<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10-Q/A

(Mark One)

       (X)   Quarterly report pursuant to Section 13 or 15(d) of the Securities
       ---   Exchange Act of 1934

             For the quarterly period ended June 30, 1999 or

       ( )   Transition report pursuant to Section 13 or 15(d) of the Securities
       ---   Exchange Act of 1934

             For the transition period from             to
                                           -------------  -----------

             Commission file number  0-24411
                                   ----------


                              MASTER GRAPHICS, INC.
                              ---------------------
             (Exact name of registrant as specified in its charter)


            Tennessee                                          62-1694322
           ------------                                       ------------
  (State or Other Jurisdiction                             (I. R. S. Employer
of Incorporation or Organization)                           Identification No.)


6075 Poplar Avenue, Suite 401, Memphis, TN                             38119
------------------------------------------                           ----------
 (Address of principal executive offices)                            (Zip Code)


                                (901) 685-2020
                                --------------
             (Registrant's telephone number, including area code)


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 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
                                       ---        ---

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.


Common Stock, $0.001 Par Value, 7,923,026 shares as of April 13, 2000.
                               ----------
<PAGE>

                              EXPLANATORY NOTES

     The Registrant hereby amends and restates in its entirety Item 1 and Item 2
of Part I of its Quarterly Report on Form 10-Q for the quarter ended June 30,
1999.  Please refer to note 1 of the Notes to Condensed Consolidated Financial
Statements filed herewith for an explanation of the reasons for which Item 1 and
Item 2 of Part I are amended and restated.


INDEX



PART I.  FINANCIAL INFORMATION


Item 1.  Financial Statements                                              Page

         Condensed Consolidated Balance Sheets, December 31, 1998 and
         June 30, 1999....................................................    3

         Condensed Consolidated Statements of Operations for the Three
         Months Ended June 30, 1998 and 1999..............................    4

         Condensed Consolidated Statements of Operations for the Six
         Months Ended June 30, 1998 and 1999..............................    5

         Condensed Consolidated Statements of Cash Flows for the Six
         Months Ended June 30, 1998 and 1999..............................    6

         Notes to Condensed Consolidated
         Financial Statements.............................................    7

Item 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations............................................   14

Signatures................................................................   19

<PAGE>

                        PART I - FINANCIAL INFORMATION
                         Item 1. Financial Statements
                     MASTER GRAPHICS, INC. AND SUBSIDIARY
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                       (In Thousands, Except Share Data)

                                                         December 31,  June 30,
                                                             1998        1999
                                                         ------------  --------
                                                                     (Unaudited)
                                     ASSETS
CURRENT ASSETS:
  Cash and cash equivalents                                  $ 13,525  $      0
  Trade accounts receivable, net                               38,529    45,959
  Inventories:
     Raw materials and supplies                                 2,909     4,328
     Work-in-process                                            5,186     8,947
                                                             --------  --------
       Total inventories                                        8,095    13,275
  Deferred income taxes                                         1,057     2,917
  Other current assets                                          4,012     4,595
                                                             --------  --------
       Total current assets                                    65,218    66,746
  Property, plant and equipment, net                           75,251    95,369
  Goodwill, net                                                64,469    96,800
  Deferred loan costs, net                                      1,352     1,335
  Other                                                         1,586     3,757
                                                             --------  --------
       Total assets                                          $207,876  $264,007
                                                             ========  ========

                       LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Current installments of long-term debt                     $    924  $  6,548
  Accounts payable                                             10,829    12,564
  Accrued expenses                                              5,540     7,634
                                                             --------  --------
       Total current liabilities                               17,293    26,746
  Long-term debt, net of current installments                 144,223   192,294
  Deferred income taxes                                         7,554     8,771
  Other liabilities                                             1,177       961
  Redeemable preferred stock                                    1,437     1,497
  Commitments and contingencies

SHAREHOLDERS' EQUITY:
  Common stock ($0.001 par value; 100,000,000 shares
     authorized; 7,879,997 shares issued and outstanding
     at December 31, 1998 and 7,923,026 shares issued
     and outstanding at June 30, 1999)                              8         8
  Additional paid-in capital                                   39,843    40,016
  Retained earnings (deficit)                                  (3,659)   (6,286)
                                                             --------  --------
       Total shareholders' equity                              36,192    33,738
                                                             --------  --------
       Total liabilities and shareholders' equity            $207,876  $264,007
                                                             ========  ========

  The accompanying notes are an integral part of these condensed consolidated
                             financial statements.

<PAGE>

                     MASTER GRAPHICS, INC. AND SUBSIDIARY
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                     (In Thousands, Except Per Share Data)
                                  (Unaudited)

                                                  Three months ended June 30,
                                                  ---------------------------
                                                      1998           1999
                                                  -------------  ------------
Net Revenue                                         $ 38,525       $ 65,277
Cost of Revenue                                       28,289         50,790
                                                    --------       --------
  Gross Profit                                        10,236         14,487
Selling, general and administrative expenses           6,969         13,115
                                                    --------       --------
  Operating Income                                     3,267          1,372
Other income (expense):
  Interest expense                                    (2,746)        (5,353)
  Other, net                                             213           (172)
                                                    --------       --------
     Income (loss) before income taxes                   734         (4,153)
Income tax benefit                                         0         (1,527)
                                                    --------       --------
     Net earnings (loss)                                 734         (2,626)
Extraordinary loss on extinguishment of debt
  net of income tax benefit of $1,458                 (2,098)             0
                                                    --------       --------
     Net loss                                       $ (1,364)      $ (2,626)
                                                    ========       ========

Basic earnings per share:
Net earnings (loss) before extraordinary loss       $   0.14       $  (0.34)
Extraordinary loss                                     (0.43)          0.00
                                                    --------       --------
     Net loss                                       $  (0.29)      $  (0.34)
                                                    ========       ========

Diluted earnings per share:
Net earnings (loss) before extraordinary loss       $   0.13       $  (0.34)
Extraordinary loss                                     (0.40)          0.00
                                                    --------       --------
     Net loss                                       $  (0.27)      $  (0.34)
                                                    ========       ========

  The accompanying notes are an integral part of these condensed consolidated
                             financial statements.

<PAGE>

                     MASTER GRAPHICS, INC. AND SUBSIDIARY
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                     (In Thousands, Except Per Share Data)
                                  (Unaudited)

                                                    Six months ended June 30,
                                                    -------------------------
                                                       1998          1999
                                                    -----------  ------------
Net Revenue                                           $66,545      $121,655
Cost of Revenue                                        48,943        92,159
                                                      -------      --------
  Gross Profit                                         17,602        29,496
Selling, general and administrative expenses           11,834        23,499
                                                      -------      --------
  Operating Income                                      5,768         5,997
Other income (expense):
  Interest expense                                     (4,994)      (10,027)
  Other, net                                              399           114
                                                      -------      --------
     Income (loss) before income taxes                  1,173        (3,916)
Income tax benefit                                         (4)       (1,349)
                                                      -------      --------
     Net earnings (loss)                                1,177        (2,567)
Extraordinary loss on extinguishment of debt,
  net of income tax benefit of $1,458                  (2,098)            0
                                                      -------      --------
     Net loss                                         $  (921)     $ (2,567)
                                                      =======      ========

Basic earnings per share:
  Net earnings (loss) before extraordinary loss       $  0.25      $  (0.34)
  Extraordinary loss                                    (0.47)         0.00
                                                      -------      --------
     Net loss                                         $ (0.22)     $  (0.34)
                                                      =======      ========

Diluted earnings per share:
  Net earnings (loss) before extraordinary loss       $  0.24      $  (0.34)
  Extraordinary loss                                    (0.44)         0.00
                                                      -------      --------
     Net loss                                         $ (0.20)     $  (0.34)
                                                      =======      ========

 The accompanying notes are an integral part of these condensed consolidated
                             financial statements.

<PAGE>

                     MASTER GRAPHICS, INC. AND SUBSIDIARY
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (In Thousands)
                                  (Unaudited)

                                                            Six months ended
                                                                 June 30,
                                                           -------------------
                                                             1998       1999
                                                           --------   --------
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                 $   (921)  $ (2,567)
  Adjustments to reconcile net income to net cash
   provided by operating activities:
     Depreciation and amortization                            2,647      5,674
     Deferred taxes                                               0       (643)
     Loss on disposal of equipment                                0        402
     Extraordinary loss on extinguishment of debt,
      net of income tax benefit                               2,098          0
     Changes in operating assets and liabilities, net of
      effect of business acquisitions:
       Trade accounts receivable                             (3,737)       459
       Inventories                                              436     (1,265)
       Other assets                                            (199)    (1,019)
       Accounts payable                                      (1,301)    (1,914)
       Accrued expenses                                      (1,488)      (417)
                                                           --------   --------
          Net cash used in operating activities              (2,465)    (1,290)
                                                           --------   --------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Business acquisitions, net of cash acquired               (43,386)   (58,096)
  Purchases of equipment                                       (760)    (4,108)
  Repayment of shareholder note receivable                    3,895          0
                                                           --------   --------
          Net cash used in investing activities             (40,251)   (62,204)
                                                           --------   --------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net borrowings on lines of credit                            (305)     9,475
  Proceeds from issuance of long-term debt                   45,186     43,159
  Net proceeds from initial public offering of stock         30,092          0
  Issuance of common stock to finance acquisitions                0        233
  Principal payments on long-term debt                      (31,356)    (2,595)
  Loan costs incurred                                          (500)      (303)
                                                           --------   --------
          Net cash provided by financing activities          43,117     49,969
                                                           --------   --------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS            401    (13,525)
CASH AND CASH EQUIVALENTS, beginning of period                1,174     13,525
                                                           --------   --------
CASH AND CASH EQUIVALENTS, end of period                   $  1,575   $      0
                                                           ========   ========

 The accompanying notes are an integral part of these condensed consolidated
                             financial statements.


<PAGE>

                     MASTER GRAPHICS, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 1999
                                  (Unaudited)


(1)  Basis of Presentation

The accompanying condensed consolidated financial statements of Master Graphics,
Inc. and its subsidiary (collectively "Company") are unaudited and have been
prepared in accordance with generally accepted accounting principles for interim
financial information and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. These condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements as of and for the year ended December 31,
1998.

In the opinion of the Company, the accompanying condensed consolidated financial
statements contain all adjustments (consisting of real, recurring adjustments)
necessary to present fairly the financial position, results of operations, and
cash flows of the Company as of the dates and for the periods presented.

Because of the seasonal nature of the Company's business, the results of
operations for the periods presented are not necessarily indicative of the
results of operations for a full fiscal year.

On May 14, 1998, the Board of Directors of the Company approved a 40,000 to 1
stock split. All references to share and per share amounts in these condensed
consolidated financial statements have been retroactively restated to reflect
the stock split.

The accompanying unaudited condensed consolidated financial statements of the
Company include the results of operations of Master Graphics, Inc. and its
subsidiary, on a consolidated basis. All intercompany balances and transactions
have been eliminated in the consolidation.

The consolidated financial statements as of and for the three months and six
months ended June 30, 1999 included in this Form 10-Q/A have been restated from
amounts previously reported on Form 10-Q for that period.

In January 2000 the Company identified certain potentially inappropriate
deferrals of salary and rent expense paid to certain of the Company's division
presidents in the first quarter of 1999. Upon further investigation, the Company
concluded that salary and rent paid during the quarter totaling $896,000 had not
been properly recorded as expense for the six months ended June 30, 1999.
The accompanying consolidated financial statements as of June 30, 1999 and for
the six months then ended have been restated to reflect the expensing of these
amounts.

In January 2000 the Company also determined that certain printing presses
classified as assets held for sale were used in production past the date on
which the Company ceased recording depreciation expense. The accompanying
consolidated financial statements as of and for the three months and six months
ended June 30, 1999 have been restated to reflect additional depreciation
expense totaling $387,000 and $573,000, respectively. In January 2000 the
Company also determined that the loss on the sale of certain printing presses
sold during the second quarter of 1999 had been mis-calculated. The accompanying
consolidated financial statements as of and for the three months and six months
ended June 30, 1999 have been restated to reflect an additional loss on sale of
equipment totaling $402,000.

For the three months and six months ended June 30, 1999, reductions in income
tax expense of $285,000 and $674,000, respectively, have been recorded as a
result of the adjustments described above.

(2)  Earnings Per Share

Basic earnings per share are calculated by dividing net earnings less preferred
stock dividend and discount accretion by the weighted average number of
common shares outstanding. For the three months June 30, 1998 and 1999, the
basic weighted average shares outstanding were 4,841,023 and 7,923,026,
respectively. For the six months June 30, 1998 and 1999, the basic weighted
average shares outstanding were 4,422,835 and 7,909,000, respectively. For the
three months and six months ended June 30, 1998 and 1999, conversion of the
preferred stock is not assumed in the diluted earnings per share calculation, as
the effect is anti-dilutive on an incremental basis. For the three months and
six months ended June 30, 1998, exercise of employee stock options and seller
warrants are not assumed because their effect would be anti-dilutive using the
treasury stock method. For the three months and six months ended June 30, 1999,
exercise of employee stock options, the deferred compensation plan, seller
warrants and lender warrants are not assumed because their effect would be anti-
dilutive using the treasury stock method. For the three months ended June 30,
1998 and 1999 the diluted weighted average shares outstanding were 5,184,466 and
7,923,026, respectively. For the six months ended June 30, 1998 and 1999 the
diluted weighted average shares outstanding were 4,754,621 and 7,909,000,
respectively (dollars in thousands, except per share amounts).

<PAGE>

                     MASTER GRAPHICS, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 June 30, 1999
                                  (Unaudited)
<TABLE>
<CAPTION>


                                                Income        Shares      Per-Share
THREE MONTHS ENDED JUNE 30, 1998              (Numerator)  (Denominator)   Amount
--------------------------------              -----------  -------------  ---------
<S>                                           <C>          <C>            <C>
Net earnings before extraordinary loss           $   734
Less: Redeemable preferred stock dividends           (28)
Less: Redeemable preferred stock discount            (29)
                                                 -------
BASIC EARNINGS PER SHARE
Net earnings available to common shareholders -
  before extraordinary loss                          677    4,841,023     $ 0.14
                                                                          ======
EFFECT OF DILUTIVE SECURITIES
Lender warrants                                        0      243,443
Deferred compensation contracts                       15      100,000
                                                 -------    ---------
DILUTED EARNINGS PER SHARE
Net earnings available to common shareholders
  plus assumed conversions - before
  extraordinary loss                             $   692    5,184,466     $ 0.13
                                                 =======    =========     ======

THREE MONTHS ENDED JUNE 30, 1999
--------------------------------
Net loss                                         $(2,626)
Less: Redeemable preferred stock dividends           (28)
Less: Redeemable preferred stock discount            (30)
                                                 -------
BASIC LOSS PER SHARE
Loss available to common shareholders            $(2,684)   7,923,026     $(0.34)
                                                 =======    =========     ======
DILUTED LOSS PER SHARE
Loss available to common shareholders            $(2,684)   7,923,026     $(0.34)
                                                 =======    =========     ======

SIX MONTHS ENDED JUNE 30, 1998
------------------------------
Net earnings before extraordinary loss           $ 1,177
Less: Redeemable preferred stock dividends           (28)
Less: Redeemable preferred stock discount            (29)
                                                 -------
BASIC EARNINGS PER SHARE
Net earnings available to common shareholders -
  before extraordinary loss                        1,120    4,422,835     $ 0.25
                                                                          ======
EFFECT OF DILUTIVE SECURITIES
Lender warrants                                        0      231,786
Deferred compensation contracts                       30      100,000
                                                 -------    ---------
DILUTED EARNINGS PER SHARE
Net earnings available to common shareholders
  plus assumed conversions - before
  extraordinary loss                             $ 1,150    4,754,621     $ 0.24
                                                 =======    =========     ======

SIX MONTHS ENDED JUNE 30, 1999
------------------------------
Net loss                                         $(2,567)
Less: Redeemable preferred stock dividends           (58)
Less: Redeemable preferred stock discount            (60)
                                                 -------
BASIC LOSS PER SHARE
Loss available to common shareholders            $(2,685)   7,909,000     $(0.34)
                                                 =======    =========     ======
DILUTED LOSS PER SHARE
Loss available to common shareholders            $(2,685)   7,909,000     $(0.34)
                                                 =======    =========     ======
</TABLE>


<PAGE>

                     MASTER GRAPHICS, INC. AND SUBSIDIARY
       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                                 June 30, 1999
                                  (Unaudited)


(3)  Acquisitions

In March 1999, the Company acquired all of the outstanding stock of Woods
Lithographics, Inc. and Columbia Graphics Corporation and a significant portion
of the operating assets of White Arts, Inc.  All of these businesses are engaged
in general commercial printing.  These acquisitions were paid for with a
combination of cash ($16.7 million) and 43,029 shares of common stock ($.25
million).  These acquisitions have been accounted for by the purchase method
and, accordingly, the results of operations of Woods Lithographics, Columbia
Graphics and White Arts Printing have been included in the Company's 1999
consolidated financial statements from their respective acquisition dates.  The
excess of the purchase prices over the fair value of the net identifiable assets
acquired is approximately $14.3 million, which has been recorded as goodwill and
is being amortized on a straight-line basis over 40 years.

In May and June 1999, the Company acquired all of the outstanding stock of Eagle
Direct, Inc. and Thomasson Printing, Inc. Both of these businesses are engaged
in general commercial printing. These acquisitions were paid for with cash
($13.0 million). These acquisitions have been accounted for by the purchase
method and, accordingly, the results of operations of Eagle Direct and Thomasson
Printing have been included in the Company's 1999 consolidated financial
statements from their respective acquisition dates. The excess of the purchase
prices over the fair value of the net identifiable assets acquired is
approximately $7.6 million, which has been recorded as goodwill and is being
amortized on a straight-line basis over 40 years.

The following unaudited pro forma financial information presents the combined
results of operations of the Company and the acquired businesses, as if the
acquisitions had occurred at January 1, 1998. Pro forma amounts for 1998 also
include the effects of the 1998 acquisitions and of the 1999 acquisitions
described above. Effect has been given to certain adjustments, including
amortization of goodwill, adjusted depreciation expense and increased interest
expense on debt related to the acquisitions. The pro forma financial information
does not necessarily reflect the results of operations that would have occurred
had the Company and the acquired businesses constituted a single entity during
such periods.

                                               Six months ended June 30,
                                               -------------------------
                                                  1998           1999
                                                  ----           ----
  Net revenue                                   $142,257       $135,088
  Net earnings                                  $ (1,430)      $ (3,187)
  Basic earnings per share                      $  (0.32)      $  (0.42)
  Diluted earnings per share                    $  (0.32)      $  (0.42)

<PAGE>

                     MASTER GRAPHICS, INC. AND SUBSIDIARY
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
                                  (Continued)
                                 June 30, 1999
                                  (Unaudited)

(4) Long-Term Debt

The following is a summary of the Company's long-term debt instruments (in
thousands) as of:


                                    December 31,     June 30,
                                    ------------     --------
                                        1998           1999
                                    ------------     --------
                                                    (unaudited)

  Senior Notes                          $130,000     $130,000
  Credit Facilities:
     Term Debt                               262       41,224
     Working Capital Debt                      0        9,475
     Sellers' notes                       16,599       15,625
     Other                                 2,919        7,638
                                        --------     --------
                                         149,780      203,962
  Less unamortized debt discount           4,633        5,120
                                        --------     --------
                                         145,147      198,842
  Less current maturities                    924        6,548
                                        --------     --------
                                        $144,223     $192,294
                                        ========     ========

In March 1999, the Company entered into a Third Amended and Restated Loan and
Security Agreement with General Electric Capital Corporation, as agent for
itself and other lenders. Pursuant to the agreement, the credit facility
consists of two term loans ("Term Loan A" and "Term Loan B") each of $30 million
and a revolving credit facility ("Revolver") of $20 million. Term Loan A bears
interest, payable monthly, at a floating rate equal to LIBOR plus 2.5% (7.4% at
June 30, 1999), and Term Loan B bears interest, payable monthly, at a floating
rate equal to LIBOR plus 3.0% (7.9% at June 30, 1999). Term Loan A matures in
March 2004, and principal is payable based on a five-year amortization.  Term
Loan B matures in March 2005 with quarterly principal payments based on amount
of principal outstanding with a final balloon payment at maturity. The annual
amortization of the $41.2 million ($20.6 million under each of Term Loan A and
Term Loan B) outstanding at June 30, 1999 will approximate $5.8 million for each
of the next five years. The use of proceeds from Term Loans A and B is
restricted to acquisitions. The Revolver, which contains certain borrowing base
limitations, bears interest at the prime rate (8.0% at June 30, 1999) and is
repayable in full in March 2004. There was $11.5 million available under the
Revolver and $18.8 million available in term debt as of June 30, 1999.

The security for the facility includes a lien on all of the assets of Premier
Graphics, Inc., Master Graphics' operating subsidiary, as well as a pledge by
Master Graphics of all of the outstanding stock of Premier Graphics. The
facility includes a prepayment penalty of 1% of the amount prepaid.

Under the facility, the Company is required to maintain certain financial tests
and ratios including, but not limited to a covenant requiring a minimum level of
prepayment to Term Loan A and Term Loan B based on 50% of annual excess cash
flow, as defined.

In connection with the Company's acquisition of White Arts in March 1999, the
Company assumed approximately $4.3 million of indebtedness owed by the acquired
company.  That indebtedness is classified above as "other" long-term debt. The
remainder of the Company's "other" long-term debt consists of approximately $2.5
million in capital lease obligations, and other miscellaneous items of
indebtedness.

See Note 7 - Subsequent Events

<PAGE>

                     MASTER GRAPHICS, INC. AND SUBSIDIARY
            NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
                                  (Continued)
                                 June 30, 1999
                                  (Unaudited)

(5)  Property, Plant and Equipment

The following is a summary of the Company's property, plant and equipment (in
thousands) as of:
<TABLE>
<CAPTION>

                                   December 31,     June 30,
                                      1998            1999
                                   ------------   -----------
                                                  (unaudited)
<S>                                <C>           <C>
  Land                                  $   486    $    786
  Buildings                               3,830       5,759
  Leasehold improvements                  1,115       1,323
  Machinery and equipment                75,602      93,113
  Furniture and fixtures                  3,331       4,443
  Vehicles                                1,374       1,248
                                        -------    --------
                                         85,738     106,672
  Less accumulated depreciation          10,487      11,303
                                        -------    --------
                                        $75,251    $ 95,369
                                        =======    ========
</TABLE>

Included in the machinery and equipment balance of $93.1 million are $2.2
million in assets held for sale. These assets reflect the value of presses taken
out of service and scheduled for sale under the Company's press replacement
program with a major press manufacturer. We have identified thirty older model
presses to be replaced with fourteen state of the art presses. These assets will
be disposed of during the third quarter.


<PAGE>

                     MASTER GRAPHICS, INC. AND SUBSIDIARY
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
                                  (Continued)
                                 June 30, 1999
                                  (Unaudited)


(6)  Wholly-owned Operating Subsidiary

Master Graphics is a holding company with no operating assets or operations.
Premier Graphics, its operating subsidiary, is the primary obligor for the
Senior Notes and the credit facility with General Electric Capital Corporation
as agent. The Senior Notes are fully and unconditionally guaranteed by Master
Graphics. Following is summarized combined financial information of Premier
Graphics as of December 31, 1998 and June 30, 1999 and for the three months and
six months ended June 30, 1998 and 1999, respectively (in thousands).
<TABLE>
<CAPTION>

                                                         December 31,   June 30,
                                                             1998         1999
                                                         ------------   --------
<S>                                                  <C>              <C>
  Balance sheet data:
     Current assets                                         $ 62,956    $ 65,976
     Property, plant and equipment                            74,943      95,012
     Goodwill, net                                            63,771      96,632
     Due from Shareholder                                     46,025      94,474
     Other non-current assets                                  1,523       9,036
                                                            --------    --------
       Total assets                                         $249,218    $361,130
                                                            ========    ========

     Current liabilities, including current
       installments of long-term debt of
       $924 and $6,548 in 1998 and 1999                     $ 16,327    $ 28,164
     Long-term debt, net                                     127,624     194,840
     Other liabilities                                         3,551       4,059
                                                            --------    --------
         Total liabilities                                   147,502     227,063
     Stockholders' equity                                    101,716     134,067
                                                            --------    --------
       Total liabilities and stockholders' equity           $249,218    $361,130
                                                            ========    ========

                                                         Three months ended June 30,
                                                              1998        1999
                                                            --------    --------
  Statement of operations data:
     Net revenues                                            $38,525     $65,277
     Gross profit                                             10,236      14,181
     Operating income                                          3,267         940
     Interest expense                                          1,576       4,894
     Income tax benefit                                            0      (1,527)
     Net earnings (loss)                                     $   251     $(2,102)

</TABLE>

<PAGE>

                     MASTER GRAPHICS, INC. AND SUBSIDIARY
            NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
                                  (Continued)
                                 June 30, 1999
                                  (Unaudited)


                                                   Six months ended June 30,
                                                      1998          1999
                                                      ----          ----
  Statement of operations data:
     Net revenues                                    $66,545      $121,655
     Gross profit                                     17,602        29,190
     Operating income                                  5,768         6,021
     Interest expense                                  3,587         9,090
     Income tax benefit                                   (4)       (1,349)
     Net earnings                                    $   694      $ (1,109)


The following unaudited pro forma financial information presents the combined
results of operations of Premier Graphics and the businesses acquired in 1998
and 1999 as if the acquisitions and related financings, including the initial
public offering of Master Graphics common stock and the Senior Notes offering
had occurred as of January 1, 1998 after giving effects to certain adjustments,
including amortization of goodwill, adjusted depreciation expense and increased
interest expense on debt related to the acquisitions. The unaudited pro forma
financial information does not necessarily reflect the results of operations
that would have occurred had Premier Graphics and the acquired businesses
constituted a single entity during such periods (in thousands).

                                                   Six months ended June 30,
                                                       1998        1999
                                                       ----        ----
    Net revenue                                     $142,257    $135,088
    Operating income                                  10,003       6,040
    Depreciation and amortization                      4,632       6,561
    Net earnings                                    $    186    $ (1,729)

Management believes that there are specific items included in the acquirees
results of operations which are non-recurring and which, if removed from the pro
forma results noted above, would increase earnings by $1.3 million and $0.3
million for the six month periods ended June 30, 1998 and 1999, respectively.

(7)  Subsequent Events

On July 8, 1999, approximately four months after the retirement of the president
of its Blackwell Lithographers division in Jackson, Mississippi, the Company
ceased operations at the Blackwell division. Blackwell's customer base was
reassigned to the sales force of Hederman Brothers Printing, the Company's other
Jackson-based operation. Costs of the shutdown include severance pay and
outplacement assistance for employees, plus a minimal level of utility and
security costs until the disposal of equipment and facility is complete. These
costs are considered immaterial. Because Blackwell sales are expected to be
recovered at Hederman Brothers, goodwill was not considered to be impaired.

On August 13, 1999, the Company amended its senior credit facility which
adjusted certain financial covenants and placed the related interest rates on
variable pricing based on leverage ratios. The effects of this amendment were
to increase interest rate margins by 25 basis points.



<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

THE QUARTERLY REPORT ON FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES. READERS ARE CAUTIONED THAT SUCH INFORMATION
INVOLVES KNOWN AND UNKNOWN UNCERTAINTIES, INCLUDING THOSE CREATED BY GENERAL
MARKET CONDITIONS, COMPETITION AND THE POSSIBILITY THAT EVENTS MAY OCCUR WHICH
LIMIT OUR ABILITY TO MAINTAIN OR IMPROVE OUR OPERATING RESULTS OR EXECUTE OUR
GROWTH STRATEGY OF ACQUIRING ADDITIONAL BUSINESSES. ALTHOUGH WE BELIEVE THAT THE
ASSUMPTIONS UNDERLYING THE FORWARD-LOOKING STATEMENTS ARE REASONABLE, ANY OF THE
ASSUMPTIONS COULD BE INACCURATE, AND THERE CAN THEREFORE BE NO ASSURANCE THAT
THE FORWARD-LOOKING STATEMENTS INCLUDED HEREIN WILL PROVE TO BE ACCURATE. THE
INCLUSION OF SUCH INFORMATION SHOULD NOT BE REGARDED AS A REPRESENTATION BY US
OR ANY OTHER PERSON THAT OUR OBJECTIVES AND PLANS WILL BE ACHIEVED.

Material Changes in Financial Condition

From December 31, 1998 to June 30, 1999, we utilized our excess cash from the
issuance of $130 million of 11.5% Senior Notes due 2005 to fund acquisitions. As
a result, our working capital position has declined by approximately $7.9
million.

Consolidated Results of Operations

The following table sets forth certain unaudited consolidated financial data for
the periods indicated (dollars in millions) and such results as a percentage of
revenue.
<TABLE>
<CAPTION>

                                                     Three months ended June 30,
                                                         1998             1999
                                                        ------           -------
<S>                                                 <C>      <C>     <C>      <C>
  Revenue                                           $ 38.5   100.0%  $ 65.3   100.0%
  Gross profit                                        10.2    26.5     14.5    22.2
  Selling, general and administrative expenses         7.0    18.2     13.1    20.1
  Operating income                                     3.2     8.3      1.4     2.1
  Interest and other expense                           2.5     6.5      5.5     8.4
  Net earnings (loss)  before extraordinary loss       0.7     1.8     (2.6)   (4.0)
  Extraordinary loss                                  (2.1)   (5.5)     0.0     0.0
  Net loss                                          $ (1.4)    3.6%  $ (2.6)   (4.0%)
</TABLE>

 Three Months Ended June 30, 1999 Compared to Three Months Ended June 30, 1998

Revenue.   Revenue increased approximately 70% from $38.5 million for the three
months ended June 30, 1998 to $65.3 million for the three months ended June 30,
1999. This growth was attributable primarily to the implementation of our
acquisition strategy. Revenue growth on a same store basis, however, declined
compared to the second quarter of 1998. This decline is primarily connected to
timing issues from key accounts in the Chicago and Houston markets, as well as a
failed unionization attempt at our largest division in Alexandria, Virginia.
Also impacting the period was our focus on ISO certification and investing in a
standardized MIS system, along with the complexities associated with installing
new presses at the Company's Henderson, North Carolina and Atlanta, Georgia
divisions.

Gross profit. Gross profit increased from $10.2 million for the three months
ended June 30, 1998 to $14.5 million for the three months ended June 30, 1999.
The increase in gross profit was attributable primarily to the implementation of
our acquisition strategy. Gross profit as a percentage of sales decreased to
22.2% for the three months ended June 30, 1999, from 26.5% in the corresponding
period of the prior year, and is directly related to the revenue decline
described above. During the quarter, we maintained our historical direct
material margin as a percentage of revenue, however the decline in revenue
caused a reduction in the direct material margin dollars available to cover
increased factory cost resulting from the addition of new acquisitions. This
resulted in a lower gross profit percentage when compared to 1998. At the end of
the quarter, we implemented a cost containment program at selected divisions
that is primarily directed at factory labor expenses. We expect to see results
from this effort during the third quarter. These events offset the progress in
implementing corporate-wide purchasing programs.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased from $7.0 million for the three months ended
June 30, 1998 to $13.1 million for the three months ended June 30,1999. Selling
expenses increased with increasing revenue mentioned above and general and
administrative expenses increased in conjunction with our acquisition strategy
and execution of our business plan, specifically costs related to ISO
certification (eight of twenty facilities are now certified or recommended for
certification) and installation of our MIS system (fifteen of twenty facilities
are now complete).

Interest and other expense. Interest and other expense increased from $2.5
million for the three months ended June 30, 1998 to $5.5 million for the three
months ended June 30, 1999.  A substantial portion of the purchase



<PAGE>

price for each of our acquisitions was financed with debt. Accordingly, the
increase in interest expense is primarily attributable to our acquisition
program and related financing activities. In addition, the change reflects the
effects of our $34 million initial public offering of stock in June 1998 and the
issuance of $130 million of 11.5% Senior Notes due 2005 by Premier
Graphics.
<TABLE>
<CAPTION>

                                                       Six months ended June 30,
                                                          1998              1999
                                                        -------           -------
<S>                                                 <C>      <C>      <C>      <C>
  Revenue                                           $ 66.5   100.0%   $121.7   100.0%
  Gross profit                                        17.6    26.5      29.5    24.2
  Selling, general and administrative expenses        11.8    17.7      23.5    19.3
  Operating income                                     5.8     8.7       6.0     4.9
  Interest and other expense                           4.6     6.9       9.9     8.1
  Net earnings (loss)  before extraordinary loss       1.2     1.8      (2.6)   (2.1)
  Extraordinary loss                                  (2.1)   (3.2)      0.0     0.0
  Net loss                                          $ (0.9)   (1.4%)  $ (2.6)   (2.1%)
</TABLE>

   Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998

Revenue. Revenue increased approximately 83% from $66.5 million for the six
months ended June 30, 1998 to $121.7 million for the six months ended June 30,
1999. Revenue growth was attributable primarily to the implementation of our
acquisition strategy. Revenue growth year to date was impacted by the year over
year decline during the second quarter.

Gross profit. Gross profit increased from $17.6 million for the six months ended
June 30, 1998 to $29.5 million for the six months ended June 30, 1999. The
increase in gross profit was attributable primarily to the implementation of our
acquisition strategy. Gross profit as a percentage of sales decreased to 24.2%
for the six months ended June 30, 1999, from 26.5% in the corresponding period
of the prior year. Similar to second quarter results, the year to date gross
profit percentage, compared to 1998, was impacted by lower gross margin dollars
and increased factory cost resulting from the addition of new acquisitions.
These events offset the progress in implementing corporate-wide purchasing
programs.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased from $11.8 million for the six months ended
June 30, 1998 to $23.5 million for the six months ended June 30,1999. Selling
expenses increased with increasing revenue mentioned above and general and
administrative expenses increased in conjunction with our acquisition strategy
and execution of our business plan.

Interest and other expense. Interest and other expense increased from $4.6
million for the six months ended June 30, 1998 to $9.9 million for the six
months ended June 30, 1999. A substantial portion of the purchase price for each
of our acquisitions was financed with debt. Accordingly, the increase in
interest expense is primarily attributable to our acquisition program and
related financing activities. In addition, the change reflects the effects of
our $34 million initial public offering of stock in June 1998 and the issuance
of $130 million of 11.5% Senior Notes due 2005 by Premier Graphics.

<PAGE>

Liquidity and Capital Resources

Our primary cash requirements are for debt service, capital expenditures,
acquisitions and working capital. Historically, we have financed our operations
and equipment purchases with cash flows from operations, capital leases and
secured loans through commercial banks or other institutional lenders and credit
lines from commercial banks. We have financed our acquisitions primarily with
funds under a credit facility as well as subordinated notes payable to former
owners of the acquired companies.  Working capital on June 30, 1999 was $40.0
million, a decrease of $7.9 million from December 31, 1998.  Our largest source
of capital for acquisitions has been debt financing including the $130 million
of 11.5% Senior Notes due 2005 as well as our senior credit facility which
originally closed in September 1997 and which has been revised from time to
time, most recently being revised in March 1999. Footnote 4 to the condensed
consolidated financial statements included herein provides a brief description
of the revised credit facility.

As part of the respective purchase agreements, we have agreed to pay the former
owners of twelve of the acquired companies additional purchase price
consideration if such companies surpass certain EBITDA-based targets, which
generally exceed the pre-acquisition performance levels of those companies.
Reaching these targets will result in additional cash inflow to the Company
arising from the incremental EBITDA above the targets and additional cash
outflow from the consideration required to be paid. The periods for which the
targets will be measured vary for each of the Companies, and the measurement
periods range from one year to five years of operations. For some of the
companies, additional consideration will be payable by us annually for each year
in which the EBITDA-based target is surpassed, and for other companies, only a
single lump sum payment will be made by us if the performance of the company
exceeds the target. The maximum additional purchase price consideration payable
to the former owners of eleven of the companies is limited to a specified
amount. The amount of additional consideration payable to the former owners of
the other company is not limited once the EBITDA-based target is surpassed.
Through June 30, 1999, we have paid former owners $8.0 million of additional
purchase price consideration and we anticipate that we will pay no additional
amounts in 1999. Thereafter, assuming that the former owners become entitled to
receive the maximum amount of additional purchase price consideration at the
earliest possible time, we would pay the former owners, over $17.9 million in
2000, over $4.1 million in 2001, $6.5 million in 2002 and $15.0 million in 2003.
One-half of the $15.0 million payable in 2003 according to the preceding
sentence would be payable in shares of our Common Stock. Otherwise, additional
purchase price consideration is payable in cash. Any additional purchase price
consideration will be recorded as additional goodwill and amortized over
approximately 40 years.

We anticipate that our cash flow from operating activities will provide cash
adequate to finance our normal working capital needs, debt service requirements
and planned capital expenditures for property and equipment which is currently
anticipated to be approximately $5 million annually, no material amount of which
is under firm commitment. Master Graphics is dependent upon the cash flow of and
the transfer of funds from Premier Graphics, its operating subsidiary, which,
under its various credit facilities, is subject to restrictions on its ability
to pay dividends to Master Graphics and is generally limited by specific amounts
or amounts in relation to the profitability of Premier Graphics. To the extent
that cash flow from operating activities is insufficient to fund the payment of
any additional purchase price consideration, we intend to finance the payment of
such consideration through our credit facilities.

We currently believe that our existing funds available under our credit facility
and funds expected to be generated from operations will provide sufficient funds
to finance our operations for at least the next 12 months. However, if the
Company's operating performance does not improve from the performance of the
second quarter of 1999, the Company may be required to seek alternative
resources for liquidity. There can be no assurances that such alternative
liquidity resources will be available. Considering our operating cash flow in
the short-term, we can adequately dispose of our current obligations including
interest and principal of outstanding debt. In addition, the operating cash flow
should provide adequate liquidity to meet our anticipated capital expenditure
plans. We may not be able to continue our acquisition strategy without ongoing
financing from third parties.

Year 2000

Year 2000 issues continue to be addressed and resolved. If internal systems do
not correctly recognize and process date information beyond the year 1999, there
could be an adverse impact on our operations. There are two other related issues
which could also lead to incorrect calculations or failures: (i) some systems
programming assigns special meaning to certain dates, such as 9/9/99, and (ii)
the year 2000 is a leap year. The Year 2000 compliance issues stem from the
computer industry's practice of conserving data storage by using two



<PAGE>

digits to represent a year. Systems and hardware using this format may process
data incorrectly or fail with the use of dates in the next century. These types
of failures can influence applications that rely on dates to perform
calculations (such as an accounts receivable aging report), as well as systems
such as building security and heating.

We believe our internal exposure to Year 2000 issues is primarily limited to the
purchase of computer hardware, and to a lesser extent software, at some of our
divisions. We have conducted a program that includes a review of all computers,
software and related date-sensitive equipment used in the management of print
jobs, office automation, accounting, process control and other applications.
This review program consisted of both information technology and non-information
technology systems. We have completed our review program and begun corrective
actions. Since July 1, 1998, Y2K compliant MIS systems and corresponding
hardware updates have been installed in over 80% of the divisions. The
installation of new divisional MIS systems/hardware will be completed by
September 30, 1999. Testing of non-MIS systems was completed on August 1, 1999
and corrective actions will be completed by September 30, 1999. We anticipate
the cost of such corrective actions will be approximately $750,000 for the
existing divisions. The due diligence process for new acquisitions includes a
Year 2000 assessment, with corrective action plans scheduled for immediate
implementation.

We believe our Year 2000 risk areas are focused on the loss of our ability to
operate due to (i) equipment malfunction or (ii) customer inability to forward
electronic images due to its own Year 2000 malfunctions. Should our information
technology systems fail, in spite of our efforts to meet Year 2000 compliance
standards, the failure could have a material effect on our ability to manage our
business including billing, collecting, disbursing and creating timely financial
reports. If a substantial portion of our equipment contains computer chips that
are not Year 2000 compliant, the equipment may not function after December 31,
1999, and, therefore, we would not be able to produce and deliver our product.
As part of the investigation process, our suppliers and other service vendors
have been asked to provide documentation on their Year 2000 compliance status,
and the majority have provided us with compliance assurances. Non-compliant
suppliers are subject to replacement. Each operating division has assigned a
Year 2000-compliance officer responsible for identifying local problem areas and
managing corrective actions. A meeting of the divisional Y2K compliance officers
to work out the final testing and implementation steps was held on June 5, 1999.
We also believe we have the expertise to assist customers in the development of
the electronic images necessary for their print jobs.

We have requested Year 2000 risk analysis compliance status reports from
customers and suppliers and to date we have received completed information from
over 60% of those surveyed. We expect that by September 30, 1999 we will have
over 90% response. Based on the results of this survey, we will formulate a
going forward plan on actions to be taken with non-compliant responders. We
expect this will be done by October 15, 1999. If a majority of our key suppliers
of raw materials such as paper, film, and plates have a disruption in their
ability to supply us, the results could have a material adverse effect on us
because we could not provide printed products to our customers. This would cause
a decline in revenue. In addition, if key customers have disruptions in their
operations due to Year 2000 compliance issues, the results could have a material
adverse effect on us due to the customers' reallocation of resources.
Contingency plans are now in place to shift work to other divisions with regard
to a worse case scenario in which a particular division is unable to perform.

If in the worst case scenario that Year 2000 issues of our equipment and
systems, our vendors, and/or our customers are not addressed satisfactorily, we
could experience a disruption in business that would cause a decline in earnings
and our cash flows.

Impact of Recently Issued Accounting Standards

We do not believe that any recently issued accounting standards which have not
yet been adopted will have a material impact on our consolidated financial
statements. SFAS 133, Accounting for Derivative Financial Instruments,
(delayed by SFAS 137) which will be effective for our year ending December 31,
2001, is not expected to have a material impact on our financial statements
because SFAS 133 deals with derivative financial instruments, which presently
are not instruments that we are involved in to a material extent. SFAS 131,
Disclosure About Segments of an Enterprise and Related Information, which was
effective for our year ended December 31, 1998 has not had a


<PAGE>

material impact on our financial statement disclosures since we consider
ourselves to be in the single reporting segment of general commercial printing.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, Master
Graphics, Inc. has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                              MASTER GRAPHICS, INC.

                              By: /s/ P. Melvin Henson, Jr.
                                  ---------------------------------
                                  P. Melvin Henson, Jr.
                                  Sr. Vice President - Finance & Administration
                                  Chief Financial Officer

                                  Date: April 13, 2000

                                  /s/ J. Denton Pearson, Jr.
                                  ---------------------------------
                                  J. Denton Pearson, Jr.
                                  Corporate Controller

                                  Date: April 13, 2000