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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 APRIL 30, 1999
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
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The number of shares outstanding of Registrant's Common Stock, par value $.01,
on June 10, 1999 was 16,076,425.
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<PAGE>
PART I.--FINANCIAL INFORMATION
<TABLE>
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PAGE(S)
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ITEM 1. FINANCIAL STATEMENTS
Included herein is the following unaudited financial information:
Consolidated Balance Sheets as of April 30, 1999 and January 31, 1999................................ 3
Consolidated Statements of Operations for the three month periods ended April 30, 1999 and 1998...... 4
Consolidated Statements of Cash Flows for the three month periods ended April 30, 1999 and 1998...... 5
Notes to Consolidated Financial Statements........................................................... 6-7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS........... 8-11
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK....................................... 12
</TABLE>
PART II.--OTHER INFORMATION
<TABLE>
<CAPTION>
PAGE(S)
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................................................ 13
SIGNATURES............................................................................................... 14
</TABLE>
2
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PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MERRILL CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
APRIL 30, JANUARY 31,
1999 1999
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<S> <C> <C>
(UNAUDITED)
Current assets
Cash and cash equivalents.......................................................... $ 4,103 $ 23,477
Trade receivables, less allowance for doubtful accounts of $9,298 and $8,126,
respectively..................................................................... 139,852 102,365
Work-in-process inventories........................................................ 25,364 12,639
Other inventories.................................................................. 8,046 7,559
Other current assets............................................................... 12,839 12,253
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Total current assets............................................................. 190,204 158,293
Property, plant and equipment, net................................................... 59,026 44,935
Goodwill, net........................................................................ 75,123 49,744
Other assets......................................................................... 12,995 12,973
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Total assets..................................................................... $ 337,348 $ 265,945
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable to banks............................................................. $ 66,500
Current maturities of long-term debt............................................... 210 $ 2,210
Current maturities of capital lease obligations.................................... 222 236
Accounts payable................................................................... 38,236 29,640
Accrued expenses................................................................... 35,707 44,642
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Total current liabilities........................................................ 140,875 76,728
Long-term debt, net of current maturities............................................ 38,110 38,110
Capital lease obligations, net of current maturities................................. 1,329 1,375
Other liabilities.................................................................... 10,517 8,581
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Total liabilities................................................................ 190,831 124,794
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Shareholders' equity
Common stock, $.01 par value: 25,000,000 shares authorized; 16,069,895 and
15,823,155 shares, respectively, issued and outstanding.......................... 161 158
Undesignated stock: 500,000 shares authorized; no shares issued....................
Additional paid-in capital, net of note receivables of $1,547...................... 13,882 12,722
Retained earnings.................................................................. 132,474 128,271
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Total shareholders' equity....................................................... 146,517 141,151
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Total liabilities and shareholders' equity....................................... $ 337,348 $ 265,945
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</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
3
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MERRILL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
APRIL 30
-----------------------------
1999 1998
------------ ------------
<S> <C> <C>
Revenue..................................................... $ 131,836 $ 123,514
Cost of revenue............................................. 84,564 75,156
------------ ------------
Gross profit.............................................. 47,272 48,358
Selling, general and administrative expenses................ 37,728 33,425
------------ ------------
Operating income.......................................... 9,544 14,933
Interest expense............................................ (1,103) (932)
Other (expense) income, net................................. (206) 307
------------ ------------
Income before provision for income taxes.................. 8,235 14,308
Provision for income taxes.................................. 3,714 6,296
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Net income................................................ $ 4,521 $ 8,012
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Net income per share:
Basic..................................................... $.28 $.49
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Diluted................................................... $.27 $.47
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Dividends per common share.................................. $.02 $.02
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Weighted average number of shares outstanding:
Basic..................................................... 15,881,177 16,332,927
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------------ ------------
Diluted................................................... 16,470,066 17,194,712
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</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
4
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MERRILL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
APRIL 30
------------------------
1999 1998
---------- ----------
<S> <C> <C>
Operating activities
Net income........................................................................... $ 4,521 $ 8,012
Adjustments to reconcile net income to net cash used in operating activities
Depreciation and amortization...................................................... 3,745 2,791
Amortization of intangibles........................................................ 1,170 1,080
Writedown of goodwill.............................................................. -- 1,000
Provision for losses on trade receivables.......................................... 1,997 1,048
Deferred compensation.............................................................. 691 1,338
Changes in operating assets and liabilities, net of effects from business
acquisitions
Trade receivables................................................................ (25,289) (8,418)
Work-in-process inventories...................................................... (7,957) (13,228)
Other inventories................................................................ (487) 202
Other current assets............................................................. 164 (697)
Accounts payable................................................................. 2,010 6,052
Accrued expenses................................................................. (13,621) (9,589)
Accrued and deferred income taxes................................................ 2,693 5,794
---------- ----------
Net cash used in operating activities.......................................... (30,363) (4,615)
---------- ----------
Investing activities
Business acquisitions, net of cash acquired.......................................... (50,371) --
Purchase of property, plant and equipment............................................ (2,836) (3,696)
Other investing activities, net...................................................... (1,089) (1,494)
---------- ----------
Net cash used in investing activities.......................................... (54,296) (5,190)
---------- ----------
Financing activities
Borrowings on notes payable to banks................................................. 69,900 12,600
Repayments on notes payable to banks................................................. (3,400) (4,900)
Principal payments on long-term debt and capital lease obligations................... (2,060) (71)
Dividends paid....................................................................... (318) (326)
Exercise of stock options............................................................ 733 669
Tax benefit realized upon exercise of stock options.................................. 430 427
Other equity transactions, net....................................................... -- 41
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Net cash provided by financing activities...................................... 65,285 8,440
---------- ----------
Decrease in cash and cash equivalents.................................................. (19,374) (1,365)
Cash and cash equivalents, beginning of period......................................... 23,477 2,531
---------- ----------
Cash and cash equivalents, end of period............................................... $ 4,103 $ 1,166
---------- ----------
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</TABLE>
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
Our consolidated financial statements as of April 30, 1999, and for the
three month periods ended April 30, 1999 and 1998, have been prepared by us,
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 we consider
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. The year end consolidated balance sheet data was derived from
audited consolidated financial statements, but does not include all disclosures
required by generally accepted accounting principles. These consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in our 1999 Annual Report.
2. NET INCOME PER SHARE
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 588,889 and 861,785 for the three month periods
ended April 30, 1999 and 1998, respectively.
3. BUSINESS ACQUISITIONS
On April 14, 1999, we purchased substantially all operating assets and
assumed certain liabilities of Daniels Printing, Limited Partnership for
approximately $44 million in cash, assumption and payment of existing lines of
credit obligations totaling approximately $5.6 million and the assumption of
certain ordinary course liabilities of $7.7 million (the Daniels Acquisition).
The acquisition has been accounted for as a purchase. The excess of the purchase
price over the estimated fair value of the net identifiable assets acquired
approximated $23.3 million and is being amortized using the straight-line method
over 20 years. The acquisition was financed with excess operating cash and
amounts available under our revolving credit agreement.
We have determined that it is impracticable at this time to provide the pro
forma financial information required under applicable Securities and Exchange
Commission rules and regulations for this acquisition. We will file the required
pro forma financial information in an amendment to the Form 8-K filed on or
before June 28, 1999.
4. SEGMENT AND RELATED INFORMATION
SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
Information," changes the way we report information about our operating
segments. Our business units have been aggregated into two reportable segments
comprising of Specialty Communication Services and Document Services.
SPECIALTY COMMUNICATION SERVICES This segment consists of three business
units--Financial Document Services, Investment Company Services and Managed
Communications Programs--that print documents and deliver services used in the
financial marketplace, including mutual fund and insurance companies and banks,
and national organizations. The principal markets for this segment include major
metropolitan centers in the world including North America, Europe, Latin America
and the Far East. Customers include major investment bankers, corporate
officers, mutual fund companies, national and regional real estate networks and
other business services.
DOCUMENT SERVICES Document Management Services is the sole business unit
reported in this segment. They deliver document management solutions to legal
and corporate clients through client-based
6
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4. SEGMENT AND RELATED INFORMATION (CONTINUED)
service centers. These Merrill-managed facilities provide clients with a broad
range of value-added document services, including litigation copying and
support, imaging, electronic document scanning, storage and retrieval, binding
and post-production shipping. The principal markets for this segment are major
metropolitan areas in North America. Customers include law firms and large
corporations.
The accounting policies of the reportable segments are the same as those
described in Note One of Notes to Consolidated Financial Statements. We evaluate
the performance of our operating segments based on revenue and operating
earnings of the respective business units. Intersegment sales and transfers are
not significant.
Summarized financial information concerning our reportable segments is shown
in the following table. The "Interest & Other" column includes corporate-related
items and, as it relates to income before provision for income taxes, income and
expense not allocated to reportable segments.
<TABLE>
<CAPTION>
SPECIALTY INTEREST &
(IN THOUSANDS) COMMUNICATION SERVICES DOCUMENT SERVICES OTHER TOTAL
<S> <C> <C> <C> <C>
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Three month period ending April 30, 1999
Revenue............................... $ 115,650 $ 16,186 $ 131,836
Income (loss) before provision for
income taxes........................ 9,418 126 $ (1,309) 8,235
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As of April 30, 1999
Total assets.......................... 266,692 34,539 36,117 337,348
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Three month period ending April 30, 1998
Revenue............................... $ 109,111 $ 14,403 $ 123,514
Income (loss) before provision for
income taxes........................ 16,641 (1,708) $ (625) 14,308
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As of January 31, 1999
Total assets.......................... $ 186,825 $ 25,966 $ 53,154 $ 265,945
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</TABLE>
5. FINANCING AGREEMENT
Subsequent to April 30, 1999, we amended our revolving credit agreement.
Amounts available for borrowing under the amended agreement were increased to
$90 million through June 30, 1999. Amounts available for borrowing under the
amended agreement are scheduled to decrease to $80 million on July 1, 1999 and
$40 million on September 1, 1999, at which time, we anticipate to have completed
the refinancing of amounts borrowed under this amended agreement related to the
Daniels Acquisition. Under the amended agreement, we have the option to borrow
at the bank's reference rate, at 1.0% above the London Interbank Offered Rate or
at 1.0% above a certificate of deposit based rate. We are required to pay a
commitment fee of 0.25% on the unused portion of the line. The amended revolving
credit agreements includes various covenants, including the maintenance of
minimum tangible net worth and limitations on the amounts of certain
transactions without the approval of the bank.
6. SUPPLEMENTAL CASH FLOW DISCLOSURE
During the first quarter of fiscal year 2000, options to purchase 180,040
shares of common stock were exercised through the issuance of non-interest
bearing note agreements primarily to officers of the Company. Amounts advanced
under the note agreements totaling approximately $1.5 million as of April 30,
1999, are recorded as a reduction of additional paid-in capital on the
accompanying unaudited consolidated balance sheets.
7
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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 Private Securities Litigation Reform Act of 1995. Such
'forward-looking' statements involve our known and unknown risks, uncertainties,
or achievements that 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 cost, the integration and performance of
recent acquisitions and Year 2000 readiness. See our 1999 Form 10-K for further
information on these risks and uncertainties.
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship to total revenue
of certain items in our consolidated statements of operations for the three
month periods ended April 30, 1999 and 1998, and the percentage change in the
dollar amounts of such items between the periods.
<TABLE>
<CAPTION>
THREE MONTHS ENDED APRIL 30,
------------------------------------
PERCENTAGE
INCREASE
PERCENTAGE (DECREASE)
OF REVENUE ----------
--------------------- 1999 VS.
1999 1998 1998
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<S> <C> <C> <C>
Revenue
Specialty Communication Services:
Financial................................ 30.6% 37.5% 13%
Corporate................................ 37.5 32.9 22
Commercial and other..................... 19.6 18.0 16
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87.7 88.4 6
Document Services:
Document management services............. 12.3 11.6 12
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Total revenue.......................... 100.0 100.0 7
Cost of revenue.............................. 64.1 60.8 13
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Gross profit............................. 35.9 39.2 (2)
Selling, general and administrative
expenses.................................... 28.6 27.1 13
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Operating income......................... 7.3 12.1 (36)
Interest expense............................. (0.8) (0.8) 18
Other income (expense), net.................. (0.3) 0.3 (167)
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Income before provision for income
taxes.................................. 6.2 11.6 (42)
Provision for income taxes................... 2.8 5.1 (41)
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Net income............................... 3.4% 6.5% (44)
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</TABLE>
BUSINESS
We are a diversified electronic and paper document management company.
During 1999, we adopted Statement of Financial Standards No. 131 "Disclosures
about Segments of an Enterprise and Related Information." As a result, we
defined our reportable segments and changed the information we report about our
operating segments. Operating segment information for prior periods has been
restated to conform to the 1999 presentation. Following the new standard, our
operating segments have been aggregated into two reportable segments: Specialty
Communication Services and Document Services.
8
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Under Specialty Communication Services, we include three business units:
Financial Document Services, Investment Company Services and Managed
Communications Programs. Revenue generated by these three business units is
categorized as financial, corporate and other. Document Management Services is
the sole business reported in the Document Services segment. Revenue generated
by this business unit is categorized as document management services. All
accounting policies of the reportable segments are consistent with generally
accepted accounting principles and our accounting policies. Additional
information about the reportable segments is included in Note Four of the 10-Q.
The financial revenue category generally reflects the level of transactional
activity in the capital markets. The financial revenue category encompasses many
types of transactions, and some types of transactions tend to increase when
others are out of favor. However, a prolonged reduction in the overall level of
financial transactions could be expected to have a negative impact on this
category. The corporate revenue category encompasses required regulatory
compliance and mutual fund documentation and other repetitive work and is
typically not significantly affected by capital market fluctuations. The
commercial and other revenue and document management services revenue categories
tend to follow general economic trends.
QUARTER ENDED APRIL 30, 1999 COMPARED TO QUARTER ENDED APRIL 30, 1998
Revenue for the first quarter of fiscal year 2000 increased by $8.3 million
or seven percent to $131.8 million. On April 14, 1999 the Company purchased
substantially all assets and assumed certain liabilities of Daniels Printing,
Limited Partnership (the Daniels Acquisition). For the period April 15, 1999 to
April 30, 1999, this operation contributed approximately $3.6 million of
revenue.
Revenue in the Specialty Communication Services segment increased six
percent in the first quarter when compared to the same period one year ago. The
revenue growth in the Specialty Communication Services was led by a 22 percent
increase in the corporate revenue category. This increase was attributed to
strong Investment Company Service activity; strong demand for corporate
compliance documents and approximately $2.2 million of revenue contributed by
the acquired operation of Daniels Printing. Commercial and other revenue
category also contributed to the Specialty Communication Services segment
revenue growth by posting a 16 percent increase in revenue during the current
first quarter. This increase resulted from our Managed Communication Program
Services' offerings to existing customers and through program introductions to
new customers. Offsetting this revenue growth was a 13 percent decline in
revenue from the financial revenue category. This decline reflects the sharp
decline in financial transactions and the continued market volatility that began
during the second half of fiscal year 1999.
Revenue in the Document Services segment increased 12 percent in the first
quarter compared to the same period last year. Leading this growth was revenue
generated by our imaging services and software products offered through
Merrill/E-Tech. Document service center revenue was constant for the comparable
first quarters of the current fiscal year and 1999.
Gross profit declined by approximately $1.1 million or two percent in the
first quarter compared to the same period last year. The current quarter gross
profit percent of 35.9 percent is down from last year's corresponding period's
gross profit percent of 39.2 percent. This decline is primarily attributed to
the weak financial transaction market that the industry experienced during the
last half of fiscal 1999. As a result, utilization at our production facilities
declined which drove gross profit margins down. We began to experience increased
utilization of our production facilities during the first quarter of fiscal 2000
as evidenced by our increased work-in-process balances at April 30, 1999.
Selling, general and administrative expenses increased 13 percent in the
first quarter compared to the same period one year ago. This increase was a
result of continued investment in the selling areas, both in hiring additional
sales representatives and branding new product marketing activities. In
addition, as a result of the financial transactions downturn, we experienced
higher than average receivables write-offs
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during the first quarter. As a result, the provision for losses on accounts
receivables increased approximately $1.0 million for the current period when
compared to the first quarter of fiscal 1999. We anticipate the selling, general
and administrative expense to net sales ratio will decrease compared to the
first quarter throughout the rest of fiscal year 2000 through cost controls and
increased sales revenue from the sales and marketing activities.
Interest expense increased in the first quarter compared to the same period
last year. This is mainly attributable to increased interest costs associated
with our revolving credit agreement as a result of higher borrowing requirements
for the Daniels Acquisition and working capital needs as trade receivables and
work-in-process inventories grew.
The effective income tax rate for the first quarter increased by
approximately one percent to 45.1 percent, compared to 44.0 percent in the same
period a year ago. The increase in the rate resulted primarily from increased
non-deductible business and entertainment expenses.
Net income for the quarter was $4.5 million or 27 cents per diluted share
compared to $8.0 million or 47 cents per diluted share in the first quarter last
year. Net income, as a percentage of revenue decreased during the current
quarter as a result of decreased gross profit margins and higher selling,
general and administrative expenses as discussed previously.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at April 30, 1999 decreased to $49.3 million from $81.6
million at January 31, 1999. The decrease is primarily attributed to the Daniels
Acquisition which was financed through excess operating cash and our revolving
credit agreement. Consideration paid for the Daniels Acquisition included
approximately $44 million in cash, assumption and payment of existing line of
credit obligations totaling approximately $5.6 million and the assumption of
certain ordinary course liabilities of $7.7 million. We plan to refinance
amounts borrowed under our revolving credit agreement for the Daniels
Acquisition to term debt during 1999. Offsetting the net decrease in working
capital was an increase in trade receivable and work-in-process balances
totaling approximately $50 million.
We used cash in operating activities of $30.4 million in the first quarter
of fiscal year 2000 compared to net cash used in operating activities of $4.6
million in the first quarter of fiscal year 1999. This change is driven by an
increase in trade receivables, work-in-process inventories and the assumption
and subsequent payment of ordinary course liabilities resulting from the Daniels
Acquisition.
Net cash used in investing activities was $54.3 million and $5.2 million for
the quarters ended April 30, 1999 and 1998, respectively. Significant use of
cash in investing activities for the current quarter included $49.6 million for
the Daniels Acquisition and capital expenditures of approximately $2.8 million.
Net cash provided by financing activities was $65.3 million compared to $8.4
million for the quarters ended April 30, 1999 and 1998, respectively. This
change is primarily the result of financing a significant portion of the Daniels
Acquisition.
YEAR 2000 READINESS
Many older computer software programs refer to years in terms of their final
two digits only. Such programs may interpret the year 2000 to mean the year 1900
instead. If not corrected, those programs could cause date-related transaction
failures. We have a Year 2000 project underway that addresses our internal
business systems including software, hardware and firmware as well as external
business partners, supply chains, and customers. Our plan includes the following
steps:
ASSESSMENT. We have identified and prioritized systems and individual
components of systems that contain potentially date-sensitive computer codes.
10
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REMEDIATION. We are making decisions on how to make systems and processes
Year 2000-ready, then proceeding to make the necessary changes.
THIRD-PARTY VENDORS. We have surveyed the Year 2000 readiness of
significant third-party vendors, including external providers of software an
hardware products, as well as print producers.
CONFIGURATION MANAGEMENT. We have tracked source code components of our
business applications and changes to those components to manage the remediation
process.
VALIDATION/TESTING. We have substantially completed testing of data and
have reviewed results to determine that errors were not introduced during the
conversion process.
CONTINGENCY PLANNING. We are formulating contingency plans that address the
continuum from minor administrative interruptions to failure of mission critical
processes to include alternate material and services suppliers where applicable.
Our project plan includes initial testing and remediation which was begun
last year and continued into the first quarter of our fiscal year ending January
31, 2000. The Company completed the surveying of key suppliers in the fourth
quarter of fiscal 1999. The Company is currently in the process of developing
contingency plans, as necessary, with the initial plan to be completed and
distributed by July 31, 1999.
We plan to have the balance of our mission-critical internal systems and
electronic data links ready by October 31, 1999, and resolve any supplier
problems. We have surveyed our major utility companies and have received most
response statements. We are in the process of analyzing those statements and
following up, where needed, for clarity.
A master project plan has been developed and a Steering Committee, chartered
by the Board of Directors, meets regularly to monitor the plan and address
issues. The project has progressed through the system assessment stage and is
well into the remediation stage where programming changes are being made to
major business and production systems. We believe that the project is currently
on schedule.
We estimate that the total cost to identify and remediate Year 2000 problems
is approximately $3.6 million. Approximately $2.0 million of these costs have
been incurred as of April 30, 1999. These costs are expensed as incurred. These
costs are primarily consultant and payroll-related costs for our information
technology group and some computer hardware and software package upgrade
purchase costs. Such costs do not include normal system upgrades and
replacements.
Detailed system-by-system status for major systems is available on our web
site http:/www.merrillcorp.com for those interest parties.
We, of course, do not have control over many Year 2000 problems. 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. We are making every effort to evaluate, correct and test potential
problem areas, but ultimately, the resolutions of Year 2000 questions by other
entities in our network of relationships could influence us significantly.
11
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We regularly invest excess operating cash in overnight repurchase agreements
that are subject to changes in short-term interest rates. Accordingly, we
believe that the market risk arising from its holding of these financial
instruments is minimal.
12
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PART II.--OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K
A Form 8-K, dated April 14, 1999, was filed during the first quarter of
the fiscal year ended January 31, 2000 related to the acquisition of
substantially all operating assets and assumption of certain liabilities
of Daniels Printing, Limited Partnership.
13
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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>
(REGISTRANT) MERRILL CORPORATION
BY (SIGNATURE) /s/ John W. Castro
(NAME AND TITLE) John W. Castro, President and Chief Executive Officer
(DATE) June 14, 1999
BY (SIGNATURE) /s/ Kay A. Barber
(NAME AND TITLE) Kay A. Barber, Chief Financial Officer
(DATE) June 14, 1999
</TABLE>
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-START> FEB-01-1999
<PERIOD-END> APR-30-1999
<CASH> 4,103
<SECURITIES> 0
<RECEIVABLES> 149,150
<ALLOWANCES> 9,298
<INVENTORY> 33,410
<CURRENT-ASSETS> 190,204
<PP&E> 128,472
<DEPRECIATION> 69,446
<TOTAL-ASSETS> 337,348
<CURRENT-LIABILITIES> 140,875
<BONDS> 39,439
0
0
<COMMON> 161
<OTHER-SE> 146,356
<TOTAL-LIABILITY-AND-EQUITY> 337,348
<SALES> 131,836
<TOTAL-REVENUES> 131,836
<CGS> 84,564
<TOTAL-COSTS> 84,564
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<INCOME-TAX> 3,714
<INCOME-CONTINUING> 4,521
<DISCONTINUED> 0
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<NET-INCOME> 4,521
<EPS-BASIC> .28
<EPS-DILUTED> .27
</TABLE>
