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-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: [email protected]
Originator-Key-Asymmetric:
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MIC-Info: RSA-MD5,RSA,
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<SEC-DOCUMENT>0000950137-96-002075.txt : 19961030
<SEC-HEADER>0000950137-96-002075.hdr.sgml : 19961030
ACCESSION NUMBER: 0000950137-96-002075
CONFORMED SUBMISSION TYPE: 10-K405
PUBLIC DOCUMENT COUNT: 5
CONFORMED PERIOD OF REPORT: 19960731
FILED AS OF DATE: 19961029
SROS: AMEX
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: AM INTERNATIONAL INC
CENTRAL INDEX KEY: 0000002310
STANDARD INDUSTRIAL CLASSIFICATION: PRINTING TRADES MACHINERY & EQUIPMENT [3555]
IRS NUMBER: 340054940
STATE OF INCORPORATION: DE
FISCAL YEAR END: 0731
FILING VALUES:
FORM TYPE: 10-K405
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-00683
FILM NUMBER: 96649493
BUSINESS ADDRESS:
STREET 1: 9399 W HIGGINS RD
CITY: ROSEMONT
STATE: IL
ZIP: 60018
BUSINESS PHONE: 7088181294
MAIL ADDRESS:
STREET 1: 9399 W HIGGINS ROAD
CITY: ROSEMONT
STATE: IL
ZIP: 60018
FORMER COMPANY:
FORMER CONFORMED NAME: ADDRESSOGRAPH MULTIGRAPH CORP
DATE OF NAME CHANGE: 19790322
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<DESCRIPTION>ANNUAL REPORT
<TEXT>
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended July 31, 1996
Commission File Number 1-683
AM INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 34-0054940
(State of Incorporation) (I.R.S. Employer Identification No.)
431 LAKEVIEW COURT
MT. PROSPECT, ILLINOIS 60056
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 375-1700
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
--------------------- ------------------------
Common Stock, $0.01 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
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
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
---- ----
<PAGE> 2
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ X ]
The aggregate market value of voting stock held by
nonaffiliates of the Registrant as of October 28, 1996:
Common Stock, $0.01 par value: $12,431,950
Indicate by check mark whether the Registrant has filed all
documents and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court.
Yes X No_____
Indicate the number of shares outstanding of the
Registrant's classes of common stock as of October 28, 1996:
7,008,421 shares of Registrant's common stock, par value
$0.01 per share were outstanding as of October 28, 1996.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's definitive proxy statement for Registrant's next Annual
Meeting of Stockholders (the "1996 Proxy Statement") are incorporated by
reference into Part III.
<PAGE> 3
PART I
ITEM 1. BUSINESS
(a) General Development of Business and Recent Events
1. Introduction.
AM International, Inc. is incorporated in Delaware. As used
herein, "Registrant" or the "Company" means AM International, Inc. and its
subsidiaries, unless the context indicates the contrary.
Registrant currently conducts its business through one business
segment, AM Multigraphics, which serves the graphics arts industry in the United
States. In September, 1996, Registrant sold its interest in AM Japan Co., Ltd.
On October 17, 1996, Registrant's Canadian subsidiary initiated bankruptcy
proceedings. Both of these subsidiaries were included as part of AM
Multigraphics for financial reporting purposes. In the last eighteen months, as
previously reported, Registrant has divested its Sheridan Systems and AM
Multigraphics - International business segments.
On August 27, 1996, Registrant sold substantially all of the
assets and liabilities of the Sheridan Systems division, a leading supplier of
systems and components to both the printing and newspaper publishing
industries, to Heidelberger Druckmaschinen AG. The sale included substantially
all of the assets and liabilities of Registrant's AM Graphics International
Limited subsidiary in Slough, England.
The disposition of the AM Multigraphics - International
operations has taken place in stages, as Registrant has divested its
unprofitable foreign subsidiaries. In February, 1996, Registrant's AM
International UK Limited subsidiary in England entered into an Adminstration
proceeding, which resulted in the sale of certain portions of that business. In
March, 1996, Registrant sold its Netherlands holding company, including all its
subsidiaries in the Netherlands, France and Belgium, to a local management
buyout team.
All financial information has been restated to reflect the
Sheridan Systems and the AM Multigraphics - International operations as
discontinued operations. AM Multigraphics is a distributor of an extensive
range of equipment, supplies and services to the graphics arts industry, having
recently undertaken the final steps to exit the manufacture of equipment. The
majority of Registrant's equipment, systems and supplies are sold under the AM
Multigraphics(R) brand name. To complement and expand its product lines,
Registrant purchases additional products from outside suppliers, which are sold
either under Registrant's or the producing company's trade names.
On October 29, 1996 the Company entered into a definitive Merger
Purchase Agreement with a corporation newly formed by affiliates of Pacholder
Associates, Inc., a Cincinnati-based provider of investment management,
financial advisory and investment banking services to institutional clients.
This agreement provides for the merger of a subsidiary of purchaser with and
into the Company pursuant to which the current shareholders of the Company will
receive $5.00 per common share and the Company will become a wholly-owned
subsidiary of the purchaser. The transaction is conditioned upon the purchaser
finalizing a credit facility within 30 days as well as a number of additional
conditions, including approval by a majority of the shareholders of the
Company at a meeting tentatively scheduled for January, 1997.
2. Bankruptcy Proceedings.
On May 17, 1993, Registrant and its subsidiary,
Addressograph-Multigraph Corporation ("AMC"), filed for protection under
Chapter 11 of the United States Bankruptcy Code, in The United States
Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") case
numbers 93-582 through 93-583 (the "Bankruptcy Proceedings"). Registrant also
filed on that date a proposed Plan of Reorganization. The Chapter 11 filing
related to Registrant's domestic operations and did not include its foreign
subsidiaries.
<PAGE> 4
On August 26, 1993, a hearing was held by the Bankruptcy Court
to consider approval of a Disclosure Statement to be distributed to creditors
and shareholders of Registrant. After that hearing, and by Order of the
Bankruptcy Court dated August 26, 1993, the Second Amended Disclosure Statement
(hereinafter the "Disclosure Statement") was approved as containing "adequate
information" for creditors and shareholders of Registrant in accordance with
Section 1125(b) of the Bankruptcy Code. Further information on the First
Amended Plan of Reorganization as amended by Amendment No. 1 thereto (as so
amended the "Plan") and the disclosures made in connection therewith, is
available in the Disclosure Statement and the Plan incorporated
herein by reference to Exhibits 28 and 10(A), respectively, to the Company's
Annual Report on Form 10-K for the fiscal year ended July 31, 1993, File No.
1-683.
On September 29, 1993, Registrant's Plan was confirmed by the
Bankruptcy Court. In general, the Plan provided for distribution of
approximately 7,000,000 shares of new Common Stock ("Common Stock"), of which
approximately 97% was distributed to former holders of Registrant's 12% Senior
Subordinated Debentures, 2% to former holders of Registrant's $2.00 Convertible
Exchangeable Preferred Stock ("Old Preferred Stock") and 1% to former holders
of Registrant's Common Stock ("Old Common Stock"). The Plan also provided for
distribution of 1,095,000 Warrants to Purchase Common Stock ("Warrants") to
former holders of Old Preferred Stock. The Warrants permitted the holder to
purchase an aggregate of 1,095,000 shares of Common Stock until October 15,
1996 at an exercise price of $18.00 per share, but have now expired and are of
no further effect. Under the Plan, general unsecured creditors are to be paid
in full over a period of five years with interest at 5% per annum unless they
elected to be paid in full under the convenience class (claims under $2,000) or
unless they elected before September 29, 1993 to receive Common Stock in lieu
of cash.
The Plan became effective on October 13, 1993 (the "Effective
Date"). Distributions provided for in the Plan, including Common Stock and
Warrants, commenced on that date. On the Effective Date, all Old Preferred
Stock, Old Common Stock, Old Warrants to Purchase Common Stock and Old
Preferred Stock Purchase Rights attached to the Old Common Stock were canceled
and became of no further force and effect except as evidence of the holder's
entitlement to a distribution under the Plan. All exchange rights associated
with the Old Preferred Stock and Old Common Stock expired on October 13, 1995.
For information relating to shares of Common Stock outstanding and shares of
Common Stock held for exchange as described above, see Notes 4 and 14 of the
"Notes to Consolidated Financial Statements" contained in Item 8 hereof. Also
on the Effective Date the former directors of Registrant were replaced.
3. Events Leading to Bankruptcy Proceedings.
Reference is made to Section D of Part III of the Disclosure
Statement (pages 22 to 29), incorporated herein by reference to Exhibit 28 to
the Company's Annual Report on Form 10-K for the fiscal year ended July 31,
1993, File No. 1-683, for information on the general development of the
business of Registrant and events which led to commencement of the Bankruptcy
Proceedings on May 17, 1993.
4. Corporate Structure of Registrant
Registrant, AM International, Inc., was originally incorporated
in Delaware in 1924 as Addressograph Securities Corporation. Registrant has
had several name changes, one of which was Addressograph-Multigraph Corporation
for the period May 6, 1931 to January 2, 1979. Registrant's subsidiary,
Addressograph-Multigraph Corporation ("AMC") was originally incorporated in
Delaware in
2
<PAGE> 5
August 1972 as AM International, Inc. and changed its name to
Addressograph-Multigraph Corporation on January 2, 1979. Until October 13,
1993, AMC was a wholly owned subsidiary of Registrant and was a holding company
for certain foreign subsidiaries. Pursuant to the Plan, AMC was merged with
and into Registrant on October 13, 1993.
(b) Financial Information About Industry Segments
See the information in the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
in Note 12 to the "Notes to Consolidated Financial Statements" under the
section entitled "Geographic Segments" contained in Items 7 and 8 of this
Report, respectively.
(c) Narrative Description of Business
Registrant currently conducts its business through its one
remaining business segment: AM Multigraphics, which currently has
approximately 800 employees. AM Multigraphics is a distributor of equipment,
supplies and services to the graphic arts industry, and is currently exiting
the engineering and manufacturing of offset duplicating equipment and supplies
to focus exclusively on distribution of equipment, supplies and service. In
1996, the Registrant divested its Sheridan Systems and AM
Multigraphics - International operations in previously reported transactions.
AM Multigraphics is headquartered in Mount Prospect, Illinois, where,
historically, it has manufactured and distributed a broad product line of
equipment and supplies and provided services for the graphics arts industry
through its own direct sales and service organizations in the United States.
AM Multigraphics products traditionally have included small offset printing
equipment, automated copy/duplicating systems, digital color printing systems,
pre and post press products and supplies.
Presently, AM Multigraphics is completing its plans to exit the
engineering and manufacturing of offset duplicating equipment to focus entirely
on distribution of supplies, services and equipment to the graphics arts
industry. The declining market for the segment's traditional offset duplicator
products, due to inroads by alternative technologies, resulted in the
re-evaluation of its traditional strategy and the decision to exit
manufacturing and focus upon the distribution of supplies, services and
equipment. Accordingly, the Registrant today is focused on (1) supplies and
prepress products, and (2) service and parts.
The supplies and prepress category consists of consumable products
used in the production of printed materials, such as films, inks, plates,
rubber rollers, cleaning solutions and cotton pads, as well as pre-press
products such as platemakers and image-setters. The Registrant tracks various
categories of these products, none of which accounts for more than 10% of its
revenues. Similarly, no single supplier accounts for more than 10% of
Registrant's revenues.
The service and parts category provides service for the traditional
installed base of offset duplicators and associated prepress products and
simple bindery equipment. The Company has 400 service representatives.
The following table sets forth the breakdown of revenues among
machines, supplies and services in the United States, Canada and Japan for
fiscal 1996, 1995 and 1994.
<TABLE>
<CAPTION>
Twelve Months Ended July 31,
----------------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
UNITED STATES
Machines $ 39,598 $ 50,829 $ 46,775
Supplies 40,921 43,578 45,599
Services 47,511 52,748 55,936
-------- -------- --------
128,030 147,155 148,310
-------- -------- --------
CANADA
Machines 4,352 3,849 4,599
Supplies 2,312 2,842 2,865
Services 3,287 3,594 4,093
-------- -------- --------
9,951 10,285 11,557
-------- -------- --------
JAPAN
Machines 13,574 15,928 14,889
Supplies 11,361 12,383 10,376
Services 5,136 5,734 5,216
-------- -------- --------
30,071 34,045 30,481
-------- -------- --------
TOTAL
Machines 57,524 70,606 66,263
Supplies 54,594 58,803 58,840
Services 55,934 62,076 65,245
-------- -------- --------
$168,052 $191,485 $190,348
======== ======== ========
</TABLE>
3
<PAGE> 6
AM Multigraphics also manages a network of approximately 74
independent dealers and sales representatives selling in approximately 95 other
countries.
The principal customers of AM Multigraphics include in-plant
print shops, franchised and independent quick print shops, small commercial
printers and governmental and educational institutions. AM Multigraphics has
in excess of 50,000 customers. No customer accounts for more than 10% of
Registrant's revenues.
5. Competition and Competitive Conditions
The Company operates in a highly competitive market in which
price, delivery and customer service are key factors. The Registrant's
customers are in-plant, quick print and small commercial printer market
segments. The market for small offset duplicator presses, the traditional
proprietary equipment of the division, is mature and continues to face
competition from alternative technologies. Because the installed base of
equipment has historically provided the primary market for many of Registrant's
services and supplies, the Company is increasingly reliant on its general
distribution capabilities in continuing to serve its market segments. Gross
margins are expected to decrease as the Company seeks to add product lines
through distribution agreements, joint ventures and affiliations with third
parties. To offset the lower margins the Company has invested in information
systems and has undertaken other reorganization measures to increase efficiency
and lower expenses.
The competitive market is also one of heavy regional competition, but
consolidation of dealers is occurring, which brings consolidated buying power
and distribution cost efficiencies. The Registrant's investments in
information systems and other reorganization measures are designed to enable it
to expand its business opportunities with existing customers and possibly to
add volume through acquisitions over time.
6. Cyclical Nature of Business and Liquidity
The revenues of Registrant are dependent upon trends in the
printing industry, which are a function of (among other factors) overall
economic factors and advertising expenditures. The backlog for the AM
Multigraphics segments is less than 5% of annual revenues and is not a material
factor in the conduct of the business. Registrant believes that substantially
all of this backlog will be shipped during the 1997 fiscal year.
Certain customers of AM Multigraphics require long-term
financing for purchases of equipment distributed by the Company. Registrant
cooperates with various independent finance and leasing companies to provide
such financing. These agreements are sometimes on a partial recourse basis
with remarketing arrangements on a non-discretionary, non-priority basis. From
time to time, Registrant's operations enter into long-term leases with their
customers. Registrant periodically sells identified pools of lease receivables
and pools of rental equipment to financial institutions on a limited recourse
basis. The existence of such financing is not, however, significant to
Registrant's domestic or international operations each taken as a whole.
7. Research and Development; Patent and Trademarks
4
<PAGE> 7
Approximately $0.4 million was expended by Registrant for
research and development in fiscal 1996, $0.7 million in 1995, and $0.6
million in 1994. Registrant's research, development and engineering
expenditures are made primarily to maintain competitive product offerings.
Registrant owns or is licensed under various patents and
trademarks. While such rights are important, Registrant does not believe that
its business as a whole is materially dependent on any one patent or trademark
or group of patents or trademarks.
5
<PAGE> 8
ITEM 2. PROPERTIES
Registrant's principal executive offices are located in Mt.
Prospect, Illinois. Registrant moved its corporate headquarters from Rosemont,
Illinois to its current headquarters in September, 1996, following the
disposition of Registrant s Sheridan Systems division. Registrant moved to
Rosemont in April, 1995 and previously had been located at the AM Multigraphics
facility in Mt. Prospect, Illinois since March 22, 1993 when it moved from its
downtown Chicago location.
In 1996, Registrant undertook the relocation of its AM
Multigraphics operations from its 700,000 square foot manufacturing and office
facility in Mt. Prospect to newer, more cost efficient facilities. The project
consisted of three parts: (1) relocation of the business offices to a 64,400
square foot facility in Mt. Prospect; (2) relocation of the distribution center
to an 80,000 square foot nearby complex in Arlington Heights, Illinois, to
enhance the unit's distribution capabilities; and, (3) the sale of its former
Mount Prospect, Illinois facility for approximately $6.8 million in 1996.
Registrant owns or leases distribution, sales and service
facilities throughout the United States. In the United States, Registrant
occupies 30 leased facilities with total square footage of 455,000. Leases for
approximately 185,000 square feet will expire in April and May of 1997, and
will not be renewed.
The facilities occupied by Registrant as of October 28, 1996,
which have more than 20,000 square feet of space or which are otherwise
material to Registrant's businesses, are set forth below. Although certain
facilities remain underused, Registrant believes that the properties and
equipment included therein are well maintained, in good operating condition and
adequate for the current needs of its operations.
6
<PAGE> 9
FACILITIES
<TABLE>
<CAPTION>
APPROXIMATE SQUARE
FEET OF FLOOR AREA
--------------------
LOCATION AND BUSINESS SEGMENT USE (1) OWNED LEASED
----------------------------- ------- ----- -------
<S> <C> <C> <C>
Corporate
---------
Rosemont, Illinois ADM 10,700 (2)
AM Multigraphics - Domestic
---------------------------
Arlington Heights, Illinois DIST 79,700 (3)
Mt. Prospect, Illinois MFG/ADM/DIST 175,000 (4)
Mt. Prospect, Illinois ADM 64,400 (3)
</TABLE>
______________________________________________
(1) ADM = Administrative; MFG = Manufacturing and
Engineering; DIST - Distribution Center; R&D = Research and
Development.
(2) Lease expires in May, 1997, and will not be renewed.
(3) Leases expire in 2005.
(4) Manufacturing operations are winding up and lease for this
facility will expire in April, 1997, and will not be renewed.
7
<PAGE> 10
ITEM 3. LEGAL PROCEEDINGS
Reference is made to Item 1, Section (a) Paragraph 2, for
information on Registrant's Bankruptcy Proceedings. The commencement of the
Bankruptcy Proceedings resulted in an automatic stay of certain litigation
against Registrant pursuant to Section 362 of the Bankruptcy Code as of May 17,
1993. Therefore, with certain exceptions, all legal proceedings against
Registrant pending as of May 17, 1993, will be resolved through the bankruptcy
process. In addition, there are significant claims pending in the Bankruptcy
Proceeding. Registrant believes the resolution of these legal proceedings and
claims will not have a material adverse effect on the business or the financial
position of Registrant.
Registrant has been notified of various environmental matters
in connection with certain current or former locations in Illinois, Indiana,
Ohio, Pennsylvania, and Rhode Island. Registrant believes that the legal
liability relating to such matters, if any, will either be resolved
consensually between Registrant and relevant governmental authorities or will
be subject to resolution through the bankruptcy process as with other disputed
claims. Registrant believes the resolution of these matters will not have a
material adverse effect on the business or the financial position of
Registrant.
Registrant is involved in various other administrative and
legal proceedings incidental to its business, including product liability and
general liability lawsuits against which Registrant is partially insured. The
resolution of these other proceedings is not expected to have a material
adverse effect on the business or the financial position of Registrant.
ITEM 4. RESULT OF VOTES OF SECURITY HOLDERS.
None.
ITEM 4(A). EXECUTIVE OFFICERS OF THE REGISTRANT
The following is a list of the names and ages, as of October
28, 1996, of all of the executive officers of Registrant and all positions and
offices of Registrant held by each person and each such person's occupation or
employment on such date and during the preceding five years. All such persons
have been elected to serve until their successors are elected or until their
earlier resignation or retirement.
8
<PAGE> 11
<TABLE>
<CAPTION>
Positions and Offices Held and
Principal Occupations or Employment
Name Age During the Past Five Years
- ------------------ --- -------------------------------------------------
<S> <C> <C>
Jerome D. Brady 52 Chairman of the Board of Directors, Chief Executive Officer and President
since September 1994. Mr. Brady was Vice President of FMC Corporation, a
manufacturer of chemicals and machinery, and General Manager of its Food
Machinery Group from October 1992 until he joined the Company. From 1978 to
1992 Mr. Brady held a number of senior management positions at Harsco
Corporation, a diversified industrial manufacturing and services company,
most recently as Senior Vice President of Operations responsible for the
Industrial Services and Building Products Group.
Steven R. Andrews 43 Vice President, General Counsel and Secretary of Registrant since June 1994.
Mr. Andrews was Vice President and General Counsel of Amana Refrigeration,
Inc., a manufacturer of major household appliances, from February 1993 to
June 1994 and Senior Deputy General Counsel of Registrant from January 1992
to February 1993. From 1988 to 1991 Mr. Andrews was Associate General
Counsel of Tonka Corporation, an international manufacturer and marketer of
toys and games.
Gregory T. Knipp 41 Treasurer of Registrant since September 1995. From 1987 to 1994 Mr. Knipp
held several treasury-related management positions of Registrant, including
that of Assistant Treasurer from 1994 to 1995. From 1981 to 1987, Mr. Knipp
was the Cash Manager of Woodland Services Co., a spinoff company of Masonite
Corporation. Prior to 1981, Mr. Knipp was an auditor with Peat Marwick
Mitchell & Co.
Thomas D. Rooney 49 President of Multigraphics since August of 1996, Vice President of
Registrant since February 1986, Chief Financial Officer since August 1993,
and Controller and Chief Accounting Officer of Registrant from September
1989 to August 1993. From 1986 to 1989 Mr. Rooney was President of
Registrant's former AM Bruning division, a manufacturer and distributor of
equipment, supplies and services for the engineering graphics market.
</TABLE>
9
<PAGE> 12
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
(a) Market and Other Information
Registrant's Plan of Reorganization provided for the amendment
and restatement of Registrant's Certificate of Incorporation and Bylaws. The
new charter authorized 50 million shares of stock of which 40 million shares
were reserved for issuance as new Common Stock and 10 million shares were
reserved for issuance as new Preferred Stock. On the Effective Date of the
Plan, the Board of Directors authorized the issuance of 7 million shares of new
Common Stock, $.01 par value, to holders of claims and interests as described
in Note 14 of "Notes to Consolidated Financial Statements" contained in Item 8
hereto.
On the Effective Date, Registrant also issued 1,095,000 new
Warrants to Purchase Common Stock at an exercise price of $18.00 per share
which expired on October 15, 1996, and are of no further effect.
At the Annual Meeting of Stockholders held on December 8,
1994, Registrant's stockholders approved the 1994 Long- Term Incentive Plan
(the "Plan"). In conjunction therewith, an additional aggregate of 1,400,000
Common Stock shares are available pursuant to and in accordance with the terms
of the Plan, subject to adjustments as provided in Section 6.7 of the Plan.
Registrant's new Common Stock, $.01 par value commenced
trading on the American Stock Exchange on December 6, 1993 under the ticker
symbol "AM."
For information regarding quarterly stock prices for the
Common Stock, see Note 13 to the "Notes to Consolidated Financial Statements"
in Item 8 entitled "Quarterly Financial Information."
(b) Holders
At October 28, 1996, Registrant had approximately 1,200
stockholders of record.
(c) Dividends
Registrant has not paid cash dividends on its Common Stock
since August 15, 1981.
10
<PAGE> 13
ITEM 6. SELECTED FINANCIAL DATA
FIVE YEAR FINANCIAL SUMMARY - Financial information has been restated to
reflect the Sheridan Systems and the Multigraphics - International operations
as discontinued operations.
<TABLE>
<CAPTION>
Reorganized Company | Predecessor Company
--------------------------------------------|------------------------------------------
Years Ended Sept. 30, 1993 | Aug. 1, 1993 Years Ended July, 31
---------------------------- Through | Through ---------------------
July 31, 1996 July 31, 1995 July 31, 1994 | Sept. 29, 1993 1993 1992
------------- ------------- ------------- |-------------- ----------- ---------
<S> <C> <C> <C> | <C> <C> <C>
OPERATIONS |
Revenues $168.1 $191.5 $163.8 | $26.5 $195.7 $202.4
Gross profit 37.6 52.7 51.4 | 7.0 57.0 62.5
as a percent of revenues 22.4% 27.5% 31.4% | 26.4% 29.1% 30.9%
Unusual items (inc.)/exp. 7.0 0.0 0.0 | 0.0 37.6 0.0
Operating income (loss) (16.4) (2.5) 6.8 | (2.0) (34.3) (75.4)
as a percent of revenues (9.8%) (1.3%) (4.2%) | (7.5%) (17.5%) (37.3%)
Net Income (Loss) from |
Continuing Operations (20.2) (4.2) 2.1 | 21.8 (43.8) (83.1)
Income (Loss) from |
discontinued operations (25.3) 8.8 4.6 | (27.8) (81.9) (41.7)
Extraordinary Gain 0.0 0.0 0.0 | 58.7 0.0 0.0
Net income (loss) ($45.5) $4.6 $6.7 | $52.7 ($125.7) ($124.8)
Capital Employed |
Working capital (38.9) 61.5 8.7 | (17.6) 5.6 (23.6)
Total assets 98.0 163.1 169.2 | 164.4 175.4 271.8
Long-term debt 8.5 14.9 19.4 | 25.5 129.0 62.6
Shareholders' equity 2.3 48.3 42.8 | 36.0 (49.7) 69.3
Per Common Share |
Net income (loss) from |
continuing operations ($2.88) ($0.59) $0.30 | N/A N/A N/A
Market price - High (1)(3) $8.375 $12.250 $11.875 | N/A N/A N/A
Low (1)(3) $1.875 $8.125 $8.750 | N/A N/A N/A
Average number of common shares |
and equivalents (in thousands)(2) 7,009 7,021 7,006 | N/A N/A N/A
NUMBER OF EMPLOYEES AT YEAR END 1,121 1,378 1,520 | 1,633 1,662 1,897
------ ------ -------- | ------ ------ ------
</TABLE>
(1) Trading of Reorganized Company Common Stock commenced on December 6,
1993.
(2) The net income per common share and average number of common shares
and equivalents for the Company has not been presented as this information is
not comparable.
(3) Trading of Predecessor Company Common Stock and Preferred Stock
was suspended on May 21, 1993. Periods prior to this date are not presented
as they are not comparable.
Refer to Management's Discussion and Analysis for explanations of significant
factors affecting comparability of the above date.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ANALYSIS OF CONTINUING OPERATIONS AND DISCONTINUED OPERATIONS
Over the past several years, the Company has formulated and executed
various restructuring plans in order to improve operating results. These plans
have included the exit from certain unprofitable foreign subsidiaries, the
divestitures of non-core product lines, the exit from manufacturing operations
at AM Multigraphics and the implementation of strategic investments in new
products and capabilities. In July 1996 the Company entered into an Asset
Purchase Agreement with Heidelberger Druckmaschinen AG for the sale of its
Sheridan Systems segment. The sale of Sheridan Systems was concluded in August
1996. In addition, during 1996 the Company disposed of its AM
Multigraphics-International Operations. These segments are reflected as
discontinued operations. Included in Continuing Operations are results of the
two remaining foreign subsidiaries; however, the Company sold its interest in
AM Japan Co., Ltd. in September, 1996, and on October 17, 1996, AM Canada filed
a voluntary assignment in bankruptcy.
CONTINUING OPERATIONS
Results of Operations
(dollars in millions)
<TABLE>
<CAPTION>
Year ended July 31,
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Revenues $168.1 $191.5 $190.3
Operating Income (Loss) 16.4) (2.5) 4.8
Non Operating Expenses (3.9) (3.2) 21.5
------ ------ ------
Pre Tax Income (Loss) (20.3) $ (5.7) $ 26.3
Net Income (Loss) (20.2) $ (4.2) $ 23.9
====== ====== ======
</TABLE>
Note: To facilitate a meaningful discussion of the Company's
comparative operating performance in fiscal years 1996, 1995, and 1994, the
results are presented on a traditional comparative basis for all periods.
Consequently, the information presented for fiscal year 1994 does not comply
with the accounting requirements for companies upon emergence from bankruptcy,
which calls for separate reporting for the Reorganized Company and the
Predecessor Company.
OPERATING RESULTS
The Continuing Operations are comprised of one business segment, the
AM Multigraphics segment. The AM Multigraphics segment serves the graphics
arts industries in North America, and until September 1996 Japan, by
distributing an extensive range of sheet fed offset duplicating presses,
digital color printing equipment, pre and post press equipment, and a wide
range of supplies and technical
11
<PAGE> 14
services. In 1995 the operation initiated efforts to transition out of
engineering and manufacturing to focus primarily on distribution, sales and
service activities.
In response to declining demand for manufactured duplicator products
and services, AM Multigraphics developed a strategic plan during 1995 to
transition from being a manufacturing based supplier to becoming a broad based
distributor of equipment, supplies and services to the graphics arts markets.
Efficiency in providing a broad line of products and services to its large
customer base and differentiation through the provision of technical service
and support are the tactical objectives of the strategy. The Company has
efforts underway to phase out its manufacturing operations, expand its product
offering through new distribution agreements and transition its organization
structure and capabilities to function as an efficient distribution business.
While progress has been made in adding new products, updating and enhancing
systems and restructuring the organization, significant efforts to complete the
transition from a manufacturing based supplier to a distribution business still
need to be completed. In addition, with the divestiture of Sheridan Systems,
it will be necessary for the Company to restructure its corporate staff and
eliminate excess facilities and equipment.
During September of fiscal year 1994, the Company emerged from Chapter
11 Bankruptcy. The Company had operated under the protection of Chapter 11
following a voluntary petition for reorganization filed in May 1993. With the
emergence from Chapter 11 in 1994, the Company adopted Fresh Start Reporting,
which resulted in material changes to the balance sheet, including valuation
changes of assets and liabilities at fair market value and valuation of equity
based on the appraised reorganization value of the business.
Revenues in 1996 declined $23.4 million, or 12% from the prior year
period. In 1995 revenues increased slightly after a decline of 3% in 1994 from
1993. The decline in revenues, which has been consistent with longer term
trends, has occurred principally in the sheet fed offset duplicator products
which include press and post-press machines, supplies and maintenance services.
The duplicator machines and supplies are products which have been largely
manufactured by the Company. Market demand for the Company's duplicator
products has declined due to inroads from competing printing
technologies. As a result of these competitive inroads, the installed base of
duplicator equipment has experienced long term decline which has led to
decreased sales of equipment, supplies and services. In addition, the Company
experienced significant liquidity problems during 1996 which led to a reduction
in inventory levels, among other things. The lower inventory level negatively
affected the Company's ability to serve its supply and service customers which
resulted in lower revenues and gross margin. The subsidiaries in Japan and
Canada, which the Company has divested, contributed revenues of $40.0 million
in 1996, $44.3 million in 1995 and $42.1 in 1994.
Non Operating Expenses consisted primarily of interest expense in
1996, 1995 and 1994. The interest expense related primarily to borrowings
under the Domestic Revolving Credit Agreement, which have been required to fund
operations, and interest on general unsecured claims and priority tax claims
from the Company's reorganization. In 1994 the Company recorded reorganization
income of $23.9 million which pertained to the adoption of Fresh Start
Reporting, as previously described. The income resulted from fair market
adjustments to tangible
12
<PAGE> 15
assets and liabilities of $8.0 million, a provision of $10.1 million to accrue
for professional fees related to the reorganization, and to record the
Reorganization Value in Excess of Fair Market Value of $26.0 million.
The net loss of $20.2 million from Continuing Operations in 1996
worsened by $16.0 million as compared with 1995. The increased loss was
primarily due to volume driven margin erosion in 1996, declines in gross margin
rates resultant from shifts in product mix to lower margin distributed
products, and restructuring charges. The restructuring charges of $7.0 million
in 1996 related to the shutdown of manufacturing operations, the closure of
corporate offices and the exit costs for the Canadian subsidiary. Continuing
Operations had a net loss of $4.2 million in 1995 compared with a net income of
$23.9 million in 1994. With the emergence from Chapter 11 in 1994, the Company
adopted Fresh Start Reporting, which resulted in material changes to the
balance sheet, including valuation changes of assets and liabilities at fair
market value and valuation of equity based on the appraised reorganization
value of the business. The reorganization and adoption of Fresh Start
Reporting in 1994 resulted in a one time reorganization income of $23.9
million.
The decrease in net income for the year ended July 31, 1995 as compared with
fiscal year 1994 was again primarily due to lower gross margins related to the
change in product mix to lower margin distributed products. In addition, in
1994 the Company recorded a favorable adjustment of $23.9 million which
resulted from the adoption of Fresh Start Reporting in 1994, as previously
described.
DISCONTINUED OPERATIONS
Results of Operations
<TABLE>
<CAPTION>
(dollars in millions) Year Ended July 31,
1996 1995 1994
------ ------ ------
<S> <C> <C>
Revenues
Sheridan Systems $109.3 $182.2 $158.1
AM Multigraphics - International 40.0 135.8 142.4
------ ------ ------
Total 149.3 318.0 300.5
Operating income (loss)
Sheridan Systems (2.6) 17.8 14.4
AM Multigraphics - International (4.2) (5.7) (2.5)
Unusual items income (expense) - 4.8 -
------ ------ ------
Total (6.8) 16.9 11.9
Non operating expense (2.6) (3.5) (30.9)
------ ------ ------
Pre-tax income (loss) (9.4) 13.4 (19.0)
Income (loss) (10.1) 8.8 (23.2)
Loss on sale (15.2) - -
------ ------ ------
Income (loss) from discontinued operations $(25.3) $ 8.8 $ 23.2
====== ====== ======
</TABLE>
13
<PAGE> 16
Note: To facilitate a meaningful discussion of the Company's
comparative operating performance in fiscal years 1996, 1995 and 1994 the
results are presented on a traditional comparative basis for all periods.
Consequently, the information presented for fiscal year 1994 does not comply
with the accounting requirements for companies upon emergence from bankruptcy,
which calls for separate reporting for the Reorganized Company and the
Predecessor Company.
OPERATING RESULTS
The Discontinued Operations is comprised of two business segments, the
Sheridan Systems segment and the divested AM Multigraphics - International
segment. The Sheridan Systems business serves the printing and newspaper
publishing industries by providing bindery systems and newspaper mailroom
systems. The products sold by Sheridan Systems were largely capital equipment
items and market demand has historically been cyclical. The divested AM
Multigraphics - International segment served certain foreign graphics arts
markets through wholly owned subsidiaries, situated primarily in Europe. The
divested AM Multigraphics - International subsidiaries distributed an extensive
range of sheet-fed offset duplicating presses, digital color printing
equipment, pre and post press equipment and a wide range of supplies and
technical services.
The net loss from Discontinued Operations was $25.3 million in 1996
compared to net income of $8.8 million in 1995, and a net loss of $23.2 million
in 1994. The increased loss in 1996 over 1995 resulted primarily from
deteriorating market conditions for the Sheridan Systems segment in 1996, and a
$15.2 million loss recorded on the sale of the segment. During September of
fiscal year 1994, the Company emerged from Chapter 11 Bankruptcy. The Company
had operated under the protection of Chapter 11 following a voluntary petition
for reorganization filed in May 1993. With the emergence from Chapter 11 in
1994, the Company adopted Fresh Start Reporting, which resulted in material
changes to the balance sheet, including valuation changes of assets and
liabilities at fair market value and valuation of equity based on the appraised
reorganization value of the business. The reorganization and adoption of Fresh
Start Reporting in 1994 resulted in a one time reorganization expense of $27.0
million.
The operating results of Sheridan Systems significantly varied from
period to period primarily due to the cyclical nature of the business which
dramatically affected revenue levels and gross margins. Orders for Sheridan
Systems bindery and newspaper mailroom products have been in the millions of
dollars and therefore revenues, margins and customer backlogs varied
significantly depending on the timing of customer orders. In 1996 Sheridan
Systems revenues declined $72.9 million from the prior year . Weak market
demand and a low beginning backlog were the principal reasons for the decrease
in revenues. The weak market demand was attributable to a combination of
factors which include a reduction in printed product for magazines, catalogs
and direct mail and the existence of excess capacity in the printing industry.
Historically, the health of the retail sector of the U.S. economy which
directly impacts advertising expenditures impacts market demand. Sheridan
Systems incurred an operating loss of $2.6 million in 1996, compared to income
of $17.8 million in the prior year period due principally to the lower volume.
Fiscal year 1995 revenues increased 15% over 1994 largely due to higher orders
particularly for bindery equipment, and a reduction in backlog. In 1995
Sheridan Systems recognized approximately
14
<PAGE> 17
$20.0 million in revenues from prototype equipment which had been shipped
in 1994 and accepted by customers in 1995. The operating income in 1995 of
$17.8 million improved by $3.4 million over 1994 due to the increased revenue
level and related gross margin increase. The 1994 operating results reflected
revenues of $158.1 million which was only slightly improved over 1993.
The results of the divested AM Multigraphics - International segment
consistently reflected operating losses and declining revenues. The revenue
decreases, throughout the periods, were attributable to declining market demand
for offset duplicating presses and the related erosion of the installed base of
duplicating equipment. The decline in market demand has been the result of
inroads made by competing printing technologies. The users of duplicators have
been the principal customers for the related supplies and services. The