<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(x) Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended OCTOBER 29, 1994 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, Illinois 60178 815/895-2101
(Address of principal executive office) (Zip Code) (Telephone Number)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
[CAPTION]
<TABLE>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
- ------------------- -------------------------------------------
<S> <C>
Common stock, par value $1.00 per share American Stock Exchange
</TABLE>
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 reports) and (2) has been subject to such
filing requirements for the past ninety days. Yes X No
--- ---
As of January 6, 1995, 7,543,278 shares of common stock with a par value of
$1.00 were outstanding. These shares, which constitute all of the voting stock
of the Registrant, had an aggregate market value on January 6, 1995, of
approximately $58.5 million based on the closing sale price reported on the
American Stock Exchange. All such shares were owned by non-affiliates of the
Registrant.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the fiscal
year ended October 29, 1994, are incorporated by reference in Parts II and IV.
Portions of the Registrant's Proxy Statement for the 1995 Annual Meeting of
Shareholders are incorporated by reference in Part III.
<PAGE> 2
PART I
ITEM 1 - BUSINESS
GENERAL
Duplex Products Inc. began operations in 1947 as a designer and manufacturer of
business forms primarily focused on government markets. Over the years, Duplex
has broadened considerably the scope of its products and services to keep pace
with emerging technologies and the changing information management requirements
of businesses. Today the Company is positioned as a leader in serving both the
business forms and information management needs of customers in financial,
industrial, retail, and commercial markets, with the primary objective of
assisting them in improving the efficiency of their operations and in lowering
their cost of processing business critical information.
Financial data and commentary on the Company's recent operating results and
financial position are included on pages 12 through 27 of the 1994 Annual
Report to Shareholders, which is incorporated herein by reference.
The Company's business is predominantly in a single industry segment, with only
the business forms class of product exceeding 10% of total sales.
PRODUCTS AND SERVICES
The Company serves the business information handling needs of customers with a
comprehensive array of value-added forms and services that are both paper-based
and electronic-based. These include:
- - Custom and stock business forms (continuous, unit set, single, and
multi-part) in fan-fold, roll, and sheeted stocks.
- - Custom and stock pressure sensitive labels in fan-fold, roll, and sheeted
stocks for a wide variety of media bases.
- - Integrated form/label combinations.
- - Forms management services, including storage, distribution, cost center
reporting and inventory management.
- - Electronic printing and mailing services, including data communication and
manipulation, variable and fixed printing, and document distribution.
- - Services related to check fraud prevention, electronic forms, and
information flow analysis.
During fiscal year 1994, the Company expanded its electronic printing and
mailing centers in Elgin, Illinois, and Timonium, Maryland, and opened a
facility in Sacramento, California, to serve the West Coast market.
MANUFACTURING AND DISTRIBUTION
Products are produced in ten Company plants in the United States and also
sourced through a network of outside strategic partners, whose product
offerings and capabilities complement those of Duplex.
Products and services are sold primarily in the United States and Puerto Rico
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through the Company's direct sales force of 305 sales consultants. Over the
past year, strong emphasis has been placed on providing training to sales
consultants on consultative selling techniques and new product and service
offerings of the Company. In addition, corporate support of the sales force
has been expanded considerably in the areas of market analysis, advertising,
and sales promotion.
The Company is not dependent upon one customer or related group of customers in
that no customer or group of customers under common control accounted for 10%
or more of total sales in fiscal year 1994. The Company's order backlog at
any time is not material in relation to annual sales volume, and the business
is not subject to significant seasonal variances.
A large portion of the Company's products are distributed to customers through
a network of business service centers. Services provided by these centers
include warehousing, customer inventory management and reporting, imprinting
services, and certain forms production.
MARKET ENVIRONMENT
Duplex operates in a highly competitive and mature market, with industry sales
of traditional business forms in the United States (estimated at approximately
$8 billion in 1994) continuing to decline gradually. This decline reflects (1)
a move by large businesses from paper-based information systems as they expand
the use of personal computers and other productivity-enhancing tools and (2) a
decline in the use of unit sets by small companies. However, certain segments
of the marketplace offer growth opportunities, including pressure sensitive
labels, short-run preprinted cut sheets, electronic printing and mailing
services, demand printing, and forms automation. In this connection,
significant opportunities relate to assisting customers to reduce their cost of
handling and processing information, including the integration of paper and
electronic documents, the enhancement of business processes, and the provision
of services that allow businesses to outsource "back room" activities that are
not central to the generation of revenues. Also, the increase in information
both generated by and required by the expanding electronic age will increase
paper-based and paperless communications, providing opportunities for suppliers
to supplant declining segments of the traditional business forms market with
other products and services.
Approximately 20% of the U.S. business forms market is controlled by one
competitor, with the remaining market share distributed among approximately 600
companies. Duplex ranks among the six largest of these companies, in an
industry where price, quality, on-time delivery, and sales service are the
prime competitive factors. Over-capacity in the industry is significant giving
rise to pricing pressures. This excess of supply over demand most probably
will lead to a reduction in the number of forms suppliers through
consolidations and mergers.
RAW MATERIALS
Duplex's principal raw material is paper, which is purchased in a wide range of
sizes, colors, widths, and weights from various paper mills. Other materials
used in the manufacturing process include inks and lithographic platemaking
materials.
After a five-year decline in paper prices, the May through December period of
1994 saw bond paper prices climb about 70%. Selling prices of Company products
were adjusted to reflect these increases; however, pressure on margins
continues, reflecting the highly competitive nature of the marketplace. In
addition, paper is in short supply and supplies are being allocated by domestic
vendors. Despite this
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situation, Duplex expects to be able to meet customer requirements as a result
of its longstanding vendor relationships and through adjustments to product
mix.
RESEARCH AND DEVELOPMENT
The Company continues to be involved in research activities relating to the
development of new products and services. The Company does not regard either
the number of people involved in, or amounts expended on, research activities
(none of which are customer sponsored) to be material.
LICENSES AND PATENTS
No material patents, licenses, franchises, or concessions are held which
significantly impact the Company's business.
ENVIRONMENTAL PROTECTION
The Company believes that it is in substantial compliance with all applicable
federal, state, and local regulations regarding environmental protection. The
Company has not incurred any material costs in this regard.
EMPLOYEES
As of October 29, 1994, 1,852 people were employed by Duplex, none of whom are
covered by a collective bargaining agreement.
ITEM 2 - PROPERTIES
The following are the principal properties of the Company:
<TABLE>
<CAPTION>
Approximate
square
Location Description footage Owned/Leased
- -------- ----------- ------- ------------
<S> <C> <C> <C>
Dillsburg, Pennsylvania Plant and warehouse 38,000 Owned
Emigsville, Pennsylvania Plant and warehouse 66,000 Owned
Goshen, Indiana Plant and warehouse 140,000 Owned
Jacksonville, Florida Plant and warehouse 127,000 Owned
Mechanicsburg, Pennsylvania Plant and warehouse 48,000 Owned
Newark, Ohio Plant and warehouse 80,000 Owned
Orlando, Florida Plant and warehouse 40,000 Owned
Salt Lake City, Utah Plant and warehouse 81,000 Owned
Santa Ana, California Plant and warehouse 65,000 Owned
Sycamore, Illinois Corporate office, plant,
and warehouse 191,000 Owned
Tucker, Georgia Plant and warehouse 82,000 Leased
West York, Pennsylvania Plant and warehouse 73,000 Owned
</TABLE>
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The Dillsburg, Pennsylvania, and Orlando, Florida, facilities are vacant and
being marketed for sale. The Company believes that its facilities are
properly maintained, and that production capacity is adequate for current
needs.
In addition, the Company leases (1) electronic printing and mailing facilities
in Timonium, Maryland, Elgin, Illinois, and Sacramento, California, (2)
leases/owns twenty business service centers in various locations across the
United States, and (3) leases eighty-three sales offices nationwide and in
Puerto Rico.
ITEM 3 - LEGAL PROCEEDINGS
The Company is not a party to, nor is its property subject to, any material
pending legal proceedings.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
None.
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
Reported as "Stock Exchange Information" and "Trading and Dividend Information"
on page 29 of the 1994 Annual Report to Shareholders.
ITEM 6 - SELECTED FINANCIAL DATA
Reported as "Selected Financial Data" on page 27 of the 1994 Annual Report to
Shareholders.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Reported as "Management's Discussion of Operations" and "Management's
Discussion of Liquidity and Capital Resources" on pages 15 through 17 of the
1994 Annual Report to Shareholders.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See index under Item 14.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH AUDITORS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding directors required by this item is incorporated by
reference to the section entitled "Election of Directors" in the Registrant's
Proxy Statement for the 1995 Annual Meeting of Shareholders.
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<PAGE> 6
Information pertaining to executive officers as of January 25, 1995, is shown
below.
<TABLE>
<CAPTION>
Executive
Officer
Name Age Since Positions During Last Five Years
---- --- ----- --------------------------------
<S> <C> <C> <C>
Ben L. McSwiney 44 1993 President and Chief Executive Officer of the
Company since December 1993; Chief Operating
Officer of the Company, September to December
1993; President and Chief Executive Officer of
WhiteStar Graphics, 1991-1993; Vice President
and General Manager of Williamhouse Regency,
1989-1991.
</TABLE>
ITEM 11 - EXECUTIVE COMPENSATION
Incorporated by reference to the section entitled "Executive Compensation" in
the Registrant's Proxy Statement for the 1995 Annual Meeting of Shareholders.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference to the section entitled "Beneficial Ownership of
Common Stock" in the Registrant's Proxy Statement for the 1995 Annual Meeting
of Shareholders.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference to the section entitled "Executive Compensation" in
the Registrant's Proxy Statement for the 1995 Annual Meeting of Shareholders.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
The following documents are filed as part of this report:
<TABLE>
<CAPTION>
Page(s) in
(a)(1) Financial Statements Annual Report
-------------
<S> <C>
Consolidated Statement of Operations 12
Consolidated Statement of Financial Position 13
Consolidated Statement of Cash Flows 14
Notes to Consolidated Financial Statements 18-25
Independent Auditors' Report 26
Selected Financial Information 27
</TABLE>
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<TABLE>
<CAPTION>
(a)(2) Financial Statement Schedules Page in
Form 10-K
---------
<S> <C>
Report of Independent Auditors on Financial
Statement Schedules 9
Schedule V - Property, Plant, and Equipment 10
Schedule VI - Accumulated Depreciation and
Amortization of Property, Plant,
and Equipment 11
Schedule VIII - Valuation and Qualifying Accounts
and Reserves 12
</TABLE>
The schedules listed in Reg. 210.5-04, except those listed above, have been
omitted because they are not applicable or the required information is shown in
the financial statements or notes thereto.
(b) Reports on Form 8-K: None.
(c) Exhibits
<TABLE>
<S> <C>
3(a) Composite of the Registrant's Restated Certificate of Incorporation as amended, incorporated by reference to
Exhibit 3 of the Registrant's Annual Report on Form 10-K for the fiscal year ended October 25, 1988.
3(b) By-Laws of the Registrant as amended.*
4 Shareholder Rights Plan, incorporated by reference to the Registrant's Form 8-K dated June 8, 1989.
10(a) 1984 Incentive Stock Option Plan, incorporated by reference to the Registrant's Annual Report on Form 10-K
for the fiscal year ended October 29, 1983.
10(b) 1993 Incentive Stock Option Plan, incorporated by reference to the Registrant's Annual Report on Form 10-K
for the fiscal year ended October 30, 1993.
11 Computation of Earnings Per Share.*
13 Portions (pages 12 through 29) of the 1994 Annual Report to Shareholders for the fiscal year ended
October 29, 1994.*
18 Letter regarding Change in Accounting Principles.*
23 Consent of Independent Auditors.*
</TABLE>
*Filed electronically herewith.
7
<PAGE> 8
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Annual Report on Form 10-K for
the fiscal year ended October 29, 1994, to be signed on its behalf by the
undersigned thereunto duly authorized on January 20, 1995.
DUPLEX PRODUCTS INC.
By /s/ Andrew A. Campbell
----------------------
Andrew A. Campbell
Vice-President Finance, Chief Financial
Officer, and Secretary
(Principal Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated, on January 20, 1995.
By /s/ Andrew A. Campbell
-----------------------
Andrew A. Campbell
Vice-President Finance, Chief Financial
Officer, and Secretary
(Principal Financial Officer)
By /s/ Ben L. McSwiney
--------------------
Ben L. McSwiney, President,
Chief Executive Officer, and Director
(Principal Executive Officer)
By /s/ John A. Bacon, Jr.
-----------------------
John A. Bacon, Jr., Director
By /s/ Michael J. Birck
---------------------
Michael J. Birck, Director
By /s/ David J. Eskra
--------------------
David J. Eskra, Director
By /s/ George S. Hoban
--------------------
George S. Hoban, Director
By /s/ W. Robert Reum
-------------------
W. Robert Reum, Director
8
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REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENT SCHEDULES
Board of Directors
Duplex Products Inc.
In connection with our audit of the consolidated financial statements of Duplex
Products Inc. and Subsidiary, referred to in our report dated December 9, 1994,
we have also audited Schedules V, VI, and VIII for each of the three years in
the period ended October 29, 1994. In our opinion, these schedules present
fairly, in all material respects, the information required to be set forth
therein.
GRANT THORNTON LLP
Chicago, Illinois
December 9, 1994
9
<PAGE> 10
DUPLEX PRODUCTS INC. AND SUBSIDIARY
SCHEDULE V - PROPERTY, PLANT, AND EQUIPMENT
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Balance at Balance at
beginning Additions end of
of year at cost Retirements year
--------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Year ended October 29, 1994
Land and land improvements $ 3,207 $ -- $ 1,067 $ 2,140
Buildings 31,238 232 5,526 25,944
Leasehold improvements 269 4 20 253
Machinery and equipment 74,267 2,612 4,045 72,834
--------- -------- -------- ---------
$108,981 $2,848 $10,658 $101,171
========= ======== ======== =========
Year ended October 30, 1993
Land and land improvements $ 3,768 $ -- $ 561 $ 3,207
Buildings 35,175 202 4,139 31,238
Leasehold improvements 400 11 142 269
Machinery and equipment 76,794 3,503 6,030 74,267
-------- ------- ------- -------
$116,137 $3,716 $10,872 $108,981
========= ======== ======== =========
Year ended October 31, 1992
Land and land improvements $ 3,768 $ -- $ -- $ 3,768
Buildings 33,989 1,208 22 35,175
Leasehold improvements 351 56 7 400
Machinery and equipment 75,573 3,655 2,434 76,794
------- ------ ------ -------
$113,681 $4,919 $2,463 $116,137
========= ======== ======== =========
</TABLE>
10
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DUPLEX PRODUCTS INC. AND SUBSIDIARY
SCHEDULE VI - ACCUMULATED DEPRECIATION AND AMORTIZATION OF
PROPERTY, PLANT, AND EQUIPMENT
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Additions
Balance at charged to Balance at
beginning costs and end of
of year expenses Retirements year
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Year ended October 29, 1994
Land and land improvements $ 720 $ 74 $ 220 $ 574
Buildings 13,900 1,128 2,528 12,500
Leasehold improvements 182 21 17 186
Machinery and equipment 49,668 4,390 3,147 50,911
-------- -------- ---------- ---------
$64,470 $5,613 $5,912 $64,171
======= ======== ========== =========
Year ended October 30, 1993
Land and land improvements $ 750 $ 84 $ 114 $ 720
Buildings 14,428 1,208 1,736 13,900
Leasehold improvements 278 42 138 182
Machinery and equipment 50,325 5,244 5,901 49,668
------- ------- ------- ------
$65,781 $6,578 $7,889 $64,470
======= ======= ======= =======
Year ended October 31, 1992
Land and land improvements $ 650 $ 100 $ -- $ 750
Buildings 13,040 1,401 13 14,428
Leasehold improvements 231 52 5 278
Machinery and equipment 47,051 5,630 2,356 50,325
-------- ------ ------ -------
$60,972 $7,183 2,374 $65,781
======= ====== ====== =======
</TABLE>
Note: For financial reporting purposes, depreciation is based on the
following estimated useful lives of assets:
<TABLE>
<S> <C>
Land improvements 5 to 10 years
Buildings and improvements 5 to 40 years
Machinery and equipment 3 to 15 years
Furniture and fixtures 5 to 15 years
Automotive equipment 4 to 5 years
Leasehold improvements Lives of leases
</TABLE>
11
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DUPLEX PRODUCTS INC. AND SUBSIDIARY
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(Dollar amounts in thousands)
<TABLE>
<CAPTION> Additions Deductions
Balance at charged to from reserves Balance
beginning costs and ---------------------- at end
Description of year expenses Description Amount of year
- ----------- ---------- ---------- ----------- ------ --------
<S> <C> <C> <C> <C> <C>
Year ended October 29, 1994
Allowance for Accounts
doubtful accounts $800 $367 charged off $452 $715
Reserve for inventory -- 1,350 -- 1,350
Year ended October 30, 1993
Allowance for Accounts
doubtful accounts 900 256 charged off 356 800
Year ended October 31, 1992
Allowance for Accounts
doubtful accounts 1,200 196 charged off 496 900
</TABLE>
12
<PAGE> 1
DUPLEX PRODUCTS INC. AND SUBSIDIARY EXHIBIT 3(b)
BYLAWS
ARTICLE I
OFFICES
SECTION 1. The principal office shall be in the City of
Wilmington, County of New Castle, State of Delaware.
SECTION 2. The corporation may also have offices at such other
places both within and without the State of Delaware as the Board of Directors
may from time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 1. Meetings of the shareholders for the election of
directors or for any other purpose may be held at such time and place within or
without the State of Delaware as shall be determined by the Board of Directors
and which shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
SECTION 2. Written notice of the annual meeting shall be given to
each shareholder entitled to vote thereat not less than ten nor more than sixty
days before the date of the meeting.
SECTION 3. The officer, or other person, corporation or company
who has charge of the stock ledger of the corporation shall prepare and make,
at least ten days before every election of directors, a complete list of the
shareholders entitled to vote at said election, arranged in alphabetical order,
showing the address of and the number of shares registered in the name of each
shareholder. Such list shall be open to the examination of any shareholder,
during ordinary business hours, for a period of at least ten days prior to the
election, either at a place within the city, town, or village where the election
is to be held, which place shall be specified in the notice of the meeting, or,
if not specified, at the place where said meeting is to be held, and the list
shall be produced and kept at the time and place of election during the whole
time thereof, and subject to the inspection of any shareholder who may be
present.
SECTION 4. Written notice of a special meeting of shareholders,
stating the time, place and object thereof, shall be given to each shareholder
entitled to vote thereat not less than ten nor more than sixty days before the
date fixed for the meeting.
SECTION 5. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the shareholders for the
transaction of business except as otherwise provided by statute or by the
Certificate of Incorporation. If, however, such quorum shall not be present or
represented at any meeting of the shareholders, the shareholders entitled to
vote thereat, present in person or represented by proxy, shall have power
to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented.
At such
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adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified.
SECTION 6. When a quorum is present at any meeting, the vote of
the holders of a majority of the stock having voting power present in person
or represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or
of the Certificate of Incorporation, a different vote is required in which case
such express provision shall govern and control the decision of such question.
SECTION 7. Each shareholder shall at every meeting of the
shareholders be entitled to one vote in person or by proxy for each share of
the capital stock having voting power held by such shareholder but no proxy
shall be voted on after three years from its date, unless the proxy provides
for a longer period, and, except where the transfer books of the corporation
have been closed or a date has been closed or a date has been filed as a record
date for the determination of its shareholders entitled to vote, no share of
stock shall be voted on at any election for directors which has been
transferred on the books of the corporation within twenty days next preceding
such election of directors.
ARTICLE III
DIRECTORS
SECTION 1. The number of directors of the corporation shall be not
less than three (3) and not more than fifteen (15) and within that variable
range shall be the number of directors set from time to time by resolution of
the Board of Directors. Each director shall hold office in accordance with the
provisions of Article Eleventh of the Certificate of Incorporation of the
corporation and shall serve until his or her successor shall have been duly
elected and qualified.
SECTION 2. The Board of Directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
SECTION 3. The first meeting of each newly elected Board of
Directors shall be held without other notice than this bylaw immediately after
the annual meeting of shareholders at such place as said directors shall
determine.
SECTION 4. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time to time be
determined by the Board.
SECTION 5. Special meetings of the Board may be called by the
president on three days' notice to each director, either personally or by mail
or by telegram; special meetings shall be called by the president or secretary
in like manner and on like notice on the written request of three directors.
SECTION 6. At all meetings of the Board, four directors shall
constitute a quorum for the transaction of business and the act of a majority
of the directors present at any meeting at which there is a quorum shall be the
act of the Board of Directors, except as may be otherwise specifically provided
by statute or by the Certificate of Incorporation. If a quorum shall not be
present at any meeting of the Board of Directors, the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
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<PAGE> 3
SECTION 7. Unless otherwise restricted by the Certificate of
Incorporation or these bylaws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if a written consent thereto is signed by all members of the
Board or of such committee as the case may be, and such written consent is
filed with the minutes of proceeding of the Board or committee.
SECTION 8. Unless otherwise restricted by the Certificate of
Incorporation or these bylaws, members of the Board of Directors, or of any
committee thereof, may participate in a meeting of such Board of Directors or
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this Section 8 shall constitute
presence in person at such meeting.
SECTION 9. The directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors and may be paid a fixed
sum for attendance at each meeting of the Board of Directors or a stated salary
as director. No such payment shall preclude any directors from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for
attending committee meetings.
ARTICLE IV
NOTICES
SECTION 1. Notices to directors and shareholders shall be in
writing and delivered personally or mailed to the directors or shareholders at
their addresses appearing on the books of the corporation. Notice by mail
shall be deemed to be given at the time when the same shall be mailed. Notice
to directors may also be given by telegram.
SECTION 2. Whenever any notice is required to be given under the
provisions of the statutes or of the Certificate of Incorporation or of these
bylaws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be
deemed equivalent thereto.
ARTICLE V
OFFICERS
SECTION 1. The officers of the corporation shall be chosen by the
Board of Directors and shall be a Chairman of the Board, President, a Vice
President, a Secretary and a Treasurer. The Board of Directors may also choose
additional Vice Presidents, and one or more Assistant Secretaries and Assistant
Treasurers. Two or more offices may be held by the same person, except that
the same person may not hold the offices of Chairman of the Board and
Secretary, or President and Secretary. The Board may from time to time by
resolution designate one of the officers of the corporation as Chief Executive
Officer (CEO), Chief Operations Officer (COO) or Chief Financial Officer (CFO).
SECTION 2. The Board of Directors at its first meeting after each
annual meeting of shareholders shall choose a Chairman of the Board and shall
choose a President from among the directors, and shall choose one or more Vice
Presidents, a Secretary, and a Treasurer, none of whom need be a member of the
Board.
SECTION 3. The Board of Directors may appoint such other officers
and agents as it shall deem necessary who shall hold their offices for such
terms and shall
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<PAGE> 4
exercise such powers and perform such duties as shall be
determined from time to time by the Board.
SECTION 4. The salaries of all officers and agents of the
corporation shall be fixed by the Board of Directors.
SECTION 5. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by
the Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
corporation shall be filled by the Board of Directors.
CHAIRMAN OF THE BOARD
SECTION 6. The Chairman of the Board shall preside at all
meetings of the shareholders and of the directors, except where by law the
signature of the President is required. The Chairman shall possess the same
power as the President to sign all certificates, contracts, and other
instruments of the corporation which may be authorized by the Board of
Directors. In the absence or disability of the President, the Chairman of the
Board shall assume the duties of the President of the corporation and shall be
responsible for the general management of the business of the corporation.
THE PRESIDENT
SECTION 7. The President shall be responsible for the general
management of the business of the corporation. The President shall execute
bonds, mortgages, and other contracts requiring a seal, under the seal of the
corporation, except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some other officer or agent of
the corporation. The President shall vote all shares of any other corporation
standing in the name of the corporation. The President shall in the absence of
the Chairman of the Board preside at all meetings of the shareholders and the
Board of Directors.
THE VICE PRESIDENTS
SECTION 8. The Vice President, or if there shall be more than one,
the Vice Presidents in the order determined by the Board of Directors, shall,
in the absence or disability of the President, perform the duties and exercise
the powers of the President including the power to vote all shares of stock of
any other corporation standing in the name of the corporation and shall perform
such other duties and have such powers as the Board of Directors may from time
to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
SECTION 9. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the shareholders and record all the proceedings
of the meetings of the corporation and of the Board of Directors in a book to
be kept for that purpose and shall perform like duties for the standing
committees when required. The Secretary shall give, or cause to be given,
notice of all meetings of the shareholders and special meetings of the Board of
Directors, and shall perform such other duties as may be prescribed by the
Board of Directors or President, under whose supervision the Secretary shall
be. The Secretary shall keep in safe custody the seal of the corporation and,
when authorized by the Board of Directors, affix the same to any instrument
requiring it and, when so affixed, it shall be attested by the Secretary's
signature or by the signature of an Assistant Secretary.
4
<PAGE> 5
SECTION 10. The Assistant Secretary, or if there be more than one,
the Assistant Secretaries in the order determined by the Board of Directors,
shall , in the absence or disability of the Secretary, perform the duties and
exercise the powers of the Secretary and shall perform such other duties and
have such other powers as the Board of Directors may from time to time
prescribe.
THE TREASURER AND ASSISTANT TREASURERS
SECTION 11. The Treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all
moneys and other valuable effects in the name and to the credit of the
corporation in such depositories as may be designated by the Board of
Directors.
The Treasurer shall disburse the funds of the corporation as may
be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors,
at its regular meetings, or when the Board of Directors so requires, an
account of all his transactions as Treasurer and of the financial condition of
the corporation.
If required by the Board of Directors, the Treasurer shall give the
corporation a bond (which shall be renewed every six years) in such sum and
with such surety or sureties as shall be satisfactory to the Board of Directors
for the faithful performance of the duties of his office and for the
restoration to the corporation, in case of his death, resignation, retirement,
or removal from office, of all books, papers, vouchers, money, and other
property of whatever kind in his possession or under his control belonging to
the corporation.
SECTION 12. The Assistant Treasurer, or if there shall be more than
one, the Assistant Treasurers in the order determined by the Board of
Directors, shall, in the absence of or disability of the Treasurer, perform the
duties and exercise the powers of the Treasurer and shall perform such other
duties and have such other powers as the Board of Directors may from time to
time prescribe.
ARTICLE VI
CERTIFICATES OF STOCK
SECTION 1. Every holder of stock in the corporation shall be
entitled to have a certificate, signed by, or in the name of the corporation
by, the Chairman of the Board, the President or a Vice President, and the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary
of the corporation, certifying the number of shares owned by him in the
corporation. If the corporation shall be authorized to issue more than one
class of stock, or more than one series of any class, the designations,
preferences and relative, participating, optional, or other special rights of
each class of stock or series thereof and the qualifications, limitations, or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class of stock; provided, however, that except as
otherwise provided in Section 194 of the General Corporation Law of Delaware,
in lieu of the foregoing requirements, there may be set forth on the face or
back of the certificate which the corporation shall issue to represent such
class or series of stock, a statement that the corporation will furnish without
charge to each stockholder who so requests, the designations, preferences and
relative, participating, optional, or other special rights of each class of
stock or series thereof and the qualifications, limitations, or restrictions of
such preferences and/or rights.
5
<PAGE> 6
SECTION 2. Where a certificate is signed (1) by a transfer agent
or an assistant transfer agent or (2) by a transfer clerk acting on behalf of
the corporation and a registrar, the signature of any such Chairman of the
Board, President, Vice President, Treasurer, Assistant Treasurer, Secretary, or
Assistant Secretary may be a facsimile. In case any officer or officers who
have signed, or whose facsimile signature or signatures have been used on, any
such certificate or certificates shall cease to be such officer or officers of
the corporation, whether because of death, resignation, or otherwise, before
such certificate or certificates have been delivered by the corporation, such
certificate or certificates may nevertheless be adopted by the corporation and
be issued and delivered as though the person or persons who signed such
certificate or certificates or whose facsimile signature or signatures have
been used thereon had not ceased to be such officer or officers of the
corporation.
LOST CERTIFICATES
SECTION 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost or destroyed,
upon the making of an affidavit of that fact by the person claiming the
certificate of stock to be lost or destroyed. When authorizing such issue of a
new certificate or certificates, the Board of Directors may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost or destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it shall require and/or to give the
corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the corporation with respect to the certificate
alleged to have been lost or destroyed.
TRANSFERS OF STOCK
SECTION 4. Upon surrender to the corporation or the transfer agent
of the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment, or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction upon its books.
CLOSING OF TRANSFER BOOKS
SECTION 5. The Board of Directors may close the stock transfer
books of the corporation for a period not exceeding sixty days nor less than
ten days preceding the date of any meeting of shareholders or the date for
payment of any dividend or the date for the allotment of rights or the date
when any change or conversion or exchange of capital stock shall go into
effect. In lieu of closing the stock transfer books as aforesaid, the Board of
Directors may fix in advance a date, not exceeding sixty days nor less than ten
days preceding the date of any meeting of shareholders, or the date for the
payment of any dividend, or the date for the allotment of rights,
or the date when any change or conversion or exchange of capital stock shall go
into effect, as a record date for the determination of the shareholders
entitled to notice of, and to vote at, any such meeting, and any adjournment
thereof, or entitled to receive payment of any such dividend, or to any such
allotment of rights, or to exercise the rights in respect of any such change,
conversion or exchange of capital stock, and in such case such shareholders and
only such shareholders as shall be shareholders of record on the date so fixed
shall be entitled to such notice of, and to vote at, such meeting and any
adjournment thereof, or to receive payment of such dividend, or to receive such
allotment of rights, or to exercise such rights, as the case may be
notwithstanding any transfer of any stock on the books of the corporation after
any such record date fixed as aforesaid.
6
<PAGE> 7
REGISTERED STOCKHOLDERS
SECTION 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
SECTION 1. Dividends upon the capital stock of the corporation,
subject to the provisions of the Certificate of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the
capital stock, subject to the provisions of the Certificate of Incorporation.
ANNUAL STATEMENT
SECTION 2. The Board of Directors shall present at each annual
meeting, and at any special meeting of the shareholders when called for by vote
of the shareholders, a full and clear statement of the business and condition
of the corporation.
CHECKS
SECTION 3. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
FISCAL YEAR
SECTION 4. The fiscal year of the corporation shall end on the
last Saturday of October of each year. Any change in such fiscal year shall be
fixed by resolution of the Board of Directors.
SEAL
SECTION 5. The corporate seal shall have inscribed thereon the
name of the corporation, the year of its organization, and the words "Corporate
Seal, Delaware." The seal may be used by causing it or a facsimile thereof
to be impressed or affixed or reproduced or otherwise.
7
<PAGE> 8
ARTICLE VIII
AMENDMENTS
SECTION 1. These bylaws may be altered, amended, or repealed or new
bylaws may be adopted by the shareholders or by the Board of Directors, when
such power is conferred upon the Board of Directors by the Certificate of
Incorporation at any regular meeting of the shareholders or of the Board of
Directors, or at any special meeting of the shareholders or of the Board of
Directors or at any special meeting of the shareholders or of the Board of
Directors or if notice of such alteration, amendment, repeal, or adoption of new
bylaws be contained in the notice of such special meeting. If the power to
adopt, amend, or repeal bylaws is conferred upon the Board of Directors by the
Certificate of Incorporation it shall not divest or limit the power of the
shareholders to adopt, amend, or repeal bylaws.
ARTICLE IX
INDEMNIFICATION
SECTION 1. The corporation shall indemnify any and all of its
directors or officers or former directors or officers or any person who may
have served at its request as a director or officer of another corporation in
which it owns shares of capital stock or of which it is a creditor who was or
is threatened to be made a party to any threatened, pending, or completed
action, suit or proceeding, whether civil, criminal, administrative, or
investigative, against expenses (including attorneys' fees), judgments, fines,
and amounts paid in settlement actually and reasonably incurred by him or her
in connection with such action, suit, or proceeding, to the extent and under
the circumstances permitted by the General Corporation Law of the State of
Delaware. Such indemnification (unless ordered by a court) shall be made as
authorized in a specific case upon a determination that indemnification of a
director, officer, employee, or agent is proper in the circumstances because he
has met the applicable standards of conduct set forth in the General
Corporation Law of the State of Delaware. Such determination shall be made (1)
by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit, or proceeding, or (2) if
such quorum is not obtainable, or even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or (3)
by the shareholders. Any and all expenses incurred in defending such action,
suit, or proceeding may be paid by the Corporation in advance of the final
disposition of such action, suit, or proceeding as authorized by the Board of
Directors in the specific case upon receipt of an undertaking by or on behalf
of the person or his or her agent to repay such amount unless it shall
ultimately be determined that he or she is entitled to be indemnified by the
corporation as authorized in this section. The foregoing right of
indemnification shall not be deemed exclusive of any other rights to which
those seeking indemnification may be entitled under any bylaw, agreement, vote
of shareholders or disinterested directors, or otherwise, and shall continue as
to a person who has ceased to be a director, officer, employee, or agent and
shall inure to the benefit of the heirs, executor and administrator of such a
person.
8
<PAGE> 1
DUPLEX PRODUCTS AND SUBSIDIARY EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
Fiscal year ended
---------------------------------------
October 29, October 30, October 31,
1994 1993 1992
--------- ---------- ----------
<S> <C> <C> <C>
Weighted average number of common
shares outstanding used in computing 7,593,625 7,731,740 7,765,865
earnings per share
Primary and fully diluted earnings
(loss) per share before accounting
changes $(1.19) $0.19 $(0.07)
Cumulative effect of accounting
changes per share (0.93) 0.13 --
----- ---- ------
Earnings (loss) per share $(2.12) $0.32 $(0.07)
====== ===== ======
</TABLE>
1
<PAGE> 1
EXHIBIT 13
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For years ended (In thousands, except per-share data)
OCTOBER 29, 1994 October 30, 1993 October 31, 1992
------------------ ---------------- ----------------
<S> <C> <C> <C>
NET SALES $265,791 $258,867 $270,093
Cost of goods sold 204,062 194,977 201,853
-------- -------- --------
GROSS PROFIT 61,729 63,890 68,240
Selling, general, and administrative
expenses 66,020 61,039 63,119
Restructuring costs 10,500 1,500 7,000
-------- -------- -------
OPERATING PROFIT (LOSS) (14,791) 1,351 (1,879)
Other income (expense)
Interest expense (469) (590) (712)
Investment income 491 632 901
Other 22 838 376
------- ------- ------
44 880 565
------- ------- ------
EARNINGS (LOSS) BEFORE INCOME TAXES
AND ACCOUNTING CHANGES (14,747) 2,231 (1,314)
Provision for income taxes (credits) (5,704) 777 (751)
------- ------- ------
EARNINGS (LOSS) BEFORE ACCOUNTING CHANGES (9,043) 1,454 (563)
Cumulative effect of accounting changes (7,084) 1,000 --
------- ------- ------
NET EARNINGS (LOSS) $(16,127) $ 2,454 $ (563)
======= ======= ======
EARNINGS (LOSS) PER SHARE BEFORE
ACCOUNTING CHANGES $ (1.19) $ 0.19 $ (0.07)
Cumulative effect of accounting changes (0.93) 0.13 --
-------- ------- --------
NET EARNINGS (LOSS) PER SHARE $ (2.12) $ 0.32 $ (0.07)
======== ======== ========
</TABLE>
The following pro forma information reflects the Company's results for 1993 and
1992 as if the revenue recognition change discussed in note 1 to the
consolidated financial statements had been retroactively applied.
<TABLE>
<CAPTION>
For years ended (In thousands, except per-share data)
October 30, 1993 October 31, 1992
---------------- ----------------
<S> <C> <C>
Net earnings (loss) $1,966 $(462)
Net earnings (loss) per share 0.25 (0.06)
</TABLE>
The notes to consolidated financial statements on pages 18-25 are an integral
part of this statement.
12
<PAGE> 2
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
<TABLE>
<CAPTION>
(In thousands) OCTOBER 29, 1994 October 30, 1993
- ----------------- ---------------- ----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents $ 16,337 $ 18,419
Accounts and notes receivable (note 2) 48,046 76,021
Inventories (note 3) 27,530 9,107
Income tax refund receivable 2,998 1,537
Deferred income taxes (note 8) 10,245 3,500
--------- ---------
TOTAL CURRENT ASSETS 105,156 108,584
PROPERTY, PLANT, AND EQUIPMENT--NET (NOTE 4) 37,000 44,511
OTHER ASSETS 4,052 2,964
--------- ---------
TOTAL ASSETS $146,208 $156,059
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt (note 5) $ 1,222 $ 1,562
Accounts payable 11,526 10,505
Accrued expenses (note 7) 20,894 13,145
--------- ---------
TOTAL CURRENT LIABILITIES 33,642 25,212
--------- ---------
LONG-TERM DEBT (NOTE 5) 5,928 7,150
--------- ---------
DEFERRED LIABILITIES AND CREDITS
Compensation plan cost 2,411 2,328
Income taxes (note 8) 4,148 3,972
Other 40 134
--------- ---------
TOTAL DEFERRED LIABILITIES AND CREDITS 6,599 6,434
--------- ---------
SHAREHOLDERS' EQUITY
Common stock (8,304 and 8,449 shares
issued, respectively) 8,304 8,449
Additional paid-in capital 4,333 5,854
Common stock held in treasury (5,809) (5,809)
Unamortized value of restricted stock issued (648) (1,217)
Retained earnings 93,859 109,986
--------- ---------
TOTAL SHAREHOLDERS' EQUITY (NOTES 9, 10, AND 11) 100,039 117,263
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $146,208 $156,059
========= =========
</TABLE>
The notes to consolidated financial statements on pages 18-25 are an integral
part of this statement.
13
<PAGE> 3
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For years ended (In thousands) OCTOBER 29, 1994 October 30, 1993 October 31, 1992
- ------------------------------ ---------------- ---------------- ----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $(16,127) $ 2,454 $ (563)
Adjustments to reconcile net earnings (loss) to
cash provided (used) by operating activities
Depreciation and amortization 5,613 6,578 7,183
Restructuring costs 10,500 1,500 7,000
Deferred income taxes (6,569) 485 (2,613)
Deferred investment credits (94) (122) (166)
Provision for doubtful accounts 348 256 196
Gain on sale of fixed assets (115) (732) (370)
(Increase) decrease in accounts and notes receivable 27,627 (8,261) 3,214
(Increase) decrease in inventories (18,423) 1,399 2,153
Increase in income tax refund receivable (1,461) (1,537) --
Increase (decrease) in accounts payable 1,021 1,155 (939)
Decrease in accrued restructuring costs (3,759) (4,921) (1,771)
Increase (decrease) in other accrued expenses 1,008 (905) (2,263)
Decrease in income taxes -- -- (1,426)
Other operating activities 646 1,328 574
-------- -------- -------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 215 (1,323) 10,209
-------- -------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (2,848) (3,716) (4,919)
Net proceeds from sale of assets 3,528 3,715 459
-------- -------- -------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 680 (1) (4,460)
-------- -------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long-term debt (1,562) (1,731) (2,117)
Dividends paid -- -- (3,729)
Restricted stock repurchased--net (1,415) (852) (216)
-------- -------- -------
NET CASH USED BY FINANCING ACTIVITIES (2,977) (2,583) (6,062)
-------- -------- -------
DECREASE IN CASH AND EQUIVALENTS DURING YEAR (2,082) (3,907) (313)
Cash and equivalents at beginning of year 18,419 22,326 22,639
-------- -------- -------
CASH AND EQUIVALENTS AT END OF YEAR $16,337 $18,419 $22,326
======== ======== =======
Other cash flow information
Cash paid for interest $ 509 $ 637 $ 783
Cash paid for income taxes -- 103 3,621
</TABLE>
The notes to consolidated financial statements on pages 18-25 are an integral
part of this statement.
14
<PAGE> 4
MANAGEMENT'S DISCUSSION OF OPERATIONS
The Company reported a net loss of $16.1 million ($2.12 per share) in 1994
compared with net income of $2.5 million ($0.32 per share) in 1993 and a net
loss of $0.6 million ($0.07 per share) in 1992. Two important factors should be
considered in assessing the Company's results over the past three
years--restructuring provisions and the effect of accounting changes. Each of
these factors is discussed below.
- -- Restructuring provisions of $10.5 million, $1.5 million, and $7.0 million
before taxes were recorded in 1994, 1993, and 1992, respectively. These
provisions were made to cover costs of programs designed to enhance the
Company's competitiveness by closing, downsizing, and streamlining certain
production, service, sales, and administrative facilities. See note 7 to
the consolidated financial statements for further information on
restructuring.
- -- In 1994, the Company changed its revenue recognition policy for certain
custom forms. The Company elected to make this change, which increased the
net loss for the year by $7.7 million, because it more accurately reflects
current operations and is expected to improve cash flow. Note 1 to the
consolidated financial statements contains additional information regarding
this change. Accounting changes also included the 1993 adoption of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," which had the effect of increasing net earnings by $1.0 million.
Excluding the effect of the above restructuring provisions and accounting
changes, 1994's net loss was $2.0 million ($0.26 per share) as contrasted with
net income in 1993 and 1992 of $2.4 million ($0.31 per share) and $3.7 million
($0.48 per share), respectively. The decline in profitability in 1994 from 1993
resulted principally from above-normal price discounting, significant increases
in bond paper costs, and higher selling expenses. These items were partially
offset by higher sales, improved manufacturing productivity, and margin gains
associated with the outsourcing of certain products. Comparing performance in
1993 with 1992, earnings dropped primarily because of a decline in revenues and
higher paper costs, which were partially offset by productivity gains in
manufacturing and administrative cost reductions.
Net sales during 1994 totaled $265.8 million, up 3% from $258.9 million in
1993, which was 4% lower than in 1992. The sales gain in 1994 represented the
first year-over-year increase since 1989. The 1994 improvement primarily
reflected higher label, custom unit set, and electronic printing and mailing
revenues, with volume gains more than offsetting the impact of
higher-than-normal price discounting. Net sales in 1993 were down from 1992
primarily because of a decline in physical volume of shipments, principally
reflecting a reduction in demand for continuous forms, offset, in part, by
higher label and cutsheet volume.
The U.S. business forms market (approximately $8 billion currently) has
declined moderately over the past three years. This reflects a reduction in the
use of paper-based business information systems and growing utilization of
laser printers, personal computers, and other office automation technologies.
Deflationary pricing conditions in some product lines also have affected
revenues during this period, reflecting over-capacity and a heightened level of
competitiveness in the forms industry. Demand for continuous forms and unit
sets, in particular, has dropped, while revenues for pre-printed cutsheets,
pressure-sensitive labels, and forms management, distribution, and reporting
services have increased.
The Company's historical marketing strategy involved selling business forms to
a broad variety of industry segments. Duplex is now transitioning to a markets
served strategy in which it will provide a wide spectrum of custom services
along with paper and electronic-based solutions to accommodate the efficient
and cost-effective flow of business information within specific market areas.
Consistent with this change in direction, the Company, in 1994, expanded its
electronic printing and mailing centers in Chicago, Illinois and Baltimore,
Maryland, and established a West Coast facility through the acquisition of
certain assets of Statement Technologies, Inc. based in Sacramento, California.
In addition, a broad range of new services and technologies have been added
recently to complement the existing spectrum of traditional business forms,
including personal computer-based requisitioning software, forms automation
solutions, a check fraud prevention program, and information process analysis.
15
<PAGE> 5
MANAGEMENT'S DISCUSSION OF OPERATIONS
Gross profit as a percentage of net sales was 23.2% in 1994 compared with 24.7%
in 1993 and 25.3% the previous year. The gross margin rate decline in 1994 was
due primarily to lower selling prices and increases in material costs,
particularly paper, which were partially offset by improved manufacturing
productivity and the positive impact of increased outsourcing of products. The
drop in the gross margin ratio in 1993 versus 1992 was driven primarily by paper
cost increases, partially offset by manufacturing productivity gains as well
as the benefits of product outsourcing.
Over the past three years, the Company significantly reduced manufacturing and
operating expenses by closing down six plants, streamlining various business
service centers, and reducing administrative employment. These actions resulted
in a 27% reduction in the total number of Company employees.
During the 1992-1994 period, the Company expanded its program of using outside
strategic partners to provide products that are not cost competitive to
manufacture in-house. Reflecting this, sales of outsourced products in 1994
($69.3 million--26% of total revenues) increased 47% from 1993 and 71% from
1992, giving rise to improved margins.
During 1994, inroads were made in reducing paper waste, and efforts to improve
plant labor productivity delivered good results. Also during the past year, a
$6.0 million capital expenditure program to upgrade manufacturing equipment was
initiated. This program, which will benefit material and labor cost
productivity, will be completed in 1995.
The cost of paper, the Company's principal raw material, fluctuated
dramatically in 1994, with bond paper prices increasing approximately 70% from
May to December. Selling prices of Company products were adjusted to reflect
these increases; however, pressure on margins continues, reflecting the highly
competitive nature of the marketplace. While bond paper currently is in short
supply, the Company expects to be able to meet customer requirements as a
result of its long-standing relationship with suppliers and through
adjustments to product mix.
Selling, general, and administrative expenses aggregated $66.0 million
in 1994, an increase of $5.0 million from $61.0 million in 1993, which was $2.1
million lower than in 1992. The increase in 1994 reflected higher selling and
training expenses and incremental costs related to the development and
management of new products and services. In 1993, expenses decreased from
1992's level primarily as a result of reductions in employment levels at
headquarters.
Other income was down $0.8 million in 1994 primarily because there was no
counterpart to the 1993 gain on the sale of real estate and equipment
associated with the closing of certain plants. Other income in 1993 ($0.9
million) was $0.3 million higher than in 1992 principally because of the level
of gain related to the disposition of assets.
The 1994 income tax provision was a credit balance of $5.7 million ($3.1
million current; $2.6 million deferred), the current portion of which can be
applied against prior years' taxable earnings. The effective tax rate for 1994
was a credit of 39% compared with a charge of 35% in 1993 and a credit of 57%
in 1992. See note 8 to the consolidated financial statements for a
reconciliation of the U.S. federal statutory tax rate with the effective tax
rate.
16
<PAGE> 6
MANAGEMENT'S DISCUSSION OF LIQUIDITY AND CAPITAL RESOURCES
Net working capital at October 29, 1994 was $71.5 million compared with $83.4
million at the previous year-end. The current ratio at the end of 1994 remained
strong at 3.1 to 1, although down from 4.3 to 1 at the conclusion of 1993. The
decline in net working capital in 1994 was due primarily to the effect of the
previously discussed revenue recognition change and increases in restructuring
cost accruals. Management believes this lower level of working capital will be
adequate to cover the Company's liquidity needs related to normal operations,
both currently and 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 the end of 1994 was $7.2
million compared with $8.7 million at the previous year-end. Total debt as a
percentage of total capital was 6.7% at year-end 1994, 0.2 points lower than at
the end of 1993.
Cash and equivalents aggregated $16.3 million at the end of 1994, down $2.1
million from year-end 1993. During 1994, the Company generated $0.2 million in
cash from operating activities, up $1.5 million from 1993's usage of $1.3
million, which represented a $11.5 million drop compared with the previous
year. Operating cash flow increased in 1994 from the prior year principally
because of variations in accounts receivable levels (excluding the effect of
the revenue recognition change), partially offset by the decline in earnings
before restructuring costs and accounting changes. Higher accounts receivable
at year-end 1993 was the main reason for the operating cash flow drop in 1993
compared with 1992.
Capital expenditures totaled $2.8 million in 1994 compared with $3.7 million
and $4.9 million in 1993 and 1992, respectively. Expenditures for plant and
equipment are expected to total about $7.5 million for 1995.
Net cash used by financing activities was $3.0 million in 1994, $2.6 million
in 1993, and $6.1 million in 1992. Financing activities consumed less cash in
1993 than in 1992 primarily because of the absence of a counterpart to the
dividend payment of $3.7 million made in 1992. Dividends were not declared in
1994.
17
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per-share data)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation. The consolidated financial statements represent the accounts of
the Company and its wholly-owned subsidiary after elimination of intercompany
transactions and balances.
Fiscal Year. The Company's fiscal year ends on the last Saturday in October.
The fiscal years ended October 29, 1994, October 30, 1993, and October 31, 1992
contained fifty-two, fifty-two, and fifty-three weeks, respectively.
Revenue Recognition. The Company recognizes revenue when product is shipped or,
for custom forms stored for future delivery, when manufacturing is complete and
the product is invoiced, with payment due in the normal course of business.
Prior to the year ended October 29, 1994, the Company recorded sales for
certain stored custom forms upon completion of the production process and
customer acceptance.
The Company changed the method of recognizing revenue for certain custom forms
in order to better manage cash flow, increase the turnover of working capital,
and lower costs associated with managing receivable levels. The Company
believes this accounting policy change is preferable in that it more accurately
reflects current operations.
This change had the effect of increasing the Company's 1994 net loss by $7,719
($1.02 per share), which consisted of the cumulative effect of the change for
periods prior to 1994 of $7,084 ($0.93 per share) plus its impact ($635, or
$0.09 per share) on the 1994 loss before the accounting change.
Cash Equivalents. The Company considers all highly liquid debt instruments
purchased with original maturities of three months and less to be cash
equivalents.
Inventories. Inventories are stated as the lower of cost or market. Cost for
substantially all of the Company's inventories is based on the last-in,
first-out (LIFO) method.
Depreciation and Amortization. For financial reporting purposes, the cost of
plant and equipment is depreciated primarily using the straight-line method
over the estimated useful lives of the assets. Depreciation for income tax
purposes is computed using accelerated methods.
Earnings per Share. Earnings per share are based on the weighted average number
of common shares outstanding each period.
Fair Value of Financial Instruments. Recorded amounts for financial
instruments approximate fair values.
NOTE 2--ACCOUNTS AND NOTES RECEIVABLE
The decline in the accounts and notes receivable balance from October 30, 1993
to October 29, 1994 occurred primarily because of the revenue recognition
change discussed in note 1.
The Company's provision for doubtful accounts and notes receivable at October
29, 1994 and October 30, 1993 was $715 and $800, respectively.
NOTE 3--INVENTORIES
<TABLE>
<CAPTION>
OCT. 29, 1994 Oct. 30, 1993
------------- -------------
<S> <C> <C>
Raw materials $ 7,380 $10,341
Work in process 2,419 2,652
Finished goods 24,680 4,448
------- -------
34,479 17,441
Less revaluation to LIFO (6,949) (8,334)
------- -------
$27,530 $ 9,107
======= =======
</TABLE>
The increase in finished goods inventories at October 29, 1994 compared with
October 30, 1993 resulted principally from the revenue recognition change
discussed in note 1.
The LIFO revaluation decreased $1,385 in 1994 compared with decreases of $55
and $702 in 1993 and 1992, respectively. The 1994 decrease resulted from price
decreases totaling $2,034, which were partially offset by quantity increases of
$649.
18
<PAGE> 8
NOTE 4--PROPERTY, PLANT, AND EQUIPMENT
<TABLE>
<CAPTION>
Oct. 29, 1994 Oct. 30, 1993
------------- -------------
<S> <C> <C>
ORIGINAL COST
Land, improvements,
and leaseholds $ 2,393 $ 3,476
Buildings 25,944 31,238
Machinery and equipment 72,834 74,267
---------- ----------
101,171 108,981
LESS ACCUMULATED
DEPRECIATION AND
AMORTIZATION (64,171) (64,470)
---------- ----------
$ 37,000 $ 44,511
========== ==========
</TABLE>
Fixed assets ($1,333) which were idle as of October 29, 1994 were classified as
other assets.
NOTE 5--DEBT
<TABLE>
<CAPTION>
Oct. 29, 1994 Oct. 30, 1993
------------- -------------
<S> <C> <C> <C>
MORTGAGE NOTES
Interest rate Maturities
8-1/4% to 8-7/10% 1995-1997 $ 790 $ 1,030
2% 1995-1997 60 82
63% of prime rate (a) 1994 -- 350
75% of prime rate (a) 1995-2002 3,750 4,350
-------- --------
4,600 5,812
CAPITALIZED LEASE 2,550 2,900
-------- --------
7,150 8,712
LESS CURRENT MATURITIES (1,222) (1,562)
-------- --------
$ 5,928 $ 7,150
======== ========
</TABLE>
(a) Prime rate at October 29, 1994 was 7-3/4%.
Aggregate amounts of long-term borrowings (excluding the capitalized lease)
that mature during the next five years are as follows:
<TABLE>
<S> <C> <C> <C>
1995 ................ $872 1998 ................ $600
1996 ................ 883 1999 ................ 600
1997 ................ 895
</TABLE>
At October 29, 1994, a revolving line of credit of $10,000 was available to the
Company. During 1994, the Company did not borrow under this credit facility,
and related commitment fees were immaterial.
NOTE 6--LEASE COMMITMENTS
The Company has entered into operating leases for certain plant and office
facilities and equipment which expire over the next eight years. Rental
expenses under these leases aggregated $6,400, $6,110, and $6,021 in 1994,
1993, and 1992, respectively.
Shown below are minimal rental commitments under capitalized and operating
leases at October 29, 1994.
<TABLE>
<CAPTION>
Capitalized Operating
lease leases
----------- ---------
<S> <C> <C>
1995 $ 533 $ 7,485
1996 508 6,373
1997 483 4,947
1998 458 3,108
1999 433 1,717
Later years 898 2,274
------- -------
Total minimum lease payments 3,313 $25,904
=======
Less interest at 7.25% (763)
-------
Present value of minimum
lease payments $ 2,550
=======
</TABLE>
19
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per-share data)
NOTE 7--ACCRUED EXPENSES
<TABLE>
Oct. 29, 1994 Oct. 30, 1993
------------- -------------
<S> <C> <C>
Restructuring costs $10,549 $ 3,808
Compensation 7,145 5,873
Insurance 800 1,200
Other 2,400 2,264
------- -------
$20,894 $13,145
======= =======
</TABLE>
During the second quarter of 1994, the Company recorded a $12,000 pretax charge
related to the restructuring of the Company's operations. The objectives of
this program are to sharpen the Company's marketing and product focus, enhance
cost competitiveness, improve margins, and streamline sales, manufacturing, and
administrative functions.
The restructuring charge consisted of approximately $8,800 of anticipated cash
payments related primarily to employee termination benefits associated with
staff reductions totaling 15% of the employee workforce, and approximately
$3,200 of non-cash write-downs of real estate and operating assets. In the
fourth quarter of 1994, the Company reviewed the status of the restructuring
plan, and decided to retain certain facilities which previously were planned to
be relocated or closed. In addition, it was decided to expand the realignment
of the sales and administrative organizations. Based on these decisions, the
restructuring charge was reduced by $1,500 (affecting cash and non-cash amounts
by $1,256 and $244, respectively). During 1994, cash payments of $1,688 were
made, and non-cash transactions aggregated $214. The remaining expenditures and
non-cash transactions are expected to occur over the next two years.
In the fourth quarter of 1993, a restructuring provision of $1,500 was
established to cover severance and other costs associated with corporate staff
reductions. Cash outlays in 1994 and 1993 totaled $677 and $770, respectively,
and remaining expenditures of approximately $53 are anticipated to be incurred
in 1995.
In the fourth quarter of 1992, a restructuring reserve of $7,000 was recorded
to cover costs associated with closing two manufacturing plants and the scaling
back of other operations. A summary of 1994 and 1993 cash and non-cash activity
related to the provision appears in the following table.
<TABLE>
Cash Payments Non-cash transactions
------------- ---------------------
<S> <C> <C>
1994 $1,173 $ --
1993 3,576 321
</TABLE>
The Company expects to incur future expenditures of approximately $1,930,
primarily related to long-term leases.
20
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands except per-share data)
NOTE 8--INCOME TAXES
PROVISION FOR INCOME TAXES (CREDITS)
<TABLE>
<CAPTION>
Oct. 29, Oct. 30, Oct. 31,
For years ended 1994 1993 1992
- --------------- -------- -------- --------
<S> <C> <C> <C>
CURRENT
Federal $(3,203) $ (427) $ 1,453
State 55 (206) 508
Puerto Rico 47 25 18
------- ------ -------
(3,101) (608) 1,979
------- ------ -------
DEFERRED
Restructuring costs (2,507) 1,368 (2,180)
Insurance 160 160 60
Vacation pay 80 153 264
Investment tax credits (94) (122) (166)
Depreciation (57) (92) (344)
Capital losses -- 86 22
Accrued expenses
for closed offices 13 20 107
Other (198) (188) (493)
------- ------ -------
(2,603) 1,385 (2,730)
------- ------ -------
$(5,704) $ 777 $ (751)
======= ====== =======
</TABLE>
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes," was adopted in November 1992. The cumulative effect of adopting
this new standard was recorded in the first quarter of 1993 ($1,000 increase in
net earnings).
<TABLE>
<CAPTION>
Oct. 29, Oct. 30,
For years ended 1994 1993
- --------------- -------- --------
<S> <C> <C>
DEFERRED TAX ASSETS
Accounting change $ 4,723 $ --
Restructuring costs 3,283 1,523
Insurance 320 480
Vacation pay 584 666
Inventory obsolescence 540 227
Other 795 604
------- ------
10,245 3,500
Restructuring costs classified
as other assets 1,000 --
------- ------
$11,245 $3,500
------- ------
DEFERRED TAX LIABILITIES
Depreciation $ 4,882 $4,939
Compensation costs (964) (931)
Other 230 (36)
------- ------
$ 4,148 $3,972
======= ======
</TABLE>
The effective tax rate for 1994, 1993, and 1992 was (38.7)%, 34.8%, and
(57.2)%, Respectively. Reconciliation of the U.S. federal statutory tax rate
(34.0)% with the effective tax rate appears in the following table.
<TABLE>
<CAPTION>
Oct. 29, Oct.30, Oct. 31,
1994 1993 1992
-------- ------- --------
<S> <C> <C> <C>
PROVISION FOR INCOME
TAXES AT U.S. FEDERAL
STATUTORY RATE $(4,980) $ 758 $(447)
INCREASE (DECREASE)
IN TAXES
State taxes, net of
federal benefits (510) 171 (96)
Investment tax credit (94) (122) (166)
Other (120) (30) (42)
------- ----- -----
$(5,704) $ 777 $(751)
======= ===== =====
</TABLE>
21
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands except per-share data)
NOTE 9--CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Unamortized
Additional Common value of
Common paid-in stock held restricted Retained
stock capital in treasury stock earnings Total
------ ---------- ----------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT OCTOBER 26, 1991 $8,509 $5,931 $(5,809) $(1,902) $111,824 $118,553
Net loss -- -- -- -- (563) (563)
Dividends declared ($0.48 Per share) -- -- -- -- (3,729) (3,729)
Stock issuance, redemption, and
amortization under stock plans, net 1 54 -- 109 -- 164
------ ---------- ----------- ----------- -------- --------
BALANCE AT OCTOBER 31, 1992 8,510 5,985 (5,809) (1,793) 107,532 114,425
Net Earnings -- -- -- -- 2,454 2,454
Stock issuance, redemption, and
amortization under stock plans, net (61) (131) -- 576 -- 384
------ ---------- ----------- ----------- -------- --------
BALANCE AT OCTOBER 30, 1993 8,449 5,854 (5,809) (1,217) 109,986 117,263
Net loss -- -- -- -- (16,127) (16,127)
Stock issuance, redemption, and
amortization under stock plans, net (145) (1,521) -- 569 -- (1,097)
------ ---------- ----------- ----------- -------- --------
BALANCE AT OCTOBER 29, 1994 $8,304 $4,333 $(5,809) $ (648) $ 93,859 $ 100,039
====== ========== =========== =========== ======== ========
</TABLE>
Authorized shares of common stock ($1.00 par value) total 20,000,000 shares.
Common shares issued and outstanding are summarized in the table below.
<TABLE>
<CAPTION>
(in thousands) Oct. 29, 1994 Oct. 30, 1993 Oct. 31, 1992
------------- ------------- -------------
<S> <C> <C> <C>
SHARES OF COMMON STOCK
Issued 8,304 8,449 8,510
In treasury (753) (753) (753)
----- ----- -----
Outstanding 7,551 7,696 7,757
===== ===== =====
</TABLE>
The Company has authorized the issuance of 1,000,000 shares of $1.00 par value
cumulative convertible preferred stock and 150,000 shares of $1.00 par value
Series A convertible preferred shares, but no such shares have been issued.
22
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per-share data)
NOTE 10--SHAREHOLDERS' RIGHTS PLAN
On June 8, 1989, the Board of Directors adopted a Shareholders' Rights Plan to
deter coercive takeover tactics and to prevent an acquirer from gaining control
of the Company without offering a fair price to all of the Company's
shareholders. Under the plan, shareholders of record on June 23, 1989 received
a dividend distribution of one right for each outstanding share of the
Company's common stock. If an acquiring person becomes the beneficial owner of,
or commences a tender or exchange offer for 25% or more of the Company's
outstanding common stock, each right will entitle the holder (other than such
acquiring person) to purchase a unit consisting of one one-hundredth of a share
of Series A convertible preferred stock for $80.00 per unit. In addition, if an
acquiring person becomes the beneficial owner of more than 30% of the Company's
outstanding common stock, or upon the occurrence of certain other events, each
right will entitle the holder (other than such acquiring person) to receive,
upon exercise, common stock of the Company having a value equal to two times
the exercise price of the right, or $160.00.
If the Company is acquired in a merger or other business combination in which
the Company would not be the surviving corporation, or if 50% or more of the
Company's assets or earning power is sold or transferred, each holder shall
have the right to receive, upon exercise, common stock of the acquiring
corporation having a value equal to two times the exercise price of the right,
or $160.00. The Company may redeem the rights in whole for $0.05 per right,
under certain circumstances. The rights will expire on June 23, 1999.
NOTE 11--EMPLOYEE BENEFIT PLANS
The Company's 1984 Incentive Stock Option Plan (which expired on February 23,
1994) provided for the issuance of shares of Company common stock upon the
exercise of stock options at prices not less than the market value of the stock
as of the date of grant. Unless otherwise specified at the time of grant, all
or any portion of the currently outstanding option shares may be exercised at
any time during the period commencing one year from the date of grant and
ending ten years from the date of grant.
The Company's 1993 Incentive Stock Option Plan provided for 500,000 shares of
the Company's common stock to be reserved for options that may be issued. The
plan also provided that the options' price shall not be less than the market
value of the stock at the date of grant. Options may be granted to any key
employee of the Company at any time prior to the tenth anniversary of the
effective date of the plan. Unless otherwise specified at the time of grant,
all or any portion of the option shares may be exercised at any time during the
period commencing one year from the date of grant and ending ten years from the
date of grant. Options granted under the plan are treated as either incentive
stock options or non-qualified stock options for federal income tax purposes.
23
<PAGE> 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per-share data)
NOTE 11--EMPLOYEE BENEFIT PLANS
A summary of stock option activity under these plans is shown in the following
table.
<TABLE>
<CAPTION>
1994 1993 1992
--------------------- ------------------- -----------------
Average Average Average
Shares Price Shares Price Shares Price
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
STOCK OPTIONS
Outstanding at beginning of year 77,700 $11.39 2,700 $11.88 2,700 $11.88
Granted 190,000 10.22 75,000 11.38 -- --
Exercised -- -- -- -- -- --
Canceled (67,700) 10.55 -- -- -- --
------- ------- -------
Outstanding at end of year 200,000 10.56 77,700 11.39 2,700 11.88
======= ======= =======
Exercisable at end of year 15,000 2,700 2,700
Available for grant at end of year 440,000 178,000 192,300
</TABLE>
The Company's Restricted Stock Purchase Plan, which expired on February 23,
1994, provided for the Company's common stock to be purchased by a broad range
of management level employees at prices established by the Board of Directors.
During 1994 and 1993, 145,074 and 60,700 shares, respectively, of stock
previously issued under the plan were repurchased at a cost of $1,415 and $852,
respectively. During 1992, 16,100 shares were issued at an aggregate purchase
price of $25, and 15,800 shares previously issued were repurchased for $241.
Plan expense amounted to $102, $187, and $330 in 1994, 1993, and 1992,
respectively.
There was no activity in the Stock Appreciation Rights Plan in 1994, 1993, or
1992. This plan expired on February 23, 1994.
The Employees' Savings and Profit Sharing Plan provides for contributions from
both the Company and eligible employees. Company contributions, which cannot
exceed 15% of earnings before such payments and federal income taxes, are at
the discretion of the Board of Directors. Company contributions to the plan
were last made in 1991.
During 1989, the Company adopted an unfunded Supplemental Executive Retirement
Plan for certain key executives. The plan provides for benefits to supplement
those provided under social security and the Employees' Savings and Profit
Sharing Plan. At October 29, 1994, the projected benefit obligation associated
with the plan totaled $1,008, all of which has been recognized. Plan expense
was $209, $140, and $221 in 1994, 1993, and 1992, respectively.
In 1994, the Company adopted SFAS No. 106, "Employers' Accounting for
Post-retirement Benefits Other Than Pensions." Adopting this new standard did
not impact earnings.
24
<PAGE> 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per-share data)
NOTE 12--QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
First Quarter Second Quarter Third Quarter Fourth Quarter
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
1994
Net sales $65,352 $66,300 $63,959 $70,180
Gross profit 15,982 14,414 15,384 15,949
Operating profit (loss) 129 (14,587) (1,152) 819
Earnings (loss) before accounting changes 38 (8,907) (744) 570
Net earnings (loss) (7,046)(a) (8,907)(b) (744)(c) 570
Per share
Earnings (loss) before accounting changes -- (1.17) (0.10) 0.08
Net earnings (loss) (0.92)(a) (1.17)(b) (0.10)(c) 0.08
</TABLE>
(a) Reflects $7,184 ($0.94 per share) reduction due to the revenue recognition
change discussed in note 1. Originally, net income of $138, or $0.02 per
share, was reported.
(b) Reflects $391 ($0.05 per share) reduction due to the revenue recognition
change discussed in note 1. Originally, net loss of $8,516, or $1.12 per
share, was reported.
(c) Reflects $211 ($0.03 per share) reduction due to the revenue recognition
change discussed in note 1. Originally, net loss of $533, or $0.07 per
share, was reported.
<TABLE>
<S> <C> <C> <C> <C>
1993
Net sales $64,788 $65,145 $61,870 $67,064
Gross profit 16,332 16,315 15,701 15,542
Operating profit (loss) 586 (851) 912 704
Earnings (loss) before accounting changes 401 (430) 637 846
Net earnings (loss) 1,401 (430) 637 846
Per share
Earnings (loss) before accounting changes 0.05 (0.05) 0.08 0.11
Net earnings (loss) 0.18 (0.05) 0.08 0.11
</TABLE>
The following pro forma information reflects the Company's results by quarter
for 1993 as if the revenue recognition change discussed in note 1 had been
retroactively applied.
<TABLE>
<CAPTION>
First Quarter Second Quarter Third Quarter Fourth Quarter
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
1993
Net earnings (loss) $1,537 $ (523) $ 323 $ 629
Net earnings (loss) per share 0.20 (0.07) 0.04 0.08
</TABLE>
Second quarter 1994 operating profit was reduced by restructuring provisions of
$12,000 ($7,303, or $0.96 per share, after taxes). In the fourth quarter of
1994, these provisions were reduced by $1,500 resulting in a corresponding
increase ($900, or $0.12 per share, after taxes) in operating profit.
Operating profit for the second quarter of 1993 was lowered by restructuring
charges of $1,500 ($929, or $0.12 per share, after taxes).
The cumulative effect of adopting SFAS No. 109 (see note 8) was recorded in the
first quarter of 1993, and resulted in an increase of $1,000 ($0.13 per share)
in net earnings.
25
<PAGE> 15
INDEPENDENT AUDITOR'S REPORT
TO THE SHAREHOLDERS OF DUPLEX PRODUCTS INC.
We have audited the accompanying consolidated statement of financial position
of Duplex Products Inc. and Subsidiary as of October 29, 1994 and October 30,
1993, and the related consolidated statements of operations and cash flows for
the years ended October 29, 1994, October 30, 1993, and October 31, 1992. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Duplex Products
Inc. and Subsidiary at October 29, 1994 and October 30, 1993 and the
consolidated results of their operations and their consolidated cash flows for
the years ended October 29, 1994, October 30, 1993, and October 31, 1992 in
conformity with generally accepted accounting principles.
As discussed in the footnotes, the Company changed its method of accounting for
revenue recognition and income taxes for the years ended October 29, 1994 and
October 30, 1993, respectively.
Grant Thornton LLP
Chicago, Illinois
December 9, 1994
26
<PAGE> 16
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(Dollar amounts in thousands, except per-share data) 1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales $265,791 $258,867 $270,093 $285,271 $297,647
Earnings (loss) before accounting changes (9,043) 1,454 (563) 4,269 9,516
Net earnings (loss) (16,127) 2,454 (563) 4,269 9,516
Per share
Earnings (loss) before accounting changes (1.19) 0.19 (0.07) 0.55 1.23
Net earnings (loss) (2.12) 0.32 (0.07) 0.55 1.23
Dividends declared -- -- 0.48 0.69 0.75
Common stock price range 11-3/4-8-5/8 11-7/8-9-1/4 13-3/4-10 15-1/2-9-3/4 22-9-3/4
Cash and equivalents 16,337 18,419 22,326 22,639 22,270
Working capital 71,514 83,372 77,479 81,370 84,716
Current ratio 3.1:1 4.3:1 3.7:1 3.9:1 4.0:1
Total assets 146,208 156,059 159,138 165,112 167,784
Short-term debt 1,222 1,562 1,731 2,117 3,164
Long-term debt 5,928 7,150 8,712 10,443 12,560
Shareholders' equity 100,039 117,263 114,425 118,553 119,241
Total debt as a percentage of total capital 6.7% 6.9% 8.4% 9.6% 11.7%
Common shares outstanding (thousands) 7,551 7,696 7,757 7,756 7,733
</TABLE>
The following pro forma information reflects the Company's results for 1993,
1992, 1991, and 1990 as if the revenue recognition change discussed in note 1
to the consolidated financial statements had been retroactively applied.
<TABLE>
<CAPTION>
(Dollar amounts in thousands, except per-share data) 1993 1992 1991 1990
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net earnings (loss) $1,966 $ (462) $4,247 $9,504
Net earnings (loss) per share 0.25 (0.06) 0.55 1.23
</TABLE>
27
<PAGE> 17
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
BOARD OF DIRECTORS CORPORATE OFFICERS
<S> <C>
John A. Bacon, Jr. Andrew A. Campbell
Private Investor Vice President, Finance and
Chief Financial Officer
Michael J. Birck
President and Sue DuChanois
Chief Executive Officer, Vice President,
Tellabs, Inc. Human Resources
David J. Eskra Gerald L. Glawe
Private Investor Treasurer
George S. Hoban Marc A. Loomer
Retired, Former Partner, Vice President,
Law Firm of Hinshaw & Culbertson Operations
Ben L. McSwiney Nicholas A. Martellotto
President and Chief Executive Officer, Vice President and General Manager,
Duplex Products Inc. Research and Technology
W. Robert Reum Rose R. Principe
Chairman, President, and Vice President,
Chief Executive Officer, Marketing
The Interlake Corporation
Laurence J. Quinn
Vice President,
Sales
Michael E. Wilson
Vice President,
Information Services
</TABLE>
28
<PAGE> 18
SHAREHOLDER INFORMATION
CORPORATE HEADQUARTERS
Duplex Products Inc.
1947 Bethany Road
Sycamore, Illinois 60178
PLANT LOCATIONS
Elgin, Illinois
Emigsville, Pennsylvania
Goshen, Indiana (2)
Jacksonville, Florida
Mechanicsburg, Pennsylvania
Newark, Ohio
Sacramento, California
Salt Lake City, Utah
Santa Ana, California
Sycamore, Illinois
Timonium, Maryland
Tucker, Georgia
West York, Pennsylvania
ANNUAL MEETING
The 1995 Annual Shareholders Meeting of Duplex Products Inc. will be held on
March 2, 1995 at 10 a.m., in the Assembly Room of The Northern Trust Company,
50 S. LaSalle Street, Chicago, Illinois.
TRANSFER AGENT AND REGISTRAR
Harris Trust and Savings Bank, Chicago, Illinois
STOCK EXCHANGE INFORMATION
Duplex common stock is listed on the American Stock Exchange under the symbol
DPX.
TRADING AND DIVIDEND INFORMATION
<TABLE>
<CAPTION>
Common stock market price
-------------------------
(In dollars) High Low
---- ---
<S> <C> <C>
1994
Fourth quarter 9-1/2 8-5/8
Third quarter 10 8-5/8
Second quarter 11-1/2 9-5/8
First quarter 11-3/4 10
1993
Fourth quarter 11-1/2 10-1/2
Third quarter 11-7/8 10-3/4
Second quarter 11-7/8 9-5/8
First quarter 11-3/8 9-1/4
</TABLE>
Dividends were not declared in 1993 or 1994. As of October 29, 1994, there were
1,297 shareholder accounts of record.
FORM 10-K REPORT
Shareholders may obtain, without charge, a copy of Form 10-K Report filed with
the Securities and Exchange Commission upon written request to the Director of
Shareholder Relations, Duplex Products Inc., 1947 Bethany Road,
Sycamore, Illinois 60178.
OUTSIDE COUNSEL
Hinshaw & Culbertson
Chicago, Illinois
INDEPENDENT AUDITORS
Grant Thornton LLP
Chicago, Illinois
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EXHIBIT 18
LETTER REGARDING CHANGE IN ACCOUNTING PRINCIPLES
Board of Directors
Duplex Products Inc.
As stated in Note 1 to the consolidated financial statements of Duplex
Products Inc. and Subsidiary (the Company) for the year ended October 29, 1994,
the Company changed its accounting policy for recognizing revenue for certain
custom-made business forms. Under the new accounting method, the Company will
recognize revenue for certain custom forms stored for future delivery when the
product is shipped. Prior to the year ended October 29, 1994, the Company
recorded sales for certain stored custom forms upon completion of the
production process and customer acceptance. Management believes the newly
adopted accounting principle is preferable in the circumstances because of the
reasons stated in Note 1. At your request, we have reviewed and discussed with
management the circumstances, business judgment, and planning that formed the
basis for making this change in accounting principle.
It should be recognized that professional standards have not been
established for selecting among alternative principles that exist in this area
or for evaluating the preferability of alternative accounting principles.
Accordingly, we are furnishing this letter solely for purposes of the Company's
compliance with the requirements of the Securities and Exchange Commission, and
it should not be used or relied on for any other purpose.
Based on our review and discussion, we concur with management's judgment
that the newly adopted accounting principle is preferable in the circumstances.
In formulating this position, we are relying on management's business planning
and judgment, which we do not find unreasonable.
GRANT THORNTON LLP
Chicago, Illinois
December 9, 1994
1
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EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We have issued our reports dated December 9, 1994 accompanying the
consolidated financial statements and schedules incorporated by reference or
included in the Annual Report of Duplex Products Inc. on Form 10-K for the year
ended October 29, 1994. We hereby consent to the incorporation by reference of
said reports in the Registration Statements of Duplex Products Inc. on Form S-8
(File No. 2-64363, File No. 2-64362, File No. 2-89910, and File No. 33-53507).
GRANT THORNTON LLP
Chicago, Illinois
January 20, 1995
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