<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JULY 31, 1998
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 0-14082
MERRILL CORPORATION
(Exact name of Registrant as specified in its charter)
MINNESOTA 41-0946258
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
ONE MERRILL CIRCLE
ST. PAUL, MINNESOTA 55108
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 651-646-4501
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 filing requirements
for the past 90 days.
Yes X No
-------- --------
The number of shares outstanding of Registrant's Common Stock, par value $.01,
on September 9, 1998 was 16,297,505.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART I.--FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE(S)
-----------
<S> <C>
ITEM 1. FINANCIAL STATEMENTS
Included herein is the following unaudited financial information:
Consolidated Balance Sheets as of July 31, 1998 and January 31, 1998................................. 3
Consolidated Statements of Operations for the three and six month periods ended July 31, 1998 and
1997................................................................................................ 4
Consolidated Statements of Cash Flows for the six month periods ended July 31, 1998 and 1997......... 5
Notes to Consolidated Financial Statements........................................................... 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS........... 7-10
</TABLE>
PART II.--OTHER INFORMATION
<TABLE>
<CAPTION>
PAGE(S)
-----------
<S> <C>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............................................. 11
ITEM 5. OTHER INFORMATION............................................................................... 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................................................ 11
</TABLE>
2
<PAGE>
MERRILL CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
JULY 31, JANUARY 31,
1998 1998
----------- -----------
<S> <C> <C>
(UNAUDITED)
Current assets
Cash and cash equivalents.......................................................... $ 3,677 $ 2,531
Trade receivables, less allowance for doubtful accounts of $8,036 and $6,992,
respectively..................................................................... 140,781 116,721
Work-in-process inventories........................................................ 19,826 13,686
Other inventories.................................................................. 7,508 7,112
Other current assets............................................................... 11,885 10,290
----------- -----------
Total current assets............................................................. 183,677 150,340
Property, plant and equipment, net................................................... 43,307 41,045
Goodwill, net........................................................................ 43,244 44,437
Other assets......................................................................... 13,117 10,657
----------- -----------
Total assets..................................................................... $ 283,345 $ 246,479
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable to banks............................................................. $ 19,600
Current maturities of long-term debt............................................... 2,655 $ 655
Current maturities of capital lease obligations.................................... 229 249
Accounts payable................................................................... 32,910 29,142
Accrued expenses................................................................... 38,044 41,033
----------- -----------
Total current liabilities........................................................ 93,438 71,079
Long-term debt, net of current maturities............................................ 38,225 40,225
Capital lease obligations, net of current maturities................................. 1,487 1,616
Other liabilities.................................................................... 8,205 7,884
----------- -----------
Total liabilities................................................................ 141,355 120,804
----------- -----------
Shareholders' equity
Common stock, $.01 par value: 25,000,000 shares authorized; 16,384,855 and
16,315,136 shares, respectively, issued and outstanding.......................... 164 163
Undesignated stock: 500,000 shares authorized; no shares issued....................
Additional paid-in capital......................................................... 22,652 22,401
Retained earnings.................................................................. 119,174 103,111
----------- -----------
Total shareholders' equity....................................................... 141,990 125,675
----------- -----------
Total liabilities and shareholders' equity....................................... $ 283,345 $ 246,479
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
3
<PAGE>
MERRILL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JULY 31 JULY 31
----------------------------- ---------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue..................................................... $ 148,458 $ 115,601 $ 271,972 $ 225,460
Cost of revenue............................................. 94,484 74,535 169,640 140,809
------------ ------------ ------------ ------------
Gross profit.............................................. 53,974 41,066 102,332 84,651
Selling, general and administrative expenses................ 37,267 28,779 70,692 57,274
------------ ------------ ------------ ------------
Operating income.......................................... 16,707 12,287 31,640 27,377
Interest expense............................................ (1,095) (1,136) (2,027) (2,130)
Other income, net........................................... 202 223 509 98
------------ ------------ ------------ ------------
Income before provision for income taxes.................. 15,814 11,374 30,122 25,345
Provision for income taxes.................................. 7,108 5,062 13,404 11,279
------------ ------------ ------------ ------------
Net income................................................ $ 8,706 $ 6,312 $ 16,718 $ 14,066
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net income per share:
Basic..................................................... $ .53 $ .39 $1.02 $ .88
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Diluted................................................... $ .50 $ .38 $ .97 $ .85
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Dividends per common share.................................. $ .02 $.015 $ .04 $ .03
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Weighted average number of shares outstanding:
Basic..................................................... 16,412,306 16,064,008 16,372,617 15,974,087
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Diluted................................................... 17,305,017 16,812,809 17,249,865 16,586,078
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
4
<PAGE>
MERRILL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JULY 31
------------------------
1998 1997
---------- ----------
<S> <C> <C>
Operating activities
Net income........................................................................... $ 16,718 $ 14,066
Adjustments to reconcile net income to net cash (used in) provided by operating
activities
Depreciation and amortization...................................................... 6,024 5,156
Amortization of intangible assets.................................................. 2,174 1,820
Writedown of goodwill.............................................................. 1,000
Provision for losses on trade receivables.......................................... 2,585 3,960
Deferred compensation.............................................................. 1,519 845
Changes in operating assets and liabilities, net of effects from business
acquisitions
Trade receivables................................................................ (25,807) (23,640)
Work-in-process inventories...................................................... (6,140) 1,483
Other inventories................................................................ (396) (136)
Other current assets............................................................. 41 1,173
Accounts payable................................................................. 2,924 424
Accrued expenses................................................................. (5,738) 3,756
Accrued and deferred income taxes................................................ (196) (4,741)
---------- ----------
Net cash (used in) provided by operating activities............................ (5,292) 4,166
---------- ----------
Investing activities
Business acquisitions, net of cash acquired.......................................... (3,200) (1,406)
Purchase of property, plant and equipment............................................ (7,809) (9,270)
Other, net........................................................................... (1,601) (829)
---------- ----------
Net cash used in investing activities.......................................... (12,610) (11,505)
---------- ----------
Financing activities
Borrowings on notes payable to banks................................................. 71,400 52,200
Repayments on notes payable to banks................................................. (51,800) (50,850)
Principal payments on long-term debt and capital lease obligations................... (149) (162)
Repurchase of common stock........................................................... (2,178) (3,065)
Dividends paid....................................................................... (655) (481)
Exercise of stock options............................................................ 1,514 4,424
Tax benefit realized upon exercise of stock options.................................. 690 1,662
Other equity transactions, net....................................................... 226 26
---------- ----------
Net cash provided by financing activities...................................... 19,048 3,754
---------- ----------
Increase (decrease) in cash and cash equivalents....................................... 1,146 (3,585)
Cash and cash equivalents, beginning of period......................................... 2,531 5,161
---------- ----------
Cash and cash equivalents, end of period............................................... $ 3,677 $ 1,576
---------- ----------
---------- ----------
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
During the second quarter of fiscal year 1998, the Company recorded an
obligation of $8 million for additional consideration related to business
acquisitions.
The accompanying notes are an integral part
of the consolidated financial statements.
5
<PAGE>
MERRILL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ACCOUNTING POLICIES
The consolidated financial statements as of July 31, 1998, and for the three
and six month periods ended July 31, 1998 and 1997, have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. The consolidated financial statements reflect all
adjustments, consisting of normal recurring accruals, which the Company
considers necessary for a fair presentation of the results for the indicated
periods. Certain information and accounting policies 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. These consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's 1998 Annual Report.
2. NET INCOME PER SHARE
Effective January 31, 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 128 "Earnings Per Share," and has disclosed
basic and diluted net income per share for the three and six month periods ended
July 31, 1998 and 1997, in accordance with the Standard.
The denominator used to calculate diluted earnings per share includes the
dilutive impact of stock options, which increase the actual weighted average
number of shares outstanding by 892,711 and 748,801 for the three month periods
ended July 31, 1998 and 1997, respectively and by 877,248 and 611,991 for the
six month periods ended July 31, 1998 and 1997, respectively.
3. BUSINESS ACQUISITIONS
On June 15, 1998, the Company completed an acquisition under which the
Company received substantially all operating assets and assumed certain
liabilities of Executech, Inc. and an affiliated company, World Wide Scan
Services, LLC, for cash consideration of $3.2 million. In addition, the
agreement requires the Company to pay contingent cash consideration based on
future performance of Executech, Inc. and World Wide Scan Services, LLC as
defined by the purchase agreement.
4. SUBSEQUENT EVENT
Subsequent to July 31, 1998, the Company repurchased 104,000 shares of its
common stock for approximately $2.4 million. A total of 204,000 shares have been
repurchased in fiscal year 1999 and a cumulative total of 468,000 shares have
been repurchased under the 1,500,000 authorized share repurchase program
approved by the Board of Directors during fiscal year 1997.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain statements in Management's Discussion and Analysis of Financial
Condition and Results of Operations, constitute 'forward-looking' statements
within the meaning of the federal Securities laws. Such 'forward-looking'
statements involve known and unknown risks, uncertainties, or achievements of
the Company which may cause actual results to be materially different from any
future results, performance, or achievements expressed or implied by such
'forward-looking' statements. These risks and uncertainties include, but are not
limited to, the effect of economic and financial market conditions, government
public reporting regulations, paper costs and the integration and performance of
recent acquisitions.
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship to total revenue
of certain items in the Company's consolidated statements of operations for the
three and six month periods ended July 31, 1998 and 1997, and the percentage
change in the dollar amounts of such items between the periods.
<TABLE>
<CAPTION>
THREE MONTHS ENDED JULY 31, SIX MONTHS ENDED JULY 31,
------------------------------------ ---------------------------------------
PERCENTAGE PERCENTAGE
INCREASE INCREASE
PERCENTAGE (DECREASE) PERCENTAGE (DECREASE)
OF REVENUE ---------- OF REVENUE ----------
--------------------- 1998 VS. ------------------------ 1998 VS.
1998 1997 1997 1998 1997 1997
-------- -------- ---------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenue
Financial.................................. 40.9% 34.6% 52% 39.4% 36.5% 30%
Corporate.................................. 33.0 38.0 11 32.9 34.8 14
Commercial and other....................... 16.3 16.5 27 17.1 17.7 17
Document management services............... 9.8 10.9 15 10.6 11.0 16
-------- -------- -------- --------
Total revenue............................ 100.0 100.0 28 100.0 100.0 21
Cost of revenue.............................. 63.6 64.5 27 62.4 62.5 20
-------- -------- -------- --------
Gross profit............................. 36.4 35.5 31 37.6 37.5 21
Selling, general and administrative
expenses.................................... 25.1 24.9 29 26.0 25.4 23
-------- -------- -------- --------
Operating income......................... 11.3 10.6 36 11.6 12.1 16
Interest expense............................. (0.7) (1.0) (4) (0.7) (0.9) (5)
Other income, net............................ 0.1 0.2 (9) 0.2 -- 419
-------- -------- -------- --------
Income before provision for income
taxes.................................. 10.7 9.8 39 11.1 11.2 19
Provision for income taxes................... 4.8 4.4 40 4.9 5.0 19
-------- -------- -------- --------
Net income............................... 5.9% 5.4% 38 6.2% 6.2% 19
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
QUARTER ENDED JULY 31, 1998 COMPARED TO QUARTER ENDED JULY 31, 1997
Revenue for the second quarter of fiscal year 1999 increased by $32.9
million or 28%, to $148.5 million. The financial revenue category increased 52%
as a result of continued growth of financial market transactions. Our market
share in the active mergers and acquisitions area has increased in all regions
of the country, especially in the important New York market. The corporate
revenue category continued to grow, posting an 11% increase compared to the same
period last year. This category is less volatile than our financial transactions
market. Investment Company Services sector revenue growth was the main
contributor to the corporate revenue category increase with revenue impact from
new clients and continued growth from existing clients. The 27% revenue increase
in the commercial and other revenue category is primarily attributable to the
Managed Communications Programs sector, which had revenue growth of 25%. The
growth was led by increased activity with Cendant Corporation under our
preferred
7
<PAGE>
vendor agreements. Revenue from real estate products and services also grew as a
result of our expanded national sales force and the continued diversification of
the product line to include direct mail and related mailing services. In
addition, the election-year ballot production business was completed during the
second quarter. The document management services revenue increased 15% in the
second quarter. Leading the growth was a 42% increase in document service center
revenue.
Gross profit margin in the second quarter of fiscal year 1999 was comparable
to the second quarter last year and was a result of our focus on large deals,
which we define as those greater than $500,000, strong overall volume in our
financial and corporate revenue categories and high utilization of our
production facilities.
Selling, general and administrative expenses increased in the second quarter
compared to the same period last year. The overall increase in expenses is
attributed to our continued expansion of sales and marketing activities in all
business segments and in part, to variable costs inherently associated with
sales and profitability. The Company expects continued investment in sales and
marketing activities throughout the year.
Other income, net was comparable on a quarterly basis and is attributable to
rental income generated by tenants of our administration facilities in St. Paul,
Minnesota and earnings related to the Quebecor Merrill Canada (QMC) joint
venture, which is accounted for under the equity method of accounting.
The effective income tax rate for the second quarter increased .4% to 44.9%,
compared to 44.5% a year ago. The increase in the rate resulted from increased
non-deductible business and entertainment expenses.
Net income totaled $8.7 million, or 50 cents per diluted share, for the
current quarter compared to $6.3 million, or 38 cents per diluted share, in the
second quarter last year. Net income, as a percentage of revenue, increased
primarily because of higher gross profit as discussed previously.
SIX MONTHS ENDED JULY 31, 1998 COMPARED TO SIX MONTHS ENDED JULY 31, 1997
Revenue for the six months ended July 31, 1998 increased by $46.5 million or
21%, to $272.0 million. The financial revenue category increased 30% as a result
of the continued growth of financial market transactions during the current six
month period. In addition, our market share in the active mergers and
acquisitions transactions has increased in all regions of the country. The
corporate revenue category increased by 14% with the increase being generated
mainly from strong investment company services revenue and higher demand for
corporate compliance work. Investment company services revenue has grown from
existing as well as new clients. The 17% increase in commercial and other
revenue was primarily the result of increased business generated by our managed
communications programs. The main drivers were increased activity with Cendant
Corporation under our preferred vendor agreements and revenue from real estate
products and services. The commercial and other revenue also increased as a
result of the election year ballot production work completed in the second
quarter of fiscal year 1999. The document management services revenue category
increased 16% from strong results in our contractual document service center
business, which has increased 50% compared to the six month period ended July
31, 1997.
The overall sales growth contributed to a $17.7 million increase in gross
profit. The gross profit margin was comparable to the prior year six month
period that also included strong overall volumes in our financial and corporate
revenue categories and high utilization of our production facilities.
Selling, general and administrative expenses increased $13.4 million to
$70.7 million. This increase is a result of our continued expansion of sales and
marketing activities in all business segments and variable costs associated with
increased sales and profitability. In addition, general and administrative
expenses increased because of a writedown of goodwill associated with Merrill
Training and Technology, formerly
8
<PAGE>
Merrill/Superstar Computing Company during the first quarter of fiscal 1998.
These increases were offset by a reduction in the provision for losses on trade
receivables.
Other income, net increased in the first six months of fiscal year 1999
compared to the same period in fiscal year 1998. The increase is primarily
attributable to earnings from the QMC joint venture.
The effective income tax rate was 44.5% for both periods. The estimated
effective income tax rate for fiscal year 1999 is estimated to be 44.5%. The
effective income tax rate is higher than the federal statutory tax rate as a
result of state income taxes, net of federal tax benefits, and non-deductible
business and entertainment expenses.
Net income totaled $16.7 million, or 97 cents per diluted share, for the
current six month period compared to $14.1 million, or 85 cents per diluted
share, in the six month period last year. Net income, as a percentage of
revenue, was comparable for both periods.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at July 31, 1998 increased to $90.2 million from $79.3
million at January 31, 1998. Strong sales activity during the first six months
of fiscal year 1999 resulted in increased accounts receivable and
work-in-process inventory balances when compared to corresponding balances at
January 31, 1998.
The Company had net cash used in operating activities of $5.3 million in the
first half of fiscal year 1999 compared to net cash provided by operating
activities of $4.2 million in the first half of fiscal year 1998. This change is
driven principally by an increase in work-in-process inventories and reductions
in accrued expenses offset by increased accrued and deferred income taxes.
Net cash used in investing activities was $12.6 million and $11.5 million
for the six months ended July 31, 1998 and 1997, respectively. Capital
expenditures during the first half of fiscal year 1999 approximated $7.8 million
and were principally for leasehold improvements and reprographic and computer
based production equipment. In addition, the acquisition of Executech, Inc. and
World Wide Scan Services, LLC, for $3.2 million, was completed during the
current second quarter.
Net cash provided by financing activities was $19.0 million compared to $3.8
million for the six months ended July 31, 1998 and 1997, respectively. This
change is primarily the result of increased borrowings under the Company's line
of credit, which was used to fund current quarter operating activities and to
repurchase approximately $2.2 million of the Company's common stock.
NEW ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." The Company is required to adopt the new standard in
the first quarter of fiscal year 2001. Although the Company has not completed a
full analysis of all of the requirements of the new standard, the Company
anticipates that this pronouncement will not have a material impact on the
Company's consolidated financial statements.
YEAR 2000 CONVERSION
The Company has a detailed Year 2000 project underway which addresses both
its internal business systems including hardware, software, and firmware as well
as its external business partners, suppliers and customers. The Company is also
verifying Year 2000 readiness by third-party vendors, including external
providers of software and hardware products and services. The Year 2000 project
has progressed through the system inventory and prioritization stage into the
remediation stage where programming changes are being made to the major business
and production systems. The Company is also surveying key suppliers and
customers regarding their Year 2000 readiness. The Company is formulating
contingency plans that address internal processes, as well as external
relationships based on the surveys. The Year 2000 project is
9
<PAGE>
on schedule and expenditures are proceeding at a rate consistent with the
$900,000 previously disclosed in our January 31, 1998 management discussion and
analysis. The total costs may be higher, contingent upon additional review of
the issues. The Company, of course, does not have control over many Year 2000
matters. The nature of our society and the interconnected systems of government
agencies, utilities, businesses and even individuals can affect our ability to
provide goods and services to our customers, and by extension could also affect
our financial position and results of operations. We are making every effort to
evaluate, correct and test potential problem areas, but the resolution of Year
2000 questions by other entities in our network of relationships and the
successful or unsuccessful implementation of our Year 2000 plan could adversely
affect the Company.
10
<PAGE>
PART II.--OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Registrant's annual meeting was held on May 28, 1998.
(b) The following matters were submitted to a vote of security holders:
Proposal 1--Election of Directors
To elect nine directors to terms expiring in 1999:
<TABLE>
<CAPTION>
VOTES VOTES
DIRECTORS FOR WITHHELD
- --------------------------------------------------------------------- ------------ ---------
<S> <C> <C>
Rick R. Atterbury.................................................... 13,993,859 7,625
James R. Campbell.................................................... 13,993,439 8,045
John W. Castro....................................................... 13,997,739 3,745
Ronald N. Hoge....................................................... 13,993,439 8,045
Frederick W. Kanner.................................................. 13,992,839 8,645
Richard G. Lareau.................................................... 13,187,261 814,223
Paul G. Miller....................................................... 13,991,439 10,045
Michael S. Scott Morton.............................................. 13,992,473 9,011
Robert F. Nienhouse.................................................. 13,993,439 8,045
</TABLE>
ITEM 5. OTHER INFORMATION.
The Securities and Exchange Commission (the "SEC") has recently amended Rule
14a-4, which governs the Company's use of discretionary voting authority with
respect to certain stockholder proposals. Rule 14a-4(c)(1) allows Company
management to use their discretionary authority to vote proxies on stockholder
proposals, without a discussion of the matter in the proxy statement, if the
proponent of such proposal fails to notify the Company at least 45 days prior to
the mailing date of the prior year's proxy statement. In order to provide
stockholders with notice of the deadline for the submission of such proposals
for the Company's 1999 Annual Meeting of Stockholders, the Company hereby
notifies all stockholders that after March 23, 1999, any stockholder proposal
submitted outside the process of SEC Rule 14a-8 will be considered untimely for
purposes of SEC Rules 14a-4 and 14a-5(c).
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K
None.
11
<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.
<TABLE>
<S> <C> <C>
(REGISTRANT) MERRILL CORPORATION
BY (SIGNATURE) /s/ John W. Castro
(NAME AND TITLE) John W. Castro, President and Chief Executive Officer
(DATE) September 14, 1998
BY (SIGNATURE) /s/ Kay A. Barber
(NAME AND TITLE) Kay A. Barber, Chief Financial Officer
(DATE) September 14, 1998
</TABLE>
12
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT METHOD OF FILING
- --------- -------------------------------
<C> <S> <C>
27. Financial Data Schedule................................................ Filed herewith electronically
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JUL-31-1998
<CASH> 3,677
<SECURITIES> 0
<RECEIVABLES> 148,817
<ALLOWANCES> 8,036
<INVENTORY> 27,334
<CURRENT-ASSETS> 183,677
<PP&E> 103,168
<DEPRECIATION> 59,861
<TOTAL-ASSETS> 283,345
<CURRENT-LIABILITIES> 93,438
<BONDS> 39,712
0
0
<COMMON> 164
<OTHER-SE> 141,826
<TOTAL-LIABILITY-AND-EQUITY> 283,345
<SALES> 271,972
<TOTAL-REVENUES> 271,972
<CGS> 169,640
<TOTAL-COSTS> 169,640
<OTHER-EXPENSES> 70,692
<LOSS-PROVISION> 2,585
<INTEREST-EXPENSE> 2,027
<INCOME-PRETAX> 30,122
<INCOME-TAX> 13,404
<INCOME-CONTINUING> 16,718
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,718
<EPS-PRIMARY> 1.02
<EPS-DILUTED> .97
</TABLE>
