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 September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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 11788-8831
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (631) 234 -1400
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 September 30, 2000, 5,518,262 shares of the Registrant's Common Stock, par
value $.01, were outstanding.
<PAGE>
DISC GRAPHICS, INC.
FORM 10-Q
Quarter Ended September 30, 2000
INDEX
Page
PART I - FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Balance Sheets as of September 30, 2000 (unaudited)
and December 31, 1999............................................ 3
Consolidated Statements of Operations for the Three and
Nine Months Ended September 30, 2000 and 1999 (unaudited)........ 4
Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 2000 and 1999 (unaudited) ................... 5
Notes to Unaudited Consolidated Financial Statements .............. 6
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations ..........................................9
PART II - OTHER INFORMATION
Item 1 Legal Proceedings ..................................................14
Item 2 Changes in Securities ..............................................14
Item 3 Defaults Upon Senior Securities ....................................14
Item 4 Submission of Matters to a Vote of Security Holders ................14
Item 5 Other Information ..................................................14
Item 6(a) Exhibits ...........................................................14
Item 6(b) Reports on Form 8-K ................................................14
Signatures ...................................................................15
Exhibit Index ................................................................16
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<PAGE>
DISC GRAPHICS, INC.
Consolidated Balance Sheets
As of September 30, 2000 (unaudited) and December 31, 1999
<TABLE>
September 30, 2000 December 31, 1999
(unaudited)
Assets
Current assets:
<S> <C> <C>
Cash $ 186,248 $ 142,531
Accounts receivable, net of allowance for doubtful accounts
of $1,443,000 and $1,418,000, respectively 14,864,951 13,579,201
Inventories 2,829,874 4,428,374
Prepaid expenses and other current assets 364,631 448,364
Income taxes receivable 1,226,864 ---
Deferred income taxes 1,092,000 1,092,000
--------- ---------
Total current assets 20,564,568 19,690,470
Plant and equipment, net 19,797,732 14,574,393
Goodwill, net of amortization of $840,000 and $499,000, respectively 5,694,861 6,247,588
Covenants not to compete, net of amortization of $309,000
and $144,000, respectively 791,236 956,236
Security deposits and other assets 453,874 1,039,119
------- ---------
Total assets $ 47,302,271 $ 42,507,806
============== ==============
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long term debt $ 2,110,835 $ 564,425
Current maturities of capitalized lease obligations 828,073 1,287,753
Accounts payable and accrued expenses 8,947,436 8,125,209
Income taxes payable --- 590,104
--------- -------
Total current liabilities 11,886,344 10,567,491
Long term debt, less current maturities 19,029,150 11,309,675
Capitalized lease obligations payable, less current maturities 557,424 2,604,586
Deferred income taxes 1,579,000 1,579,000
---------- ---------
Total liabilities 33,051,918 26,060,752
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
5,548,761 shares 55,488 55,488
Additional paid in capital 5,009,671 5,009,671
Retained earnings 9,217,122 11,413,501
--------- ----------
14,282,281 16,478,660
Less:
Treasury stock, at cost, 30,499 and 30,409 shares at
September 30, 2000 and December 31, 1999, respectively (31,928) (31,606)
------- -------
Total stockholders' equity 14,250,353 16,447,054
---------- ----------
Total liabilities and stockholders' equity $ 47,302,271 $ 42,507,806
============== ==============
</TABLE>
See accompanying notes to unaudited consolidated financial statements
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DISC GRAPHICS, INC.
Consolidated Statements of Operations
For the Three and Nine Months Ended September 30, 2000 and 1999
(unaudited)
<TABLE>
Three Months Ended September 30, Nine Months Ended September 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net sales $ 17,803,868 $ 18,972,403 $ 49,971,782 $ 48,575,073
Cost of sales 14,504,812 14,069,134 41,934,302 36,156,572
----------- ----------- ----------- ----------
Gross profit 3,299,056 4,903,269 8,037,480 12,418,501
Operating Expenses:
Selling and shipping 1,749,559 1,833,226 5,339,296 4,894,901
General and administrative 1,661,526 1,571,153 4,983,637 4,127,199
---------- ---------- ---------- ---------
Operating income (loss) (112,029) 1,498,890 (2,285,453) 3,396,401
Interest expense, net 432,542 250,537 1,149,926 482,052
---------- --------- ---------- ---------
Income (loss) before income taxes (544,571) 1,248,353 (3,435,379) 2,914,349
Provision (benefit) for income taxes (185,000) 500,000 (1,239,000) 1,165,000
--------- -------- ----------- ---------
Net income (loss) $ (359,571) $ 748,353 $ (2,196,379) $ 1,749,349
============ ============ ============== ============
Net income (loss) per share:
Basic $ (0.07) $ 0.14 $ (0.40) $ 0.32
============ =========== ============= ============
Diluted $ (0.07) $ 0.14 $ (0.40) $ 0.32
============ =========== ============= ============
Weighted average number of shares outstanding
Basic 5,518,262 5,518,352 5,518,277 5,518,364
Diluted 5,518,262 5,534,731 5,518,277 5,544,583
See accompanying notes to unaudited consolidated financial statements
</TABLE>
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<PAGE>
DISC GRAPHICS, INC.
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2000 and 1999
(unaudited)
<TABLE>
September 30, September 30,
2000 1999
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) $ (2,196,379) $ 1,749,349
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 2,624,512 1,680,160
Provision for doubtful accounts 100,185 357,980
Loss on sale of assets related to consolidation of facilities 258,770 ---
Changes in assets and liabilities:
Accounts receivable (1,385,472) (682,532)
Inventory 1,598,500 (459,934)
Prepaid expenses and other current assets (84,752) (113,260)
Accounts payable and accrued expenses 805,356 954,690
Income taxes payable/receivable (1,816,968) (68,879)
Security deposits and other assets 583,046 (1,900,465)
Net cash provided by operating activities 486,798 1,517,109
------- ---------
Cash flows from investing activities:
Capital expenditures (8,148,049) (918,173)
Purchase of net assets of business acquired (7,500) (3,574,829)
Proceeds from sale of equipment 549,747 ---
------- ----------
Net cash used in investing activities (7,605,802) (4,493,002)
---------- ----------
Cash flows from financing activities:
Net proceeds from long-term debt 9,669,885 4,282,591
Principal payments of capital lease obligations (2,506,842) (1,195,347)
Purchase of treasury stock (322) (270)
---- ----
Net cash provided by financing activities 7,162,721 3,086,974
--------- ---------
Net increase in cash 43,717 111,081
Cash at December 31 142,531 43,313
------- ------
Cash at September 30 $ 186,248 $ 154,394
=========== ===========
Cash paid during the year for:
Interest $ 1,029,558 $ 453,989
Income taxes $ 577,968 $ 1,189,354
See accompanying notes to unaudited consolidated financial statements
</TABLE>
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<PAGE>
DISC GRAPHICS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
General
-------
The consolidated financial statements included herein have been prepared by
Disc Graphics, Inc., and its subsidiaries (collectively, the "Company") without
audit. Certain information and footnote disclosures normally included in
consolidated 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. Although the Company believes that the
disclosures made herein are adequate to make the information presented not
misleading, it is recommended that these consolidated financial statements be
read in conjunction with the audited consolidated financial statements and the
Notes thereto for the year ended December 31, 1999 included in the Company's
Annual Report on Form 10-K for its fiscal year ended December 31, 1999. The
December 31, 1999 figures included herein were derived from such audited
consolidated financial statements. In the opinion of management, the information
furnished herein reflects all normal recurring adjustments that are necessary to
present fairly such information.
Acquisition
-----------
On July 1, 1999, the Company acquired substantially all of the assets and
certain liabilities of Contemporary Color Graphics, Inc. ("CCG"), a commercial
printer (the "Acquisition"). The notes to the audited consolidated financial
statements referred to above contain a description of the terms of the
Acquisition. The following unaudited pro forma results have been prepared for
comparative purposes only and include certain adjustments such as (i) additional
amortization expense due to goodwill (15 years) and a covenant not to compete (5
years) resulting from the Acquisition and (ii) increased interest expense due to
cash borrowed under the Company's financing agreement for the payment of the
purchase price, the repayment of CCG's notes payable and a note, supplemental
note and convertible debenture issued by the Company. These unaudited pro forma
results are not necessarily indicative of the results of operations which
actually would have resulted had the purchase been effected on January 1, 1999,
nor of future results of operations of the consolidated entities.
Nine Months Ended
September 30, 1999
------------------
(In thousands, except per share amounts)
Net sales $52,193
Net income 1,549
Net income per share:
Basic .28
Diluted .28
During the second quarter, the Company adjusted the goodwill associated
with the acquisition of CCG by approximately $185,000 to properly reflect the
value of certain assets and liabilities assumed as of the acquisition date. In
accordance with the terms of the acquisition agreement an adjustment would be
made to the purchase price as a result of the actual fair value of assets and
liabilities acquired. The Company is currently in negotiations with the former
owners of CCG regarding the finalization of the adjustments in the purchase
price due to further modifications to minimum net worth levels of the business
acquired.
The principal amount due on the promissory note and convertible debentures
on August 1, 2000 of $320,000 was not paid because minimum sales amounts
required under the asset purchase agreement were not achieved. In addition, as a
result of the sales shortfall, the remaining balances of the promissory note and
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<PAGE>
convertible debenture was reduced by an additional $84,000. As a result of the
downward adjustment, goodwill was also adjusted accordingly in the amount of
$404,000. During the third quarter, the Company reversed approximately $42,000
of interest expense accrued on the principal obligations.
Inventories
-----------
Inventories consist of the following:
September 30, 2000 December 31, 1999
Raw materials $1,962,442 $3,477,610
Work-in-process 617,413 700,981
Finished goods 250,019 249,783
------- -------
$2,829,874 $4,428,374
========== ==========
Consolidation of Facility
-------------------------
In March 2000, the Company announced that it would close its Edgewood
facility and consolidate its operations with its Hauppauge, New York facility. A
summary of the charges relating to the consolidation of facilities is presented
below:
Severance $ 40,000
Loss on sale of equipment 229,000
Lease termination costs 44,000
Other 11,000
----------
Total $324,000
========
These charges for the nine months ended September 30, 2000 are included in
cost of sales and general and administrative expenses in the amounts of $315,000
and $9,000, respectively, and were recorded in the first quarter of the year.
The consolidation of this facility has been completed and all severance and
other payments have been made. There were no changes in the total amounts
accrued as compared to the actual total costs incurred. In addition, all
accruals for expenses related to the consolidation of facilities were exhausted
by September 30.
Long Term Debt
--------------
As a result of the net loss in the second quarter of 2000, the Company did
not meet certain financial covenants contained in its $15 million revolving
credit facility (the "Credit Agreement"). On August 10, 2000, the lender under
the Credit Agreement waived compliance by the Company with the covenants for the
second quarter and issued a Commitment Letter to amend certain covenants.
Accordingly, the borrowings outstanding have been classified as long-term debt
on the accompanying balance sheet at September 30, 2000. The terms of the
amended Credit Agreement include covenants which provide, among other things,
that the Company meet certain financial performance criteria including
maintenance of specified net worth levels and debt service ratios.
On July 10, 2000, the Company obtained an increase to the amount available
under the Credit Agreement from $15 million to $16.5 million until October 6,
2000. The Company is currently negotiating an extension to the increase. At
September 30, 2000, $1,050,000 was outstanding under the extension and has been
classified as current maturities of long term debt in the accompanying balance
sheet.
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<PAGE>
Subsequent Event
----------------
On October 25, 2000, Allied Digital Technologies, Corp. ("Allied"), one of
the Company's long term customers, filed a voluntary petition for relief under
Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the
District of Delaware. For the nine months ended September 30, 2000, Allied
accounted for 3.9% of the Company's sales. The Company believes its allowance
for doubtful accounts is adequate to cover any loss it may incur as a result of
Allied's bankruptcy.
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<PAGE>
DISC GRAPHICS, INC.
This Form 10-Q contains predictions, projections and other statements about
the future that are intended to be "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties, and
other important factors that could cause the actual results, performance or
achievements of the Company, or industry results, to differ materially from
those expressed or implied by such statements. Such risks, uncertainties, and
other important factors include, among others: the Company's ability to fulfill
its stated business strategies; the Company's ability to identify other
strategic business opportunities, and to integrate any such businesses into the
Company's operations; the Company's ability to identify and develop additional
product innovations; the Company's ability to sustain current growth rates in
net sales of certain products; the effects of recent equipment purchases and
leases for additional space on the Company's operations; the Company's ability
to continue to improve efficiencies through the purchase or lease of equipment;
the degree of success of the Company's ISO certification efforts; the amounts
required for capital expenditures in future periods; the availability and cost
of materials; and continuing industry-wide pricing pressures and other industry
conditions. Such forward-looking statements speak only as of the date of this
Report, and the Company disclaims any obligation or undertaking to update such
statements. Each forward-looking statement that the Company believes is material
is accompanied by one or more cautionary statements identifying important
factors that could cause actual results to differ materially from those
described in the forward-looking statement. The cautionary statements are set
forth following the forward-looking statement in other sections of this Form
10-Q, and/or in the Company's other documents filed with the Securities and
Exchange Commission, whether or not such documents are incorporated herein by
reference. In assessing forward-looking statements, readers are urged to read
carefully all such cautionary statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
-------
The following discussion and analysis of the financial condition and
results of operations of Disc Graphics, Inc. and its subsidiaries (collectively
"Disc Graphics" or the "Company") for the nine-month period ended September 30,
2000 should be read in conjunction with the unaudited consolidated financial
statements and the notes thereto included elsewhere in this Report, and the
Company's Annual Report on Form 10-K for its fiscal year ended December 31,
1999, as filed with the Securities and Exchange Commission (the "1999 Form
10-K"). Results for the periods reported herein are not necessarily indicative
of results that may be expected for the full year or in future periods.
Results of Operations for the Three Months Ended September 30, 2000 and 1999
----------------------------------------------------------------------------
Net Sales
---------
Net sales for the three months ended September 30, 2000 were $17,804,000
compared to $18,972,000 for the same period in 1999, representing a decrease of
$1,168,000, or 6.2%. The $1,168,000 decline in revenues was due principally to
decreased sales to commercial customers. The decrease in sales to commercial
customers was partially the result of the Company's decision to eliminate low
margin and unprofitable commercial sales in an effort to concentrate our
resources on more profitable sectors within the commercial category.
Additionally, the quarter's results were influenced by lower than anticipated
sales from existing and potential new customers.
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<PAGE>
Gross Profit
------------
The Company recognized gross profit of $3,299,000 (an 18.5% profit margin)
for the three months ended September 30, 2000, as compared to $4,903,000 (a
25.8% profit margin) for the same period in 1999, representing a decrease of
$1,604,000, or 32.7%. The Company's operating results continue to be negatively
affected by lower than expected sales volume, an increased cost structure
associated with the expansion of our facilities and the acquisition of large
format equipment, as well as a 13.0% increase in raw material costs which can
only be partially passed on to customers. Certain initiatives put into place
during the year have begun to improve margins, as gross profit margin of 18.5%
for the three months ended September 30, 2000 is an improvement over the 11.8%
experienced in the three months ended June 30, 2000; however, it trails the
25.8% achieved during the same period in 1999. The Company has completed its
planned capital improvement program in new technologies and equipment. The
Company believes that the integration of this new equipment should enhance its
operating efficiencies and improve its ability to compete in new markets, but
there can be no assurance that the Company will be able to achieve these goals.
Selling, General, and Administrative Expenses
---------------------------------------------
Selling, general and administrative ("SG&A") expenses for the three months
ended September 30, 2000 were $3,411,000 (19.2% of net sales) compared to
$3,404,000 (17.9% of net sales) for the same period a year ago, an increase of
$7,000. The increase of 1.3 percentage points is primarily due to the decrease
in sales.
Net Interest Expense
--------------------
Net interest expense for the three months ended September 30, 2000 was
$433,000 compared to $251,000 for the same period of the prior year. Interest
expense includes interest payable under the Company's revolving credit facility,
equipment notes payable, its capital lease obligations on equipment and its
note, supplemental note and debenture issued in connection with the acquisition
of CCG. The increase in net interest expense is due to increased borrowings
under the Company's revolving credit facility.
Income Taxes
------------
As a result of the third quarter loss, the Company recorded a tax benefit
of $185,000 compared to a provision for income taxes of $500,000 for the third
quarter of the prior year.
Net Income (Loss)
-----------------
The net loss for the three months ended September 30, 2000 was $360,000,
compared to net income of $748,000 for the same period in the prior year, a
decrease of $1,108,000. The decrease in net income is due to lower than expected
sales volume coupled with the increased cost structure associated with the
expansion of our facilities to accommodate large format equipment.
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<PAGE>
Results of Operations for the Nine Months Ended September 30, 2000 and 1999
---------------------------------------------------------------------------
Net Sales
---------
Net sales for the nine months ended September 30, 2000 were $49,972,000
compared to $48,575,000 for the same period in 1999, representing an increase of
$1,397,000, or 2.9%. Contributing to the overall increase in sales was the
Company's acquisition on July 1, 1999 of the assets and certain liabilities of
Contemporary Color Graphics, Inc. ("CCG") (the "Acquisition"), as well as an
increase of $461,000 from cosmetic sampling products. Consumer product
packaging, music/audio packaging and pharmaceutical packaging sales increased
slightly due to increased sales efforts within these categories. These increases
were offset by a decrease in video and entertainment software packaging sales
which were adversely impacted by lower than anticipated sales from existing and
potential new customers.
Gross Profit
------------
The Company recognized gross profit of $8,037,000 (a 16.1% profit margin)
for the nine months ended September 30, 2000, as compared to $12,419,000 (a
25.6% profit margin) for the same period in 1999, representing a decrease of
$4,382,000, or 35.3%. The Company's operating results continue to be negatively
affected by lower than expected sales volume, an increased cost structure
associated with the expansion of our facilities and the acquisition of large
format equipment. Also contributing to the reduction in gross profit is a 13.0%
increase in raw material costs which can only be partially passed on to
customers, as well as hard and soft costs associated with the implementation of
ISO 9001 procedures.
Selling, General, and Administrative Expenses
---------------------------------------------
Selling, general and administrative ("SG&A") expenses for the nine months
ended September 30, 2000 were $10,323,000 (20.7% of net sales) compared to
$9,024,000 (18.6% of net sales) for the same period a year ago, an increase of
$1,299,000. The increase in the dollar amount of SG&A is primarily due to
increased headcount and the amortization of goodwill associated with the
Acquisition. The remainder of the increase is due to normal inflationary
increases, and revenue related expenses such as freight and commissions.
Net Interest Expense
--------------------
Net interest expense for the nine months ended September 30, 2000 was
$1,150,000 compared to $482,000 for the same period of the prior year. Interest
expense includes interest payable under the Company's revolving credit facility,
equipment notes payable, its capital lease obligations on equipment and its
note, supplemental note and debenture issued in connection with the Acquisition.
The increase in net interest expense is due to increased borrowings under the
Company's revolving credit facility and accrued interest payable on the note,
supplemental note and debenture related to the Acquisition.
Income Taxes
------------
As a result of the nine month loss, the Company recorded a tax benefit of
$1,239,000 as compared to a provision for income taxes of $1,165,000 for the
first nine months of the prior year.
Net Income (Loss)
-----------------
The net loss for the nine months ended September 30, 2000 was $2,196,000,
compared to net income of $1,749,000 for the same period in the prior year, a
decrease of $3,945,000. The decrease in net income is due to lower than expected
sales volume coupled with the increased cost structure associated with the
expansion of our facilities to accommodate large format equipment, costs
associated with closing the Edgewood facility, increase in paper costs, and hard
and soft costs of implementing the ISO 9001 quality system.
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<PAGE>
Liquidity and Capital Resources
-------------------------------
The primary source of cash for the Company's business has been cash flow
from operations and availability under the Company's $15 million revolving
credit facility. Cash as of September 30, 2000 was $186,000, compared to
$143,000 as of December 31, 1999. Net cash provided by operations for the nine
months ended September 30, 2000 was $477,000 compared to $1,517,000, for the
nine months ended September 30, 1999. The decrease in cash flows from operations
is primarily attributable to the loss from operations discussed above. As of
September 30, 2000 the Company had working capital of $8,678,000.
On July 10, 2000, the Company obtained an increase to the amount available
under the Credit Agreement from $15 million to $16.5 million until October 6,
2000. The Company is currently negotiating an extension to the increase in
availability under the credit agreement. With the aforementioned extension, the
Company has $450,000 available under the revolving credit facility. The Credit
Agreement contains covenants which requires Disc Graphics to satisfy certain
performance criteria, net worth levels, and debt service ratios.
As a result of the Acquisition in 1999, the Company's total indebtedness
and future debt service obligations have increased significantly from prior
levels. The Company intends to fund these debt service obligations from
operating cash flow in future periods, and believes that it will have sufficient
funds to do so. There can be no assurance, however that the Company will be able
to integrate CCG's business successfully or realize any benefit from the
Acquisition, or that earnings attributable to the Acquisition will be sufficient
to offset the related costs associated with the Company's debt service
obligations.
Beginning in the third quarter of 1999 and through September 30, 2000, the
Company made $9.7 million of capital improvements in connection with the
purchase, preparation, and installation of a new 56-inch high speed diecutter
and 56-inch six color press, as well as additional manufacturing equipment. The
Company anticipates that by the end of fiscal 2000 it will refinance $9 to $10
million of existing operating equipment, which is inclusive of the
aforementioned 56-inch equipment and the manufacturing equipment. The
installation of the diecutter, press, and future additional equipment is
intended to increase capacity and further improve plant efficiencies. However,
there can be no assurance that the Company will be able to enter into financing
agreements for such equipment on satisfactory terms, that the installation of
such equipment will result in improved efficiencies, or that the Company's
future results of operations will be improved as a result of any such plans.
Subsequent Events
-----------------
On October 25, 2000, Allied Digital Technologies, Corp. ("Allied"), one of
the Company's long term customers, filed a voluntary petition for relief under
Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the
District of Delaware. In 1999, Allied accounted for 5.1% of the Company's annual
sales. For the nine months ended September 30, 2000, Allied accounted for 3.9%
of the Company's sales. The Company believes its allowance for doubtful accounts
is adequate to cover any loss it may incur as a result of Allied's bankruptcy.
Disc is making efforts to sell directly to Allied's customers to mitigate the
effect that Allied's bankruptcy will have on the Company.
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<PAGE>
New Accounting Pronouncements
-----------------------------
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standard No. 133, "Accounting for Derivative Instruments and Hedging
Activities" (SFAS No. 133) as amended by SFAS 137 and SFAS 138, which is
effective for quarters of fiscal years beginning after June 15, 2000. SFAS No.
133 provides guidance for accounting for all derivative instruments, including
certain derivative instruments embedded in other contracts, and for hedging
activities. The Company does not believe that the implementation of SFAS No. 133
will have a significant impact on its financial position or results of
operations.
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<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
As of September 30, 2000, there were no lawsuits pending, or, to the
knowledge of the Company, claims threatened, which in the aggregate would be
material, against the Company.
Item 2. Changes in Securities and Use of Proceeds
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6(a) Exhibits
The Exhibits to this Quarterly Report on Form 10-Q are listed in the
Exhibit Index which appears elsewhere herein and is incorporated herein by
reference.
Item 6(b) Reports on Form 8-K
The Company did not file any Current Reports on Form 8-K during its fiscal
quarter ended September 30, 2000.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DISC GRAPHICS, INC.
(Registrant)
November 13, 2000 /s/ Donald Sinkin
-----------------
Donald Sinkin
President & CEO
November 13, 2000 /s/ Margaret Krumholz
---------------------
Margaret Krumholz
Sr. Vice President of Finance & CFO
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DISC GRAPHICS, INC.
Quarterly Report on Form 10-Q
for the Fiscal Quarter Ended September 30, 2000
EXHIBIT INDEX
Exhibit
Number Description
27.1* Financial Data Schedule
* Document filed herewith
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