 $ 8,618,000
Income from operations 2,196,000 1,322,000 350,000 1,072,000
Identifiable assets 88,819,000 39,144,000 87,839,000 15,202,000
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<PAGE>
UNIDIGITAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)
NOTE F - COMPREHENSIVE INCOME:
Comprehensive income consisted of the following:
THREE MONTHS ENDED
---------------------------------
NOVEMBER 30, NOVEMBER 30,
1999 1998
---------------------------------
Net income $583,000 $371,000
Net change in foreign currency
translation adjustment (64,000) (83,000)
----------- --------
Comprehensive income $519,000 $288,000
As of November 30, 1999 and November 30, 1998, the cumulative other
comprehensive loss consisted of the Company's foreign currency translation
adjustment.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
GENERAL
The Company is a media services company that provides large and grand
format digital image solutions combined with a full suite of digital "premedia"
(previously referred to as prepress) services to advertising agencies,
retailers, publishers, graphic design firms, consumer product companies,
government agencies, individual graphic artists and marketing and communications
firms in both the United States and Europe. During 1999, the Company began
delivering its services through two principal business divisions. The Media
Solutions division creates and produces large and grand format images for
out-of-home advertising and develops new media concepts. The Premedia Services
division provides digital premedia, including retouching and short-run digital
printing services.
The statements contained in this Quarterly Report on Form 10-Q 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, Year 2000 compliance 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 media services
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 September 2, 1998, the Company consummated the acquisition of all of the
issued and outstanding capital stock of MegaArt Corp. located in New York City
(the "MegaArt Acquisition") resulting in the expansion of its wide format,
digital premedia and printing
-13-
<PAGE>
services. On October 30, 1998, the Company, consummated the acquisition of Hy
Zazula Associates, Inc. located in New York City (the "Zazula Acquisition")
resulting in the expansion of its retouching and premedia services, primarily to
advertising agencies.
On November 30, 1998, the Company consummated the acquisition (the
"SuperGraphics Acquisition") of all of the issued and outstanding capital stock
of SuperGraphics Holding Company, Inc. and its wholly-owned subsidiary,
SuperGraphics Corporation, located in San Francisco, resulting in the expansion
of its large format printing services.
In April 1999, the Company consummated the acquisition of (i) substantially
all of the assets of Peter X(+C) Limited (the "X+C Acquisition"), located in New
York City, (ii) substantially all of the assets of Progress Graphics, Inc. (the
"Progress Acquisition"), located in Jersey City, New Jersey, and (iii) all the
issued and outstanding shares of capital stock of Interface Graphics Limited
(the "Interface Acquisition"), a company located in Edinburgh, Scotland. Such
acquisitions have further enhanced the Company's creative and technical
capabilities, broadened its client base within the high-end digital premedia
market and expanded the Company's premedia services into the music industry and
into the United Kingdom market.
In August 1999, the Company consummated the acquisitions of (i) all the
issued and outstanding capital stock of Pre-Press Services Limited (the
"Pre-Press Acquisition"), M. Nur Marketing & Kommunikation GmbH (the "M. Nur
Acquisition") and Big Bills Limited (the "Big Bills Acquisition"). The Pre-Press
Acquisition continued the expansion of the Company's premedia services in the
United Kingdom. The M. Nur Acquisition and Big Bills Acquisition launched the
expansion of the Company's Media Solutions division into Europe.
All of the foregoing acquisitions have been accounted for under the
purchase method of accounting and, therefore, results of operations from such
acquisitions are included in the Company's consolidated financial statements
from the date of the respective acquisition.
In furtherance of its strategy to focus on its Media Solutions division, in
August 1999, the Company sold substantially all the assets of its wholly-owned
subsidiary, Unidigital Elements (NY), Inc. ("Elements (NY)") to a group
comprised of that unit's management (the "Elements Sale"). Elements (NY)
provided short-run digital printing products and services primarily to graphic
artists and marketing professionals. The services previously provided by the
Company through Elements (NY) no longer constitute the core of the Premedia
Services division's services.
The Company incurred a loss on its disposal of its discontinued segment of
$9,000 net of a tax benefit of $18,000, for the three months ended November 30,
1998. Accordingly, the Company has restated its consolidated income statement
for the three months ended November 30, 1998.
THREE MONTHS ENDED NOVEMBER 30, 1999 AND NOVEMBER 30, 1998
----------------------------------------------------------
NET SALES. Net sales for the three months ended November 30, 1999 ("First
Quarter of Fiscal 2000") increased by 94%, or $11,640,000, to $24,002,000 from
$12,362,000 for the three months ended November 30, 1998 ("First Quarter of
Fiscal 1999"). Net sales for the Company's United States operations increased by
74%, or $6,550,000, from $8,876,000 in the First Quarter
-14-
<PAGE>
of Fiscal 1999 to $15,426,000 in the First Quarter of Fiscal 2000. Net sales for
the Company's European operations increased by 146%, or $5,090,000, from
$3,486,000 in the First Quarter of Fiscal 1999 to $8,576,000 in the First
Quarter of Fiscal 2000. Net sales for the Company's Media Solutions division
increased by 218%, or $9,036,000, from $4,151,000 in the First Quarter of Fiscal
1999 to $13,187,000 in the First Quarter of Fiscal 2000. This increase was
attributable primarily to an increase in net sales arising out of the Company's
MegaArt operations, the SuperGraphics Acquisition, the M. Nur Acquisition and
the Big Bills Acquisition. Net sales for the Company's Premedia Services
division increased by 32%, or $2,604,000, from $8,211,000 in the First Quarter
of Fiscal 1999 to $10,815,000 in the First Quarter of Fiscal 2000. This increase
was attributable primarily to an increase in net sales resulting from a full
three months of net sales resulting from the Pre-Press Acquisition and the
Interface Acquisition.
COST OF SALES. Cost of sales for the First Quarter of Fiscal 2000 increased
by 107%, or $6,857,000, to $13,275,000 from $6,418,000 for the First Quarter of
Fiscal 1999. As a percentage of net sales, cost of sales increased from 52% for
the First Quarter of Fiscal 1999 to 55% for the First Quarter of Fiscal 2000.
Cost of sales for the Company's United States operations increased as a
percentage of net sales from 49% for the First Quarter of Fiscal 1999 to 52% for
the First Quarter of Fiscal 2000. Cost of sales for the Company's European
operations increased as a percentage of net sales from 59% for the First Quarter
of Fiscal 1999 to 61% for the First Quarter of Fiscal 2000. Cost of sales for
the Company's Media Solutions division increased as a percentage of net sales
for such division from 50% in the First Quarter of Fiscal 1999 to 57% in the
First Quarter of Fiscal 2000. Such increase was attributable primarily to the
change in product mix in the Company's United States operations to include more
large format services. Cost of sales for the Company's Premedia Services
division increased slightly as a percentage of net sales for such division from
53% in the First Quarter of Fiscal 1999 to 54% in the First Quarter of Fiscal
2000.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses ("SG&A") increased by 67%, or $2,885,000, from
$4,324,000 for the First Quarter of Fiscal 1999 to $7,209,000 for the First
Quarter of Fiscal 2000. Such increase was attributable primarily to the
increased level of operations. As a percentage of net sales, SG&A decreased from
35% for the First Quarter of Fiscal 1999 to 30% for the First Quarter of Fiscal
2000. SG&A decreased as a percentage of net sales as a result of increased sales
volume.
RESTRUCTURING EXPENSES. In the First Quarter of Fiscal 1999, the Company
consolidated its United Kingdom financial printing operations. As a result of
such consolidation, the Company incurred restructuring expenses of $198,000.
INCOME FROM CONTINUING OPERATIONS. Income from continuing operations for
the First Quarter of Fiscal 2000 increased by 147%, or $2,096,000, to $3,518,000
from $1,422,000 for the First Quarter of Fiscal 1999. Of this amount, $2,549,000
was contributed by the Company's United States operations and $969,000 by the
Company's European operations. In addition, of this amount, $2,249,000 was
contributed by the Company's Media Solutions division and $1,269,000 from the
Company's Premedia Services division. This increase resulted from higher net
sales offset, in part, by higher production costs associated with such net
sales.
-15-
<PAGE>
NET INTEREST EXPENSE. Net interest expense for the First Quarter of Fiscal
2000 increased by 255%, or $1,894,000, to $2,638,000 from $744,000 for the First
Quarter of Fiscal 1999. This increase resulted from increased interest payments
incurred in connection with the Subordinated Loan and increased borrowings under
the Company's credit facilities.
INCOME TAXES. Income taxes for the First Quarter of Fiscal 2000 and the
First Quarter of Fiscal 1999 remained relatively constant at $297,000 and
$298,000, respectively.
DISCONTINUED OPERATIONS. In August 1999, the Company sold its New York
operations for on-demand print and prepress services. In addition, the San
Francisco and London on-demand print and prepress business ceased operations and
closed or reallocated their facilities to other segments, respectively, prior to
August 31, 1999. There were no remaining assets or liabilities related to the
discontinuance of the on-demand print and prepress business as of August 31,
1999. As a result, the Company incurred a loss of $9,000 on discontinued
operations for the First Quarter of Fiscal 1999.
NET INCOME. As a result of the factors described above, net income for the
First Quarter of Fiscal 2000 increased by 57%, or $212,000, to $583,000 as
compared to net income of $371,000 for the First Quarter of Fiscal 1998.
LIQUIDITY, CAPITAL RESOURCES AND OTHER MATTERS
CASH FLOW. Net cash used in operating activities was $9,589,000 for the
First Quarter of Fiscal 2000 and $2,004,000 for the First Quarter of Fiscal
1999. Net cash used in investing activities for the acquisition of property and
equipment was $832,000 for the First Quarter of Fiscal 2000 and $396,000 for the
First Quarter of Fiscal 1999. For the First Quarter of Fiscal 2000 and the First
Quarter of Fiscal 1999, the Company acquired equipment under capital leases of
$183,000 and $2,032,000, respectively, and made payments under capital leases of
$491,000 and $617,000, respectively. Net bank borrowings provided funds of
$9,806,000 for the First Quarter of Fiscal 2000 and $27,339,000 for the First
Quarter of Fiscal 1999.
BANK CREDIT FACILITIES. In May 1999, the Company terminated its existing
financing facilities and entered into a new borrowing arrangement consisting of
a $65,000,000 revolving line of credit facility. On September 30, 1999, the
revolving line of credit facility was increased to $80,000,000. The borrowings
are guaranteed by the Company's subsidiaries and the Company pledged all of its
equity interests in its United States subsidiaries and 65% of its equity
interests in its United Kingdom subsidiaries as collateral for such credit
facility. Interest under such credit facility is, at the Company's option, at
the Prime Rate or at the Eurodollar Rate, as defined, plus an Applicable Margin,
as defined, ranging from 1.0% to 3.25% depending on the Company's consolidated
debt to earnings ratio and the type of loan. As of November 30, 1999, the
Company had an outstanding balance of $64,265,000 under the revolving credit
facility.
The credit facility contains covenants that 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 facility is secured
by a first priority lien on all of the
-16-
<PAGE>
assets of the Company and its subsidiaries and restricts the Company's ability
to pay certain dividends without the bank's prior written consent.
In November 1998, the Company borrowed a principal amount of $10,000,000
pursuant to a subordinated unsecured loan. In connection with such subordinated
loan, the Company issued ten-year warrants to the lender to purchase 440,000
shares of the Company's Common Stock at an exercise price of $4.50 per share. In
September 1999, upon prepayment of such loan, the lender opted to have the
interest of such loan paid in warrants to purchase Common Stock of the Company.
As a result, the Company issued warrants to purchase 208,150 shares of the
Company's Common Stock at an exercise price of $0.01 per share to such lender.
Subject to certain limitations, the Company has granted registration rights,
including "demand" registration rights, to such lender.
The warrants issued in connection with such subordinated loan, which were
deemed to have a value of approximately $308,000, have been recorded as deferred
financing costs, and are being amortized on a straight-line basis over
approximately five years.
On September 14, 1999, the Company borrowed a principal amount of
$20,000,000 pursuant to another subordinated unsecured loan (the "Subordinated
Loan"). A portion of the proceeds of such subordinated loan was used to prepay
the Company's $10,000,000 subordinated loan. The Subordinated Loan matures on
August 31, 2006 and bears interest at 14% per annum. The Company is permitted to
defer the payment of up to 2/14ths of the amount of interest due on any
regularly scheduled interest payment date. Any such deferred interest shall be
deemed to be included in the principal amount of the Subordinated Loan. The
Company is obligated to prepay without premium the greater of (i) $10,000,000 or
(ii) one-half of the then outstanding principal amount of the Subordinated Loan
on August 31, 2005. In addition, on any prepayments of the Subordinated Loan
made prior September 1, 2002, the Company will incur an additional premium equal
to the Make Whole Amount, as defined. For prepayments made after September 1,
2002, such additional premium shall be 3.0%. Such additional premium shall be
reduced by 100 basis points on each September 1 thereafter until September 1,
2005. In connection with the Subordinated Loan, the Company issued seven-year
warrants to the lender to purchase 690,134 shares of the Company's Common Stock
at an exercise price of $5.425 per share. Subject to certain limitations, the
Company granted registration rights, including "demand" registration rights, to
such lender.
The Company expects that 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 increased by $10,714,000
from $3,509,000 at August 31, 1999 to $14,223,000 at November 30, 1999.
-17-
<PAGE>
YEAR 2000 COMPLIANCE
--------------------
The Company believes that it has sufficiently assessed its state of
readiness with respect to its Year 2000 compliance. The Company has developed or
is developing a program to address on a timely basis the risk that computer
applications developed, marketed, sold and delivered or used by the Company may
be unable to recognize and properly perform date-sensitive functions involving
dates prior to and after December 31, 1999 (the "Year 2000 Problem"). The
Company does not believe that Year 2000 compliance will result in material
investments by the Company, nor does the Company anticipate that the Year 2000
Problem will have any adverse effects on the business operations or financial
performance of the Company. The Company does not believe that it has any
material exposure to the Year 2000 Problem with respect to its own information
systems. There can be no assurance, however, that the Year 2000 Problem will not
adversely affect the Company's business, operating results and financial
condition.
The Company believes that each of its products is Year 2000 compliant,
however, it has no control over whether software modification made by third
parties or the combination of its products with the software developed by third
parties and combined with the Company's products will be Year 2000 compliant.
Additionally, there can be no assurance that such potential instances of
non-compliance will not adversely affect the Company's business, operating
results and financial condition. The Company has established no reserve for
auditing its software products or for correcting Year 2000 compliance issues
with such products.
Although the Company believes its products are Year 2000 compliant, the
purchasing patterns of customers and potential customers may be affected by
issues associated with the Year 2000 Problem. As companies expend significant
resources to correct their current data storage solutions, these expenditures
may result in reduced funds to purchase products as those offered by the
Company. There can be no assurance that the Year 2000 Problem will not adversely
affect the Company's business, operating results and financial condition.
Conversely, the Year 2000 Problem may cause other companies to accelerate
purchases, thereby causing an increase in short-term demand and a consequent
decrease in long-term demand for the Company's products.
To date, the Year 2000 Problem has not adversely affected the Company's
business.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
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 Europe 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 other
European currencies and the United States Dollar, such change would adversely
affect the results of the Company's European 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.
-18-
<PAGE>
On October 29, 1999, the Company entered into an interest rate collar
agreement on $35,000,000 of variable rate bank debt. Under this interest rate
collar agreement, the Company is required to pay interest at the higher of 6.12%
or the Company's current rate (6.04% at November 30, 1999), to a maximum of
7.80% per annum, as defined. The interest rate collar agreement terminates on
October 29, 2001. The Company's estimated credit exposure related to the
interest rate collar agreement is summarized as follows:
Notional Credit
Amount Exposure
------ --------
Interest rate collar agreement $35,000,000 $30,000
The notional amount of the derivative does not represent the amount
exchanged by the parties, and is not a measure of the exposure of the Company
through its use of derivatives. The amounts exchanged are calculated on the
basis of the notional amounts and the other terms of the derivatives, which
relate to interest rates.
The Company is exposed to credit losses in the event of nonperformance by
counterparties to financial instruments, but it does not expect any
counterparties to fail to meet their obligations given their current credit
ratings.
-19-
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Subsequent to the end of the quarter, on January 14, 2000, the Company
filed a complaint against Ehud Aloni, the former President of MegaArt and a 10%
stockholder of the Company, in the United States District Court of the Southern
District of New York. By the action, the Company seeks to enforce the
restrictive covenants set forth in Mr. Aloni's employment agreement with the
Company. On January 14, 2000, the court granted the Company a temporary
restraining order against Mr. Aloni. The Company is also seeking $175 million in
damages.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
On September 14, 1999, the Company issued seven-year warrants to
Massachusetts Mutual Life Insurance Company and certain of its affiliates to
purchase 690,134 shares of the Company's Common Stock at an exercise price of
$5.425 per share.
On September 14, 1999, the Company issued warrants to CIBC WMC Inc. to
purchase 208,150 shares of the Company's Common Stock at an exercise price of
$0.01 per share. The warrants are exercisable until November 30, 2008.
Subsequent to the end of the quarter, on December 1, 1999, the Company
issued 100,000 shares of restricted Common Stock of the Company to Ehud Aloni in
partial consideration of the MegaArt Acquisition.
No underwriter was employed by the Company in connection with the issuances
and sales of the securities described above. The Company believes that the
issuances and sales of all of the foregoing securities were exempt from
registration under either (i) Section 4(2) of the Securities Act of 1933, as
amended (the "Act"), as transactions not involving a public offering, or (ii) in
the case of the shares issued to the employee, Rule 701 under the Act as a
transaction made pursuant to a written compensatory benefit plan or pursuant to
a written contract relating to compensation. 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 Mr.
Aloni. In addition, appropriate legends will be affixed to the stock
certificates issued upon the respective exercise of the foregoing warrants. All
recipients had adequate access to information about the Company.
-20-
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
Exhibit No. Description of Exhibit
---------- ----------------------
4.1 Form of Warrant issued to Massachusetts
Mutual Life Insurance Company and certain
of its affiliates. Incorporated by reference
to Exhibit 4.11 to the Company's Annual
Report on Form 10-K for the period ended
August 31, 1999.
4.2 Registration Rights Agreement dated
September 14, 1999 by among Unidigital Inc.
and Massachusetts Mutual Life Insurance
Company and certain of its affiliates.
Incorporated by reference to Exhibit 4.12 to
the Company's Annual Report on Form 10-K for
the period ended August 31, 1999.
4.3 Form of $20,000,000 14% Senior Subordinated
Notes due August 31, 2006 issued by
Unidigital Inc. and its subsidiaries in
favor of Massachusetts Mutual Life Insurance
Company and certain of its affiliates.
Incorporated by reference to Exhibit 4.13 to
the Company's Annual Report on Form 10-K for
the period ended August 31, 1999.
4.4 Revolving Promissory Note dated September
29, 1999 made by Unidigital Inc. in favor of
Fleet Bank, N.A. in principal amount of
$5,000,000. Incorporated by reference to
Exhibit 4.17 to the Company's Annual Report
on Form 10-K for the period ended August 31,
1999.
4.5 Revolving Promissory Note dated September
29, 1999 made by Unidigital Inc. in favor of
People's Bank of California in principal
amount of $5,000,000. Incorporated by
reference to Exhibit 4.18 to the Company's
Annual Report on Form 10-K for the period
ended August 31, 1999.
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<PAGE>
4.6 Revolving Promissory Note dated September
29, 1999 made by Unidigital Inc. in favor of
Sovereign Bank in principal amount of
$5,000,000. Incorporated by reference to
Exhibit 4.19 to the Company's Annual
Report on Form 10-K for the period ended
August 31, 1999.
10.1 Amendment No. 2 to Credit Agreement dated
September 29, 1999 among Unidigital Inc.,
Fleet Bank, N.A., Bank Austria Creditanstalt
Corporate Finance, Inc. and the Banks,
Financial Institutions and other
Institutional Lenders named therein.
Incorporated by reference to Exhibit 10.26
to the Company's Annual Report on Form 10-K
for the period ended August 31, 1999.
10.2 Securities Purchase Agreement among
Unidigital Inc. and its subsidiaries and
Massachusetts Mutual Life Insurance Company
and certain of its affiliates. Incorporated
by reference to Exhibit 10.37 to the
Company's Annual Report on Form 10-K for the
period ended August 31, 1999.
27.1 Financial Data Schedule for the period ended
November 30, 1999.
27.2 Restated Financial Data Schedule for the
period ended November 30, 1998.
(b) Reports on Form 8-K.
None.
-22-
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
UNIDIGITAL INC.
DATE: January 19, 2000 By: /s/ William E. Dye
-----------------------------------
William E. Dye, Chief Executive Officer
(Principal Executive, Financial and
Accounting Officer)
-23-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited consolidated financial statements at November 30, 1999 and is
qualified in its entirety by reference to such financial statements. Earnings
per share information has been presented 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-START> Sep-01-1999
<PERIOD-END> Nov-30-1999
<EXCHANGE-RATE> 1
<CASH> 1,082,000
<SECURITIES> 0
<RECEIVABLES> 24,733,000
<ALLOWANCES> (811,000)
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<CURRENT-ASSETS> 33,304,000
<PP&E> 25,752,000
<DEPRECIATION> (10,713,000)
<TOTAL-ASSETS> 127,963,000
<CURRENT-LIABILITIES> 19,081,000
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<TOTAL-COSTS> 13,275,000
<OTHER-EXPENSES> 7,327,000
<LOSS-PROVISION> 66,000
<INTEREST-EXPENSE> 2,460,000
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<INCOME-TAX> 297,000
<INCOME-CONTINUING> 583,000
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<EPS-BASIC> 0.10
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<TABLE> <S> <C>
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<LEGEND>
This schedule contains summary financial information extracted from the
unaudited consolidated financial statements at November 30, 1998 and is
qualified in its entirety by reference to such financial statements. Earnings
per share information has been presented 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-31-1999
<PERIOD-START> Sep-01-1998
<PERIOD-END> Nov-30-1998
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<CASH> 862,000
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<CURRENT-ASSETS> 23,892,000
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<TOTAL-REVENUES> 12,380,000
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