<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 July 29, 1995
Commission File Number 1-7208
DUPLEX PRODUCTS INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 36-2109817
(State of Incorporation or Organization (I.R.S. Employer
Identification No.)
1947 Bethany Road, Sycamore, IL 60178
(Address of Principal Executive Offices) (Zip Code)
(815) 895-2101
(Registrant's Telephone No.)
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 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 July 29, 1995, 7,489,878 shares of common stock with a par value of
$1.00 were outstanding.
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Duplex Products Inc.
Condensed Consolidated Statement of Earnings
(Unaudited)
(In thousands, except per-share data)
<TABLE>
<CAPTION>
Third quarter ended Nine months ended
July 29, July 30, July 29, July 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales $ 64,388 $ 63,959 $207,293 $195,611
Cost of goods sold 50,557 48,575 159,522 149,831
------- ------- -------- --------
Gross profit 13,831 15,384 47,771 45,780
Selling, general, and
administrative expenses 16,695 16,536 50,299 49,390
Restructuring costs -- -- -- 12,000
------- ------- -------- --------
Operating loss (2,864) (1,152) (2,528) (15,610)
------- ------- -------- --------
Other income (expense)
Interest expense (159) (147) (396) (442)
Other Income 516 138 855 381
------- ------- -------- --------
357 (9) 459 (61)
------- ------- -------- --------
Loss before income tax credits
and accounting changes (2,507) (1,161) (2,069) (15,671)
Provision for income tax credits (978) (417) (807) (6,058)
------- ------- -------- --------
Loss before accounting changes (1,529) (744) (1,262) (9,613)
Cumulative effect of accounting changes -- -- -- (7,084)
------- ------- -------- --------
Net loss $ (1,529) $ (744) $ (1,262) $(16,697)
======== ======== ======== =======
Per share
Loss before accounting changes $(0.20) $(0.10) $(0.17) $(1.27)
Net loss (0.20) (0.10) (0.17) (2.19)
</TABLE>
The accompanying notes to condensed consolidated financial statements are an
integral part of this statement.
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Duplex Products Inc.
Condensed Consolidated Statement of Financial Position
(Unaudited)
<TABLE>
<CAPTION>
July 29, October 29,
(In thousands) 1995 1994
-------- -----------
<S> <C> <C>
Current assets
Cash and equivalents $ 11,386 $ 16,337
Accounts and notes receivable 43,215 48,046
Inventories 25,020 27,530
Income tax refund receivable 847 2,998
Deferred income taxes 10,245 10,245
-------- --------
Total current assets 90,713 105,156
Property, plant, and equipment--net 37,614 37,000
Other assets 6,654 4,052
-------- --------
Total assets $134,981 $146,208
======== ========
Liabilities and Shareholders Equity
Current liabilities
Current portion of long-term debt 1,222 1,222
Accounts payable 8,999 11,526
Accrued expenses 14,995 20,894
-------- --------
Total current liabilities 25,216 33,642
-------- --------
Long-term debt 4,861 5,928
-------- --------
Deferred liabilities and credits 6,599 6,599
-------- --------
Shareholders Equity
Common stock (8,243 and 8,304 shares issued,
respectively) 8,243 8,304
Additional paid-in capital 3,806 4,333
Common stock held in treasury (5,809) (5,809)
Unamortized value of restricted stock issued (530) (648)
Retained earnings 92,595 93,859
-------- --------
Total shareholders equity 98,305 100,039
-------- --------
Total liabilities and shareholders equity $134,981 $146,208
======== ========
</TABLE>
The accompanying notes to condensed consolidated financial statements are an
integral part of this statement.
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<PAGE> 4
Duplex Products Inc.
Condensed Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
------------------------
July 29, July 30,
(In thousands) 1995 1994
------------ ----------
<S> <C> <C>
Cash flows from operating activities
Net loss $(1,262) $(16,696)
Adjustments to reconcile net loss to
cash provided by operating activities
Depreciation 4,106 5,080
Restructuring costs -- 12,000
Deferred income taxes -- (8,791)
Decrease in accounts and notes receivable 4,831 34,407
Decrease (increase) in inventories 2,510 (19,483)
Decrease in income tax refund receivable 2,151 571
Decrease in accounts payable (2,527) (2,665)
Decrease in accrued restructuring costs (3,169) (2,100)
Decrease in other accrued expenses (2,730) (779)
Other operating activities (344) (20)
------- --------
Net cash provided by operating activities 3,566 1,524
------- --------
Cash flows from investing activities
Purchase of long-term investments (2,545) --
Capital expenditures (5,055) (1,834)
Net proceeds from sale of assets 620 140
------- --------
Net cash used by investing activities (6,980) (1,694)
------- --------
Cash flows from financing activities
Repayment of long-term debt (1,067) (1,406)
Restricted stock repurchased-net (470) (1,034)
------- --------
Net cash used by financing activities (1,537) (2,440)
------- --------
Decrease in cash and equivalents
during first nine months (4,951) (2,610)
Cash and equivalents at beginning of year 16,337 18,419
------- --------
Cash and equivalents at end of
first nine months $11,386 $ 15,809
======= ========
</TABLE>
The accompanying notes to condensed consolidated financial statements are an
integral part of this statement.
Duplex Products Inc.
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<PAGE> 5
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>
July 29, October 29,
1995 1994
-------- -----------
<S> <C> <C>
Raw materials $ 9,824 $ 7,380
Work-in-process 1,983 2,419
Finished goods 25,061 24,680
-------- -------
36,868 34,479
Less revaluation to LIFO (11,848) (6,949)
-------- -------
Total inventories $ 25,020 $27,530
======== =======
</TABLE>
_______________________________________________________________________
Changes in the revaluation to LIFO negatively impacted income before taxes for
the third quarter and the first nine months of 1995 by $1,654 and $4,899,
respectively. For the corresponding 1994 periods, the LIFO revaluation change
benefited pretax earnings by $418 and $910, respectively.
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<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>
July 29, October 29,
(In thousands) 1995 1994
------- ----------
<S> <C> <C>
Property, plant, and equipment, at cost $103,851 $101,171
Less accumulated depreciation (66,237) (64,171)
-------- --------
Net property, plant, and equipment $ 37,614 $ 37,000
======== ========
</TABLE>
Note 5 - 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 third quarter of 1995 and 1994
were 7,501 and 7,577, respectively.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
A. RESULTS OF OPERATIONS -THIRD QUARTER 1995 COMPARED WITH THIRD QUARTER OF
1994
The company reported a net loss of $1.5 million, or $0.20 per share, in the
third quarter of 1995 compared with a net loss of $0.7 million ($0.10 per
share) in the same quarter of 1994. This decline in performance was
attributable principally to lower unit volume, continued higher-than-
anticipated costs related to the expansion of product and service offerings,
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 in the current quarter.
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. The supply of bond paper has improved somewhat, and
Duplex has been able to satisfy customer requirements. The Company does not
anticipate a material change in this situation in the foreseeable future.
Net sales for the third quarter of 1995 were $64.4 million, up 0.7% from the
$64.0 million posted in the comparable period in 1994, with lower unit volume
essentially offseting selling price gains. The decline in unit volume was
attributable to softness in overall market demand and a reduction of the
Company's sales coverage due to the departure of sales personnel. An
aggressive recruiting program is underway to rebuild and expand the sales
force.
Gross profit as a percentage of sales was 21.5% for the third quarter of 1995
compared with 24.1% in the year-earlier period. This year's rate was depressed
3.2 percentage points due to the increase in the LIFO inventory provision.
Under-utilization of plant capacity because of the decline in physical volume
also had a negative impact on gross profit.
Selling, general, and administrative costs totaled $16.7 million (25.9% of
sales) in 1995's third quarter, an increase of $0.2 million from $16.5 million
(25.9% of sales) in the same period of 1994.
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<PAGE> 7
The Company's operating loss increased to $2.9 million in the third quarter of
this year from $1.2 million a year ago.
Other income totaled $0.4 million for the third quarter, up $0.4 million over
last year. The increase was attributable primarily to gain on the sale of
facilities.
B. RESULTS OF OPERATIONS - NINE MONTHS 1995 COMPARED WITH NINE MONTHS 1994
For the first nine months of 1995, Duplex incurred a net loss of $1.3 million
($0.17 per share) as contrasted with a net loss of $16.7 million ($2.19 per
share) for the first nine months of last year. Last year's results were
negatively impacted by the effect of restructuring charges ($7.3 million) and
an accounting change ($7.1 million). Excluding these items, year-to-date
performance represented a $1.0 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 product and service expansion
costs, significant increases in paper costs and related LIFO inventory
provision, and higher operating expenses.
The Company posted net sales of $207.3 million for the first three quarters of
this year, up 6.0% from the $195.6 million reported in the corresponding period
in 1994. This increase reflected higher selling prices, offset in part by a
decline in volume of shipments.
For the first nine months of the year, gross profit as a percentage of sales
was 23.0%, down 0.4 percentage points from the previous year.
Selling, general, and administrative costs totaled $50.3 million (24.3% of
sales) in 1995's first nine months, an increase of $0.9 million from $49.4
million (25.2% of sales) in the same period of 1994. This increase was due
primarily to higher spending on training, sales promotion, and process
improvement.
Excluding the impact of 1994 restructuring charges, the operating loss in the
first nine months of 1995 ($2.5 million) represented a $1.1 million improvement
from last year's level.
For the first three quarters of this year, other income amounted to $0.5
million. This was a $0.5 million increase over last year due largely to higher
gain on the disposition of facilities and equipment.
LIQUIDITY AND CAPITAL RESOURCES
Working capital of $65.5 million at the end of the third quarter of 1995 was
$6.0 million lower than at year-end 1994. This reduction was driven primarily
by declines in cash, receivables, and inventory balances, partially offset by
lower accounts payable and accrued expense levels. The current ratio at July
29, 1995 was 3.6 to 1, up 0.5 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 July 29, 1995 was $6.1 million, down $1.1 million
from year-end 1994. Total debt as a percentage of total capital was 5.8% at
the end of 1995's third quarter, 0.9 percentage points lower than at the end of
1994.
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<PAGE> 8
Cash and equivalents at the end of 1995's third quarter were $11.4 million, a
decrease of $5.0 million from year-end 1994. A similar decline in cash and
equivalents occurred in the first nine months of 1994.
During the first three quarters of 1995, $3.6 million was provided by operating
activities, up $2.1 million from 1994's $1.5 million level. This generation of
cash was driven primarily by 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 nine months of 1995 aggregated
$7.0 million, consisting primarily of $2.5 million for the purchase of
long-term securities and $5.1 million for capital expenditures. This year's
capital expenditures were $3.2 million higher than in the previous year and
were incurred primarily to upgrade and increase the operating efficiency of
manufacturing equipment.
Cash consumed by financing activities decreased to $1.5 million in the first
nine months of 1995 from $2.4 million a year earlier. The decrease was due
primarily to the drop in restricted stock repurchases.
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
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.
/s/ Andrew A. Campbell
-----------------------------
Andrew A. Campbell, President
September 12, 1995
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<PAGE> 1
Duplex Products Inc.
Exhibit 11 - Computation of Earnings Per Share
(Unaudited)
(In thousands, except per-share data)
<TABLE>
<CAPTION>
Third quarter ended Nine months ended
------------------- -----------------
July 29, July 30, July 29, July 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Weighted average number of common
shares outstanding used in
computing earnings per share 7,501 7,577 7,525 7,604
Primary and fully diluted loss
per share $(0.20) $(0.10) $(0.17) $(2.19)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> 0
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-29-1994
<PERIOD-END> JUL-29-1995
<EXCHANGE-RATE> 1
<CASH> 11,386
<SECURITIES> 0
<RECEIVABLES> 43,954
<ALLOWANCES> 739
<INVENTORY> 25,020
<CURRENT-ASSETS> 90,713
<PP&E> 103,851
<DEPRECIATION> 66,237
<TOTAL-ASSETS> 134,981
<CURRENT-LIABILITIES> 25,216
<BONDS> 4,861
<COMMON> 0
0
8,243
<OTHER-SE> 90,062
<TOTAL-LIABILITY-AND-EQUITY> 134,981
<SALES> 64,388
<TOTAL-REVENUES> 64,388
<CGS> 50,557
<TOTAL-COSTS> 50,557
<OTHER-EXPENSES> 16,607
<LOSS-PROVISION> 88
<INTEREST-EXPENSE> 159
<INCOME-PRETAX> (2,507)
<INCOME-TAX> (978)
<INCOME-CONTINUING> (1,529)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,529)
<EPS-PRIMARY> (0.20)
<EPS-DILUTED> (0.20)
</TABLE>
