<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
Form 8-K/A
Amendment No. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
----------------------
Date of Report (Date of earliest event reported) : April 15, 1996
----------------------
MERRILL CORPORATION
(Exact name of registrant as specified in its charter)
Minnesota 0-14082 41-0946258
--------- ------- ----------
(State of Incorporation) (Commission (I.R.S. Employer
File Number) Identification No.)
One Merrill Circle, St. Paul, Minnesota 55108
---------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (612) 646-4501
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
A. FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
Financial statements of The Corporate Printing Company, Inc. and
Affiliated Group (consisting of balance sheets as of December 31,
1995 and 1994 and the related statements of income and retained
earnings, and cash flows for the years then ended including the
accountants' reports thereon) are included in this Report.
B. PRO FORMA FINANCIAL INFORMATION.
Unaudited condensed consolidated pro-forma statements of operations
for the three month period ended April 30, 1996 and for the year
ended January 31, 1996 are included in this report. A pro-forma
balance sheet is not included as all applicable purchase
transactions are reflected in Merrill Corporation's consolidated
balance sheet filed as part of its' April 30, 1996 Form 10-Q.
C. EXHIBITS.
23.1 Consent of Mirsky, Furst & Associates, P.A., Independent
Accountants
<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.
Date: July 1, 1996 MERRILL CORPORATION
(Registrant)
By /s/ Steven J. Machov
----------------------
Steven J. Machov
Vice President and General Counsel
<PAGE>
[MIRSKY, FURST & ASSOCIATES, P.A. LETTERHEAD]
Report of Independent Public Accountants
----------------------------------------
To the Board of Directors of
The Corporate Printing Company, Inc. and Affiliated Group:
We have audited the accompanying combined and consolidated balance sheets of The
Corporate Printing Company, Inc. and Affiliated Group (identified in Note 1 -
the "Company") as of December 31, 1995 and 1994, and the related combined and
consolidated statements of income and retained earnings and cash flows for the
years then ended. 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 audits.
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 combined and consolidated financial position of The
Corporate Printing Company, Inc. and Affiliated Group as of December 31, 1995
and 1994, and the results of their operations and their cash flows for the years
then ended in conformity with generally accepted accounting principles.
/s/ MIRSKY, FURST & ASSOCIATES, P.A.
Fort Lee, New Jersey
April 9, 1996, except for Note 12,
as to which the date is April 15, 1996
<PAGE>
THE CORPORATE PRINTING COMPANY, INC. AND AFFILIATED GROUP
COMBINED AND CONSOLIDATED BALANCE SHEETS
December 31, 1995 and December 31, 1994
ASSETS December 31, December 31,
1995 1994
Current assets: ------------ ------------
Cash and cash equivalents $ 4,073,000 $ 1,527,000
Accounts receivable - trade, less allowance
for doubtful accounts of $1,800,000
and $870,000 20,808,000 18,694,000
Accumulated costs on jobs in progress
and supplies 2,446,000 3,815,000
Prepaid expenses and other current assets 2,212,000 4,210,000
----------- -----------
Total current assets 29,539,000 28,246,000
Machinery, equipment and improvements, less
accumulated depreciation and amortization 6,780,000 6,521,000
Other assets 2,299,000 2,614,000
----------- -----------
Total assets $38,618,000 $37,381,000
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities:
Bank debt $ 9,250,000 $ 500,000
Subordinated debt 4,181,000 840,000
Accounts payable 6,926,000 4,375,000
Accrued expenses and other current
liabilities 2,473,000 4,081,000
Income taxes payable - deferred 1,598,000 1,031,000
----------- -----------
Total current liabilities 24,428,000 10,827,000
Long-term debt - Bank 0 9,450,000
Retirement benefits 912,000 697,000
Deferred credits 750,000 179,000
Commitments and contingencies - -
Minority interest 32,000 32,000
Subordinated debt 0 2,700,000
----------- -----------
Total liabilities 26,122,000 23,885,000
----------- -----------
Stockholders' equity
Common stock - -
Additional paid-in capital 201,000 201,000
Retained earnings 12,295,000 13,295,000
----------- -----------
Total stockholders' equity 12,496,000 13,496,000
----------- -----------
Total liabilities and stockholders' equity $38,618 000 $37,381,000
----------- -----------
----------- -----------
PRIOR YEAR BALANCES HAVE BEEN RECLASSED TO AGREE TO CURRENT YEAR PRESENTATION.
See accompanying notes
Page 2
<PAGE>
THE CORPORATE PRINTING COMPANY, INC. AND AFFILIATED GROUP
COMBINED AND CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
Twelve Months Ended December 31, 1995 and 1994
1995 1994
------------ ------------
Net sales $ 64,593,000 $ 75,081,000
Cost of sales 43,706,000 48,218,000
------------ ------------
Gross profit 20,887,000 26,863,000
------------ ------------
Other costs and expenses:
Selling 10,804,000 11,465,000
General and administrative 9,481,000 8,865,000
Interest expense 1,349,000 569,000
Interest income (369,000) (22,000)
Other income & expense 168,000
------------ ------------
21,433,000 20,877,000
------------ ------------
Income before income taxes (546,000) 5,986,000
Income taxes 374,000 870,000
------------ ------------
Income before extraordinary item (920,000) 5,116,000
Extraordinary item, net of income taxes - (6,436,000)
------------ ------------
Net income (920,000) (1,320,000)
Retained earnings, beginning of period 13,295,000 15,757,000
Dividends paid (80,000) (1,142,000)
------------ ------------
Retained earnings, end of period $ 12,295,000 $ 13,295,000
------------ ------------
------------ ------------
See accompanying notes.
Page 3
<PAGE>
THE CORPORATE PRINTING COMPANY, INC. AND AFFILIATED GROUP
COMBINED AND CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1995 and 1994
1995 1994
Cash flows from operating activities: ----------- ------------
Net income (loss) $ (920,000) $ (1,320,000)
Adjustments to reconcile net income
to net cash provided by operating
activities:
Extraordinary item, net 7,246,000
Depreciation and amortization 1,443,000 1,374,000
Provision for doubtful accounts 887,000 126,000
Provision for retirement benefits 215,000 62,000
Provision for deferred income taxes 567,000 (243,000)
Net rent deferral 571,000 179,000
Minority interest 2,000
Increase (decrease) from changes in:
Accounts receivable (3,001,000) 2,912,000
Accumulated costs on jobs in progress
and supplies 1,368,000 640,000
Prepaid expenses and other current
assets 198,000 (352,000)
Other assets 37,000 (621,000)
Accounts payable 2,551,000 (1,224,0O0)
Accrued expenses and other current
liabilities (1,608,000) (41,000)
Accrued interest on subordinated debt 641,000
Income taxes payable/refundable (69,000) (25,000)
----------- -----------
Net cash provided by (used in)
operating activities 2,880,000 8,715,000
----------- ------------
Cash flows from investing activities:
Net additions to machinery, equipment
and improvements (1,578,000) (2,068,000)
Write-off of investment 152,000
Net (increase) decrease in life insurance
cash surrender values 3,000 (53,000)
----------- ------------
Net cash (used in) investing activities (1,423,000) (2,121,000)
----------- ------------
Cash flows from financing activities:
Term loan borrowings from bank 3,500,000
Term loan repayments to bank (700,000) (500,000)
Net (repayments) borrowings under
revolving line of credit (3,500,000) 3,750,000
Subordinated debt repayments (5,579,000)
Advances (payments) to/from shareholders 1,869,000 (2,000,000)
Dividends paid (80,000) (1,142,000)
----------- ------------
Net cash (used in) provided by financing
activities 1,089,000 (5,471,000)
----------- ------------
Net (decrease) increase in cash and
cash equivalents 2,546,000 1,123,000
Cash and cash equivalents, beginning
of period 1,527,000 404,000
----------- ------------
Cash and cash equivalents, end of period $ 4,073,000 $ 1,527,000
----------- ------------
----------- ------------
PRIOR YEAR BALANCES HAVE BEEN RECLASSED TO AGREE TO CURRENT YEAR PRESENTATION.
See accompanying notes.
Page 4
<PAGE>
THE CORPORATE PRINTING COMPANY, INC. AND AFFILIATED GROUP
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION; BUSINESS
The combined and consolidated financial statements of The Corporate Printing
Company, Inc. and Affiliated Group include the accounts of The Corporate
Printing Company, Inc., CP International Holdings, Inc., CPC Communications,
Inc., CPC Reprographics, Inc., and The Corporate Printing Company
International, Ltd., together with their majority-owned subsidiaries and
partnerships, all of which are under common control and management
(collectively, the "Company"). All significant intercompany accounts and
transactions have been eliminated. The 1994 financial statements have been
reclassified to conform to the 1995 presentation.
The Company provides financial printing and duplication services and, although
maintaining offices internationally, sells primarily to customers seeking
access to the United States' securities markets.
CASH AND CASH EQUIVALENTS
Cash equivalents include highly liquid investments with original maturities
of three months or less.
ACCUMULATED COSTS ON JOBS IN PROGRESS AND SUPPLIES
Accumulated costs on jobs in progress (1995 -- $1,623,000; 1994 -- $2,697,000)
are valued at the lower of cost or market, and consist primarily of outside
purchases, labor and overhead. Supplies (1995 -- $823,000; 1994 --
$1,118,000) are valued at the lower of cost or market (first-in, first-out),
and consist primarily of paper, ink and chemicals.
MACHINERY, EQUIPMENT AND IMPROVEMENTS
Machinery, equipment and improvements are stated at cost. Depreciation is
calculated by using the straight-line method over the estimated useful lives
of the assets; amortization of leasehold improvements is calculated by using
the straight-line method over the estimated useful lives of the assets or the
lease terms, whichever is shorter.
Page 5
<PAGE>
THE CORPORATE PRINTING COMPANY, INC. AND AFFILIATED GROUP
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995 AND 1994
GOODWILL
Cost in excess of net assets of acquired businesses ("goodwill") is being
amortized using the straight-line method over a period of forty years.
INCOME TAXES
Several of the affiliated companies have elected to be taxed as Subchapter S
corporations, whereby their taxable incomes are reported directly by their
stockholders; accordingly, these companies have no federal income tax provisions
and reduced state and local income tax provisions.
The Company provides deferred income taxes for the differences between income
reported for tax and for financial statement purposes, principally the use of
the cash basis of accounting for tax purposes.
PERVASIVENESS 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 revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE 2. ACCOUNTS RECEIVABLE - TRADE
Accounts receivable - trade include unbilled amounts (1995 - $2,077,000; 1994 -
$1,233,000).
Page 6
<PAGE>
THE CORPORATE PRINTING COMPANY, INC. AND AFFILIATED GROUP
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995 AND 1994
NOTE 3. PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets include the following:
1995 1994
----------- -----------
Advances to stockholders $ 181,000 $ 2,000,000
Compensation 875,000 1,014,000
Non-trade receivables 91,000 277,000
Taxes receivable 543,000 474,000
Other 522,000 445,000
----------- -----------
$ 2,212,000 $ 4,210,000
----------- -----------
----------- -----------
NOTE 4. MACHINERY, EQUIPMENT AND IMPROVEMENTS
Machinery, equipment and improvements include the following:
1995 1994
----------- -----------
Machinery and equipment $10,213,000 $ 9,970,000
Leasehold improvements 3,361,000 3,161,000
Furniture and fixtures 1,967,000 1,926,000
Construction in progress 890,000 71,000
Other 1,363,000 1,408,000
----------- -----------
17,794,000 16,536,000
Less accumulated depreciation
and amortization 11,014,000 10,015,000
----------- -----------
$ 6,780,000 $ 6,521,000
----------- -----------
----------- -----------
NOTE 5. OTHER ASSETS
Other assets include the following:
1995 1994
----------- -----------
Cash surrender values and
other insurance contracts $ 1,029,000 $ 1,083,000
Goodwill 595,000 612,000
Investment in joint venture, at equity - 199,000
Other 675,000 720,000
----------- -----------
$ 2,299,000 $ 2,614,000
----------- -----------
----------- -----------
Page 7
<PAGE>
THE CORPORATE PRINTING COMPANY, INC. AND AFFILIATED GROUP
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995 AND 1994
NOTE 6. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities include the following:
1995 1994
---------- ----------
Compensation and commissions $2,114,000 $3,589,000
Other accrued expenses 212,000 305,000
Deferred income 147,000 187,000
---------- ----------
$2,473,000 $4,081,000
---------- ----------
---------- ----------
NOTE 7. BANK DEBT AND SUBORDINATE DEBT
The Company and its principal bank are parties to a credit agreement, as
amended, which provides for (a) a revolving line of credit of $12 million,
(b) a $5 million term loan availability, and (c) the $1 million balance of a
pre-existing term loan facility. Revolving loan borrowings are limited to
certain trade accounts receivable ($8.9 million as of December 31, 1995) and
originally matured on January 31, 1997. Interest on the revolving and term
loans range from 8% to 9% per annum, respectively, at December 31, 1995;
commitment fees of 1/4% and 1/2% per annum, respectively, are payable
quarterly on the unused portions of the revolving and term loans.
Borrowings under the credit agreement are collateralized by substantially all
of the Company's assets, including accounts receivable, jobs in progress, and
machinery, equipment and improvements. The agreement contains various
covenants, including financial covenants relating to stockholders' equity,
indebtedness, dividends, and the maintenance of earnings and cash flow, as
defined.
Page 8
<PAGE>
THE CORPORATE PRINTING COMPANY, INC. AND AFFILIATED GROUP
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995 AND 1994
During 1995 the credit agreement was amended and certain defaults relating to
financial covenants were waived. As of December 31, 1995, the Company
continued to be in default of certain financial covenants; plus a cross
default relating to the non-payment of the annual installment due on December
29, 1995, under the Subordinated Notes Agreement. On February 15, 1996, the
bank reduced the revolving loan commitment to the lesser of (a) the borrowing
base availability, as defined, less the term loans outstanding at such time
or (b) $5,000,000. This commitment expires on April 30, 1996. Therefore, the
company has classified its total debt as current liabilities.
In December 1994, the Company settled two long-standing legal actions
involving one of its unions.
In connection therewith, the Company paid $5 million and issued a $5 million
subordinated note to the union. The note is payable in five annual $1 million
principal installments. Quarterly interest payments at 6% per annum will
commence in 1997 on the remaining principal balance. The note also provides
for a lien on the Company's assets which is junior to that of its principal
bank. At December 31, 1995 the subordinated note is recorded at it's net
present value of $4,181,000 based on its terms.
In connection with these matters, the Company recorded extraordinary items
(and reduced income), in the amount of $6,436,000, net of income tax benefits
of $810,000 ($8,000 current and $802,000 deferred). In February, 1996, the
Company was notified that the subordinated note agreement was in default due
to the non-payment of the annual installment due on December 29, 1995. In
March, 1996 the company cured the default by making the payment plus penalty
interest.
Page 9
<PAGE>
THE CORPORATE PRINTING COMPANY, INC. AND AFFILIATED GROUP
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995 AND 1994
NOTE 8. INCOME TAXES PAYABLE
The tax provisions on income before extraordinary item are comprised as
follows:
1995 1994
--------- -----------
Current:
Federal $ - $ 88,000
State and local - 223,000
--------- -----------
- 311,000
---------- -----------
Deferred:
Federal - -
State and local 374,000 559,000
--------- -----------
374,000 559,000
--------- -----------
Total $ 374,000 $ 870,000
--------- -----------
--------- -----------
The reconciliations of the difference between income taxes computed at
federal statutory tax rates and the financial statement provisions are as
follows:
1995 1994
---------- -----------
Income taxes computed at federal
statutory tax rates $(186,000) $ 2,035,000
Subchapter S elections 203,000 (1,986,000)
State and local tax provisions, net
of federal income tax benefits 247,000 517,000
Other, net 110,000 304,000
--------- -----------
Total $ 374,000 $ 870,000
--------- -----------
--------- -----------
As of December 31, 1995, the Company had state and local tax net operating
loss carryforwards of approximately $5.1 million; such carryforwards are
available to be utilized in future years and expire in 2010. A valuation
reserve equal to the deferred tax asset has been recorded as it is not
certain that these net operating losses will be utilized.
Page 10
<PAGE>
THE CORPORATE PRINTING COMPANY, INC. AND AFFILIATED GR0UP
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995 AND 1994
NOTE 9: LITIGATION
The Company is a party to several claims arising in the ordinary course of
business. In the opinion of the Company's management, after review and
consultation with counsel, the ultimate resolution of these matters will not
have a material adverse effect on the Company's financial position.
NOTE 10: COMMITMENTS AND CONTINGENCIES
LEASES
The Company occupies premises and utilizes equipment under non-cancelable
operating leases which expire on various dates through 2014. Many of the leases
provide for payments of certain expenses (viz., real estate taxes on leased
premises, minimum or excess copy charges on leased copier equipment, etc.) and
may contain renewal and/or purchase options; in addition, the leases on premises
provide for rent increases relating to increases in real estate taxes and the
consumer price index. Rent expense under such leases, including the
aforementioned expenses, amounted to $3,834,000 in 1995 and $4,155,000 in 1994.
Future minimum annual lease commitments under non-cancelable operating leases
are summarized as follows:
1996 $ 3,061,000
1997 2,326,000
1998 1,580,000
1999 1,328,000
2000 1,269,000
Thereafter 16,288,000
-----------
Total $25,852,000
-----------
-----------
Page 11
<PAGE>
THE CORPORATE PRINTING COMPANY, INC. AND AFFILIATED GROUP
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995 AND 1994
EMPLOYMENT AGREEMENTS AND BENEFITS
The Company has entered into employment agreements with certain officers and key
employees which require payments of minimum salaries and/or non-refundable draws
against commissions through 2002, as follows: 1996 - $4,306,000, 1997 -
$4,339,000, 1998 - $4,102,000, 1999 - $3,429,000, 2000 - $2,815,000, and
thereafter - $2,189,000.
The Company also has non-qualified deferred compensation agreements with several
officers and key employees providing for annual post-retirement benefit payments
upon reaching age sixty-five. While the present value of these agreements is
accrued for, there is no present funding for them.
In addition, the Company maintains a discretionary salary deferral savings plan
(a 401(k) plan) for substantially all employees not covered by collective
bargaining agreements. The Company contributed $107,000 to this plan during 1995
and $116,000 during 1994.
NOTE 11. STOCKHOLDERS' EQUITY
The capitalizations of the members of the Affiliated Group are as follows (there
were no changes during 1995 except for newly-formed entities): (a) The Corporate
Printing Company, Inc., common stock, par value $.01 per share, 2,000 shares
authorized, 1,600 shares issued and outstanding; (b) CP International Holdings,
Inc., common stock, par value $.01 per share, 1,000 shares authorized, 200
shares issued and outstanding; (c) CPC Communications, Inc., common stock, no
par value, 200 shares authorized, issued and outstanding; (d) CPC
Reprographics, Inc., common stock, par value $.01 per share, 1,000 shares
authorized, 100 shares issued and outstanding; and (e) The Corporate Printing
Company International, Ltd., common stock, par value $.10 per share, 10,000
shares authorized, 400 shares issued and outstanding.
Page 12
<PAGE>
THE CORPORATE PRINTING COMPANY, INC. AND AFFILIATED GROUP
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995 AND 1994
NOTE 12. SUBSEQUENT EVENT
On April 15, 1996, the Company sold substantially all of its assets, net of
certain liabilities to Merrill Corporation. The effect of this transaction on
the carrying amounts of the assets at December 31, 1995 is not significant.
Page 13
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
--------------------------
The following unaudited pro forma combined condensed statements of operations
for the three-month period ended April 30, 1996, and for the year ended
January 31, 1996 were prepared to illustrate the effects on the results of
continuing operations of Merrill Corporation (the Company), The Corporate
Printing Company, Inc. and Affiliated Group (CPC) and FMC Resource Management
Corporation (FMC), using the purchase method of accounting and the assumptions
described in the accompanying notes, and assuming the acquisitions occurred on
February 1, 1995. The unaudited pro forma combined condensed statements of
operations are not necessarily indicative of the combined results of operations
as they may be in the future or as they might have been for the periods
presented had the acquisitions been effective at February 1, 1995. The
unaudited pro forma combined statements of operations and accompanying notes
are based on the historical consolidated financial statements of the Company
and FMC and the historical consolidated and combined financial statements of
CPC. The results of operations for CPC and FMC included in the pro forma
combined condensed statement of operations for the year ended January 31, 1996,
are those for the year ended December 31, 1995. The pro forma adjustments are
based upon available information and upon certain assumptions that the Company
believes are reasonable in the circumstances.
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
for the three month period ended April 30, 1996
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Merrill Pro Forma
Corporation CPC FMC Total Adjustments Combined
----------- -------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues $71,200 $12,920 $2,322 $86,442 $86,442
Cost of revenues 46,030 8,644 1,608 56,282 (27)(1) 56,255
----------- -------- -------- -------- ----------- --------
Gross profit 25,170 4,276 714 30,160 27 30,187
Selling, general and
administrative expenses 17,509 4,783 555 22,847 322 (2) 23,156
(13)(1)
----------- -------- -------- -------- ----------- --------
Operating income 7,661 (507) 159 7,313 (282) 7,031
Other, net (81) (79) (32) (192) (435)(3) (737)
(52)(4)
(58)(5)
----------- -------- -------- -------- ----------- --------
Income before
provision for income taxes 7,580 (586) 127 7,121 (827) 6,294
Provision for income taxes (3,335) 0 0 (3,335) 585 (6) (2,750)
----------- -------- -------- -------- ----------- --------
Net income $4,245 ($586) $127 $3,786 ($242)(8)(9) $3,544
----------- -------- -------- -------- ----------- (10) --------
----------- -------- -------- -------- ----------- --------
Income per common and common
equivalent share: $0.54 $0.45
----------- --------
----------- --------
Weighted average number of
common and common equivalent
shares outstanding: 7,933,251 7,933,251 21,004 (7) 7,954,255
----------- --------- -------- -----------
----------- --------- -------- -----------
</TABLE>
See accompanying notes to the Unaudited Pro Forma Combined
Condensed Statements of Operations.
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
for the year ended January 31, 1996
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Merrill Pro Forma
Corporation CPC FMC Total Adjustments Combined
----------- -------- -------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues $245,306 $64,593 $15,258 $325,157 $325,157
Cost of revenues 165,765 43,706 10,400 219,871 (110)(1) 219,761
----------- -------- -------- -------- ----------- ---------
Gross profit 79,541 20,887 4,858 105,286 110 105,396
Selling, general and administrative
expenses 60,079 20,285 3,947 84,311 1,424 (2) 85,685
(50)(1)
----------- -------- -------- -------- ----------- ---------
Operating income 19,462 602 911 20,975 (1,264) 19,711
Other, net (756) (1,148) (154) (2,058) (2,358)(3) (4,910)
(255)(4)
(239)(5)
----------- -------- -------- -------- ----------- ---------
Income before provision for
income taxes 18,706 (546) 757 18,917 (4,116) 14,801
Provision for income taxes (8,044) (374) 0 (8,418) 1,880 (6) (6,538)
----------- -------- -------- -------- ----------- ---------
Net income $10,662 ($920) $757 $10,499 ($2,236)(8)(9) $8,263
----------- -------- -------- -------- ----------- (10) ---------
----------- -------- -------- -------- ----------- ---------
Income per common and common equivalent
share: $1.34 $1.04
----------- ---------
----------- ---------
Weighted average number of common and
common equivalent shares outstanding: 7,945,146 7,945,146 22,067 (7) 7,967,213
----------- --------- ----------- ---------
----------- --------- ----------- ---------
</TABLE>
See accompanying notes to the Unaudited Pro Forma Combined
Condensed Statements of Operations.
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED STATEMENT OF OPERATIONS
(All amounts in thousands, except per share data)
(1) - Represents adjustments to depreciation and amortization resulting from the
fair value adjustments to fixed assets recorded in connection with the
acquisitions.
(2) - Represents the amortization of goodwill on a straight line basis over 15
years.
(3) - Represents additional interest expense, computed using historical
interest rates, resulting from increased borrowings under the Company's
note payable in order to finance the acquisitions. Pro forma interest
expense would be reduced by approximately $70 and $280 for the three
month period ended April 30, 1996 and for the year ended January 31, 1996,
respectively, due to anticipated lower interest rates of approximately 1%
from historical interest rates associated with permanent financing.
(4) - Represents reduced interest income resulting from a decrease in interest
bearing cash and cash equivalents used to fund the acquisitions.
(5) - Represents additional interest expense resulting from a non-compete
obligation with the principal shareholder of CPC.
(6) - Represents the income tax effect of the unaudited pro forma combined
condensed statement of operations adjustments based on the statutory rate
in effect for the periods shown.
(7) - Represents additional common equivalent shares as a result of granting
stock options at fair value in connection with the acquisition of CPC.
(8) - CPC's historical statements of operations include operating results from
foreign sales offices. CPC commenced closing these foreign sales offices
prior to the acquisition. The remaining foreign sales offices are
anticipated to be closed during the remainder of 1996. Excluding the
operating results of CPC's foreign sales offices, pro forma operating
results would have been as follows:
<TABLE>
<CAPTION>
Three month
period ended Year ended
April 30, 1996 January 31, 1996
---------------- --------------
<S> <C> <C>
Pro forma revenue $85,333 $320,262
======= ========
Pro forma net income $ 4,490 $ 11,009
======= ========
Pro forma E.P.S. $ .56 $ 1.38
======= ========
</TABLE>
Foreign sales offices' identifiable tangible assets are not significant.
(9) - The purchase agreements for CPC and FMC include contingent consideration
not to exceed $12 million and $4 million, respectively. Any resulting
contingent consideration will be recorded as goodwill and amortized on a
straight line basis over the remainder of the 15 years from the date of
the original acquisition. Pro forma net income, assuming the payment of
the total maximum contingent consideration of $16 million under these
agreements, at the date of original acquisition would be approximately
$3.4 million ($ .43 per share ) for the three month period ended April
30, 1996 and approximately $7.5 million ($0.95 per share) for the year
ended January 31, 1996.
In addition, the purchase price for the CPC acquisitions is subject to
adjustments, which have not been determined as of the filing date of
this Form 8-K/A, for the collection of certain accounts receivables, final
determination of any loss of CPC's affiliated companies, expenses for
closing certain foreign sales offices and for 11% of the net income of
CPC's affiliated S corporations. Any resulting adjustments will be
recorded as an adjustment to goodwill and amortization over the remainder
of the 15 years from the date of the original acquisition.
(10)- The historical financial statements of CPC and FMC include officers'
salaries and bonuses that are non recurring subsequent to the
acquisitions.
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description Method of Filing
- ------- ----------- ----------------
23.1 Consent of Mirsky, Furst &
Associates & Associates............ Filed electronically with this
Direct Transmission
<PAGE>
EXHIBIT 23.1
[LETTERHEAD]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of Merrill Corporation on Form S-8
(File No. 33-46275) of our report dated April 9, 1996, except for Note 12 as
to which the date is April 15, 1996 on the combined and consolidated
financial statements of The Corporate Printing Company, Inc. and Affiliated
Group as of December 31, 1995 and 1994 and for the years then ended.
/s/ MIRSKY, FURST & ASSOCIATES, P.A.
MIRSKY, FURST & ASSOCIATES, P.A.
Fort Lee, New Jersey
June 5, 1996
