UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 25, 2001
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MASTER GRAPHICS, INC.
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(Exact name of registrant as specified in its charter)
Tennessee 0-24411 62-0784645
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
70 Timber Creek Dive, Suite 5, Cordova, Tennessee 38017
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (901) 685-2020
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Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
INFORMATION TO BE INCLUDED IN THE REPORT
Item 3. Bankruptcy or Receivership.
Confirmation of Plan
On January 25, 2001, the United States Bankruptcy Court for the District of
Delaware entered an order confirming the First Amended Joint Plan of
Reorganization dated December 19, 2000 (the "Plan") of Master Graphics, Inc. and
its wholly-owned operating subsidiary Premier Graphics, Inc. (collectively, the
"Debtors"). A copy of such order is attached as Exhibit 2.2 hereto and
incorporated herein by reference.
Summary of the Plan
The following is a summary of the material features of the Plan, a copy of
which is set forth as Exhibit 2.1 hereto and hereby incorporated by reference.
A more complete description of the Plan is set forth in the Disclosure Statement
dated as of December 19, 2000 (the "Disclosure Statement"), a copy of which is
attached hereto as Exhibit 2.3 and incorporated herein by reference.
Capitalized terms used but not defined herein shall have the meanings assigned
to them in the Plan.
The Plan is premised upon implementation of a business plan developed by
the Debtors with the assistance of their financial advisors and management
consultants (the "Business Plan"). The Business Plan contemplates the
restructuring of the Debtors' operations around a core group of their operating
divisions (the "Core Divisions"). The remaining divisions (the "Non-Core
Divisions") will be disposed of, either by sale, combination, or liquidation,
and the proceeds used to reduce the Debtors' secured indebtedness. The Business
Plan also contemplates the sale or other disposition of certain items of leased
and owned equipment, including the relocation of certain equipment from some
divisions to others.
The Plan is also premised on the substantial restructuring of the Debtors'
unsecured indebtedness, including in particular the indebtedness owed to holders
of the Debtors' public indebtedness. Specifically, the Plan contemplates
cancellation of the Debtors' existing equity and the unsecured indebtedness of
Master Graphics, Inc. and conversion of substantially all of the unsecured
indebtedness of Premier Graphics, Inc. into substantially all of the equity in
the reorganized enterprise which will be organized as a holding company and
operating subsidiary.
While the Debtors believe that the Business Plan and proposed financial
restructuring are reasonable and appropriate, they include a number of
assumptions that may differ from actual results and are subject to a number of
risk factors. These risk factors are discussed in Article IX of the Disclosure
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Statement.
After careful review of the Debtors' current business operations, estimated
recoveries in a liquidation scenario, the prospects of ongoing business
relationships, and the Business Plan, the Debtors have concluded that the
recovery to the Debtors' creditors will be maximized by the continued operation
of the Debtors' printing business through the Core Divisions. In particular,
according to the liquidation analysis and other analyses prepared by the Debtors
with the assistance of their financial advisors, the Debtors believe that the
value of their estates is greater as a going concern than in a liquidation.
The Plan constitutes a separate plan of reorganization for each of the
Debtors. Accordingly, the Plan contains separate classes for the Claims and
Interests of each Debtor. As contemplated by the Bankruptcy Code, Administrative
Claims and Priority Tax Claims are not classified and will be treated as
described in the Disclosure Statement.
The table below summarizes the classification and treatment of the
prepetition Claims and Interests under the Plan. The classification and
treatment for all Classes are described in more detail in the Disclosure
Statement.
The table below also sets forth the Debtors' estimates of the amount of
Claims that will ultimately become allowed in each Class based upon review by
the Debtors of all Claims scheduled by and filed against the Debtors and
consideration of the provisions of the Plan that affect the allowance of certain
Claims. The table below includes an estimated percentage recovery for holders
of Claims in each Class. For purposes of estimating the percentage recoveries
for holders of Claims in certain classes as set forth below, the reorganization
value of the Debtors is
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between $80.65 million and $94.65 million and the New Holding Company Common
Stock was assumed to be valued at between $21.74 million and $35.74 million in
the aggregate, with a mid-point value of $28.74 million. The estimated
percentage recoveries that are based upon distributions of New Holding Company
Common Stock were calculated using the mid-point of this valuation range.
The Debtors' financial advisors, Lazard Freres & Company, LLC ("Lazard"),
valued the New Holding Company Common Stock based, in part, on information and
financial projections provided by the Debtors. The foregoing valuation
assumptions include, among other things, an assumption that the operating
results projected for the Reorganized Debtors will be achieved in all material
respects, including revenue growth and improvements in operating margins,
earnings and cash flow. Certain of the projected results are materially better
than certain historical results of operations and no assurance can be given that
the projected results will be achieved. To the extent that the valuation
assumptions are dependent upon the achievement of the operating results
projected by the Debtors, the valuation assumptions must be considered
speculative. The valuation assumptions also consider, among other matters, (i)
market valuation information concerning certain publicly traded equity
securities of certain other companies that are considered relevant, (ii) certain
general economic and industry information considered relevant to the business of
the Reorganized Debtors, and (iii) such other investigations and analyses as
were deemed necessary or appropriate. The Debtors and Lazard believe these
valuation assumptions are reasonable.
The foregoing valuation assumptions are not a prediction or reflection of
post-Confirmation trading prices of the New Holding Company Common Stock or any
other securities. Such securities may trade at substantially higher or lower
prices or not at all because of a number of factors, including those discussed
in Article IX of the Disclosure Statement. The trading prices of securities
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issued under a plan of reorganization are subject to many unforeseeable
circumstances and therefore cannot be predicted.
Also, for certain Classes of Claims, the actual amounts of Allowed Claims
could materially exceed or could be materially less than the estimated amounts
shown in the table that follows. Accordingly, for these reasons, no
representation can be or is being made with respect to whether the estimated
percentage recoveries shown in the table below will actually be realized by the
holders of Allowed Claims in any particular Class. In addition, the Plan
provides for certain distribution reserves to be established with respect to
Disputed Claims. As a result, the process of distributing all of the property
to be distributed to holders of Claims under the Plan will be completed over
time.
Classification and Treatment of Pre-Petition Claims and Interests - Premier Graphics, Inc.
Class Description Treatment Under Plan
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Class P1 Holders of Allowed Secured Lender Claims shall be paid in full in Cash from (i)
Secured Lender Claims the Proceeds from the Exit Facility not required by the Reorganized Debtors for
working capital or other purposes, and (ii) to the extent such proceeds are
insufficient to pay Allowed Secured Lender Claims in full, the Net Proceeds
from sales of Non-Core Divisions and/or their assets that comprise Collateral
of the Allowed Secured Lender Claims. To the extent that the Secured Lender
Claims are paid in full on the later of the Effective Date or the date such
claims are allowed, such claims are unimpaired under the Plan.
Estimated Amount of Claims: $56.8 million
Estimated Percentage Recovery: 100%
Class P2 Class P2 consists of Premier Graphics obligations to GE Capital under the terms
Warrant Put Note Claim of the Warrant Put Note Guaranty Agreement. The Warrant Put Note Guaranty Agreement
guarantees Master Graphics' obligations to GE Capital under the Warrant Put Note.
On, or as soon as reasonably practicable after, the Effective Date, the Warrant
Put Note Guaranty Agreement shall be replaced by Premier Graphics' issuance of the
New Warrant Put Note Guaranty Agreement.
Estimated Amount of Claim: up to $2.2 million
Estimated Percentage Recovery: TBD
Class P3 The legal, equitable, and contractual rights of the Holders of Allowed Other
Other Secured Claims Secured Claims, including primarily capital lease obligations, are unaltered by
the Plan. Holders of such Claims shall receive either (i) Cash, (ii) such
other treatment as to which the Debtors and the Holders agree, or (iii) such
other treatment that will not impair the Holders of such Claims.
Estimated Amount of Claims: $5.43 million
Estimated Percentage Recovery: 100%
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Class P4 The legal, equitable, and contractual rights of the Holders of Allowed Other
Other Priority Claims Priority Claims, including claims for wages, salaries, and employee benefits,
are unaltered by the Plan. Holders of such Claims shall receive either (i)
Cash, (ii) such other treatment as to which the Debtors and the Holders agree,
or (iii) such other treatment that will not impair the Holders of such Claims.
Estimated Amount of Claims: $0
Estimated Percentage Recovery: 100%
Class P5 Holders of Allowed Class P5 General Unsecured Claims shall receive their pro
General Unsecured Claims rata share of (i) 100% of the New Holding Company Common Stock, plus (ii)
distributions from recoveries on Avoidance Claims and Causes of Action, if any.
Estimated Amount of Claims $160 million
Estimated Percentage Recovery: 13.5% - 22.3%
Class P6 Class P6 consists of unsecured claims against Premier Graphics in an amount
Administrative Convenience equal to or less than $10,000. At the election of Premier Graphics, holders of
Claims Administrative Convenience Claims shall receive either (i) Cash in an amount
equal to 25% of the allowed amount of such Claims or (ii) the treatment
afforded holders of Class P-5 General Unsecured Claims.
Estimated Amount of Claims: $1.6 million
Estimated Percentage Recovery: 13.5% - 25%
Class P7 Class P7 consists of the Old Premier Graphics Common Stock. Under the Plan,
Interests all such Interests shall be cancelled and the Holders thereof shall be entitled
to no distribution. On the Effective Date, New Holding Company shall be
created, the New Operating Company Common Stock shall be issued to New Holding
Company, and the New Holding Company Common Stock shall be issued to Holders of
Class P5 General Unsecured Claims, with the balance reserved to new management.
Estimated Percentage Recovery: 0%
Classification and Treatment of Pre-Petition Claims and Interests - Master Graphics, Inc.
Class Description Treatment Under Plan
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Class M1 Class M1 arises out of Master Graphics' guaranty of Premier Graphics'
Secured Lender Claims obligations to the Prepetition Lenders under the Prepetition Credit Agreement.
Holders of such Claims shall receive the treatment afforded to Class P1 Secured
Lender Claims.
Estimated Amount of Claims: $56.8 million
Estimated Percentage Recovery: 100%
Class M2 Class M2 consists of Master Graphics' obligations to GE Capital under the
Warrant Put Note Claim Warrant Put Note. On, or as soon as reasonably practicable after, the
Effective Date, the Warrant Put Note shall be replaced by Master Graphics'
issuance of the New Warrant Put Note to GE Capital.
Estimated Amount of Claim: up to $2.2 million
Estimated Percentage Recovery: TBD
Class M3 The legal, equitable, and contractual rights of the Holders of Allowed Other
Other Secured Claims Secured Claims, including capital lease obligations, are unaltered by the Plan.
Holders of such Claims shall receive either (i) Cash, (ii) such other treatment
as to which the Debtors and the Holders agree, or (iii) such other treatment
that will not impair the Holders of such Claims.
Estimated Amount of Claims: $5.43 million
Estimated Percentage Recovery: 100%
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Class M4 The legal, equitable, and contractual rights of the Holders of Allowed
Other Priority Claims Other Priority Claims, including claims for wages, salaries, and employee
benefits, are unaltered by the Plan. Holders of such Claims shall receive
either (i) Cash, (ii) such other treatment as to which the Debtors and the
Holders agree, or (iii) such other treatment that will not impair the
Holders of such Claims.
Estimated Amount of Claims: $0
Estimated Percentage Recovery: 100%
Class M5 Class M5 consist of all General Unsecured Claims against Master Graphics.
General Unsecured Claims Holders of Class M5 Allowed General Unsecured Claims shall receive no
distributions on account of their Claims.
Estimated Amount Claims $19.8 million
Estimated Percentage Recovery: 0%
Class M6 Class M6 consists of the Old Master Graphics Common Stock and the Old
Interests Master Graphics Preferred Stock. Under the Plan, all such Interests shall
be cancelled and the Holders thereof shall be entitled to no distribution.
Estimated Percentage Recovery: 0%
Outstanding Securities
As of September 30, 2000, there were 7,923,026 shares of Old Master
Graphics Common Stock issued and outstanding. Under the Plan, all Old Master
Graphics Common Stock and Old Master Graphics Preferred Stock shall be
cancelled, and no consideration will be paid or delivered with respect thereto.
Information as to Assets and Liabilities
Information as to assets and liabilities of the Debtors for the period of
December 1 through December 31, 2000 contained in the Debtors' Monthly Operating
Report for such period, as filed with the Bankruptcy Court, is attached as
Exhibit 99 hereto.
Master Graphics, Inc. cautions investors and potential investors not to
place undue reliance upon the information contained in the Monthly Operating
Report. The Monthly Operating Report contains unaudited information and is in a
format prescribed by the applicable bankruptcy laws. There can be no assurance
that, from the perspective of an investor or potential investor in the Master
Graphics, Inc. securities, the Monthly Operating Report is complete. The Monthly
Operating Report also contains information for periods which may be shorter or
otherwise different from those required in Master Graphics, Inc.'s reports
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Such information may not be indicative of Master Graphics, Inc.'s
financial condition or operating results for the periods which would be
reflected in the financial statements of Master Graphics, Inc. or in its reports
pursuant to the Exchange Act.
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Item 7. Financial Statements and Exhibits
(c) Exhibits.
The following exhibits are filed pursuant to Item 601 of
Regulation S-K:
Exhibit
Number Description
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2.1 First Amended Joint Plan of Reorganization of Master Graphics, Inc.
and Premier Graphics, Inc., dated December 19, 2000.
2.2 Order Confirming First Amended Joint Plan of Reorganization of Master
Graphics, Inc. and Premier Graphics, Inc., dated January 25, 2001.
2.3 Disclosure Statement dated December 19, 2000 with respect to the First
Amended Joint Plan of Reorganization of Master Graphics, Inc. and
Premier Graphics, Inc.
99 Monthly Operating Report for the Period from December 1 to
December 31, 2000.
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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 thereunto duly authorized.
MASTER GRAPHICS, INC.
Date: February 15, 2001 By: /s/ P. Melvin Henson, Jr.
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P. Melvin Henson, Jr.
Chief Financial Officer
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