<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended April 30, 1995 Commission File Number 0-12204
GRAPHIC INDUSTRIES, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified In Its Charter)
GEORGIA 58-1101633
- ------------------------------- ------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation of Organization) Identification No.)
2155 MONROE DRIVE, N.E., ATLANTA,A GA. 30324
- -------------------------------------- ------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (404) 874-3327
Not Applicable
-------------------------------------------------------
Former name, former address and former fiscal year,
if changed since last report.
TITLE OF EACH CLASS SHARES OUTSTANDING AS OF April 30, 1995
- ------------------------------ ---------------------------------------
COMMON STOCK, $.10 PAR VALUE 6,235,337
CLASS B COMMON STOCK, $.10 PAR VALUE 4,519,117
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 COMMISSION ACT OF
1934 DURING THE PRECEDING TWELVE MONTHS (OR SUCH SHORTER PERIODS 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
---- ----
<PAGE>
GRAPHIC INDUSTRIES, INC.
------------------------
INDEX
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PART I - FINANCIAL INFORMATION PAGE NUMBER
- ------------------------------ -----------
Item 1. - Financial Statements (Unaudited)
<TABLE>
<CAPTION>
<S> <C>
Condensed Consolidated Statements of Income - 1
three months ended April 30, 1995 and
April 30, 1994
Condensed Consolidated Balance Sheets - 2-3
April 30, 1995 and January 31, 1995
Condensed Consolidated Statements of 4
Cash Flows - three months ended
April 30, 1995 and April 30, 1994
Notes to Condensed Consolidated Financial 5
Statements - April 30, 1995
</TABLE>
Item 2. - Management's Discussion and Analysis 6
of Financial Condition and Results of
Operations
<TABLE>
<CAPTION>
PART II - OTHER INFORMATION
- ---------------------------------------------
<S> <C> <C>
Item l. Legal Proceedings 9
2. Changes in Securities 9
3. Defaults upon Senior Securities 9
4. Submission of Matters to a Vote of 9
Security Holders
5. Other Information 9
6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
GRAPHIC INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED APRIL 30,
----------------------------
<S> <C> <C>
1995 1994
------------ -----------
Net Sales $105,798,991 $88,081,871
Cost of Sales 80,098,318 66,176,728
------------ -----------
25,700,673 21,905,143
Selling, General and
Administrative Expenses 18,580,916 16,454,432
Interest and Other Income-net 372,545 296,401
Interest Expense 2,866,446 2,050,440
------------ -----------
Income before income taxes 4,625,856 3,696,672
Income Taxes 1,850,000 1,479,000
------------ -----------
Net Income $ 2,775,856 $ 2,217,672
============ ===========
Net Income per common share:
Primary $ .26 $ .21
============ ===========
Fully diluted $ .25 $ .21
============ ===========
Dividends declared:
Common Stock $ .0175 $ .0175
============ ===========
Class B Common Stock $ .0125 $ .0125
============ ===========
</TABLE>
See notes to condensed consolidated financial statements.
-1-
<PAGE>
GRAPHIC INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
APRIL 30, JANUARY 31,
1995 1995
------------ ------------
(Unaudited)
<S> <C> <C>
A S S E T S
- -----------
Current Assets
Cash and marketable
securities $ 20,538,774 $ 28,287,722
Trade accounts receivable 74,362,921 59,917,946
Inventories:
Materials 13,718,006 12,325,468
Work-in-process 16,859,439 14,659,141
------------ ------------
30,577,445 26,984,609
Prepaid expenses and other
current assets 6,378,247 3,990,781
------------ ------------
Total Current Assets 131,857,387 119,181,058
Other Assets 18,691,621 21,461,440
Property, Plant and Equipment
Land 9,618,883 9,618,883
Buildings and improvements 39,201,182 38,976,010
Machinery and equipment 142,896,253 138,571,937
------------ ------------
191,716,318 187,166,830
Less accumulated depreciation 76,829,244 74,643,058
------------ ------------
114,887,074 112,523,772
------------ ------------
$265,436,082 $253,166,270
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
-2-
<PAGE>
GRAPHIC INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
APRIL 30, JANUARY 31,
1995 1995
------------ ------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current Liabilities
Notes payable $ 31,881,771 $ 21,909,936
Accounts payable 25,512,925 25,308,635
Other current liabilities 15,962,905 15,083,800
Current portion of long-term
obligations 11,378,029 11,087,348
------------ ------------
Total Current Liabilities 84,735,630 73,389,719
Long-Term Obligations, less
current portion 66,388,965 68,781,374
Deferred Income Taxes 15,660,446 15,306,327
7% Convertible Subordinated
Debentures 20,787,000 20,787,000
Shareholders' Equity
Preferred Stock, no par value;
authorized 500,000
shares; none issued -0- -0-
Common Stock, $.10 par value;
authorized 20,000,000 shares;
issued 6,235,337 at April 30,
1995 and 6,234,449 at January
31, 1995, including treasury
shares of 77,461 at April 30,
1995 and January 31, 1995 623,534 623,445
Common Stock, Class B, $.10 par
value; authorized 10,000,000
shares; issued 4,519,117 in
both periods 451,912 451,912
Additional paid-in capital 9,330,688 9,322,787
Retained earnings 68,252,287 65,298,086
------------ ------------
78,658,421 75,696,230
Less treasury stock at cost (794,380) (794,380)
------------ ------------
77,864,041 74,901,850
------------ ------------
$265,436,082 $253,166,270
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
-3-
<PAGE>
GRAPHIC INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
APRIL 30,
---------------------------
1995 1994
------------- ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,775,856 $ 2,217,672
Depreciation and amortization 3,949,564 3,478,281
Provision for deferred taxes 92,500 222,000
Changes in operating assets and liabilities (19,341,882) (10,132,824)
------------ ------------
Net cash used in operating activities (12,523,962) (4,214,871)
INVESTING ACTIVITIES
Additions to property, plant and equipment (6,350,139) (3,698,050)
Net increase in marketable securities (564,106) (6,277,521)
Other investing activities 2,807,092 91,013
------------ ------------
Net cash used in investing activities (4,107,153) (9,884,558)
FINANCING ACTIVITIES
Borrowings on long-term obligations 593,285 757,432
Payments on long-term obligations (2,695,013) (2,582,287)
Net borrowings on notes payable 9,971,835 960,998
Dividends (164,253) (160,619)
Other financing activities 7,992 20,229
------------ ------------
Net cash provided by (used in) financing activities 7,713,846 (1,004,247)
------------ ------------
Net decrease in cash and cash equivalents $(8,917,269) $(15,103,676)
=========== ============
</TABLE>
See notes to condensed consolidated financial statements.
-4-
<PAGE>
GRAPHIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
APRIL 30, 1995
NOTE A--BASIS OF PRESENTATION
The financial statements included herein have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information not misleading. These financial statements should be read
in conjunction with the financial statements and related notes contained in the
1995 Annual Report on Form l0-K. In the opinion of Management, the financial
statements contain all adjustments of a normal recurring nature necessary to
present fairly the financial position as of April 30, 1995 and the results of
the operations and cash flows for the three months then ended. The results of
operations for the three months ended April 30, 1995 are not necessarily
indicative of the results to be expected for the year ending January 31, 1996.
NOTE B--ACCOUNTING FOR INVESTMENTS IN DEBT AND EQUITY SECURITIES
In fiscal 1995, the Company adopted Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities." As
of April 30, 1995, the cumulative effect of applying Statement 115 was a
reduction to shareholders' equity of $970,756 (net of $647,170 in deferred
income taxes) to reflect the unrealized holding losses on securities classified
as "available-for-sale." This adjustment is the result of a net increase in
market interest rates since the beginning of fiscal 1995 and does not
necessarily reflect the ultimate realization on these investments. This
cumulative adjustment includes an increase to shareholders' equity of $342,596
(net of $261,619 in deferred income taxes) for the three months ended April 30,
1995. This change is the result of an increase in the market value of
securities during the first quarter of fiscal 1996 due to a decrease in market
interest rates for the period ended April 30, 1995.
NOTE C--NET INCOME PER COMMON SHARE
Primary earnings per share are computed based on the weighted average number of
common shares outstanding during the period. Fully diluted earnings per share
are based on the weighted average number of shares outstanding and, when
dilutive, assumed conversion of convertible securities during the period, after
appropriate adjustments for interest and applicable income tax effect.
-5-
<PAGE>
ITEM 2
------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
The following table sets forth items from the Condensed Consolidated Statements
of Income as a percentage of net sales for the indicated periods.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED APRIL 30,
----------------------
<S> <C> <C>
1995 1994
---- ----
Net sales l00.0% l00.0%
Cost of sales 75.7 75.1
Selling, general and administrative
expenses 17.6 18.7
Interest and other income - net 0.4 0.3
Interest expense 2.7 2.3
---- ----
Income before income taxes 4.4 4.2
Provision for income taxes 1.8 1.7
---- ----
Net income 2.6% 2.5%
==== ====
</TABLE>
RESULTS OF OPERATIONS
General. As of April 29, 1994, the Company acquired Southern Signatures,
- --------
Inc., ("SSI") a commercial printing company in Atlanta, Georgia. The
acquisition was financed through the issuance of 119,337 shares of the Company's
Common Stock valued at $1,005,000.
The Company invests excess working capital in interest-bearing and investment
grade short-term securities.
NET SALES. Net sales, for the three months ended April 30, 1995, increased
- ----------
approximately $17.7 million or 20.1% as compared to the same period last year.
Of this increase, approximately 2% was attributable to the net sales of SSI,
approximately 4% was due to the mix of jobs produced, which included a higher
than usual amount of work performed outside our plants, approximately 4% was
attributable to paper price increases(which are typically passed through) and
approximately 10% was due to increased sales volume growth at our operations.
COST OF SALES. Cost of sales for the three months ended April 30, 1995
- --------------
increased 0.6%, as a percentage of sales, as compared to the same period last
year. The increase is due to higher paper prices which are typically passed
through and to the higher than usual mix of work performed outside our plants.
-6-
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
- ---------------------------------------------
administrative expenses for the three months ended April 30, 1995,
decreased 1.1%, as a percentage of sales, as compared to the same period
last year. This percentage decrease is due primarily to the significant
sales increase which offset these expenses. The dollar increase in these
expenses is primarily due to higher commissions on the increase in sales.
INTEREST AND OTHER INCOME-NET. Interest and other income-net, as a percentage
- ------------------------------
of sales, remained essentially the same for the three months ended April 30,
1995, as compared to the same period last year.
INTEREST EXPENSE. Interest expense, as a percentage of sales, increased 0.4%
- -----------------
for the three months ended April 30, 1995, as compared to the same period last
year. The increase is due primarily to an increase in the prime interest rate
and higher notes payable financing on accounts receivable related to the sales
increase.
INCOME TAXES. The effective income tax rate was 40.0% for the three months
- -------------
ended April 30, 1995 and April 30, 1994.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At April 30, 1995, the Company had approximately $47.1 million in working
capital as compared to approximately $49.0 million at April 30, 1994. Capital
expenditures for property, plant and equipment were approximately $6.4 million
during the three months ended April 30, 1995.
The Company's capital expenditures and increases in current assets due to an
increase in the sales volume have been financed by funds from operations, from
additional borrowings, from a decrease in Other Assets representing advance
payments on capital equipment made in fiscal 1995, and from use of cash and cash
equivalents during the first three months. In addition, certain capital
expenditures were temporarily financed with short term notes payable pending the
completion of long-term financing in process at April 30, 1995.
The Company believes that existing working capital, including a cash and
marketable securities balance of approximately $20.5 million at April 30, 1995,
funds provided from operations, undrawn bank lines and additional bank financing
will be adequate to satisfy the Company's presently anticipated needs for
working capital and capital expenditures, including possible future
acquisitions.
-7-
<PAGE>
IMPACT OF INFLATION
- -------------------
The Company has experienced increases in the costs of materials, labor,
equipment and machinery as well as other operating expenses. Its ability to
pass on such increased costs through increased prices has been affected
differently in different time periods; however, the Company has generally been
able to mitigate cost increases by increasing its production efficiencies or by
passing on increased costs to customers.
-8-
<PAGE>
PART II - OTHER INFORMATION
---------------------------
ITEM ONE - LEGAL PROCEEDINGS
- ----------------------------
At April 30, 1995, there were no material pending legal proceedings to
which the Company was a party or to which any of its property was the
subject.
ITEM TWO - CHANGES IN SECURITIES
- --------------------------------
None
ITEM THREE - DEFAULTS UPON SENIOR SECURITIES
- --------------------------------------------
None
ITEM FOUR - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ---------------------------------------------------------------
None
ITEM FIVE - OTHER INFORMATION
- -----------------------------
None
ITEM SIX - EXHIBITS AND REPORTS ON 8-K
- --------------------------------------
Exhibit 11 - Statement Regarding Computation of Earnings Per Share.
Reports on Form 8-K - No report on Form 8-K has been filed by the
registrant during the quarter for which this report is filed.
-9-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GRAPHIC INDUSTRIES, INC.
----------------------------------------
DATE: June 13, 1995
------------------
/s/ Mark C. Pope III
----------------------------------------
Mark C. Pope III
Chairman and Chief Executive Officer
DATE: June 13, 1995
------------------
/s/ David S. Fraser
----------------------------------------
Chief Financial Officer and Treasurer
-10-
<PAGE>
EXHIBIT 11
GRAPHIC INDUSTRIES, INC.
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED APRIL 30,
-----------------------------
<S> <C> <C>
1995 1994
----------- -----------
Net income $ 2,775,856 $ 2,217,672
Add interest on 7% convertible
subordinated debentures(2) 218,264 218,264
----------- -----------
TOTAL $ 2,994,120 $ 2,435,936
=========== ===========
Shares (1)
Primary
Weighted average shares
outstanding 10,676,554 10,428,305
Fully Diluted
Add common shares applicable
to assumed conversion of 7%
convertible subordinated
debentures 1,279,200 1,279,200
----------- -----------
Weighted average shares
outstanding, as adjusted 11,955,754 11,707,505
=========== ===========
Primary earnings per share $.26 $.21
==== ====
Fully diluted earnings per share $.25 $.21 (3)
==== ====
</TABLE>
(1) No significant dilutive common stock equivalents were outstanding in any
year.
(2) Net of income tax effect.
(3) Fully diluted earnings per share, as computed, were not dilutive and
therefore, equal primary earnings per share.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1995
<PERIOD-END> APR-30-1995
<CASH> 20,539
<SECURITIES> 0
<RECEIVABLES> 74,363
<ALLOWANCES> 0
<INVENTORY> 30,577
<CURRENT-ASSETS> 131,857
<PP&E> 191,716
<DEPRECIATION> 76,829
<TOTAL-ASSETS> 265,436
<CURRENT-LIABILITIES> 84,735
<BONDS> 20,787
<COMMON> 1,075
0
0
<OTHER-SE> 76,789
<TOTAL-LIABILITY-AND-EQUITY> 265,436
<SALES> 105,799
<TOTAL-REVENUES> 105,799
<CGS> 80,098
<TOTAL-COSTS> 80,098
<OTHER-EXPENSES> 18,209
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,866
<INCOME-PRETAX> 4,626
<INCOME-TAX> 1,850
<INCOME-CONTINUING> 2,776
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,776
<EPS-PRIMARY> .26
<EPS-DILUTED> .25
</TABLE>
