<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C.
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended April 29, 1995 Commission File Number 1-7208
DUPLEX PRODUCTS INC.
(Exact name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
Delaware 36-2109817
(State of Incorporation or Organization) (I.R.S. Employer Identification No.)
1947 Bethany Road, Sycamore, Illinois 60178 (815) 895-2101
(Address of Principal Executive Offices) (Zip Code) (Registrant's Telephone No.)
</TABLE>
Indicate by check mark whether the Registrant (1) has filied all reports
required to be filed by Section 13 or 15(d) of the Securites Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
Registrant was required to file such report) and (2) has been subject to such
filing requirements for the past ninety days. Yes X No __
As of April 29, 1995, 7,512,578 shares of common stock with a par value of $1.00
were outstanding.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
DUPLEX PRODUCTS INC.
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
Second quarter ended First half ended
----------------------- -------------------------
April 29, April 30, April 29, April 30,
(In thousands, except per-share data) 1995 1994 1995 1994
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 69,568 $ 66,300 $ 142,905 $ 131,652
Cost of goods sold 53,748 51,886 108,966 101,256
-------- -------- --------- ---------
Gross profit 15,820 14,414 33,939 30,396
Selling, general, and administrative expenses 16,512 17,001 33,604 32,854
Restructuring costs -- 12,000 -- 12,000
-------- -------- --------- ---------
Operating profit (loss) (692) (14,587) 335 (14,458)
-------- -------- --------- ---------
Other income (expense)
Interest expense (119) (147) (237) (295)
Other income 184 90 339 243
-------- -------- --------- ---------
65 (57) 102 (52)
-------- -------- --------- ---------
Earnings (loss) before income taxes (credits)
and accounting changes (627) (14,644) 437 (14,510)
Provision for income taxes (credits) (245) (5,737) 170 (5,641)
-------- -------- --------- ---------
Earnings (loss) before accounting changes (382) (8,907) 267 (8,869)
Cumulative effect of accounting changes -- -- -- (7,084)
-------- -------- --------- ---------
Net earnings (loss) $ (382) $ (8,907) $ 267 $ (15,953)
======== ======== ========= =========
Per share
Earnings (loss) before accounting changes $ (0.05) $ (1.17) $ 0.04 $ (1.17)
Net earnings (loss) (0.05) (1.17) 0.04 (2.09)
</TABLE>
The accompanying notes to condensed consolidated financial statements are an
integral part of this statement.
<PAGE> 3
DUPLEX PRODUCTS INC.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(UNAUDITED)
<TABLE>
<CAPTION>
April 29, October 29,
(In thousands) 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Current assets
Cash and equivalents $ 13,699 $ 16,337
Accounts and notes receivable 46,780 48,046
Inventories 25,486 27,530
Income tax refund receivable -- 2,998
Deferred income taxes 10,189 10,245
-------- --------
Total current assets 96,154 105,156
Property, plant, and equipment--net 37,934 37,000
Other assets 6,040 4,052
-------- --------
Total assets $140,128 $146,208
======== ========
Liabilities and Shareholders' Equity
Current liabilities
Current portion of long-term debt $ 1,222 $ 1,222
Accounts payable 11,534 11,526
Accrued expenses 15,112 20,894
-------- --------
Total current liabilities 27,868 33,642
-------- --------
Long-term debt 5,617 5,928
-------- --------
Deferred liabilities and credits 6,599 6,599
-------- --------
Shareholders' Equity
Common stock (8,266 and 8,304 shares issued,
respectively) 8,266 8,304
Additional paid-in capital 4,030 4,333
Common stock held in treasury (5,809) (5,809)
Unamortized value of restricted stock issued (569) (648)
Retained earnings 94,126 93,859
-------- --------
Total shareholders' equity 100,044 100,039
-------- --------
Total liabilities and shareholders' equity $140,128 $146,208
======== ========
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes to condensed consolidated financial statements are an
integral part of this statement.
<PAGE> 4
DUPLEX PRODUCTS INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
First half ended
-----------------------------------
April 29, April 30,
(In thousands) 1995 1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $ 267 $ (15,953)
Adjustments to reconcile net earnings (loss)
to cash provided by operating activities
Depreciation 2,814 3,367
Restructuring costs -- 12,000
Deferred income taxes 56 (8,649)
Decrease in accounts and notes receivable 1,266 31,931
Decrease (increase) in inventories 2,044 (18,939)
Decrease in income tax refund receivable 2,998 850
Increase in income tax payable 143 --
Increase (decrease) in accounts payable 8 (2,278)
Decrease in accrued restructuring costs (1,927) (1,436)
Decrease in other accrued expenses (3,995) (90)
Other operating activities 42 (678)
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES (3,716) 134
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of long-term investments (2,035) --
Captial expenditures (3,843) (880)
Net proceeds from sale of assets 97 44
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES (5,781) (836)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long-term debt (311) (661)
Restricted stock repurchased-net (262) (1,049)
--------- ---------
NET CASH USED BY FINANCING ACTIVITIES (573) (1,710)
--------- ---------
DECREASE IN CASH AND EQUIVALENTS DURING FIRST HALF (2,638) (2,412)
Cash and equivalents at beginning of year 16,337 18,419
--------- ---------
CASH AND EQUIVALENTS AT END OF FIRST HALF $ 13,699 $ 16,007
========= =========
- -----------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to condensed consolidated financial statements are an
integral part of this statement.
<PAGE> 5
DUPLEX PRODUCTS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per-share data)
NOTE 1 -- FINANCIAL INFORMATION
The unaudited financial statements include all normal recurring adjustments
which are, in the opinion of management, necessary for a fair presentation of
the results of operations, financial position, and cash flows. The results
reflected in these quarterly financial statements should not be regarded as
necessarily indicative of results that may be expected for the entire year.
NOTE 2 -- BASIS OF PRESENTATION
These financial statements are presented in accordance with requirements of
Form 10-Q and consequently may not contain all disclosures normally required by
generally accepted accounting principles or those usually reflected in the
Company's Annual Report on Form 10-K.
Accordingly, the financial statements and notes contained herein should be read
in conjunction with the financial statements and associated notes included in
Duplex's Annual Report on Form 10-K for the fiscal year ended October 29, 1994.
NOTE 3 -- INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
April 29, October 29,
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Raw materials $ 8,321 $ 7,380
Work-in-process 1,891 2,419
Finished goods 25,468 24,680
-------- -------
35,680 34,479
Less revaluation to LIFO (10,194) (6,949)
-------- -------
Total inventories $ 25,486 $27,530
======== =======
- --------------------------------------------------------------------------------
</TABLE>
Changes in the revaluation to LIFO negatively impacted income before taxes for
the second quarter and first half of 1995 by $1,585 and $3,245, respectively.
For the corresponding 1994 periods, the LIFO revaluation change benefited
pretax earnings by $217 and $492, respectively.
<PAGE> 6
DUPLEX PRODUCTS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per-share data)
NOTE 4 -- PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment comprised the following:
<TABLE>
<CAPTION>
April 29, October 29,
(In thousands) 1995 1994
- --------------------------------------------------------------------------
<S> <C> <C>
Property, plant, and equipment, at cost $104,556 $101,171
Less accumulated depreciation (66,622) (64,171)
-------- --------
Net property, plant, and equipment $ 37,934 $ 37,000
======== ========
</TABLE>
NOTE 5 -- RESTRUCTURING COSTS
At the end of fiscal 1994, liabilities for 1992, 1993, and 1994 restructuring
programs totaled $10.5 million. During the six months ended April 29, 1995,
the Company made cash payments totaling $1.9 million related to these programs,
primarily for employee termination benefits. Management continues to evaluate
these prior-year restructuring programs in light of current business
circumstances.
NOTE 6 -- COMMON STOCK DATA
Authorized common stock consisted of 20,000 shares having a par value of $1.00
per share. Average shares outstanding for the second quarter of 1995 and 1994
were 7,528 and 7,589, respectively.
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
A. RESULTS OF OPERATIONS -- SECOND QUARTER 1995 COMPARED WITH SECOND QUARTER
OF 1994
The Company reported a net loss of $0.4 million, or $0.05 per share, in
the second quarter of 1995 compared with a net loss of $8.9 million ($1.17
per share) in the same quarter of 1994. Excluding the impact of 1994
restructuring charges ($7.3 million after tax; $0.96 per share), second
quarter 1995's results represented a $1.2 million improvement from the
prior year. This improvement was attributable principally to higher
revenues, continued improvement in manufacturing productivity, and lower
selling costs. These positive factors were partially offset by
higher-than-anticipated start-up costs related to the introduction of new
products and services and significant increases in paper costs and related
LIFO inventory provision. The LIFO inventory adjustment had a negative
impact on net earnings per share of $0.13.
<PAGE> 7
The Company has adjusted selling prices to reflect the rise in paper
costs; however, pressure on margins continues, reflecting the
highly-competitive nature of the marketplace. While bond paper is in short
supply, Duplex has been able to satisfy customer requirements by virtue of
its long-standing relationship with suppliers and through adjustments made
to product mix. The Company does not anticipate a material change in this
situation in the foreseeable future.
Net sales for the second quarter of 1995 were $69.6 million, up 4.9%
from the $66.3 million reported in the comparable period in 1994, with
selling price gains more than offsetting lower volume levels.
Gross margin as a percentage of sales was 22.7% for the second quarter
of 1995 compared with 21.7% in the year-earlier period. This year's margin
rate was depressed 2.3 percentage points due to the increase in the LIFO
inventory provision.
Selling, general, and administrative costs aggregated $16.5 million
(23.7% of sales) in 1995's second quarter, a decrease of $0.5 million from
$17.0 million (25.6% of sales) in the same period of 1994. The decrease in
the current quarter was due to slower rates of spending for sales promotion
and training.
The Company's operating loss narrowed to $0.7 million in the
second quarter of this year from $2.6 million in 1994's second quarter
(before restructuring charges).
B. RESULTS OF OPERATIONS -- FIRST HALF 1995 COMPARED WITH FIRST HALF OF 1994
For the first six months of 1995, Duplex earned $0.3 million ($0.04 per
share) as contrasted with a net loss of $16.0 million ($2.09 per share)
reported for the first six months of last year. Last year's results were
negatively impacted by the effect of restructuring charges ($7.3 million)
and an accounting change ($7.0 million). Excluding these items,
year-to-date performance represented a $2.0 million improvement over
results a year ago. This improvement was driven principally by growth in
revenues and reductions in manufacturing costs, partially offset by
higher-than-expected product and service introduction costs, as well as
significant increases in paper costs and related LIFO inventory provision
and higher operating expenses.
The Company posted net sales of $142.9 million for the first half of
1995, up 8.5% from the $131.7 million reported in the comparable period in
1994. This increase reflected higher selling prices, offset in part by a
decline in volume of shipments.
For the first six months of this year, gross margin as a percentage of
sales was 23.7%, up 0.6 percentage points from the previous year.
Selling, general, and administrative costs totaled $33.6 million (23.5%
of sales) in 1995's first half, an increase of $0.7 million from $32.9
million (25.0% of sales) in the same period of 1994. This increase was
<PAGE> 8
due primarily to higher spending on training, sales promotion, and
process improvement.
Excluding the impact of 1994 restructuring charges, operating profit in
the first half of 1995 increased $2.8 million, to $0.3 million, from last
year's level.
Liquidity and Capital Resources
Working capital of $68.3 million at the end of the second quarter of 1995 was
$3.2 million lower than at year-end 1994. This reduction was driven primarily
by declines in cash, receivable, and inventory balances, partially offset by
lower accrued expenses. The current ratio at April 29, 1995 was 3.5 to 1, up
0.4 from the corresponding year earlier date.
Management believes that the current level of working capital will be adequate
to cover the Company's liquidity needs related to normal operations in the
foreseeable future. Sufficient resources are deemed to exist to support the
Company's growth through a combination of currently available cash, cash to be
generated from future operations, or additional short-term borrowings.
The Company's total debt at April 29, 1995 was $6.8 million, down $0.3 million
from year-end 1994. Total debt as a percentage of total capital was 6.4% at
the end of 1995's second quarter, 0.3 percentage points lower than at the end
of 1994.
Cash and equivalents at the end of 1995's first half were $13.7 million, a
decrease of $2.6 million from year-end 1994. A similar decline in cash and
equivalents occurred in the first six months of 1994.
During the first half of 1995, $3.7 million was provided by operating
activities, up $3.6 million from 1994's $0.1 million level. This generation of
cash was due primarily to depreciation and decreases in receivable and
inventory balances, partially offset by a reduction in accrued expenses,
principally payroll, employee benefit, and restructuring costs.
Cash used in investing activities in the first six months of 1995 aggregated
$5.8 million: $2.0 million for the purchase of long-term securities and $3.8
million for capital expenditures. This year's capital expenditures were $2.9
million higher than in the prior year period, and were made primarily to
upgrade and increase the operating efficiency of manufacturing equipment.
Cash consumed by financing activities decreased to $0.6 million in the first
half of 1995 from $1.7 million a year earlier. The decrease was due primarily
to the drop in restricted stock repurchases in the first six months of 1995.
<PAGE> 9
PART II -- OTHER INFORMATION
ITEM 6 -- EXHIBITS AND REPORT ON FORM 8-K
(a) Exhibits
11 Computation of Earnings per Share
27 Financial Data Schedule
(b) Reports on Form 8-K
None
<PAGE> 10
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.
DUPLEX PRODUCTS INC.
-----------------------------------
Andrew A. Campbell, Vice President-
Finance, Chief Financial Officer,
Secretary, and Treasurer
June 8, 1995
<PAGE> 11
DUPLEX PRODUCTS INC.
EXHIBIT 11 -- COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
<TABLE>
<CAPTION>
Second quarter ended First half ended
----------------------- ----------------------
April 29, April 30, April 29, April 30,
(In thousands, except per-share data) 1995 1994 1995 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Weighted average number of common
shares outstanding used in
computing earnings per share 7,528 7,589 7,537 7,618
Primary and fully diluted earnings
(loss) per share $(0.05) $(1.17) $0.04 $(1.17)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-29-1994
<PERIOD-END> APR-29-1995
<CASH> 13699
<SECURITIES> 0
<RECEIVABLES> 47565
<ALLOWANCES> 785
<INVENTORY> 25486
<CURRENT-ASSETS> 96154
<PP&E> 104556
<DEPRECIATION> 66622
<TOTAL-ASSETS> 140128
<CURRENT-LIABILITIES> 27868
<BONDS> 5617
<COMMON> 8266
0
0
<OTHER-SE> 91778
<TOTAL-LIABILITY-AND-EQUITY> 140128
<SALES> 69568
<TOTAL-REVENUES> 69568
<CGS> 53748
<TOTAL-COSTS> 53748
<OTHER-EXPENSES> 16425
<LOSS-PROVISION> 87
<INTEREST-EXPENSE> 119
<INCOME-PRETAX> (627)
<INCOME-TAX> (245)
<INCOME-CONTINUING> (382)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (382)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
