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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) FEBRUARY 11, 2000
PARAGON CORPORATE HOLDINGS INC.
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(Exact name of registrant as specified in its charter)
Delaware No. 333-51569 34-1845312
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
7400 Caldwell Avenue, Niles, Illinois 60714
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(Address of principal executive offices) (Zip Code)
(847) 779-2500
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Registrant's telephone number, including area code
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(Former name or former address, if changed since last report.)
The undersigned Registrant, Paragon Corporate Holdings Inc., hereby amends Item
7 of its current report on Form 8-K filed with the Securities and Exchange
Commission on February 11, 2000 to add the financial statements and pro forma
information required by Parts (a) and (b) on Item 7.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired:
The audited financial statements of Multigraphics, Inc. as of
and for the year ended July 31, 1999 and the report of the
independent public accountants filed with the Securities and
Exchange Commission on October 20, 1999 on Form 10-K and the
unaudited financial statements for the quarter ended October
30, 1999 filed with the Securities and Exchange Commission on
December 3, 1999 on Form 10-Q are hereby incorporated by
reference.
(b) Pro Forma Financial Information:
The following unaudited pro forma combined financial
information has been prepared to give effect to the merger of
Paragon Corporate Holdings Inc. ("Paragon") and
Multigraphics, Inc. ("Multigraphics"). The unaudited pro
forma combined statement of operations for the year ended
December 31, 1999 gives effect to the merger as if the merger
had occurred on January 1, 1999. The unaudited pro forma
combined statement of operations for the year ended December
31, 1999 includes the statement of operations of Paragon for
the year ended December 31, 1999; the statement of operations
of Multigraphics for the fiscal year ended July 31, 1999,
adjusted for its quarterly and monthly statements of
operations for the quarters ended October 30, 1999 and 1998
and the months of November and December of both 1999 and
1998, to reflect Multigraphics results of operations for the
twelve-month period ended December 25, 1999; and the pro
forma adjustments to reflect the combination.
The unaudited pro forma combined balance sheet as of December
31, 1999 gives effect to the merger as if the merger had
occurred on that date. The unaudited pro forma combined
balance sheet includes the balance sheet of Paragon as of
December 31, 1999 and Multigraphics as of December 25, 1999
and the pro forma adjustments to reflect the combination.
The pro forma adjustments are based upon the "purchase method"
of accounting, available information, and particular
assumptions that Paragon believes to be reasonable. The excess
of the purchase price over the fair value of the net assets
acquired is being amortized on a straight-line basis over a
30-year period.
The purchase price allocation is preliminary, therefore, final
amounts could differ from those reflected in the unaudited pro
forma combined financial information. Upon final
determination, the purchase price will be allocated to the
assets and liabilities acquired based on fair value as of the
date of the merger.
The pro forma combined financial information and accompanying
notes should be read in conjunction with the audited
historical financial statements and related notes of Paragon
included in Paragon's Annual Report on Form 10-K for the year
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ended December 31, 1999 and the audited and unaudited
financial statements and related notes of Multigraphics for
its fiscal year ending July 31, 1999 and for its quarter
ending October 30, 1999, that are incorporated by reference.
The unaudited pro forma combined financial information is
provided for informational purposes only in response to SEC
requirements and does not purport to be indicative of and
should not be relied upon as indicative of the financial
position or operating results that would have actually
occurred if the merger had in fact occurred at such dates or
is it necessarily indicative of future operating results or
financial position.
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UNAUDITED PRO FORMA COMBINED
BALANCE SHEET
AS OF DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
-----------------------------------
PARAGON MULTIGRAPHICS
AS OF AS OF PRO FORMA PRO FORMA
DEC. 31, 1999 DEC. 25, 1999 ADJUSTMENTS COMBINED
-------------- --------------- ------------- ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 15,341 $ 1,490 $ 298 (a) $ 17,129
Short-term investments 3,610 - - 3,610
Accounts receivable, less allowances 35,943 11,445 (19) (b) 47,369
Inventories 45,924 11,052 - 56,976
Other current assets 1,923 468 (50) (c) 2,341
-------------- --------------- ------------- ------------
Total current assets 102,741 24,455 229 127,425
Property, plant and equipment, net 20,363 7,567 (4,931) (d) 22,999
Goodwill, net 30,692 4,139 (4,139) (e) 59,235
28,543 (d)
Other assets 6,860 869 (53) (f) 5,676
(2,000) (c)
-------------- --------------- ------------- ------------
$ 160,656 $ 37,030 $ 17,649 $ 215,335
============== =============== ============= ============
LIABILITES AND STOCKHOLDER'S EQUITY
(DEFICIT)
Current liabilities:
Revolving credit facilities $ 10,219 $ 7,085 $ (7,085) (g) $ 21,162
10,943 (a)
Accounts payable 18,813 9,223 (19) (b) 28,017
Accrued compensation 6,034 4,595 1,689 (h) 12,318
Accrued other 14,701 2,893 2,033 (h) 19,577
(50) (c)
Deferred service revenue 6,037 9,669 - 15,706
Due to GEC 852 - - 852
Current portion of long-term debt and
capital lease obligations 1,498 1,234 - 2,732
-------------- --------------- ------------- ------------
Total current liabilities 58,154 34,699 7,511 100,364
Senior Notes 115,000 - - 115,000
Other long-term debt and capital lease
obligations, less current portion 1,849 2,442 (2,000) (c) 2,291
Retirement obligations 3,546 7,556 890 (d) 11,992
Other long-term liabilities 2,296 3,581 - 5,877
-------------- --------------- ------------- ------------
180,845 48,278 6,401 235,524
Stockholder's equity (deficit):
Common stock 1 - - 1
Paid-in capital 47 22,956 (22,956) (i) 47
Retained earnings (deficit) (19,506) (34,204) 34,204 (i) (19,506)
Accumulated other comprehensive loss (731) - - (731)
-------------- --------------- ------------- ------------
Total stockholder's equity (20,189) (11,248) 11,248 (20,189)
(deficit)
-------------- --------------- ------------- ------------
$ 160,656 $ 37,030 $ 17,649 $ 215,335
============== =============== ============= ============
</TABLE>
The accompanying notes are an integral part of these unaudited Pro Forma
Combined Financial Statements.
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NOTES TO UNAUDITED PRO FORMA
COMBINED BALANCE SHEET
as of December 31, 1999
(Dollars in Thousands)
(a) Represents borrowings of $10,943 on Paragon's existing credit
facilities used in connection with the financing of the acquisition.
(b) Represents the elimination of receivables/payables between Paragon and
Multigraphics.
(c) Represents elimination of $2,000 pre-acquisition working capital loan
and accrued interest by Paragon to Multigraphics.
(d) Represents the excess of purchase price over the net assets acquired in
the amount of $28,543. The purchase price allocation includes a net
write-off of $4,931 of redundant computer equipment and software and
leasehold improvements that will no longer be used by the combined
Company. In addition, the post retirement benefit liability was
increased by $890 to reflect the fair value of the actuarially
determined obligation. The preliminary purchase price allocation was
based on available information and certain assumptions Paragon
considers reasonable. The final purchase price allocation will be based
upon a final determination of the fair values of the assets and
liabilities acquired.
(e) Represents the write-off of goodwill of $4,139 associated with previous
acquisitions of Multigraphics and reflected in the determination of the
excess of the purchase price over the net assets acquired.
(f) Represents the write-off of capitalized financing costs of $53
associated with the existing indebtedness of Multigraphics that was
repaid at the date of acquisition.
(g) Represents the repayment of Multigraphics revolving credit facilities
of $7,085 by Paragon at December 31, 1999.
(h) Represents accruals for costs related to the assumption and
cancellation of the Arlington Heights, IL distribution center and the
Mount Prospect, IL headquarters facility leases and the related exit
costs for the closure of these Multigraphics facilities in the amount
of $2,033 and the termination of certain employees in the amount of
$1,689 in connection with redundant activities and operations of
Multigraphics.
(i) Represents the elimination of the stockholder's equity related to
Multigraphics.
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UNAUDITED PRO FORMA COMBINED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
-------------------------------------
PARAGON MULTIGRAPHICS
FOR THE YEAR FOR THE YEAR
ENDED ENDED PRO FORMA PRO FORMA
DEC. 31, 1999 DEC. 25, 1999 ADJUSTMENTS COMBINED
---------------- ---------------- -------------- -------------
<S> <C> <C> <C> <C>
Net revenue $ 248,668 $ 105,999 $ (71) (a) $ 354,596
Cost of revenue 158,803 79,142 (2,232) (b) 235,698
(15) (a)
---------------- ---------------- -------------- -------------
Gross profit 89,865 26,857 2,176 118,898
COSTS AND EXPENSES
Sales and marketing expenses 42,275 8,484 (612) (b) 50,147
General and administrative expenses 38,785 14,358 (3,193) (b) 49,950
Research and development 3,631 - - 3,631
Depreciation and amortization 7,270 2,072 778 (c) 9,184
(936) (d)
Management fee 233 - - 233
Acquisition, relocation and severance
costs 1,633 735 - 2,368
---------------- ---------------- -------------- -------------
93,827 25,649 (3,963) 115,513
---------------- ---------------- -------------- -------------
Operating income (loss) (3,962) 1,208 6,139 3,385
Interest income 1,044 - (50) (e) 994
Interest expense (12,383) (1,872) (164) (e) (14,369)
50 (e)
Other expense (90) - - (90)
---------------- ---------------- -------------- -------------
Income (loss) before income taxes (15,391) (664) 5,975 (10,080)
Income tax benefit 164 - - 164
---------------- ---------------- -------------- -------------
Net income (loss) $ (15,227) $ (664) $ 5,975 $ (9,916)
================ ================ ============== =============
</TABLE>
The accompanying notes are an integral part of these unaudited Pro Forma
Combined Financial Statements.
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NOTES TO UNAUDITED PRO FORMA
COMBINED STATEMENT of OPERATIONS
as of December 31, 1999
(Dollars in Thousands)
(a) Represents the elimination of sales between Paragon and Multigraphics.
(b) Represents the annual net cost savings resulting from Multigraphics
workforce reductions and realignments and the closure of the
Multigraphics Arlington Heights, IL distribution center and the Mount
Prospect, IL headquarters facility. Includes warehousing, personnel,
office and service technician travel costs that are redundant and will
be provided at other Paragon locations at an incremental cost of $231.
Workforce reductions and
related travel costs $ 4,828
Warehouse rental costs 189
Office rental and other costs 1,020
-----------
Net cost savings $ 6,037
===========
The net cost savings included in the pro forma financial data above are
the projected annual savings relating to Multigraphics during the year
of acquisition only. Upon completion of the workforce reductions and
realignments and closure of redundant facilities for both Multigraphics
and Paragon, the annual net cost savings are estimated to be in the $10
million to $13 million range. The additional savings above $6 million
have not been included in the pro forma financial data.
(c) Represents the incremental amortization expense related to goodwill,
amortized over a period of 30 years.
(d) Represents the depreciation expense related to the write-off of
redundant computer equipment and software and leasehold improvements
that will no longer be used by the combined Company.
(e) Represents increased interest expense related to the additional
borrowings under Paragon's revolving credit facility at an interest
rate of 9.25% and the elimination of related interest on the $2,000
pre-acquisition working capital loan by Paragon to Multigraphics.
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(c) Exhibits:
23.1 Consent of Independent Auditors.
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 hereunto duly authorized.
PARAGON CORPORATE HOLDINGS INC.
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(Registrant)
April 11, 2000 /s/ Gregory T. Knipp
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Acting Chief Financial Officer
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EXHIBIT 23.1
CONSENT of INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this Current Report on Form 8-K/A of our report
dated October 19, 1999 included in the Company's Annual Report on Form 10-K for
the year ended July 31, 1999. It should be noted that we have not audited any
financial statements of the company subsequent to July 31, 1999 or performed
any audit procedures subsequent to the date of our report.
/s/ ARTHUR ANDERSEN LLP
-----------------------------------
Chicago, Illinois
April 7, 2000
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