Prospectus Supplement This Prospectus Supplement is filed
(To Prospectus dated July 9, 1999) under Rule 424(b)(3) and relates to
Registration Statement No. 33-97090
American Color Graphics, Inc.
12 3/4% SENIOR SUBORDINATED EXCHANGE NOTES DUE 2005
----------------
Unconditionally Guaranteed on a Senior Subordinated Basis by
ACG Holdings, Inc.
----------------
Attached hereto and incorporated by reference herein is our Quarterly
Report on Form 10-Q for the three month period ended December 31, 1999.
----------------
The Securities and Exchange Commission and state securities regulators
have not approved or disapproved these securities, or determined if this
prospectus supplement is truthful or complete. Any representation to the
contrary is a criminal offense.
----------------
Morgan Stanley & Co. Incorporated and Dean Witter Reynolds Inc.
(collectively, "Morgan Stanley Dean Witter") will use this prospectus
supplement, together with the prospectus, in connection with offers and sales of
the Notes in market-making transactions at negotiated prices related to
prevailing market prices at the time of sale. Morgan Stanley Dean Witter may act
as principal or agent in the transactions. American Color Graphics will receive
no portion of the proceeds of the sales of the Notes and will bear the expenses
incident to the registration of the Notes. If Morgan Stanley Dean Witter
conducts any market-making activities, it may be required to deliver a
"market-making prospectus" when effecting offers and sales of the Notes because
of the equity ownership of ACG Holdings by certain private investment
partnerships, which are affiliates of Morgan Stanley Dean Witter. For so long as
a market-making prospectus is required to be delivered, the ability of Morgan
Stanley Dean Witter to make a market in the Notes may be dependent, in part, on
the ability of American Color Graphics and ACG Holdings to maintain a current
market-making prospectus.
February 11, 2000
<PAGE>
UNITED STATES
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 December 31, 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 33-97090
ACG HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware 62-1395968
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification number)
100 Winners Circle
Brentwood, Tennessee 37027
(615) 377-0377
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
AMERICAN COLOR GRAPHICS, INC.
(Exact name of registrant as specified in its charter)
New York 16-1003976
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification number)
100 Winners Circle
Brentwood, Tennessee 37027
(615) 377-0377
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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 periods that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
ACG Holding, Inc. has 142,417 shares outstanding of its Common Stock, $.01 Par
Value, as of January 31, 2000 (all of which are privately owned and not traded
on a public market.)
<PAGE>
INDEX
Part I. Financial Information Page No.
--------------------- --------
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of
December 31, 1999 and March 31, 1999 3
Condensed Consolidated Statements of Operations for the
Three Months ended December 31, 1999 and 1998 5
Condensed Consolidated Statements of Operations for the
Nine Months ended December 31, 1999 and 1998 6
Condensed Consolidated Statements of Cash Flows for the
Nine Months ended December 31, 1999 and 1998 7
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 14
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 22
Part II. Other Information
-----------------
Item 1. Legal Proceedings 23
Item 2. Changes in Securities and Use of Proceeds 23
Item 6. Exhibits and Reports on Form 8-K 23
Signatures 24
Exhibit Index 25
2
<PAGE>
ACG HOLDINGS, INC.
Condensed Consolidated Balance Sheets
(Dollars in thousands, except par values)
December 31, 1999 March 31, 1999
----------------- --------------
(Unaudited)
Assets
- ------
Current assets:
Cash $ 0 0
Receivables:
Trade accounts, less allowance
for doubtful accounts of $2,549
and $2,860 at December 31, 1999 and
March 31, 1999, respectively 63,484 57,895
Other 3,060 2,082
--------- ---------
Total receivables 66,544 59,977
Inventories 10,417 8,343
Prepaid expenses and other current assets 2,710 3,271
--------- ---------
Total current assets 79,671 71,591
Property, plant and equipment 277,363 263,191
Less accumulated depreciation (140,718) (119,576)
--------- ---------
Net property, plant and equipment 136,645 143,615
Excess of cost over net assets acquired,
less accumulated amortization of
$46,517 and $44,587 at December 31, 1999
and March 31, 1999, respectively 70,099 72,029
Other assets 11,442 11,765
--------- ---------
Total assets $ 297,857 299,000
========= =========
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
ACG HOLDINGS, INC.
Condensed Consolidated Balance Sheets
(Dollars in thousands, except par values)
December 31, 1999 March 31, 1999
----------------- --------------
(Unaudited)
Liabilities and Stockholders' Deficit
- -------------------------------------
Current liabilities:
Current installments of long-term debt
and capitalized leases $ 7,813 7,994
Trade accounts payable 42,862 37,096
Accrued expenses 30,935 30,756
Income taxes 503 1,196
--------- ---------
Total current liabilities 82,113 77,042
Long-term debt and capitalized leases,
excluding current installments 265,340 281,595
Deferred income taxes 7,680 7,916
Other liabilities 50,407 51,753
--------- ---------
Total liabilities 405,540 418,306
Stockholders' deficit:
Common stock, voting, $.01 par value,
5,852,223 shares authorized, 143,499
and 134,250 shares issued and
outstanding at December 31,1999 and
March 31,1999, respectively 1 1
Preferred Stock, $.01 par value, 15,823
shares authorized, 3,622 shares
Series AA convertible preferred stock
issued and outstanding, $40,000,000
liquidation preference, 1,606 shares
Series BB convertible preferred
stock issued and outstanding,
$17,500,000 liquidation preference -- --
Additional paid-in capital 58,286 58,286
Accumulated deficit (163,389) (174,905)
Other accumulated comprehensive loss (2,581) (2,688)
--------- ---------
Total stockholders' deficit (107,683) (119,306)
--------- ---------
Commitments and contingencies
Total liabilities and stockholders' deficit $ 297,857 299,000
========= =========
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
ACG HOLDINGS, INC.
Condensed Consolidated Statements of Operations
(In thousands)
(Unaudited)
Three Months Ended December 31,
-------------------------------
1999 1998
---- ----
Sales $ 152,213 144,296
Cost of sales 126,405 118,314
--------- ---------
Gross profit 25,808 25,982
Selling, general and administrative expenses 10,473 11,929
Amortization of goodwill 665 619
--------- ---------
Operating income 14,670 13,434
Other expense (income):
Interest expense 8,447 8,960
Interest income (21) (60)
Other, net 276 232
--------- ---------
Total other expense 8,702 9,132
--------- ---------
Income before income taxes 5,968 4,302
Income tax expense (682) (745)
--------- ---------
Net income $ 5,286 3,557
========= =========
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
ACG HOLDINGS, INC.
Condensed Consolidated Statements of Operations
(In thousands)
(Unaudited)
Nine Months Ended December 31,
------------------------------
1999 1998
---- ----
Sales $ 410,032 399,074
Cost of sales 340,664 334,552
--------- ---------
Gross profit 69,368 64,522
Selling, general and administrative expenses 28,614 31,772
Amortization of goodwill 1,930 1,908
--------- ---------
Operating income 38,824 30,842
Other expense (income):
Interest expense 25,566 27,512
Interest income (96) (106)
Other, net 189 808
--------- ---------
Total other expense 25,659 28,214
--------- ---------
Income before income taxes and
extraordinary item 13,165 2,628
Income tax expense (1,649) (2,066)
--------- ---------
Income before extraordinary item 11,516 562
Extraordinary loss on early extinguishment
of debt -- (4,020)
--------- ---------
Net income (loss) $ 11,516 (3,458)
========= =========
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
ACG HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
December 31,
-----------------
1999 1998
---- ----
<S> <C> <C>
Cash flows provided (used) by operating activities:
Net income (loss) $ 11,516 (3,458)
Adjustments to reconcile net income (loss) to cash provided by operating
activities:
Depreciation 22,378 22,088
Amortization of goodwill and other assets 2,844 2,981
Amortization of deferred financing costs 990 1,076
Extraordinary non-cash charges from early retirement of debt, net -- 4,020
(Increase) decrease in working capital and other (5,502) 4,575
-------- --------
Net cash provided by operating activities 32,226 31,282
Cash flows provided (used) by investing activities:
Purchases of property, plant and equipment (14,309) (6,682)
Proceeds from sales of property, plant and equipment 20 765
Other (68) 75
-------- --------
Net cash used by investing activities (14,357) (5,842)
Cash flows provided (used) by financing activities:
Repayment of long-term debt, net, including current maturities (15,218) (63,402)
Proceeds from Term Loan Facilities -- 75,000
Net increase (decrease) in revolver borrowings 3,402 (29,257)
Repayment of capital lease obligations (5,634) (5,152)
Payment of deferred financing costs (355) (2,548)
Other, net (22) (84)
-------- --------
Net cash used by financing activities (17,827) (25,443)
Effect of exchange rates on cash and cash equivalents (42) 3
-------- --------
Net change in cash -- --
Cash:
Beginning of period -- --
-------- --------
End of period $ -- --
======== ========
Non-cash investing activity:
Equipment purchases under capital leases $ 1,015 4,121
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
7
<PAGE>
ACG HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Description of the Company
ACG Holdings, Inc. ("Holdings") has no operations or significant assets other
than its investment in American Color Graphics, Inc. ("Graphics"). Holdings is
dependent upon distributions from Graphics to fund its obligations. Under the
terms of its debt agreements at December 31, 1999, Graphics' ability to pay
dividends or lend to Holdings was either restricted or prohibited, except that
Graphics may pay specified amounts to Holdings (i) to pay the repurchase price
payable to any officer or employee (or their estates) of Holdings, Graphics or
any of their respective subsidiaries in respect of their stock or options to
purchase stock in Holdings upon the death, disability or termination of
employment of such officers and employees (so long as no Default, or Event of
Default, as defined, has occurred under the terms of the Bank Credit Agreement,
as defined below, and provided the aggregate amount of all such repurchases does
not exceed $2 million) and (ii) to fund the payment of Holdings' operating
expenses incurred in the ordinary course of business and other corporate
overhead costs and expenses (so long as the aggregate amount of such payments
does not exceed $250,000 in any fiscal year) and Holdings' obligations pursuant
to a tax sharing agreement with Graphics. A significant portion of Graphics'
long-term obligations have been fully and unconditionally guaranteed by
Holdings.
The two business segments of the commercial printing industry in which the
Company operates are (i) Print and (ii) Digital imaging and prepress services
conducted by its American Color division ("American Color").
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and are in accordance with instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation have been included. The operating results for the three and nine
month periods ended December 31, 1999 are not necessarily indicative of the
results that may be expected for the fiscal year ending March 31, 2000. These
unaudited condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and footnotes thereto
included in the Company's Form 10-K for the fiscal year ended March 31, 1999 and
the Company's Post-Effective Amendment No. 5 to Registration Statement No.
33-97090 on Form S-1.
Certain prior period amounts have been reclassified to conform with the most
recent period presentation.
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
8
<PAGE>
ACG HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
2. Refinancing Transaction
On May 8, 1998, the Company completed a refinancing transaction (the "1998
Refinancing") which included the following: (1) the Company entered into a $145
million credit facility with a syndicate of lenders (the "Bank Credit
Agreement") providing for a $70 million revolving credit facility which is not
subject to a borrowing base limitation (the "Revolving Credit Facility")
maturing on March 31, 2004, a $25 million amortizing term loan facility maturing
on March 31, 2004 (the "A Term Loan Facility") and a $50 million amortizing term
loan facility maturing on March 31, 2005 (the "B Term Loan Facility"); (2) the
repayment of all $57.0 million of indebtedness outstanding under the Company's
previous credit agreement, as amended (the "Old Bank Credit Agreement") (plus
accrued interest to the date of repayment); (3) the repayment of all $25.0
million of indebtedness outstanding under the $25 million term loan facility
which included a $5 million participation by Morgan Stanley Senior Funding,
Inc., a related party, which was to mature on March 31, 2001 (the "Old Term Loan
Facility") (plus accrued interest to the date of repayment) and (4) the payment
of fees and expenses associated with the 1998 Refinancing. In addition, the
Company recorded an extraordinary loss related to early extinguishment of debt
of $4.0 million, net of taxes associated with the write-off of deferred
financing costs related to refinanced indebtedness in the quarter ended June 30,
1998.
Interest under the Bank Credit Agreement is floating based upon existing market
rates plus agreed upon margin levels. In addition, the Company is obligated to
pay specific commitment and letter of credit fees. Such margin levels and fees
reduce over the term of the agreement subject to the achievement of certain
Leverage Ratio measures.
Borrowings under the Bank Credit Agreement are secured by substantially all of
the Company's assets. In addition, Holdings has guaranteed the indebtedness
under the Bank Credit Agreement, which guarantee is secured by a pledge of all
of Graphics' and its subsidiaries' stock. The agreement (1) requires
satisfaction of certain financial covenants including Minimum Consolidated
EBITDA, Consolidated Interest Coverage Ratio and Leverage Ratio requirements,
(2) requires prepayments in certain circumstances including excess cash flows,
proceeds from asset dispositions in excess of prescribed levels and certain
capital structure transactions and (3) contains various restrictions and
limitations on the following items: (a) the level of capital spending, (b) the
incurrence of additional indebtedness, (c) mergers, acquisitions, investments
and similar transactions and (d) dividends and other distributions. In addition,
the agreement includes various other customary affirmative and negative
covenants.
3. Inventories
The components of inventories are as follows (in thousands):
December 31, 1999 March 31, 1999
----------------- --------------
Paper $ 8,190 6,525
Ink 254 232
Supplies and other 1,973 1,586
------- -------
Total Inventories $10,417 8,343
======= =======
9
<PAGE>
ACG HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
4. Comprehensive Income (Loss)
Effective April 1, 1998 the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130
requires foreign currency translation adjustments, minimum pension liability
adjustments and unrealized gains or losses on available-for-sale securities to
be included in new disclosures related to comprehensive income. Prior to
adoption of SFAS 130, the Company disclosed such items when applicable
separately in Stockholders' deficit. The adoption of SFAS 130 had no impact on
the Company's Net income (loss) or Stockholders' deficit. Total comprehensive
income (loss) for the three and nine months ended December 31, 1999 and 1998 are
as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended December 31, Nine Months Ended December 31,
------------------------------- ------------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) $ 5,286 3,557 11,516 (3,458)(a)
Foreign currency translation
adjustment (21) (167) 107 (765)
------- ------- ------- -------
Total comprehensive income (loss) $ 5,265 3,390 11,623 (4,223)
======= ======= ======= =======
</TABLE>
(a) Includes $4.0 million extraordinary loss related to early
extinguishment of debt associated with the 1998 Refinancing (see
note 2 to the unaudited condensed consolidated financial
statements).
5. Commitments and Contingencies
The Company has employment agreements with three of its principal officers and
eleven other employees. Such agreements provide for minimum salary levels as
well as for incentive bonuses, which are payable if specified management goals
are attained. The aggregate commitment for future salaries at December 31, 1999,
excluding bonuses, was approximately $5.3 million.
On December 21, 1989, Graphics sold to CPS Corp. ("CPS") its ink manufacturing
operations and facilities. Concurrent with the sale of its ink manufacturing
facility, Graphics entered into a long-term ink supply contract with CPS. The
supply contract requires Graphics to purchase a significant portion of its ink
requirements, within certain limitations and minimums, from CPS. Graphics
believes that prices for products under this contract approximate market prices
at the time of purchase of such products.
In the quarter ended December 31, 1997, the Company entered into multi-year
contracts to purchase a portion of the Company's raw materials to be used in its
normal operations. In connection with such purchase agreements, pricing for a
portion of the Company's raw materials is adjusted for certain movements in
market prices, changes in raw material costs and other specific price increases.
The Company is deferring certain contractual provisions over the life of the
contracts, which are being recognized as the purchase commitments are achieved.
The amount deferred at December 31, 1999 is $26.0 million and is included within
"Other liabilities" in the condensed consolidated balance sheet.
10
<PAGE>
ACG HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Graphics, together with over 300 other persons, has been designated by the U.S.
Environmental Protection Agency as a potentially responsible party (a "PRP")
under the Comprehensive Environmental Response Compensation and Liability Act
("CERCLA," also known as "Superfund") at one Superfund site. Although liability
under CERCLA may be imposed on a joint and several basis and the Company's
ultimate liability is not precisely determinable, the PRPs have agreed that
Graphics' share of removal costs is 0.46% and therefore Graphics believes that
its share of the anticipated remediation costs at such site will not be material
to its business or financial condition. Based upon an analysis of Graphics'
volumetric share of waste contributed to the site and the agreement among the
PRPs, the Company maintains a balance sheet reserve of approximately $0.1
million in connection with this liability on its consolidated balance sheet at
December 31, 1999. The Company believes this amount is adequate to cover such
liability.
The Company has been named as a defendant in several legal actions arising from
its normal business activities. In the opinion of management, any liabilities
that may arise from such actions will not, individually or in the aggregate,
have a material adverse effect on the consolidated financial statements of the
Company.
6. Restructuring Costs
In March 1999, the Company approved a plan for its American Color division,
which was designed to consolidate certain facilities in order to improve asset
utilization and operational efficiency, modify the organizational structure as a
result of facility consolidation and other changes and reduce overhead and other
costs. The cost of this plan is being accounted for in accordance with the
guidance set forth in Emerging Issues Task Force Issue 94-3 "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (Including Certain Costs Incurred in a Restructuring)" ("EITF 94-3").
The pretax costs of $4.6 million which were incurred as a direct result of this
plan (excluding other special charges related to asset write-offs and
write-downs) includes $2.5 million of employee termination costs, $1.2 million
of lease settlement costs and $0.9 million of other transition and restructuring
expenses. This restructuring charge was recorded in the quarter ended March 31,
1999. The majority of these costs will be paid or settled before March 31, 2000.
The Company made cash payments of $0.8 million, $1.8 million and $0.7 million in
the fiscal year ended March 31, 1999, the nine months and three months ended
December 31, 1999, respectively related to these costs.
7. Industry Segment Information
Effective March 31, 1999, the Company adopted the provisions of Statement of
Financial Accounting Standard No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"). The Company has restated its
prior period sector disclosures to conform to the requirements of SFAS 131. The
Company has significant operations principally in two industry segments: (1)
Print and (2) Digital imaging and prepress services. All of the Company's
printing business and assets are attributed to the Print division and all of the
Company's Digital imaging and prepress services business and assets are
attributed to the American Color division (American Color). The Company's
digital visual effects operations (Digiscope) and corporate expenses have been
segregated and do not constitute a reportable segment of the Company as
contemplated by SFAS 131.
The Company has two reportable segments: (1) Print and (2) Digital imaging and
prepress services. The Print business produces retail advertising inserts,
comics (newspaper Sunday comics, comic insert advertising and comic books), and
other publications. The Company's Digital imaging and prepress services business
assists customers in the capture, manipulation, transmission and distribution of
images. The majority of the Digital imaging and prepress services work leads to
the production of four-color separations in a format appropriate for use by
printers.
11
<PAGE>
ACG HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The accounting policies of the segments are the same as those described in note
1. The Company evaluates performance based on segment EBITDA that is defined as
earnings before net interest expense, income tax expense, depreciation,
amortization, other income (expense) and extraordinary items. The Company
generally accounts for intersegment revenues and transfers as if the revenues or
transfers were to third parties, that is, at current market prices.
The Company's reportable segments are business units that offer different
products and services. They are managed separately because each segment requires
different technology and marketing strategies. A substantial portion of the
revenue, long-lived assets and other assets of the Company's reportable segments
are attributed to or located in the United States.
<TABLE>
<CAPTION>
Digital
Imaging
& Corporate
(In Thousands of Dollars) Print Prepress and Other Total
- --------------------------------------- ------------ ----------- ---------- -------
<S> <C> <C> <C> <C>
Nine Months Ended December 31, 1999
Segment revenues $ 346,857 60,965 2,210 410,032
EBITDA $ 58,416 8,342 (2,712) 64,046
Depreciation and amortization 17,213 4,531 3,478 25,222
Interest expense -- -- 25,566 25,566
Interest income -- -- (96) (96)
Other, net 16 64 109 189
--------- --------- --------- ---------
Income (loss) before income taxes $ 41,187 3,747 (31,769) 13,165
Total assets $ 260,450 27,472 9,935 297,857
Total capital expenditures $ 11,898 3,171 255 15,324
- ------------------------------------------------------------------------------------------------
Nine Months Ended December 31, 1998
Segment revenues $ 330,587 64,423 4,064 399,074
EBITDA $ 49,236 8,234 (1,312) 56,158
Depreciation and amortization 16,899 4,931 3,239 25,069
Interest expense -- -- 27,512 27,512
Interest income -- -- (106) (106)
Other special charges -- 247 -- 247
Other, net (31) 551 288 808
--------- --------- --------- ---------
Income (loss) before income taxes
and extraordinary item $ 32,368 2,505 (32,245) 2,628
Total assets $ 260,392 32,698 13,867 306,957
Total capital expenditures $ 5,608 4,401 794 10,803
</TABLE>
12
<PAGE>
ACG HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
<TABLE>
<CAPTION>
Digital
Imaging
& Corporate
(In Thousands of Dollars) Print Prepress and Other Total
- --------------------------------------- ------------ ----------- ---------- -------
<S> <C> <C> <C> <C>
Three Months Ended December 31, 1999
Segment revenues $131,104 20,373 736 152,213
EBITDA $ 21,139 2,939 (1,024) 23,054
Depreciation and amortization 5,735 1,466 1,183 8,384
Interest expense -- -- 8,447 8,447
Interest income -- -- (21) (21)
Other, net -- 59 217 276
-------- -------- -------- --------
Income (loss) before income taxes $ 15,404 1,414 (10,850) 5,968
Total assets $260,450 27,472 9,935 297,857
Total capital expenditures $ 1,960 1,391 27 3,378
- ------------------------------------------------------------------------------------------------
Three Months Ended December 31, 1998
Segment revenues $120,499 22,016 1,781 144,296
EBITDA $ 19,467 2,808 (322) 21,953
Depreciation and amortization 5,705 1,702 1,112 8,519
Interest expense -- -- 8,960 8,960
Interest income -- -- (60) (60)
Other, net 14 91 127 232
-------- -------- -------- --------
Income (loss) before income taxes $ 13,748 1,015 (10,461) 4,302
Total assets $260,392 32,698 13,867 306,957
Total capital expenditures $ 1,142 1,679 696 3,517
</TABLE>
13
<PAGE>
ACG HOLDINGS, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Special Note Regarding Forward Looking Statements
This Quarterly Report on Form 10-Q (this "Report") contains forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934. Discussions containing such forward-looking statements may be found in
this section, as well as within this Report generally. In addition, when used in
this Report, the words "believes," "anticipates," "expects" and similar
expressions are intended to identify forward-looking statements. Forward-looking
statements are subject to a number of risks and uncertainties. Actual results in
the future could differ materially from those described in the forward-looking
statements as a result of many factors outside of our control, including, but
not limited to:
- fluctuations in the cost of paper and other raw materials
used,
- changes in the advertising and printing markets,
- actions by our competitors, particularly with respect to
pricing,
- the financial condition of our customers,
- our financial condition and liquidity,
- the general condition of the United States economy,
- demand for our products and services,
- the availability of qualified personnel and other information
technology resources, and
- the matters set forth in this Report generally.
Consequently, such forward-looking statements should be regarded solely as our
current plans, estimates and beliefs. We do not undertake, and specifically
decline, any obligation to publicly release the results of any revisions to
these forward-looking statements that may be made to reflect any future events
or circumstances after the date of such statements or to reflect the occurrence
of anticipated or unanticipated events.
14
<PAGE>
ACG HOLDINGS, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following table summarizes our results of operations for the three months
ended December 31, 1999 (the "1999 Three-Month Period"), the three months ended
December 31, 1998 (the "1998 Three-Month Period"), the nine months ended
December 31, 1999 (the "1999 Nine-Month Period") and the nine months ended
December 31, 1998 (the "1998 Nine-Month Period"):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
----------------------------- ---------------------------
1999 1998 1999 1998
---- ---- ---- ----
(dollars in thousands)
<S> <C> <C> <C> <C>
Sales:
Print $ 131,104 120,499 346,857 330,587
American Color 20,373 22,016 60,965 64,423
Other (a) 736 1,781 2,210 4,064
--------- --------- --------- ---------
Total $ 152,213 144,296 410,032 399,074
Gross Profit:
Print $ 21,451 19,967 56,729 48,515
American Color 4,819 5,399 13,930 15,285
Other (a) (462) 616 (1,291) 722
--------- --------- --------- ---------
Total $ 25,808 25,982 69,368 64,522
Gross Margin:
Print 16.4% 16.6% 16.4% 14.7%
American Color 23.7% 24.5% 22.8% 23.7%
Total 17.0% 18.0% 16.9% 16.2%
Operating Income (Loss):
Print $ 15,404 13,762 41,203 32,337
American Color 1,473 1,106 3,811 3,056
Other (a) (b) (2,207) (1,434) (6,190) (4,551)
--------- --------- --------- ---------
Total $ 14,670 13,434 38,824 30,842
</TABLE>
(a) Other operations primarily include revenues and expenses associated with
our digital visual effects operations ("Digiscope").
(b) Also includes corporate general and administrative expenses, and
amortization expense.
15
<PAGE>
ACG HOLDINGS, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Print
Sales. In the 1999 Nine-Month Period, Print sales increased $16.3 million to
$346.9 million from $330.6 million in the 1998 Nine-Month Period. The increase
in the 1999 Nine-Month Period includes the impact of favorable changes in
customer and product mix, an increase in paper sales to customers and an
approximate 4% increase in Print production volume. These changes were offset in
part by declining paper prices.
In the 1999 Three-Month Period, Print sales increased $10.6 million to $131.1
million from $120.5 million in the 1998 Three-Month Period. This increase
includes a Print production volume increase of approximately 7%, favorable
changes in customer and product mix, and an increase in paper sales to
customers. These changes were offset in part by declining paper prices.
Gross Profit. In the 1999 Nine-Month Period, Print gross profit increased $8.2
million to $56.7 million from $48.5 million in the 1998 Nine-Month Period. In
the 1999 Nine-Month Period, Print gross margin increased to 16.4% from 14.7% in
the 1998 Nine-Month Period. The increase in gross profit was primarily the
result of increased production volume, reduced manufacturing costs and favorable
changes in customer and product mix. These changes in gross margin were offset
in part by an increase in paper sales to customers.
In the 1999 Three-Month Period, Print gross profit increased $1.5 million to
$21.5 million from $20.0 million in the 1998 Three-Month Period. In the 1999
Three-Month Period, Print gross margin decreased to 16.4% from 16.6% in the 1998
Three-Month Period. The increase in gross profit is primarily the result of
increased production volume and favorable changes in customer and product mix,
offset in part by an increase in certain manufacturing costs. The decrease in
gross margin is primarily the result of an increase in certain manufacturing
costs and a decrease in sales to customers who supply their own paper, offset in
part by increased production volume and favorable changes in customer and
product mix.
Selling, General and Administrative Expenses. In the 1999 Nine-Month Period,
Print selling, general and administrative expenses decreased $0.7 million to
$15.5 million, or 4.5% of Print sales, from $16.2 million, or 4.9% of Print
sales in the 1998 Nine-Month Period. The decrease in the 1999 Nine-Month Period
includes decreases in certain selling expenses, offset in part by increases in
employee related expenses.
In the 1999 Three-Month Period, Print, selling, general and administrative
expenses decreased $0.2 million to $6.0 million, or 4.6% of Print sales, from
$6.2 million, or 5.1% of Print sales in the 1998 Three-Month Period. The
decrease in the 1999 Three-Month Period is primarily the result of decreases in
certain selling expenses, offset in part by increases in employee related
expenses.
Operating Income. In the 1999 Nine-Month Period, as a result of the factors
discussed above, Print operating income increased by 27.4% to $41.2 million from
$32.3 million in the 1998 Nine-Month Period; and in the 1999 Three-Month Period,
increased by 11.9% to $15.4 million from $13.8 million in the 1998 Three-Month
Period.
16
<PAGE>
ACG HOLDINGS, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
American Color
Sales. In the 1999 Nine-Month Period, American Color's sales decreased $3.4
million to $61.0 million from $64.4 million in the 1998 Nine-Month Period. The
decrease in the 1999 Nine-Month Period was primarily the result of reduced
prepress production volume.
In the 1999 Three-Month Period, American Color's sales decreased $1.6 million to
$20.4 million from $22.0 million in the 1998 Three-Month Period. The decrease in
the 1999 Three-Month Period was primarily the result of reduced prepress
production volume.
Gross Profit. In the 1999 Nine-Month Period, American Color's gross profit
decreased $1.4 million to $13.9 million from $15.3 million in the 1998
Nine-Month Period. In the 1999 Nine-Month Period, American Color's gross margin
decreased to 22.8% from 23.7% in the 1998 Nine-Month Period. The 1998 Nine-Month
Period included $0.9 million of nonrecurring costs associated with the
consolidation of certain production facilities. The decreases in the 1999
Nine-Month Period gross profit and gross margin result primarily from reduced
sales volume and related margins.
In the 1999 Three-Month Period, American Color's gross profit decreased $0.6
million to $4.8 million from $5.4 million in the 1998 Three-Month Period. In the
1999 Three-Month Period, American Color's gross margin decreased to 23.7% from
24.5% in the 1998 Three-Month Period. The decreases in the 1999 Three-Month
Period gross profit and gross margin result primarily from reduced sales volume
and related margins.
Selling, General and Administrative Expenses. In the 1999 Nine-Month Period,
American Color's selling, general and administrative expenses decreased $2.1
million to $10.1 million, or 16.6% of American Color's sales from $12.2 million,
or 19.0% of American Color's sales in the 1998 Nine-Month Period. These
decreases are attributable to various cost containment measures implemented
during the 1999 Nine-Month Period.
In the 1999 Three-Month Period, American Color's selling, general and
administrative expenses decreased $1.0 million to $3.3 million or 16.4% of
American Color's sales from $4.3 million or 19.5% of American Color's sales in
the 1998 Three-Month Period. These decreases are attributable to various cost
containment measures implemented during the 1999 Three-Month Period.
Operating Income. In the 1999 Nine-Month Period, as a result of the factors
discussed above, operating income at American Color increased to $3.8 million
from $3.1 million in the 1998 Nine-Month Period; and in the 1999 Three-Month
Period increased to $1.5 million from $1.1 million in the 1998 Three-Month
Period.
Other Operations
Other operations consist primarily of revenues and expenses associated with
Digiscope, corporate general and administrative expenses, other expenses and
amortization expense. Amortization expense associated with other operations,
which primarily includes goodwill amortization, was $2.1 million and $2.0
million in the 1999 Nine-Month Period and the 1998 Nine-Month Period,
respectively. Amortization expense associated with other operations was $0.7
million in both the 1999 Three-Month Period and the 1998 Three-Month Period.
17
<PAGE>
ACG HOLDINGS, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
In the 1999 Nine-Month Period, operating losses from other operations increased
to a loss of $6.2 million from a loss of $4.6 million in the 1998 Nine-Month
Period. In the 1999 Three-Month Period, operating losses from other operations
increased to a loss of $2.2 million from a loss of $1.4 million in the 1998
Three-Month Period. These changes include $1.6 million and $0.8 million of
increased operating losses at Digiscope due primarily to lower digital visual
effects sales volume in the 1999 Nine-Month Period and the 1999 Three-Month
Period, respectively.
Restructuring Costs
In March 1999, we approved a plan for the American Color division, which was
designed to consolidate certain facilities in order to improve asset utilization
and operational efficiency, modify the organizational structure as a result of
facility consolidation and other changes and reduce overhead and other costs.
The cost of this plan is being accounted for in accordance with the guidance set
forth in EITF 94-3. The pretax costs of $4.6 million, which were incurred as a
direct result of this plan (excluding other special charges related to asset
write-offs and write-downs), include $2.5 million of employee termination costs,
$1.2 million of lease settlement costs and $0.9 million of other transition and
restructuring expenses. This restructuring charge was recorded in the quarter
ended March 31, 1999. The majority of these costs will be paid or settled before
March 31, 2000. We made cash payments of $0.8 million in the fiscal year ended
March 31, 1999, $1.8 million in the 1999 Nine-Month Period and $0.7 million in
the 1999 Three-Month Period related to these costs.
Interest Expense
In the 1999 Nine-Month Period, interest expense decreased 7.1% to $25.6 million
from $27.5 million in the 1998 Nine-Month Period; and, in the 1999 Three-Month
Period, interest expense decreased 5.7% to $8.4 million from $9.0 million in the
1998 Three-Month Period. These decreases are primarily the result of lower
levels of indebtedness and reduced borrowing margins associated with our 1998
refinancing.
Other, Net
In the 1999 Nine-Month Period, other, net improved to expense of $0.2 million
from expense of $0.8 million in the 1998 Nine-Month Period; and, in the 1999
Three-Month Period, increased to expense of $0.3 million from expense of $0.2
million in the 1998 Three-Month Period.
Income Tax Expense
In the 1999 Nine-Month Period, income tax expense decreased to $1.6 million from
$2.1 million in the 1998 Nine-Month Period; and was $0.7 million in both the
1999 and 1998 Three-Month Periods. The decrease in the 1999 Nine-Month Period is
primarily due to smaller amounts of taxable income in foreign jurisdictions and
changes in the deferred tax valuation allowance.
Extraordinary Loss on Early Extinguishment of Debt
As part of the 1998 Refinancing (see note 2 to our unaudited condensed
consolidated financial statements), we recorded an extraordinary loss related to
early extinguishment of debt of $4.0 million, net of taxes. This extraordinary
loss primarily consisted of the write-off of deferred financing costs related to
refinanced indebtedness in the quarter ended June 30, 1998.
18
<PAGE>
ACG HOLDINGS, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Net Income (Loss)
As a result of the factors discussed above, including the $4.0 million
extraordinary loss related to the early extinguishment of debt in the 1998
Nine-Month Period, the 1999 Nine-Month Period net income (loss) improved to
income of $11.5 million from a loss of $3.5 million in the 1998 Nine-Month
Period; and, in the 1999 Three-Month Period, improved to income of $5.3 million
from income of $3.6 million in the 1998 Three-Month Period.
Liquidity and Capital Resources
On May 8, 1998, we refinanced all of our existing bank indebtedness in the 1998
Refinancing (see note 2 to our unaudited condensed consolidated financial
statements). The primary objectives of the refinancing were to gain greater
financial and operating flexibility, to reduce our overall cost of capital and
to provide greater opportunity for internal growth and growth through
acquisitions.
The 1998 Refinancing transaction included the following:
(1) We entered into a $145 million credit facility with a syndicate of
lenders (the "Bank Credit Agreement") providing for:
- a $70 million revolving credit facility, which is not subject to a
borrowing base limitation, maturing on March 31, 2004 (the
"Revolving Credit Facility"),
- a $25 million amortizing term loan facility maturing on March 31,
2004 (the "A Term Loan Facility"), and
- a $50 million amortizing term loan facility maturing on March 31,
2005 (the "B Term Loan Facility"),
(2) The repayment of all $57.0 million of indebtedness outstanding under our
previous credit agreement as amended (the "Old Bank Credit Agreement")
(plus accrued interest to the date of repayment);
(3) The repayment of all $25.0 million of indebtedness outstanding under the
Old Term Loan Facility (plus accrued interest to the date of repayment);
and
(4) The payment of fees and expenses associated with the refinancing
transaction.
The Revolving Credit Facility provides for a maximum of $70 million borrowing
availability. This availability includes a provision for up to $40 million of
letters of credit. At December 31, 1999, we had total borrowings and letters of
credit outstanding under the Revolving Credit Facility of approximately $26.6
million and, therefore, additional borrowing availability of approximately $43.4
million.
At December 31, 1999, we had total indebtedness outstanding of $273.2 million,
including capital lease obligations, as compared to $300.9 million at December
31, 1998. Of the total indebtedness outstanding at December 31, 1999, $52.7
million was outstanding under the Bank Credit Agreement at a weighted average
interest rate of 8.5%. Indebtedness under the Bank Credit Agreement bears
interest at floating rates. At December 31, 1999, we had indebtedness other than
obligations under the Bank Credit Agreement of $220.5 million (including $185
million of the 12 3/4% Senior Subordinated Notes Due 2005, the "Notes"). We are
currently in compliance with all financial covenants set forth in the Bank
Credit Agreement.
19
<PAGE>
ACG HOLDINGS, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
At December 31, 1999, $9.6 million of the A Term Loan Facility and $39.6 million
of the B Term Loan Facility remained outstanding. On July 12, 1999 and December
29, 1999, we made voluntary prepayments of our bank indebtedness of $10 million
and $5 million, respectively, which collectively reduced the A Term Loan
Facility by $10.9 million and the B Term Loan Facility by $4.1 million to these
levels. As a result of these voluntary prepayments, we have no scheduled
maturities due under either the A Term Loan Facility or B Term Loan Facility
until March 31, 2002. Scheduled repayments of existing capital lease obligations
and other senior indebtedness during the remainder of the fiscal year ending
March 31, 2000 ("Fiscal Year 2000") will approximate $1.8 million and $0.2
million, respectively.
During the 1999 Nine-Month Period, net cash provided by operating activities of
$32.2 million (see our condensed consolidated statements of cash flows), net
revolver borrowings of $3.4 million, and proceeds from long-term debt of $0.4
million were primarily used to (1) fund principal repayments of indebtedness and
financing costs of $21.7 million (including capital lease obligations of $5.6
million and voluntary prepayments on the A Term Loan Facility and B Term Loan
Facility of $10.9 million and $4.1 million, respectively) and (2) fund cash
capital expenditures of $14.3 million. We plan to continue our program of
upgrading our printing and prepress equipment and currently anticipate that full
year Fiscal Year 2000 cash capital expenditures will approximate $21.2 million,
and equipment acquired under capital leases will approximate $1.4 million. Our
cash-on-hand of approximately $3.4 million is presented net of outstanding
checks within trade accounts payable at December 31, 1999. Accordingly, cash is
presented at a balance of $0 in the December 31, 1999 balance sheet.
Our primary sources of liquidity are cash provided by operating activities and
borrowings under the Revolving Credit Facility. We anticipate that our primary
needs for liquidity will be to conduct our business, meet our debt service
requirements, make capital expenditures and, if we elect, repay, redeem or
repurchase outstanding indebtedness.
A significant portion of Graphics' long-term obligations, including indebtedness
under the Bank Credit Agreement and the Notes, has been fully and
unconditionally guaranteed by Holdings. Holdings is subject to certain
restrictions under its guarantee of indebtedness under the Bank Credit
Agreement, including, among other things, restrictions on mergers, acquisitions,
incurrence of additional debt and payment of cash dividends.
EBITDA
Three Months Ended Nine Months Ended
December 31, December 31,
-------------------- ----------------------
1999 1998 1999 1998
---- ---- ---- ----
(dollars in thousands)
EBITDA:
Print $ 21,139 19,467 58,416 49,236
American Color 2,939 2,808 8,342 8,234
Other (a) (1,024) (322) (2,712) (1,312)
-------- -------- -------- --------
Total $ 23,054 21,953 64,046 56,158
EBITDA Margin:
Print 16.1% 16.2% 16.8% 14.9%
American Color 14.4% 12.8% 13.7% 12.8%
Total 15.1% 15.2% 15.6% 14.1%
(a) Other operations primarily include revenues and expenses associated with
our digital visual effects business and corporate general and
administrative expenses.
20
<PAGE>
ACG HOLDINGS, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
EBITDA is presented and discussed because management believes that investors
regard EBITDA as a key measure of a leveraged company's performance and ability
to meet its future debt service requirements. "EBITDA" is defined as earnings
before net interest expense, income tax expense, depreciation, amortization,
other income (expense) and extraordinary items. "EBITDA Margin" is defined as
EBITDA as a percentage of net sales. EBITDA is not a measure of financial
performance under generally accepted accounting principles and should not be
considered an alternative to net income (or any other measure of performance
under generally accepted accounting principles) as a measure of performance or
to cash flows from operating, investing or financing activities as an indicator
of cash flows or as a measure of liquidity. Certain covenants in the Indenture
and the Bank Credit Agreement are based on EBITDA, subject to certain
adjustments.
Print. As a result of the reasons previously described under "--Print"
(excluding changes in depreciation and amortization expense), Print EBITDA
increased to $58.4 million in the 1999 Nine-Month Period from $49.2 million in
the 1998 Nine-Month Period, representing an increase of $9.2 million or 18.6%.
The Print EBITDA Margin increased to 16.8% in the 1999 Nine-Month Period from
14.9% in the 1998 Nine-Month Period. Print EBITDA increased to $21.1 million in
the 1999 Three-Month Period from $19.5 million in the 1998 Three-Month Period,
representing an increase of $1.6 million or 8.6%. The Print EBITDA Margin
decreased to 16.1% in the 1999 Three-Month Period from 16.2% in the 1998
Three-Month Period.
American Color. As a result of the reasons previously described under
"--American Color" (excluding changes in depreciation, amortization and other
non-cash expenses), American Color's EBITDA increased to $8.3 million in the
1999 Nine-Month Period from $8.2 million in the 1998 Nine-Month Period
representing an increase of $0.1 million or 1.3%. American Color EBITDA Margin
increased to 13.7% in the 1999 Nine-Month Period from 12.8% in the 1998
Nine-Month Period. EBITDA increased to $2.9 million in the 1999 Three-Month
Period from $2.8 million in the 1998 Three-Month Period, representing an
increase of $0.1 million or 4.7%. American Color EBITDA Margin increased to
14.4% in the 1999 Three-Month Period from 12.8% in the 1998 Three-Month Period.
Other. As a result of the reasons previously described under "Other Operations"
(excluding changes in depreciation and amortization expense), other operations
negative EBITDA increased to $2.7 million in the 1999 Nine-Month Period from
negative EBITDA of $1.3 million in the 1998 Nine-Month Period. Other operations
negative EBITDA increased to $1.0 million in the 1999 Three-Month Period from
negative EBITDA of $0.3 million in the 1998 Three-Month Period.
21
<PAGE>
ACG HOLDINGS, INC.
Quantitative and Qualitative
Disclosures About Market Risk
There have been no significant changes since March 31, 1999. Reference is made
to Item 7A (Quantitative and Qualitative Disclosures About Market Risk)
disclosure in our Form 10-K filed for the fiscal year ended March 31, 1999.
22
<PAGE>
ACG HOLDINGS, INC.
Part II Other Information
Item 1. (a) Legal Proceedings
Reference is made to Item 3 (Legal Proceedings) disclosure in our
Form 10-K filed for the fiscal year ended March 31, 1999.
Item 2. Changes in Securities and Use of Proceeds
Recent Sales of Unregistered Securities
---------------------------------------
During the quarter ended December 31, 1999 certain officers
exercised options to purchase an aggregate of 1,106 shares of
Holdings' common stock for $.01/share.
During the quarter ended June 30, 1999, certain officers exercised
options to purchase an aggregate of 8,143 shares of Holdings'
common stock for $.01/share.
During the fourth quarter of the fiscal year ending March 31,
1998, certain officers exercised options to purchase an aggregate
of 8,254 shares of Holdings' common stock for $.01/share.
The issuance of shares was made pursuant to Section 4(2) of the
Securities Act of 1933.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
----------- -----------
10.1 November 9, 1999, Third Amendment to Amended
and Restated Credit Agreement dated as of May
8, 1998, among Holdings, Graphics, GE Capital
Corporation as Documentation Agent, Morgan
Stanley Senior Funding, Inc. as Syndication
Agent, Bankers Trust Company as
Administrative Agent and the parties
signatory thereto
12.1 Statement Re: Computation of Ratio of
Earnings to Fixed Charges
27.0 Financial Data Schedule
(b) Reports on Form 8-K
None filed in the quarter ended December 31, 1999.
Form 8-K filed with the Securities Exchange Commission on
February 2, 2000 under Item 5 to announce ACG's financial
results for the three months ended December 31, 1999.
23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Holdings and Graphics have duly caused this report to be signed on their behalf
by the undersigned thereunto duly authorized.
ACG Holdings, Inc.
American Color Graphics, Inc.
Date February 11, 2000 By /s/ Joseph M. Milano
---------------------- -----------------------------------
Joseph M. Milano
Executive Vice President and
Chief Financial Officer
(Authorized Officer and
Principal Financial Officer)
Date February 11, 2000 By /s/ Patrick W. Kellick
---------------------- ------------------------------------
Patrick W. Kellick
Senior Vice President - Corporate Controller
(Chief Accounting Officer)
24
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page
- ----------- ----------- ----
10.1 November 9, 1999, Third Amendment to Amended and
Restated Credit Agreement dated as of May 8, 1998,
among Holdings, Graphics, GE Capital Corporation as
Documentation Agent, Morgan Stanley Senior Funding,
Inc. as Syndication Agent, Bankers Trust Company as
Administrative Agent and the parties signatory thereto 26
12.1 Statement Re: Computation of Ratio of Earnings to Fixed
Charges 32
27.0 Financial Data Schedule 33
25
<PAGE>
EXHIBIT 12.1
STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in Thousands)
<TABLE>
<CAPTION>
Nine Months
Ended Year Ended Year Ended
December 31, March 31, March 31,
1999 1999 1998
-------------- ------------ ----------
<S> <C> <C> <C>
Consolidated pretax income (loss) from
Continuing operations $13,165 (7,839) (27,122)
Net amortization of debt issuance expense 990 1,412 2,292
Interest expense 24,576 34,830 36,664
Interest portion of rental expense 1,726 2,301 2,130
------- ------- -------
Earnings $40,457 30,704 13,964
======= ======= =======
Interest expense $24,576 34,830 36,664
Net amortization of debt issuance expense 990 1,412 2,292
Interest portion of rental expense 1,726 2,301 2,130
------- ------- -------
Fixed Charges $27,292 38,543 41,086
======= ======= =======
Ratio of Earnings to Fixed Charges 1.48 (a) (a)
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
March 31, March 31, March 31,
1997 1996 1995
------------ ------------ -----------
<S> <C> <C> <C>
Consolidated pretax income (loss) from
Continuing operations (26,005) (21,431) (1,869)
Net amortization of debt issuance expense 1,784 2,139 2,174
Interest expense 34,505 30,549 23,578
Interest portion of rental expense 1,799 1,618 1,392
------- ------- -------
Earnings 12,083 12,875 25,275
======= ======= =======
Interest expense 34,505 30,549 23,578
Net amortization of debt issuance expense 1,784 2,139 2,174
Interest portion of rental expense 1,799 1,618 1,392
------- ------- -------
Fixed Charges 38,088 34,306 27,144
======= ======= =======
Ratio of Earnings to Fixed Charges (a) (a) (a)
======= ======= =======
</TABLE>
(a) The deficiency in earnings required to cover fixed charges for the
fiscal years ended March 31, 1999, 1998, 1997, 1996 and 1995 was
$7,839, $27,122, $26,005, $21,431, and $1,869 respectively. The
deficiency in earnings to cover fixed charges is computed by
subtracting earnings before fixed charges, income taxes, discontinued
operations and extraordinary items from fixed charges. Fixed charges
consist of interest expense and one-third of operating lease rental
expense, which is deemed to be representative of the interest factor.
The deficiency in earnings required to cover fixed charges includes
depreciation of property, plant and equipment and amortization of
goodwill and other assets and non-cash charges which are reflected in
cost of sales and selling, general and administrative expenses, in the
following amounts (in thousands):
<TABLE>
<CAPTION>
Nine Months
Ended Fiscal Year Ended March 31,
December 31, -----------------------------------------------------------------------
1999 1999 1998 1997 1996 1995
------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Depreciation $22,378 $29,651 28,124 25,282 21,385 18,327
Amortization 2,844 4,025 10,413 9,374 9,311 8,941
Non-cash charges(gain) -- 1,150 2,301 1,944 3,435 (3,311)
------- ------- ------- ------- ------- -------
Total $25,222 $34,826 40,838 36,600 34,131 23,957
======= ======= ======= ======= ======= =======
</TABLE>
