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 June 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 June 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 June 30, 2000
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Balance Sheets as of June 30, 2000 (unaudited)
and December 31, 1999................................. 3
Consolidated Statements of Operations for the Three and
Six Months Ended June 30, 2000 and 1999 (unaudited) .. 4
Consolidated Statements of Cash Flows for the Six Months
Ended June 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 .....................................8
PART II - OTHER INFORMATION
Item 1 Legal Proceedings ............................................12
Item 2 Changes in Securities ........................................12
Item 3 Defaults Upon Senior Securities ..............................12
Item 4 Submission of Matters to a Vote of Security Holders ..........12
Item 5 Other Information ............................................12
Item 6(a) Exhibits .....................................................12
Item 6(b) Reports on Form 8-K ..........................................12
Signatures ..............................................................13
Exhibit Index ..............................................................14
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<PAGE>
DISC GRAPHICS, INC.
Consolidated Balance Sheets
As of June 30, 2000 (unaudited) and December 31, 1999
<TABLE>
June 30, 2000 December 31, 1999
(unaudited)
Assets
Current assets:
<S> <C> <C>
Cash $ 252,985 $ 142,531
Accounts receivable, net of allowance for doubtful accounts
of $1,461,000 and $1,418,000, respectively 11,079,544 13,579,201
Inventories 2,917,584 4,428,374
Prepaid expenses and other current assets 731,684 448,364
Income taxes receivable 995,996 ---
Deferred income taxes 1,092,000 1,092,000
--------- ---------
Total current assets 17,069,793 19,690,470
Plant and equipment, net 19,858,443 14,574,393
Goodwill, net of amortization of $724,000 and $499,000, respectively 6,214,768 6,247,588
Covenants not to compete, net of amortization of $254,000
and $144,000, respectively 846,236 956,236
Security deposits and other assets 434,418 1,039,119
-------- ---------
Total assets $ 44,423,658 $ 42,507,806
============== ===============
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long term debt $ 832,583 $ 564,425
Current maturities of capitalized lease obligations 923,922 1,287,753
Accounts payable and accrued expenses 6,442,823 8,125,209
Income taxes payable --- 590,104
-------- -------
Total current liabilities 8,199,328 10,567,491
Long term debt, less current maturities 19,319,258 11,309,675
Capitalized lease obligations payable, less current maturities 716,152 2,604,586
Deferred income taxes 1,579,000 1,579,000
---------- ---------
Total liabilities 29,813,738 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 9,576,689 11,413,501
---------- ----------
14,641,848 16,478,660
Less:
Treasury stock, at cost, 30,499 and 30,409 shares at
June 30, 2000 and December 31, 1999, respectively (31,928) (31,606)
------- -------
Total stockholders' equity 14,609,920 16,447,054
----------- -----------
Total liabilities and stockholders' equity $ 44,423,658 $ 42,507,806
============== ===============
</TABLE>
See accompanying notes to unaudited consolidated financial statements
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<PAGE>
DISC GRAPHICS, INC.
Consolidated Statements of Operations
For the Three and Six Months Ended June 30, 2000 and 1999
(unaudited)
<TABLE>
Three Months Ended June 30, Six Months Ended June 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net sales $ 15,595,475 $ 14,707,675 $ 32,167,914 $ 29,602,670
Cost of sales 13,750,582 10,616,965 27,429,490 22,087,438
----------- ----------- ----------- ----------
Gross profit 1,844,893 4,090,710 4,738,424 7,515,232
Operating Expenses:
Selling and shipping 1,809,510 1,538,135 3,589,737 3,061,675
General and administrative 1,648,214 1,280,366 3,322,111 2,556,046
---------- ---------- ---------- ---------
Operating income (loss) (1,612,831) 1,272,209 (2,173,425) 1,897,511
Interest expense, net 371,626 108,592 717,387 231,515
-------- -------- -------- -------
Income (loss) before income taxes (1,984,457) 1,163,617 (2,890,812) 1,665,996
Provision (benefit) for income taxes (693,000) 464,000 (1,054,000) 665,000
--------- -------- ----------- -------
Net income (loss) $ (1,291,457) $ 699,617 $ (1,836,812) $ 1,000,996
============ ============== ============== ==============
Net income (loss) per share:
Basic $ (0.23) $ 0.13 $ (0.33) $ 0.18
============ ============== ============== ==============
Diluted $ (0.23) $ 0.13 $ (0.33) $ 0.18
============ ============== ============== ==============
Weighted average number of shares outstanding
Basic 5,518,262 5,518,352 5,518,284 5,518,370
Diluted 5,518,262 5,543,358 5,518,284 5,549,510
</TABLE>
See accompanying notes to unaudited consolidated financial statements
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<PAGE>
DISC GRAPHICS, INC.
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2000 and 1999
(unaudited)
<TABLE>
June 30, 2000 June 30, 1999
------------- -------------
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) $ (1,836,812) $ 1,000,996
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 1,700,995 945,260
Provision for doubtful accounts 117,025 212,416
Loss on sale of assets related to
consolidation of facilities 228,591 ---
Changes in assets and liabilities:
Accounts receivable 2,383,095 1,865,013
Inventory 1,510,790 (222,642)
Prepaid expenses and other current assets (211,965) (136,941)
Accounts payable and accrued expenses (1,699,257) 229,258
Income taxes payable/receivable (1,586,100) (187,519)
Security deposits and other assets 603,255 (1,011,005)
-------- -----------
Net cash provided by operating activities 1,209,617 2,694,836
---------- -----------
Cash flows from investing activities:
Capital expenditures (7,116,817) (346,233)
Purchase of net assets of business acquired (7,500) ---
------ ----------
Net cash used in investing activities (7,124,317) (346,233)
----------- ----------
Cash flows from financing activities:
Net proceeds from (repayments of) long-term debt 8,277,741 (1,015,499)
Principal payments of capital lease obligations (2,252,265) (792,865)
Purchase of treasury stock (322) (270)
----------- ----------
Net cash provided by (used in) financing activities 6,025,154 (1,808,634)
---------- -----------
Net increase in cash 110,454 539,969
Cash at December 31 142,531 43,313
--------- ---------
Cash at June 30 $ 252,985 $ 583,282
=============== ===============
Cash paid during the year for:
Interest $ 609,097 $ 251,951
Income taxes $ 532,100 $ 852,520
</TABLE>
See accompanying notes to unaudited consolidated financial statements
- 5 -
<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 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.
Six Months Ended
June 30, 1999
(In thousands, except per share amounts)
Net sales $33,221
Net income 801
Net income per share:
Basic .15
Diluted .14
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 acquisition agreement, one year from the acquisition date,
an adjustment would be made to the purchase price as a result of the
finalization of the actual fair value of assets and liabilities acquired. The
Company is currently in negotiations with the former owners of CCG regarding
additional downward adjustments in the purchase price due to further
modifications to minimum net worth levels of business acquired.
On August 1, 2000, principal and interest payments are due on the
promissory note and the convertible debenture. The Company believes that the
payments due on August 1, 2000 will be fully abated because CCG failed to
achieve dollar sales amounts required under the asset purchase agreement. The
Company is currently in negotiations with the former owners of CCG regarding the
abatement.
- 6 -
<PAGE>
Inventories
-----------
Inventories consist of the following:
June 30, 2000 December 31, 1999
Raw materials $1,942,604 $3,477,610
Work-in-process 717,862 700,981
Finished goods 257,118 249,783
------- -------
$2,917,584 $4,428,374
========== ==========
Consolidation of Facilities
---------------------------
In March 2000, the Company announced that it would close its CCG 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 six months ended June 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, there is no
remaining accrual in relation to the consolidation of facilities at June 30,
2000.
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 through
June 30, 2001 and accordingly, the borrowings outstanding have been classified
as long-term debt on the accompanying balance sheet at June 30, 2000. The terms
of the amended Credit Agreement include covenants which provide that Disc
maintain, among other things, certain financial performance criteria including
net worth levels and debt service ratios.
On July 10, 2000, the Company obtained an increase to the availability
under the Credit Agreement from $15 million to $16.5 million until October 6,
2000, at which time the availability will be reduced to $15 million.
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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 and consummate
future acquisitions and 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 effects 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 six-month period ended June 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 June 30, 2000 and 1999
-----------------------------------------------------------------------
Net Sales
---------
Net sales for the three months ended June 30, 2000 were $15,595,000
compared to $14,708,000 for the same period in 1999, representing an increase of
$887,000, or 6.0%. Contributing to the overall increase in sales was $771,000
related to the Company's acquisition on July 1, 1999 of Contemporary Color
Graphics, Inc. ("CCG") (the "Acquisition"), as well as an increase of $421,000
from cosmetic sampling products. Consumer product packaging, music/audio
packaging and video packaging sales increased due to increased sales efforts
within these categories. These increases were offset by a decrease in
entertainment software packaging which were adversely impacted by the delay in
the launch of a product line for one of the Company's significant customers.
Gross Profit
------------
The Company recognized gross profit of $1,845,000 (an 11.8% profit margin)
for the three months ended June 30, 2000, as compared to $4,091,000 (a 27.8%
profit margin) for the same period in 1999, representing a decrease of
$2,246,000, or 54.9%. The decrease of 16.0 percentage points in gross profit
margin is due to the continued integration of CCG, production inefficiencies
associated with the expansion of our Hauppauge facility to accommodate Disc's
substantial investment in large format equipment, a 13% increase in raw material
costs which can only be partially passed on to customers, the impact of less
than anticipated sales for the quarter and hard and soft costs
- 8-
<PAGE>
associated with the implementation of ISO 9001 procedures. The installation of
this new equipment and the expansion of our Hauppauge facility, by leasing
additional space, will continue into the third quarter of the year 2000 and will
continue to have an adverse impact on earnings. The Company's 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 June 30, 2000 were $3,458,000 (22.2% of net sales) compared to $2,819,000
(19.2% of net sales) for the same period a year ago, an increase of $639,000.
The increase in the dollar amount of SG&A is primarily due to normal operating
expenses and the amortization of goodwill, in each case associated with the CCG
Acquisition. The remainder of the increase is due to normal inflationary
increases, and revenue related expenses such as freight to customers and
commissions.
Net Interest Expense
--------------------
Net interest expense for the three months ended June 30, 2000 was $372,000
compared to $109,000 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 second quarter loss, the Company recorded a tax benefit
of $693,000 compared to a provision for income taxes of $464,000 for the second
quarter of the prior year.
Net Income (Loss)
-----------------
The net loss for the three months ended June 30, 2000 was $1,291,000,
compared to net income of $700,000 for the same period in the prior year, a
decrease of $1,991,000. The decrease in net income is due to costs of
integrating CCG into our operations after its acquisition, production
inefficiencies resulting from the expansion of our Hauppauge facility to
accommodate large format equipment, impact of less than anticipated sales,
increase in paper pricing, the adverse impact from the timing of orders, and
hard and soft costs of implementing the ISO 9001 quality system.
Results of Operations for the Six Months Ended June 30, 2000 and 1999
---------------------------------------------------------------------
Net Sales
---------
Net sales for the six months ended June 30, 2000 were $32,168,000 compared
to $29,603,000 for the same period in 1999, representing an increase of
$2,565,000, or 8.7%. Contributing to the overall increase in sales was the
Company's acquisition on July 1, 1999 of Contemporary Color Graphics, Inc.
("CCG") (the "Acquisition"), as well as an increase of $421,000 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 which were adversely impacted by the delay in
the launch of a product line for one of the Company's significant customers.
Gross Profit
------------
The Company recognized gross profit of $4,738,000 (a 14.7% profit margin)
for the six months ended June 30, 2000, as compared to $7,515,000 (a 25.4%
profit margin) for the same period in 1999, representing a decrease of
$2,777,000, or 37.0%. The decrease of 10.7 percentage points in gross profit
margin is due to the continued
- 9-
<PAGE>
integration of CCG, production inefficiencies associated with the expansion of
our Hauppauge facility to accommodate Disc's substantial investment in large
format equipment, a 13% increase in raw material costs which can only be
partially passed on to customers, the impact of less than anticipated sales for
the quarter and 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 six months
ended June 30, 2000 were $6,912,000 (21.5% of net sales) compared to $5,618,000
(19.0% of net sales) for the same period a year ago, an increase of $1,294,000.
The increase in the dollar amount of SG&A is primarily due to normal operating
expenses and the amortization of goodwill, in each case associated with the CCG
Acquisition. The remainder of the increase is due to normal inflationary
increases, and revenue related expenses such as freight to customers and
commissions.
Net Interest Expense
--------------------
Net interest expense for the six months ended June 30, 2000 was $717,000
compared to $232,000 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 six month loss, the Company recorded a tax benefit of
$1,054,000 as compared to a provision for income taxes of $665,000 for the first
six months of the prior year.
Net Income (Loss)
-----------------
The net loss for the six months ended June 30, 2000 was $1,837,000,
compared to net income of $1,001,000 for the same period in the prior year, a
decrease of $2,838,000. The decrease in net income is due to costs of
integrating CCG into our operations after its acquisition, costs associated with
closing the CCG facility, production inefficiencies resulting from the expansion
of our Hauppauge facility to accommodate large format equipment, impact of less
than anticipated sales, increase in paper pricing, the adverse impact from the
timing of orders, and hard and soft costs of implementing the ISO 9001 quality
system.
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 June 30, 2000 was $253,000, compared to $143,000 as
of December 31, 1999. Net cash provided by operations for the six months ended
June 30, 2000 was $1,209,000 compared to $2,695,000, for the six months ended
June 30, 1999. The decrease in cash flows from operations is primarily
attributable to the loss from operations
- 10 -
<PAGE>
discussed above. As of June 30, 2000 the Company had working capital of
$8,870,000, and $500,000 was available to the Company under its revolving credit
facility. The Credit Agreement contains covenants which requires Disc Graphics
to satisfy certain performance criteria, net worth levels and debt service
ratios.
On July 10, 2000, the Company obtained an increase to the availability
under the Credit Agreement from $15 million to $16.5 million until October 6,
2000, at which time the availability will be reduced to $15 million.
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 through
June 30, 2001 and accordingly, the borrowings outstanding have been classified
as long-term debt on the accompanying balance sheet at June 30, 2000. The terms
of the amended Credit Agreement include covenants which provide that Disc
maintain, among other things, certain financial performance criteria including
net worth levels and debt service ratios.
As a result of the CCG 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 CCG Acquisition, or that earnings attributable to the CCG 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 June 30, 2000, the
Company incurred a total of $5.6 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. The Company anticipates that by the end
of fiscal 2000 it will finance $9 to $10 million of existing operating
equipment, which is inclusive of the aforementioned 56-inch equipment, as well
as additional 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.
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 June 30, 2000, there were no lawsuits pending, or threatened claims,
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
On June 19, 2000, the Company held its Annual Meeting of Stockholders. The
stockholders elected Stephen Frey and John Rebecchi as the Class III directors,
to serve until the Annual Meeting of Stockholders in 2003 or until their
successors have been elected and qualified or until their earlier resignation,
retirement, disqualification, removal or death. Mr. Frey and Mr. Rebecchi each
received 4,055,295 votes in favor of his election, with 11,000 votes withheld,
no abstentions and no broker non-votes. The stockholders also ratified the
appointment of KPMG LLP as the Company's independent auditors for 2000, with
4,060,595 votes in favor, 3,000 votes opposed, 2,700 abstentions and no broker
non-votes.
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 June 30, 2000.
- 12 -
<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)
August 14, 2000 /s/ Donald Sinkin
-----------------
Donald Sinkin
President & CEO
August 14, 2000 /s/ Margaret Krumholz
---------------------
Margaret Krumholz
Sr. Vice President of Finance & CFO
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<PAGE>
DISC GRAPHICS, INC.
Quarterly Report on Form 10-Q
for the Fiscal Quarter Ended June 30, 2000
EXHIBIT INDEX
Exhibit
Number Description
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10.21* Supplemental Revolving Credit Note dated July 10, 2000, between
the Registrant and The Dime Savings Bank of New York, FSB, f/k/a
KeyBank National Association
27.1* Financial Data Schedule
* Document filed herewith
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