SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended September 30, 1997 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from _________ to _________.
Commission file number: 333-23519
VESTCOM INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
New Jersey 22-2476114
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1100 Valley Brook Avenue
Lyndhurst, New Jersey 07071
(Address of principal executive office, including zip code)
201-935-7666
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether 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 [ ]
The number of shares of common stock outstanding as of November 1, 1997, was
8,349,291 shares.
<PAGE>
INDEX TO 10-Q
Part I: Financial Information Page(s)
Item 1: Financial Statements
Vestcom International, Inc.:
Condensed Consolidated Balance Sheets - As of
December 31, 1996 and September 30, 1997 (unaudited) 4
Condensed Consolidated Statements of Operations - For the
Three Months Ended September 30, 1997 (unaudited) and
the Nine Months Ended September 30, 1997 (unaudited) 5
Condensed Consolidated Statement of Cash Flows - For the Nine
Months Ended September 30, 1997 (unaudited) 6
Notes to Condensed Consolidated Financial Statements (unaudited) 7-10
Comvestrix Corp.:
Condensed Balance Sheet - As of December 31, 1996 11
Condensed Statements of Income - For the Three Months Ended
September 30, 1996 (unaudited) and the One Month
Ended August 1, 1997 (unaudited) and the Nine
Months Ended September 30, 1996 (unaudited)
and the Seven Months Ended August 1, 1997
(unaudited) 12
Condensed Statements of Cash Flows - For the Nine
Months Ended September 30, 1996 (unaudited) and
the Seven Months Ended August 1, 1997 (unaudited) 13
Notes to Condensed Financial Statements (unaudited) 14
Morris County Direct Mail Services, Inc. and related companies:
Condensed Combined Balance Sheet - As of December 31, 1996 15
Condensed Combined Statements of Income - For the Three
Months Ended September 30, 1996 (unaudited) and
the One Month Ended August 1, 1997 (unaudited)
and the Nine Months Ended September 30, 1996
(unaudited) and the Seven Months Ended
August 1, 1997 (unaudited) 16
Condensed Combined Statements of Cash Flows - For the
Nine Months Ended September 30, 1996 (unaudited)
and the Seven Months Ended August 1, 1997 (unaudited) 17
Notes to Condensed Combined Financial Statements (unaudited) 18
Image Printing Systems, Inc.:
Condensed Balance Sheet - As of December 31, 1996 19
Condensed Statements of Income - For the Three Months
Ended September 30, 1996 (unaudited) and the
One Month Ended August 1, 1997 (unaudited) and
the Nine Months Ended September 30, 1996
(unaudited) and the Seven Months Ended
August 1, 1997 (unaudited) 20
Condensed Statements of Cash Flows - For the Nine Months
Ended September 30, 1996 (unaudited) and the
Seven Months Ended August 1, 1997 (unaudited) 21
Notes to Condensed Financial Statements (unaudited) 22
Electronic Imaging Services, Inc.:
Condensed Balance Sheet - As of December 31, 1996 23
Condensed Statements of Operations - For the Three
Months Ended September 30, 1996 (unaudited) and
the One Month Ended August 1, 1997 (unaudited)
and the Nine Months Ended September 30, 1996
(unaudited) and the Seven Months Ended August 1,
1997 (unaudited) 24
Condensed Statements of Cash Flows - For the Nine
Months Ended September 30, 1996 (unaudited)
and the Seven Months Ended August 1, 1997 (unaudited) 25
Notes to Condensed Financial Statements (unaudited) 26
<PAGE>
Page(s)
Computer Output Systems, Inc.:
Condensed Balance Sheet - As of December 31, 1996 27
Condensed Statements of Income - For the Three Months
Ended September 30, 1996 (unaudited) and the
One Month Ended August 1, 1997 (unaudited) and
the Nine Months Ended September 30, 1996
(unaudited) and the Seven Months Ended
August 1, 1997 (unaudited) 28
Condensed Statements of Cash Flows - For the Nine
Months Ended September 30, 1996 (unaudited)
and the Seven Months Ended August 1, 1997 (unaudited) 29
Notes to Condensed Financial Statements (unaudited) 30
Lirpaco Inc. and Subsidiary:
Condensed Consolidated Balance Sheet - As of December 31, 1996 31
Condensed Consolidated Statements of Income - For the Three
Months Ended September 30, 1996 (unaudited) and the
One Month Ended August 1, 1997 (unaudited) and the
Nine Months Ended September 30, 1996 (unaudited)
and the Seven Months Ended August 1, 1997 (unaudited) 32
Condensed Consolidated Statements of Cash Flows - For the
Nine Months Ended September 30, 1996 (unaudited)
and the Seven Months Ended August 1, 1997 (unaudited) 33
Notes to Condensed Consolidated Financial Statements (unaudited) 34
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
Introduction 35
Pro Forma Results of Operations 36
Liquidity and Capital Resources 37
Founding Companies 38
Part II: Other Information
Item 2. Changes in Securities and Use of Proceeds 39-40
Item 6. Exhibits and Reports on Form 8-K 40
Signatures 40
Exhibit - Financial Data Schedule (For Electronic Submission Only) 41
<PAGE>
<TABLE>
<CAPTION>
VESTCOM INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
As of December 31, 1996 and September 30, 1997
December 31, 1996 September 30, 1997
(unaudited)
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 1,344,758 $ 2,770,806
Marketable securities - 23,280,965
Accounts receivable, net - 11,749,197
Other current assets 392,664 5,259,967
--------- ----------
Total current assets 1,737,422 43,060,935
PROPERTY AND EQUIPMENT, net - 19,853,238
GOODWILL - 44,643,138
OTHER ASSETS - 373,687
----------- --------------
Total assets $ 1,737,422 $ 107,930,998
=========== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings - $ 80,585
Notes payable to related parties $ 1,292,732 -
Current portion of long-term debt
and capitalized lease obligation - 2,478,403
Accounts payable - 3,095,048
Other liabilities 320,230 10,947,647
------------ ------------
Total current liabilities 1,612,962 16,601,683
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS - 8,454,477
OTHER NONCURRENT LIABITILIES - 3,378,825
------------ ------------
Total liabilities 1,612,962 28,434,985
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Undesignated stock, no shares authorized
at December 31, 1996; 10,000,000 shares
authorized at September 30, 1997:
Preferred stock, 3,000,000 shares
authorized, no shares issued
and outstanding at December 31, 1996;
301 shares issued and outstanding at
September 30, 1997 - 2,651,867
Common stock, no par value, 20,000,000
shares authorized; 1,295,192 shares
issued and outstanding at December 31,
1996; 8,349,291 shares issued and
outstanding at September 30, 1997 5,481,501 81,797,935
Subscriptions receivable (279,082) -
Retained earnings (deficit) (5,077,959) (4,960,177)
Cumulative translation adjustment - 6,388
----------- -----------
Total stockholders' equity 124,460 79,496,013
---------- ------------
Total liabilities and
stockholders' equity $ 1,737,422 $ 107,930,998
============== ============
</TABLE>
The accompanying notes to condensed consolidated financial statements are
an integral part of these balance sheets.
<PAGE>
<TABLE>
VESTCOM INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended September 30, 1997
and the Nine Months Ended September 30, 1997
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1997
------------------- -------------------
(unaudited) (unaudited)
<S> <C> <C>
REVENUES $ 11,050,965 $ 11,050,965
COST OF REVENUES 6,668,305 6,668,305
------------------ ---------------
Gross profit 4,382,660 4,382,660
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 3,315,510 3,662,201
GOODWILL AMORTIZATION 242,248 242,248
------------------ -----------------
Income from operations 824,902 478,211
OTHER INCOME (EXPENSE)
Interest expense (358,555) (413,249)
Interest and other income 275,962 292,840
------------------ -----------------
Income before provision for income taxes 742,309 357,802
PROVISION FOR INCOME TAXES 393,823 240,020
------------------ -----------------
Net income $ 348,486 $ 117,782
================== =================
Earnings per share $ 0.06 0.04
================== =================
Weighted average shares used in computing
earnings per share 5,659,000 2,616,000
================== =================
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these statements.
<PAGE>
<TABLE>
VESTCOM INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1997
<CAPTION>
1997
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C>
Net income $ 117,782
Adjustments to reconcile net income to net cash provided by
operating activities-
Depreciation and amortization 683,431
Changes in operating assets (increase) decrease in-
Accounts receivable 145,441
Other current assets 956,688
Other assets - non-current 9,813
Changes in operating liabilities increase (decrease) in-
Other current liabilities (643,543)
Other non-current liabilities 2,200,038
---------
Net cash provided by (used in) operating activities 3,469,650
------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (794,499)
Acquisition of Founding Companies,
net of cash acquired (49,449,722)
Purchase of marketable securities (23,280,965)
-------------
Net cash (used in) investing activities (73,525,186)
CASH FLOWS FROM FINANCING ACTIVITIES:
Collection of subscriptions receivable 279,082
Net payments on borrowings (7,772,187)
Issuance of common stock 76,316,434
Issuance of preferred stock 2,651,867
Cumulative translation adjustments 6,388
-------------
Net cash provided by financing activities 71,481,584
-------------
Net increase in cash and cash equivalents 1,426,048
-------------
CASH AND CASH EQUIVALENTS, beginning of period 1,344,758
-------------
CASH AND CASH EQUIVALENTS, end of period $ 2,770,806
=============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Capital lease obligations $ 904,836
=============
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these statements.
<PAGE>
VESTCOM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(1) BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. The
balance sheet at December 31, 1996 has been derived from the audited
financial statements at that date. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered
necessary for a fair presentation have been included. Operating results
for the nine and three-month periods ended September 30, 1997 are not
necessarily indicative of the results that may be expected for the year
ended December 31, 1997.
(2) NATURE OF BUSINESS
Vestcom International, Inc. (a New Jersey corporation) ("Vestcom" or the
"Company"), was formed in September 1996 to create an international
provider of computer output and document management services. The
Company's primary strategy is to consolidate similar and complementary
companies in the highly fragmented computer output and document
management services industry through acquisition.
On July 30, 1997, Vestcom International, Inc. announced the initial
public offering of 3,850,000 shares of its Common Stock at a price of
$13.00 per share. The Company's underwriters exercised in full an option
to purchase an additional 577,500 shares of the Company's Common Stock at
$13.00 per share to cover over allotments of the initial public offering.
The initial public offering was consummated on August 4, 1997. The
capital raised by this offering was approximately $54,000,000 net of
underwriting discounts.
(3) ACQUISITIONS
Concurrently with the consummation of the Company's initial public
offering, Vestcom International, Inc. acquired seven companies in the
computer output and document management services industry - Comvestrix
Corp., Morris County Direct Mail Services, Inc. and related companies,
Image Printing Systems, Inc., Electronic Imaging Services, Inc., COS
Information, Computer Output Systems, Inc. and Mystic Graphic Systems,
Inc. (Founding Companies). The aggregate consideration paid by Vestcom to
acquire the Founding Companies was, subject to working capital
adjustments and earnouts, approximately $18.4 million in cash and
2,852,111 shares of Vestcom common stock. The acquisitions were accounted
for as purchases as of August 1, 1997. The resulting goodwill of
approximately $45,000,000, which is being amortized over 30 years, is
based on the preliminary allocation of the purchase price to the net
assets acquired.
(4) CREDIT FACILITY
On August 13, 1997, the Company and Summit Bank entered into an Equipment
Loan and Revolving Credit Agreement in the amount of $30,000,000.
(5) EARNINGS PER SHARE
The computation of net income per share for the three and nine months
ended September 30, 1997, is based upon 5,659,000 and 2,616,000 shares
respectively of common stock outstanding. The conversion of stock options
outstanding are not included in the computations. In February 1997, the
Financial Accounting Standards Board issued Statement No. 128, "Earnings
per Share". This statement supersedes APB Opinion No. 15, "Earnings per
Share" and simplifies the computation of earnings per share ("EPS").
Primary EPS is replaced with a presentation of basic EPS. Basic EPS
includes no dilution and is computed by dividing income available to
common stockholders by the weighted-average number of common shares
outstanding for the period. Fully diluted EPS is
<PAGE>
VESTCOM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
replaced with diluted EPS. Diluted EPS reflects the potential dilution if
certain securities are converted. SFAS No. 128 requires dual presentation
of basic and diluted EPS by entities that issue any securities other than
ordinary common stock. SFAS No. 128 will be effective for financial
statements for both interim and annual periods ending after December 15,
1997, and requires retroactive restatements of all EPS data presented.
The Company plans to adopt the statement on December 31, 1997. The
Company does not expect the effect of adopting SFAS No. 128 to have a
material impact on its EPS calculations, and, if adopted currently, SFAS
No. 128 would not have a material impact on the Company's reported EPS.
(6) CAPITAL STOCK
In March, 1997, the Company filed a restated Certificate of
Incorporation, to eliminate the Preferred Stock and create a class of
10,000,000 shares of Undesignated Stock.
In May and July 1997, Oppenheimer & Co., Inc. returned to Vestcom an
aggregate of 225,512 shares of common stock.
(7) COMMITMENTS AND CONTINGENCIES
In May, 1997 the Company entered into an agreement with Oppenheimer &
Co., Inc. ("Oppenheimer") pursuant to which the Company agreed to pay
Oppenheimer an aggregate amount of up to $1.8 million for advisory
services provided by Oppenheimer. In addition, Vestcom has agreed to
reimburse Oppenheimer for up to $75,000 of out-of-pocket expenses related
to such services.
Certain executives of the Company have each entered into employment
agreements with the Company. Each of the employment agreements provides
that, in the event of a termination of employment by the Company without
cause, such employee will be entitled to receive from the Company an
amount in cash equal to the employee's then current annual base salary
for the remainder of the term.
<PAGE>
VESTCOM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
(8) NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued two new statements.
Statements of Financial Accounting Standards Numbers 130, "Reporting
Comprehensive Income" (SFAS 130"), and 131, "Disclosures About Segments
of an Enterprise and Related Information" (SFAS 131").
SFAS 130 establishes standards for reporting and displaying comprehensive
income and its components in a full set of general purpose financial
statements. The objective of SFAS 130 is to report a measure of all
changes in equity of an enterprise that result from transactions and
other economic events of the period other than transactions with owners
("comprehensive income"). Comprehensive income is the total of net income
and all other non-owner changes in equity. SFAS 130 is effective for
fiscal years beginning after December 15, 1997, with earlier application
allowed but not required. Upon adoption, reclassification of comparative
financial statements provided for prior periods is required. The Company
intends to adopt this standard when required and is in the process of
determining the effect of SFAS 130 on the Company's financial statement
presentation.
SFAS 131 introduces a new model for segment reporting, called the
"management approach." The management approach is based on the way that
the chief operating decision maker organizes segments within a company
for making operating decisions and assessing performance. Reportable
segments are based on products and services, geography, legal structure,
management structure - any manner in which management disaggregates a
company. The management approach replaces the notion of industry and
geographic segments in current FASB standards. The Company is required to
adopt this standard as of December 15, 1997, and early adoption is
encouraged. However, SFAS 131 need not be applied to interim statements
in the initial year of application. SFAS 131 requires restatement of all
prior period information reported. The Company intends to adopt this
standard when required and is in the process of determining the effect of
SFAS 131 on the Company's financial statements.
(9) PRO FORMA SCHEDULES
The following Pro Forma Statements of Operations for Vestcom
International, Inc., assume that the acquisitions of the Founding
Companies were consummated on January 1 of the periods presented. This
information is not necessarily indicative of the results the Company
would have obtained had these events actually then occurred or of the
Company's future results.
<PAGE>
<TABLE>
VESTCOM INTERNATIONAL, INC. AND FOUNDING COMPANIES
PRO FORMA STATEMENTS OF
OPERATIONS For the Three Months and Nine Months
Ended September 30, 1996 and 1997
(unaudited)
<CAPTION>
Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended
September 30, 1996 September 30, 1997 September 30, 1996 September 30, 1997
Pro Forma Pro Forma Pro Forma Pro Forma
Combined Combined Combined Combined
<S> <C> <C> <C> <C>
Revenues $ 16,049,377 $ 17,473,419 $ 48,367,883 $ 53,537,123
Cost of revenues 10,958,191 11,097,349 31,813,772 33,965,998
------------- ------------ ------------- ------------
Gross profit 5,091,186 6,376,070 16,554,111 19,571,125
Selling, general and
administrative expenses 3,943,770 4,348,525 11,566,880 12,603,250
Goodwill amortization 363,372 363,372 1,090,116 1,090,116
------------- ------------ -------------- ------------
Income (loss) from operations 784,044 1,664,173 3,897,115 5,877,759
Other income (expense):
Interest expense - (176,885) - (427,156)
Interest and other income 79,558 287,018 163,231 323,944
------------ ------------- -------------- ----------
Income before provision for
income taxes 863,602 1,774,306 4,060,346 5,774,547
Provision for income taxes 490,790 855,071 2,060,185 2,745,865
------------- ----------- ------------- -----------
Net income $ 372,812 $ 919,235 $ 2,000,161 $ 3,028,682
============= ============== ============== ==============
Net income per share $ 0.04 $ 0.11 $ 0.24 $ 0.36
============= ============== ============== ==============
Weighted average shares used
in computing pro forma net
income per share 8,349,291 8,349,291 8,349,291 8,349,291
============ ============== ============ ==============
</TABLE>
<PAGE>
<TABLE>
COMVESTRIX CORP.
CONDENSED BALANCE SHEET
As of December 31, 1996
<CAPTION>
December 31, 1996
ASSETS
CURRENT ASSETS:
<S> <C>
Cash and cash equivalents $ 106,610
Accounts receivable, net 4,135,168
Other current assets 2,789,112
---------------
Total current assets 7,030,890
PROPERTY AND EQUIPMENT, net 4,385,047
OTHER ASSETS 105,750
---------------
Total assets $ 11,521,687
===============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 1,900,000
Current portion of debt 785,472
Other current liabilities 3,485,661
---------------
Total current liabilities 6,171,133
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS 682,611
DEFERRED EXPENSES 383,454
---------------
Total liabilities 7,237,198
---------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock 7,500
Additional paid-in capital 355,863
Subscriptions receivable (106,297)
Retained earnings 5,465,803
---------------
5,722,869
Less-Treasury stock (1,438,380)
---------------
Total stockholders' equity 4,284,489
---------------
Total liabilities and stockholders' equity $ 11,521,687
===============
</TABLE>
The accompanying notes to condensed financial statements
are an integral part of this balance sheet.
<PAGE>
<TABLE>
COMVESTRIX CORP.
CONDENSED STATEMENTS OF INCOME
For the Three Months Ended September 30, 1996 and the One
Month Ended August 1, 1997 and the Nine Months Ended
September 30, 1996 and the Seven Months Ended August 1, 1997
<CAPTION>
Three Months One Month Nine Months Seven Months
Ended Ended Ended Ended
September 30, August 1, September 30, August 1,
1996 1997 1996 1997
------------- ---------- ------------- -------------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
REVENUES $ 5,167,231 $ 2,521,314 $ 15,930,492 $ 14,602,784
COST OF REVENUES 3,135,014 1,378,006 9,199,133 7,901,864
------------- ------------- ---------- ------------
Gross profit 2,032,217 1,143,308 6,731,359 6,700,920
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 1,803,467 688,854 5,400,941 4,677,958
-------------- ------------- ---------- -------------
Income from operations 228,750 454,454 1,330,418 2,022,962
OTHER INCOME (EXPENSE)
Interest expense (31,182) (61,257) (103,724) (397,842)
Interest and other income 33,419 6,107 64,307 27,172
-------------- -------------- ---------- -------------
Income before provision
for income taxes 230,987 399,304 1,291,001 1,652,292
PROVISION FOR INCOME TAXES 5,771 9,982 32,271 41,307
------------- ------------- --------- -------------
Net income $ 225,216 $ 389,322 $1,258,730 $ 1,610,985
============= ============= ========== ==============
</TABLE>
The accompanying notes to condensed financial statements
are an integral part of these statements.
<PAGE>
<TABLE>
COMVESTRIX CORP.
CONDENSED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1996
and the Seven Months Ended August 1, 1997
<CAPTION>
1996 1997
---------------- -------------
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 1,258,730 $ 1,610,985
Adjustments to reconcile net income to net cash
provided by operating activities-
Depreciation and amortization 832,448 1,196,387
(Gain) Loss on sale of property (2,598) 4,266
Changes in operating assets (increase) decrease in -
Accounts receivable (336,464) (564,570)
Other current assets (486,969) 251,395
Other assets (141,536) (93,662)
Changes in operating liabilities increase (decrease) in -
Other current liabilities 1,761,964 1,106,851
Deferred charges 208,152 243,491
----------- -----------
Net cash provided by operating activities 3,093,727 3,755,143
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (868,892) (459,462)
Proceeds from sale of equipment 9,260 2,700
----------- -----------
Net cash used in investing activities (859,632) (456,762)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Collection of subscriptions receivable 12,832 15,002
Net payments on borrowings (1,471,623) (1,096,524)
Distributions to Stockholders (821,475) (2,215,822)
----------- -----------
Net cash used in financing activities (2,280,266) (3,297,344)
----------- -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (46,171) 1,037
CASH AND CASH EQUIVALENTS, beginning of period 150,832 106,610
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 104,661 $ 107,647
=========== ===============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Capital lease obligations - $ 6,943,939
============ ===============
ISSUANCE OF COMMON STOCK EVIDENCED BY
SUBSCRIPTIONS RECEIVABLE $ 123,000 $ -
=========== ===============
</TABLE>
The accompanying notes to condensed financial statements
are an integral part of these statements.
<PAGE>
COMVESTRIX CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
(1) BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. The balance sheet at
December 31, 1996 has been derived from the audited financial statements
at that date. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair
presentation have been included. Operating results for the seven and one
month periods ended September 30, 1997 are not necessarily indicative of
the results that may be expected for the consolidated financial
statements for the year ended December 31, 1997.
On July 30, 1997, Vestcom International, Inc., announced the initial
public offering of 3,850,000 shares of its Common Stock at a price of
$13.00 per share. Vestcom's underwriters exercised in full an option to
purchase an additional 577,500 shares of Vestcom's Common Stock at $13.00
per share to cover over allotments of the initial public offering. The
capital raised by this offering was approximately $54,000,000, net of
underwriting discounts. Concurrently with the Offering, Vestcom acquired
all of the outstanding shares of Comvestrix Corp. Accordingly, the
accompanying financial statements of Comvestrix do not include a balance
sheet as of September 30, 1997 and reflect Comvestrix's operations and
cash flows up until the date of acquisition by Vestcom. See the Vestcom
financial statements included elsewhere herein.
(2) SHAREHOLDER DISTRIBUTIONS
On July 29, 1997, the Company made distributions to shareholders of
$1,618,382.
<PAGE>
<TABLE>
MORRIS COUNTY DIRECT MAIL SERVICES, INC. AND RELATED COMPANIES
CONDENSED COMBINED BALANCE SHEET
As of December 31, 1996
<CAPTION>
December 31, 1996
ASSETS
CURRENT ASSETS:
<S> <C>
Cash and cash equivalents $ 572,714
Accounts receivable, net 2,647,434
Other current assets 873,099
------------
Total current assets 4,093,247
PROPERTY AND EQUIPMENT, net 1,504,158
GOODWILL 396,184
OTHER ASSETS 131,488
-----------
Total assets $ 6,125,077
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 160,000
Current portion of long-term debt and
capital lease obligations 481,807
Other current liabilities 3,004,922
------------
Total current liabilities 3,646,729
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS 949,482
DEFERRED EXPENSES 11,420
------------
Total liabilities 4,607,631
------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock 19,990
Additional paid-in capital 182,768
Retained earnings 1,716,188
------------
1,918,946
Less-Treasury stock (401,500)
-------------
Total stockholders' equity 1,517,446
-------------
Total liabilities and stockholders' equity $ 6,125,077
============
</TABLE>
The accompanying notes to condensed financial statements
are an integral part of this balance sheet.
<PAGE>
<TABLE>
MORRIS COUNTY DIRECT MAIL SERVICES, INC. AND RELATED COMPANIES
CONDENSED COMBINED STATEMENTS OF INCOME
For the Three Months Ended September 30, 1996 and the One
Month Ended August 1, 1997 and the Nine Months Ended
September 30, 1996 and the Seven Months Ended August 1, 1997
<CAPTION>
Three Months One Month Nine Months Seven Months
Ended Ended Ended Ended
September 30, August 1, September 30, August 1,
1996 1997 1996 1997
------------- --------- -------------- -------------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
REVENUES $ 3,071,277 $ 1,014,280 $ 9,886,654 $ 8,029,919
COST OF REVENUES 2,371,423 981,381 6,681,600 5,727,684
------------- ----------- ------------ -------------
Gross profit 699,854 32,899 3,205,054 2,302,235
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 831,346 (276,815) 2,531,052 1,747,901
------------- ----------- ------------ -------------
Income (loss) from
operations (131,492) (243,916) 674,002 554,334
OTHER INCOME (EXPENSE)
Interest expense (34,201) (37,110) (94,153) (118,370)
Interest and other income 23,417 5,060 61,856 9,765
----------- ----------- ------------ ---------
(Loss) income before provision
for income taxes (142,276) (275,966) 641,705 445,729
PROVISION FOR INCOME TAXES - - 15,786 17,188
------------ ------------ ---------- --------
Net (loss) income $ (142,276) $ (275,966) $ 625,919 $ 428,541
============= ============ ============= ==============
</TABLE>
The accompanying notes to condensed financial statements
are an integral part of these statements.
<PAGE>
<TABLE>
MORRIS COUNTY DIRECT MAIL SERVICES, INC. AND RELATED COMPANIES
CONDENSED COMBINED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1996
and the Seven Months Ended August 1, 1997
<CAPTION>
1996 1997
----------- -----------
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 625,919 $ 428,541
Adjustments to reconcile net income to net cash
provided by (used in) operating activities-
Depreciation and amortization 360,152 340,908
Gain on sale of property - (17,617)
Changes in operating assets (increase) decrease in -
Accounts receivable (1,280,995) (302,459)
Other current assets 612,872 (295,552)
Other assets (49,200) 70,481
Changes in operating liabilities increase (decrease) in -
Other current liabilities (136,673) (64,667)
Other liabilities (250,831) 52,403
----------- ----------
Net cash provided by (used in) operating activities (118,756) 212,038
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (635,800) (373,901)
Acquisition of goodwill (412,300) -
------------ ----------
Net cash used in investing activities (1,048,100) (373,901)
------------ ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from borrowing 969,623 429,325
Issuance of note receivable - 61,019
Distributions to Stockholders - (539,802)
------------ ---------
Net cash provided by (used in) financing activities 969,623 (49,458)
------------ ----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (197,233) (211,321)
CASH AND CASH EQUIVALENTS, beginning of period 534,459 572,714
----------- ----------
CASH AND CASH EQUIVALENTS, end of period $ 337,226 $ 361,393
============ ===========
</TABLE>
The accompanying notes to condensed financial statements
are an integral part of these statements.
<PAGE>
MORRIS COUNTY DIRECT MAIL SERVICES, INC.
AND RELATED COMPANIES
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS
(unaudited)
(1) BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. The balance sheet at
December 31, 1996 has been derived from the audited financial statements
at that date. In the opinion of management all adjustments (consisting of
normal recurring adjustments) considered necessary for a fair
presentation have been included. Operating results for the seven and one
month periods ended September 30, 1997 are not necessarily indicative of
the results that may be expected for the consolidated financial
statements for the year ended December 31, 1997.
On July 30, 1997, Vestcom International, Inc. announced the initial
public offering of 3,850,000 shares of its Common Stock at a price of
$13.00 per share. Vestcom's underwriters exercised in full an option to
purchase an additional 577,500 shares of Vestcom's Common Stock at $13.00
per share to cover over allotments of the initial public offering. The
initial public offering was consummated on August 4, 1997. The capital
raised by this offering was approximately $54,000,000, net of
underwriting discounts. Concurrently, with the Offering, Vestcom acquired
all of the outstanding shares of Morris County Direct Mail Services, Inc.
and related companies. Accordingly, the accompanying financial statements
of Morris County Direct Mail Services, Inc. and related companies do not
include a balance sheet as of September 30, 1997 and reflect Morris
County Direct Mail Services, Inc. and related companies' operations and
cash flows up until the date of acquisition by Vestcom. See the Vestcom
financial statements included elsewhere herein.
<PAGE>
<TABLE>
IMAGE PRINTING SYSTEMS, INC.
CONDENSED BALANCE SHEET
As of December 31, 1996
<CAPTION>
December 31, 1996
ASSETS
CURRENT ASSETS:
<S> <C>
Cash and cash equivalents $ 61,137
Accounts receivable, net 1,422,234
Other current assets 659,389
-----------------
Total current assets 2,142,760
PROPERTY AND EQUIPMENT, net 2,725,129
OTHER ASSETS -
-----------------
Total assets $ 4,867,889
=================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 795,494
Current portion of long-term debt and
capital lease obligations 468,094
Other current liabilities 1,864,883
----------------
Total current liabilities 3,128,471
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS 1,433,810
----------------
Total liabilities 4,562,281
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock 15,593
Retained earnings 291,748
-----------------
307,341
Less-Treasury stock (1,733)
-----------------
Total stockholders' equity 305,608
-----------------
Total liabilities and stockholders' equity $ 4,867,889
=================
</TABLE>
The accompanying notes to condensed financial statements
are an integral part of this balance sheet.
<PAGE>
<TABLE>
IMAGE PRINTING SYSTEMS, INC.
CONDENSED STATEMENTS OF INCOME
For the Three Months Ended September 30, 1996 and the One
Month Ended August 1, 1997 and the Nine Months Ended
September 30, 1996 and the Seven Months Ended August 1, 1997
<CAPTION>
Three Months One Month Nine Months Seven Months
Ended Ended Ended Ended
September 30, August 1, September 30, August 1,
1996 1997 1996 1997
------------ ----------- ------------- -------------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
REVENUES $ 2,133,079 $ 781,725 $ 6,639,331 $5,900,738
COST OF REVENUES 1,499,121 545,574 4,697,261 4,109,688
------------- ----------- ----------- ----------
Gross profit 633,958 236,151 1,942,070 1,791,050
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 590,256 191,238 1,730,312 1,303,107
-------------- ----------- ---------- ---------
Income (loss ) from operations 43,702 44,913 211,758 487,943
OTHER INCOME (EXPENSE)
Interest expense (33,996) (37,770) (210,226) (253,089)
Interest and other income - 1,013 - 6,916
-------------- ---------- ----------- ---------
Net income $ 9,706 $ 8,156 $ 1,532 $ 241,770
============== ========== =========== =========
</TABLE>
The accompanying notes to condensed financial statements
are an integral part of these statements.
<PAGE>
<TABLE>
IMAGE PRINTING SYSTEMS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1996
and the Seven Months Ended August 1, 1997
<CAPTION>
1996 1997
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $ 1,532 $ 241,770
Adjustments to reconcile net income (loss) to net cash
provided by operating activities-
Depreciation and amortization 461,960 396,258
Loss on write-off of subscriptions receivable 10,855 -
Changes in operating assets (increase) decrease in -
Accounts receivable (1,001,072) 95,756
Other current assets 195,194 265,724
Changes in operating liabilities increase (decrease) in -
Other current liabilities 606,937 99,302
--------- ----------
Net cash provided by operating activities 275,406 1,098,810
--------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (108,774) (412,801)
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from borrowings (154,569) (64,725)
Distributions to Stockholders - (599,882)
---------- -----------
Net cash used in financing activities (154,569) (664,607)
---------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 12,063 21,402
CASH AND CASH EQUIVALENTS, beginning of period 61,835 61,137
---------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 73,898 $ 82,539
=========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Capital lease obligation incurred $ 151,702 $ 761,904
============ ===========
</TABLE>
The accompanying notes to condensed financial statements
are an integral part of these statements.
<PAGE>
IMAGE PRINTING SYSTEMS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
(1) BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. The balance sheet at
December 31, 1996 has been derived from the audited financial statements
at that date. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair
presentation have been included. Operating results for the seven and one
month periods ended September 30, 1997 are not necessarily indicative of
the results that may be expected for the consolidated financial
statements for the year ended December 31, 1997.
On July 30, 1997, Vestcom International, Inc. announced the initial
public offering of 3,850,000 shares of its Common Stock at a price of
$13.00 per share. Vestcom's underwriters exercised in full an option to
purchase an additional 577,500 shares of Vestcom's Common Stock at $13.00
per share to cover over allotments of the initial public offering. The
initial public offering was consummated on August 4, 1997. The capital
raised by this offering was approximately $54,000,000, net of
underwriting discounts. Concurrently with the Offering, Vestcom acquired
all of the outstanding shares of Image Printing Systems, Inc.
Accordingly, the accompanying financial statements of Image Printing
Systems, Inc., do not include a balance sheet as of September 30, 1997,
and reflect Image Printing Systems, Inc.'s operations and cash flows up
until the date of acquisition by Vestcom. See the Vestcom financial
statements included elsewhere herein.
<PAGE>
ELECTRONIC IMAGING SERVICES, INC.
CONDENSED BALANCE SHEET
As of December 31, 1996
December 31, 1996
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 45,089
Accounts receivable, net 826,655
Other current assets 525,906
---------------
Total current assets 1,397,650
PROPERTY AND EQUIPMENT, net 1,526,992
OTHER ASSETS 54,944
---------------
Total assets $ 2,979,586
===============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 662,575
Current portion of long-term debt and
capital lease obligations 402,256
Other current liabilities 1,440,516
---------------
Total current liabilities 2,505,347
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS 817,148
DEFERRED EXPENSES 86,740
PLEDGED STOCK 375,000
---------------
Total liabilities 3,784,235
---------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock 11
Accumulated deficit (429,660)
---------------
(429,649)
Less-Treasury stock (375,000)
---------------
Total stockholders' equity (deficit) (804,649)
---------------
Total liabilities and stockholders' equity $ 2,979,586
===============
The accompanying notes to condensed financial statements
are an integral part of this balance sheet.
<PAGE>
<TABLE>
ELECTRONIC IMAGING SERVICES, INC.
<CAPTION>
CONDENSED STATEMENTS OF OPERATIONS
For the Three Months Ended September 30, 1996 and the One
Month Ended August 1, 1997 and the Nine Months Ended
September 30, 1996 and the Seven Months Ended August 1, 1997
Three Months One Month Nine Months Seven Months
Ended Ended Ended Ended
September 30, August 1, September 30, August 1,
1996 1997 1996 1997
------------ ------------ ------------- -----------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
REVENUES $ 2,058,362 $ 807,725 $ 5,522,919 $ 5,208,574
COST OF REVENUES 1,654,237 599,476 4,545,545 3,963,855
--------- ----------- ---------- ----------
Gross profit 404,125 208,249 977,374 1,244,719
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 346,576 106,588 1,010,363 855,845
---------- ----------- --------- ---------
Income (loss) from operations 57,549 101,661 (32,989) 388,874
OTHER INCOME (EXPENSE)
Interest expense (84,139) (19,366) (110,326) (127,250)
Interest and other income 12,114 10 26,460 (15,052)
---------- ----------- ----------- ---------
Income (loss) before
provision for
income taxes (14,476) 82,305 (116,855) 246,572
PROVISION FOR INCOME TAXES - 30,343 - 91,427
----------- --------- ------------ --------
Net income (loss) $ (14,476) $ 51,962 $ (116,855) $155,145
============ ========= ============ =========
</TABLE>
The accompanying notes to condensed financial statements
are an integral part of these statements.
<PAGE>
ELECTRONIC IMAGING SERVICES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1996
and the Seven Months Ended August 1, 1997
1996 1997
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (116,855) $ 155,145
Adjustments to reconcile net income
(loss) to net cash provided
(used in) by operating activities-
Depreciation and amortization 187,336 234,664
Provision for doubtful accounts 36,267 16,700
Gain on sale property - 12,650
Changes in operating assets
(increase) decrease in -
Accounts receivable (143,742) (26,407)
Other current assets (249,937) (91,781)
Changes in operating liabilities
increase (decrease) in -
Other current liabilities 252,151 (268,004)
---------- ------------
Net cash provided by (used in)
operating activities (34,780) 32,967
---------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (190,479) (8,324)
---------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds (repayments) from borrowings 202,361 (69,732)
----------- -------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (22,898) (45,089)
CASH AND CASH EQUIVALENTS, beginning of period 22,898 45,089
----------- -------------
CASH AND CASH EQUIVALENTS, end of period - -
============ =============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Capital lease obligation incurred $ 818,700 $ 347,559
============= ===============
Purchase of treasury stock
through issuance of note $ 375,000 -
============ ===============
The accompanying notes to condensed financial statements
are an integral part of these statements.
<PAGE>
ELECTRONIC IMAGING SERVICES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
(1) BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. The balance sheet at
December 31, 1996 has been derived from the audited financial statements
at that date. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair
presentation have been included. Operating results for the seven and one
month periods ended September 30, 1997 are not necessarily indicative of
the results that may be expected for the consolidated financial
statements for the year ended December 31, 1997.
On July 30, 1997, Vestcom International, Inc. announced the initial
public offering of 3,850,000 shares of its Common Stock at a price of
$13.00 per share. Vestcom's underwriters exercised in full an option to
purchase an additional 577,500 shares of the Vestcom's Common Stock at
$13.00 per share to cover over allotments of the initial public offering.
The initial public offering was consummated on August 4, 1997. The
capital raised by this offering was approximately $54,000,000, net of
underwriting discounts. Concurrently with the Offering, Vestcom acquired
all of the outstanding shares of Electronic Imaging Services, Inc.
Accordingly, the accompanying financial statements of Electronic Imaging
Services, Inc., do not include a balance sheet as of September 30, 1997
and reflect Electronic Imaging Services, Inc.'s operations and cash flows
up until the date of acquisition by Vestcom. See the Vestcom financial
statements included elsewhere herein.
<PAGE>
COMPUTER OUTPUT SYSTEMS, INC.
CONDENSED BALANCE SHEET
As of December 31, 1996
December 31, 1996
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ -
Accounts receivable, net 964,035
Other current assets 341,311
------------
Total current assets 1,305,346
PROPERTY AND EQUIPMENT, net 472,003
OTHER ASSETS 36,240
------------
Total assets $ 1,813,589
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ -
Current portion of long-term debt
and capital lease obligations 244,584
Other current liabilities 904,389
-------------
Total current liabilities 1,148,973
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS 130,072
DEFERRED EXPENSES -
-------------
Total liabilities 1,279,045
-------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock 10
Additional paid-in capital 732,470
Retained earnings (197,936)
------------
Total stockholders' equity 534,544
------------
Total liabilities and stockholders' equity $ 1,813,589
=============
The accompanying notes to condensed financial statements
are an integral part of this balance sheet.
<PAGE>
<TABLE>
COMPUTER OUTPUT SYSTEMS, INC.
CONDENSED STATEMENTS OF INCOME
For the Three Months Ended September 30, 1996 and the One
Month Ended August 1, 1997 and the Nine Months Ended
September 30, 1996 and the Seven Months Ended August 1, 1997
<CAPTION>
Three Months One Month Nine Months Seven Months
Ended Ended Ended Ended
September 30, August 1, September 30, August 1,
1996 1997 1996 1997
------------ ------------ ------------- -------------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
REVENUES $ 1,313,551 $ 761,036 $ 3,681,978 $ 4,236,913
COST OF REVENUES 798,462 488,270 2,327,822 2,764,962
------------- ------------ ------------- -------------
Gross profit 515,089 272,766 1,354,156 1,471,951
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 327,237 131,250 864,998 769,576
------------- ------------- -------------- -------------
Income from operations 187,852 141,516 489,158 702,375
OTHER INCOME (EXPENSE)
Interest expense - (4,532) (11,051) (29,817)
Interest and other income - - - 1,952
------------ ------------- ------------- -------------
Income before provision
for income taxes 187,852 136,984 478,107 674,510
PROVISION FOR INCOME TAXES 13,807 14,041 42,362 69,245
------------ ------------- ----------- ------------
Net income $ 174,045 $ 122,943 $ 435,745 $ 605,265
============= =========== ============= =============
</TABLE>
The accompanying notes to condensed financial statements
are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
COMPUTER OUTPUT SYSTEMS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1996
and the Seven Months Ended August 1, 1997
1996 1997
-------- ----------
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 435,745 $ 605,265
Adjustments to reconcile net income to net cash
provided by operating activities-
Depreciation and amortization 94,761 89,496
Changes in operating assets (increase) decrease in -
Accounts receivable (45,402) (10,096)
Other current assets (59,697) (121,656)
Changes in operating liabilities
increase (decrease) in -
Other current liabilities (192,458) 517,794
----------- ------------
Net cash provided by operating activities 232,949 1,080,803
----------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (102,909) (90,886)
Security deposits (1,800) (1,320)
----------- --------------
Net cash used in investing activities (104,709) (92,206)
----------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds (repayments) from borrowings (197,925) 45,557
Distributions to Stockholders (17,910) (927,400)
------------- --------------
Net cash used in financing activities (215,835) (881,843)
------------- --------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (87,595) 106,754
CASH AND CASH EQUIVALENTS, beginning of period 95,468 -
-------------- --------------
CASH AND CASH EQUIVALENTS, end of period $ 7,873 $ 106,754
============= ==============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Capital lease obligations incurred - $ 161,183
============= ==============
</TABLE>
The accompanying notes to condensed financial statements
are an integral part of these statements.
<PAGE>
COMPUTER OUTPUT SYSTEMS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
(1) BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. The balance sheet at
December 31, 1996 has been derived from the audited financial statements
at that date. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair
presentation have been included. Operating results for the seven and one
month periods ended September 30, 1997 are not necessarily indicative of
the results that may be expected for the consolidated financial
statements for the year ended December 31, 1997.
On July 30, 1997, Vestcom International, Inc. announced the initial
public offering of 3,850,000 shares of its Common Stock at a price of
$13.00 per share. Vestcom's underwriters exercised in full an option to
purchase an additional 577,500 shares of the Vestcom's Common Stock at
$13.00 per share to cover over allotments of the initial public offering.
The initial public offering was consummated on August 4, 1997. The
capital raised by this offering was approximately $54,000,000 net of
underwriting discounts. Concurrently with the Offering, Vestcom acquired
all of the outstanding shares of Computer Output Systems, Inc.
Accordingly, the accompanying financial statements of Computer Output
Systems, Inc. do not include a balance sheet as of September 30, 1997
and reflect Computer Output System Inc.'s operations and cash flows up
until the date of acquisition by Vestcom. See the Vestcom financial
statements included elsewhere herein.
<PAGE>
LIRPACO INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
As of December 31, 1996
December 31, 1996
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 88,198
Accounts receivable, net 743,380
Other current assets 221,989
-----------------
Total current assets 1,053,567
PROPERTY AND EQUIPMENT, net 661,901
-----------------
Total assets $ 1,715,468
=================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and capital leases $ 51,752
Other current liabilities 711,573
-----------------
Total current liabilities 763,325
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS 245,166
DEFERRED EXPENSES 26,474
------------------
Total liabilities 1,034,965
-----------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock 102
Preferred stock 170,206
Retained earnings 474,943
Cumulative translation adjustments 35,252
------------------
Total stockholders' equity 680,503
-----------------
Total liabilities and stockholders' equity $ 1,715,468
==================
The accompanying notes to condensed financial statements
are an integral part of this balance sheet.
<PAGE>
<TABLE>
LIRPACO INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended September 30, 1996 and the One
Month Ended August 1, 1997 and the Nine Months Ended
September 30, 1996 and the Seven Months Ended August 1, 1997
<CAPTION>
Three Months One Month Nine Months Seven Months
Ended Ended Ended Ended
September 30, August 1, September 30, August 1,
1996 1997 1996 1997
------------- ----------- ------------- ------------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
REVENUES $ 1,294,368 $ 361,626 $ 3,778,489 $ 2,499,443
COST OF REVENUES 853,467 292,383 2,489,714 1,746,423
----------- -------------- ------------- -------------
Gross profit 440,901 69,243 1,288,775 753,020
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 346,230 80,375 979,419 602,391
------------- -------------- ------------- --------------
Income (loss) from operations 94,671 (11,132) 309,356 150,629
OTHER INCOME (EXPENSE)
Interest expense (4,769) (908) (13,428) (17,139)
Interest and other income - - - -
------------- -------------- -------------- --------------
Income (loss) before provision for
income taxes 89,902 (12,040) 295,928 133,490
PROVISION FOR INCOME TAXES 12,039 - 63,545 36,383
-------------- --------------- --------------- --------------
Net income (loss) $ 77,863 $ (12,040) $ 232,383 $ 97,107
=============== ============== ============= ==============
</TABLE>
The accompanying notes to condensed financial statements
are an integral part of these statements.
<PAGE>
<TABLE>
LIRPACO INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1996
and the Seven Months Ended August 1, 1997
<CAPTION>
1996 1997
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 232,383 $ 97,107
Adjustments to reconcile net income to net cash
provided by operating activities-
Depreciation and amortization 73,005 48,099
Changes in operating assets (increase) decrease
Accounts receivables 129,808 105,949
Other current assets 210,378 (38,178)
Changes in operating liabilities increase (decrease)
Other current liabilities (130,568) (175,983)
Deferred charges 36,638 (195)
--------- ----------
Net cash provided by operating activities 551,644 36,799
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (167,058) (91,697)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cumulative translation adjustment 2 41,840
Net (proceeds) repayments from borrowings (384,588) 10,445
---------- ----------
Net cash provided by
(used in) financing activities (384,586) 52,285
---------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS - (2,613)
CASH AND CASH EQUIVALENTS, beginning of period - 88,198
----------- ----------
CASH AND CASH EQUIVALENTS, end of period $ - $ 85,585
=========== ==========
</TABLE>
The accompanying notes to condensed financial statements
are an integral part of these statements.
<PAGE>
LIRPACO INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(1) BASIS OF PRESENTATION
Lirpaco Inc. (the "Company"), a Canadian corporation, is a holding
company with one subsidiary, COS INFORMATION INC., a Quebec corporation.
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. The balance sheet at
December 31, 1996 has been derived from the audited financial statements
at that date. In the opinion of management all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair
presentation have been included. Operating results for the seven and one
month periods ended September 30, 1997 are not necessarily indicative of
the results that may be expected for the consolidated financial
statements for the year ended December 31, 1997.
On July 30, 1997, Vestcom International, Inc. announced the initial
public offering of 3,850,000 shares of its Common Stock at a price of
$13.00 per share. Vestcom's underwriters exercised in full an option to
purchase an additional 577,500 shares of Vestcom's Common Stock at
$13.00 per share to cover over allotments of the initial public
offering. The initial public offering was consummated on August 4, 1997.
The capital raised by this offering was approximately $54,000,000, net
of underwriting discounts. Concurrently with the Offering, Vestcom
acquired all of the outstanding shares of Lirpaco, Inc. Accordingly, the
accompanying financial statements of Lirpaco, Inc. do not include a
balance sheet as of September 30, 1997 and reflect Lirpaco Inc.'s
operations and cash flows up until the date of acquisition by Vestcom.
See the Vestcom financial statements included elsewhere herein.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
Vestcom International, Inc. was incorporated in September 1996. Concurrently
with the consummation of the Company's initial public offering (the "Offering")
on August 4, 1997, the Company acquired the Founding Companies, each of which
had been operating as a separate independent entity.
For accounting purposes, the acquisition date was deemed to be August 1, 1997,
at which time the Founding Companies were consolidated with the Company as
Vestcom International, Inc. The Balance Sheet as of September 30, 1997, includes
the Founding Companies. The Results of Operations for the Three and Nine Months
Ended September 30, 1997, and the Statements of Cash Flows for the Nine Months
Ended September 30, 1997, includes the results of Vestcom for the entire period
and the results of the acquired Founding Companies only since August 1, 1997.
Consequently, management believes that individual Founding Companies financial
comparisons are no longer meaningful. Therefore, third quarter 1997 Management's
Discussion and Analysis of Financial Condition and Results of Operations is
presented on a pro forma consolidated basis.
The Founding Companies were managed prior to their acquisition as independent
private companies, and their results of operations reflect different tax
structures (S corporations and C corporations for the U.S. Founding Companies),
which have influenced, among other things, their historical levels of owners'
compensation. In connection with the organization of the Company, these owners
and certain key employees have agreed to certain reductions in their
compensation commencing on the consummation of the Offering.
Vestcom, which conducted no operations prior to the consummation of the Offering
other than in connection with the acquisitions of the Founding Companies (the
"Acquisitions") and the financing activities related thereto, including the
Offering, intends to integrate these businesses and their operations and
administrative functions over a period of time. This integration process may
present opportunities to reduce costs through the elimination of duplicative
functions and through economies of scale, particularly in obtaining greater
volume discounts from suppliers, but will also necessitate additional costs and
expenditures for corporate management and administration (including costs
related to the hiring of additional management personnel), corporate expenses
related to being a public company, systems integration and facilities expansion.
These various costs and possible cost-savings may make comparison of historical
operating results not comparable to, or indicative of, future performance. In
addition, Vestcom may make payments of up to $2.8 million and may issue up to an
additional 844,997 shares of Common Stock in connection with the Acquisitions of
four Founding Companies if specified revenue or earnings thresholds are attained
during various periods ending no later than two years after the first day of the
fiscal quarter in which the Offering was consummated. Any earn-outs will
increase goodwill recorded for the Acquisition transactions. The amortization of
any additional goodwill and the increased number of shares issued if the
earn-outs are achieved will negatively affect the Company's future earnings per
share.
For all the reasons set forth above and others, the following discussion of Pro
Forma Results of Operations should be read with the foregoing caveats as to
non-comparability in mind.
This Quarterly Report on Form 10-Q contains forward-looking statements made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 ("Forward-Looking Statements"), which involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the Forward-Looking Statements. Factors that might cause
such a difference include the risks described under the caption "Risk Factors"
in the Company's Prospectus dated July 30, 1997. Such factors may also cause
substantial volatility in the market price of the Company's Common Stock.
<PAGE>
PRO FORMA RESULTS OF OPERATIONS
================================================================================
Nine Months Ended September 30, 1997 Compared to Nine Months Ended September 30,
1996
================================================================================
Pro Forma revenues increased $5,169,000, or 10.7%, from $48,368,000 for the nine
months ended September 30, 1996 to $53,537,000 for the nine months ended
September 30, 1997. This increase was primarily attributable to increased
volumes of Vestcom's production of statements, point-of- purchase labels and
micrographics, although revenues also increased in most other areas of Vestcom's
business.
Vestcom's Pro Forma gross profit increased $3,017,000, or 18.2%, from
$16,554,000 for the nine months ended September 30, 1996 to $19,571,000 for the
nine months ended September 30, 1997. The Pro Forma gross profit margin
increased from 34.2% in 1996 to 36.6% in 1997 primarily due to improved capacity
utilization resulting from the increased volume of business and the refinancing
through capital leases of certain existing production equipment which resulted
in reduced lease and maintenance costs.
Pro Forma selling, general and administrative expenses increased $1,036,000, or
9.0% from $11,567,000 for the nine months ended September 30, 1996 to
$12,603,000 for the nine months ended September 30, 1997. As a percentage of
revenues, selling, general and administrative expenses decreased from 23.9% in
1996 to 23.5% in 1997. The increase in the dollar amount of Pro Forma selling,
general and administrative expense was primarily attributable to increased
compensation expense for new technical personnel, increased commissions,
increased administrative expenses to support the greater volume of business and
the costs associated with the new Vestcom corporate structure while the
percentage decrease was attributable to the increase in revenues discussed
above.
Pro Forma interest expense increased $427,000 or 100% from $0 for the nine
months ended September 30, 1996, to $427,000 for the nine months ended September
30, 1997. The increase in interest expense was due to capitalized leases entered
into in 1997.
Pro Forma interest and other income increased $161,000 or 99% from $163,000 for
the nine months ended September 30, 1996 to $324,000 for the nine months ended
September 30, 1997. This increase was due primarily to the temporary investment
of cash generated by Vestcom's initial public offering.
Pro Forma net income increased from $2,000,000 for the nine months ended
September 30, 1996 to $3,029,000 for the nine months ended September 30, 1997,
for the reasons discussed above.
Three Months Ended September 30, 1997 Compared to Three Months Ended September
30, 1996
================================================================================
Pro Forma revenues increased $1,424,000, or 8.9%, from $16,049,000 for the three
months ended September 30, 1996 to $17,473,000 for the three months ended
September 30, 1997. This increase was primarily attributable to increased
volumes of Vestcom's production of statements, point-of purchase labels and
micrographics, although revenues also increased in most other areas of Vestcom's
business.
Vestcom's Pro Forma gross profit increased $1,285,000, or 25.2%, from $5,091,000
for the three months ended September 30, 1996 to $6,376,000 for the three months
ended September 30, 1997. The Pro Forma gross profit margin increased from 31.7%
in 1996 to 36.5% in 1997 primarily due to improved capacity utilization
resulting from the increased volume of business and the refinancing through
capital leases of certain existing production equipment which resulted in
reduced lease and maintenance costs.
<PAGE>
Pro Forma selling, general and administrative expenses increased $405,000, or
10.3% from $3,944,000 for the three months ended September 30, 1996 to
$4,349,000 for the three months ended September 30, 1997. As a percentage of
revenues, selling general and administrative expenses increased from 24.6% in
1996 to 24.9% in 1997. The increase in Pro Forma selling, general and
administrative expenses was primarily due to increased compensation expense for
new technical personnel, increased commissions, increased administrative
expenses to support the greater volume of business and the costs associated with
the new Vestcom corporate structure.
Pro Forma interest expense increased $177,000 from $0 for the three months ended
September 30, 1996, to $177,000 for the three months ended September 30, 1997.
The increase in interest expense was due to capitalized leases entered into in
1997.
Pro Forma interest and other income increased $207,000 or 259% from $80,000 for
the three months ended September 30, 1996 to $287,000 for the three months ended
September 30, 1997. This increase was due primarily to the temporary investment
of cash generated by Vestcom's initial public offering.
Pro Forma net income increased from $373,000 for the three months ended
September 30, 1996 to $919,000 for the three months ended September 30, 1997,
for the reasons discussed above.
================================================================================
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
================================================================================
On July 30, 1997 Vestcom International, Inc. announced the initial public
offering of 3,850,000 shares of its Common Stock at a price of $13.00 per share.
The Company's underwriters exercised in full an option to purchase an additional
577,500 shares of the Company's Common Stock at $13.00 per share to cover over
allotments of the initial public offering. The capital raised by this offering
was approximately $54,000,000 net of underwriting discounts. On August 13, 1997,
the Company and Summit Bank entered into an Equipment Loan and Revolving Credit
Agreement in the amount of $30,000,000. At September 30, 1997, the entire credit
line was available.
At September 30, 1997, Vestcom had working capital of $26,460,000. Net cash
provided by operating activities for the nine months ended September 30, 1997
was $3,470,000. Net cash used in investing acitivities for the nine months ended
September 30, 1997 was ($73,525,000) which includes the acquisition of the
Founding Companies. Net cash provided by financing activities for the nine
months ended September 30, 1997 was $71,481,000 which includes the issuance of
common stock relating to the public offering.
Long term debt of $8,454,000 consists primarily of capital leases with equipment
vendors for production equipment. Vestcom incurs postage costs on behalf of
customers of approximately $3,000,000 to $6,000,000 each month. The Company's
policy is to collect such postage costs from its customers in advance. To the
extent the Company is unsuccessful in doing so, cash flow is negatively affected
and Vestcom may be required to utilize its bank credit line. While no assurance
can be given, management of Vestcom believes it has adequate cash flow and
financing alternatives available to it to fund its operations and its plan to
acquire additional related businesses for the foreseeable future.
================================================================================
<PAGE>
COMVESTRIX CORP.
================================================================================
On August 4, 1997, all of the outstanding stock of Comvestrix Corp. was acquired
by Vestcom International, Inc. Accordingly, management believes that comparative
analysis of the operating results of Comvestrix for the three months and nine
months ended September 30, 1996, to the one month and the seven months ending
August 1, 1997 (the effective date of acquisition by Vestcom for accounting
purposes), as well as a Comvestrix Liquidity and Capital Resource discussion
would not be meaningful. See Vestcom International, Inc. Pro Forma Consolidated
Management's Discussion and Analysis of Financial Condition and Results of
Operations elsewhere herein.
MORRIS COUNTY DIRECT MAIL SERVICES, INC. and related companies (DMS)
================================================================================
On August 4, 1997, all of the outstanding stock of DMS was acquired by Vestcom
International, Inc. Accordingly, management believes that comparative analysis
of the operating results of DMS for the three months and nine months ended
September 30, 1996, to the one month and the seven months ending August 1, 1997
(the effective date of acquisition by Vestcom for accounting purposes), as well
as a DMS Liquidity and Capital Resource discussion would not be meaningful. See
Vestcom International, Inc. Pro Forma Consolidated Management's Discussion and
Analysis of Financial Condition and Results of Operations elsewhere herein.
IMAGE PRINTING SYSTEMS, INC.
================================================================================
On August 4, 1997, all of the outstanding stock of Image was acquired by Vestcom
International, Inc. Accordingly, management believes that comparative analysis
of the operating results of Image for the three months and nine months ended
September 30, 1996, to the one month and the seven months ending August 1, 1997
(the effective date of acquisition by Vestcom for accounting purposes), as well
as an Image Liquidity and Capital Resource discussion would not be meaningful.
See Vestcom International, Inc. Pro Forma Consolidated Management's Discussion
and Analysis of Financial Condition and Results of Operations elsewhere herein.
ELECTRONIC IMAGING SERVICES, INC. (EIS)
================================================================================
On August 4, 1997, all of the outstanding stock of EIS was acquired by Vestcom
International, Inc. Accordingly, management believes that comparative analysis
of the operating results of EIS for the three months and nine months ended
September 30, 1996, to the one month and the seven months ending August 1, 1997
(the effective date of acquisition by Vestcom for accounting purposes), as well
as an EIS Liquidity and Capital Resource discussion would not be meaningful. See
Vestcom International, Inc. Pro Forma Consolidated Management's Discussion and
Analysis of Financial Condition and Results of Operations elsewhere herein.
COMPUTER OUTPUT SYSTEMS, INC.
================================================================================
On August 4, 1997, all of the outstanding stock of Computer Output was acquired
by Vestcom International, Inc. Accordingly, management believes that comparative
analysis of the operating results of Computer Output for the three months and
nine months ended September 30, 1996, to the one month and the seven months
ending August 1, 1997 (the effective date of acquisition by Vestcom for
accounting purposes), as well as a Computer Output Liquidity and Capital
Resource discussion would not be meaningful. See Vestcom International, Inc.
Pro Forma Consolidated Management's Discussion and Analysis of Financial
Condition and Results of Operations elsewhere herein.
COS INFORMATION
================================================================================
On August 4, 1997, all of the outstanding stock of COS Information was acquired
by Vestcom International, Inc. Accordingly, management believes that comparative
analysis of the operating results of COS Information for the three months and
nine months ended September 30, 1996, to the one month and the seven months
ending August 1, 1997 (the effective date of acquisition by Vestcom for
accounting purposes), as well as a COS Information Liquidity and Capital
Resource discussion would not be meaningful. See Vestcom International, Inc.
Pro Forma Consolidated Management's Discussion and Analysis of Financial
Condition and Results of Operations elsewhere herein.
<PAGE>
Part II: Other Information
Item 2 - Changes in Securities and Use of Proceeds
The Company's initial public offering was effected pursuant to a
registration statement on Form S-1 (No. 333-23519) declared effective by the
Securities and Exchange Commission (the "SEC") on July 29, 1997. The offering
commenced on July 30, 1997 and terminated after all securities were sold.
Pursuant to Rule 463 promulgated by the SEC, the Company provides the following
information regarding its initial public offering:
(a) The managing underwriters were Oppenheimer & Co., Inc. and Prudential
Securities Incorporated.
(b) The title of the class of stock registered was Common Stock, no par
value. The Company sold all 4,427,500 shares that were registered (including
577,500 shares which were sold pursuant to the exercise of the Underwriters'
over-allotment option). There were no selling securityholders. The aggregate
price of the offering amount registered and sold was $57,557,500.
(c) From July 30, 1997 through September 30, 1997, the Company's reasonable
estimate of the amount of expenses incurred for the Company's account in
connection with the issuance and distribution of the securities registered for
underwriting discounts and commissions was $4,029,025, for finders' fees was $0,
for expenses paid to or for underwriters was $ 0 and for other expenses was
$3,796,402. Thus, the total amount of such expenses was $7,825,427 and the net
proceeds to the Company was $49,732,073. Except as set forth in the immediately
following sentence, none of the above-mentioned expenses represented direct or
indirect payments to directors or officers of the Company or their associates,
to persons owning ten percent or more of any class of equity security of the
Company or to affiliates of the Company. As set forth in the above-mentioned
registration statement, one of the Company's directors (Richard D. White) is a
Managing Director at Oppenheimer & Co., Inc., one of the managing underwriters
of the Company's initial public offering.
(d) From July 30, 1997 through September 30, 1997, the Company has used the
following amount of such net proceeds for the following categories enumerated by
the SEC:
Reasonable Estimated
Category Amount
Construction of plant, building and facilities 0
Purchase and installation of machinery and
equipment $ 182,537
Purchases of real estate 0
Acquisition of other businesses $16,032,592
Repayment of indebtedness $10,235,979
Working capital 0
Short term investments $23,280,965
Other purposes for which at least $100,000
has been used 0
None of the above-mentioned uses of proceeds represented direct or indirect
payments to directors or officers of the Company or their associates, to persons
owning ten percent or more of any class of equity security of the Company or to
affiliates of the Company other than as set forth below. As described in the
Company's registration statement, simultaneously with the consummation of the
Company's initial public offering, the Company acquired seven companies which
provide computer output and document management services (the "Founding
Companies"). The following directors and executive officers of the Company
received the following cash payments as part of the consideration paid to them
as stockholders of their respective Founding Companies: Joel Cartun (the
Company's President and Chairman of the Board) received $4,129,610, Gary
Marcello (a director of the Company) received $3,271,303, Howard April (a
director of the Company) received $502,640 and Leslie Abcug (an executive
officer of the Company) received $90,813.
None of the uses described above represents a material change in the use of
proceeds described in the above-mentioned registration statement.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits:
27.1 Financial Data Schedule (For Electronic Submission Only)
(b) Reports on Form 8-K:
None
Signatures
Pursuant to 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.
VESTCOM INTERNATIONAL, INC.
By: /s/Harvey Goldman
_______________________________
Harvey Goldman, Executive Vice
President and Chief Financial Officer
Dated: November 14, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE COMPANY'S BALANCE SHEET AT SEPTEMBER 30, 1997 AND NINE MONTH
STATEMENT OF OPERATIONS ENDING SEPTEMBER 30, 1997 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0001034941
<NAME> VESTCOME INTERNATIONAL, INC.
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 2,770,806
<SECURITIES> 23,280,965
<RECEIVABLES> 12,249,197
<ALLOWANCES> 500,000
<INVENTORY> 1,904,706
<CURRENT-ASSETS> 43,060,935
<PP&E> 20,006,638
<DEPRECIATION> 153,400
<TOTAL-ASSETS> 107,930,998
<CURRENT-LIABILITIES> 16,601,683
<BONDS> 0
0
2,651,867
<COMMON> 81,797,935
<OTHER-SE> (4,898,217)
<TOTAL-LIABILITY-AND-EQUITY> 107,930,998
<SALES> 11,050,965
<TOTAL-REVENUES> 11,050,965
<CGS> (6,668,305)
<TOTAL-COSTS> (3,662,201)
<OTHER-EXPENSES> (242,248)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (413,249)
<INCOME-PRETAX> 357,802
<INCOME-TAX> 240,020
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 117,782
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
