<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

(Mark One)

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

             For the quarterly period ended September 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 November 12, 1999.
                               ----------

<PAGE>

INDEX



PART I.  FINANCIAL INFORMATION


Item 1.  Financial Statements                                              Page

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

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

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

         Condensed Consolidated Statements of Cash Flows for the Nine
         Months Ended September 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

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.......   18

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings................................................   18

Item 6.  Exhibits and Reports on Form 8-K.................................   19

Signatures................................................................   20


<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,     September 30,
                                                  1998               1999
                                                  ----               ----
                                                                 (Unaudited)
                                     ASSETS

CURRENT ASSETS:
  Cash and cash equivalents                     $ 13,525          $  3,847
  Trade accounts receivable, net                  38,529            51,002
  Inventories:
     Raw materials and supplies                    2,909             4,337
     Work-in-process                               5,186            10,437
                                                --------          --------
       Total inventories                           8,095            14,774
  Deferred income taxes                            1,057             1,957
  Other current assets                             4,012             5,699
                                                --------          --------
       Total current assets                       65,218            77,279
  Property, plant and equipment, net              75,251            89,702
  Goodwill, net                                   64,469           100,709
  Deferred loan costs, net                         1,352             1,232
  Other                                            1,586             2,712
                                                --------          --------
       Total assets                             $207,876          $271,634
                                                ========          ========

                       LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Current installments of long-term debt        $    924          $  6,542
  Accounts payable                                10,829            14,600
  Accrued expenses                                 5,540            12,577
                                                --------          --------
       Total current liabilities                  17,293            33,719
  Long-term debt, net of current installments    144,223           196,992
  Deferred income taxes                            7,554             9,159
  Other liabilities                                1,177               530
  Redeemable preferred stock                       1,437             1,527
  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 September 30, 1999)                8                 8
  Additional paid-in capital                      39,843            39,986
  Retained earnings (deficit)                     (3,659)          (10,287)
                                                --------          --------
       Total shareholders' equity                 36,192            29,707
                                                --------          --------
       Total liabilities and shareholders'
          equity                                $207,876          $271,634
                                                ========          ========


  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)

<TABLE>
<CAPTION>
                                                    Three months ended September 30,
                                                          1998             1999
                                                        -------          --------
<S>                                                 <C>                <C>
Net revenue                                             $43,390          $ 68,567
Cost of revenue                                          32,240            53,246
                                                        -------          --------
  Gross profit                                           11,150            15,321
Selling, general and administrative expenses              7,265            14,047
                                                        -------          --------
  Operating income                                        3,885             1,274
Other income (expense):
  Interest expense                                       (2,132)           (5,750)
  Other, net                                                133               (18)
                                                        -------          --------
     Income (loss) before income taxes                    1,886            (4,494)
Income tax expense                                            0               675
                                                        -------          --------
     Net earnings (loss)                                $ 1,886           ($5,169)
                                                        =======          ========

Earnings (loss) per share - basic                       $  0.24            ($0.66)
                                                        =======            ======

Earnings (loss) per share - diluted                     $  0.23            ($0.66)
                                                        =======            ======
</TABLE>


  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)
<TABLE>
<CAPTION>


                                                           Nine months ended September 30,
                                                               1998             1999
                                                             --------         --------
<S>                                                        <C>               <C>
Net revenue                                                  $109,935         $190,222
Cost of revenue                                                81,183          144,412
                                                             --------         --------
  Gross profit                                                 28,752           45,810
Selling, general and administrative expenses                   19,099           37,070
                                                             --------         --------
  Operating Income                                              9,653            8,740
Other income (expense):
  Interest expense                                             (7,126)         (15,777)
  Other, net                                                      532              499
                                                             --------         --------
     Income (loss) before income taxes                          3,059           (6,538)
Income tax benefit                                                 (4)               0
                                                             --------         --------
     Net earnings (loss) before extraordinary loss              3,063           (6,538)
Extraordinary loss on extinguishment of debt,
  net of income tax benefit of $1,458                          (2,098)               0
                                                             --------         --------
     Net earnings (loss)                                     $    965          ($6,538)
                                                             ========         ========

Basic earnings per share:
  Net earnings (loss) before extraordinary loss              $   0.53           ($0.85)
  Extraordinary loss                                            (0.38)            0.00
                                                             --------         --------
     Net earnings (loss)                                     $   0.15           ($0.85)
                                                             ========         ========

Diluted earnings per share:
  Net earnings (loss) before extraordinary loss              $   0.50           ($0.85)
  Extraordinary loss                                            (0.35)            0.00
                                                             --------         --------
     Net earnings (loss)                                     $   0.15           ($0.85)
                                                             ========         ========
</TABLE>
  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)
<TABLE>
<CAPTION>


                                                                                              Nine months ended September 30,
                                                                                                   1998             1999
                                                                                             ----------------  ---------------
<S>                                                                                          <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net earnings (loss)                                                                               $    965          ($6,538)
  Adjustments to reconcile net income to net cash provided by operating activities:
     Depreciation and amortization                                                                     4,334            8,370
     Deferred taxes                                                                                        0              705
     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                                                                      (7,390)          (4,584)
       Inventories                                                                                     1,418           (2,764)
       Other assets                                                                                     (544)          (2,584)
       Accounts payable                                                                               (2,156)             122
       Accrued expenses                                                                                 (649)           4,526
                                                                                                    --------         --------
          Net cash used in operating activities                                                       (1,924)          (2,747)
                                                                                                    --------         --------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Business acquisitions, net of cash acquired                                                        (83,059)         (59,804)
  Purchases of equipment                                                                                (867)          (7,627)
  Disposals of equipment                                                                                   0            5,990
  Repayment of shareholder note receivable                                                             3,895                0
                                                                                                    --------         --------
          Net cash used in investing activities                                                      (80,031)         (61,441)
                                                                                                    --------         --------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net borrowings on lines of credit                                                                    5,301           15,669
  Proceeds from issuance of long-term debt                                                            76,316           43,109
  Net proceeds from initial public offering of stock                                                  30,087                0
  Issuance of common stock to finance acquisitions                                                     1,280              233
  Principal payments on long-term debt                                                               (31,453)          (4,246)
  Loan costs incurred                                                                                   (750)            (255)
                                                                                                    --------         --------
                      Net cash provided by financing activities                                       80,781           54,510
                                                                                                    --------         --------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                                  (1,174)          (9,678)
CASH AND CASH EQUIVALENTS, beginning of period                                                         1,174           13,525
                                                                                                    --------         --------
CASH AND CASH EQUIVALENTS, end of period                                                            $      0         $  3,847
                                                                                                    ========         ========
</TABLE>


  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
                               SEPTEMBER 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 only normal, 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.

(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 ended September 30, 1998 and 1999, the
basic weighted average shares outstanding were 7,736,229 and 7,923,026,
respectively. For the nine months ended September 30, 1998 and 1999, the basic
weighted average shares outstanding were 5,540,413 and 7,913,727, respectively.
For the three months and nine months ended September 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 nine months ended September 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 nine
months ended September 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 September 30, 1998 and 1999 the diluted weighted
average shares outstanding were 8,056,229 and 7,923,026, respectively.  For the
nine months ended September 30, 1998 and 1999 the diluted weighted average
shares outstanding were 5,919,162 and 7,913,727, respectively (dollars in
thousands, except per share amounts).
<PAGE>

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


                                                         Income       Shares      Per-Share
THREE MONTHS ENDED SEPTEMBER 30, 1998                 (Numerator)  (Denominator)    Amount
-------------------------------------                 -----------  -------------  ---------
<S>                                                   <C>          <C>            <C>
Net earnings before extraordinary loss                  $  1,886
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                                1,829      7,736,229      $  0.24
                                                                                   =========
EFFECT OF DILUTIVE SECURITIES
Lender warrants                                                0        220,000
Deferred compensation contracts                               15        100,000
                                                        --------      ---------
DILUTED EARNINGS PER SHARE
Net earnings available to common shareholders plus
  assumed conversions                                   $  1,844      8,056,229      $  0.23
                                                        ========      =========    =========

THREE MONTHS ENDED SEPTEMBER 30, 1999
-------------------------------------
Net loss                                                 ($5,169)
Less: Redeemable preferred stock dividends                   (29)
Less: Redeemable preferred stock discount                    (30)
                                                        --------
BASIC LOSS PER SHARE
Loss available to common shareholders                    ($5,228)     7,923,026       ($0.66)
                                                        ========      =========    =========
DILUTED LOSS PER SHARE
Loss available to common shareholders                    ($5,228)     7,923,026       ($0.66)
                                                        ========      =========    =========

NINE MONTHS ENDED SEPTEMBER 30, 1998
------------------------------------
Net earnings before extraordinary loss                  $  3,063
Less: Redeemable preferred stock dividends                   (56)
Less: Redeemable preferred stock discount                    (58)
                                                        --------
BASIC EARNINGS PER SHARE
Net earnings available to common shareholders -
  before extraordinary loss                                2,949      5,540,413      $  0.53
                                                                                   =========
EFFECT OF DILUTIVE SECURITIES
Lender warrants                                                0        278,749
Deferred compensation contracts                               31        100,000
                                                        --------      ---------
DILUTED EARNINGS PER SHARE
Net earnings available to common shareholders plus
  assumed conversions - before extraordinary loss       $  2,980      5,919,162      $  0.50
                                                        ========      =========    =========

NINE MONTHS ENDED SEPTEMBER 30, 1999
------------------------------------
Net loss                                                 ($6,538)
Less: Redeemable preferred stock dividends                   (87)
Less: Redeemable preferred stock discount                    (90)
                                                        --------
BASIC LOSS PER SHARE
Loss available to common shareholders                    ($6,715)     7,913,727       ($0.85)
                                                        ========      =========    =========
DILUTED LOSS PER SHARE
Loss available to common shareholders                    ($6,715)     7,913,727       ($0.85)
                                                        ========      =========    =========
</TABLE>
<PAGE>

                      MASTER GRAPHICS, INC. AND SUBSIDIARY
       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                               September 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 $14.6 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 $9.1 million, which has been recorded as goodwill and is being
amortized on a straight-line basis over 40 years.

In July 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.

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.

                                     Nine months ended September 30,
                                          1998             1999
                                     ---------------  ---------------
  Net revenue                               $216,325        $204,189
  Net earnings (loss)                       $    543         ($7,040)
  Basic earnings (loss) per share           $   0.08          ($0.91)
  Diluted earnings (loss) per share         $   0.08          ($0.91)
<PAGE>

                      MASTER GRAPHICS, INC. AND SUBSIDIARY
       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                               September 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,  September 30,
                                    ------------  --------------
                                        1998           1999
                                    ------------  --------------
                                                   (unaudited)
  Senior Notes                          $130,000       $130,000
  Credit Facilities:
     Term Debt                               262         39,781
     Working Capital Debt                      0         15,669
     Sellers' notes                       16,599         15,639
     Other                                 2,919          7,366
                                        --------       --------
                                         149,780        208,455
  Less unamortized debt discount           4,633          4,921
                                        --------       --------
                                         145,147        203,534
  Less current maturities                    924          6,542
                                        --------       --------
                                        $144,223       $196,992
                                        ========       ========

In August 1999, the Company entered into a Fourth Amendment to the 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.
In August 1999, the Company amended its senior credit facility, adjusting
certain financial covenants and placed the related interest rates on variable
pricing based on leverage ratios. The effect of this amendment was to increase
interest rate margins by 25 basis points. Term Loan A bears interest, payable
monthly, at a floating rate equal to LIBOR plus 2.75% (8.12% at September 30,
1999), and Term Loan B bears interest, payable monthly, at a floating rate equal
to LIBOR plus 3.25% (8.62% at September 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 the amount of
principal outstanding with a final balloon payment at maturity. The annual
amortization of the $39.8 million ($19.6 million under of Term Loan A and $20.2
million under Term Loan B) outstanding at September 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 (8.25% at
September 30, 1999), and is repayable in full in March 2004. There was $4.3
million available under the Revolver and $18.8 million available in term debt as
of September 30, 1999.

The security for the facility includes a lien on all of the assets of Premier
Graphics, Inc., Master Graphics' primary 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 3% of the amount prepaid during
the first year of the loan, 2% during the second year, 1% during the third year,
and no prepayment penalty after March 2002.

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 $2.6
million in capital lease obligations, and other miscellaneous items of
indebtedness.

<PAGE>

                      MASTER GRAPHICS, INC. AND SUBSIDIARY
       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                               September 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:

                                   December 31,  September 30,
                                   ------------  --------------
                                       1998           1999
                                       ----           ----
                                                   (unaudited)
  Land                                  $   486       $    786
  Buildings                               3,830          5,907
  Leasehold improvements                  1,115          2,068
  Machinery and equipment                75,602         88,962
  Furniture and fixtures                  3,331          4,256
  Vehicles                                1,374          1,260
                                        -------       --------
                                         85,738        103,239
  Less accumulated depreciation          10,487         13,537
                                        -------       --------
                                        $75,251       $ 89,702
                                        =======       ========

Included in the machinery and equipment balance of $89.0 million are $6.7
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.  The program identified
thirty-six older model presses to be replaced with sixteen state of the art
presses.  The balance of these assets will be disposed of during the fourth
quarter.
<PAGE>

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


(6)  Wholly-owned Operating Subsidiary

Master Graphics is a holding company with no operating assets or operations.
Premier Graphics, its primary 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 September 30, 1999 and for the
three months and nine months ended September 30, 1998 and 1999, respectively (in
thousands).


                                                December 31,  September 30,
                                                    1998           1999
                                                ------------  --------------
Balance sheet data:
 Current assets                                     $ 62,956       $ 81,599
 Property, plant and equipment                        74,943         89,280
 Goodwill, net                                        63,771        100,312
 Due from Shareholder                                 46,025         92,226
 Other non-current assets                              1,523          6,824
                                                    --------       --------
    Total assets                                    $249,218       $370,241
                                                    ========       ========

 Current liabilities, including current
  installments of long-term debt of
  $924 and $6,531 in 1998 and 1999                  $ 16,327       $ 34,322
 Long-term debt, net                                 127,624        199,940
 Other liabilities                                     3,551          4,448
                                                    --------       --------
   Total liabilities                                 147,502        238,710
 Stockholders' equity                                101,716        131,531
                                                    --------       --------
   Total liabilities and stockholders' equity       $249,218       $370,241
                                                    ========       ========

                                                Three months ended September 30,
                                                      1998           1999
                                                    --------       --------
Statement of operations data:
 Net revenues                                       $ 43,390       $ 68,567
 Gross profit                                         11,150         15,454
 Operating income                                      3,885          2,734
 Interest expense                                      1,490          5,280
 Net earnings (loss)                                $    271        ($3,732)
<PAGE>

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


                                               Nine months ended September 30,
                                                   1998               1999
                                              --------------      -------------
  Statement of operations data:
     Net revenues                                 $109,935           $190,222
     Gross profit                                   28,752             45,637
     Operating income                                9,653             10,224
     Interest expense                                5,077             14,370
     Net earnings                                 $    965            ($3,643)


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).


                                               Nine months ended September 30,
                                                   1998               1999
                                              --------------      -------------
          Net revenue                            $216,325            $204,189
          Operating income                         15,611              10,489
          Depreciation and amortization             8,469               8,422
          Net earnings (loss)                    $    543             ($4,145)


Management believes that there are specific items included in the acquired
companies' results of operations which are non-recurring and which, if removed
from the pro forma results noted above, would increase earnings by $3.0 million
and $0.4 million for the nine month periods ended September 30, 1998 and 1999,
respectively.

(7)    Subsequent Events

On October 1, 1999 Premier Graphics sold the net assets of its Eagle Direct
division to EagleDirect.com, inc., a newly-formed and wholly-owned subsidiary of
the Company, in return for a note from EagleDirect.com, inc. for approximately
$11.5 million. The Company is positioning itself to take advantage of Internet-
based strategies through the initial filing of a registration statement for a
public offering of a minority interest in EagleDirect.com, inc.

As of October 12, 1999 the Company amended its senior credit facility to include
an overline facility in the amount of $2.0 million. As of November 15, 1999 the
Company amended its senior credit facility to correct a violation of the senior
debt leverage ratio and cure an event of default related to the Company's
default on a seller note. The effect of this amendment was to increase our
interest rate by 50 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, 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 AND THOSE OTHER RISKS SET
FORTH ELSEWHERE IN THIS REPORT. 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 September 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 $4.4 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 September 30,
                                                      1998                  1999
                                                 -------------          --------------
<S>                                               <C>    <C>            <C>      <C>
  Revenue                                         $43.4  100.0%         $ 68.6   100.0%
  Gross profit                                     11.2   25.8            15.3    22.3
  Selling, general and administrative expenses      7.3   16.8            14.0    20.4
  Operating income                                  3.9    9.0             1.3     1.9
  Interest and other expense                        2.0    4.6             5.8     8.5
  Net earnings (loss)                             $ 1.9    4.4%          ($5.2)   (7.6%)
</TABLE>
        Three Months Ended September 30, 1999 Compared to Three Months
                           Ended September 30, 1998

Revenue. Revenue increased approximately 58% from $43.4 million for the three
months ended September 30, 1998 to $68.6 million for the three months ended
September 30, 1999. This growth was attributable to the implementation of our
acquisition strategy. Revenue growth on a same store basis, however, declined by
7.3% compared to the third quarter of 1998. This decline is primarily due to
longer than anticipated downtime associated with the installation of thirteen
new presses at some of our divisions, a deterioration of sales performance at
our three web press divisions and competitive pricing pressures we are
experiencing in several key markets.

Gross profit. Gross profit increased from $11.2 million for the three months
ended September 30, 1998 to $15.3 million for the three months ended September
30, 1999. The increase in gross profit was attributable primarily to increase in
revenue from the implementation of our acquisition strategy. Gross profit as a
percentage of sales decreased to 22.3% for the three months ended September 30,
1999, from 25.8% in the corresponding period of the prior year, and is directly
related to the same store revenue decline cited above. During the quarter we
also experienced a 3% decline in our historic direct materials margin (as a
percentage of revenue) due to increased waste associated with start-up training
on our new press installations. This lower material margin, combined with lower
sales volume, resulted in a lower gross profit percentage when compared to 1998.
During the quarter, we continued our cost containment program at selected
divisions. The program is primarily directed at controlling factory labor
expenses.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased from $7.3 million for the three months ended
September 30, 1998 to $14.0 million for the three months ended September
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.

<PAGE>

Interest and other expense. Interest and other expense increased from $2.0
million for the three months ended September 30, 1998 to $5.8 million for the
three months ended September 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, along with the increase in our working
capital debt. In addition, the change reflects the effects of the issuance of
$130 million of 11.5% Senior Notes due 2005 by Premier Graphics in December
1998.
<TABLE>
<CAPTION>

                                                        Nine months ended September 30,
                                                          1998                 1999
                                                     --------------        --------------
<S>                                                  <C>      <C>          <C>      <C>
  Revenue                                            $109.9   100.0%       $190.2   100.0%
  Gross profit                                         28.8    26.2          45.8    24.1
  Selling, general and administrative expenses         19.1    17.4          37.1    19.5
  Operating income                                      9.7     8.8           8.7     4.6
  Interest and other expense                            6.6     6.0          15.2     8.0
  Net earnings (loss) - before extraordinary loss       3.1     2.8          (6.5)   (3.4)
  Extraordinary loss                                   (2.1)   (1.9)          0.0     0.0
  Net earnings (loss)                                $  1.0     0.9%        ($6.5)   (3.4%)
</TABLE>

      Nine Months Ended September 30, 1999 Compared to Nine Months Ended
                              September 30, 1998

Revenue. Revenue increased approximately 73% from $109.9 million for the nine
months ended September 30, 1998 to $190.2 million for the nine months ended
September 30, 1999. Revenue growth was attributable primarily to the continued
implementation of our acquisition strategy. Year over year revenue decline of
6.8% on a same store basis was impacted by the sales issues described above.

Gross profit. Gross profit increased from $28.8 million for the nine months
ended September 30, 1998 to $45.8 million for the nine months ended September
30, 1999. The increase in gross profit was attributable primarily to increased
revenue from the continued implementation of our acquisition strategy. Gross
profit as a percentage of sales decreased to 24.1% for the nine months ended
September 30, 1999, from 26.2% in the corresponding period of the prior year.
Similar to third 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 new acquisitions.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased from $19.1 million for the nine months ended
September 30, 1998 to $37.1 million for the nine months ended September 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 $6.6
million for the nine months ended September 30, 1998 to $15.2 million for the
nine months ended September 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, along with the increase in our working
capital debt. In addition, the change reflects the effects of our issuance of
$130 million of 11.5% Senior Notes due 2005 by Premier Graphics in December
1998.

<PAGE>

Liquidity and Capital Resources

Our primary cash requirements are for working capital, capital expenditures,
debt service and acquisitions. Historically we have financed our operations and
capital expenditures with cash flow from operations, capital leases and secured
loans through commercial banks or other institutional lenders and credit lines
from commercial banks. 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
November 1999. Footnotes 4 and 7 to the condensed consolidated financial
statements included herein provide a brief description of the revised credit
facility. In addition we have issued subordinated notes payable to former owners
of the acquired companies to finance acquisitions. Working capital on September
30, 1999 was $43.6 million, a decrease of $4.4 million from December 31, 1998. A
portion of the cash balance at September 30, 1999 ($4.9 million) was in an
escrow account subject to use as directed by General Electric Credit
Corporation. We are negotiating an amendment to our credit facility which will
allow us to use the cash in the escrow account to repay debt and increase
availability under our Revolver.

As part of the respective purchase agreements, we have agreed to pay the former
owners of thirteen 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 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 if the performance of the company exceeds
the target. The maximum additional purchase price consideration payable to the
former owners of twelve 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
September 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 $18.9 million in
2000, over $4.1 million in 2001, $8.0 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 goodwill and amortized over 40 years.

Master Graphics is dependent upon the cash flow of and the transfer of funds
from Premier Graphics, its primary 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 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 twelve months. However, if the
Company's performance does not improve from the performance experienced during
the second and third quarters of 1999, the Company may be required to seek
alternative resources of liquidity. There can be no assurances that such
alternative liquidity resources will be available.

With cooperation from General Electric Credit Corporation in the use of the cash
in the escrow account, we can dispose of our other current obligations
including interest and principal of outstanding debt in the short-term. In
addition, the operating cash flow should provide adequate liquidity to meet our
anticipated capital expenditure plans. We are not able to continue our
acquisition strategy without ongoing financing from third parties.

We exceeded our senior debt leverage ratio covenant under our senior credit
facility in the third quarter of 1999. Also, we have received a demand from the
estate of a former owner of one of our acquired companies to pay a demand
promissory note payable to that former owner in the principal amount of
approximately $1.5 million. We are prevented from making this payment due to
restrictions imposed by our Senior Notes. Failure to make this payment is an
event of default under our senior credit facility. As of November 15, 1999 the
Company amended its senior credit facility to correct the covenant violation and
cure the event of default.
<PAGE>

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. The Year 2000 compliance issues
stem from the computer industry's practice of conserving data storage by using
two 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. The installation of new divisional MIS systems/hardware was completed
before September 30, 1999. Testing of non-MIS systems was completed on August 1,
1999 and most of the corrective actions were completed by October 1999. All
divisions should be 100% compliant by December 1, 1999. We anticipate the cost
of such corrective actions will be approximately $750,000.

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.
Subsequent calls were made to assure follow-up.

We have requested Year 2000 risk analysis compliance status reports from
customers and suppliers. At the present time we have substantial compliance.
Based on the results of this survey, we will formulate a going forward plan on
actions to be taken with non-compliant responders. We have informed non-
compliant responders accordingly. 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. Recognizing this
we have asked mission critical suppliers to increase their inventories of key
items for a period of sixty days starting December 15, 1999. Contingency plans
are now in place to shift work to other divisions under a worse case scenario
where 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
<PAGE>

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 are effective for our year ended December 31, 1998
has not had a material impact on our financial statement disclosures since we
consider ourselves to be in the single reporting segment of general commercial
printing.


Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risks were not material at September 30, 1999. As of that date,
substantially all of our interest bearing indebtedness bore interest on a fixed
rate basis, except for the $39.8 million term debt and the $15.7 million
revolving line of credit, which bore interest on a variable basis.  An increase
in interest rates of 1% would cause an increase in annual interest expense of
approximately $0.6 million.  We do not currently deal in any derivative
instruments nor are we exposed to any currency translation fluctuations. We do
not have any commodity derivative instruments because we generally pass any
paper price fluctuations through to our customers using product pricing.

                          PART II - OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may be involved in litigation relating to claims arising
in the normal course of business. We maintain insurance coverage in amounts
deemed adequate to cover potential claims. Current litigation that involves us
is not considered by management to be significant to our financial position or
operating results. While the outcome of lawsuits or other proceedings against us
cannot be predicted with certainty, we believe the outcomes of any of these
matters will not have a material effect on operating results or financial
position.

<PAGE>

Item 6. Exhibits and Reports on Form 8-K

(A)  EXHIBITS

      3.1*  Charter of Master Graphics, Inc. (Exhibit 3.1)
      3.2*  Bylaws of Master Graphics, Inc. (Exhibit 3.3)
     11.1   Statement regarding computation of Per Share Earnings
     27.1   Financial Data Schedule (for SEC use only)

  *  Incorporated by reference to Master Graphics' Registration Statement on
     Form S-1 (Registration No. 333- 49861). The parenthetical exhibit number
     indicates where the exhibit is found in that filing.

(B)  REPORTS ON FORM 8-K

None

<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:  Lance T. Fair
                                 ---------------------------------
                                 Lance T. Fair
                                 Sr. Vice President - Acquisitions
                                 Chief Financial Officer

                                 Date: November 15, 1999

                                 P. Melvin Henson, Jr.
                                 ---------------------------------
                                 P. Melvin Henson, Jr.
                                 Sr. Vice President - Finance & Administration
                                 Chief Accounting Officer

                                 Date: November 15, 1999