EXHIBIT 6
EAGLE PRESS
FINANCIAL STATEMENTS
APRIL 30, 1996 AND DECEMBER 31, 1995
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
INDEPENDENT AUDITORS' REPORT
The Sole Proprietor
Eagle Press:
We have audited the accompanying balance sheets of Eagle Press as of April
30, 1996 and December 31, 1995, and the related statements of income,
proprietor's equity, and cash flows for the four months ended April 30, 1996,
and for the year ended December 31, 1995. The financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits 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 audits provide 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 Eagle Press as of April 30,
1996 and December 31, 1995, and the results of its operations and its cash flows
for the four months ended April 30, 1996 and for the year ended December 31,
1995 in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
May 30, 1996
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EAGLE PRESS
BALANCE SHEETS
APRIL 30, DECEMBER 31,
1996 1995
---------- ------------
ASSETS
Current assets:
Cash...................................... $ 115,965 50,177
Accounts receivable:
Trade.................................. 1,192,624 878,303
Other.................................. -- 110
---------- ---------
1,192,624 878,413
Inventories............................... 197,272 302,460
Prepaid expenses.......................... 13,265 8,450
---------- ---------
Total current assets.............. 1,519,126 1,239,500
Property and equipment (note 2)............. 3,510,289 3,264,630
Less accumulated depreciation............. 895,486 823,341
---------- ---------
2,614,803 2,441,289
Other assets:
Deposits.................................. 3,149 3,149
Loan fees................................. 237 1,194
---------- ---------
3,386 4,343
---------- ---------
$4,137,315 3,685,132
========== =========
LIABILITIES AND PROPRIETOR'S EQUITY
Current liabilities:
Accounts payable.......................... $ 119,273 272,967
Accounts payable to related
parties................................ 34,859 --
Accrued expenses.......................... 30,133 11,024
Capitalized lease obligations (note 3).... 6,633 16,446
Current maturities of long-term
debt (note 4).......................... 146,827 150,243
---------- ---------
Total current liabilities......... 337,725 450,680
Noncurrent portion of long-term debt
(note 4).................................. 1,068,599 1,094,625
---------- ---------
Total liabilities................. 1,406,324 1,545,305
Proprietor's equity......................... 2,730,991 2,139,827
Commitments and contingencies (note 6)......
---------- ---------
$4,137,315 3,685,132
========== =========
See accompanying notes to financial statements.
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EAGLE PRESS
STATEMENTS OF INCOME
FOUR MONTHS
ENDED YEAR ENDED
APRIL 30, DECEMBER 31,
1996 1995
------------ -------------
Net sales............................ $3,434,702 6,596,819
Cost of sales........................ 2,035,379 4,348,599
---------- ---------
Gross profit............... 1,399,323 2,248,220
Selling, general and administrative
expenses........................... 531,151 782,792
---------- ---------
Income from operations..... 868,172 1,465,428
Other income and (expenses):
Interest income.................... 230 1,575
Miscellaneous income............... 5,611 34,335
Loss on sale of assets............. -- (1,700)
Bad debt expense................... -- (9,649)
Interest expense................... (47,936) (132,907)
---------- ---------
Total other income and
(expenses).............. (42,095) (108,346)
---------- ---------
Net income................. $ 826,077 1,357,082
========== =========
See accompanying notes to financial statements.
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EAGLE PRESS
STATEMENTS OF PROPRIETOR'S EQUITY
FOR THE FOUR MONTHS ENDED APRIL 30, 1996 AND
FOR THE YEAR ENDED DECEMBER 31, 1995
Balance at December 31, 1994.................................... $1,493,283
Net income................................................. 1,357,082
Withdrawals................................................ (710,538)
----------
Balance at December 31, 1995.................................... 2,139,827
Net income................................................. 826,077
Withdrawals................................................ (234,913)
----------
Balance at April 30, 1996....................................... $2,730,991
==========
See accompanying notes to financial statements.
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EAGLE PRESS
STATEMENTS OF CASH FLOWS
FOUR MONTHS
ENDED YEAR ENDED
APRIL 30, DECEMBER 31,
1996 1995
----------- ------------
Cash flows from operating activities:
Net income..................................... $ 826,077 1,357,082
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization............... 73,102 207,577
Loss on fixed asset
disposition................................. -- 1,700
(Increase) decrease in:
Accounts receivable....................... (314,211) (410,041)
Inventories............................... 105,188 (125,502)
Prepaid expense........................... (4,815) (1,821)
Increase (decrease) in:
Accounts payable.......................... (118,835) 135,583
Accrued expenses.......................... 19,109 (11,915)
--------- ----------
Net cash provided by operating
activities.................... 585,615 1,152,663
--------- ----------
Cash flows from investing activities:
Purchases of fixed assets...................... (245,659) (124,501)
Reduction of deposits.......................... -- 4,186
--------- ----------
Net cash (used by) investing
activities.................... (245,659) (120,315)
--------- ----------
Cash flows from financing activities:
Reductions of long-term debt and
capital lease obligations..................... (39,255) (321,102)
Loan fees paid................................. -- (3,650)
Borrowing from credit line..................... -- 924,000
Repayments to credit line...................... -- (924,000)
Withdrawals.................................... (234,913) (710,538)
--------- ----------
Net cash (used by) financing
activities.................... (274,168) (1,035,290)
--------- ----------
Net increase (decrease) in
cash.......................... 65,788 (2,942)
Cash at beginning of year........................ 50,177 53,119
--------- ----------
Cash at end of year.............................. $ 115,965 50,177
========== ==========
SUPPLEMENTARY INFORMATION:
Cash paid for interest........................... $ 47,936 132,907
========= ==========
See accompanying notes to financial statements.
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EAGLE PRESS
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1996 AND DECEMBER 31, 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Eagle Press (the Company), a proprietorship, operates primarily as a
printing company with one plant located in Sacramento, California.
BASIS OF ACCOUNTING
The Company's financial statements are presented in accordance with
generally accepted accounting principles.
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, liabilities, revenues
and expenses during the reporting period. Actual results could differ from those
estimates applied in the preparation of the financial statements.
ACCOUNTS RECEIVABLE
The Company uses the specific write-off method of accounting for bad debts.
The proprietor considers all receivables to be collectible as of April 30, 1996
and December 31, 1995.
INVENTORIES
The Company's inventory, consisting of paper stocks and works in progress,
is valued at cost by specific identification.
PROPERTY AND EQUIPMENT
The Company's property and equipment are recorded at cost. Depreciation is
computed using the straight-line and declining balance methods over the
estimated useful lives of the assets, with appropriate provisions for salvage
value. The useful lives used in computing depreciation are as follows:
Machinery and equipment................................. 5-18 years
Vehicles................................................ 5 years
Office equipment and software........................... 6 years
Furniture and fixtures.................................. 10 years
Building, building improvements, and
leasehold improvements................................ 31 years
INCOME TAXES
Federal and state income taxes of the Company are computed on the
proprietor's total income from all sources; accordingly, no provision for income
taxes is made in these statements.
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(2) PROPERTY AND EQUIPMENT
Property and equipment recorded at cost as of April 30, 1996 and December
31, 1995 consists of:
1996 1995
------------ -----------
Land............................................. $ 91,750 91,750
Machinery and equipment.......................... 2,749,234 2,513,025
Building......................................... 341,510 341,510
Building improvements............................ 146,291 146,291
Office equipment and software.................... 108,686 106,740
Vehicles......................................... 42,312 42,312
Furniture and fixtures........................... 23,367 23,002
Leasehold improvements........................... 7,139 --
---------- -----------
3,510,289 3,264,630
Less accumulated depreciation and
amortization................................ 895,486 823,341
---------- -----------
$2,614,803 2,441,289
========== ===========
Depreciation and amortization charged to expense for the four months ended
April 30, 1996 and the year ended December 31, 1995 were $73,102 and $207,577,
respectively.
(3) LEASE OBLIGATIONS
The Company has entered into a noncancelable office lease. The three-year
operating lease continues through March 14, 1997, with an option to renew the
lease at that time. The Company also leases two pieces of equipment under
noncancelable capital leases with interest rates of 10% and 12.86%. The
following is a schedule of future minimum lease payments under noncancelable
leases in the aggregate:
YEAR ENDING
DECEMBER 31,
------------
1996..................................................... $ 48,638
1997..................................................... 7,200
After 1997............................................... --
---------
Total minimum lease payments............................. 55,838
Total imputed interest................................... 608
---------
$ 55,230
=========
(4) LONG-TERM DEBT
The Company financed the purchase of a printing press with Phoenixcor, Inc.
in 1994. The stated interest rate on the note is 9.38% due March 25, 2001. Fixed
payments of principal and interest in the amount of $21,722 are payable monthly
with a balloon payment of $295,254 due at maturity. If the note is prepaid in
full prior to the second anniversary date, a 4% premium must be paid. The
premium decreases by one percent for each year thereafter. Scheduled maturities
of long-term debt outstanding at December 31 of each of the years indicated are
as follows: 1996 -- $150,243; 1997 -- $164,958; 1998 -- $181,113; 1999 --
$198,852; 2000 -- $218,327; thereafter -- $331,376.
(5) RELATED PARTY
The Company paid job referral commissions to Richard Ross, brother of John
D. Ross, the sole proprietor, totaling $51,723 and $25,000 for the four months
ended April 30, 1996 and the year ended
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December 31, 1995, respectively. These commissions were paid in the normal
course of business on the same terms as commissions paid to others.
(6) COMMITMENTS AND CONTINGENCIES
The Company has an agreement for a line of credit of $250,000 with
WestAmerica Bank, secured by trade accounts receivable, which provides for
working capital financing. Borrowings bear interest at the WestAmerica Bank
reference rate plus 2%. No balance was outstanding as of April 30, 1996 or
December 31, 1995. The line of credit was available to the Company until May 31,
1996, at which time management did not renew the line of credit.
(7) PENSION PLAN
All non-union employees are eligible for a simplified employee pension
plan. The Company contributes up to 6% of the participants' gross annual wages
to the plan. Total contributions paid to the plan were $10,163 and $21,541 for
the four months ended April 30, 1996 and the year ended December 31, 1995,
respectively.
(8) CONCENTRATION OF RISK
A substantial part of the Company's revenues comes from one customer, the
loss of which could have a material effect. Approximately $2,230,000, or 65%,
and $5,178,000, or 78%, of revenues for the four months ended April 30, 1996 and
the year ended December 31, 1995, respectively, were attributable to this
customer. Approximately $1,033,872 and $337,000 were included in receivables as
of April 30, 1996 and December 31, 1995, respectively.
(9) FAIR VALUE OF FINANCIAL INSTRUMENTS
The Statement of Financial Accounting Standards No. 107, DISCLOSURES ABOUT
FAIR VALUE OF FINANCIAL INSTRUMENTS, requires the disclosure of fair value
information about financial instruments, whether or not recognized in the
balance sheet, for which it is practicable to estimate that value.
Fair value methods and assumptions are set forth below for the Company's
financial instruments. As of April 30, 1996 and December 31, 1995, the estimated
fair values of cash, long-term debt and the line of credit approximated their
carrying amounts.
(10) SUBSEQUENT EVENT
On May 4, 1996, the Company and Consolidated Graphics, a commercial
printing company, entered into a letter of intent that would result in Eagle
Press becoming a subsidiary of Consolidated Graphics. The proposed acquisition
is subject to numerous conditions that must be finalized.
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