<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended July 31, 1996
Commission File Number 1-683
MULTIGRAPHICS, INC.
Formerly
(AM International, Inc.)
(Exact name of registrant as specified in its charter)
DELAWARE 34-0054940
(State of Incorporation) (I.R.S. Employer Identification No.)
431 LAKEVIEW COURT
MT. PROSPECT, ILLINOIS 60056
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 375-1700
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
--------------------- ------------------------
Common Stock, $0.25 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports) and (2) has been subject
to such filing requirements for the past 90 days.
Yes X No
---- ----
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ X ]
The aggregate market value of voting stock held by
nonaffiliates of the Registrant as of June 2, 1997:
Common Stock, $0.025 par value: $4,325,293
Indicate by check mark whether the Registrant has filed all
documents and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court.
Yes X No
---- ----
Indicate the number of shares outstanding of the
Registrant's classes of common stock as of June 2, 1997:
2,815,968 shares of Registrant's common stock, par value
$0.025 per share were outstanding as of June 2, 1997.
<PAGE> 2
PART II
ITEM 7. MANAGEMENT'S DISSCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Item 7 of the Registrant's Annual Report on Form 10-K for the fiscal year ended
July 31, 1996 is deleted and hereby amended in its entirety to read as follows:
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ANALYSIS OF CONTINUING OPERATIONS AND DISCONTINUED OPERATIONS
(THREE YEARS ENDED JULY 31, 1996)
Over the past several years, the Company has formulated and executed
various restructuring plans in order to improve operating results. These plans
have included the exit from certain unprofitable foreign subsidiaries, the
divestitures of non-core product lines, the exit from manufacturing operations
at AM Multigraphics and the implementation of strategic investments in new
products and capabilities. In July 1996 the Company entered into an Asset
Purchase Agreement with Heidelberger Druckmaschinen AG for the sale of its
Sheridan Systems business segment. The sale of Sheridan Systems was concluded
in August 1996. In addition, during 1996 the Company disposed of its AM
Multigraphics-International Operations. These segments are reflected as
discontinued operations. Included in Continuing Operations are results of the
two remaining foreign subsidiaries; however, the Company sold its interest in
AM Japan Co., Ltd. in September 1996, and on October 17, 1996, AM Canada filed
a voluntary assignment in bankruptcy.
CONTINUING OPERATIONS
<TABLE>
<CAPTION>
Results of Operations
(dollars in millions)
Year ended July 31,
1996 1995 1994
-------- ------- -------
<S> <C> <C> <C>
Revenues $ 168.1 $191.5 $190.3
Operating Income (Loss) (16.4) (2.5) 4.8
Non Operating Expenses (3.9) (3.2) 21.5
------- ------ -------
Pre Tax Income (Loss) ($20.3) ($5.7) $ 26.3
Net Income (Loss) ($20.2) ($4.2) $ 23.9
======= ====== =======
</TABLE>
Note: To facilitate a meaningful discussion of the Company's comparative
operating performance in fiscal years 1996, 1995, and 1994, the results are
presented on a traditional comparative basis for all periods. Consequently,
the information presented for fiscal year 1994 does not comply with the
accounting requirements for companies upon emergence from bankruptcy, which
calls for separate reporting for the Reorganized Company and the Predecessor
Company.
<PAGE> 3
OPERATING RESULTS
The Continuing Operations are comprised of one business segment, the AM
Multigraphics segment. The AM Multigraphics segment serves the graphics arts
industries in North America, and until September 1996 Japan, by distributing an
extensive range of sheet fed offset duplicating presses, digital color printing
equipment, pre and post press equipment, and a wide range of supplies and
technical services. In 1995, the operation initiated efforts to transition out
of engineering and manufacturing to focus primarily on distribution, sales and
service activities.
In response to declining demand for manufactured duplicator products and
services, AM Multigraphics developed a strategic plan during 1995 to transition
from being a manufacturing based supplier to becoming a broad based distributor
of equipment, supplies and services to the graphics arts markets. Efficiency in
providing a broad line of products and services to its large customer base and
differentiation through the provision of technical service and support are the
tactical objectives of the strategy. The Company has efforts underway to phase
out its manufacturing operations, expand its product offering through new
distribution agreements and transition its organization structure and
capabilities to function as an efficient distribution business. While progress
has been made in adding new products, updating and enhancing systems and
restructuring the organization, significant efforts to complete the transition
from a manufacturing based supplier to a distribution business still need to be
completed. In addition, with the divestiture of Sheridan Systems, it will be
necessary for the Company to restructure its corporate staff and eliminate
excess facilities and equipment.
During September of fiscal year 1994, the Company emerged from Chapter 11
Bankruptcy. The Company had operated under the protection of Chapter 11
following a voluntary petition for reorganization filed in May 1993. With the
emergence from Chapter 11 in 1994, the Company adopted Fresh Start Reporting,
which resulted in material changes to the balance sheet, including valuation
changes of assets and liabilities at fair market value and valuation of equity
based on the appraised reorganization value of the business.
Revenues in 1996 declined $23.4 million, or 12% from the prior year
period. In 1995, revenues increased slightly after a decline of 3% in 1994
from 1993. The decline in revenues, which has been consistent with longer term
trends, has occurred principally in the sheet fed offset duplicator products
which include press and post-press machines, supplies and maintenance services.
The duplicator machines and supplies are products which have been largely
manufactured by the Company. Market demand for the Company's duplicator
products has declined due to inroads from competing printing technologies. As a
result of these competitive inroads, the installed base of duplicator equipment
has experienced long term decline which has led to decreased sales of
equipment, supplies and services. In addition, the Company experienced
significant liquidity problems during 1996 which led to a reduction in
inventory levels, among other things. The lower inventory level negatively
affected the Company's ability to serve its supply and service customers which
resulted in lower revenues and gross margin. The subsidiaries in Japan and
Canada, which the Company has divested, contributed revenues of $40.0 million
in 1996, $44.3 million in 1995 and $42.1 in 1994.
<PAGE> 4
Non Operating Expenses consisted primarily of interest expense in 1996,
1995 and 1994. The interest expense related primarily to borrowings under the
Domestic Revolving Credit Agreement, which have been required to fund
operations, and interest on general unsecured claims and priority tax claims
from the Company's reorganization. In 1994 the Company recorded reorganization
income of $23.9 million which pertained to the adoption of Fresh Start
Reporting, as previously described. The income resulted from fair market
adjustments to tangible assets and liabilities of $8.0 million, a provision of
$10.1 million to accrue for professional fees related to the reorganization,
and to record the Reorganization Value in Excess of Fair Market Value of $26.0
million.
The net loss of $20.2 million from Continuing Operations in 1996 worsened
by $16.0 million as compared with 1995. The increased loss was primarily due
to volume driven margin erosion in 1996, declines in gross margin rates
resultant from shifts in product mix to lower margin distributed products, and
restructuring charges. The restructuring charges of $7.0 million in 1996
related to the shut down of manufacturing operations, the closure of corporate
offices and the exit costs for the Canadian subsidiary. Continuing Operations
had a net loss of $4.2 million in 1995 compared with a net income of $23.9
million in 1994. With the emergence from Chapter 11 in 1994, the Company
adopted Fresh Start Reporting, which resulted in material changes to the
balance sheet, including valuation changes of assets and liabilities at fair
market value and valuation of equity based on the appraised reorganization
value of the business. The reorganization and adoption of Fresh Start
Reporting in 1994 resulted in a one time reorganization income of $23.9
million.
The decrease in net income for the year ended July 31, 1995 as compared
with fiscal year 1994 was again primarily due to lower gross margins related to
the change in product mix to lower margin distributed products. In addition,
in 1994 the Company recorded a favorable adjustment of $23.9 million which
resulted from the adoption of Fresh Start Reporting in 1994, as previously
described.
<PAGE> 5
DISCONTINUED OPERATIONS
<TABLE>
<CAPTION>
Results of Operations
(dollars in millions) Year Ended July 31,
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Revenues
Sheridan Systems $109.3 $182.2 $158.1
AM Multigraphics - International 40.0 135.8 142.4
------ ------ ------
Total 149.3 318.0 300.5
Operating Income (Loss)
Sheridan Systems (2.6) 17.8 14.4
AM Multigraphics - International (4.2) (5.7) (2.5)
Unusual Items Inc (Expense) - 4.8 -
------ ------ ------
Total (6.8) 16.9 11.9
Non Operating Expense (2.6) (3.5) (30.9)
------ ------ ------
Pre-Tax Income (Loss) (9.4) 13.4 (19.0)
Income (Loss) (10.1) 8.8 (23.2)
Loss on Sale (15.2) - -
------ ------ ------
Income (Loss) from
Discontinued Operations $(25.3) $ 8.8 $(23.2)
====== ====== ======
</TABLE>
Note: To facilitate a meaningful discussion of the Company's comparative
operating performance in fiscal years 1996, 1995 and 1994 the results are
presented on a traditional comparative basis for all periods. Consequently,
the information presented for fiscal year 1994 does not comply with the
accounting requirements for companies upon emergence from bankruptcy, which
calls for separate reporting for the Reorganized Company and the Predecessor
Company.
OPERATING RESULTS
The Discontinued Operations is comprised of two business segments, the
Sheridan Systems segment and the divested AM Multigraphics - International
segment. The Sheridan Systems business serves the printing and newspaper
publishing industries by providing bindery systems and newspaper mailroom
systems. The products sold by Sheridan Systems were largely capital equipment
items and market demand has historically been cyclical. The divested AM
Multigraphics - International segment served certain foreign graphics arts
markets through wholly owned subsidiaries, situated primarily in Europe. The
divested AM Multigraphics - International subsidiaries distributed an extensive
range of digital pre-press equipment, photocopiers, sheet-fed offset
duplicating presses, digital color printing equipment, pre and post press
equipment and a wide range of supplies and technical services.
The net loss from Discontinued Operations was $25.3 million in 1996
compared to net income of $8.8 million in 1995, and a net loss of $23.2 million
in 1994. The increased loss in 1996 over 1995 resulted primarily from
deteriorating market conditions for the Sheridan Systems segment in 1996, and a
$15.2 million loss recorded on the sale of the segment. During September of
fiscal year 1994, the Company emerged from Chapter 11 Bankruptcy. The
<PAGE> 6
Company had operated under the protection of Chapter 11 following a voluntary
petition for reorganization filed in May 1993. With the emergence from Chapter
11 in 1994, the Company adopted Fresh Start Reporting, which resulted in
material changes to the balance sheet, including valuation changes of assets
and liabilities at fair market value and valuation of equity based on the
appraised reorganization value of the business. The reorganization and
adoption of Fresh Start Reporting in 1994 resulted in a one time reorganization
expense of $27.0 million.
The operating results of Sheridan Systems significantly varied from period
to period primarily due to the cyclical nature of the business which
dramatically affected revenue levels and gross margins. Orders for Sheridan
Systems bindery and newspaper mailroom products have been in the millions of
dollars and therefore revenues, margins and customer backlogs varied
significantly depending on the timing of customer orders. In 1996 Sheridan
Systems revenues declined $72.9 million from the prior year . Weak market
demand and a low beginning backlog were the principal reasons for the decrease
in revenues. The weak market demand was attributable to a combination of
factors which include a reduction in printed product for magazines, catalogs
and direct mail and the existence of excess capacity in the printing industry.
Historically, the health of the retail sector of the U.S. economy which
directly impacts advertising expenditures impacts market demand. Sheridan
Systems incurred an operating loss of $2.6 million in 1996, compared to income
of $17.8 million in the prior year period due principally to the lower volume.
Fiscal year 1995 revenues increased 15% over 1994 largely due to higher orders
particularly for bindery equipment, and a reduction in backlog. In 1995
Sheridan Systems recognized approximately $20.0 million in revenues from
prototype equipment which had been shipped in 1994 and accepted by customers in
1995. The operating income in 1995 of $17.8 million improved by $3.4 million
over 1994 due to the increased revenue level and related gross margin increase.
The 1994 operating results reflected revenues of $158.1 million which was only
slightly improved over 1993.
The results of the divested AM Multigraphics - International segment
consistently reflected operating losses and declining revenues. The revenue
decreases, throughout the periods, were attributable to declining market demand
for offset duplicating presses and the related erosion of the installed base of
duplicating equipment. The decline in market demand has been the result of
inroads made by competing printing technologies. The users of duplicators have
been the principal customers for the related supplies and services. The
divested AM Multigraphics - International operations were also adversely
impacted by decreases in sales and margins of electronic pre-press products due
to competitive pressures in all periods. The Company undertook numerous
restructuring initiatives in response to the declining revenues and operating
losses, with significant headcount reductions accomplished and overall cost
reductions implemented over the reporting periods. The restructurings were
costly due to local statutory requirements and required labor negotiations
which slowed the implementation of cost reduction actions. Despite these
restructuring efforts and cash expenditures the Company was not able to
eliminate the operating losses which ultimately led to the divestiture of these
operations.
In 1996, the Company had unusual item expense of $15.2 million which
resulted from the sales of substantially all of the assets and liabilities of
the Sheridan Systems division. In 1995 the Company had unusual item income of
$4.8 million. This income resulted from divestitures of non-core product lines
in the Discontinued Operations. The divestitures included the sale of
<PAGE> 7
certain assets related to the service of forms and sheetfed presses, the
service and supply business formerly known as Advanced Imaging Products, and
the U.K. copier business.
Non Operating expenses include interest expense, primarily on borrowings
under the Revolving Credit Agreement and goodwill amortization expense. In
1994, the Company recorded reorganization expense of $27.0 million which
pertained to the adoption of Fresh Start Reporting, as previously described.
The expense resulted from fair market adjustments to tangible assets and
liabilities of $9.7 million, a write off of existing Goodwill of $39.8 million
and to record the Reorganization Value on Excess of Fair Market Value of $22.5
million.
LIQUIDITY AND CAPITAL RESOURCES (THREE YEARS ENDED JULY 31, 1996)
The Company's total cash and cash equivalents were $2.6 million as of July
31, 1996 as compared with $12.6 million on July 31, 1995 and $21.1 million on
July 31, 1994. In addition to the reduction in cash balances during the year
ended July 31, 1996, net borrowings under revolving credit facilities increased
$5.4 million from prior year level.
Operating Activities. In 1996, the Company had a cash outflow from
operating activities of $3.9 million as compared with a cash outflow of $4.9
million in 1995 and a cash inflow of $15.6 million in 1994. Net income has
significantly varied in the comparative periods, with a net loss of $45.5
million in 1996 as compared with net income of $4.6 million and $59.3 million
in 1995 and 1994, respectively.
Depreciation and amortization of $4.2 million in 1996 increased by $1.8
million over 1995 primarily due to increased capital expenditures in 1996 to
upgrade systems and to provide for leasehold improvements. In 1995,
depreciation and amortization expense decreased by $1.6 million primarily due
to a reduction in the amortization of goodwill expense. In 1995 and 1994, the
Company benefited from operating loss carryforwards of $8.0 million and $10.5
million, respectively. Fresh Start Reporting rules require recognition of tax
expense although the Company was not required to pay US Federal taxes.
Discontinued Operations provided cash inflow in 1996 of $26.3 million, which
was derived largely through the collection of accounts receivable and lease
receivables. In 1995, Discontinued Operations had a cash outflow of $15.7
million due primarily to a reduction in customer advances on a lower backlog of
customer orders. In 1994, Discontinued Operations had a positive cash flow of
$22.2 million due primarily to a reduction in assets. Accounts receivable
decreased $6.3 million in 1996 as a result of the collection of comparatively
higher outstanding balances which existed at July 31, 1995 due to a higher
revenue level in that period. The changes in accounts receivable in 1995 (a
decrease of $0.4 million) and a decrease of $1.8 million in 1994 resulted
largely from changes in revenue levels, as the collection rates remained
relatively consistent between the periods. Inventory decreased $13.1 million
in 1996 primarily as the result of phasing out machine manufacturing activities
and a related reduction in parts and finished goods inventories. Inventory
decreased $2.7 million in 1995 due to reductions in parts and components for
manufactured equipment. In 1994, inventory increased $5.0 million as stocking
levels were restored following the Company's reorganization. In both 1996 and
1995 accounts payable and other accruals decreased primarily as a result of
payments for restructuring activities. In 1994, accounts payable increased
$3.9 million as the Company rebuilt credit relations with its vendors
following the reorganization.
<PAGE> 8
Investing Activities. Capital expenditures of $9.0 million in 1996 were
primarily to upgrade systems and equipment and to provide for leasehold
improvements. The Company has committed to capital expenditures related to
certain increased systems capabilities which will be financed utilizing a
combination of cash balances, funds obtained under the revolving credit
facility, and third party leases. The capital expenditures in 1995 and 1994
were primarily for replacement of existing assets to maintain operating
capabilities. In 1996, the Company received $6.8 million in proceeds for the
sale of its AM Multigraphics headquarters, manufacturing and distribution
facility in Mt. Prospect, Illinois. Discontinued Operations had cash outflows
of $1.3 million and $3.0 million in 1996 and 1994, respectively, which were to
improve systems and maintain/replace existing capabilities. In 1995, the
Discontinued Operations had a cash inflow of $0.9 million from the sale of
assets.
Financing Activities. In 1996, the Company borrowed $5.4 million under
its Revolving Credit Agreement to provide funding for operations. Payments of
$5.1 million, $4.3 million and $6.2 million have been made in 1996, 1995 and
1994, respectively, for general unsecured claims and priority tax claims in
accord with scheduled Plan payments. In 1996, the Company incurred $4.0
million in capital lease obligations to finance the upgrade of systems and
leasehold improvements. In 1996 Discontinued Operations had a reduction in
long-term debt and capital lease obligations of $6.7 million which resulted
primarily from repayments made with the proceeds from divestitures of non-core
product lines. In 1995 and 1994, Discontinued Operations had borrowings which
were necessitated primarily by operating losses.
The Company's principal credit facility as of July 1996 was its $25.0
million revolving credit facility which expired in October 1996. The
utilization's under this facility were limited by a borrowing base which as of
July 31, 1996, was approximately $18.4 million.
In August 1996, the Company completed the sale of its Sheridan Systems
segment for proceeds of $50.1 million. In September the Company collected
approximately $11.0 million from the sale of its interest in AM Japan Co., Ltd.
The increase in cash balances from these transactions provides the Company
with adequate financial resources for the foreseeable future. At September 28,
1996, the Company had a cash balance of $41.2 million after repaying bank debt
and meeting other short-term obligations. The Company is currently seeking to
obtain new banking facilities to provide for the issuance of letters of credit,
fund selected customer financing programs, and increase liquidity to the
Company.
PLAN OF REORGANIZATION
On September 29, 1993 the Company's Reorganization Plan (the Plan) was
confirmed by the United States Bankruptcy Court, with the Plan being
consummated on October 13, 1993. As a result of the reorganization and the
recording of the restructuring transaction and implementation of Fresh Start
Reporting, the Company's results of operations for the year ending July 31,
1996 are not comparable to the two preceding years. See Note 14 of "Notes to
Consolidated Financial Statements" for information on consummation of the Plan
and implementation of Fresh Start Reporting.
<PAGE> 9
The most significant adjustments which resulted from recording the
restructuring transaction and the implementation of Fresh Start Reporting
affected the Company's Statement of Operations. These adjustments related to
decreased interest expense, decreased amortization of intangibles and increased
income tax expense. In the Consolidated Balance Sheet, the most significant
adjustments affected long-term debt and equity.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8 of the Registrant's Annual Report on Form 10-K for the fiscal year ended
July 31, 1996 is hereby deleted and amended in its entirety to read as follows:
<PAGE> 10
AM INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PREDECESSOR
REORGANIZED COMPANY (a) COMPANY
----------------------------------------------------------- -----------
TEN MONTHS TWO MONTHS
TWELVE MONTHS ENDED ENDED ENDED
JULY 31, 1996 JULY 31, 1995 JULY 31, 1994 SEPT. 29,
1993
--------------- --------------- --------------- ------------
<S> <C> <C> <C> <C>
REVENUES
Machines and Supplies $112,118 $ 129,409 $108,627 $16,476
Services 55,934 62,076 55,189 10,056
-------- --------- -------- -------
TOTAL REVENUES 168,052 191,485 163,816 26,532
-------- --------- -------- -------
COST OF SALES
Machines and Supplies 94,448 99,460 78,949 12,904
Services 35,973 39,292 33,446 6,622
-------- --------- -------- -------
TOTAL COST OF SALES 130,421 138,752 112,395 19,526
-------- --------- -------- -------
GROSS MARGIN 37,631 52,733 51,421 7,006
OPERATING EXPENSES
Selling, general and administrative 47,048 55,224 44,632 9,032
Unusual items, net expense 7,032 0 0 0
-------- --------- -------- -------
TOTAL OPERATING EXPENSES 54,080 55,224 44,632 9,032
OPERATING INCOME (LOSS) (16,449) (2,491) 6,789 (2,026)
Non-operating income (expense):
Interest income 169 222 517 2
Interest expense (3,762) (3,355) (2,663) (51)
Reorganization items, net 0 0 575 23,946
Other, net (212) (53) (742) (76)
-------- --------- -------- -------
Income (loss) before income taxes,
discontinued operations and
extraordinary gain (20,254) (5,677) 4,476 21,795
Income tax expense (benefit) (97) (1,526) 2,394 0
-------- --------- -------- -------
Net income (loss) before discontinued
operations and extraordinary gain (20,157) (4,151) 2,082 21,795
Net income (loss) of discontinued
operations, net of tax (25,342) 8,764 4,570 (27,810)
-------- --------- -------- -------
Net income (loss) before extraordinary
gain $(45,499) $ 4,613 $ 6,652 $(6,015)
======== ========= ======== =======
Extraordinary gain 0 0 0 58,704
-------- --------- -------- -------
NET INCOME (LOSS) $(45,499) $ 4,613 $ 6,652 $52,689
======== ========= ======== =======
PER SHARE OF COMMON STOCK: (b)
Income (loss) from continuing operations $ (2.88) $ (0.59) $ 0.30 N/A
Income (loss) from discontinued operations (3.62) 1.25 0.65 N/A
======== ========= ======== =======
Net income (loss) $ (6.49) $ 0.66 $ 0.95 N/A
======== ========= ======== =======
Weighted average shares of common stock and
common stock equivalents outstanding (in
thousands) 7,009 7,021 7,006 N/A
======== ========= ======== =======
</TABLE>
(a) Due to the Reorganization and implementation of Fresh Start Reporting,
financial statements for the Reorganized Company (period starting September
30, 1993) are not comparable to those of the Predecessor Company. See
Notes to the Financial Statements (Note 14) for additional information.
(b) The weighted average number of common shares outstanding and net income per
common share for the Predecessor Company have not been presented due to the
Reorganization and implementation of Fresh Start Reporting, they are not
comparable to subsequent periods.
The Notes to Consolidated Financial Statements are an integral part of these
financial statements.
<PAGE> 11
AM INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
PREDECCESOR
REORGANIZED COMPANY COMPANY
--------------------------------------------- ---------------------
TEN MONTHS TWO MONTHS
TWELVE MONTHS ENDED ENDED ENDED
JULY 31, 1996 JULY 31, 1995 JULY 31, 1994 SEPT. 29, 1993
------------- --------------- ------------- ---------------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $(45,499) $ 4,613 $ 6,652 $ 52,689
ADJUSTMENTS TO RECONCILE NET INCOME
TO CASH FLOW FROM OPERATING ACTIVITIES:
Depreciation of property, plant and
equipment 3,769 1,632 2,204 327
Amortization and writedown of other
assets 407 706 1,395 -
Benefit from operating loss
carryforwards - 8,037 10,494 -
Discontinued operations 26,284 (15,715) 12,636 9,596
Net assets held for sale (2,682) - - -
Change in assets and liabilities:
Accounts receivable, net 6,308 (391) (5,105) 6,855
Inventory, net 13,056 2,703 (4,455) (559)
Prepaid expenses and other assets (334) (372) (2,816) 314
Accounts payable and accruals (2,434) (2,157) (6,843) 10,704
Other, net (2,794) (3,950) 3,130 1,041
Changes due to Fresh Start Reporting
and reorganization - - - (82,650)
-------- -------- -------- --------
CASH FLOW FROM OPERATING ACTIVITIES (3,919) (4,894) 17,292 (1,683)
-------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (8,990) (2,362) (1,560) (135)
Proceeds from disposition of property 6,822 - - -
Discontinued operations (1,262) 886 (2,973) -
-------- -------- -------- --------
CASH FLOW FROM INVESTING ACTIVITIES (3,430) (1,476) (4,533) (135)
-------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) under
revolving credit facilities 5,430 - - -
Payment of Bankruptcy Claims (5,106) (4,312) (6,200) -
Borrowings under capital lease and
other arrangements 4,041 - - 1,931
Payments under capital lease
arrangements (358) - - -
Discontinued operations (6,661) 2,133 2,565 1,061
-------- -------- -------- --------
CASH FLOW FROM FINANCING ACTIVITIES (2,654) (2,179) (3,635) 2,992
-------- -------- -------- --------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (10,003) (8,549) 9,124 1,174
Cash and cash equivalents at
beginning of period 12,563 21,112 11,988 10,814
-------- -------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 2,560 $ 12,563 $ 21,112 $ 11,988
======== ======== ======== ========
</TABLE>
(a) Due to the Reorganization and implementation of Fresh Start Reporting,
financial statements for the Reorganized Company (period starting
September 30, 1993) are not comparable to those of the Predecessor Company.
See Notes to the Financial Statements (Note 14) for additional information.
The Notes to Consolidated Financial Statements are an integral part of these
financial statements.
<PAGE> 12
AM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in thousands)
<TABLE>
<CAPTION>
Preferred Stock Common Stock Treasury Stock
---------------------------- --------------------------- --------------------------
Number Number Number
of Shares Amount of Shares Amount of Shares Amount
----------- --------- --------- --------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
PREDECESSOR COMPANY:
Balance July 31, 1993 3,414,065 34 52,477,683 525 5,483,600 (23,107)
Net Income
Reorganization Items:
Cancellation of Stock (3,414,065) (34) (52,477,683) (525) (5,483,600) 23,107
Fresh Start Adjustment - - - - - -
Aggregate effect of current
year translation adjustments
Issuance of New Common Stock 7,000,000 70
Issuance of Warrants
---------- ---- ------------ ---- --------- --------
Reorganized Company Balance,
September 30, 1993(a) - - 7,000,000 70 - -
REORGANIZED COMPANY
Net Income
Aggregate effect of current
year translation adjustments
Purchase of Treasury Stock 1,119 (6)
---------- ---- ------------ ---- --------- --------
Balance July 31, 1994 - - 7,000,000 70 1,119 (6)
Net Income
Aggregate effect of current
year translation adjustments
Issuance of new common stock 10,000 -
Purchase of Treasury Stock 126 -
---------- ---- ------------ ---- --------- --------
Balance at July 31, 1995 - - 7,010,000 70 1,245 (6)
Net loss
Aggregate effect of current
year translation adjustments
Purchase of Treasury Stock 334 -
Other, net ---------- ---- ------------ ---- --------- --------
Balance at July 31, 1996 - $ - 7,010,000 $70 1,579 ($6)
========== ==== ============ ==== ========= ========
</TABLE>
<TABLE>
<CAPTION>
Warrants
---------------------
Capital in Cumulative Total
Number Excess of Accumulated Translation Shareholders'
of Shares Amount Par Value Earnings/(Deficit) Adjustment Equity
----------- ------- ----------- ------------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
PREDECESSOR COMPANY:
Balance July 31, 1993 - - 339,781 (368,842) 1,958 (49,651)
Net Income 52,689 52,689
Reorganization Items:
Cancellation of Stock - - (339,781) (317,233)
Fresh Start Adjustments - - - 316,153 (2,125) 314,028
Aggregate effect of current
year translation adjustments 167 167
Issuance of New Common 35,547 35,617
Issuance of Warrants 1,095,000 383 383
----------- ------- ----------- ------------------ ------------ ------------
Reorganized Company Balance,
September 30, 1993 (a) 1,095,000 383 35,547 - - 36,000
REORGANIZED COMPANY
Net Income 6,652 6,652
Aggregate effect of current
year translation adjustments 130 130
Purchase of Treasury Stock (6)
--------- ---- ------- -------- ---- -------
Balance July 31, 1994 1,095,000 383 35,547 6,652 130 42,776
Net Income 4,613 4,613
Aggregate effect of current
year translation adjustments 822 822
Issuance of new common stock 90 90
Purchase of Treasury Stock -
--------- ---- ------- -------- ---- -------
Balance at July 31, 1995 1,095,000 383 35,637 11,265 952 48,301
Net loss (45,499) (45,499)
Aggregate effect of current
year translation adjustments (734) (734)
Purchase of Treasury Stock -
Other, net 228 228
--------- ---- ------- -------- ---- -------
Balance at July 31, 1996 1,095,000 $383 $35,865 $(34,234) $218 $ 2,296
========= ==== ======= ======== ==== =======
</TABLE>
(a) Due to the Reorganization and implementation of Fresh Start
Reporting, financial statements for the Reorganized Company (period starting
September 30, 1993) are not comparable to the Predecessor Company. See Notes to
the Financial Statements (Note 14) for additional information.
The Notes to Consolidated Financial Statements are an integral part of these
financial statements.
<PAGE> 13
AM INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
JULY 31, JULY 31,
1996 1995
----------- -----------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,560 $ 12,563
Accounts receivable, net 19,774 36,409
Inventories, net 11,602 28,432
Prepaid expenses and other assets 1,069 1,722
Net assets held for sale 7,698 0
Net assets of discontinued operations 42,940 61,301
------- --------
TOTAL CURRENT ASSETS 85,643 140,427
Property, plant and equipment, net 10,867 12,453
Excess reorganization value 0 5,430
Other assets, net 1,452 4,762
------- --------
TOTAL ASSETS $97,962 $163,072
======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings and current maturities of long-term
debt $14,381 $ 6,132
Accounts payable 15,435 21,134
Service contract deferred income 12,924 17,312
Payroll related expenses 13,227 13,175
Other current liabilities 17,956 21,172
------- --------
TOTAL CURRENT LIABILITIES 73,923 78,925
Long-term debt 8,527 14,915
Other long-term liabilities 13,216 20,931
------- --------
TOTAL LIABILITIES 95,666 114,771
COMMITMENTS AND CONTINGENCIES (NOTE 5)
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value; 40 million shares authorized;
7,010,000 issued as of July 31, 1996 and July 31, 1995 70 70
Capital in excess of par value 35,865 35,637
Less: treasury stock, at cost, 1,579 shares as of July 31,
1996 and 1,245 shares as of July 31, 1995 (6) (6)
Warrants, 1,095,000 issued, exercise price of $18.00 as of
July 31, 1996 and July 31, 1995 383 383
Accumulated earnings (deficit) (34,234) 11,265
Cumulative translation adjustment 218 952
------- --------
TOTAL SHAREHOLDERS' EQUITY 2,296 48,301
------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $97,962 $163,072
======= ========
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
financial statements.
<PAGE> 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT AS OTHERWISE NOTED AND PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations: AM International, Inc. (the "Company"), a Delaware
corporation, distributes equipment and supplies, and provides services for the
graphics arts industry. The Company is in process of executing plans to exit
its machine manufacturing business, consistent with management's strategic
objectives. The Company's continuing distributed products consist primarily of
pre-press equipment, supplies and services. The Company has in excess of
50,000 customers, including small commercial printers, large quick print
franchises, company run in-house print shops, governmental agencies, and
educational institutions. No individual customer accounts for more than 10% of
net revenue.
The Company's headquarters and primary operations are located in Mt. Prospect,
Illinois. Products are distributed throughout the United States utilizing six
distribution facilities. To a lesser extent, products are distributed
internationally through independent dealers. The Company employs approximately
400 service technicians throughout the United States to provide technical
service and training.
Basis of Presentation: The Consolidated Financial Statements of the Reorganized
Company (period beginning September 30, 1993) and the Predecessor Company
(periods prior to September 30, 1993) include the accounts of AM International,
Inc. and its subsidiaries (the "Company"). All significant intercompany
transactions have been eliminated. The Company's fiscal year end is July 31.
All references to years, unless otherwise indicated, refer to the fiscal year.
Certain prior year amounts have been reclassified to be consistent with current
year presentation.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Cash Equivalents: The Company considers all highly liquid investments purchased
with a maturity of three months or less to be cash equivalents.
Inventories: Inventories are valued at the lower of cost, which includes
material, labor and overhead, determined by the first-in, first out (FIFO)
method, or market.
Properties, Equipment and Depreciation: Properties and Equipment are stated at
cost and are depreciated over estimated useful lives, ranging from 5 to 30
years, primarily on a straight-line basis. The Company adjusts the net book
value to recognize impairments in accordance with "SFAS 121: Accounting for
the Impairment of Long-Lived Assets and Long-Lived assets to be Disposed Of."
Intangibles: Excess reorganization values are amortized on a straight-line
basis over periods not exceeding 20 years. Identifiable intangible assets are
amortized on a straight-line basis over their estimated useful lives.
Accumulated amortization of excess reorganization value was $2,472 at July 31,
1996 and $2,065 at July 31, 1995. The Company continually evaluates current
events and circumstances in order to determine whether the estimated useful
lives and recorded balances of excess reorganization value have been impaired.
The Company utilizes evaluations of estimated undiscounted future cash flows
and financial ratios in this review.
Currency Translation: Foreign assets and liabilities have been translated into
United States dollars at current exchange rates as of the balance sheet dates,
and revenues and expenses have been translated at the average exchange rates in
effect during each period. Translation adjustments are reported as a separate
component of Shareholders' Equity. Exchange gains and losses on foreign
currency transactions are included in the Consolidated Statement of Operations
and are not material.
<PAGE> 15
- --------------------------------------------------------------------------------
NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition: Revenue is recognized from sales when a product is
shipped. Amounts billed for service contracts are credited to Service Contract
Deferred Income and recognized as revenues over the term of the contracts. The
Company recognizes warranty and equipment installation expenses at the time a
product is shipped, if applicable. The expense is estimated considering
current warranty policies and historical expense.
Research and Development Expense: Expenses for research and development are
charged to income as incurred. For the reorganized company, such expenses were
$364 in 1996, $744 in 1995, and $559 in 1994. Such expenses were $95 for the
Predecessor Company in 1994.
Income Taxes: Income taxes are provided based on the liability method of
accounting pursuant to Statement of Financial Accounting Standards (SFAS) No.
109, " Accounting for Income Taxes." Deferred income taxes are recorded to
reflect the future tax consequences of differences between the tax basis of
assets and liabilities and their financial reporting amounts at each year end.
Income per Common Share: Income per share amounts are determined after
deducting any dividend requirements of preferred shares and are based on the
weighted average shares of common stock and common stock equivalents
outstanding during each period.
Financial Instruments: The carrying value of financial instruments approximates
fair market value of those assets and liabilities.
Future Adoption of Accounting Standards: In fiscal 1997, the Company is
required to adopt "SFAS 123: Accounting for Stock-Based Compensation." The
adoption of this accounting standard is not expected to have a material impact
on the financial statements.
NOTE 2 - DISCONTINUED OPERATIONS
In August 1996, the Company completed the sale of substantially all of the
assets and liabilities of the Sheridan Systems division for proceeds of
$50,100. A loss of $15,212 has been recorded in the fourth quarter of the
Company's fiscal year ended July 31, 1996 as a result of the transaction, with
no recorded tax benefit.
During the year, the Company completed the exit of its AM Multigraphics -
International subsidiaries with the sale of its subsidiaries in the
Netherlands, France, and Belgium and the placement of the Company's AM
Multigraphics UK holding company into an Administration Proceeding. The sale
of the subsidiaries in the Netherlands, France, and Belgium required the
Company to provide consideration of approximately $3,000 in the form of cash
and other assets. No gain or loss was recorded as a result of the exit of the
AM Multigraphics - International subsidiaries.
<PAGE> 16
- -------------------------------------------------------------------------------
NOTE 2 - DISCONTINUED OPERATIONS (CONTINUED)
The results of these discontinued business units are included in the
consolidated statements of income under "discontinued operations." The
following table summarizes key financial data related to the above discontinued
operations:
<TABLE>
<CAPTION>
Twelve Months Ten Months Two Months
Ended Ended Ended
July 31, 1996 July 31, 1995 July 31, 1994 Sept. 29, 1993
------------- --------------- --------------- -----------------
<S> <C> <C> <C> <C>
Net sales $149,256 $318,016 $257,809 $ 42,682
Gross margin 34,709 86,219 77,115 11,722
Unusual income - (4,845) - -
Operating income (loss) (6,749) 16,944 12,220 (323)
Non-operating (income) expense 2,136 3,212 3,046 443
Allocated interest expense 581 314 315 -
Reorganization items, net - - - 27,049
Income tax provision (benefit) applicable
to discontinued businesses 664 4,654 4,289 (5)
-------- -------- -------- --------
Income (loss) from operations of discontinued
business net of applicable taxes (10,130) 8,764 4,570 (27,810)
Loss on Sale (15,212) - - -
-------- -------- -------- --------
Income (loss) from discontinued operations $(25,342) $ 8,764 $ 4,570 $(27,810)
======== ======== ======== ========
</TABLE>
The results of operations, net of taxes, and the net assets of Sheridan Systems
and the divested AM Multigraphics - International operations are presented in
the consolidated financial statements as discontinued operations. Interest
expense pertaining to the Company's Revolving Credit Facility has been
allocated based upon the ratio of the net assets of the discontinued operations
to the consolidated capitalization of the Company. Continuing operations and
discontinued operations reflect the net tax benefit or tax expense generated by
the respective operations, limited, however, by the income tax benefit or tax
expense recognized in the Company's historical financial statements. No
general corporate expenses have been allocated to the discontinued operations.
The results of the discontinued operations are not necessarily indicative of
the results of operations which may have been obtained had the continuing and
discontinued operations been operating independently.
The net assets of discontinued operations included in the Consolidated Balance
Sheets at July 31, 1996 and July 31, 1995 amounted to $42,940 and $61,301,
respectively, and consisted primarily of receivables, inventory, property and
equipment, intangible assets related to the discontinued operations, net of
accounts payable and accrued liabilities.
The net assets of discontinued operations included in the Consolidated Balance
Sheet at July 31, 1996 is net of approximately $7,000 of liabilities to be paid
from the $50,100 sale proceeds.
<PAGE> 17
- --------------------------------------------------------------------------------
NOTE 3 - BORROWING ARRANGEMENTS
The Company's short and long-term borrowings are comprised of the following:
<TABLE>
<CAPTION>
July 31, 1996 July 31, 1995
-------------- --------------
<S> <C> <C>
Revolving Credit Facility $ 5,430 $ -
General Unsecured Claims & Priority Tax
Claims 13,795 21,047
Capital Leases 3,683 -
------- -------
Total $22,908 $21,047
======= =======
Classified in the Consolidated Balance Sheet
as follows:
Short-term $14,381 $ 6,132
Long-term 8,527 14,915
------- -------
Total $22,908 $21,047
======= =======
</TABLE>
The Company maintained a $25,000 three year secured domestic Revolving Credit
Facility (subject to borrowing base limitations) which expired October 12, 1996
with BT Commercial Corporation and LaSalle National Bank. The Revolving Credit
Facility included a $10,000 sub-facility for the issuance of letters of credit.
As of July 31, 1996, the calculated borrowing base was approximately $18,400.
As security for utilizations of the Revolving Credit Facility, the Company
granted a security interest and general lien upon its domestic assets. As of
July 31, 1996 the Company had borrowings of $5,430 under the Revolving Credit
Facility and was utilizing $3,347 of the facility to secure outstanding letters
of credit. Interest was charged at a rate of 1.75% in excess of the prime
lending rate of Bankers Trust Company. Letter of credit fees were 2.5% per
annum plus a 0.5% facing fee on standby letters of credit and 1.5% per annum on
commercial documentary letters of credit. As of July 31, 1996, the interest
rate was 10.0%.
The Revolving Credit Facility agreement contained restrictive covenants which
limited capital expenditures, restricted the payment of dividends and other
payments and provided for quarterly measures of pretax net income and interest
coverage, among other things. In addition, the agreement limited the Company's
ability to borrow or to request letters of credit following a material adverse
change as determined by the lenders.
In August 1996, the Company completed the sale of substantially all of the
assets and liabilities of the Sheridan Systems division for proceeds of
$50,100. The proceeds of the sale were used in part to pay off all outstanding
borrowings on the Revolving Credit Facility and to cash collateralize
outstanding letters of credit. At September 28, 1996 the Company had a cash
balance of $41,228 after repaying bank debt and meeting other short term
obligations. The Company is currently seeking to obtain new banking facilities
to provide for the issuance of letters of credit, fund selected customer
financing programs, and increase liquidity to the Company.
On October 13, 1993 the Company concluded a reorganization when the United
States Bankruptcy Court for the District of Delaware confirmed the Company's
Plan of Reorganization (Plan). The Plan provides that holders of allowed
general unsecured claims receive cash payments toward satisfaction of the full
amount of their claims in equal quarterly payments payable on the last business
day of each calendar quarter ending after October 13, 1993 over a five-year
period, together with interest at 5% per annum. Holders of priority tax claims
are paid 10% of the allowed claim together with accrued and unpaid interest at
8% per annum on the then outstanding amount on each anniversary of October 13,
1993 which occurs prior to the sixth anniversary of the date of assessment and
the balances of such claims along with accrued and unpaid interest on the sixth
anniversary. For financial reporting purposes interest on general unsecured
claims has been imputed at 9% per annum. At July 31, 1996 the Company had $872
of restricted cash which primarily pertains to the settlement of disputed
claims in accordance with the Plan.
<PAGE> 18
- -------------------------------------------------------------------------------
NOTE 3 - BORROWING ARRANGEMENTS (CONTINUED)
As of July 31, 1996, aggregate maturities of total debt, excluding capitalized
leases, are as follows:
<TABLE>
<S> <C>
Due fiscal year ending:
1997 $13,178
1998 4,855
1999 1,192
2000 -
2001 -
Thereafter -
</TABLE>
Cash paid for interest was $2,282 during 1996, $1,103 during fiscal 1995, and
$655 for the ten months ended July 1994 for the Reorganized Company. The
Predecessor Company paid no interest in the two months ended September 1993.
NOTE 4 - CAPITAL STRUCTURE
The Company's charter authorizes 50 million shares of stock, of which 40
million shares are reserved for issuance as Common Stock and 10 million shares
are reserved for issuance as Preferred Stock. The Board of Directors has
authorized the issuance of 7,010,000 of such shares of $.01 par value Common
Stock. Of these shares, 7,000,000 were issued on the effective date to holders
of claims and interests as described in Note 14. In addition, the Company
issued Warrants on the Effective Date to purchase 1,095,000 shares of Common
Stock. The Warrants were exercisable at $18.00 per share and expired on
October 15, 1996. No warrants were exercised prior to their expiration. As
of July 31, 1996 the Company has not yet issued any Preferred Stock. The
Common Stock and all other equity securities issued under the new charter are
voting securities (although the voting rights of any preferred stock issued
would differ from those of the Common Stock) and will not have any preemptive
rights to subscribe for additional shares. The Common Stock is not subject to
conversion or redemption and when issued is fully paid and non-assessable.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
The Company received creditor claims during its bankruptcy proceedings which
the Company believes are duplicative, erroneous or exaggerated and to which the
Company believes it has valid defenses. The Company has filed objections to
these disputed claims in the United States Bankruptcy Court in Delaware. As of
July 31, 1995 and July 31, 1996, disputed claims amounted to $50,700 and
$31,300, respectively. The disputed claims are primarily comprised of
environmental and product liability claims. The Company has been notified of
various environmental matters in connection with certain current or former
Company locations in Illinois, Ohio, Indiana, Pennsylvania, and Rhode Island.
In the third quarter of 1996 the Company recorded a $2,800 favorable adjustment
due to the resolution of legal disputes which had been previously reserved.
The Company is also involved in various other administrative and legal
proceedings incidental to its business, including product liability and general
liability lawsuits against which the Company is partially insured. The
disputed claims are in many cases in excess of recorded reserves. At the
present time, it is management's opinion, based on information available to the
Company and management's experience in such matters, that the resolution of
these legal proceedings is not expected to have a material adverse effect on
the Company's financial condition, results of operations or liquidity.
The Company has sold certain receivables related to machine sales, subject to
recourse provisions and repurchase provisions. Management believes unreserved
exposures pertaining to these contingencies will not materially impact the
Company's financial condition, results of operations or liquidity.
<PAGE> 19
- --------------------------------------------------------------------------------
NOTE 6 - INCOME TAXES
The components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
Reorganized Company Predecessor Company
---------------------------------------------------- --------------------
Twelve Months Ended Ten Months Two Months
Ended Ended
July 31, 1996 July 31, 1995 July 31, 1994 Sept. 29, 1993
------------- -------------- --------------- --------------------
<S> <C> <C> <C> <C>
The domestic and foreign components of
income (loss) from continuing operations
are as follows:
Domestic $(18,857) $(5,302) $4,029 $21,988
Foreign (1,397) (375) 447 (193)
-------- ------- ------ -------
$(20,254) $(5,677) $4,476 $21,795
======== ======= ====== =======
Provision (benefit) for income taxes
for continuing operations:
Domestic $ - $(1,744) $2,050 $ -
Foreign (97) 218 344 -
-------- ------- ------ -------
$ (97) $(1,526) $2,394 $ -
======== ======= ====== =======
A reconciliation of the income tax expense
(benefit) on income (loss) per the U.S.
federal statutory rate to the reported
income tax expense (benefit) follows:
US Federal statutory rate applied to pretax
income $ (6,886) $(1,930) $1,521 $ 7,410
Intangibles with no tax benefit 138 240 474 -
Operating loss with no current tax benefit
and varying tax rates of other national
governments 6,597 130 192 732
State income tax - - 162 -
Non taxable reorganization items - - - (8,142)
Other 54 34 45 -
-------- ------- ------ -------
INCOME TAX EXPENSE (RECOVERY) $ (97) $(1,526) $2,394 $ -
======== ======= ====== =======
</TABLE>
<PAGE> 20
- -------------------------------------------------------------------------------
NOTE 6 - INCOME TAXES (CONTINUED)
The Company accounts for income taxes pursuant to Statement of Financial
Accounting Standard (SFAS) No. 109. At July 31, 1996 and July 31, 1995 the
approximate amounts of deferred tax assets and deferred tax liabilities
resulting from temporary differences and carryforwards were as follows:
<TABLE>
<CAPTION>
1996 1995
------- --------
<S> <C> <C>
Deferred Tax Assets
Inventory valuation $ 3,600 $ 2,400
Insurance reserves 6,400 7,000
Other 10,700 10,700
-------- --------
Subtotal 20,700 20,100
Domestic tax operating loss carryforwards
limited by Sec 382. 21,000 21,000
Domestic tax operating loss carryforwards 49,800 37,400
Foreign tax operating loss carryforwards 2,700 2,400
AMT credit carryforward 1,800 1,800
-------- --------
Deferred Tax assets 96,000 82,700
Valuation allowance (96,000) (82,700)
-------- --------
Net deferred tax asset $ - $ -
======== ========
</TABLE>
The Sec. 382 ownership change which resulted from the 1993 bankruptcy
reorganization imposed a limitation on the usage of pre-reorganization domestic
tax operating loss carryforwards. Usage of this loss carryforward is limited
to $3,689 per year or $55,335 for a period of 15 years following the ownership
change. In addition, as of July 31, 1996 the Company had domestic tax loss
carryforwards of approximately $131,000 attributable to post-reorganization
periods and therefore not subject to limitation. The domestic tax loss
carryforwards will expire from 1997 to 2011. The AMT credit, although subject
to the Sec. 382 limitation, has no expiration date.
During 1996, the deferred tax asset increased by $13,300 primarily due to the
creation of additional domestic loss carryforwards. Due to the uncertainty as
to the realizability of the deferred tax assets, the Company has established
valuation allowances in accordance with SFAS No. 109 to offset the asset.
To the extent the Company realizes a tax benefit as a result of future
reductions in the valuation allowance related to the utilization of
pre-reorganization deferred tax assets, fresh start accounting rules provide
for the reporting of such benefit first by reducing "Reorganization Value in
Excess of Amounts Allocable to Identifiable Assets" and thereafter increasing
Capital in excess of par value. Although the future recognition of this
benefit will have no impact on net earnings, the Company will realize a cash
benefit from utilization of the "Pre-Reorganization Benefits" against any
future tax liabilities.
<PAGE> 21
- -------------------------------------------------------------------------------
NOTE 7 - DEFERRED COMPENSATION
The Company's 1994 Long Term Incentive Plan provides for the issuance of
1,400,000 shares of new $.01 par value Common Stock. Options to purchase the
Common Stock are awarded at a price not less than 100% of the market price on
the date of grant, which becomes exercisable at various dates generally from
one to four years after the date of grant, and expire ten years after the date
of grant. In the event a holder of options is no longer employed by the
Company, the unvested shares are cancelled upon the employee's termination and
any vested shares must be excercised within 90 days or they are also cancelled.
The number of shares outstanding at the end of 1996 includes 57,200 unvested
and 35,336 vested shares with an option price range of $2.130 - $9.625 which
are held by Sheridan Systems employees. The unvested shares were cancelled on
the date of the Sheridan Systems sale, August 27, 1996, and the vested shares
may be exercised by no later than November 25, 1996.
<TABLE>
<CAPTION>
1996 1995
------------------------------ ---------------------------
Option Price Option Price
Number of Range Number of Range
Shares Per Share Shares Per Share
--------- -------------- --------- -------------
<S> <C> <C> <C> <C>
OUTSTANDING AT BEGINNING OF THE YEAR 598,417 $8.750-12.125 376,000 $9.625-11.500
Granted 91,236 $ 2.130-8.125 277,917 $8.750-12.125
Exercised - - - -
Canceled (183,500) $2.130-12.125 (55,500) $9.625-10.000
-------- -------------- -------- -------------
OUTSTANDING AT END OF PERIOD 506,153 $8.750-12.125 598,417 $8.750-12.125
======== ============== ======== =============
EXERCISABLE AT END OF PERIOD 205,600 $8.125-12.125 127,900 $9.125-11.500
======== ============== ======== =============
</TABLE>
<PAGE> 22
- --------------------------------------------------------------------------------
NOTE 8 - UNUSUAL ITEMS
During 1996, the Company committed to certain restructuring actions in an
effort to realign the operations with established strategic objectives. The
restructuring actions are summarized as follows:
<TABLE>
<S> <C>
Corporate Office Downsizing and Consolidation Expense $2,845
Bankruptcy of Canadian Subsidiary 3,561
Exit of Manufacturing Operations and Office Closures 626
------
Total Restructuring Costs $7,032
======
</TABLE>
In an effort to reduce costs, in the fourth quarter management committed to a
plan to close its Corporate headquarters and consolidate certain functions
within the AM Multigraphics operations. This decision resulted in the
termination of seven employees, including three officers. Severence and
benefits associated with these terminations were estimated to aggregate $2,845,
all of which is expected to be paid in fiscal 1997. The decision to close and
consolidate the Corporate office was necessary under each of the strategic
alternatives that were considered by the Company during the fourth quarter.
The decision was made irrespective of the completion of the sale of the
Sheridan Systems division. The amounts accrued were based primarily on various
employment agreements and the Company's severance policy. These amounts were
not materially different, in the aggregate, from the amounts determined under
Change in Control and Termination Benefits Agreements for certain officers
following the completion of the Sheridan Systems sale. Such amounts totaling
$2,845, were originally reported as $1,250 for "Change in Control payments"
made as a result of the Sheridan Systems division sale and $1,595 for
"corporate restructuring" charges for a plan committed to in conjunction with
the Sheridan sale. Such descriptions of the charges were not representative of
the basis of the charges, which is a restructuring plan which is independent of
the Sheridan sale.
During the fourth quarter, the Company committed to a plan to exit its Canadian
subsidiary. On October 17, 1996 the subsidiary filed for a voluntary
assignment in bankruptcy. In connection with the exit plan, reserves were
established to write-off net assets of the operation. The Canadian subsidiary
had revenues of $9,951, $10,285 and $11,557 in 1996, 1995 and 1994,
respectively.
During the year, management finalized plans to exit the machine manufacturing
business and consolidate its field sales and service facilities. Costs
associated with the exit plan are comprised primarily of facility closure
costs, disposal of manufacturing equipment and severance costs. The Company
began implementation of such plans during the fourth quarter and anticipates
all actions to be completed within one year.
<PAGE> 23
- --------------------------------------------------------------------------------
NOTE 9 - BALANCE SHEET ACCOUNTS
<TABLE>
<CAPTION>
The components of certain balance sheet accounts
are as follows:
July 31, 1996 July 31, 1995
------------- -------------
<S> <C> <C>
ACCOUNTS RECEIVABLE:
Accounts receivable $20,596 $37,721
Allowance for doubtful accounts (822) (1,312)
------- -------
Total accounts receivable, net $19,774 $36,409
======= ========
INVENTORIES:
Raw materials $ 1,407 $ 1,415
Work-in-process 2,959 3,485
Finished goods 7,236 23,532
------- -------
Total inventories, net $11,602 $28,432
======= =======
PROPERTY, PLANT AND EQUIPMENT
Land $ - $ 4,600
Buildings - 2,101
Machinery and equipment 13,240 8,699
Leasehold improvements 3,026 608
------- -------
16,266 16,008
Less accumulated depreciation and amortization (5,399) (3,555)
------- -------
Net property, plant and equipment $10,867 $12,453
======= =======
</TABLE>
<PAGE> 24
- --------------------------------------------------------------------------------
NOTE 10 - RETIREMENT BENEFIT PLANS
The Company maintains defined contribution retirement plans for domestic
employees comprised of savings plans (401(k)) and a Retirement Accumulation
Plan. Contributions to these plans take the form of (i) company contributions
to match a portion of employee contribution and (ii) contributions made at the
discretion of the Board of Directors. The Company's contributions to the
domestic defined contribution plans were $1,317, $1,778 and $2,019 for the
Reorganized Company in 1996, 1995 and 1994 respectively, and $403 for the
Predecessor Company in 1994.
The Company also maintains defined benefit pension plans for certain U.S
employees under a Company maintained plan. The components of net periodic
pension cost for these plans are shown below for 1996, 1995 and 1994:
<TABLE>
<CAPTION>
PREDECESSOR
REORGANIZED COMPANY COMPANY
---------------------------------------------- -------------
Ten Months Two Months
Twelve Months Ended Ended Ended
July 31, 1996 July 31, 1995 July 31, 1994 Sept. 29, 1993
-------------- ------------- --------------- ---------------
<S> <C> <C> <C> <C>
Benefits earned during the year $ 233 $226 $ 92 $18
Interest accrued on projected benefit obligation 63 41 41 8
Actual return on assets - - - -
Net amortization and deferral 12 24 - 7
------ ---- ------ ---
Net periodic pension cost $ 308 $291 $ 133 $33
====== ==== ====== ===
The status of the defined benefit pension plans at July 31 was
as follows:
1996 1995
--------- --------
Plan assets at fair value $ - $ -
Actuarial present value of benefit obligation
Vested 1,069 1,186
Nonvested - -
------ -------
Accumulated Benefit Obligation 1,069 1,186
Effect of projected future salary increases - 265
------ -------
Projected benefit obligation 1,069 1,451
------ -------
Plan assets in excess of (less than) projected
benefit obligation (1,069) (1,451)
Unrecognized net transition (asset) obligation - -
Unrecognized net (gain) loss 190 468
------ -------
Prepaid (accrued) pension cost at year end ($879) ($983)
====== =======
</TABLE>
<PAGE> 25
- -------------------------------------------------------------------------------
NOTE 10 - RETIREMENT BENEFIT PLANS (CONTINUED)
The assumed discount rates on benefit obligations was 7.0% in 1996 and 1995.
The assumed rates of compensation increases were 4.0% in 1996 and 3.3% in 1995.
The Company's operations in Canada and Japan also maintain defined benefit
pension plans. The unfunded benefit obligation for Japan amounted to $3,508 in
1996 and $4,519 in 1995. The prepaid pension cost in Canada was $3,114 in 1996
and $3,015 in 1995. The combined net periodic pension cost was $290 in 1996,
$327 in 1995 and $258 in 1994. Such expenses were $60 for the Predecessor
Company in 1994. As discussed in Note 8 and Note 15, the Company completed the
exit of these operations in the first quarter of 1997.
In addition to pension benefits, the Company provides limited life insurance
and health care benefits to certain domestic retired employees and provides for
certain medical and life insurance benefits for retirees of previously closed
manufacturing locations. The effect of adopting SFAS 106 was not material.
Net post-retirement life and health care cost includes the following
components:
<TABLE>
<CAPTION>
REORGANIZED COMPANY PREDECESSOR COMPANY
------------------------------------------- -------------------
Ten Months Two Months
Twelve Months Ended Ended Ended
July 31, 1996 July 31, 1995 July 31, 1994 Sept. 29, 1993
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Service Cost - benefits earned during the period $ 5 $ 5 $ 5 $ 1
Interest cost on accumulated post-retirement
benefit obligation 843 846 591 118
------- ------- ---- ----
Total life and health care costs $ 848 $ 851 $596 $119
======= ======= ==== ====
The plans' funded status at July 31, was as follows:
1996 1995
------------- -------------
Actuarial present value of benefit obligations-
Retirees $ 9,617 $10,412
Fully eligible active participants 294 269
------- -------
Accumulated postretirement benefit obligation 9,911 10,681
Cummulative unrecognized actuarial (gain)loss 253 (167)
Plan assets - -
------- -------
Accrued post-retirement life and health
care costs $10,164 $10,514
======= =======
Assumptions used for the Company's retiree life and health care
plans as of July 31, were as follows:
1996 1995
------- -------
Discount rate for determining obligations and
interest cost 8.00% 8.00%
</TABLE>
If the health care cost trend rates were increased 1% for all future years, the
accumulated postretirement benefit obligation would have increased 0.1% at July
31, 1996. The effect of this change on the aggregate of service and interest
cost would have been an increase of 4.9% for 1996. A 13% increase in the
health care cost trend rate was assumed for retirees under age 65 and an 11.0%
increase for those over the age of 65. These rates are assumed to decrease
gradually to 5.5% in the year 2003.
<PAGE> 26
- -------------------------------------------------------------------------------
NOTE 11 - LEASE TRANSACTIONS
The Company leases certain real and personal property and is responsible for
most maintenance, insurance and tax expenses related to leased facilities. At
July 31, 1996, the future lease payments for continuing operating leases are as
follows:
<TABLE>
<C> <C>
1997 $ 2,718
1998 1,593
1999 1,060
2000 1,005
2001 949
2002 and thereafter 3,642
-------
Total future operating lease payments $10,967
=======
</TABLE>
Rental expenses for all operating leases were $5,184, $2,437 and $2,457 for the
Reorganized Company in 1996, 1995 and 1994, respectively, and $491 for the
Predecessor Company in 1994.
During 1996, the Company entered into certain capital lease arrangements,
primarily relating to computer hardware and software. Obligations under these
arrangements amount to approximately $3,683 as of July 31, 1996 and extend for
periods of three to five years.
<PAGE> 27
- -------------------------------------------------------------------------------
NOTE 12 - GEOGRAPHIC SEGMENTS
The Company's operations are conducted through AM Multigraphics, its
sole continuing business segment. AM Multigraphics is a leading distributor and
to a lesser degree a manufacturer of equipment and service to the graphics arts
industry. Its principal operations are in North America. The Company also
distributes internationally through foreign dealers and a majority owned
subsidiary in Japan. In September 1996, the Company sold all of its interest
in its AM Japan subsidiary.
<TABLE>
<CAPTION>
Reorganized Company Predecessor Company
---------------------------------------------------------------- --------------------
Ten Months Two Months
Twelve Months Ended Ended Ended
July 31, 1996 July 31, 1995 July 31, 1994 Sept. 29, 1993
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Revenues
North America $ 137,981 $157,440 $137,047 $22,820
Japan 30,071 34,045 26,769 3,712
--------- --------- -------- -------
Total $ 168,052 $191,485 $163,816 $26,532
========= ========= ======== =======
Operating Profit (Loss)*
North America ($15,221) $ 1,278 $ 9,292 $ 1,221
Japan (442) 911 1,847 (292)
--------- --------- -------- -------
Total ($15,663) $ 2,189 $ 11,139 $ 929
========= ========= ======== =======
Assets**
North America $ 45,675 $ 69,555 $ 71,314 $60,495
Japan 7,698 20,284 19,383 17,552
--------- --------- -------- -------
Total $ 53,373 $ 89,839 $ 90,697 $78,047
========= ========= ======== =======
</TABLE>
* Before Corporate expenses and unusual items
** Excludes Corporate assets primarily consisting of cash and assets of
discontinued operations.
<PAGE> 28
- --------------------------------------------------------------------------------
NOTE 13 - QUARTERLY FINANCIAL INFORMATION - (UNAUDITED)
A summary of quarterly financial information for fiscal 1996, 1995 and 1994 is
as follows:
<TABLE>
<CAPTION>
Quarter
---------------------------------------------------------
1996 1st 2nd 3rd 4th Total Year
- ---- -------- -------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Revenues $42,994 $40,886 $44,340 $ 39,832 $168,052
Gross Profit 10,889 9,400 11,321 6,021 37,631
Net income (loss) from continuing operations (3,460) (4,329) 2,493 (14,861) (20,157)
Net income (loss) from discontinued operations (310) (4,401) (1,163) (19,468) (25,342)
------- ------- --------- --------- -----------
Net income (loss) (3,770) (8,730) 1,330 (34,329) (45,499)
======= ======= ========= ========= ===========
Per Common Share (2):
Net income (loss) from continuing operations ($0.49) ($0.62) $ 0.36 ($2.12) ($2.88)
Net income (loss) from discontinued operations (0.04) (0.63) (0.17) (2.78) (3.62)
------- ------- --------- --------- -----------
Total ($0.54) ($1.25) $ 0.19 ($4.90) ($6.49)
======= ======= ========= ========= ===========
Closing Market Price
High $ 8.375 $ 7.500 $ 4.688 $ 3.063 $ 8.375
Low $ 7.250 $ 4.688 $ 1.875 $ 1.875 $ 1.875
<CAPTION>
Quarter
---------------------------------------------------------
1995 1st 2nd 3rd 4th Total Year
- ---- --------- -------- ---------- ---------- ------------
Revenues $43,532 $47,697 $47,095 $ 53,161 $191,485
Gross Profit 12,392 12,787 13,203 14,351 52,733
Net income (loss) from continuing operations (1,442) (1,400) (557) (752) (4,151)
Net income (loss) from discontinued operations 1,741 1,656 730 4,637 8,764
-------- ------- --------- --------- -----------
Net income (loss) 299 256 173 3,885 4,613
======== ======= ========= ========= ===========
Per Common Share (2):
Net income (loss) from continuing operations ($0.20) ($0.20) ($0.08) ($0.11) ($0.59)
Net income (loss) from discontinued operations 0.24 0.24 0.10 0.66 1.25
-------- ------- --------- --------- -----------
Total $ 0.04 $ 0.04 $ 0.02 $ 0.55 $ 0.66
======== ======= ========= ========= ===========
Closing Market Price
High $12.250 $10.125 $ 9.250 $ 9.250 $ 12.250
Low $10.000 $ 8.875 $ 8.625 $ 8.125 $ 8.125
<CAPTION>
Predecessor
Company Reorganized Company
-------------- -------------------------------------------------------------
Aug. 1, 1993 Sept. 30, 1993 Quarter
Through Through ---------------------------------------------
1994 Sept. 29, 1993 Oct. 30, 1993 2nd 3rd 4th Total Period
- ---- -------------- -------------- -------- ---------- ---------- ------------
Revenues $26,532 $19,030 $44,375 $47,121 $ 53,290 $163,816
Gross Profit 7,006 4,548 13,751 15,401 17,721 51,421
Net income (loss) from continuing operations (1) 21,795 (1,277) 191 1,196 1,972 2,082
Net income (loss) from discontinued operations (27,810) 1,506 1,166 1,477 421 4,570
-------------- ------------- ------- --------- --------- ---------
Net income (loss) (6,015) 229 1,357 2,673 2,393 6,652
============== ============= ======= ========= ========= =========
Per Common Share (2):
Net income (loss) from continuing operations N/A (3) ($0.18) $ 0.03 $ 0.17 $ 0.28 $ 0.30
Net income (loss) from discontinued operations N/A (3) 0.21 0.16 0.21 0.06 0.65
-------------- ------------- ------- --------- --------- ---------
Total N/A (3) $ 0.03 $ 0.19 $ 0.38 $ 0.34 $ 0.95
============== ============= ======= ========= ========= =========
Closing Market Price:
High N/A (4) N/A (4) $10.250 $10.875 $ 11.875 $ 11.875
Low N/A (4) N/A (4) $ 9.500 $ 9.125 $ 8.750 $ 8.750
(1) Net loss excludes $ 58,704 of Extraordinary Gain.
(2) Sum of quarters may not equal the total for the year due to changes in the
number of shares outstanding during the year.
(3) The net income (loss) per common share for the Predecessor Company has not
been presented because it is not comparable.
(4) Trading of Predecessor Company Common Stock and Preferred Stock was
suspended on May 21, 1993. Periods prior to this date are not presented as
they are not comparable.
</TABLE>
<PAGE> 29
- ------------------------------------------------------------------------------
NOTE 14 - PLAN OF REORGANIZATION AND FRESH START REPORTING
The United States Bankruptcy Court for the District of Delaware confirmed the
Company's Plan of Reorganization (the Plan) on September 29, 1993 (the
Confirmation Date), which allowed the Company to emerge from Chapter 11
Bankruptcy effective October 13, 1993 (the Effective Date). The Company
operated under the protection of Chapter 11 following a voluntary petition for
reorganization filed May 17, 1993. The Plan provided for the issuance of
approximately seven million new shares of common stock and distributions to
major creditors and shareholders. The holders of the Company's 12% senior
subordinated debentures received nearly 97% of the new common stock with the
balance of the new common stock distributed to preferred stock and common stock
holders. General unsecured creditors receive quarterly cash payments for five
years with payments commencing December 31, 1993. All distributions were made
in accordance with the plan provisions.
The distribution of shares of the new Common Stock and Warrants commenced on
October 13, 1993. The new Common Stock and new Warrants became listed on the
American Stock Exchange on December 6, 1993.
Fresh Start Reporting
As of the Confirmation Date, the Company adopted Fresh Start Reporting in
accordance with the American Institute of Certified Public Accountants
Statement of Position 90-7 (SOP 90-7) -- "Financial Reporting by Entities in
Reorganization under the Bankruptcy Code." Fresh Start Reporting resulted in
material changes to the consolidated balance sheet, including valuation of
assets and liabilities at fair market value and valuation of equity based on
the appraised reorganization value of the ongoing business.
The Company recorded a reorganization value of $36,000 (the approximate fair
value) which was based on the consideration of many factors and various
valuation methods, including discounted cash flows and price/earnings and other
applicable ratios and valuation techniques believed by management and its
financial advisors to be representative of the Company's business and industry.
The excess of the reorganization value over the fair value of net assets and
liabilities is reported as excess reorganization value and is amortized over a
twenty year period.
The Reorganization and the adoption of Fresh Start Reporting resulted in the
following adjustments to the Company's Consolidated Statement of Operations for
the period ended September 29, 1993:
Reorganization Items:
<TABLE>
<CAPTION>
Income/(expense)
-------------------------
Continuing Discontinued
Operations Operations
---------- ------------
<S> <C> <C>
Fair Market Value Adjustment to tangible Assets and Liabilities, net $ 8,024 ($9,680)
Write-off existing Goodwill - (39,840)
Accrue Professional Fees to complete reorganization process (10,100) -
Reorganization Value in excess of Fair Market Value tangible Assets and Liabilities 26,022 39,471
Certain foreign entities with Reorganization Value - (17,000)
Less than Fair Value of Tangible Assets and Liabilities -------- -------
Total Reorganization Items $ 23,946 $27,049
======== =======
Extraordinary Gain: Income/(expense)
------------------------
Continuing Discontinued
Operations Operations
---------- ------------
Carrying Value of 12% Senior Subordinated Debentures plus accrued interest $ 93,624 $ -
Fair Value of Equity exchanged for Debt per the Plan (34,920) -
-------- ---
Total Extraordinary Gain $ 58,704 $ -
======== ===
</TABLE>
<PAGE> 30
- -------------------------------------------------------------------------------
NOTE 15 - SUBSEQUENT EVENTS
During the fourth quarter of 1996, the Company committed to sell all of its
ownership interest in its majority owned Japanese subsidiary. On September 20,
1996 the Company completed the sale of its 2,148,000 shares of AM Japan Co.,
Ltd. and the Company received proceeds of approximately $10,600, net of
certain costs. At July 31, 1996, the Company's investment in the subsidiary
amounted to $7,698 and is reflected as "Net assets held for sale" in the
Consolidated Balance Sheet. This amount consists primarily of receivables,
inventory, property and equipment, intangible assets, net of accounts payable
and accrued liabilities. A gain of approximately $2,600 will be recorded by
the Company in the first quarter of fiscal 1997 as a result of the sale.
On October 29, 1996 the Company entered into a definitive Merger Purchase
Agreement with a corporation newly formed by affiliates of Pacholder
Associates, Inc., a Cincinnati-based provider of investment management,
financial advisory and investment banking services to institutional clients.
The agreement provides for the merger of a subsidiary of purchaser with and
into the Company pursuant to which the current shareholders of the Company will
receive $5.00 per common share and the Company will become a wholly-owned
subsidiary of the purchaser. The transaction is conditioned upon the purchaser
finalizing a credit facility within 30 days. The transaction is subject to a
number of additional conditions, including approval by a majority of the
shareholders of the Company at a meeting tentatively scheduled for January,
1997.
<PAGE> 31
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and the
Board of Directors of
AM International, Inc.
We have audited the accompanying consolidated balance sheets of AM
International, Inc. (Reorganized Company) and subsidiaries as of July 31, 1996
and 1995 and the related consolidated statements of operations, shareholders'
equity and cash flows for the years ended July 31, 1996 and 1995, and the
period from September 30, 1993 through July 31, 1994. We have also audited the
related consolidated statements of operations, shareholders' equity and cash
flows of AM International, Inc. (Predecessor Company) and subsidiaries for the
period from August 1, 1993 through September 29, 1993. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audits in accordance with generally accepted auditing
standards. 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 audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of AM International, Inc.
(Reorganized Company) and subsidiaries as of July 31, 1996 and 1995 and the
results of their operations and cash flows for the years ended July 31, 1996
and 1995, and for the period from September 30, 1993 through July 31, 1994 and
the results of operations and cash flows of AM International, Inc. (Predecessor
Company) for the period from August 1, 1993 through September 29, 1993, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
October 29, 1996
Chicago, Illinois
<PAGE> 32
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: June 3, 1997 MULTIGRAPHICS, INC.
(REGISTRANT)
By /S/Thomas D. Rooney
-----------------------------
Thomas D. Rooney,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed as of June 3, 1997 by the following persons on
behalf of the Registrant and in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/S/JEFF M. MOORE CHAIRMAN
- ----------------------------------
JEFF M. MOORE
/S/THOMAS D. ROONEY DIRECTOR, PRESIDENT AND
- ---------------------------------- CHIEF EXECUTIVE OFFICER
THOMAS D. ROONEY
/S/GREGORY T. KNIPP VICE PRESIDENT AND
- ---------------------------------- CHIEF FINANCIAL OFFICER
GREGORY T. KNIPP (PRINCIPAL ACCOUNTING &
FINANCIAL OFFICER)
/S/ROBERT E. ANDERSON, III DIRECTOR
- ----------------------------------
ROBERT E. ANDERSON, III
/S/JEFFREY D. BENJAMIN DIRECTOR
- ----------------------------------
JEFFREY D. BENJAMIN
/S/ROBERT N. DANGREMOND DIRECTOR
- ----------------------------------
ROBERT N. DANGREMOND
</TABLE>
46
