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Previous: LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT M, 24F-2NT, 1999-03-19 |
Next: DOLLAR THRIFTY AUTOMOTIVE GROUP INC, 10-K, 1999-03-19 |
<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 8-K/A
----------------------
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
January 4, 1999
------------------------------------------------------
(Date of earliest event reported)
BIG FLOWER HOLDINGS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-29474 13-3971556
(State of Incorporation) (Commission File Number) (IRS Employer
Identification No.)
3 East 54th Street
New York, NY 10022
- --------------------------------------------------------------------------------
(Address of Registrant's principal executive office)
(212) 521-1600
- --------------------------------------------------------------------------------
(Registrant's telephone number)
================================================================================
<PAGE>
Item 7. Financial Statements, Pro Forma Information and Exhibits.
(a) Financial Statements of Businesses Acquired.
The financial statements for Colorgraphic Direct Response Limited
("Colorgraphic") are filed herewith.
(b) Pro Forma Financial Information.
The unaudited pro forma condensed combined financial information of
the Registrant, reflecting the acquisition Colorgraphic, is filed herewith.
Exhibits.
2.1 Agreement, dated December 16, 1998, among Big Flower Limited, Colorgraphic
Direct Response Limited and the holders of capital stock of Colorgraphic
Direct Response Limited. (1)
99.1 Registrant's press release dated December 16, 1998. (1)
99.2 Registrant's press release dated January 5, 1999. (1)
99.3 Financial Statements of Colorgraphic for the year ended September 30,
1998. *
99.4 Financial Statements of Colorgraphic for the year ended September 30,
1997. *
99.5 Summary of Differences between UK and US GAAP for the year ended September
30, 1997. *
99.6 Pro forma condensed combined financial data. *
- --------------------------------------------------------------------------------
* Being Filed Herewith
(1) Incorporated by reference to Registrant's Current Report on Form 8-K, dated
January 4, 1999, concerning the consummation of the Registrant's acquisition of
Colorgraphic Direct Response Limited (File #0-29474).
<PAGE>
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.
BIG FLOWER HOLDINGS, INC.
/s/ RICHARD L. RITCHIE
--------------------------------------
Richard L. Ritchie
Executive Vice President and Chief
Financial Officer (Principal Financial
and Accounting Officer)
DATE: March 19, 1999
<PAGE>
EXHIBIT INDEX
EXHIBIT
NO.
- ---
2.1 Agreement, dated December 16, 1998, among Big Flower Limited, Colorgraphic
Direct Response Limited and the holders of capital stock of Colorgraphic
Direct Response Limited. (1)
99.1 Registrant's press release dated December 16, 1998. (1)
99.2 Registrant's press release dated January 5, 1999. (1)
99.3 Financial Statements of Colorgraphic for the year ended September 30,
1998. *
99.4 Financial Statements of Colorgraphic for the year ended September 30,
1997. *
99.5 Summary of Differences between UK and US GAAP for the year ended September
30, 1997. *
99.6 Pro forma condensed combined financial data. *
- --------------------------------------------------------------------------------
* Being Filed Herewith
(1) Incorporated by reference to Registrant's Current Report on Form 8-K, dated
January 4, 1999, concerning the consummation of the Registrant's acquisition of
Colorgraphic Direct Response Limited (File #0-29474).
<PAGE>
Exhibit 99.3
COLORGRAPHIC DIRECT RESPONSE LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
30 September 1998
Registered number 3135040
<PAGE>
FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<S> <C>
Independent Auditors Report 1
Consolidated profit and loss account 2
Consolidated balance sheet 3
Consolidated cash flow statement 4
Notes 5
</TABLE>
<PAGE>
kpmg
1 Waterloo Way
Leicester
LE1 6LP
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS OF COLORGRAPHIC DIRECT RESPONSE LIMITED
We have audited the accompanying consolidated balance sheet of Colorgraphic
Direct Response Limited and its subsidiaries at 30 September 1998, and the
related consolidated profit and loss account, statement of movements in
shareholders' equity and consolidated cash flow statement for the year ended 30
September 1998. These consolidated financial statements are the responsibility
of the management of Colorgraphic Direct Response Limited. Our responsibility is
to express an opinion on these consolidated financial statements based on our
audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United Kingdom, that are substantially equivalent to auditing standards
generally accepted in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Colorgraphic Direct
Response Limited and its subsidiaries at 30 September 1998, and the results of
their operations and their cash flow for the year ended 30 September 1998, in
conformity with generally accepted accounting principles in the United Kingdom.
Accounting principles generally accepted in the United Kingdom vary in certain
significant respects from accounting principles generally accepted in the United
States of America. Application of accounting principles generally accepted in
the United States would have affected net income for the year ended 30 September
1998 and shareholders' equity at 30 September 1998, to the extent summarised in
Note 26 to the consolidated financial statements.
/s/ KPMG 11 November 1998
Chartered Accountants
Registered Auditor
Leicester
England
<PAGE>
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30 SEPTEMBER 1998
<TABLE>
<CAPTION>
NOTE 1998
(pound)'000
<S> <C> <C>
TURNOVER 2 33,374
Cost of sales (22,921)
--------
GROSS PROFIT 10,453
Distribution costs (832)
Administrative expenses (4,616)
--------
OPERATING PROFIT 3 - 5 5,005
Net interest payable 6 (798)
--------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 4,207
Tax on profit on ordinary activities 7 (1,295)
--------
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 2,912
Dividends on equity and non-equity shares 8 (745)
--------
RETAINED PROFIT FOR THE YEAR 2,167
--------
--------
</TABLE>
A statement of the movement on reserves is given in note 17.
The group has no recognised gains or losses nor historical cost profits and
losses other than the profit for the year.
The results of the group all relate to continuing activities.
The accompanying notes form an integral part of these consolidated financial
statements.
2
<PAGE>
CONSOLIDATED BALANCE SHEET
AT 30 SEPTEMBER 1998
<TABLE>
<CAPTION>
NOTE 1998
(pound)'000 (pound)'000
<S> <C> <C> <C>
FIXED ASSETS
Tangible assets 9 11,153
CURRENT ASSETS
Stocks and work in progress 10 805
Debtors 11 7,772
Cash at bank and in hand 139
--------
8,716
CREDITORS: amounts falling due within one year 12 (11,789)
--------
NET CURRENT LIABILITIES (3,073)
-------
TOTAL ASSETS LESS CURRENT LIABILITIES 8,080
CREDITORS: amounts falling due after more than
one year 13 (6,968)
PROVISIONS FOR LIABILITIES AND CHARGES 15 (784)
-------
NET ASSETS 328
-------
-------
CAPITAL AND RESERVES
Called up share capital 16 10,450
Profit and loss account 17 (10,122)
-------
328
-------
-------
SHAREHOLDERS' FUNDS
Equity deficit (9,622)
Non-equity 9,950
-------
-------
328
-------
-------
</TABLE>
The accompanying notes form an integral part of these consolidated financial
statements.
These financial statements were approved by the board of directors on 11
November 1998 and were signed on its behalf by:
/s/ RS TAYLOR
DIRECTOR
3
<PAGE>
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 SEPTEMBER 1998
<TABLE>
<CAPTION>
NOTE 1998
(pound)'000
<S> <C> <C>
CASH FLOW STATEMENT
CASH FLOW FROM OPERATING ACTIVITIES 21 7,235
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE 22 (1,512)
TAXATION (1,260)
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT 22 (6,086)
FINANCING 22 (886)
-------
DECREASE IN CASH IN THE YEAR (2,509)
-------
-------
RECONCILIATION OF NET CASH FLOW
TO MOVEMENT IN NET DEBT
DECREASE IN CASH IN THE YEAR (2,509)
Cash inflow from increase in debt and lease financing 2,886
-------
Change in net debt resulting from cash flows 377
New loans (2,000)
-------
MOVEMENT IN NET DEBT IN THE YEAR (1,623)
NET DEBT AT THE START OF THE YEAR (8,174)
-------
NET DEBT AT THE END OF THE YEAR 23 (9,797)
-------
-------
</TABLE>
The accompanying notes form an integral part of these consolidated financial
statements.
4
<PAGE>
NOTES
(FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS)
1 ACCOUNTING POLICIES
These non-statutory financial statements have been prepared in accordance with
applicable Accounting Standards in the United Kingdom. A summary of the more
important accounting policies, which have been applied consistently, is set out
below.
BASIS OF PREPARATION
The consolidated financial statements have been prepared in accordance with
applicable accounting standards and under the historical cost accounting rules.
BASIS OF CONSOLIDATION
The consolidated financial statements include the financial statements of the
company and its subsidiary undertakings made up to 30 September 1998.
Goodwill arising on consolidation (representing the excess of the fair value of
the consideration given over the fair value of the separable net assets
acquired) is written off against reserves on acquisition.
Under section 230(4) of the Companies Act 1985 the company is exempt from the
requirement to present its own profit and loss account.
FIXED ASSETS AND DEPRECIATION
Depreciation is provided to write off the cost or valuation less the estimated
residual value of tangible fixed assets by equal instalments over their
estimated useful economic lives as follows:
<TABLE>
<S> <C> <C>
Leasehold land and buildings - life of lease
Plant and machinery - 3 to 10 years
Motor vehicles - 4 years
</TABLE>
FOREIGN CURRENCIES
Transactions in foreign currencies are recorded using the rate of exchange
ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are translated using the rate of exchange
ruling at the balance sheet date and the gains or losses on translation are
included in the profit and loss account.
5
<PAGE>
NOTES (CONTINUED)
ACCOUNTING POLICIES (continued)
LEASES
Assets acquired under finance leases are capitalised and the outstanding future
lease obligations are shown in creditors. Operating lease rentals are charged to
the profit and loss account on a straight line basis over the period of the
lease.
POST RETIREMENT BENEFITS
The group operates a defined contribution pension scheme. The amount charged
against profits represents the contributions payable to the scheme in respect of
the accounting period.
STOCKS
Stocks are stated at the lower of cost and net realisable value.
TAXATION
The charge for taxation is based on the profit for the year and takes into
account taxation deferred because of timing differences between the treatment of
certain items for taxation and accounting purposes. Provision is made for
deferred tax only to the extent that it is probable that an actual liability
will crystallise.
Advance corporation tax recoverable by deduction from future corporation tax is
carried forward within deferred taxation or as ACT recoverable within debtors as
appropriate.
TURNOVER
Turnover represents the amounts (excluding value added tax) derived from the
provision of goods and services to third party customers.
CASH AND LIQUID RESOURCES
Cash, for the purpose of the cash flow statement, comprises cash in hand and
deposits repayable on demand, less overdrafts payable on demand.
Liquid resources are current asset investments which are disposable without
curtailing or disrupting the business and are either readily convertible into
known amounts of cash at or close to their carrying values or traded in an
active market. Liquid resources comprise term deposits of less than one year
(other than cash), government securities and investments in money market managed
funds.
6
<PAGE>
NOTES (CONTINUED)
2 ANALYSIS OF TURNOVER
All turnover is derived in the United Kingdom. The geographical analysis of
turnover by destination is stated below:
<TABLE>
<CAPTION>
Turnover
1998
(pound)'000
<S> <C>
BY GEOGRAPHICAL MARKET
United Kingdom 30,219
Europe (excluding UK) 2,164
USA 991
------
33,374
------
------
</TABLE>
The directors are of the opinion that the group has only one class of business
and therefore no further analysis of turnover, profit or assets is provided.
3 PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
<TABLE>
<CAPTION>
1998
(pound)'000
<S> <C>
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION IS STATED
AFTER CHARGING
Auditors' remuneration:
Group - audit 20
- fees paid to the auditor and its associates in respect of other services 12
Depreciation and other amounts written off tangible and intangible fixed assets:
Owned 1,871
Leased 168
Hire of plant and machinery - rentals payable under operating leases 674
AFTER CREDITING
Exchange gains 82
------
------
</TABLE>
7
<PAGE>
NOTES (CONTINUED)
4 REMUNERATION OF DIRECTORS
<TABLE>
<CAPTION>
1998
(pound)'000
<S> <C>
Directors' emoluments 356
Company contributions to money purchase pension schemes 82
Compensation for loss of office 30
---
468
---
---
</TABLE>
The aggregate of emoluments and amounts receivable under long term incentive
schemes of the highest paid director was (pound)127,163, and company pension
contributions of (pound)12,000 were made to a money purchase scheme on his
behalf. Disclosure of directors' share options may be found under directors'
share interests in the directors' report.
<TABLE>
<CAPTION>
NUMBER OF DIRECTORS
1998
<S> <C>
Retirement benefits are accruing to the following number of directors under:
Money purchase schemes 3
Defined benefit schemes -
----
----
The number of directors who exercised share options was -
----
----
The number of directors in respect of whose services shares were received or
receivable under long term incentive schemes was -
----
----
</TABLE>
5 STAFF NUMBERS AND COSTS
The average number of persons employed by the group (including directors) during
the year, analysed by category, was as follows:
<TABLE>
<CAPTION>
NUMBER OF EMPLOYEES
1998
<S> <C>
Production 227
Administration 88
----
315
----
----
</TABLE>
8
<PAGE>
NOTES (CONTINUED)
STAFF NUMBERS AND COSTS (CONTINUED)
The aggregate payroll costs of these persons were as follows:
<TABLE>
<CAPTION>
1998
<S> <C>
(pound)'000
Wages and salaries 8,279
Social security costs 809
Other pension costs 129
------
9,217
------
------
</TABLE>
6 INTEREST PAYABLE AND SIMILAR CHARGES
<TABLE>
<CAPTION>
1998
(pound)'000
<S> <C>
On all other loans 915
Bank interest receivable (181)
Finance charges payable in respect of finance leases and hire purchase contracts 64
------
798
------
------
</TABLE>
7 TAXATION
<TABLE>
<CAPTION>
1998
(pound)'000
<S> <C>
UK corporation tax at 31% - current year 1,141
Deferred taxation - current year 182
- prior year (23)
ACT surrender (5)
------
1,295
------
------
</TABLE>
9
<PAGE>
NOTES (CONTINUED)
8 DIVIDENDS
<TABLE>
<CAPTION>
1998
(pound)'000
<S> <C>
`A' preference shares 587
`B' preference shares 98
Preferred ordinary shares 60
------
745
------
------
</TABLE>
9 TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
PLANT AND FIXTURES AND
MACHINERY FITTINGS TOTAL
(pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C>
GROUP
COST
At beginning of year 13,050 944 13,994
Additions 6,054 52 6,106
Disposals (47) - (47)
------- ------- -------
At end of year 19,057 996 20,053
------- ------- -------
DEPRECIATION
At beginning of year 6,257 640 6,897
Charge for year 2,028 11 2,039
On disposals (36) - (36)
------- ------- -------
At end of year 8,249 651 8,900
------- ------- -------
NET BOOK VALUE
AT 30 SEPTEMBER 1998 10,808 345 11,153
------- ------- -------
------- ------- -------
</TABLE>
Included in plant and machinery are leased assets with a net book value of
(pound)866,000. The depreciation charge on these assets in the year amounted to
(pound)168,000.
10
<PAGE>
NOTES (CONTINUED)
10 STOCKS
<TABLE>
<CAPTION>
GROUP
1998
(pound)'000
<S> <C>
Raw materials and consumables 677
Work in progress 128
----
805
----
----
</TABLE>
11 DEBTORS
<TABLE>
<CAPTION>
1998
(pound)'000
<S> <C>
Trade debtors 6,466
Amounts owed by group undertakings -
Prepayments and accrued income 1,306
------
7,772
------
------
</TABLE>
12 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
1998
(pound)'000
<S> <C>
Bank loans and overdrafts (see note 14) 2,790
Obligations under finance leases and
hire purchase contracts 178
Trade creditors 5,437
Amounts owed to group undertakings -
Taxation and social security 294
Corporation tax payable 962
Other creditors 812
Accruals and deferred income 1,223
ACT payable 93
-------
11,789
-------
-------
</TABLE>
11
<PAGE>
NOTES (CONTINUED)
13 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
1998
(pound)'000
<S> <C>
Debenture loans 6,952
Obligations under finance leases and hire purchase contracts
16
-------
6,968
-------
-------
</TABLE>
The obligations under finance leases all expire in one to two years.
<TABLE>
<CAPTION>
1998
(pound)'000
<S> <C>
Debt can be analysed as falling due:
In one year or less, or on demand 2,757
Between one and two years 2,650
Between two and five years 4,302
In five years or more 33
------
9,742
------
------
</TABLE>
12
<PAGE>
NOTES (CONTINUED)
14 LOANS
<TABLE>
<CAPTION>
1998
(pound)'000
<S> <C>
Lombard 2,140
Bank of Scotland 7,602
Other loan -
------
9,742
------
------
</TABLE>
The loans from Lombard North Central plc are industrial mortgages secured on
specific items of plant and equipment and are repayable by instalments. Interest
is payable at fixed rates of 8.32% and 9.08%.
The loan from the Bank of Scotland is repayable in half yearly instalments over
a period of six years. Interest is charged at 2% over LIBOR. The loan is secured
by a debenture consisting of fixed and floating charges.
15 PROVISIONS FOR LIABILITIES AND CHARGES
<TABLE>
<CAPTION>
TAXATION
INCLUDING
DEFERRED
TAXATION
(pound)'000
<S> <C>
GROUP
At beginning of year 625
Charge for the year 159
----
At end of year 784
----
----
</TABLE>
13
<PAGE>
NOTES (CONTINUED)
16 CALLED UP SHARE CAPITAL
<TABLE>
<CAPTION>
1998
(pound)'000
<S> <C>
AUTHORISED
Equity: 6,500,000 Ordinary shares of 10p each 650
------
------
ALLOTTED, CALLED UP AND FULLY PAID
Equity: 5,000,000 Ordinary shares of 10p each 500
------
------
AUTHORISED, ALLOTTED, CALLED UP AND FULLY PAID
Non-equity: 2,692,300 Preferred ordinary shares of 10p 269
Non-equity: 8,380,770 `A' preference shares of (pound)1 8,381
Non-equity:1,300,000 `B' preference shares of (pound)1 1,300
------
9,950
------
Total
10,450
------
------
</TABLE>
"A" PREFERENCE SHARES
The shares of (pound)1 each may be redeemed by the company, provided written
consent has been obtained from not less than three-quarters of the shareholders.
Alternatively 750,000 shares will be redeemed on 30 September 1999, 30 September
2000 and 30 September 2001 respectively. 1,500,000 shares shall be redeemed on
30 September 2002 and 2,000,000 shares on 30 September 2003. All of the
remaining "A" preference shares will be redeemed on 30 September 2004. The
amount paid up together with all arrears and accruals of the fixed dividend will
be payable upon redemption.
The shares carry a dividend of 7% from 1 October 1997 payable half yearly on 15
January and 15 July. The dividends are cumulative. No voting rights attach to
the shares unless the dividend or redemptions' are in arrears or the business of
any meeting includes a resolution for the liquidation of the company, a
reduction of the capital or a resolution directly or adversely abrogating any of
the special rights and privileges attaching to the "A" preference shares.
On a winding up the shares carry the right in priority to the holders of any
other class of share, repayment of the amount paid up together with all arrears
and accruals of the fixed dividend.
14
<PAGE>
NOTES (CONTINUED)
CALLED UP SHARE CAPITAL (CONTINUED)
"B" PREFERENCE SHARES
The shares may be redeemed by the company at any time, provided written consent
has been obtained from not less than three-quarters of the "A" preference shares
and the "B" preference shares in issue or an Extraordinary Resolution has been
passed. The "B" preference shares not previously redeemed will be redeemed on 1
March 2005.
The shares carry a dividend of 7.5% from 1 October 1997 payable half yearly on
15 January and 15 July following the payment of all dividend due to the holders
of "A" preference shares but in priority to the holders of any other class of
share. The rights to the dividend are cumulative.
On a winding up the shares carry the entitlement, after payment of all sums due
to the holders of "A" Preference shares but in priority to the holders of any
other class of share, repayment of the amount paid up together with all arrears
and accruals of the fixed dividend.
PREFERRED ORDINARY SHARES
The shares carry a dividend of 7.5% for the period from 1 October 1997 to 30
September 1998 payable half yearly on 15 January and 15 July. Thereafter an
interim dividend equal to 4% of the issue price will be paid on 15 July and a
final dividend equal to 7.5% of the consolidated net profit after taxation less
the interim dividend paid will be paid on 15 January each year.
On a winding up the shares carry the entitlement after payment of all sums due
to the holders of "A" Preference shares and then "B" Preference shares but in
priority to the holders of any other class of share, to receive, an amount equal
to the issue price together with all arrears and accruals of the dividend
payable. After payments to the holders of Preference shares and Preferred
Ordinary shares mentioned above and after payment to the holders of the Ordinary
shares of amounts equal to the issue price, the shares also carry the right to a
proportion of the balance of any assets, equal to the proportion that the total
issue price of all the Preferred Ordinary shares to the amount paid up in
respect of all the Preferred Ordinary shares then in issue.
ORDINARY SHARES
Except with the consent or sanction of the holders of the Preference shares and
the Preferred Ordinary shares, the holders of the 10p Ordinary shares are not
entitled to receive any dividend.
On a winding up the Ordinary shares will be entitled after payment of all sums
due to the holders of "A" Preference shares, "B" preference shares and Preferred
Ordinary shares, to receive an amount equal to a proportion of the balance of
such assets equal to the proportion that the amount paid up on the Ordinary
shares together with an amount credited to the shares premium account in respect
of such Ordinary shares bears to the aggregate of the amount paid up and the
amount credited to the share premium account of the company in respect of all
the Preferred ordinary shares and Ordinary shares.
15
<PAGE>
NOTES (CONTINUED)
17 PROFIT AND LOSS ACCOUNT
<TABLE>
<CAPTION>
PROFIT
AND LOSS
ACCOUNT
(pound)'000
<S> <C>
GROUP
At beginning of year (12,289)
Retained profit for the year 2,167
--------
At end of year (10,122)
--------
--------
</TABLE>
Goodwill arising on the purchase of Colorgraphic (Leicester) Limited during
the year ended 30 September 1996, representing the excess of the
consideration of (pound)16,360,000 over the net asset value of
(pound)305,000, was written off to reserves during that year.
18 CONTINGENT LIABILITIES
A documentary credit is in place in the amount of DEM 719,000.
16
<PAGE>
NOTES (CONTINUED)
19 COMMITMENTS
(a) Capital commitments at the end of the financial year for which no
provision has been made, are as follows:
<TABLE>
<CAPTION>
1998
(pound)'000
<S> <C>
Contracted 2,027
-------
-------
</TABLE>
(b) Annual commitments under non-cancellable operating leases are as follows:
<TABLE>
<CAPTION>
1999
Land and Other
buildings
(pound)'000 (pound)'000
<S> <C> <C>
GROUP
Operating leases which expire:
Within one year - -
In the second to fifth years inclusive 120 418
Over five years 377 -
---- ----
497 418
---- ----
---- ----
</TABLE>
20 PENSION SCHEME
The group operates a defined contribution pension scheme. The pension cost
charge for the period represents contributions payable by the group to the fund
and amounted to (pound)129,000.
There were no outstanding or prepaid contributions at either the beginning or
end of the financial year.
17
<PAGE>
NOTES (CONTINUED)
21 RECONCILIATION OF OPERATING PROFIT TO OPERATING CASH FLOWS
<TABLE>
<CAPTION>
1998
Total
(pound)'000
<S> <C>
Operating profit 5,005
Depreciation charge 2,039
Profit on sale of fixed assets (8)
Decrease in stocks 81
Increase in debtors (1,073)
Increase in creditors 1,191
------
NET CASH INFLOW FROM OPERATING ACTIVITIES 7,235
------
------
</TABLE>
22 ANALYSIS OF CASH FLOWS
<TABLE>
<CAPTION>
1998 1998
(pound)'000 (pound)'000
<S> <C> <C>
RETURNS ON INVESTMENT AND SERVICING OF FINANCE
Interest received 181
Interest paid (915)
Preference dividend paid (714)
Interest element of finance lease rental payments (64)
-------
(1,512)
-------
-------
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of tangible fixed assets (6,106)
Sale of plant and machinery 20
------
(6,086)
-------
-------
FINANCING
Debt due within one year:
Repayment of secured loan (2,417)
Debt due after more than one year:
New secured loan 2,000
Capital element of finance lease rental payments (469)
------
(886)
-------
-------
</TABLE>
18
<PAGE>
NOTES (CONTINUED)
23 ANALYSIS OF NET DEBT
<TABLE>
<CAPTION>
At beginning of Cash flow Other non-cash At end of year
year changes
(pound)'000 (pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C>
Cash in hand, at bank 2,648 (2,509) - 139
Debt due after one year (7,699) 2,130 (1,383) (6,952)
Debt due within one year (2,460) 287 (617) (2,790)
Finance leases (663) 469 (194)
------- ------- ------- -------
TOTAL (8,174) 377 (2,000) (9,797)
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
24 POST BALANCE SHEET EVENTS
On January 4, 1999 the entire share capital of the company was acquired by
Big Flower Limited its current immediate parent company. Its ultimate holding
company is Big Flower Holdings,Inc.
25 SHARE OPTIONS
During the financial year share options were granted to Mr CW Ingham by way of
an option to subscribe for 13% of the issued ordinary shares of the company
immediately prior to an exit event which shall be satisfied by the issue of
1,250,000 shares. An exit event means the first to occur of flotation, sale or
liquidation. The consideration payable for each option share shall be the
nominal value of that option share. The Board has 21 days to notify the option
holder of an exit event, he then has 14 days after receipt of the notice to
serve an option notice.
These share options were exercised following the acquisition by Big Flower
Limited as detailed in note 24.
26 SUMMARY OF DIFFERENCES BETWEEN UK AND US GAAP
The consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United Kingdom ("UK GAAP"). These
accounting principles differ in certain material respects from accounting
principles generally accepted in the United States ("US GAAP"). Described below
are the material differences between UK GAAP and US GAAP, affecting the
consolidated net income and shareholders' equity which are set forth in the
tables that follow.
GOODWILL
Under UK GAAP, goodwill arising on consolidation representing the excess of the
fair values of the consideration given over the fair value of the separate net
assets acquired is written off against reserves on acquisition. Under US GAAP
purchased goodwill should be capitalised and amortised over its estimated useful
life not exceeding 40 years using the straight line method.
19
<PAGE>
NOTES (CONTINUED)
Effect of material differences between UK and US GAAP and additional
disclosures.
a) Net income
<TABLE>
<CAPTION>
1998
(pound)'000
<S> <C>
Net income reported under UK GAAP 2,167
Amortisation of goodwill (401)
---------
Net income in accordance with US GAAP 1,766
---------
---------
</TABLE>
b) Shareholders equity
<TABLE>
<CAPTION>
1998
(pound)'000
<S> <C>
Shareholders equity reported under UK GAAP 328
Goodwill write off reinstated net of amortisation 15,252
---------
Shareholders equity in accordance with US GAAP 15,580
---------
---------
</TABLE>
c) Cash flows
The combined cash flow statements prepared in accordance with UK GAAP present
substantially the same information as that required under US GAAP. Under US GAAP
however, there are certain differences from UK GAAP with regard to
classification of items within the cash flow statement and with regard to the
definition of cash and cash equivalents.
Under UK GAAP, cash flows are presented separately for operating activities,
returns on investments and servicing of finance, taxation, capital expenditure
and financial investment, acquisitions and disposals, and equity dividends paid.
Under US GAAP, three categories of cash flow activity are reported , being
operating activities, investing activities and financing activities. Cash flows
from taxation and returns on investments and servicing of finance would, with
the exception of dividends paid and cost of financing, be included as operating
activities under US GAAP. The payment of dividends and cost of financing would
be included under financing activities under US GAAP.
20
<PAGE>
NOTES (CONTINUED)
Under US GAAP, cash and equivalents do not include bank loans and overdrafts
repayable within three months from the date of the advance as is the case under
UK GAAP. Under US GAAP, all short-term borrowings are included under financing
activities.
Set out below, for illustrative purposes, is a summary consolidated statement of
cash flows under US GAAP.
<TABLE>
<CAPTION>
1998
(pound)'000
<S> <C>
Net cash provided by operating activities 5,177
Net cash outflow from investing activities (6,086)
Net cash flow from financing activities (1,600)
--------
Net decrease in cash and cash equivalents under US GAAP (2,509)
Overdrafts with original maturity less than three months -
--------
Net decrease in cash balances under UK GAAP (2,509)
--------
--------
</TABLE>
21
<PAGE>
Exhibit 99.4
COLORGRAPHIC DIRECT RESPONSE LIMITED
(Registered Number: 3135040)
DIRECTORS' REPORT AND ACCOUNTS
YEAR ENDED 30 SEPTEMBER 1997
<PAGE>
COLORGRAPHIC DIRECT RESPONSE LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 30 SEPTEMBER 1997
The directors have pleasure in submitting their report and accounts for the year
ended 30 September 1997.
ACTIVITIES AND REVIEW OF THE BUSINESS
The group's principal activity during the year was the printing and production
of direct response products.
The group profit for the year after tax amounted to (pound)2,851,000, (1996:
(pound)1,801,000). A dividend of (pound)886,000 was declared in the year which
included the undeclared dividend of (pound)292,000 relating to 1996.
(pound)2,257,000 (1996: (pound)1,509,000) has been transferred to reserves. The
undeclared dividend relating to 1996 has been deducted from reserves.
DIRECTORS
The directors who held office during the year were as follows:
M G Hunter OBE (Chairman)
R S Taylor
N W Dixon
K P Reynolds
C Ingham (appointed 15 September 1997)
R M Parker (resigned 14 November 1997)
The interests of the directors who held office at the year end, in the shares of
the company at 30 September 1997 were:
<TABLE>
<CAPTION>
Ordinary shares of 10p each
--------------------------------------
30 September 1997 30 September 1996
----------------- -----------------
Number Number
<S> <C> <C>
M G Hunter OBE: Beneficial 1,769,240 1,769,240
R S Taylor: Non-beneficial 1,615,380 1,615,380
NW Dixon: Non-beneficial 1,615,380 1,615,380
</TABLE>
<TABLE>
<CAPTION>
Preferred ordinary shares of 10p each
--------------------------------------
30 September 1997 30 September 1996
----------------- -----------------
Number Number
<S> <C> <C>
MG Hunter OBE: Beneficial 591,380 591,380
K P Reynolds: Beneficial 2,600 2,600
</TABLE>
1
<PAGE>
COLORGRAPHIC DIRECT RESPONSE LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 30 SEPTEMBER 1997 (CONTINUED)
DIRECTORS (CONTINUED)
<TABLE>
<CAPTION>
"A" preference shares of (pound)1 each
----------------------------------------
30 September 1997 30 September 1996
----------------- -----------------
Number Number
<S> <C> <C>
M G Hunter OBE: Non beneficial 1,840,862 1,840,862
</TABLE>
<TABLE>
<CAPTION>
"B" preference shares of (pound)1 each
----------------------------------------
30 September 1997 30 September 1996
----------------- -----------------
Number Number
<S> <C> <C>
M G Hunter OBE: Beneficial 583,938 583,938
M G Hunter OBE: Non beneficial 339,138 339,138
R S Taylor: Beneficial 188,462 188,462
N Dixon: Beneficial 188,462 188,462
</TABLE>
CHARITABLE DONATIONS
During the year the company made charitable donations of (pound)2,100 (1996:
(pound)Nil). The company did not make any political donations.
AUDITORS
A resolution proposing the appointment of KPMG as auditors will be presented at
the Annual General Meeting.
EMPLOYEES
During the period, the company gave full and fair consideration to applications
for employment from disabled persons having regard to their particular aptitudes
when related to any suitable opportunities available. Company policy provides
that existing employees who become disabled shall continue employment with the
company if at all possible, subject to any appropriate retraining.
Training, career development and promotion apply equally to all employees,
taking into consideration their aptitudes and abilities.
Matters of interest and concern are regularly circulated to employees. Meetings
are held at various staff levels on a regular basis to discuss matters of mutual
interest and the view of employees are taken into account when making decisions
which are likely to affect their interests.
2
<PAGE>
COLORGRAPHIC DIRECT RESPONSE LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 30 SEPTEMBER 1997 (CONTINUED)
DIRECTORS' RESPONSIBILITIES
Company law requires the directors to prepare financial statements for each
financial period which give a true and fair view of the state of affairs of the
company and the group and of the profit or loss of the group for that period. In
preparing those financial statements, the directors are required to
o select suitable accounting policies and then apply them consistently;
o make judgements and estimates that are reasonable and prudent;
o state whether applicable accounting standards have been followed, subject to
any material departures disclosed and explained in the financial statements;
o prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the group will continue in business.
The directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
company and the group and to enable them to ensure that the financial statements
comply with the Companies Act 1985. They are also responsible for safeguarding
the assets of the company and of the group and hence for taking reasonable steps
for the prevention and detection of fraud and other irregularities.
By Order of the Board
R S Taylor
SECRETARY
15 December 1997
3
<PAGE>
AUDITORS' REPORT TO THE SHAREHOLDERS OF
COLORGRAPHIC DIRECT RESPONSE LIMITED
We have audited the financial statements on pages 5 to 22 which have been
prepared under the historical cost convention and the accounting policies set
out on pages 9 and 10.
Respective responsibilities of directors and auditors
As described on page 3 the company's directors are responsible for the
preparation of financial statements. It is our responsibility to form an
independent opinion, based on our audit, on those statements and to report our
opinion to you.
Basis of opinion
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements. It
also includes an assessment of the significant estimates and judgements made by
the directors in the preparation of the financial statements, and of whether the
accounting policies are appropriate to the company's circumstances, consistently
applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information In the financial statements.
Opinion
In our opinion the financial statements give a true and fair view of the state
of affairs of the company and of the group as at 30 September 1997 and of the
profit and cash flows of the group for the year then ended and have been
properly prepared in accordance with the Companies Act 1985.
Price Waterhouse
Chartered Accountants and
Registered Auditors 15 December 1997
4
<PAGE>
COLORGRAPHIC DIRECT RESPONSE LIMITED
GROUP PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30 SEPTEMBER 1997
<TABLE>
<CAPTION>
7 Months
1997 1996
---- --------
(pound)'000 (pound)'000
<S> <C> <C> <C>
TURNOVER (Note 2) 30,350 16,980
Cost of sales (20,916) (11,421)
------- -------
GROSS PROFIT 9,434 5,559
Distribution costs (849) (533)
Administrative expenses (3,792) (1,880)
------- -------
OPERATING PROFIT (Notes 3 & 4) 4,793 3,146
Net interest payable (Note 5) (840) (575)
------- -------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 3,953 2,571
Tax on profit on ordinary activities (Note 6) (1,102) (770)
------- -------
PROFIT FOR THE PERIOD 2,851 1,801
Non-equity dividend (Note 18) (886) (292)
Reversal of undeclared non-equity preference
and preferred ordinary dividend 292 --
------- -------
TRANSFER TO RESERVES (Note 19) 2,257 1,509
======= =======
</TABLE>
There are no recognised gains or losses, nor historical cost profits and losses,
other than the profit for the year. Consequently, separate statements of total
recognised gains and losses and historical cost profits and losses are not
presented. All operations are continuing.
The notes on pages 9 to 22 form part of these accounts.
5
<PAGE>
COLORGRAPHIC DIRECT RESPONSE LIMITED
GROUP BALANCE SHEET - 30 SEPTEMBER 1997
<TABLE>
<CAPTION>
1997 1996
---- ----
(pound)'000 (pound)'000
FIXED ASSETS
<S> <C> <C>
Tangible assets (Note 7) 7,097 7,469
------- -------
CURRENT ASSETS
Stock and work in progress (Note 9) 886 1,204
Debtors (Note 10) 6,699 6,580
Cash at bank and in hand 2,648 1,095
------- -------
10,233 8,879
CREDITORS - Amounts falling due within one year
(Note 11) (10,651) (9,542)
------- -------
NET CURRENT LIABILITIES (418) (663)
------- -------
TOTAL ASSETS LESS CURRENT LIABILITIES 6,679 6,806
CREDITORS - Amounts falling due after more than
one year (Note 12) (7,893) (10,043)
PROVISIONS FOR LIABILITIES AND CHARGES (Note 16) (625) (567)
------- -------
(1,839) (3,804)
======= =======
CAPITAL AND RESERVES
Called up share capital (Note 17) 10,450 10,450
Profit and loss account (Note 19) (12,289) (14,254)
------- -------
Total shareholders' funds (Note 20) (1,839) (3,804)
======= =======
Equity shareholders' funds (11,789) (14,046)
Non-equity shareholders' funds (Note 20) 9,950 10,242
------- -------
(1,839) (3,804)
======= =======
</TABLE>
APPROVED BY THE BOARD ON
15 DECEMBER 1997
M G Hunter
DIRECTOR
The notes on pages 9 to 22 form part of these accounts.
6
<PAGE>
COLORGRAPHIC DIRECT RESPONSE LIMITED
COMPANY BALANCE SHEET - 30 SEPTEMBER 1997
<TABLE>
<CAPTION>
1997 1996
---- ----
(pound)'000 (pound)'000
<S> <C> <C>
FIXED ASSETS
Investments (Note 8) 16,360 16,360
------ ------
CURRENT ASSETS
Debtors (Note 10) 3,894 5,111
CREDITORS - Amounts falling due within one year
(Note 11) (2,245) (1,842)
------ ------
NET CURRENT ASSETS 1,649 3,269
------ ------
TOTAL ASSETS LESS CURRENT LIABILITIES 18,009 19,629
CREDITORS - Amounts falling due after more than
one year (Note 12) (7,559) (9,515)
PROVISIONS FOR LIABILITIES AND CHARGES (Note 16) -- --
------ ------
10,450 10,114
====== ======
CAPITAL AND RESERVES
Called up share capital (Note 17) 10,450 10,450
Profit and loss account (Note 19) -- (336)
------ ------
Total shareholders' funds (Note 20) 10,450 10,114
====== ======
Equity shareholders' funds 500 (128)
Non-equity shareholders' funds (Note 20) 9,950 10,242
------ ------
10,450 10,114
====== ======
</TABLE>
APPROVED BY THE BOARD ON
15 DECEMBER 1997
M G Hunter
DIRECTOR
The notes on pages 9 to 22 form part of these accounts.
7
<PAGE>
COLORGRAPHIC DIRECT RESPONSE LIMITED
GROUP CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 SEPTEMBER 1997
<TABLE>
<CAPTION>
7 months
1997 1996
---- --------
(pound)'000 (pound)'000
<S> <C> <C>
NET CASH INFLOW FROM OPERATING ACTIVITIES (Note 21(1)) 6,609 1,263
------ -------
RETURNS ON INVESTMENT AND SERVICING OF FINANCE
Interest received 155 33
Interest paid (1,025) (516)
Interest element of finance lease rentals (34) (28)
Non equity dividends paid (761) --
------ -------
(1,665) (511)
TAXATION (263) (1,115)
CAPITAL EXPENDITURE
Purchase of tangible fixed assets (1,061) (1,084)
Sale of tangible fixed assets 140 33
------ -------
(921) (1,051)
ACQUISITIONS AND DISPOSALS
Purchase of subsidiary undertakings -- (13,360)
FINANCING
Issue of share capital -- 7,450
New secured loans -- 11,580
Repayment of amounts borrowed (1,993) (176)
Capital element of finance lease rentals (214) (144)
------ -------
INCREASE IN CASH (Note 21(2)) 1,553 3,936
====== =======
</TABLE>
The notes on pages 9 to 22 from part of these accounts.
8
<PAGE>
COLORGRAPHIC DIRECT RESPONSE LIMITED
NOTES TO THE ACCOUNTS - 30 SEPTEMBER 1997
1 ACCOUNTING POLICIES
(1) Accounting Convention
The financial statements have been prepared under the historical
cost convention and in accordance with applicable Accounting
Standards.
(2) Basis of consolidation
The group accounts consolidate the accounts of Colorgraphic Direct
Response Limited and its subsidiaries.
In the company's accounts investments in subsidiaries are stated at
cost.
(3) Depreciation
Tangible fixed assets are stated at cost less depreciation.
Depreciation is provided at rates calculated to write off the cost
of each asset on a straight line basis over its expected useful
life. The expected useful lives of assets are as follows:
Plant and equipment 3 - 10 years
Motor Vehicles 4 years
(4) Stocks
Stocks are stated at the lower of cost and net realisable value.
(5) Turnover
Turnover comprises the value of sales (excluding VAT and trade
discounts) of goods and services in the normal course of business.
(6) Leases
Where assets are financed by leasing agreements that give rights
approximating to ownership, the assets are treated as if they had
been acquired outright at their purchase price. The corresponding
leasing commitments are shown as obligations to the lessors. Finance
charges are calculated to produce a constant periodic rate of charge
on the obligations to lessors.
Rentals paid under other leases are charged against income on a
straight line basis over the lease term.
(7) Foreign currencies
Revenue transactions are converted using the rate of exchange at the
time of the transaction. Assets and liabilities are converted using
the rate of exchange at the year end or, where appropriate, the rate
of exchange specified in any related forward contracts. Exchange
differences are taken to profit and loss account.
9
<PAGE>
COLORGRAPHIC DIRECT RESPONSE LIMITED
NOTES TO THE ACCOUNTS - 30 SEPTEMBER 1997
1 ACCOUNTING POLICIES (CONTINUED)
(8) Goodwill
Purchased goodwill which is the difference between the fair value of
assets acquired and the consideration paid is written off to profit
and loss reserves on acquisition.
(9) Deferred taxation
Deferred taxation is provided to the extent that timing differences,
arising between profits as computed for taxation purposes and
profits as stated In the accounts, are anticipated to reverse in the
foreseeable future.
(10) Pensions
Contributions payable for pension arrangements for employees which
are in the nature of defined contribution schemes are charged to the
profit and loss account as incurred.
2 TURNOVER
All turnover is derived in the United Kingdom. The geographical
analysis of turnover by destination is stated below:
<TABLE>
<CAPTION>
7 months
1997 1996
---- --------
(pound)'000 (pound)'000
<S> <C> <C>
United Kingdom 25,240 12,806
Europe (excluding United Kingdom) 2,648 2,935
USA 2,462 1,239
------ ------
30,350 16,980
====== ======
</TABLE>
The directors are of the opinion that the group has only one class
of business and therefore no further analysis of turnover, profit or
assets is provided.
10
<PAGE>
COLORGRAPHIC DIRECT RESPONSE LIMITED
NOTES TO THE ACCOUNTS - 30 SEPTEMBER 1997
3 OPERATING PROFIT
Operating profit is stated after charging:
<TABLE>
<CAPTION>
7 months
1991 1996
---- --------
(pound)'000 (pound)'000
<S> <C> <C>
Staff costs:
Wages and salaries 7,028 3,758
Social security costs 708 403
Other pension costs 82 41
----- -----
7,818 4,202
===== =====
Depreciation 1,867 1,126
Other operating leases 547 271
Audit fee 17 17
Foreign exchange losses/(gains) 28 (2)
(Gain)/loss on disposal of fixed assets (62) 4
===== =====
</TABLE>
The group audit fee includes (pound)1,000 which relates to
Colorgraphic Direct Response Limited.
4 DIRECTORS AND EMPLOYEES
<TABLE>
<CAPTION>
7 months
1997 1996
---- --------
(pound)'000 (pound)'000
<S> <C> <C>
Aggregate emoluments 361 184
Pension contributions to money purchase
schemes 43 26
Amounts paid to third parties 12 5
--- ---
416 215
=== ===
</TABLE>
Retirement benefits were accruing to 4 directors under money
purchase schemes at 30 September 1997. The emoluments, excluding
pension contributions, of the highest paid director were
(pound)109,818 (1996: (pound)46,855) and pension contributions of
(pound)12,166 (1996: (pound)12,220) were paid in respect of him by
the company towards money purchase benefits.
The average number of employees (including directors) during the
year was:
<TABLE>
<CAPTION>
1997 1996
---- ----
Number Number
<S> <C> <C>
Production 216 167
Administration 75 77
--- ---
291 244
=== ===
</TABLE>
11
<PAGE>
COLORGRAPHIC DIRECT RESPONSE LIMITED
NOTES TO THE ACCOUNTS - 30 SEPTEMBER 1997
5 NET INTEREST PAYABLE
<TABLE>
<CAPTION>
7 months
1997 1996
---- --------
(pound)'000 (pound)'000
<S> <C> <C>
Interest payable on:
Finance leases 34 28
Loans 961 580
---- ---
995 608
Bank interest receivable (155) (33)
---- ---
840 575
==== ===
</TABLE>
6 TAX ON PROFIT ON ORDINARY ACTIVITIES
<TABLE>
<CAPTION>
7 months
1997 1996
---- --------
(pound)'000 (pound)'000
<S> <C> <C>
Corporation tax on profit for the year
at 32% (1996: 33%)
Current year 1,363 670
Prior year adjustment (319) --
Deferred tax 58 100
----- ---
1,102 770
===== ===
</TABLE>
7 TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
Group Plant & Fixtures &
Machinery fittings Total
--------- ---------- -----
(pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C>
Cost:
1 October 1996 11,948 729 12,677
Additions 1,350 223 1,573
Disposals (248) (8) (256)
------ --- ------
At 30 September 1997 13,050 944 13,994
------ --- ------
Depreciation:
1 October 1996 4,687 521 5,208
Charge for period 1,741 126 1,867
Disposals (171) (7) (178)
------ --- ------
At 30 September 1997 6,257 640 6,897
------ --- ------
Net Book Value
30 September 1997 6,793 304 7,097
===== === =====
30 September 1996 7,261 208 7,469
===== === =====
</TABLE>
12
<PAGE>
COLORGRAPHIC DIRECT RESPONSE LIMITED
NOTES TO THE ACCOUNTS - 30 SEPTEMBER 1997
7 TANGIBLE FIXED ASSETS (CONTINUED)
Included in plant and machinery are leased assets with a net book
value of (pound)501,000 (1996: (pound)580,000). The depreciation
charge on these assets in the year amounted to (pound)136,000 (1996:
(pound)71,000).
8 INVESTMENTS
Fixed asset investments comprise the cost of acquiring the ordinary
shares in the following subsidiary.
<TABLE>
<CAPTION>
Shareholding/
Company Principal Activity voting rights
------------------ --------------
<S> <C> <C>
Harvey/Hunter Holdings Limited Holding company 100%
</TABLE>
The following companies are wholly owned subsidiaries of
Harvey/Hunter Holdings Limited and therefore all indirectly owned by
Colorgraphic Direct Response Unlimited
<TABLE>
<CAPTION>
Shareholding/
Principal Activity voting rights
------------------ -------------
<S> <C> <C>
Colorgraphic (Leicester) Limited Printing 100%
3H Properties Limited Dormant 100%
Colorfactory Limited Dormant 100%
</TABLE>
Each of the subsidiaries are registered and principally operate in
England.
9 STOCK AND WORK IN PROGRESS
<TABLE>
<CAPTION>
Group Group
1997 1996
----- -----
(pound)'000 (pound)'000
<S> <C> <C>
Raw materials and consumables 555 641
Work in progress 331 563
--- -----
886 1,204
=== =====
</TABLE>
10 DEBTORS
<TABLE>
<CAPTION>
Group Company Group Company
1997 1997 1996 1996
----- ------- ----- -------
(pound)'000 (pound)'000 (pound)'000 (pound)'O00
<S> <C> <C> <C> <C>
Trade debtors 6,289 -- 6,240 --
Amounts owed by group undertakings -- 3,794 -- 4,993
Prepayments and accrued income 410 100 340 118
----- ----- ----- -----
6,699 3,894 6,580 5,111
===== ===== ===== =====
</TABLE>
13
<PAGE>
COLORGRAPHIC DIRECT RESPONSE LIMITED
NOTES TO THE ACCOUNTS - 30 SEPTEMBER 1997
11 CREDITORS - Amounts falling due within one year
<TABLE>
<CAPTION>
Group Company Group Company
1997 1997 1996 1996
----- ------- ----- -------
(pound)'000 (pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C>
Bank overdraft -- -- -- 19
Loans (Note 13) 2,460 2,000 2,272 1,750
Trade creditors 3,761 6 3,638 --
Amounts owed to group undertakings -- 40 -- --
Other creditors 1,351 -- 1,638 --
Taxation and social security 1,479 -- 617 --
Obligations under finance leases (Note 14) 469 -- 202 --
Accruals and deferred income 1,131 199 1,175 73
------ ----- ----- -----
10,651 2,245 9,542 1,842
====== ===== ===== =====
</TABLE>
The bank overdraft is secured by a fixed and floating charge over
the company's assets.
12 CREDITORS - Amounts falling due after more than one year
<TABLE>
<CAPTION>
Group Company Group Company
1997 1997 1996 1996
----- ------- ----- -------
(pound)'000 (pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C>
Loans (Note 13) 7,699 7,559 9,880 9,515
Obligations under finance leases (Note 14) 194 -- 163 --
----- ----- ------ -----
7,893 7,559 10,043 9,515
===== ===== ====== =====
</TABLE>
14
<PAGE>
COLORGRAPHIC DIRECT RESPONSE LIMITED
NOTES TO THE ACCOUNTS - 30 SEPTEMBER 1997
13 LOANS
<TABLE>
<CAPTION>
Group Company Group Company
1997 1997 1996 1996
----- ------- ----- -------
(pound)'000 (pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C>
Lombard 365 -- 572 --
Bank of Scotland 9,559 9,559 11,265 11,265
Other loan 235 -- 315 --
------ ----- ------ ------
10,159 9,559 12,152 11,265
====== ===== ====== ======
</TABLE>
The loans from Lombard North Central plc are industrial mortgages
secured on specific items of plant and equipment and are repayable
by instalments. Interest is payable at fixed rates of 8.32% and
9.08%.
The loan from the Bank of Scotland is repayable in six monthly
Instalments over a period of six years. Interest is charged at 2%
above LIBOR. The loan is secured by a debenture consisting of fixed
and floating charges.
The other loan balance at 30 September 1997 represents an interest
free loan from a director of the company and is secured by a
subordinated floating charge over the assets of the company. The
loan does not have any fixed repayment terms and therefore the
analysis of repayments below is based on the anticipated repayment
periods.
<TABLE>
<CAPTION>
Group Company Group Company
1997 1997 1996 1996
----- ------- ----- -------
(pound)'000 (pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C>
Analysis of repayments:
Within one year 2,460 2,000 2,272 1,750
From one to two years 7,699 7,559 9,475 9,250
From two to five years -- -- 405 265
------ ----- ------ ------
10,159 9,559 12,152 11,265
====== ===== ====== ======
</TABLE>
15
<PAGE>
COLORGRAPHIC DIRECT RESPONSE LIMITED
NOTES TO THE ACCOUNTS - 30 SEPTEMBER 1997
14 OBLIGATIONS UNDER FINANCE LEASES
<TABLE>
<CAPTION>
Group Group
1997 1996
----- -----
(pound)'000 (pound)'000
<S> <C> <C>
Analysis of repayments:
Within one year 521 225
Within two to five years 203 169
--- ---
724 394
Less: future finance charges (61) (29)
--- ---
663 365
=== ===
Due within one year 469 202
Due after more than one year 194 163
--- ---
663 365
=== ===
</TABLE>
15 OPERATING LEASES
Annual commitments under operating leases which expire:
<TABLE>
<CAPTION>
Group Group
1997 1996
----- -----
(pound)'000 (pound)'000
<S> <C> <C>
Between two and five years 286 221
Over five years 259 259
--- ---
545 480
=== ===
</TABLE>
16 PROVISIONS FOR LIABILITIES AND CHARGES
The potential amount of deferred taxation at 32% comprises:
<TABLE>
<CAPTION>
Group Company Group Company
1997 1997 1996 1996
----- ------- ----- -------
(pound)'000 (pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C>
Accelerated capital allowances 625 -- 692 --
=== == === ==
Amount provided 625 -- 567 --
=== == === ==
</TABLE>
16
<PAGE>
COLORGRAPHIC DIRECT RESPONSE LIMITED
NOTES TO THE ACCOUNTS - 30 SEPTEMBER 1997
17 SHARE CAPITAL
<TABLE>
<CAPTION>
Allotted and
No of Shares Authorised fully paid
------------ ---------- ------------
Equity (pound)'000 (pound)'000
<S> <C> <C> <C>
At 30 September 1997:
Ordinary shares of 10p each 6,500,000 650 500
---
At 30 September 1996
Ordinary shares of 10p each 5,000,000 500 500
---
</TABLE>
Non-equity
At 30 September 1997 and 1996
<TABLE>
<CAPTION>
Authorised
allotted and
fully paid
------------
(pound)'000
<S> <C> <C>
Preferred ordinary shares of 10p 2,692,300 269
'A' Preference shares of(pound)1 8,380,770 8,381
'B' Preference shares of(pound)1 1,300,000 1,300
------
Total non-equity 9,950
------
Total 10,450
======
</TABLE>
"A" Preference Shares
The shares of (pound)1 each may be redeemed by the company, provided
written consent has been obtained from not less than three-quarters
of the shareholders. Alternatively 750,000 shares will be redeemed
on 30 September 1999, 30 September 2000 and 30 September 2001
respectively. 1,500,000 shares shall be redeemed on 30 September
2002 and 2,000,000 shares on 30 September 2003. All of the remaining
"A" Preference shares will be redeemed on 30 September 2004. The
amount paid up together with all arrears and accruals of the fixed
dividend will be payable upon redemption.
The shares carry a dividend of 6% from 1 October 1996 to 30
September 1997 and 7% from 1 October 1997 payable half yearly on 15
January and 15 July. The dividends are cumulative. No voting rights
attach to the shares unless the dividend or redemption's are in
arrears or the business of any meeting includes a resolution for the
liquidation of the company, a reduction of the capital or a
resolution directly or adversely abrogating any of the special
rights and privileges attaching to the "A" Preference shares.
On a winding up the shares carry the right in priority to the
holders of any other class of share, repayment of the amount paid up
together with all arrears and accruals of the fixed dividend.
17
<PAGE>
COLORGRAPHIC DIRECT RESPONSE LIMITED
NOTES TO THE ACCOUNTS - 30 SEPTEMBER 1997
17 SHARE CAPITAL (CONTINUED)
"B" Preference shares
The shares may be redeemed by the company at any time, provided
written consent has been obtained from not less than three-quarters
of the "A" Preference shares and the "B" Preference shares in issue
or an Extraordinary Resolution has been passed. The "B" Preference
shares not previously redeemed will be redeemed on 1 March 2005.
The shares carry a dividend of 6% for the period from 1 October 1996
to 30 September 1997 and 7 1/2% from 1 October 1997 payable half
yearly on 15 January and 15 July following the payment of all
dividends due to the holders of "A" Preference shares but in
priority to the holders of any other class of share. The rights to
the dividend are cumulative.
On a winding up the shares carry the entitlement, after payment of
all sums due to the holders of "A" Preference shares but in priority
to the holders of any other class of share, repayment of the amount
paid up together with all arrears and accruals of the fixed
dividend.
Preferred Ordinary Shares
The shares carry a dividend of 5% from the date of issue to 30
September 1997 and 7.5% for the period from 1 October 1997 to 30
September 1998 payable half yearly on 15 January and 15 July.
Thereafter an interim dividend equal to 4% of the issue price will
be paid on 15 July and a final dividend equal to 7 1/2% of the
consolidated net profit after taxation less the interim dividend
paid will be paid on 15 January each year.
On a winding up the shares carry the entitlement after payment of
all sums due to the holders of "A" Preference shares and then "B"
Preference shares but in priority to the holders of any other class
of share, to receive, an amount equal to the issue price together
with all arrears and accruals of the dividend payable. After
payments to the holders of Preference shares and Preferred Ordinary
shares mentioned above and after payment to the holders of the
Ordinary shares of amounts equal to the issue price, the shares also
carry the right to a proportion of the balance of any assets, equal
to the proportion that the total issue price of all the Preferred
Ordinary shares to the amount paid up in respect of all the
Preferred Ordinary shares and Ordinary shares then in issue.
Ordinary Shares
Except with the consent or sanction of the holders of the Preference
shares and the Preferred Ordinary shares, the holders of the 10p
Ordinary shares are not entitled to receive any dividend.
On a winding up the Ordinary shares will be entitled after payment
of all sums due to the holders of "A" Preference shares, "B"
preference shares and Preferred Ordinary shares, to receive an
amount equal to a proportion of the balance of such assets equal to
the proportion that the amount paid up on the Ordinary shares
together with an amount credited to the share premium account in
respect of such Ordinary shares bears to the aggregate of the amount
paid up and the amount credited to the share premium account of the
company in respect of all the Preferred ordinary shares and Ordinary
shares.
18
<PAGE>
COLORGRAPHIC DIRECT RESPONSE LIMITED
NOTES TO THE ACCOUNTS - 30 SEPTEMBER 1997
18 DIVIDENDS
<TABLE>
<CAPTION>
1997 1996
---- ----
(pound)'000 (pound)'000
<S> <C> <C>
'A' Preference shares 503 246
'B' Preference shares 78 38
Preferred Ordinary shares 13 8
1996 undeclared non equity dividend 292 --
--- ---
886 292
=== ===
</TABLE>
The undeclared dividend in the year ended 30 September 1996 has been
paid during the year and is included above.
19 PROFIT AND LOSS ACCOUNT
Group
<TABLE>
<CAPTION>
(pound)'000
<S> <C>
At 1 October 1996 (14,254)
Profit for the period 2,257
Prior year undeclared non-equity preference and
preferred ordinary dividend (292)
-------
At 30 September 1997 (12,289)
=======
</TABLE>
In accordance with Section 230(4) of the Companies Act 1985, no
profit and loss account of the Company has been presented. The
profit for the year of the company was (pound)1,225,000 (loss in
1996: (pound)336,000).
20 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
1997 1996
--------------------- --------------------
Group Company Group Company
----- ------- ----- -------
(pound)'000 (pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C>
Profit/(loss) for the period 2,851 1,222 1,801 (336)
Dividend (594) (594) (292) (292)
Goodwill written off -- -- (16,055) --
Share capital subscribed -- -- 10,450 10,450
1996 non-equity dividend (292) (292) 292 292
------ ------ ------ ------
Net addition/(decrease) to shareholders' funds 1,965 336 (3,804) 10,114
Opening shareholders' funds (3,804) 10,114 -- --
------ ------ ------ ------
Closing shareholders' funds (1,839) 10,450 (3,804) 10,114
====== ====== ====== ======
</TABLE>
19
<PAGE>
COLORGRAPHIC DIRECT RESPONSE LIMITED
NOTES TO THE ACCOUNTS - 30 SEPTEMBER 1997
20 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS (CONTINUED)
The goodwill arose on the purchase of Colorgraphic (Leicester)
Limited during the year ended 30 September 1996 and represents the
excess of the consideration of (pound)16,360,000 over the net asset
value of (pound)305,000. No fair value adjustments were made in
determining the net asset value.
<TABLE>
<CAPTION>
Non-equity shareholders' funds 1997 1996
----------------- -----------------
Group and Company Group and Company
----------------- -----------------
(pound)'000 (pound)'000
<S> <C> <C>
Non-equity shareholders' funds may be analysed as follows:
Share capital 9,950 9,950
Undeclared preference and preferred ordinary
dividends -- 292
----- ------
9,950 10,242
===== ======
Representing
"A" Preference shares of(pound)1 each 8,381 8,627
"B" Preference shares of(pound)1 each 1,300 1,338
Preferred Ordinary shares of 10p each 269 277
----- ------
9,950 10,242
===== ======
</TABLE>
20
<PAGE>
COLORGRAPHIC DIRECT RESPONSE LIMITED
NOTES TO THE ACCOUNTS - 30 SEPTEMBER 1997
21 NOTES TO THE GROUP CASH FLOW STATEMENT
(1) Reconciliation of operating profit to net cash inflow from
operations
<TABLE>
<CAPTION>
1997 1996
---- ----
(pound)'000 (pound)'000
<S> <C> <C>
Operating profit 4,793 3,146
Depreciation 1,867 1,126
(Profit)/loss on disposal of fixed assets (62) 4
(Decrease)/increase in stocks 318 (184)
Increase in debtors (119) (1,899)
Decrease in creditors (188) (930)
----- -----
6,609 1,263
===== =====
</TABLE>
(2) Reconciliation to net debt
<TABLE>
<CAPTION>
1997 1996
---- ----
(pound)'000 (pound)'000
<S> <C> <C>
Increase in cash in the period 1,553 3,936
Decrease/(increase) in debt and lease financing 2,207 (11,260)
------- -------
Change in net debt from cash flows 3,760 (7,324)
Loan and finance leases acquired -- (1,257)
New finance leases (512) --
------- -------
Movements in net debt in period 3,248 (8,581)
Net debt at 1 October (11,422) (2,841)
------- -------
Net debt at 30 September (8,174) (11,422)
======= =======
</TABLE>
(3) Analysis of net debt
<TABLE>
<CAPTION>
Other
1 October 1996 Cash Flow Non-cash 30 September 1997
-------------- --------- -------- -----------------
(pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C>
Cash in hand, at bank 1,095 1,553 -- 2,648
Debt due after 1 year (9,880) 2,181 -- (7,699)
Debt due within 1 year (2,272) (188) -- (2,460)
Finance leases (365) 214 (512) (663)
------- ----- ---- ------
(11,422) 3,760 (512) (8,174)
======= ===== ==== ======
</TABLE>
21
<PAGE>
COLORGRAPHIC DIRECT RESPONSE LIMITED
NOTES TO THE ACCOUNTS - 30 SEPTEMBER 1997
22 CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES
There were no capital commitments at 30 September 1997 (1996: Nil).
23 OTHER STATUTORY DISCLOSURES
Fees paid for Price Waterhouse for non audit services amounted to
(pound)6,450 in the period (1996: (pound)15,000).
24 PENSION SCHEME
The employees of the group participate in the Colorgraphic Group
Pension Plan. This scheme is of a defined contribution type.
25 RELATED PARTY TRANSACTIONS
The company has taken advantage of the exemption not to disclose
transactions with subsidiary undertakings, on the basis that more
than 90% of its voting rights are controlled by the group and the
consolidated financial statements in which the company's results are
included are publicly available.
Other loans outstanding at 30 September 1997 of (pound)235,000
represented an interest free loan from a director, Mr M G Hunter to
Colorgraphic (Leicester) Limited. The balance on the loan at 30
September 1996 was (pound)315,000 and (pound)80,000 was repaid
during the period. The loan is secured by a subordinated floating
charge over the assets of the company. The loan does not have any
fixed repayment terms.
22
<PAGE>
Exhibit 99.5
UNAUDITED SUMMARY OF DIFFERENCES BETWEEN UK AND US GAAP FOR THE YEAR ENDED
SEPTEMBER 30, 1997
The financial statements of Colorgraphic Direct Response Limited for the
year ended September 30, 1997 are prepared in accordance with accounting
principles generally accepted in the United Kingdom ("UK GAAP"). These
accounting principles differ in certain material respects from accounting
principles generally accepted in the United States ("US GAAP"). Described
below are the material differences between UK GAAP and US GAAP, affecting the
combined net income and shareholders' equity which are set forth in the
tables that follow.
GOODWILL
Under UK GAAP, goodwill arising on consolidation representing the excess of the
fair values of the consideration given over the fair value of the separate net
assets acquired is written off against reserves on acquisition. Under US GAAP
purchased goodwill should be capitalised and amortised over its estimated useful
life not exceeding 40 years using the straight line method.
Effect of material differences between UK and US GAAP and additional
disclosures.
a) Net income 1997
(pound)000
Net income reported under UK GAAP 2,851
Amortisation of goodwill (401)
------
Net income in accordance with US GAAP 2,450
======
b) Shareholders equity 1997
(pound)000
Shareholders equity reported under UK GAAP (1,839)
Goodwill write off reinstated 15,653
------
Shareholders equity in accordance with US GAAP 13,814
======
c) Cash flows
The combined cash flow statements prepared in accordance with UK GAAP present
substantially the same information as that required under US GAAP. Under US GAAP
however, there are certain differences from UK GAAP with regard to
classification of items within the cash flow statement and with regard to the
definition of cash and cash equivalents.
<PAGE>
Under UK GAAP, cash flows are presented separately for operating activities,
returns on investments and servicing of finance, taxation, capital expenditure
and financial investment, acquisitions and disposals, and equity dividends paid.
Under US GAAP, three categories of cash flow activity are reported, being
operating activities, investing activities and financing activities. Cash flows
from taxation and returns on investments and servicing of finance would, with
the exception of dividends paid and cost of financing, be included as operating
activities under US GAAP. The payment of dividends and cost of financing would
be included under financing activities under US GAAP.
Under US GAAP, cash and equivalents do not include bank loans and overdrafts
repayable within three months from the date of the advance as is the case under
UK GAAP. Under US GAAP, all short-term borrowings are included under financing
activities.
Set out below, for illustrative purposes, is a summary combined statement of
cash flows under US GAAP.
1997
(pound)000
Net cash provided by operating activities 5,442
Net cash outflow from investing activities (921)
Net cash flow from financing activities (2,968)
------
Net increase in cash and cash equivalents under US GAAP 1,553
Overdrafts with original maturity less than three months -
------
Net increase in cash balances under UK GAAP 1,553
======
<PAGE>
Exhibit 99.6
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The following unaudited pro forma condensed combined financial data is
based on, and should be read in conjunction with, the consolidated financial
statements of Big Flower Holdings, Inc. and its subsidiaries (the "Company").
These financial statements were filed in the Company's annual report on Form
10-K for the year ended December 31, 1997 and its quarterly filing on Form 10-Q
for the nine months ended September 30, 1998. The pro forma information has been
prepared to illustrate the effect of the acquisition of Colorgraphic, which was
accounted for under the purchase method of accounting.
The unaudited pro forma condensed combined balance sheet as of
September 30, 1998 assumes that the acquisition of Colorgraphic was consummated
on that date. The unaudited pro forma condensed combined statements of
operations for the nine months ended September 30, 1998, and for the year ended
December 31, 1997, assume that the acquisition of Colorgraphic was consummated
as of the first day of the periods presented.
The pro forma adjustments are based on preliminary estimates, which are
derived from available information and certain assumptions. While the Company
believes, based on available information, that the fair values and allocations
included in the unaudited pro forma condensed combined financial statements are
reasonable estimates, final purchase accounting adjustments will be made at the
completion of the evaluations and estimates as of the actual purchase dates. As
a result, the final allocation of costs related to the acquired companies may
differ materially from that presented herein.
The unaudited pro forma condensed combined financial data excludes any
potential benefits that might result from the acquisitions due to synergies that
may be derived from the elimination of certain costs. The pro forma financial
data does not purport to represent what the Company's results of operations
actually would have been if the acquisition had actually occurred on the date or
for the periods indicated or what such results will be for any future date or
future periods.
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
Pro Forma
The Company Colorgraphic Adjustments Pro Forma
----------- ------------ ----------- ---------
(in thousands)
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 5,800 $ 234 $ 6,034
Accounts receivable, net 180,726 11,559 192,285
Inventories 56,263 1,368 57,631
Deferred income taxes and income tax receivable 19,974 19,974
Prepaid expenses and other assets 8,346 1,310 9,656
----------- -------- -------- ----------
Total current assets 271,109 14,471 285,580
Property, plant and equipment, net 440,283 19,209 459,492
Goodwill, net 466,901 27,276 $(27,276)(a) 533,611
66,710 (a)
Intangibles and other assets, net 78,249 78,249
----------- -------- -------- ----------
TOTAL ASSETS $ 1,256,542 $ 60,956 $ 39,434 $1,356,932
=========== ======== ======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 150,497 $ 8,736 $ 159,233
Compensation and benefits payable 41,702 177 41,879
Accrued interest 9,852 1,663 11,515
Other current liabilities, including current portion of
long-term debt 63,259 9,377 $ 584 (a) 67,594
(5,042)(b)
(584)(b)
----------- -------- -------- ----------
Total current liabilities 265,310 19,953 (5,042) 280,221
Long-term debt, net of current portion 713,192 11,838 49,779 (a) 797,339
(11,838)(b)
34,368 (b)
Deferred income taxes 39,077 1,332 40,409
Other long-term liabilities 19,705 19,705
----------- -------- -------- ----------
Total liabilities 1,037,284 33,123 67,267 1,137,674
----------- -------- -------- ----------
Company-obligated manditorily redeemable convertible
preferred securities of a subsidiary trust whose sole
assets are convertible subordinated debentures of Big
Flower Holdings, Inc. 115,000 115,000
Stockholders' equity:
Preferred stock 16,904 (16,904)(b) -
Common stock 198 849 (849)(c) 198
Additional paid in capital 147,353 147,353
Retained earnings (accumulated deficit) (46,152) 10,080 (10,080)(c) (46,152)
Accumulated other comprehensive income 3,664 3,664
Other (805) (805)
----------- -------- -------- ----------
Total stockholders' equity 104,258 27,833 (27,833) 104,258
----------- -------- -------- ----------
TOTAL LIABILITIES AND EQUITY $ 1,256,542 $ 60,956 $ 39,434 $1,356,932
=========== ======== ======== ==========
</TABLE>
See notes to unaudited pro forma condensed combined balance sheet
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(a) The pro forma purchase cost of Colorgraphic, and the determination of the
estimated excess purchase cost over the book value of the assets acquired,
is as follows:
<TABLE>
<CAPTION>
(in 000s)
--------
<S> <C>
Purchase Cost:
Cash paid $ 47,107
Estimated fees, costs and expenses 2,672
--------
Total purchase cost, borrowed under the
Company's revolving credit facility 49,779
Net assets acquired:
Historical balances 27,833
Less preferred stock (16,904)
Less historical goodwill (27,276)
Less preferred dividends to date of redemption (584)
--------
Adjusted net assets acquired (16,931)
--------
Excess of purchase cost over net assets acquired $ 66,710
========
</TABLE>
(b) The Company repaid previously existing debt and redeemed outstanding
preferred stock (including dividends accrued to the acquisition date)
using funds borrowed under the Company's revolving credit facility.
<TABLE>
<CAPTION>
(in 000s)
--------
<S> <C>
Debt retired:
Current portion $ 5,042
Long-term portion 11,838
Preferred stock redeemed 16,904
Preferred dividends paid 584
--------
Total $ 34,368
========
</TABLE>
(c) Represents the elimination of the acquired company's historical capital
and retained earnings.
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
The Pro Forma
Company Colorgraphic Adjustments Pro Forma
---------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 1,376,706 $ 49,487 $ 1,426,193
Operating expenses:
Costs of production 1,072,296 38,022 1,110,318
Selling, general and administrative 140,394 472 140,866
Depreciation and amortization of intangibles 67,322 3,081 $ 1,668 (a) 72,071
In process acquired technology write off 58,192 58,192
----------- -------- -------- -----------
1,338,204 41,575 1,668 1,381,447
----------- -------- -------- -----------
Operating income 38,502 7,912 (1,668) 44,746
----------- -------- -------- -----------
Other expense (income):
Interest expense 40,300 1,713 4,891 (b) 46,904
Amortization of deferred financing costs 1,696 1,696
Interest income (349) (308) (657)
Preferred dividends of a subsidiary trust 1,340 1,340
Other, net 7,141 (102) 7,039
----------- -------- -------- -----------
50,128 1,303 4,891 56,322
----------- -------- -------- -----------
Income (loss) before income taxes (11,626) 6,609 (6,559) (11,576)
Income tax expense 21,945 1,843 (3,083) (c) 20,705
----------- -------- -------- -----------
Income (loss) before extraordinary item $ (33,571) $ 4,766 $ (3,476) $ (32,281)
=========== ======== ======== ===========
Loss per share before extraordinary item $ (1.79) $ (1.73)
============ ============
Weighted average shares - basic and diluted 18,704 18,704
============ ============
</TABLE>
See notes to unaudited pro forma condensed combined statements of operations.
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
The Pro Forma
Company Colorgraphic Adjustments Pro Forma
---------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 1,236,879 $ 42,546 $1,279,425
Operating expenses:
Costs of production 930,992 33,176 964,168
Selling, general and administrative 149,363 362 149,725
Depreciation and amortization of intangibles 64,588 2,585 $ 1,251 (a) 68,424
----------- -------- -------- ----------
1,144,943 36,123 1,251 1,182,317
----------- -------- -------- ----------
Operating income 91,936 6,423 (1,251) 97,108
----------- -------- -------- ----------
Other expense (income):
Interest expense 41,135 1,168 3,785 (b) 46,088
Amortization of deferred financing costs 1,381 1,381
Interest income (353) (204) (557)
Preferred dividends of a subsidiary trust 5,175 5,175
Other, net 3,125 (15) 3,110
----------- -------- -------- ----------
50,463 949 3,785 55,197
----------- -------- -------- ----------
Income before income taxes 41,473 5,474 (5,036) 41,911
Income tax expense 19,077 1,685 (2,316) (c) 18,446
----------- -------- -------- ----------
Net income $ 22,396 $ 3,789 $ (2,720) $ 23,465
=========== ======== ======== ==========
Basic earnings per share $ 1.14 $ 1.20
=========== ==========
Diluted earnings per share $ 1.03 $ 1.07
=========== ==========
Weighted average shares - basic 19,625 19,625
=========== ==========
Weighted average shares - diluted 24,735 24,735
=========== ==========
</TABLE>
See notes to unaudited pro forma condensed combined statements of operations.
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
(a) Represents the amortization of the estimated excess purchase cost over
book value which is being amortized over a 40 year period.
(b) Reflects (i) the interest on the additional borrowings under the Company's
credit facility which were used to finance the acquisition and (ii) the
elimination of interest incurred by the acquired company on debt repaid
upon acquisition.
Year Ended Nine Months Ended
December 31, 1997 September 30, 1998
----------------- ------------------
(in thousands)
Eliminate interest expense on debt repaid
upon acquisition $(1,713) $(1,168)
Additional interest expense on credit facility 6,604 4,953
------- -------
$ 4,891 $ 3,785
======= =======
(c) Pro forma tax adjustments reflect applying the Company's effective tax
rates of 47% in 1997 and 46% in 1998 to all pro forma adjustments for the
respective periods.
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