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
OR
[ ] - TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period from January 1, 1996 to March 31, 1996
Commission File Number: 0-22696
Disc Graphics, Inc.
(Exact name of registrant as specified in its charter)
Delaware 13-3678012
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10 Gilpin Avenue, Hauppauge, New York 11788
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 234-1400
(Former name, former address and former fiscal year, if changed since last
report)
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 and 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 such
filing requirements for the past 90 days
Yes X No
As of May 10, 1996, 4,962,188 shares of the Registrant's common stock, par
value $.01, were outstanding.
INDEX TO FORM 10-Q
Page
PART I - FINANCIAL INFORMATION
Consolidated Balance Sheets as of December 31, 1995 and March 31, 1996 ...1
Consolidated Statements of Income for the Three Months ended
March 31, 1996 and 1995 ..................................................2
Consolidated Statements of Cash Flows for the Three Months ended
March 31, 1996 and 1995 ..................................................3
Notes to Financial Statements ...........................................4
Management's Discussion and Analysis of Financial Condition and
Results of Operations.....................................................10
PART II - OTHER INFORMATION
Other Information ......................................................14
Signatures .............................................................16
<TABLE>
<CAPTION>
DISC GRAPHICS, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
As of March 31, 1996 and December 31, 1995
March 31, December 31,
1996 1995
--------- ------------
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,226,004 $ 1,309,677
Accounts receivable, net of allowance
for doubtful accounts of $546,000
and $494,000, respectively 7,664,100 7,200,428
Inventories 1,660,040 1,812,137
Prepaid expenses and other current assets 456,749 571,394
Current maturities of notes receivable 92,237 82,777
Prepaid taxes 129,370 -
---------- ----------
Total current assets 11,228,500 10,976,413
Plant and equipment, net 8,455,445 6,776,378
Notes receivable, less current maturities 59,937 59,937
Covenant not to compete, less accumulated
amortization of $135,642
and $126,984, respectively 2,886 11,544
Security deposits and other assets 235,673 285,647
---------- ----------
Total assets $19,982,441 $18,109,919
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of equipment
notes payable 402,064 386,787
Current maturities of capitalized lease
obligations payable 821,637 584,635
Accounts payable and accrued expenses 3,091,403 2,857,055
Income taxes payable - 105,084
--------- ---------
Total current liabilities 4,315,104 3,933,561
Notes payable to bank 3,000,000 3,000,000
Equipment notes payable, less
current maturities 2,335,620 2,418,881
Capitalized lease obligations
payable, less current maturities 2,556,086 963,950
Deferred income taxes 366,406 366,406
---------- ----------
Total liabilities 12,573,216 10,682,798
Stockholders' equity:
Preferred stock:
$.01 par value; authorized 5,000
shares; no shares issued and
outstanding - -
Common stock:
$.01 par value; authorized 20,000,000
shares; issued and outstanding
4,962,188 shares 49,622 49,622
Additional paid in capital 4,913,119 4,948,119
Retained earnings 2,446,484 2,429,380
--------- ---------
Total stockholders' equity 7,409,225 7,427,121
Total liabilities and
stockholders' equity $19,982,441 $18,109,919
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
<CAPTION>
DISC GRAPHICS, INC.
AND SUBSIDIARIES
Consolidated Statements of Income For the three months
ended March 31, 1996 and March 31, 1995
March 31, March 31,
1996 1995
---------- ----------
<S> <C> <C>
Sales $8,304,328 $8,513,038
Cost of sales 6,572,176 6,706,986
---------- ----------
Gross profit 1,732,152 1,806,052
Operating expenses:
Selling and shipping 656,168 700,616
General and administrative expenses 867,304 711,840
-------- -------
Operating income 208,680 393,596
Interest expense (178,679) (194,628)
-------- --------
Loss on disposal of equipment - (4,471)
-------- --------
Income before provision for income taxes 30,001 194,497
-------- --------
Provision for income taxes 12,897 85,665
-------- --------
Net income $17,104 $108,832
======== ========
Net Income per share $0.00 $0.04
======== ========
Weighted average number of
shares outstanding 4,962,188 2,714,229
========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DISC GRAPHICS, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For The Three Months Ended March 31, 1996 and March 31, 1995
March 31, 1996 March 31, 1995
-------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 17,104 $108,832
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 331,182 236,042
Loss on disposition of assets - 4,470
Decrease (Increase) in accounts
receivable (463,672) 385,178
Decrease (Increase) in inventory 152,097 (253,737)
Decrease in prepaid expenses and
other current assets 114,645 37,119
Increase in prepaid taxes (129,370) -
Increase in accounts payable and
accrued expenses 394,848 374,306
Decrease in income taxes payable (105,083) (136,013)
Increase (Decrease) in security
deposits and other 49,974 (44,375)
------- -------
Total adjustments 344,621 602,990
------- -------
Net cash provided by operating activities 361,725 711,822
------- -------
Cash flows from investing activities:
Capital expenditures (84,704) (161,257)
Proceeds from sale of equipment - 21,520
------- --------
Net cash used in investing activities (84,704) (139,737)
------- --------
Cash flows from financing activities:
Proceeds of secured bank loan payable,
net of repayments - (420,507)
Origination of long term notes receivable (9,460) -
Payments of notes receivable - 68,833
Payments of long-term debt (316,234) (202,803)
Decrease in paid in capital (35,000) -
--------- --------
Net cash used in financing activities (360,694) (554,477)
--------- --------
Net increase (decrease) in cash (83,673) 17,608
Cash, December 31 1,309,677 4,822
---------- --------
Cash, March 31 $1,226,004 $22,430
========== ========
</TABLE>
See accompanying notes to consolidated financial statements.
DISC GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Organization, Operation and Summary of Significant Accounting Policies:
General:
The financial statements included herein have been prepared by Disc
Graphics, Inc. (the "Company") without audit. Pursuant to the merger agreement
discussed below, the Company's name was changed, effective October 30, 1995,
from RCL Capital Corp. to Disc Graphics, Inc. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted pursuant to the
rules and regulations of the Securities and Exchange Commission. While the
Company believes that the disclosures made are adequate to make the information
presented not misleading, it is recommended that these financial statements
should be read in conjunction with the audited financial statements and the
notes thereto for the year ended December 31, 1995. The Company also believes
that this document should be read in conjunction with the Company's Transition
Report on Form 10-K for the period ended December 31, 1995. The December 31,
1995 figures were derived from the audited consolidated financial statements. In
the opinion of management, the information furnished reflects all adjustments
that are necessary to fairly present such information. These adjustments consist
only of normal recurring adjustments.
Organization And Operation:
The Company was incorporated as RCL Capital Corp. ("RCL") in the State of
Delaware on August 3, 1992 for the purpose of raising capital to be used to make
an acquisition. In August 1992, the Company issued an aggregate of 377,160
shares of common stock for an aggregate purchase price of $17,960, or
approximately $.05 per share. In October 1992, the Company issued an aggregate
of 753,060 shares of common stock for an aggregate purchase price of $35,860, or
approximately $.05 per share. On July 19, 1993, the Company effected an
approximate .375 for 1 stock split which reduced the number of outstanding
shares of common stock at that time from 5,382,000 to 2,018,250 and on September
29, 1993, the Company effected an approximate .56 for 1 stock split which
reduced the number of outstanding shares of common stock at that time from
2,018,250 to 1,130,220. All share data included in these financial statements
(including the notes) is presented on a post-split basis. On October 29, 1993,
the Company repurchased an aggregate of 233,100 shares of common stock for an
aggregate purchase price of $11,100, or approximately $.05 per share, from
certain of its officers and directors. The shares were canceled at the time of
their repurchase.
Note 1 Organization, Operation and Summary of Significant Accounting
Policies (continued):
Organization And Operation (continued):
The Merger
On October 30, 1995, RCL consummated the merger (the "Merger") pursuant to
an Agreement and Plan of Merger dated as of May 8, 1995 (the "Merger Agreement")
between RCL and Disc Graphics, Inc., a New York corporation ("Old Disc"). The
Merger was subject to, among other things, approval by RCL's stockholders, which
approval was obtained at a special meeting of stockholders held on October 27,
1995. Pursuant to the Merger Agreement, (i) Old Disc merged with and into RCL,
(ii) RCL's name was changed to Disc Graphics, Inc., and (iii) all of the
outstanding shares of Class A Common Stock, no par value, and Class B Common
Stock, no par value, of Old Disc were converted into (a) an aggregate of
3,100,000 shares of Common Stock of RCL and (b) and an aggregate of 1,000,000
warrants to purchase an aggregate of 1,000,000 shares of Common Stock of the
Company, one-quarter of which is exercisable at a price of each of $7.00, $8.00,
$9.00 and $10.00 per share.
Potential Future Issuances of Shares of Common Stock by the Company
Pursuant to the Merger Agreement as modified by a certain Agreement dated
as of October 30, 1995 by and among certain stockholders of RCL (the "RCL
Stockholders") and the former shareholders of Old Disc (the "Old Disc
Shareholders") and RCL, if the Old Disc Shareholders subsequently determine from
time to time until up to five years after October 30, 1995 (the "Effective
Time") that, as of the Effective Time, either (i) RCL did not have cash or
marketable securities with a fair market value as of the Effective Time of at
least $6,000,00 (the actual amount of cash and marketable securities held by RCL
as of the Effective Time, the "First Amount") or (ii) the cash and marketable
securities of RCL did not exceed all liabilities of RCL of any kind or nature
(whether fixed or contingent, matured or unmatured) (including, without
limitation, all liabilities based upon, relating to or arising from any actions
taken by or on behalf of RCL or the failure of RCL to take any actions prior to
the Effective Time or any facts or circumstances existing prior to the Effective
Time, which in any such case results in any liabilities, obligations or claims
against the Company after the Effective Time) (all such liabilities
collectively, the "RCL Liabilities"), by at least $6,000,000 (the actual amount
of cash and marketable securities held by RCL as of the Effective Time less such
liabilities, the "Second Amount"), then promptly upon notice of such
determination by the Old Disc Shareholders to the Company, the Company shall
issue to the Old Disc Shareholders, on a pro rata basis based on the number of
shares of Old Disc Common Stock held by such shareholders immediately prior to
the Effective Time, the number of shares of the Company's Common Stock (the "RCL
Designated Shares") sufficient (without duplication) to increase the percentage
ownership of the Company by all of such shareholders to that which such
shareholders would have had immediately after the Effective Time (excluding, any
RCL Indemnity Shares (as defined below) issued after the Effective Time) from
60.23% to a percentage determined by the dividing (i) $9,075,000 by (ii) the sum
of $9,075,000 and the First Amount or the Second Amount, as the case may be. If,
at any time or from time to time, the excess of $6,000,000 over the First Amount
or the Second Amount is more than $100,000 on a cumulative basis, the number of
shares of the Company's Common Stock to be issued to the Old Disc Shareholders
pursuant to the immediately preceding sentence shall be equal to two times the
number of RCL Designated Shares and if, at any time or from time to time, such
excess is more than $1,000,000, the number of shares of the Company's Common
Stock to be issued to the Old Disc Shareholders shall be equal to three times
the number of RCL Designated Shares. (The shares of the Company's Common Stock
issuable from time to time pursuant to this provision are collectively referred
to as the "RCL Indemnity Shares.")
Notwithstanding the provision of the Merger Agreement described in the
immediately preceding paragraph, the RCL Stockholders and the Old Disc
Shareholders have entered into an agreement pursuant to which the RCL
Stockholders will transfer to the Old Disc Shareholders shares of the Company's
Common Stock owned by the RCL Stockholders instead of the Company issuing
certain shares of Disc Common Stock to the Old Disc Shareholders, but only if
and to the extent that Net Assets are between $4,900,000 and $5,304,750. "Net
Assets" means RCL's cash and marketable securities at the Effective Time less
the RCL Liabilities.
It is anticipated that in addition to shares of the Company's Common Stock
to be transferred by the RCL Stockholders to the Old Disc Shareholders, the
Company will be required to issue approximately 342,000 RCL Indemnity Shares to
the Old Disc Shareholders for no additional consideration.
Proceeds of the Merger
Net proceeds of the Merger after the payment for the redemption of
approximately 185,000 shares of Common Stock at $5.15 per share, in accordance
with the terms of the original RCL offering, yielded net proceeds to the Company
of approximately $4,900,000. These proceeds were used primarily to reduce
certain indebtedness of the Company and for working capital purposes.
The Merger has been treated for accounting and financial reporting purposes
as a reverse merger of RCL into Old Disc. Accordingly, the Company's results of
operations prior to October 30, 1995 are those of Old Disc. In addition, in
connection with the Merger, Disc adopted a December 31 fiscal year end.
DISC GRAPHICS, INC.
Notes to Consolidated Financial Statements
Note 1 Organization, Operation and Summary of Significant Accounting
Policies (continued):
Cash And Cash Equivalents:
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
Net Income (Loss) Per Share:
Net income (loss) per share is computed based upon the weighted average
number of shares outstanding for the period. The computation is presented as if
the reverse stock splits referred to above had occurred as of the date of
incorporation. Outstanding warrants were not included in the computation as
their effect is antidilutive.
Amortization
Organization costs are being amortized over a period of 60 months by the
straight-line method.
Inventories
Inventories consist of the following:
March 31, December 31,
1996 1995
Raw materials $ 1,261,243 $ 1,327,496
Work-in-process 180,287 265,873
Finished Goods 218,510 218,768
------------ ---------
$ 1,660,040 $ 1,812,137
============ ===========
Lease Transfers:
Pursuant to the Merger Agreement, certain capital leases for manufacturing
equipment held by certain executive officers, Directors and shareholders of the
Company through Horizon Equities L.P., a limited partnership, were transferred
to the Company on January 1, 1996. As of that date, the net book value of the
assets transferred was $2,077,388.
Note 2 Public Offering of Securities:
On November 18, 1993, the Company, then known as RCL Capital Corp.,
completed a public offering of units ("Units"), each Unit consisting of one
share of RCL's Common Stock and two redeemable warrants. Net proceeds of the
public offering after the payment of certain additional expenses yielded
approximately $6,400,000, which was put into escrow pursuant to an Escrow
Agreement between the Company and the United States Trust Company of New York
("U.S. Trust") pending the acquisition of an operating business.
On October 30, 1995, the day the escrowed funds were released to the
Company, approximately $6,900,000 was held in escrow, consisting principally of
Treasury Bills valued at cost plus accrued interest.
Note 3 Related Party Transactions:
From October 1, 1992 to November 9, 1993, the Company was obligated to RCL
Capital Partners, Inc. (formerly RCL Management Corp.), a New York corporation
("RCL Capital Partners"), to pay a monthly fee of $7,500 for general and
administrative expenses pursuant to a management agreement. From November 9,
1993 until the management agreement terminated upon the Merger on October 30,
1995, such fee was $12,000 per month. RCL Capital Partners forgave approximately
$20,000 owed it by the Company at the time of the Merger. H. Sean Mathis, a
former executive officer and Director of the Company, and Mark L. Friedman and
Seymor W. Zises, Directors and former executive officers are officers and
Directors of RCL Capital Partners.
The Company leases a 55,000 square foot building in Hauppauge, New York
from Horizon Equities L.P. ("Horizon"). Horizon Equities, Inc., the corporate
general partner of Horizon, is owned by Donald Sinkin, Stephen Frey, and John
Rebecchi, executive officers and Directors of the Company, and two other
employees of the Company. The limited partners of Horizon are Holding Capital
Management Corp., a more than five percent beneficial stockholder of the
Company, Timothy F. Healy, an affiliate of Holding Capital Management Corp.,
Investment Services Corp. ("ISC"), an affiliate of Daniel Levinson, a Director
of the Company and a corporation owned by an affiliate of Holding Capital
Management Corp. The aggregate payments by the Company in 1995 for rental of the
building and the equipment, beginning on the date of the Merger, were $58,000
and $75,256, respectively. Payments under the building lease will be $29,000 per
month in 1996. The Company believes that the terms of the building lease are at
least as favorable to the Company as the terms for an equivalent lease which
could have been obtained from unaffiliated third parties.
The Company is party to consulting agreements with each of Timothy F. Healy
& Co., Inc. ("TFH&C"), Holding Services Corp. ("HSC") and ISC. TFH&C and HSC are
affiliates of Timothy F. Healy and Holding Capital Management Corp.,
respectively. The aggregate payments under the consulting agreements were
$18,660 in 1995, beginning on the date of the Merger, and will be $112,000 in
1996. The Company believes that the terms of these consulting agreements are at
least as favorable to the Company as the terms for equivalent consulting
agreements which could have been obtained from unaffiliated third parties.
Messrs. Rebecchi and Frey, executive officers and Directors of the Company,
each had outstanding notes payable to the Company evidencing personal loans. The
notes bear interest at a rate of 9.0% per annum. The largest aggregate principal
amounts outstanding under these notes for Messrs. Rebecchi and Frey since
January 1, 1996 were $48,312 and $51,040, respectively, and on April 15, 1996,
the balances thereon were $48,312 and $51,040, respectively, plus interest. The
notes are payable in five equal annual installments on May 1 of each year from
1993 to 1997. On or about April 15, 1996 and April 15, 1997, Messrs. Rebecchi
and Frey each have received and will receive additional compensation of up to
$29,000 (in 1996) and $27,000 (in 1997) in connection with the repayment of such
notes.
Messrs. Friedman and Zises, Directors and former executive officers of the
Company, and Mr. Mathis, a former Director and executive officer, were
guarantors of a $250,000 demand note of the Company outstanding in 1995
payable to the United States Trust Company of New York. The demand note was
repaid at the time of the Merger.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
On November 18, 1993, the Company, then known as RCL Capital Corp.,
completed a public offering of units ("Units"), each Unit consisting of one
share of the RCL's Common Stock and two redeemable warrants. Net proceeds of the
public offering after the payment of certain additional expenses yielded
approximately $6,400,000, which was put into escrow pursuant to an Escrow
Agreement between the Company and the United States Trust Company of New York
pending the acquisition of an operating business.
For the period from August 3, 1992 (date of incorporation) through
September 30, 1995, the Company had a net loss of $239,385. The interest income
generated from funds was insufficient to meet all expenses associated with due
diligence activities engaged in by the Company with respect to potential
acquisitions. Accordingly, the Company has used a portion of the proceeds raised
in the offering to pay such expenses.
On October 30, 1995, Disc Graphics, Inc., a New York corporation ("Old
Disc") was merged into the Company and the Company changed its name from RCL
Capital Corp. to Disc Graphics, Inc. ("Disc"). The Merger was accounted for as a
reverse merger for financial reporting purposes. Stockholders of Old Disc
received an aggregate of 3,100,000 shares of the Company's Common Stock (subject
to adjustment) and 1,000,000 warrants to purchase shares of the Company's common
stock at exercise prices ranging from $7.00 to $10.00 per share. As a condition
of the Merger, the principal stockholders of the Company contributed 200,000
shares of the Company's Common Stock to treasury for no consideration. In
addition, pursuant to the Merger Agreement as modified by a certain agreement
dated October 30, 1995 by and among the shareholders of Old Disc (the "Old Disc
Shareholders") and certain stockholders of the Company (the "RCL Stockholders"),
depending upon the net proceeds received by Old Disc in the Merger, the Old Disc
Shareholders will be entitled to receive additional shares of Common Stock, in
certain instances from the Company and in other instances from certain of the
RCL Stockholders, for no additional consideration. See Note 1 to the notes to
the consolidated financial statements. Old Disc was, and the Company is a
diversified manufacturer and printer of specialty packaging focused on the home
video, pharmaceutical, music, publishing and cosmetic markets.
Three Months Ended March 31, 1996 Compared to Three Months Ended March 31,
1995.
Results of Operations
Net Sales
Net sales for the three months ended March 31, 1996 were $8,304,000,
compared to $8,513,000 for the same period the prior year, representing a
decrease of $209,000, or 2.5%. The categories of the business which continue to
experience growth are Video/Software packaging and Consumer Product Packaging,
which increased $254,000, or 13%, and $80,000, or 4.3%, respectively. Labels and
Commercial sales also increased by 4.3% and 2.7%, respectively. The categories
which decreased in the three months ended March 31, 1996, compared to the same
three months of the prior year, were Music/Audio and Pharmaceutical/Vitamin
packaging. These categories decreased by $434,000, or 23.7%, and $110,000, or
8.6%, respectively. Music/Audio packaging continues to be adversely impacted by
a general downturn in the music industry. Pharmaceutical/Vitamin packaging has
been adversely impacted by the consolidation of several pharmaceutical
manufacturers. Sales were also adversely impacted by the severe weather
conditions in the Northeast.
Gross Profit
Gross profit for the three months ended March 31, 1996 was $1,732,000 (a
21% profit margin), compared to $1,806,000 (a 21% profit margin) for the same
period the prior year, representing a decrease of $74,000, or 4.1%. The decrease
was due primarily to a decrease in sales and was partially offset by the
favorable impact of decreases in paper and paperboard costs along with the
improvement in manufacturing efficiencies.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months ended
March 31, 1996 were $1,524,000, compared to $1,413,000 for the same period the
prior year, an increase of $111,000, or 7.9%. This increase is due in part to
normal inflationary increases and the costs of being a public company. These
costs include professional fees, directors' and officers' liability insurance,
filing fees and consulting fees.
Interest Expense
Interest expense for the three months ended March 31, 1996 was $179,000,
compared to $195,000 for the same three months of the prior period, a decrease
of $16,000, or 8.2%. This decrease was due primarily to the repayment of debt
with the proceeds from the Merger. This decrease was partially offset by the
interest expense related to asset acquisitions that were made to increase
manufacturing capacity and to expand capabilities for new markets.
Income Taxes
The provision for income taxes for the three months ended March 31, 1996
was $13,000, compared to $86,000 for the same period in 1995, a decrease of
$73,000. This decline was primarily due to the decrease in pretax income as the
effective tax rate remained substantially unchanged at 43% in 1996, compared
with 44% in 1995.
Net Income
Net income for the three months ended March 31, 1996 was $17,000, compared
to $109,000 for the same period of the prior year, a decrease of $82,000, or
84%. The anticipated decline in sales, partially due to the softness in the
Music industry, coupled with the increased costs of being a public company, were
partially offset by improved efficiencies in manufacturing processes along with
declines in costs of paper and paperboard. The cost decrease in paper and
paperboard resulted from industry price declines and discount programs the
Company negotiated with major suppliers.
Liquidity And Capital Resources
The primary source of cash for Disc's business activities has been cash
flow from operations and borrowings under the financing agreement with Disc's
bank lender (the "Financing Agreement"). As of March 31, 1996, Disc had working
capital of $6,913,396. Net cash provided from operating activities for the three
months ended March 31, 1996 was $326,725. This was due primarily to the increase
in accounts payable, accrued expenses and depreciation, and offset by an
increase in accounts receivable. The increase in payables was due to extension
of terms with major vendors while the increases in accrued expenses and
depreciation were due to normal fluctuations.
Capital expenditures of $84,704 were primarily for purchases of
manufacturing furniture and fixtures.
Disc's Financing Agreement with its bank lender allows Disc to borrow an
amount equal to 85% of eligible accounts receivable plus 70% of the value of
rolled paper inventory up to a maximum of $8,500,000. Amounts outstanding under
the Financing Agreement bear interest at 1% over the lender's prime rate. On
October 19, 1995, a $3,000,000 fixed rate borrowing under the Financing
Agreement was renewed for six months at a rate of 7.89%. As of March 31, 1996,
Disc had approximately $5,500,000 available for borrowing under the Financing
Agreement. Although the Financing Agreement will expire at the end of May 1996,
the Company expects that it will be renewed by the same bank lender upon
substantially the same terms.
Based upon its existing Financing Agreement, income from operations and
cash available, Disc believes that it will have sufficient liquidity to meet its
operating needs and capital requirements through 1996. Nevertheless, Disc may
require or choose to obtain additional borrowings to fund future capital
expenditures and acquisitions.
Part II - Other Information
Item 6. Exhibits and Current Reports on Form 8-K.
(a) Exhibits:
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
None.
<PAGE>
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on behalf by the
undersigned thereunto duly authorized.
Disc Graphics, Inc.
(Registrant)
May 15, 1996 /s/ Donald Sinkin
-------------------------------------------
Date Donald Sinkin - President
May 15, 1996 /s/ Margaret Krumholz
-------------------------------------------
Date Margaret Krumholz - Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000904541
<NAME> Disc Graphics, Inc.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,226,004
<SECURITIES> 0
<RECEIVABLES> 8,362,274
<ALLOWANCES> (546,000)
<INVENTORY> 1,660,040
<CURRENT-ASSETS> 11,228,500
<PP&E> 12,927,835
<DEPRECIATION> 4,472,390
<TOTAL-ASSETS> 19,982,441
<CURRENT-LIABILITIES> 4,315,104
<BONDS> 7,891,706
0
0
<COMMON> 49,622
<OTHER-SE> 7,359,603
<TOTAL-LIABILITY-AND-EQUITY> 19,982,441
<SALES> 8,304,328
<TOTAL-REVENUES> 8,304,328
<CGS> 6,572,176
<TOTAL-COSTS> 6,572,176
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 63,334
<INTEREST-EXPENSE> (178,679)
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