<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended March 31, 1997
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: 0-26674
DATA DOCUMENTS INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 47-0714942
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4205 SOUTH 96TH STREET, OMAHA, NEBRASKA
(Address of principal executive offices)
68127
(Zip Code)
(402) 339-0900
(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 shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
----- -----
The number of shares outstanding of the Registrant's Common Stock, as of
March 31, 1997, was 9,615,668 shares (excluding 269,607 treasury shares).
1
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DATA DOCUMENTS INCORPORATED
INDEX
PART I. FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C> <C>
ITEM 1: FINANCIAL STATEMENTS:
CONSOLIDATED BALANCE SHEETS -
At March 31, 1997 and December 31, 1996 3
CONSOLIDATED STATEMENTS OF OPERATIONS -
For the Three Months Ended March 31, 1997 and 1996 4
CONSOLIDATED STATEMENTS OF CASH FLOWS -
For the Three Months Ended March 31, 1997 and 1996 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6-8
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9-10
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES 11
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K 11-12
SIGNATURES 13
</TABLE>
2
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PART I - FINANCIAL INFORMATION
ITEM I. - FINANCIAL STATEMENTS
DATA DOCUMENTS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND DECEMBER 31, 1996
(COLUMNAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
------------------------------
1997 1996
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 9,467 $ 11,151
Accounts receivable, net of allowance of $ 415,000 and $311,000 32,396 31,459
Inventories (Note B) 38,747 37,979
Other current assets
916 898
--------- ---------
Total Current Assets 81,526 81,487
PROPERTY, PLANT AND EQUIPMENT 37,072 37,328
GOODWILL, net of accumulated amortization of $2,793,000 and $ 2,689,000 9,677 9,837
DEFERRED FINANCING COSTS AND OTHER ASSETS
5,245 5,325
--------- ---------
$ 133,520 $ 133,977
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 16,440 $ 18,566
Accrued compensation 2,811 3,453
Accrued interest payable 2,029 4,072
Current maturities of long-term obligations 938 934
Current and deferred income taxes
2,518 1,017
--------- ---------
Total Current Liabilities 24,736 28,042
POSTRETIREMENT BENEFITS 1,889 1,881
LONG-TERM OBLIGATIONS 63,959 63,965
DEFERRED INCOME TAXES 2,424 2,413
COMMITMENTS AND CONTINGENCIES (Note C)
COMMON STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value; 5,000,000 shares authorized; none issued -- --
Common stock, $0.001 par value; 15,000,000 shares authorized; 9,885,275 and
9,564,831 shares issued; 9,615,668 and 9,295,224 shares outstanding 10 10
Additional paid-in capital 32,022 32,020
Retained Earnings 8,686 5,881
Stockholder notes receivable (206) (235)
Treasury stock, 269,607 shares acquired at no cost
--------- ---------
Total Common Stockholders' Equity
40,512 37,676
--------- ---------
$ 133,520 $ 133,977
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
3
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DATA DOCUMENTS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(COLUMNAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------
1997 1996
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
NET SALES $ 62,583 $ 65,040
COST OF GOODS SOLD 45,727 48,721
---------- ----------
Gross Profit 16,856 16,319
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 9,785 9,499
---------- ----------
Operating Income 7,071 6,820
DEBT EXPENSE, net, including amortization of $ 201,000 and $208,000 2,353 2,520
---------- ----------
INCOME BEFORE INCOME TAXES 4,718 4,300
INCOME TAX EXPENSE 1,913 1,745
---------- ----------
NET INCOME $ 2,805 $ 2,555
========== ==========
EARNINGS PER COMMON SHARE:
Primary $ 0.28 $ 0.26
========== ==========
WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES
OUTSTANDING:
Primary 9,957,992 9,904,265
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
4
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DATA DOCUMENTS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(COLUMNAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
1997 1996
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,805 $ 2,555
Adjustments to reconcile net income to net cash flows from operating
activities:
Depreciation 968 1,262
Amortization of intangibles 398 350
Provision for deferred income taxes (72) (107)
(Gain)/loss on sale of property, plant and equipment 2 (37)
Changes in operating assets and liabilities:
Accounts receivable (937) (421)
Inventories (768) (140)
Other current assets (18) (325)
Accounts payable and accrued liabilities (2,072) 1,302
Accrued interest (2,043) (1,990)
Current taxes on income and other 1,640 1,680
Other assets (163) (27)
-------- -------
Net cash flows from operating activities (260) 4,102
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (718) (653)
Proceeds from the sale of property, plant and equipment 4 81
-------- -------
Net cash flows from investing activities (714) (572)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of debt (53) (57)
Change in liability for outstanding checks (688) (1,669)
Payment for stock registration costs - net -- (53)
Proceeds from sale of common stock 2 --
Principal receipts on stockholder notes receivable 29 --
-------- -------
Net cash flows from financing activities (710) (1,779)
-------- -------
NET INCREASE (DECREASE) IN CASH (1,684) 1,751
CASH AND CASH EQUIVALENTS, Beginning of period 11,151 2,024
-------- -------
CASH AND CASH EQUIVALENTS, End of Period $ 9,467 $ 3,775
======== =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 4,344 $ 4,372
======== =======
Income taxes $ 348 $ 139
======== =======
</TABLE>
See Notes to Consolidated Financial Statements.
5
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DATA DOCUMENTS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997 AND 1996
(UNAUDITED)
- --------------------------------------------------------------------------------
A. MANAGEMENT STATEMENTS
The consolidated financial statements of DATA DOCUMENTS INCORPORATED
include the accounts of its wholly-owned subsidiaries Data Documents,
Inc. (DDI), PBF Washington, Inc. (PBF) and Cal Emblem Labels, Inc. (Cal
Emblem). The summarized financial information of DDI (see Note D)
include the accounts of its wholly-owned subsidiaries PBF and Cal
Emblem. All significant intercompany transactions and accounts have been
eliminated during consolidation.
The consolidated financial statements of the Company contained herein
should be read in conjunction with the financial statements included in
the Company's Annual Report on Form 10-K for the year ended December 31,
1996.
The consolidated financial statements are unaudited and reflect all
adjustments (consisting of normal and recurring adjustments) that are,
in the opinion of management, necessary for a fair presentation of the
financial position, results of operations and cash flows for the interim
periods.
Certain reclassifications have been made to the 1996 financial
statements to conform to those classifications used in 1997.
B. INVENTORIES
Inventories consisted of (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
--------- ------------
1997 1996
(UNAUDITED)
<S> <C> <C>
Finished goods $29,571 $28,739
Work in process 1,108 1,264
Raw materials 7,082 7,032
Supplies and spare parts 986 944
------- -------
$38,747 $37,979
======= =======
</TABLE>
Substantially all inventories were valued using the LIFO method. If the
FIFO method of inventory accounting had been used, inventories would
have been lower than reported by $3,705,000 and $3,500,000 at March 31,
1997 and December 31, 1996, respectively. On a FIFO basis, operating
income would have been lower by $205,000 and $1,158,000, respectively,
for the three months ended March 31, 1997 and March 31, 1996. The FIFO
cost of inventories approximates replacement cost.
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C. COMMITMENTS AND CONTINGENCIES
The Company is subject to lawsuits and claims which arise out of the
normal course of its business. In the opinion of management, the
disposition of such claims will not have a material adverse effect on
the Company's financial position or results of operations.
D. SUMMARIZED FINANCIAL INFORMATION
Following is the summarized financial information of Data Documents,
Inc. and subsidiaries in (thousands):
<TABLE>
<CAPTION>
March 31, December 31,
---------------------------
1997 1996
(Unaudited)
<S> <C> <C>
Current assets $81,526 $81,487
Noncurrent assets $51,994 $52 490
Current liabilities $24,736 $28,042
Noncurrent liabilities $68,272 $68,259
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
---------------------------
March 31, March 31,
1997 1996
(Unaudited) (Unaudited)
<S> <C> <C>
Net sales $62,583 $65,040
Gross Profit $16,856 $16,319
Net income $ 2,805 $ 2,555
</TABLE>
Following is the summarized financial information of PBF Washington,
Inc. and Cal Emblem Labels, Inc. (wholly owned subsidiaries of Data
Documents, Inc.), guarantors of the Senior Notes.
<TABLE>
<CAPTION>
March 31, December 31,
----------------------------
1997 1996
(Unaudited)
<S> <C> <C>
Current assets $ 6,370 $ 6,849
Noncurrent assets $ 8,621 $ 8,813
Current liabilities $ 6,627 $ 7,474
Noncurrent liabilities $ 722 $ 883
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
March 31, March 31,
----------------------------
1997 1996
(Unaudited) Unaudited)
<S> <C> <C>
Net sales $ 8,428 $ 8,642
Gross Profit $ 1,766 $ 1,760
Net income $ 337 $ 261
</TABLE>
7
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E. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1996, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 125, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities which established accounting and reporting standards for
such transfers. The Company has adopted SFAS No. 125 effective January
1, 1997 as required. The impact on the Company's financial position and
results of operations was not material.
In February 1997, the Financial Accounting Standards Board issued SFAS
No. 128, Earnings Per Share which specifies the computation,
presentation and disclosure requirements for earnings per share. The
objective of the statement is to simplify the computation of earnings
per share. The impact on the Company's earnings per share is not
materially different than earnings per share determined in accordance
with current guidance. SFAS No. 128 is applicable for fiscal years
ending after December 15, 1997.
8
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1997 AND 1996:
NET SALES
Net sales were $62.6 million for the quarter ended March 31, 1997, a decrease of
3.7% from $65.0 million in 1996. Paper price decreases in 1997 over 1996 are
estimated to have negatively impacted total sales by approximately 6.1%, most of
which related to business forms and supplies. Net sales of business forms,
supplies and services decreased 10.4% with decreases of 2.9% in custom forms
sales and 29.1% in stock forms sales. These decreases were partially offset by
$1.6 million of increased sales from Odyssey Integrated Services(R) customers.
Pressure-sensitive label sales increased 7.5% and InteliMail(R) sales increased
5.2% in 1997 as compared to 1996.
GROSS PROFIT
Gross profit was $16.9 million for the quarter ended March 31, 1997, an increase
of 3.3% from $16.3 million in 1996. Gross profit in 1997 was favorably impacted
by approximately $0.3 million in reduced depreciation expense from
fully-depreciated assets. As a percentage of sales, gross profit was 26.9%
compared with 25.1% in 1996. Gross profit margins of business forms, supplies
and services increased 3.5% for the first quarter of 1997. Pressure-sensitive
labels gross profit margins decreased by 0.6% in the first quarter of 1997
primarily as a result of sales mix. InteliMail gross profit margins increased
1.0%, primarily as a result of operating levels from increased sales volume.
During the first quarter of 1997, LIFO income of $0.2 million was more than
offset by $0.3 million reduction of on-hand standard inventory values. During
the comparable quarter of 1996, LIFO income of $1.2 million was offset by a
reduction of on-hand standard inventory values of $1.5 million.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses were $9.8 million for the quarter
ended March 31, 1997, an increase of $0.3 million over 1996. This increase is
primarily the result of payroll related costs. These expenses as a percentage of
sales were 15.6% in 1997 compared to 14.6% in 1996.
DEBT EXPENSE
The decrease in debt expense of $0.2 million is due to the combination of lower
debt in 1997 and interest income from the Company's cash balance.
9
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LIQUIDITY AND CAPITAL RESOURCES
The Company relies primarily upon operating cash flow and borrowings under its
revolving credit facilities to finance capital expenditures, increases in
working capital and debt service. At March 31, 1997, working capital was $56.8
million, an increase of $3.4 million from the working capital balance as of
December 31, 1996. Operating activities used cash of approximately $0.3 million
during the quarter ended March 31, 1997. Cash generated by the increased
earnings during the quarter was primarily used to pay interest, accounts payable
and accrued liabilities. The Company had a net cash outflow of approximately
$0.7 million from its investing activities in the quarter ended March 31, 1997,
for capital expenditures. The Company estimates that its capital expenditures
for fiscal 1997 will be between $6.0 million and $7.0 million.
In connection with the 1995 acquisition of Cal Emblem, the Company issued two
five-year term promissory notes in the aggregate principal amount of $2.2
million which accrue interest at the rate of 10% per annum. Principal and
interest payments are due in approximately equal installments over five years.
The tax-exempt industrial revenue bonds in the principal amount of $170 thousand
bear an annual interest rate of 10.125% and are due on October 1, 1997. Monthly
sinking fund payments are required.
In January 1997, DDI entered into a new revolving facility (the "Revolving
Credit Facility") that provides for borrowing of up to $20 million. The
Revolving Credit Facility is secured by the Company's accounts receivable and
the proceeds thereof and, subject to the first lien of the holders of the Senior
Notes, by the Company's inventory and proceeds thereof. Outstanding indebtedness
under the Revolving Credit Facility is limited to 80% of eligible accounts
receivable (subject to reduction by the lender under certain circumstances). The
facility will expire in July 1999. Under the terms of the Indenture governing
the Senior Notes, the Company is permitted to incur additional revolving credit
indebtedness in an amount equal to 85% of its accounts receivable, and based
upon accounts receivable balances at March 31, 1997, the Company was permitted
to incur approximately $20 million of revolving credit indebtedness. As of March
31, 1997, there was no amount outstanding under the Company's Revolving Credit
Facility. The facility restricts certain liens, the payment of dividends on, and
redemption of, any class of the capital stock of DDI (all of which is currently
owned by Data Documents Incorporated), PBF or Cal Emblem and certain other
restricted payments, among other things.
The Company expects to satisfy its obligations under the Senior Notes, the
promissory notes issued in connection with the Cal Emblem acquisition and the
industrial revenue bonds, as well as future capital expenditures and working
capital requirements, with cash flow from operations, and believes that this
source will provide sufficient liquidity to enable it to meet its working
capital requirements for at least the next 12 months.
10
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PART II. OTHER INFORMATION
Item 2. CHANGES IN SECURITIES
(a) During the quarter ended March 31, 1997, 320,111 shares of
common stock were issued as a result of the exercise of 49,043
Warrants.
(b) During the quarter ended March 31, 1997, 333 shares of common
stock were issued as a result of the exercise of stock options.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 11 - Statement Regarding Computation of Per Share
Earnings
(b) Current Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
March 31, 1997.
11
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATA DOCUMENTS INCORPORATED
Date: May 13, 1997 By: /s/ A. ROBERT THOMAS
-------------------------------------
A. Robert Thomas,
Chief Financial Officer
Date: May 13, 1997 By: /s/ WALTER J. KEARNS
-------------------------------------
Walter J. Kearns,
President and Chief Executive Officer
13
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EXHIBIT 11
DATA DOCUMENTS INCORPORATED AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1997 1996
<S> <C> <C>
PRIMARY EARNINGS PER SHARE:
Common stock outstanding 9,615,668 8,603,409
Common stock equivalents:
Common stock warrants, if dilutive 268,529 1,280,455
Common stock options -- incremental shares 73,795 20,401
---------- ----------
Weighted average shares outstanding 9,957,992 9,904,265
========== ==========
Net income available for common stock $ 2,805 $ 2,555
========== ==========
Primary earnings per share $ 0.28 $ 0.26
========== ==========
</TABLE>
12
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 9,467
<SECURITIES> 0
<RECEIVABLES> 32,811
<ALLOWANCES> 415
<INVENTORY> 38,747
<CURRENT-ASSETS> 81,526
<PP&E> 85,351
<DEPRECIATION> 48,279
<TOTAL-ASSETS> 133,520
<CURRENT-LIABILITIES> 24,736
<BONDS> 63,959
0
0
<COMMON> 10
<OTHER-SE> 40,502
<TOTAL-LIABILITY-AND-EQUITY> 133,520
<SALES> 62,583
<TOTAL-REVENUES> 62,583
<CGS> 45,727
<TOTAL-COSTS> 45,727
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,353
<INCOME-PRETAX> 4,718
<INCOME-TAX> 1,913
<INCOME-CONTINUING> 2,805
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,805
<EPS-PRIMARY> .28
<EPS-DILUTED> .28
</TABLE>
