SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarterly Period Ended October 31, 1998
Commission file number 1-683
Multigraphics, Inc.
(Exact name of registrant as specified in its charter)
Delaware 34-0054940
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
431 Lakeview Court Mt. Prospect, IL 60056
(Address of principal executive offices) (Zip Code)
(847) 375-1700
(Registrant's telephone number, including area code)
AM International, Inc.
(Former Name)
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 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 each of the issuer's
classes of common stock, as of the latest practicable date.
2,831,814 shares of Registrant's
Common Stock, $.025 par value, were outstanding as of December 8,
1998.
<PAGE>
MULTIGRAPHICS, INC.
INDEX
Page
PART I - Financial Information
Item 1 - Condensed Consolidated Statement of
Operations for the Three Months Ended
October 31, 1998 and November 1, 1997
(unaudited). 1
Condensed Consolidated Balance Sheet
as of October 31, 1998 (unaudited) and
July 31, 1998. 2
Condensed Consolidated Statement of
Cash Flows for the Three Months Ended
October 31, 1998 and November 1, 1997
(unaudited). 3
Notes to Condensed Consolidated Financial
Statements (unaudited). 4 - 8
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of
Operations. 9 - 13
Part II Other Information
Item 4- Submission of Matters to a Vote of
Security Holders 14
Item 6 - Exhibits 14
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
MULTIGRAPHICS, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
<S> <C> <C>
October 31, November 1,
1998 1997
Revenues
Machines and Supplies $ 15,736 $ 10,160
Services 9,933 10,540
Total Revenues 25,669 20,700
Cost of Sales
Machines and Supplies 12,483 7,856
Services 6,319 7,298
Total Cost of Sales 18,802 15,154
Gross Margin 6,867 5,546
Operating Expenses
Selling, general and
administrative 6,085 5,053
Miscellaneous (income)
expense 24 (16)
Total Operating Expenses 6,109 5,037
Operating income 758 509
Non - operating income
(expense):
Interest income 20 120
Interest expense (495) (374)
Other, net (21) -
Income Before Taxes 262 255
Income tax expense 100 97
Net income $ 162 $ 158
<PAGE>
Net income per common
share :
Basic $ 0.06 $ 0.06
Diluted $ 0.06 $ 0.06
Weighted average shares
of common stock and common stock
equivalents outstanding (in
thousands):
Basic 2,830 2,815
Diluted 2,928 2,815
The Notes to Consolidated Financial Statements are
an integral part of these financial statements.
</TABLE>
MULTIGRAPHICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in thousands, except per share amounts)
(Unaudited)
<TABLE> October 31, July 31,
1998 1998
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 2,901 $ 2,869
Accounts receivable, net 12,889 14,629
Inventories, net 14,355 13,188
Prepaid expenses and other
assets 578 726
Total current assets 30,723 31,412
Property, plant and
equipment, net 9,285 9,554
Goodwill 3,777 3,681
Other assets, net 1,011 992
Total assets $ 44,796 $45,639
<PAGE>
Liabilities and Shareholders' Equity
Current liabilities:
Short-term borrowings and current
maturities of long-term debt $ 10,543 $10,745
Accounts payable 8,382 7,312
Service contract deferred income 11,179 12,013
Payroll related expenses 5,827 6,219
Other 4,752 5,248
Total current liabilities 40,683 41,537
Long-term debt 1,016 1,048
Post-retirement benefit
obligations 8,351 8,626
Other long-term liabilities 4,619 4,572
Total liabilities 54,669 55,783
Shareholders Equity:
Preferred stock, 0.5 million shares
authorized; no shares issued
Common stock, $.025 par value; 9.5
million shares authorized; - -
2,829,526 issued as of October 31, 1998
and July 31, 1998 70 70
Capital in excess of par value 22,956 22,847
Accumulated earnings (deficit) (32,899) (33,061)
Total shareholders' equity (9,873) (10,144)
Total liabilities and
shareholders' equity $ 44,796 $ 45,639
The Notes to Consolidated Financial Statements are an
integral part of these financial statements.
</TABLE>
<PAGE>
MULTIGRAPHICS, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands, except per share amounts)
(Unaudited)
Three Months Ended
<TABLE>
October 31, November 1,
1998 1997
<S> <C> <C>
Cash Flows from Operating
Activities:
Net income $ 162 $ 158
Adjustments to reconcile net income
to cash flow from operating
activities:
Depreciation of property, plant
and equipment 457 454
Amortization of Goodwill 21 -
Benefit from operating loss
carryforwards 100 97
Change in assets and
liabilities:
Accounts receivable, net 1,740 1,976
Inventory, net (1,167) 994
Prepaid expenses and other
assets 148 200
Accounts payable 1,070 (1,024)
Other current liabilities (888) (2,512)
Other, net (1,022) (381)
Cash flow from operating
activities 621 (38)
Cash Flows from Investing
Activities:
Acquisition activities (167) -
Capital expenditures (188) (147)
Cash flow from investing
activities (355) (147)
Cash Flows from Financing
Activities:
Net borrowings (payments) under
revolving credit facilities 960 -
Payments of Bankruptcy Claims (1,094) (972)
Payments under capital lease
arrangements (100) (170)
Cash flow from financing activities (234) (9,620)
<PAGE>
Increase (decrease) in cash and
cash equivalents 32 (1,327)
Cash and cash equivalents at
beginning of period 2,869 10,376
Cash and cash equivalents at end
of period $ 2,901 $ 9,049
The Notes to Consolidated Financial Statements are an
integral part of these financial statements.
</TABLE>
MULTIGRAPHICS, INC.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
Note 1 - Basis of Presentation
The Condensed Consolidated Financial Statements included herein
have been prepared by the Company, without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission.
In the opinion of management, the Condensed Consolidated
Financial Statements reflect all adjustments, which are of a
recurring nature, necessary for fair presentation. Certain prior
year amounts have been reclassified to conform with the current
year presentation. The accompanying Condensed Consolidated
Financial Statements and the related notes should be read in
conjunction with the Consolidated Financial Statements and the
related notes thereto included in the Company's Annual Report on
Form 10-K for the year ended July 31, 1998.
<PAGE>
Note 2 - Acquisitions
In December 1997, the Company purchased all of the outstanding
shares of Publishing Solutions Inc., and acquired the operating
assets of Hanley Graphic Products Company. Publishing Solutions
provides its customers with equipment and systems integration
solutions utilizing digital technologies for design, pre-press,
imaging, and interactive media applications. Hanley Graphic
Products Company is a regional dealer of graphic arts equipment
and supplies serving customers in Northern Illinois. In June
1998, the Company acquired the business and certain assets of
Progressive LithoPlate and Supply Company, a regional graphic
arts dealer serving customers in Northern Illinois. In September
1998, the Company acquired the business and certain assets of
Austin, Texas based Texas PrePress Systems, Inc., a regional
prepress systems integrator. The aggregate purchase price for
the four companies was approximately $6,900 including expenses of
the transactions, and could increase by a maximum of $1,950,
contingent upon the companies' attainment of certain operating
targets over the two years following the acquisition. The excess
purchase price over the fair market value of net assets acquired
amounts to a preliminary value of $3,840, which will be amortized
over a period not to exceed forty years. The allocation of
purchase price was based on preliminary estimates, and may be
revised at a later date.
The acquisitions have been accounted for as purchases and,
accordingly, the financial statements include results of
operations from the respective dates of acquisition. The
following pro forma summary presents the results of operations
for the current and prior period as though the acquisitions had
taken place at the beginning of the prior period. The pro forma
amounts give effect to certain adjustments including increased
interest expense, goodwill amortization, estimated income tax
expense as well as other factors, and do not necessarily reflect
the results which would have occurred had the businesses operated
as a single entity during such periods, nor are they necessarily
indicative of results which may be obtained in the future.
Note 2 Acquisitions (continued)
Three Months Ended
October 31, November 1,
1998 1997
<TABLE>
<S> <C> <C>
Revenues $ 25,879 $ 28,464
Net Income $ 165 $ 233
Earnings per
share:
Basic $ 0.06 $ 0.08
Diluted $ 0.06 $ 0.08
</TABLE>
<PAGE>
Note 3 - Borrowing Arrangements
The Company's short and long-term borrowings are comprised of the
following:
October 31 July 31,
1998 1998
<TABLE>
<S> <C> <C>
Revolving Credit Facility $ 8,727 $ 7,768
General Unsecured Claims & Priority Tax
Claims 1,171 2,265
Capital Leases 1,661 1,760
Total $ 11,559 $ 11,793
Classified in the Consolidated Balance
Sheet as follows:
Short-term $ 10,543 $ 10,745
Long-term 1,016 1,048
Total $ 11,559 $ 11,793
</TABLE>
<PAGE>
In May, 1997 the Company entered into a $10,000 three year
secured Revolving Credit Facility (subject to borrowing base
limitations) with Foothill Capital Corporation ("Foothill"). The
Revolving Credit Facility includes a $5,000 sub-facility for the
issuance of letters of credit. As security for utilization of the
Revolving Credit Facility, the Company granted a security
interest and general lien upon all of its assets. On February
19, 1998 the Revolving Credit Facility was amended and restated
("the Amendment") to add the Company's wholly owned subsidiary,
Publishing Solutions Inc., as a co-borrower under the Facility.
The Amendment was made, among other things, to allow the eligible
assets of Publishing Solutions Inc. to be included in the
Company's borrowing base and to reset the Company's covenant
requirements in light of the acquisitions made by the Company
during the quarter ended January 31, 1998. On July 30, 1998 the
Revolving Credit Facility was amended further to, among other
things; (1) grant the Company the ability to increase
the Revolving Credit Facility limit in increments of $1,000 up to
a maximum limit of $15,000, and (2) extend the expiration date an
additional two years to May 30, 2000 plus an automatic one year
extension unless terminated pursuant to the terms of the
Revolving Credit Facility. On July 31, 1998, the Company
increased the Revolving Credit Facility limit to $11,000 and on
November 6, 1998 the Company further increased the Revolving
Credit Facility limit to $12,000. On October 31, 1998, the
calculated borrowing base was approximately $11,100. As of
October 31, 1998, the Company had borrowings of $8,727 under the
Revolving Credit Facility and was utilizing approximately $1,829
of the Facility to secure outstanding letters of credit.
Interest generally will be charged at a spread of 1% above the
reference (i.e. prime) rate of Foothill and can be reduced in
1/2% increments in each of the next two fiscal years if certain
performance measures are achieved. As of October 31, 1998, the
reference rate was 8.0%. Letter of credit fees are 0.75% per
annum plus issuance costs and processing fees. The agreement
contains restrictive covenants limiting capital expenditures,
restricting the payment of dividends and other payments and
providing for quarterly measures of working capital and net
worth, among other things. In addition, the agreement limits the
Company's ability to borrow or to request letters of credit
following a material adverse change as determined by Foothill.
As of October 31, 1998, the Company was in compliance with the
covenants of the Revolving Credit Facility.
<PAGE>
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 ("the 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. The last scheduled quarterly payment was paid during the
quarter ended October 31, 1998. 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
October 31, 1998 the Company had $2,408 of restricted cash which
pertains to the settlement of disputed claims in accordance with
the Plan.
Note 4 - Capital Structure
The Company has authorized 10,000,000 shares of capital stock
with 9,500,000 shares being reserved for issuance as Common Stock
and 500,000 shares being reserved for issuance as Preferred
Stock. The Company's 1994 Long Term Incentive Plan provides for
the issuance of 560,000 shares of 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 the grant, become
exercisable at various dates generally from one to four years
after the date of grant, and expire ten years after the date
of grant. At October 31, 1998 options to purchase 351,983
shares were outstanding at option prices ranging from $2.1875
to $8.2139 per share.
On October 20, 1998, the Company's Board of Directors approved
the Multigraphics, Inc. 1998 Stock Incentive Plan for Directors.
Options to purchase a total of 140,000 shares of the Company's
Common Stock are included in the Plan. Under the Plan, each non-
employee director received an option for 10,000 shares on October
20, 1998 and will receive an additional 5,000 share option grant
on the date of each annual meeting of stockholders, commencing in
1999, at an option exercise price per share equal to the fair
market value of a share of Common Stock on the date of grant.
Such options are exercisable in part or in full on the date of
grant and will expire ten years after the date of grant.
The Company has not issued any Preferred Stock. The Common Stock
is not subject to conversion or redemption and when issued is
fully paid an non-assessable and has no preemptive rights.
<PAGE>
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
October 31, 1998 disputed claims amounted to approximately
$5,205. 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. 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 in the bankruptcy proceeding and the other
legal proceedings 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.
Note 6 - Components of Certain Balance Sheet Accounts
<TABLE> <C> <C>
<S> October 31, July 31,
Accounts receivable: 1998 1998
Accounts receivable $ 13,258 $14,929
Allowance for doubtful accounts (369) (300)
Total accounts receivable, net $ 12,889 $14,629
Property, plant and equipment:
Machinery and equipment $ 12,176 $11,985
Leasehold improvements 3,338 3,338
$ 15,514 $ 15,323
Less accumulated depreciation and
amortization (6,229) (5,769)
Property, plant and equipment, net $ 9,285 $ 9,554
Goodwill:
Goodwill $ 3,840 $ 3,723
Amortization (63) (42)
Goodwill, net $ 3,777 $ 3,681
</TABLE>
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The discussion of the results of operations and financial
condition presented below should be read in conjunction with
Management's Discussion and Analysis included in the Company's
Annual Report to Shareholders for the year ended July 31, 1998.
As previously reported, the Company acquired the operating assets
of Hanley Graphic Products Company, and purchased all of the
outstanding shares of Publishing Solutions Inc. in separate
transactions consummated in the second quarter of fiscal 1998,
and in June 1998 the Company acquired the business and certain
assets of Progressive Lithoplate and Supply Company. In
September 1998 the Company acquired the business and certain
assets of Austin, Texas based Texas PrePress Systems, Inc., a
regional prepress systems integrator. The acquisitions have been
accounted for as purchases and, accordingly, the consolidated
financial statements include the post-acquisition results of
these operations since their respective acquisition dates. All
per share data is presented on a diluted basis.
Consolidated Results of Operations
<TABLE>
<S> <C> <C>
Three Months Ended
($ in millions) October 31, 1998 November 1, 1997
Revenues $25.7 $20.7
Gross margin 6.9 5.5
Gross margin % 26.8% 26.8%
Operating expenses 6.1 5.0
Operating income 0.8 0.5
Non-operating
expense, net 0.5 0.2
Income tax expense 0.1 0.1
Net income $0.2 $0.2
</TABLE>
The net income for the first quarter ended October 31, 1998 was
$0.2 million ($0.06 per common share). In the comparable prior
year period, the Company also had net income of $0.2 million
($0.06 per common share).
<PAGE>
First quarter revenues of $25.7 million increased $5.0 million
over the comparable prior year period. Since December of 1997,
the Company has acquired four regional graphic arts dealers as
part of its strategy of expanding its target customer base of
small to mid-size commercial printers. The 24% growth in revenues
was primarily attributable to the acquisitions of three regional
graphic arts dealers which the Company completed in the prior
fiscal year, and the September 1998 acquisition of Texas PrePress
Systems, a regional prepress systems integrator. These
acquisitions complement the Company's internal efforts to expand
its product offerings, enhance its digital sales and support
capabilities and provide technical service to manufacturers and
national accounts.
Gross margin of $6.9 million increased by $1.4 million over the
comparable prior year period, while the overall margin rate
remained unchanged. The increased margins derived from the
acquired operations and from a favorable sales mix more than
offset declines in margin from press products and related
services, upon which the Company had historically been dependent,
and which have been in long term decline. As previously
reported, the Company has pursued a growth strategy to replace
the revenues previously derived from its historically higher
margin manufactured products with product lines added through
distribution agreements, joint ventures, affiliations with third
parties and acquisitions of graphic arts dealers. To offset the
lower margin rates which accompany those relationships, the
Company has invested in information systems and has undertaken
other reorganization measures to increase efficiency and lower
expenses.
Selling, general and administrative expenses in the first quarter
of $6.1 million increased by $1.1 million over the prior year
period, but declined as a percent of sales. The increase in
expense levels was primarily the result of the addition of direct
sales and sales support personnel related to the acquired
businesses. The improved relationship of expenses to revenue
levels was the result of various actions taken by the Company to
lower headcount, facility and other general and administrative
costs, while improving service levels and operational efficiency.
Non-operating expenses consist primarily of net interest expense,
which increased $0.3 million from the prior year. Higher
interest costs in the current year quarter were due to borrowings
primarily incurred to finance acquisitions. Interest expense
related to pre-petition debt obligations decreased $0.1 million
from the prior year, and the final scheduled payment obligation
was disbursed in September 1998.
The Company recorded income tax expense of $0.1 million during
its fiscal first quarters of 1999 and 1998. Fresh Start
Reporting rules require recognition of tax expense although the
Company had no requirement to pay U.S. Federal taxes due to
utilization of net operating loss carryforwards available to the
Company.
<PAGE>
As noted above and in previous reports, the Company has developed
strategies to increase revenues through product line additions,
third party service agreements and acquisitions. An increase in
revenue levels could improve profitability since the Company has
infrastructure and systems, which are capable of absorbing a
greater volume of transactions.
Liquidity and Capital Resources
(Three months ended October 31, 1998 and November 1, 1997)
The Company's total cash and cash equivalents was $2.9 million at
both July 31, 1998 and October 31, 1998. Although cash balances
remained unchanged, debt decreased by $0.2 million during the
first quarter of the current year as a $1.1 million decrease in
general unsecured bankruptcy claims was largely offset by a $1.0
million increase in revolving credit facility borrowings.
Operating Activities. In the first quarter ended October 31,
1998 the Company had a cash flow from operating activities of
$0.6 million as compared to a minimal cash outflow in the
comparable period ended November 1, 1997. Net income was $0.2
million in both the current and prior year period.
Accounts receivable decreased by $1.7 million in the first
quarter ended October 31, 1998 and $2.0 million in the comparable
period ended November 1, 1997 resulting from collection of the
relatively higher outstanding balances which exist at the
inception of each fiscal year. In the first quarter ended
October 31, 1998, inventories increased $1.2 million due
primarily to higher stocking levels of machines and supplies to
support the Company's digital product offerings. During the
prior year quarter, inventories decreased $1.0 million due
primarily to lower stocking levels of machines resulting from an
increase in drop shipment sales. Accounts payable increased $1.1
million during the first quarter ended October 31, 1998 due
primarily to the higher inventory levels discussed above. During
the prior year quarter, accounts payable decreased $1.0 million
due to lower inventory purchases and reductions resulting from
taking prompt payment discounts with vendors. In the current
year first quarter, accrued liabilities were reduced by $0.9
million due primarily to payment of $0.4 million of payroll
related liabilities and payments of approximately $0.3 million
for severance. During the prior year quarter, accrued
liabilities were reduced by $2.5 million primarily due to payment
of $1.2 million of payroll related liabilities, payment of $0.6
million to settle a recourse obligation of a divested operation,
and other payments of approximately $0.5 million relating to the
Company's phase-out of its manufactured machine product line.
Investing Activities. Cash flows from investing activities are
for capital expenditures primarily to upgrade the Company's
information systems. In addition, during the first quarter ended
October 31, 1998, the Company incurred acquisition expenditures
primarily relating to the Company's acquisition of Texas PrePress
Systems, Inc.
<PAGE>
Financing Activities. Payments of general unsecured claims were
$1.1 million and $1.0 million in the first quarter of 1998 and
1997, respectively. During the first quarter ended October 31,
1998 the Company increased net borrowings under its Revolving
Credit Facility by $1.0 million which occurred as a result of the
operating, investing, and financing activities discussed above.
The Company's primary source of financing is its revolving credit
facility which was established in May 1997 and which has been
subsequently amended to provide liquidity needed to execute the
Company's growth strategy. The Company believes that its
existing cash reserves and the liquidity provided by the credit
facility are sufficient to finance current operations and support
future growth strategies, which may include the acquisitions of
other regional dealers or distributors in the graphic arts
industry. The Company may also seek to increase its capital
availability to expand its growth strategy beyond its current
sources of liquidity.
YEAR 2000 DISCLOSURE
The Company's information systems will require certain
modifications to enable them to be able to process information
without regard to whether the date occurs prior to or after the
year 2000. Currently, some information systems do not properly
identify a year that begins with "20" instead of the familiar
"19". These and similar issues are generally referred to as
"Year 2000" issues. The Company's information systems are
relatively new, and its recent systems implementation in the Fall
of 1997 achieved near compliance in the Company's operating
systems and full compliance in its host hardware. Based on the
Company's experience in the new system implementation and its
analysis of the work remaining, the Company anticipates that
expenditures for modifying the systems will be approximately $0.2
million, and the work necessary to complete all modifications and
testing will be complete by mid 1999. During the first quarter
ended October 31, 1998, the Company expended $0.1 million for
Year 2000 modifications. The Company is working with its
software and systems licensor in completing this project.
Accordingly, the Company does not believe that the remaining
actions or the associated costs will be material to the Company's
operating results.
The Company has also undertaken a review of its other equipment
and operating systems, and has begun the process of contacting
its significant vendors and service providers to assess the
possible impact on the Company of such third parties' failure to
address Year 2000 issues. Although the Company cannot verify the
results of its inquiries of third parties, it has not received
any information which would lead it to believe that there will be
material problems in obtaining products, supplies and services
from its third party service providers and vendors.
Nevertheless, any significant or prolonged interruption in the
supply of essential services or products could adversely effect
the Company's revenues and financial results. Similarly,
problems with any significant portion of the Company's 20,000
customers in processing and paying invoices from the Company
could result in cash flow shortages and liquidity problems.
<PAGE>
The Company is undertaking to prepare a contingency plan to
address potential Year 2000 problems. The systems issues and
supplier contacts described above are a part of those efforts.
In the event that the Company identifies potential problems with
a service provider or other vendor, it will attempt to obtain
services and products from other sources. The Company has
available to it a broad range of products, however, and it is
unlikely that serious shortages will materialize. Similarly,
although the Company will have completed and tested its systems
capabilities in advance of the year 2000, the Company is
preparing to operate without significant portions of its
operating and information systems. Customer service
representatives are trained to take orders without access to the
information systems, purchasing representatives are trained to
purchase parts without access to the information systems, and the
Company's finance department is preparing to invoice and bill
customers without access to the information systems, if
necessary. The Company is unable to anticipate whether
significant customers or significant numbers of its customers
will have difficulty processing and paying its invoices.
Moreover, the Company cannot predict or address all possible
problems which may be associated with Year 2000 issues.
FORWARD LOOKING STATEMENTS
This document contains certain forward-looking statements and
other statements that are not historical facts concerning, among
other things, market conditions and the Company's strategies for
growth and expansion. These statements are highly dependent upon
a variety of important factors that could cause such results or
events to differ materially. These factors include, but are not
limited to, changing market conditions, the availability and cost
of products, the impact of competitive products and pricing, the
continued ability to execute its strategic plans, the continued
availability of sources of financing to assist in the execution of
the Company's strategic plans, the impact of Year 2000 issues,
including, in particular, the ability of customers and
vendors to achieve Year 2000 compliance, and other risks
detailed herein and from time-to-time in the Company's Securities
and Exchange Commission filings. There can be no assurance that
the Company has accurately identified and properly weighed all of
the factors that affect market conditions and demand for the
Company's products and services, that the public information on
which the Company has relied is accurate or complete or that the
Company's analysis of the market and demand for its products and
services is correct and, as a result, that the strategies based
on such analysis will be successful.
PART II - OTHER INFORMATION
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders.
On December 3, 1998, Registrant held its Annual Meeting of
Stockholders for the fiscal year ended July 31, 1998.
Registrant's stockholders reelected the five incumbent members of
the Board of Directors to serve until the next annual meeting or
until their successors are elected and qualified. The Board of
Directors consists of Robert E. Anderson III, Jeffrey D.
Benjamin, Robert N. Dangremond, Jeff M. Moore, and Thomas D.
Rooney.
Registrant's stockholders also ratified the appointment of Arthur
Andersen LLP as the Registrant's independent public accountants
for the fiscal year ending July 31, 1999. The vote total was
2,763,575 votes "for", 2,626 votes "against", and 577 votes to
"abstain".
Item 6. Exhibits
(a) Exhibits
27 Financial Data Schedule
(b) Reports on form 8-K
None
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant had duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
MULTIGRAPHICS, INC.
Date: December 14, 1998 /s/ Gregory T. Knipp
Gregory T. Knipp
Vice President and Chief
Financial Officer
(authorized officer and principal
accounting officer)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-END> OCT-31-1998
<CASH> 2,901
<SECURITIES> 0
<RECEIVABLES> 13,258
<ALLOWANCES> (369)
<INVENTORY> 14,355
<CURRENT-ASSETS> 30,723
<PP&E> 15,514
<DEPRECIATION> 6,229
<TOTAL-ASSETS> 44,796
<CURRENT-LIABILITIES> 40,683
<BONDS> 0
0
0
<COMMON> 70
<OTHER-SE> (9,943)
<TOTAL-LIABILITY-AND-EQUITY> 44,796
<SALES> 25,669
<TOTAL-REVENUES> 25,669
<CGS> 18,802
<TOTAL-COSTS> 25,507
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 495
<INCOME-PRETAX> 262
<INCOME-TAX> 100
<INCOME-CONTINUING> 162
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 162
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
