-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, O0obKPpxfU2s5LKzR7Nz0pXZBWXLXWEJ+6tbUy5PtTb40cWrFRYfYyWm21JxhMAE 6RtBwMopr33iidze2VeL0g== 0001015357-99-000030.txt : 19990217 0001015357-99-000030.hdr.sgml : 19990217 ACCESSION NUMBER: 0001015357-99-000030 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981130 ITEM INFORMATION: FILED AS OF DATE: 19990216 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNIDIGITAL INC CENTRAL INDEX KEY: 0001003934 STANDARD INDUSTRIAL CLASSIFICATION: SERVICE INDUSTRIES FOR THE PRINTING TRADE [2790] IRS NUMBER: 133856672 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 001-14126 FILM NUMBER: 99541703 BUSINESS ADDRESS: STREET 1: 229 WEST 28TH STREET CITY: NEW YORK STATE: NY ZIP: 10001 BUSINESS PHONE: 2122447820 MAIL ADDRESS: STREET 1: 229 WEST 28TH STREET CITY: NEW YORK STATE: NY ZIP: 10001 8-K/A 1 UNIDIGITAL FORM 8-K/A 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 (Date of earliest event reported) February 16, 1999 (November 30, 1998) Unidigital Inc. (Exact Name of Registrant as Specified in Charter) Delaware 1-14126 13-3856672 - -------------------------------------------------------------------------------- (State or Other Jurisdiction (Commission File Number) (IRS Employer of Incorporation) Identification No.) 229 West 28th Street, New York, New York 10001 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (zip code) (212) 244-7820 ------------------------------------------------ (Registrant's telephone number, including area code) --------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. As reported in the Current Report on Form 8-K dated December 14, 1998 filed by Unidigital Inc. (the "Company"), on November 30, 1998, the Company consummated the acquisition of all of the issued and outstanding capital stock of SuperGraphics Holding Company, Inc., a Delaware corporation ("SuperGraphics"). As a result of the acquisition, SuperGraphics became a wholly-owned subsidiary of the Company. The Company hereby files this Amendment No. 1 on Form 8-K/A to file the financial statements and related pro forma financial statements required pursuant to Item 7 of Form 8-K with respect to such transaction. (a) FINANCIAL INFORMATION OF BUSINESS ACQUIRED. SUPERGRAPHICS HOLDING COMPANY, INC. AND SUBSIDIARY For the Year Ended December 31, 1997 (With Report of Independent Certified Public Accountants) SUPERGRAPHICS HOLDING COMPANY, INC. AND SUBSIDIARY ================================================================================ CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 1997 SUPERGRAPHICS HOLDING COMPANY, INC. AND SUBSIDIARY CONTENTS ================================================================================ REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 3 FINANCIAL STATEMENTS Consolidated balance sheet 4-5 Consolidated statement of income 6 Consolidated statement of stockholders' equity 7 Consolidated statement of cash flows 8 Summary of accounting policies 9-10 Notes to financial statements 11-16 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors SuperGraphics Holding Company, Inc. and Subsidiary Sunnyvale, California We have audited the consolidated balance sheet of SuperGraphics Holding Company, Inc. and Subsidiary as of December 31, 1997, and the related statements of income, stockholders' equity, and cash flow 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 SuperGraphics Holding Company, Inc. and Subsidiary at December 31, 1997, and the results of their operations and their cash flow for the year then ended, in conformity with generally accepted accounting principles. /s/ BDO Seidman, LLP San Francisco, California March 12, 1998 3 SUPERGRAPHICS HOLDING COMPANY, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEET ================================================================================ DECEMBER 31, 1997 - -------------------------------------------------------------------------------- ASSETS (Note 3) CURRENT Cash and cash equivalents $ 284,925 Accounts receivable, less allowance for possible losses of $35,000 (Note 2) 2,468,975 Inventory 203,092 Net deferred tax assets (Note 4) 151,000 Prepaid expenses and other 71,927 - -------------------------------------------------------------------------------- TOTAL CURRENT ASSETS 3,179,919 - -------------------------------------------------------------------------------- PROPERTY AND EQUIPMENT Machinery and equipment 249,983 Computer equipment 208,463 Furniture and fixtures 5,318 Leasehold improvements 9,760 - -------------------------------------------------------------------------------- 473,524 Less accumulated depreciation and amortization 155,863 - -------------------------------------------------------------------------------- NET PROPERTY AND EQUIPMENT 317,661 - -------------------------------------------------------------------------------- OTHER ASSETS Deferred loan costs, net of accumulated amortization of $47,403 332,237 Goodwill, net of accumulated amortization of $390,783 (Note 1) 7,382,842 - -------------------------------------------------------------------------------- TOTAL OTHER ASSETS 7,715,079 - -------------------------------------------------------------------------------- $11,212,659 - -------------------------------------------------------------------------------- SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES AND NOTES TO FINANCIAL STATEMENTS. 4 SUPERGRAPHICS HOLDING COMPANY, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEET ================================================================================ DECEMBER 31, 1997 - -------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 604,085 Accrued expenses 698,852 Accrued income taxes (Note 4) 440,180 Current portion, notes payable (Note 3) 1,761,388 - -------------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 3,504,505 - -------------------------------------------------------------------------------- Long-term portion, notes payable (Note 3) 5,050,494 - -------------------------------------------------------------------------------- TOTAL LIABILITIES 8,554,999 - -------------------------------------------------------------------------------- COMMITMENTS AND CONTINGENCIES (Notes 1 and 6) STOCKHOLDERS' EQUITY (Note 5) Preferred stock, $0.10 par value-shares authorized, 6,000; issued and outstanding 2,000 200 Common stock, $0.01 par value-shares authorized, 6,000,000; issued and outstanding, 500,000 5,000 Additional paid-in capital 2,494,800 Retained earnings 157,660 - -------------------------------------------------------------------------------- TOTAL STOCKHOLDERS' EQUITY 2,657,660 - -------------------------------------------------------------------------------- $11,212,659 - -------------------------------------------------------------------------------- SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES AND NOTES TO FINANCIAL STATEMENTS. 5 SUPERGRAPHICS HOLDING COMPANY, INC. AND SUBSIDIARY CONSOLIDATED STATEMENT OF INCOME ================================================================================ YEAR ENDED DECEMBER 31, 1997 - -------------------------------------------------------------------------------- REVENUES $7,906,433 COST OF REVENUES, including depreciation of $160,975 4,801,043 - -------------------------------------------------------------------------------- Gross profit 3,105,390 - -------------------------------------------------------------------------------- OPERATING EXPENSES Marketing and sales 1,003,828 General and administrative 393,620 Amortization expense (Note 1) 438,745 - -------------------------------------------------------------------------------- TOTAL OPERATING EXPENSES 1,836,193 - -------------------------------------------------------------------------------- OPERATING INCOME 1,269,197 OTHER INCOME (EXPENSE) Interest income 8,778 Interest expense (681,015) - -------------------------------------------------------------------------------- INCOME BEFORE INCOME TAXES 596,960 INCOME TAXES (Note 4) 439,300 - -------------------------------------------------------------------------------- NET INCOME $ 157,660 - -------------------------------------------------------------------------------- SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES AND NOTES TO FINANCIAL STATEMENTS. 6
SUPERGRAPHICS HOLDING COMPANY, INC. AND SUBSIDIARY CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY ================================================================================================================================= Additional Total Common Stock Preferred Stock Paid-In Retained Stockholders' --------------------- ---------------- Shares Amount Shares Amount Capital Earnings Equity - --------------------------------------------------------------------------------------------------------------------------------- Issuance of common stock; 500,000 shares at $.01 per share in January 1997 500,000 $5,000 - $ - $ 495,000 $ - $ 500,000 Issuance of preferred stock; 2,000 shares at $0.10 per share in January 1997 - - 2,000 200 1,949,800 - 2,000,000 Net income for the year - - - - - 157,660 157,660 - --------------------------------------------------------------------------------------------------------------------------------- BALANCE, December 31, 1997 500,000 $5,000 2,000 $200 $2,494,800 $157,660 $2,657,660 - ---------------------------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES AND NOTES TO FINANCIAL STATEMENTS. 7 SUPERGRAPHICS HOLDING COMPANY, INC. AND SUBSIDIARY CONSOLIDATED STATEMENT OF CASH FLOWS ================================================================================ YEAR ENDED DECEMBER 31, 1997 - -------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 157,660 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 160,975 Amortization 438,745 Changes in assets and liabilities, net of assets acquired and liabilities assumed: Accounts receivable (1,618,874) Inventory (30,217) Net deferred tax assets 4,000 Prepaid expenses and other 209,213 Accounts payable 838,196 Accrued expenses and taxes 285,811 - -------------------------------------------------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 445,509 - -------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Capital contributions 2,500,000 Payment for purchase of business, net of cash acquired (2,288,625) Purchase of property and equipment (60,726) - -------------------------------------------------------------------------------- CASH FLOWS PROVIDED BY INVESTING ACTIVITIES 150,649 - -------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Deferred loan costs (380,199) Payments on notes payable (1,155,000) Advances from notes payable 1,223,966 - -------------------------------------------------------------------------------- NET CASH USED IN FINANCING ACTIVITIES (311,233) - -------------------------------------------------------------------------------- NET INCREASE IN CASH 284,925 CASH AND CASH EQUIVALENTS, beginning of year - - -------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, end of year $ 284,925 - -------------------------------------------------------------------------------- SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES AND NOTES TO FINANCIAL STATEMENTS. 8 SUPERGRAPHICS HOLDING COMPANY, INC. AND SUBSIDIARY SUMMARY OF ACCOUNTING POLICIES ================================================================================ ORGANIZATION AND SuperGraphics Holding Company, Inc. (the Company) was formed NATURE OF BUSINESS to purchase the stock of SuperGraphics, Inc. which provides short-run, photo realistic imaging of large format graphics on self-adhesive vinyl in the transit, broadcast and signage industries. The Company is positioned as a wholesaler and sells its products through media sales and production companies primarily in the United States. MANAGEMENT'S USE The preparation of financial statements in conformity with OF ESTIMATES generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of 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. CASH AND CASH The Company considers all highly liquid investments with an EQUIVALENTS original or remaining maturity of three months or less at the date of purchase to be cash equivalents. REVENUE Revenues from product sales are recognized upon shipment if RECOGNITION remaining obligations are insignificant and collection of the resulting accounts receivable is probable. Where the Company receives payments from customers in advance of shipment of the product, those amounts are recognized as a liability until shipment occurs. INVENTORY Inventory consists of raw materials, stated at the lower of cost (first-in, first-out) or market, and Jobs-in-Process which includes accumulated material, labor and overhead costs. Costs are applied to jobs at standards which approximate actual cost. PROPERTY, Property and equipment are stated at cost less accumulated EQUIPMENT AND depreciation and amortization. Depreciation is provided DEPRECIATION using the straight-line method over the estimated useful lives of the assets. Equipment acquired under capital leases is stated at cost and amortized on a straight-line basis over the period of the lease. 9 SUPERGRAPHICS HOLDING COMPANY, INC. AND SUBSIDIARY SUMMARY OF ACCOUNTING POLICIES ================================================================================ WARRANTY The Company provides a one-year warranty regarding the workmanship, including installation, of its product. Accrued warranty costs of $75,000 are included in accrued expenses on the consolidated balance sheet. TAXES ON INCOME Income taxes are calculated using the liability method specified by Statement of Financial Accounting Standards No. 109, ACCOUNTING FOR INCOME TAXES. Deferred income tax assets and liabilities are recognized based on temporary differences between the financial statements and income tax bases of assets, liabilities and carryforwards using enacted tax rates. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. GOODWILL Goodwill arose on the acquisition of the stock of SuperGraphics, Inc. (the Subsidiary) by SuperGraphics Holding Company, Inc. on January 3, 1997. The Company is amortizing its goodwill over twenty years. DEFERRED LOAN Deferred loan costs arose on the refinancing of the original COSTS notes payable and are amortized over the approximate term on the Company's Stepdown Revolving Term Loan (four years). 10 SUPERGRAPHICS HOLDING COMPANY, INC. AND SUBSIDIARY NOTES TO FINANCIAL STATEMENTS ================================================================================ 1. ACQUISITION The Company commenced operations with the acquisition of SuperGraphics, Inc.'s stock on January 3, 1997 for approximately $10.6 million, including acquisition expenses. The Company is also obligated to the former shareholders of SuperGraphics, Inc. for "earn out" payments equal to 15% of net operating income for 1999 and 2000, plus an additional 10% of amounts that exceed projected operating income. Net assets acquired consisted of the following: ------------------------------------------------------------ Cash $1,599,000 Accounts receivable 850,000 Other current assets 609,000 Property and equipment 418,000 Accounts payable and accrued expenses (633,000) ------------------------------------------------------------ $2,843,000 ------------------------------------------------------------ 2. CERTAIN RISK AND The Company's products are concentrated in the entertainment CONCENTRATIONS and retail industries which are highly competitive and rapidly changing. The majority of the Company's sales are referred from one media sales company. As of December 31, 1997, two customers account for 12.3% and 10.1% of accounts receivable. Sales to these customers represented approximately 4% and 3% of 1997 sales. Supply for self-adhesive vinyl is concentrated among a few providers. The loss of certain supplier relationships, significant technological changes in the industry or customer requirements, or the emergence of competitor products with new capabilities or technologies could adversely affect operating results. 3. NOTES PAYABLE DECEMBER 31, 1997 ------------------------------------------------------------ Notes payable to previous stockholders of SuperGraphics, Inc. Non-interest bearing note payable in quarterly installments of $241,513, with $724,540 due as a final payment on June 30, 1998. Discounted at 10%. Unamortized discount at December 31, 1997 totals $41,133. $1,166,433 11 SUPERGRAPHICS HOLDING COMPANY, INC. AND SUBSIDIARY NOTES TO FINANCIAL STATEMENTS ================================================================================ DECEMBER 31, 1997 ------------------------------------------------------------ Notes payable to current shareholders of SuperGraphics Holding Company, Inc. $1 Million Junior Promissory Notes bearing interest at 8% from January 3, 1997 until the first payment of principal ($500,000) on June 30, 1997, and at the rate of 15% until the note is paid in full. The balance of the note shall be due on January 1, 1999. $ 500,000 Credit Agreement secured by majority of the Company's assets. The agreement requires the Company to maintain certain financial covenants. As of December 31, 1997, the Company was in compliance with the covenants: Stepdown Revolving Term Loan, repayable in scheduled quarterly installments. Interest is payable monthly at the reference rate at time of borrowing plus 1.75% or LIBOR plus 3.75%, currently 10.25%. The term loan terminates on July 1, 2001. 4,641,468 $1.5 Million Working Capital Commitment, bearing interest at the reference rate at time of borrowing plus 1.75% or LIBOR plus 3.75%, currently 10.25%. Interest is payable monthly. The minimum loan balance is $1,000. The working capital commitment decreases based upon certain asset or stock sales. The loan terminates on July 1, 2001, with a possible extension for an additional 12 months, but in no event beyond July 1, 2003. 1,000 Term Loan, bearing interest at the reference rate at the time of borrowing plus 2.25% or LIBOR plus 4.25%, payable monthly, currently 10.75%. The loan is repayable in scheduled quarterly installments. The term loan terminates on July 1, 2003. 483,026 Other 19,955 ------------------------------------------------------------ Total notes payable 6,811,882 Less current portion 1,761,388 ------------------------------------------------------------ Long-term notes payable $5,050,494 ------------------------------------------------------------ Principal payments due over the next five years total approximately $1,761,000, $1,475,000, $1,675,000, $1,698,000 and $202,000. 12 SUPERGRAPHICS HOLDING COMPANY, INC. AND SUBSIDIARY NOTES TO FINANCIAL STATEMENTS ================================================================================ 4. INCOME TAXES The provision for income taxes is as follows: 1997 ------------------------------------------------------------ CURRENT Federal $364,000 State 53,000 ------------------------------------------------------------ 417,000 DEFERRED TAXES 22,300 ------------------------------------------------------------ $439,300 ------------------------------------------------------------ The Company's effective income tax rate is in excess of statutory rates primarily because of nondeductible goodwill totaling approximately $400,000. The Company's net deferred tax assets are as follows: 1997 ------------------------------------------------------------ Deferred tax assets: Allowance for doubtful accounts $ 15,000 Accrued vacation and payroll 27,500 Other accruals 83,000 California net operating loss carryforward (NOL) 49,000 ------------------------------------------------------------ 174,500 Deferred tax liabilities: Accumulated depreciation (23,500) ------------------------------------------------------------ Net deferred tax assets $151,000 ------------------------------------------------------------ As of December 31, 1997, the Company has approximately $550,000 of California net operating loss carryforwards remaining from its acquisition of SuperGraphics, Inc. The NOLs expire in 2002. 13 SUPERGRAPHICS HOLDING COMPANY, INC. AND SUBSIDIARY NOTES TO FINANCIAL STATEMENTS ================================================================================ 5. SHAREHOLDERS' Preferred Stock --------------- EQUITY The preferred stock issued and outstanding at December 31, 1997, consists of Series A Preferred Stock. The holders of Series A Preferred Stock are entitled to receive dividends prior to and in preference to any declaration or payment of any dividends on common stock, at the rate of 10% (or $100) per annum per share of Series A Preferred Stock, and no more, payable quarterly, commencing January 3, 1997. Such dividends are cumulative from the later of the date of issuance of the shares of Series A Preferred Stock or the most recent dividend payment date. Cumulative unpaid dividends at December 31, 1997 total $200,000. The shares of Series A Preferred Stock are redeemable at the option of the Company, at any time, subject to certain limitations, at a call price of $1,020 per share during 1998 and $1,010 per share during 1999 and thereafter, plus all accrued and unpaid dividends. In the event of any liquidation, dissolution or winding up of the affairs of the Company, the holders of shares of Series A Preferred Stock are entitled to receive, in cash, out of the remaining net assets of the Company, $1,000 plus accrued and unpaid dividends for each share, in preference to the holders of common stock. Common Stock ------------ The Company has a stock option plan (the Plan) under which 55,556 shares of the Company's common stock have been reserved for grant of stock options to employees, directors or consultants under terms and provisions established by the Board of Directors. Options may only be exercised when vested. Options generally vest ratably over a four-year period commencing at the grant date. 14 SUPERGRAPHICS HOLDING COMPANY, INC. AND SUBSIDIARY NOTES TO FINANCIAL STATEMENTS ================================================================================ The following table summarizes the stock option activity:
Options Available Options Outstanding ---------------------------- for Grant Shares Price Per Share ---------------------------------------------------------------------- Options authorized 55,556 Options granted (27,778) 27,778 $1 ---------------------------------------------------------------------- BALANCE, December 31, 1997 27,778 27,778 $1 ----------------------------------------------------------------------
In January 1998, 9,250 options were granted to employees. As permitted by Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation, the Company uses the intrinsic value method prescribed by APB Opinion No. 25, Accounting for Stock Issued to Employees, to account for employee stock options. The Company applies APB Opinion No. 25 and related interpretations in accounting for its plans. Stock options are granted to employees with an exercise price equal to the estimated fair market value of the stock. Accordingly, no compensation cost has been recognized for its stock option plan. Had compensation cost for the Company's stock-based compensation plan been determined based on the fair value at the grant dates for awards under the plan consistent with the method of FASB Statement 123, the Company's net income would not have been materially affected. 6. COMMITMENTS The Company leases its facility under a noncancelable AND operating lease expiring in July 1999. CONTINGENCIES 15 SUPERGRAPHICS HOLDING COMPANY, INC. AND SUBSIDIARY NOTES TO FINANCIAL STATEMENTS ================================================================================ Future annual minimum lease payments under non-cancelable operating leases as of December 31, 1997 are as follows: YEARS ENDED DECEMBER 31, ------------------------------------------------------------ 1998 $111,720 1999 65,170 ------------------------------------------------------------ Total minimum lease payments $176,890 ------------------------------------------------------------ Rent expense for the year ended December 31, 1997 was $124,118. The Company is currently disputing penalties and interest charges of approximately $144,000 for late filing of the 1996 income tax return of SuperGraphics, Inc., which was acquired on January 3, 1997. The Company does not believe the outcome of this matter will have a material adverse effect on its financial condition. This potential liability is not accrued in the financial statements. 7. SUPPLEMENTAL Year ended December 31, 1997 ------------------------------------------------------------ CASH FLOW Cash paid during the period for: INFORMATION Taxes $ 16,000 Interest $394,994 ------------------------------------------------------------ In connection with the acquisition of SuperGraphics, Inc., the Company issued notes payable totaling approximately $6.7 million. During 1997, the Company refinanced debt totaling $4.4 million. 16 (b) PRO FORMA FINANCIAL INFORMATION (UNAUDITED). PRO FORMA FINANCIAL INFORMATION The following Pro Forma Financial Statements are based on the historical financial statements of the Company, adjusted to give effect to the acquisition of all of the capital stock of SuperGraphics by the Company (the "SuperGraphics Acquisition"). The Pro Forma Statements of Operations for the three months ended November 30, 1998 and the twelve months ended August 31, 1998 assume that the SuperGraphics Acquisition occurred as of the first day of the applicable period and are adjusted to give effect to the merger of Hy Zazula Associates, Inc., a New York corporation, into a wholly-owned subsidiary of the Company on October 30, 1998 (the "Zazula Acquisition") and assume that such acquisition occurred as of the first day of the applicable periods. In addition, the Pro Forma Statement of Operations for the twelve months ended August 31, 1998 is adjusted to give effect to the Company's acquisition of substantially all of the assets of Kwik International Color, Ltd., a New York corporation, on March 25, 1998 (the "Kwik Acquisition"), its acquisition of certain of the assets of Five Star Finishers, Ltd., a United Kingdom corporation, on July 2, 1998 (the "Five Star Acquisition") and its acquisition of all of the capital stock of Mega Art Corp., a New York corporation, on September 2, 1998 (the "Mega Art Acquisition") and assumes that such acquisitions occurred as of September 1, 1997. As noted above, the SuperGraphics Acquisition occurred on November 30, 1998. As a result, the balance sheet which is included in the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1998 includes the balance sheet items acquired in connection with the SuperGraphics Acquisition. Accordingly, a pro forma balance sheet is not required to be filed herewith. The Pro Forma Financial Statements should be read in conjunction with the audited consolidated financial statements of the Company and the related notes thereto which are included in the Company's Annual Report on Form 10-KSB for the year ended August 31, 1998, the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1998, the Company's Current Report on Form 8-K/A2 dated December 17, 1998, the Company's Current Report on Form 8-K dated December 14, 1998, the Company's Current Report on Form 8-K/A dated November 16, 1998, the Company's Current Report on Form 8-K dated November 16, 1998, the Company's Current Report on Form 8-K dated September 14, 1998, the Company's Current Report on Form 8-K/A dated June 8, 1998, the Company's Current Report on Form 8-K dated April 8, 1998 (each as filed with the Securities and Exchange Commission) and the audited financial statements of SuperGraphics that are filed herewith. The pro forma financial information does not purport to present what the Company's results of operations would actually have been if the SuperGraphics Acquisition, the Zazula Acquisition, the Mega Art Acquisition, the Five Star Acquisition and the Kwik Acquisition had occurred on the assumed dates, as specified above, or to project the Company's financial condition or results of operations for any future period.
UNIDIGITAL INC. --------------- PRO FORMA CONDENSED STATEMENT OF OPERATIONS (UNAUDITED) ------------------------------------------------------- THREE MONTHS ENDED NOVEMBER 30, 1998 ------------------------------------ UNIDIGITAL ZAZULA* SUPERGRAPHICS** ADJUSTMENTS PRO FORMA ---------- ------- --------------- ----------- --------- Revenues Net sales................... $15,953,000 $600,000 $2,566,000 $ -- $19,119,000 ----------- ---------- ------------ ----------- ----------- Expenses Cost of sales............... 8,748,000 349,000 1,547,000 -- 10,644,000 Selling, general & administrative expenses... 5,404,000 411,000 1,109,000 (a) 133,000 7,057,000 Expenses incurred due to restructuring............. 198,000 -- -- -- 198,000 ----------- ---------- ------------ ----------- ---------- Total operating expenses.... 14,350,000 760,000 2,656,000 133,000 17,899,000 Income from operations...... 1,603,000 (160,000) (90,000) (133,000) 1,220,000 Interest expense............ (1,167,000) -- (300,000) (b) (336,000) (1,803,000) Interest expense-deferred financing costs........... (56,000) -- -- (c) (24,000) (80,000) Interest and other income- net....................... 271,000 -- -- -- 271,000 ----------- ---------- ------------ ----------- ---------- Income (loss) before income taxes..................... 651,000 (160,000) (390,000) (493,000) (392,000) Provision for income taxes.. 280,000 -- (162,000) (d) (265,000) (147,000) ----------- ---------- ------------ ----------- ---------- Net income (loss)........... $ 371,000 $(160,000) $(228,000) $ (228,000) $(245,000) =========== ========== ============= =========== ========== Net income (loss) per share available to common stockholders: Basic..................... $ 0.08 $(0.05) =========== ========== Diluted................... $ 0.08 =========== Shares used to compute net income per share: Basic..................... 4,798,731 427,737 5,226,468 =========== =========== ========== Diluted................... 4,885,905 ===========
* September 1, 1998 to October 30, 1998 ** September 1, 1998 to November 30, 1998
UNIDIGITAL INC. --------------- PRO FORMA CONDENSED STATEMENT OF OPERATIONS (UNAUDITED) ------------------------------------------------------- YEAR ENDED AUGUST 31, 1998 -------------------------- UNIDIGITAL KWIK* FIVE STAR** MEGA ART ---------- ----- ----------- -------- Revenues Net sales...................... $47,389,000 $8,093,000 $576,000 $5,177,000 ----------- ---------- ----------- ---------- Expenses Cost of sales.................. 25,305,000 5,569,000 285,000 2,322,000 Selling, general & administrative expenses...... 15,925,000 2,983,000 51,000 2,036,000 Expenses incurred due to restructuring................ 771,000 -- -- -- ---------- --------- ---------- --------- Total operating expenses....... 42,001,000 8,552,000 336,000 4,358,000 Income (loss) from operations.. 5,388,000 (459,000) 240,000 819,000 Interest expense............... (1,913,000) (134,000) -- (32,000) Interest expense-deferred financing costs.............. (1,143,000) -- -- -- Interest and other (expenses) income-net................... (75,000) 72,000 -- 334,000 ----------- --------- ---------- -------- Income (loss) before income taxes........................ 2,257,000 (521,000) 240,000 1,121,000 Provision for income taxes..... 978,000 79,000 74,000 481,000 ---------- --------- ---------- --------- Net income (loss) before extraordinary item........... 1,279,000 (600,000) 166,000 640,000 Extraordinary item-loss on early retirement of debt (net of income tax benefit of $137,000).................... (143,000) -- -- -- ---------- --------- ---------- --------- Net income (loss).............. $1,136,000 $(600,000) $ 166,000 $ 640,000 ========== ========= ========== ========= Basic earnings (loss) per common share: Earnings before extraordinary item....................... $0.36 Extraordinary item........... (0.04) ---------- Net income................... $0.32 ========== Diluted earnings (loss) per common share: Earnings before extraordinary item....................... $0.34 Extraordinary item........... (0.04) ---------- Net income................... 0.30 ========== Shares used to compute net income per share: Basic...................... 3,530,836 ========== Diluted.................... 3,779,438 ==========
*September 1, 1997 to March 25, 1998 **September 1, 1997 to July 2, 1998
UNIDIGITAL INC. --------------- PRO FORMA CONDENSED STATEMENT OF OPERATIONS (UNAUDITED) ------------------------------------------------------- YEAR ENDED AUGUST 31, 1998 (CONTINUED) -------------------------------------- ZAZULA SUPERGRAPHICS ADJUSTMENTS PRO FORMA ------ ------------- ----------- --------- Revenues Net sales........................... $4,094,000 $11,600,000 (e) $(576,000) $76,353,000 ---------- ----------- --------- ----------- Expenses Cost of sales....................... 1,695,000 6,892,000 (f) (576,000) 41,492,000 Selling, general & administrative expenses.......................... 2,377,000 2,327,000 (g) (801,000) 24,898,000 Expenses incurred due to restructuring..................... -- -- -- 771,000 ---------- ----------- ---------- ----------- Total operating expenses............ 4,072,000 9,219,000 (1,377,000) 67,161,000 Income (loss) from operations....... 22,000 2,381,000 801,000 9,192,000 Interest expense.................... (74,000) (729,000) (h) (3,097,000) (5,979,000) Interest expense-deferred financing costs................... -- -- (i) (100,000) (1,243,000) Interest and other (expenses) income-net........................ 5,000 -- -- 336,000 ---------- ----------- ---------- ----------- Income (loss) before income taxes............................. (47,000) 1,652,000 (2,396,000) 2,306,000 Provision for income taxes.......... 20,000 1,023,000 (j) (1,337,000) 1,318,000 ---------- ----------- ---------- ----------- Net income (loss) before extraordinary item................ (67,000) 629,000 (1,059,000) 988,000 Extraordinary item-loss on early retirement of debt (net of income tax benefit of $137,000)......................... -- -- -- (143,000) ---------- ----------- ---------- ----------- Net income (loss).................. $(67,000) $629,000 $(1,059,000) $ 845,000 =========== =========== =========== =========== Basic earnings (loss) per common share: Earnings before extraordinary item.......................... $0.20 Extraordinary item ............... (0.03) ----- Net income........................ $0.17 ===== Diluted earnings (loss) per common share: Earnings before extraordinary item............................ $0.19 Extraordinary item................ (0.03) ----- Net income........................ $0.16 ===== Shares used to compute net income per share: Basic....................... 1,322,617 4,853,453 ========== ========== Diluted..................... 1,528,845 5,308,283 ========== ==========
NOTES TO PRO FORMA CONDENSED CONSOLIDATED ----------------------------------------- FINANCIAL STATEMENTS (UNAUDITED) -------------------------------- For purposes of determining the pro forma effect of the Zazula Acquisition and the SuperGraphics Acquisition on the Company's income statement for the three months ended November 30, 1998, the following pro forma adjustments have been made:
NOVEMBER 30, 1998 ---- ZAZULA SUPERGRAPHICS Cash received from borrowings $ 2,275,000 $ 17,000,000 Cash consideration for acquisitions (2,275,000) (16,514,000) ------------------------------------------ $ -- $ 486,000 ========================================== Consideration ------------- Cash $ 2,275,000 $ 15,889,000 Issuance of 433,076 Common Shares at $5.25 per share 2,275,000 -- Issuance of 135,393 Common Shares at $4.51 per share -- 611,000 Warrants issued for acquisition* -- 931,000 Expenses of acquisition 288,000 625,000 ------------------------------------------ Total Consideration 4,838,000 18,056,000 ------------------------------------------ Total value of net assets acquired 412,000 1,284,000 ------------------------------------------ Goodwill $ 4,426,000 $ 16,772,000 ==========================================
ZAZULA SUPERGRAPHICS TOTAL ------ ------------- ----- (a) Amortization of Goodwill $ 29,000 $ 168,000 $ 197,000 Additional (Excess) owners' compensation (26,000) -- (26,000) Employee Terminations (38,000) -- (38,000) -------------------------------------------- (35,000) 168,000 133,000 ============================================ (b) Additional Financing Costs $ 48,000 $ 288,000 $ 336,000 ======== ========= ========= (c) Deferred Financing Costs $ 2,000 $ 22,000 $ 24,000 ======== ========= ========= (d) Pro Forma Tax Adjustment $(81,000) $(184,000) $(265,000) *Preliminary estimate.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED ----------------------------------------- FINANCIAL STATEMENTS (UNAUDITED) -------------------------------- For purposes of determining the pro forma effect of the Kwik Acquisition, the Five Star Acquisition, the Mega Art Acquisition, the Zazula Acquisition and the SuperGraphics Acquisition on the Company's income statement for the twelve months ended August 31, 1998, the following pro forma adjustments have been made:
KWIK FIVE STAR MEGA ART ZAZULA SUPERGRAPHICS TOTAL FINISHERS (e) Reduction in intercompany sales $ -- $ (576,000) $ -- $ -- $ -- $ (576,000) =========== =========== ========= ========= =========== ============ (f) Reduction in Outsource Expenses $ -- $ (576,000) $ -- $ -- $ -- $ (576,000) =========== =========== ========= ========= =========== ============ (g) Amortization of Goodwill over 25 years $ 515,000 $ -- $ 411,000 $ 177,000 $ 671,000 $ 1,774,000 Excess owners' compensation (1,525,000) -- (541,000) (233,000) -- (2,299,000) Employee Terminations -- -- -- (229,000) -- (229,000) Professional Fees -- -- -- (47,000) -- (47,000) --------- ---------- --------- --------- ----------- ----------- $(1,010,000) $ -- $(130,000) $(332,000) $ 671,000 $ (801,000) =========== ========== ========= ========= =========== =========== (h) Additional Financing Costs $ 1,218,000 $ 43,000 $ 493,000 $ 193,000 $ 1,150,000 $ 3,097,000 =========== ========== ========= ========= =========== =========== (i) Deferred Financing Costs $ -- $ -- $ -- $ 11,000 $ 89,000 $ 100,000 =========== ========== ========= ========= =========== =========== (j) Pro Forma Tax Adjustment $ (96,000) $ -- $(132,000) $ 17,000 $(1,126,000) $(1,337,000) =========== ========== ========= ========= =========== ===========
(c) EXHIBITS. Exhibit No. Description of Exhibit ----------- ---------------------- 4.1 Form of Warrant Agreement issued to the stockholders of SuperGraphics Holding Company, Inc. (included as an exhibit to the Current Report on Form 8-K of the Company dated December 14, 1998 and incorporated by reference herein). 4.2 Warrant Agreement dated as of November 25, 1998 by and between Unidigital Inc. and CIBC Wood Gundy Capital Corp. (included as an exhibit to the Current Report on Form 8-K of the Company dated December 14, 1998 and incorporated by reference herein). 4.3 Registration and Equity Rights Agreement dated as of November 25, 1998 by and between Unidigital Inc. and CIBC Wood Gundy Capital Corp. (included as an exhibit to the Current Report on Form 8-K of the Company dated December 14, 1998 and incorporated by reference herein). 10.1 Agreement for Purchase and Sale of Stock dated as of November 16, 1998 by and among Unidigital Inc., SuperGraphics Holding Company, Inc. ("Holding"), SuperGraphics Corporation and the stockholders of Holding (included as an exhibit to the Current Report on Form 8-K of the Company dated December 14, 1998 and incorporated by reference herein). 10.2 Amendment No. 3 to Credit Agreement dated as of November 30, 1998 by and among Unidigital Inc., the several lenders from time to time parties thereto and Canadian Imperial Bank of Commerce (included as an exhibit to the Current Report on Form 8-K of the Company dated December 14, 1998 and incorporated by reference herein). 10.3 Securities Purchase Agreement dated as of November 25, 1998 by and among Unidigital Inc., Unison (NY), Inc., Unison (MA), Inc., Unidigital Elements (NY), Inc., Unidigital Elements (SF), Inc. and Mega Art Corp. (included as an exhibit to the Current Report on Form 8-K of the Company dated December 14, 1998 and incorporated by reference herein). 10.4 Senior Subordinated Increasing Rate Note dated November 30, 1998 of Unidigital Inc. payable to CIBC Wood Gundy Capital Corp. in the principal amount of $10,000,000 (included as an exhibit to the Current Report on Form 8-K of the Company dated December 14, 1998 and incorporated by reference herein). 23.1 Consent of BDO Seidman, LLP. 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. Unidigital Inc. By: /s/ William E. Dye --------------------------------- William E. Dye, Chief Executive Officer (Principal Executive, Financial and Accounting Officer) Date: February 16, 1999 EX-23 2 EXHIBIT 23.1 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We consent to the inclusion in this Form 8-K/A of our report dated March 12, 1998, on our audit of the consolidated financial statements of SuperGraphics Holding Company, Inc. and Subsidiary as of December 31, 1997, and for the year then ended, which report is included in this Form 8-K/A. /s/ BDO Seidman, LLP San Francisco, California February 15, 1999 -----END PRIVACY-ENHANCED MESSAGE-----