UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 8-K/A
AMENDMENT NO. 1
TO
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
DATE OF REPORT: JULY 3, 1996
CONSOLIDATED GRAPHICS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 0-24068
(STATE OR OTHER JURISDICTION OF (COMMISSION FILE NUMBER)
INCORPORATION)
76-0190827
(I.R.S. EMPLOYER IDENTIFICATION NO.)
2210 WEST DALLAS STREET
HOUSTON, TEXAS
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
77019
(ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 529-4200
The undersigned registrant hereby amends Item 2. Acquisition or Disposition
of Assets and Item 7. Financial Statements and Exhibits of its Current Report on
Form 8-K dated July 3, 1996, as originally filed, with respect to the
acquisition by Consolidated Graphics, Inc. (the "Company") of Garner Publishing
Company ("Garner Printing") on July 3, 1996 (the "Garner Acquisition").
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 3, 1996, the Company acquired all of the issued and outstanding
stock of Garner Printing, a commercial printing company located in Des Moines,
Iowa. The Company issued 177,780 shares of its common stock in connection with
the acquisition. The Company expects to continue operating Garner Printing
without making any significant changes in its operations.
The Company has accounted for the Garner Acquisition as a purchase. The
allocation of purchase price to the assets acquired was based on estimates of
fair market values and may be revised when additional information that the
Company is awaiting concerning asset and liability values is obtained.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(A) Financial statements of business acquired.
The information contained in Exhibit 6 hereto is incorporated herein by
reference.
(B) Pro forma financial information.
The following unaudited pro forma financial statements give effect to the
Company's acquisition of Garner Printing. The unaudited pro forma financial
statements presented below were prepared utilizing the audited historical
financial statements of the Company and Garner Printing. The unaudited pro forma
financial statements should be read in conjunction with the audited historical
financial statements and notes thereto of Garner Printing for the year ended
December 31, 1995 incorporated herein and the Company's audited historical
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K for the fiscal year ended March 31, 1996 previously filed with the
Securities and Exchange Commission. The pro forma financial statements do not
purport to be indicative of the Company's financial position or results of
operations that would have occurred had the transaction been completed as of or
at the beginning of the periods presented, nor do such statements purport to
indicate the Company's financial condition or results of operations at any
future date or for any future period.
2
CONSOLIDATED GRAPHICS, INC.
UNAUDITED PRO FORMA BALANCE SHEET
(IN THOUSANDS)
THE UNAUDITED PRO FORMA BALANCE SHEET PRESENTED BELOW REFLECTS
THE FINANCIAL POSITION OF THE COMPANY AS OF MARCH 31, 1996,
TOGETHER WITH THE FINANCIAL POSITION OF GARNER PRINTING AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
HISTORICAL
----------------------
GARNER PRO FORMA COMPANY
COMPANY PRINTING ADJUSTMENTS PRO FORMA
--------- --------- ------------ -------------
(AUDITED) (AUDITED)
ASSETS
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents....... $ 3,086 $ 149 $ -- $ 3,235
Accounts receivable, net........ 19,317 2,022 -- 21,339
Inventories..................... 8,023 418 -- 8,441
Prepaid expenses................ 1,077 19 -- 1,096
--------- --------- ------------ -------------
Total current assets....... 31,503 2,608 -- 34,111
PROPERTY AND EQUIPMENT, net.......... 50,591 3,533 3,228(a) 57,352
GOODWILL, net........................ 5,015 -- 71(b) 5,086
OTHER ASSETS......................... 700 -- -- 700
--------- --------- ------------ -------------
$87,809 $ 6,141 $ 3,299 $97,249
========= ========= ============ =============
LIABILITIES AND
SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term
debt.......................... $ 1,221 $ 1,360 $ -- $ 2,581
Accounts payable................ 5,719 829 -- 6,548
Accrued liabilities............. 5,648 544 100(c) 6,292
Income taxes payable............ 60 -- -- 60
--------- --------- ------------ -------------
Total current
liabilities............. 12,648 2,733 100 15,481
LONG-TERM DEBT, net of current
portion............................ 20,105 1,507 -- 21,612
DEFERRED INCOME TAXES................ 5,180 -- 967(d) 6,147
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock.................... 59 15 (13)(e) 61
Additional paid-in capital...... 32,762 110 4,021(e) 36,893
Retained earnings............... 17,055 1,776 (1,776)(e) 17,055
--------- --------- ------------ -------------
Total shareholders'
equity.................. 49,876 1,901 2,232 54,009
--------- --------- ------------ -------------
$87,809 $ 6,141 $ 3,299 $97,249
========= ========= ============ =============
</TABLE>
Note: Certain reclassifications were made to the historical financial statements
of Garner Printing for purposes of clear and consistent presentation.
See footnotes on page 4.
3
CONSOLIDATED GRAPHICS, INC.
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
(a) Reflects the additional value assigned, pursuant to purchase accounting
rules, to the property and equipment of Garner Printing.
(b) Reflects the value assigned, pursuant to purchase accounting rules, to
goodwill in connection with the Garner Acquisition.
(c) Reflects estimated costs incurred by the Company in connection with the
Garner Acquisition.
(d) Reflects the amount of additional deferred taxes to be recorded in
connection with the Garner Acquisition pursuant to purchase accounting rules
and Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes".
(e) Reflects the elimination of the historical shareholders' equity of Garner
Printing pursuant to purchase accounting rules and the issuance of 177,780
shares of the Company's common stock, valued at $23.25 per share, as
consideration in the transaction.
4
CONSOLIDATED GRAPHICS, INC.
UNAUDITED PRO FORMA INCOME STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE YEAR ENDED MARCH 31, 1996 OF THE COMPANY TOGETHER WITH THE YEAR ENDED
DECEMBER 31, 1995 OF GARNER PRINTING, ASSUMING THE GARNER ACQUISITION
OCCURRED AS OF THE BEGINNING OF THE ENTITY'S FISCAL YEAR.
<TABLE>
<CAPTION>
HISTORICAL
---------------------------
GARNER PRO FORMA COMPANY
COMPANY PRINTING ADJUSTMENTS PRO FORMA
----------- ------------ ------------ ----------
(AUDITED) (AUDITED)
<S> <C> <C> <C> <C>
SALES................................ $85,133 $ 12,673 $-- $ 97,806
COST OF SALES........................ 61,237 9,756 (206)(a) 70,787
----------- ------------ ------------ ----------
Gross profit.................... 23,896 2,917 206 27,019
SELLING EXPENSES..................... 8,532 1,016 -- 9,548
GENERAL AND ADMINISTRATIVE
EXPENSES........................... 6,873 1,008 (173)(b) 7,708
RESTRUCTURING CHARGE................. 1,500 -- -- 1,500
----------- ------------ ------------ ----------
Operating income................ 6,991 893 379 8,263
INTEREST EXPENSE..................... 876 273 -- 1,149
INTEREST INCOME...................... (16) -- -- (16)
----------- ------------ ------------ ----------
Income before provision for
income taxes.................. 6,131 620 379 7,130
PROVISION FOR INCOME TAXES........... 2,146 -- (c) 379(c) 2,525
----------- ------------ ------------ ----------
NET INCOME........................... $ 3,985 $ 620 $-- $ 4,605
=========== ============ ============ ==========
EARNINGS PER SHARE OF COMMON STOCK... $ .72 $ .81(d)
=========== ==========
</TABLE>
Note: Certain reclassifications were made to the historical financial
statements of Garner Printing for purposes of clear and consistent
presentation.
See footnotes on page 6.
5
CONSOLIDATED GRAPHICS, INC.
NOTES TO UNAUDITED PRO FORMA INCOME STATEMENTS
(a) Reflects a net reduction in depreciation and amortization expense associated
with the Garner Acquisition. Pro forma depreciation and amortization expense
was determined based on a preliminary allocation of the purchase price to
the operating assets acquired based on estimates of fair values and an
estimate of useful lives ranging generally from 3 to 15 years.
(b) Reflects the elimination of certain payments to and on behalf of the selling
shareholders of Garner Printing which will not be incurred prospectively
pursuant to agreement.
(c) Garner Printing operated under S-corporation status for federal and state
income tax purposes prior to the acquisition. Accordingly, no provision for
income tax expense is reflected in Garner Printing's historical financial
statements and an adjustment for pro forma federal and state income tax
expense has been made.
(d) Pro forma earnings per share was calculated based on the historical weighted
average shares of the Company outstanding for the year ended March 31, 1996
of 5,534,180 plus 177,780 shares issued in connection with the Garner
Acquisition.
6
(C) Exhibits.
The following additional exhibits to the report are furnished with this
amendment:
5 -- Consent of Denman & Company, L.L.P.
6 -- Financial Statements of Garner Publishing Company,
including independent auditor's report.
7
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
CONSOLIDATED GRAPHICS, INC.
(REGISTRANT)
By /s/ G. CHRISTOPHER COLVILLE
-----------------------
G. Christopher Colville
VICE PRESIDENT -- MERGERS AND
ACQUISITIONS
CHIEF FINANCIAL AND ACCOUNTING
OFFICER
Date: August 13, 1996
8
EXHIBIT 5
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report included in this Form 8-K/A into the Company's previously filed
Registration Statements No. 33-87192 and
No. 333-06097.
August 13, 1996
West Des Moines, Iowa
EXHIBIT 6
GARNER PUBLISHING COMPANY
D/B/A GARNER PRINTING
DES MOINES, IOWA
FINANCIAL REPORT
AS OF AND FOR THE THREE MONTHS
ENDED MARCH 31, 1996 AND
THE YEAR ENDED DECEMBER 31, 1995
CONTENTS
PAGE
------
INDEPENDENT AUDITOR'S REPORT ON THE
FINANCIAL STATEMENTS............... 3
FINANCIAL STATEMENTS
Balance sheets..................... 4-5
Statements of income............... 6
Statements of stockholders'
equity.......................... 7
Statements of cash flows........... 8-9
Notes to financial statements...... 10-13
2
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Garner Publishing Company
Des Moines, Iowa
We have audited the accompanying balance sheet of Garner Publishing Company
(d/b/a Garner Printing) as of December 31, 1995, and the related statements of
income, stockholders' equity and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Garner Publishing Company as
of December 31, 1995, and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting principles.
DENMAN & COMPANY, L.L.P.
West Des Moines, Iowa
February 7, 1996
3
GARNER PUBLISHING COMPANY
D/B/A GARNER PRINTING
BALANCE SHEETS
MARCH 31 DECEMBER 31
1996 1995
------------ ------------
(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash (Note 3)...................... $ 318,565 $ 148,550
Accounts receivable
Trade, less allowance for
uncollectible accounts
1996 $51,001; 1995 $40,140
(Note 8).................. 1,824,513 1,995,578
Other......................... 1,812 25,964
------------ ------------
1,826,325 2,021,542
Inventories
Work-in-process............... 436,923 183,175
Raw materials................. 263,272 234,739
------------ ------------
700,195 417,914
Prepaid expenses................... 26,508 13,255
Deposit on equipment............... 6,699 6,699
------------ ------------
Total current assets.......... 2,878,292 2,607,960
------------ ------------
PROPERTY AND EQUIPMENT
Land............................... 19,900 19,900
Building........................... 343,904 343,904
Leasehold improvements............. 512,461 498,106
Production equipment............... 6,181,146 5,942,821
Custodial.......................... 4,659 4,659
Office equipment................... 180,620 180,620
Shipping equipment................. 96,039 96,039
Automobiles........................ 256,787 256,787
------------ ------------
7,595,516 7,342,836
Less accumulated depreciation and
amortization...................... 4,022,115 3,810,118
------------ ------------
Total property and
equipment................. 3,573,401 3,532,718
------------ ------------
Totals..................... $ 6,451,693 $6,140,678
============ ============
See Notes to Financial Statements.
4
GARNER PUBLISHING COMPANY
D/B/A GARNER PRINTING
BALANCE SHEETS
MARCH 31 DECEMBER 31
------------ ------------
1996 1995
------------ ------------
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable and current
maturities of long-term debt
(Notes 2 and 3).................. $ 1,394,845 $ 1,359,930
Accounts payable
Trade......................... 1,068,310 828,503
Payroll taxes including
amounts withheld from
employees................. 38,641 124,505
Accrued liabilities
Salaries, wages, commissions
and bonuses............... 162,736 186,593
Vacation pay.................. 153,764 145,805
Property and sales tax........ 71,127 74,109
Interest...................... 13,925 13,282
------------ ------------
Total current
liabilities............. 2,903,348 2,732,727
------------ ------------
LONG-TERM DEBT, less current maturities
(Notes 2 and 3)....................... 1,417,270 1,507,031
------------ ------------
COMMITMENTS AND CONTINGENCIES (Notes 7,
9 and 11)
STOCKHOLDERS' EQUITY
Common stock, no par; authorized
200,000 shares;
issued 1996 and 1995 50,000
shares............................ 15,084 15,084
Additional paid-in capital......... 110,263 110,263
Retained earnings.................. 2,005,728 1,775,573
------------ ------------
Total stockholders' equity.... 2,131,075 1,900,920
------------ ------------
Totals..................... $ 6,451,693 $ 6,140,678
============ ============
See Notes to Financial Statements.
5
GARNER PUBLISHING COMPANY
D/B/A GARNER PRINTING
STATEMENTS OF INCOME
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
1996 1995
------------------ ------------
(UNAUDITED)
NET SALES (Note 8)................... $3,299,799 $ 12,673,376
COST OF SALES
Materials....................... 1,142,634 4,841,579
Direct labor.................... 407,817 1,626,662
Factory overhead................ 946,488 3,462,220
------------------ ------------
Totals..................... 2,496,939 9,930,461
Production transfers............ (1,542) (49,103)
------------------ ------------
Total cost of sales........ 2,495,397 9,881,358
------------------ ------------
Gross profit............ 804,402 2,792,018
------------------ ------------
OPERATING EXPENSES
Selling expenses................ 281,286 1,015,874
Administrative and general
expenses...................... 230,084 1,007,908
------------------ ------------
511,370 2,023,782
------------------ ------------
Operating income........... 293,032 768,236
FINANCIAL INCOME (EXPENSE),
including interest expense 1996
$64,884, 1995 $273,147............. (46,877) (148,296)
------------------ ------------
Net income................. $ 246,155 $ 619,940
================== ============
See Notes to Financial Statements.
6
GARNER PUBLISHING COMPANY
D/B/A GARNER PRINTING
STATEMENTS OF STOCKHOLDERS' EQUITY
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND THE
YEAR ENDED DECEMBER 31, 1995
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS
------- ----------- ----------
BALANCE, December 31, 1994........... $15,084 $ 110,263 $1,583,133
Net income......................... -- -- 619,940
Distributions to stockholders...... -- -- (427,500)
------- ----------- ----------
BALANCE, December 31, 1995........... 15,084 110,263 1,775,573
Net income (Unaudited)............. -- -- 246,155
Distributions to stockholders
(Unaudited)........................ -- -- (16,000)
------- ----------- ----------
BALANCE, March 31, 1996
(Unaudited).......................... $15,084 $ 110,263 $2,005,728
======= =========== ==========
See Notes to Financial Statements
7
GARNER PUBLISHING COMPANY
D/B/A/ GARNER PRINTING
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
1996 1995
------------------ ------------
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers....... $ 3,465,761 $ 12,465,278
Cash paid to suppliers and
employees........................ (2,913,016) (10,722,294)
Interest paid...................... (64,241) (270,671)
------------------ ------------
Net cash provided by operating
activities................. 488,504 1,472,313
------------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures............... (271,823) (303,964)
Proceeds from sale of property and
equipment........................ -- 1,300
------------------ ------------
Net cash (used in) investing
activities................. (271,823) (302,664)
------------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt....... 206,180 833,454
Principal payments on long-term
debt............................. (230,207) (1,560,451)
Net proceeds (payments) under
short-term lines of credit....... (6,639) 126,023
Distributions to stockholders...... (16,000) (427,500)
------------------ ------------
Net cash (used in) financing
activities................. (46,666) (1,028,474)
------------------ ------------
NET INCREASE IN CASH.................... 170,015 141,175
CASH
Beginning.......................... 148,550 7,375
------------------ ------------
Ending............................. $ 318,565 $ 148,550
================== ============
See Notes to Financial Statements.
8
GARNER PUBLISHING COMPANY
D/B/A/ GARNER PRINTING
STATEMENTS OF CASH FLOWS -- (CONTINUED)
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
1996 1995
------------------ ------------
(UNAUDITED)
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Net income......................... $246,155 $ 619,940
Adjustments to reconcile net income
to net cash
provided by operating activities
Depreciation and
amortization............... 211,997 789,961
Loss on disposal of
equipment.................. -- 3,909
Changes in assets and
liabilities
(Increase) decrease in
accounts receivable,
trade.................... 171,065 (163,352)
(Increase) in other
receivables,
net of investing
activities............... (28) (1,336)
(Increase) decrease in
inventories.............. (282,281) 102,840
(Increase) decrease in
prepaid expenses......... (13,253) 10,324
Increase (decrease) in
accounts payable, trade,
net of amounts for
capital expenditures..... 258,950 (10,176)
Increase (decrease) in
accounts payable, payroll
taxes.................... (85,864) 46,574
Increase (decrease) in
accrued liabilities
Salaries, wages,
commissions and
bonuses............... (23,857) 63,036
Vacation pay............. 7,959 (6,123)
Property and sales tax... (2,982) 14,240
Interest................. 643 2,476
------------------ ------------
Net cash provided by operating
activities....................... $488,504 $1,472,313
================== ============
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING
AND FINANCING ACTIVITIES
Capital lease obligations incurred
for the use of equipment......... $-- $ 364,325
================== ============
See Notes to Financial Statements.
9
GARNER PUBLISHING COMPANY
D/B/A GARNER PRINTING
NOTES TO FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF ACCOUNTING POLICIES
COMPANY'S ACTIVITIES
The Company conducts a general printing and publishing business, primarily
performed on a job or custom basis, for customers primarily located in Iowa and
South Dakota.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
principally by the first-in, first-out method. In printing and publishing
operations, the Company employs a full absorption procedure using standard cost
techniques.
CAPITALIZATION, DEPRECIATION AND AMORTIZATION
Property and equipment are recorded at cost. Depreciation is provided on
straight-line and accelerated methods over the estimated useful lives of the
assets. The costs of major remodeling and improvements are capitalized as
leasehold improvements. Leasehold improvements are amortized over the shorter of
the life of the applicable lease or the life of the asset.
INTERIM FINANCIAL INFORMATION
The interim financial statements as of March 31, 1996, and for the three
months ended March 31, 1996, are unaudited, and certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted. In the opinion
of management, all adjustments consisting only of normal recurring adjustments
necessary to fairly present the financial position, results of operations and
cash flows with respect to the interim financial statements have been included.
The results of operations for the interim period are not necessarily indicative
of the results for the entire year.
10
GARNER PUBLISHING COMPANY
D/B/A GARNER PRINTING
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2 NOTES PAYABLE AND LONG-TERM DEBT
Following is a summary of notes payable and long-term debt:
MARCH 31, DECEMBER 31,
1996 1995
----------- ------------
(UNAUDITED)
Notes payable, bank
Notes due May 3, 1996, with monthly
interest payments due at 1% over the
bank's prime rate. (The interest rate
was 9.5% at December 31, 1995.)... $ 419,384 $ 426,023
Note payable in monthly
installments of $2,400 including
interest at 1% over the bank's
prime rate. (The interest rate was
9.5% at December 31, 1995.)
Remaining principal balance is due
April 20, 1996.................... 742 7,846
THE ABOVE NOTES ARE COLLATERALIZED BY ALL ASSETS OF THE COMPANY SUBJECT
ONLY TO SECURITY INTERESTS IN EQUIPMENT PURCHASED FROM OTHER LENDERS SHOWN
BELOW, AND ARE SECURED BY PERSONAL GUARANTEES OF THE STOCKHOLDERS.
Equipment notes payable in monthly
installments totaling $69,355 including
interest at rates ranging from 8.34%
to 10.95% through July 1999. Collateralized
by equipment with an aggregate book value of
$1,931,883............................ 1,371,900 1,547,152
Equipment obligations payable in monthly
installments totaling $15,172
including interest at rates ranging
from 8.45% to 8.7% through January
2001. Collateralized by production
equipment with an aggregate book value
of $460,640........................... 648,795 496,567
Vehicle notes payable in monthly
installments totaling $5,081 including
interest at rates ranging from 6.95%
to 9% through October 1998.
Collateralized by vehicles with an
aggregate book value of $167,693...... 101,847 114,714
Real estate note payable in monthly
installments of $3,841 including
interest at 9.25% through October
2004. Collateralized by land and
building with a book value of
$381,511.............................. 269,447 274,659
----------- ------------
2,812,115 2,866,961
Less current maturities............ 1,394,845 1,359,930
----------- ------------
$ 1,417,270 $1,507,031
=========== ============
The aggregate amount of required payments at December 31, 1995, is as
follows:
YEAR ENDED DECEMBER 31
- ----------------------------------------
1996.............................. $ 1,359,930
1997.............................. 750,619
1998.............................. 332,124
1999.............................. 150,299
2000.............................. 122,255
Thereafter........................ 151,734
------------
Total........................ $ 2,866,961
============
11
GARNER PUBLISHING COMPANY
D/B/A GARNER PRINTING
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3 FAIR VALUE OF FINANCIAL INSTRUMENTS
All financial instruments are held for purposes other than trading. The
following methods and assumptions were used to estimate the fair value of each
financial instrument for which it is practicable to estimate that value:
CASH
The carrying amount approximates fair value because of the short maturity
of those instruments.
NOTES PAYABLE, BANK
The carrying amount approximates fair value due to variable interest rates
on these notes.
LONG-TERM DEBT
The fair value of the Company's long-term debt, excluding capital lease
obligations, is estimated based on the current rates offered to the Company for
debt of the same remaining maturities with similar collateral requirements.
The estimated fair values of the Company's financial instruments as of
December 31, 1995 are as follows:
CARRYING
AMOUNT FAIR VALUE
------------ ------------
Cash................................. $ 148,550 $ 148,550
Notes payable, bank.................. 433,869 433,869
Long-term debt
Vehicle notes................... 114,714 114,714
Equipment notes................. 1,547,152 1,552,017
Real estate note................ 274,659 274,659
NOTE 4 INCOME TAX STATUS
The Company, with the consent of its stockholders, has elected to be taxed
under sections of the federal and state income tax laws, which provide that, in
lieu of corporation income taxes, the stockholders separately account for their
pro rata shares of the Company's items of income, deductions, losses and
credits. Therefore, these statements do not include any provision for
corporation income taxes.
NOTES 5 PROFIT SHARING RETIREMENT PLAN
The Company has adopted a defined contribution profit sharing retirement
plan for nonbargaining unit employees. The plan provides for employer
contributions of an amount necessary to match any nonbargaining unit employee
contribution up to 4% of wages. An additional amount may be deposited as
determined by the Board of Directors. Profit sharing and retirement plan expense
was $50,559 for the year ended December 31, 1995.
NOTE 6 MULTIEMPLOYER PENSION PLAN
The Company contributes to a defined benefit multiemployer pension plan for
its union employees. The plan is contributed to on a monthly basis at a
percentage of hourly pay. Amounts charged to pension expense and contributed to
the plan totaled $93,532 for the year ended December 31, 1995.
NOTE 7 LEASE COMMITMENTS
In 1994, the Company purchased 51% of the building and land at its current
operating location. The note payable for this purchase is described in Note 2.
The remaining 49% of the building and land is being leased by the Company under
a noncancelable operating lease. The original term lease expires in October
1996, with an option to purchase the remaining interest at that time for
$389,999. If the option to purchase is not exercised, the lease will continue
through a series of automatic one year renewals, with a new purchase option
after each successive year, until October 2006 at which time the option price is
$200,000. In the event none of the options to purchase are exercised, the lease
will automatically extend for an additional five years for a monthly lease
amount of $5,386. Minimum future rental payments through
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GARNER PUBLISHING COMPANY
D/B/A GARNER PRINTING
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
October 2006 totaling $531,186 are as follows for the years ending December
31: 1996 $58,323; 1997 $48,088; 1998 $48,088; 1999 $48,088; 2000 $48,088;
thereafter, $280,511.
Net rent charged to expense amounted to $59,342 for the year ended December
31, 1995.
NOTE 8 MAJOR CUSTOMERS/CONCENTRATIONS OF CREDIT RISK
Net sales for 1995 include sales of $2,335,026 to one major customer which
accounted for 18% of the total net sales of the Company for the year ended
December 31, 1995. Trade receivables for this customer were $476,940 as of
December 31, 1995.
Additionally, the Company maintains its cash accounts at one commercial
bank. The amount on deposit at December 31, 1995 exceeded the limits of the
Federal Deposit Insurance Corporation by approximately $193,000.
NOTE 9 STOCK REDEMPTION AGREEMENT
In the event of the death or departure of a stockholder, the Company has
agreed to purchase the outstanding stock held by the stockholder. The redemption
value is to be computed using a formula whereby the excess or deficiency in
average earnings (as compared to industry standards) is capitalized at an agreed
upon rate for purposes of computing the amount to be assigned to goodwill, which
is then added to or subtracted from the fair value of net tangible assets. At
death, life insurance policies are to be used to redeem the stock. In the event
of departure for reasons other than death, the redemption value is to be paid in
equal monthly installments with interest over a ten year period to begin 60 days
after departure.
On January 1, 1996 a stockholder retired. As of this date, neither the
redemption value nor the other terms of the pay-off have been agreed upon.
NOTE 10 INTENTION TO DECLARE DIVIDENDS
The Board of Directors intends to declare dividends during the year
subsequent to the balance sheet date to assist the stockholders in paying their
personal income taxes on the income of the Corporation.
NOTE 11 COMMITMENTS
On December 29, 1995, the Company committed to purchasing certain
production equipment at a total cost of $182,000. The purchase will be financed
over five years and will be payable in monthly installments of $3,769 including
interest at 8.9%
NOTE 12 SUBSEQUENT EVENT (UNAUDITED)
On May 23, 1996, the Company and Consolidated Graphics, a commercial
printing company, entered into a letter of intent that would result in the
Company becoming a subsidiary of Consolidated Graphics. The proposed acquisition
is subject to numerous conditions that must be finalized.
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