<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 28, 1995 Commission file number 1-7208
DUPLEX PRODUCTS INC.
(Exact name of Registrant as specified in its charter)
Delaware 36-2109817
- --------------------------------------- ------------------------------
(State of incorporation or organization) (I.R.S. Employer Identification No.)
1947 Bethany Road, Sycamore, Illinois 60178 815/895-2101
- --------------------------------------- ------------------------------
(Address of principal executive office) (Zip Code) (Telephone Number)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each class Name of each exchange on which registered
- ----------------------------------- -----------------------------------------
Common stock, par value American Stock Exchange
$1.00 per share
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 5, 1996, 7,484,878 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 5, 1996, of
approximately $59.9 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 28, 1995, are incorporated by reference in Parts II and IV.
Portions of the Registrant's Proxy Statement for the 1996 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 1995 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.
- -Prepaid phone card packages.
- -Services related to check fraud prevention, electronic forms, and information
flow analysis.
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
through the Company's direct sales force of 260 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.
2
<PAGE> 3
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 1995. 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 variations.
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 1995) 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 may 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 1994 through October 1995
period, bond paper prices climbed approximately 115%. Selling prices of Company
products were adjusted to reflect these increases; however, pressure on margins
continues, reflecting the highly competitive nature of the marketplace.
Currently, paper is in good supply and Duplex expects to be able to meet
customer requirements.
3
<PAGE> 4
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 28, 1995, 1,665 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:
Approximate
square
Location Description footage Owned/Leased
- -------- ----------- ------------ ------------
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
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
The Company believes that its facilities are properly maintained, and that
production capacity is adequate for current needs.
4
<PAGE> 5
In addition, the Company leases (1) electronic printing and mailing facilities
in Timonium, Maryland, Elgin, Illinois, and Sacramento, California, (2)
leases/owns sixteen business service centers in various locations across the
United States, and (3) leases sixty-nine 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 1995 Annual Report to Shareholders.
ITEM 6 - SELECTED FINANCIAL DATA
Reported as "Selected Financial Data" on page 27 of the 1995 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
1995 Annual Report to Shareholders.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See index under Item 14.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
5
<PAGE> 6
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 1996 Annual Meeting of Shareholders.
Information pertaining to executive officers as of January 24, 1996, is shown
below.
Executive
Officer
Name Age Since Positions During Last Five Years
---- --- --------- --------------------------------
<TABLE>
<S> <C> <C> <C>
Andrew A. Campbell 50 1995 President of the Company since June
1995; Vice President, Finance, and
Chief Financial Officer of the
Company, November 1994 - June 1995;
Vice President, Finance, and Chief
Financial Officer, Simmons
Upholstered Furniture Inc., 1991 -
1994.
James R. Ramig 42 1995 Vice President, Finance and
Administration, and Chief Financial
Officer of the Company since
November 1995; President and Chief
Executive Officer, Chilton-Globe
Inc., May 1995 - November 1995;
Chief Financial Officer, Treasurer,
and Secretary, Revell-Monogram,
Inc., 1991 - 1995.
David B. Preston 39 1995 Vice President, Sales of the
Company since September 1995;
Regional Sales Director of the
Company, 1993 - 1995; District
Sales Manager of the Company,
1991-1993.
Marc A. Loomer 45 1993 Vice President, Operations of the
Company since 1994, Vice President,
Continuous Improvement of the
Company, 1993 - 1994; Director,
Marketing of the Company, 1992 -
1993; Director, Planning of the
Company, 1991 - 1992.
</TABLE>
ITEM 11 - EXECUTIVE COMPENSATION
Incorporated by reference to the section entitled "Executive Compensation" in
the Registrant's Proxy Statement for the 1996 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 1996 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 1996 Annual Meeting of Shareholders.
6
<PAGE> 7
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
The following documents are filed as part of this report:
Page(s) in
Annual Report
(a)(1) Financial Statements
Consolidated Statement of Operations 12
Consolidated Statement of Financial Position 13
Consolidated Statement of Cash Flows 14
Notes to Consolidated Financial Statements 18-25
Report of Independent Auditors' 26
Selected Financial Data 27
Page in
Form 10-K
---------
(a)(2) Financial Statement Schedule
Report of Independent Auditors on Financial
Statement Schedule 10
Schedule II - Valuation and Qualifying Accounts
and Reserves 11
The schedules listed in Reg. 210.5-04, except the schedule 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
3(a) Composite of the Registrant's Restated Certificate of
Incorporation as amended, including amendment filed March 15, 1990
with the Secretary of the State of Delaware.*
3(b) By-Laws of the Registrant as amended, incorporated by reference to
the Registrant's Annual Report on Form 10-K for the fiscal year
ended October 29, 1994.
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.
7
<PAGE> 8
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.
10(c) Agreement made and entered into as of June 15, 1995 between Registrant
and John C. Colman.*
10(d) Agreement made and entered into as of November 15, 1994 between
Registrant and Andrew A. Campbell.*
11 Computation of Earnings (Loss) Per Share.*
13 Portions (pages 12 through 29) of the 1995 Annual Report to Shareholders
for the fiscal year ended October 28, 1995.*
23 Consent of Independent Auditors.*
27 Financial Data Schedule.*
*Filed electronically herewith.
8
<PAGE> 9
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 28, 1995, to be signed on its behalf by the
undersigned thereunto duly authorized on January 24, 1996.
DUPLEX PRODUCTS INC.
By /s/ James R. Ramig
---------------------------
James R. Ramig
Vice President, Finance and
Administration, and Chief Financial
Officer
(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 24, 1996.
By /s/ Andrew A. Campbell
-----------------------------
Andrew A. Campbell, President
and Director
By /s/ John A. Bacon, Jr.
-----------------------------
John A. Bacon, Jr., Director
By /s/ Michael J. Birck
-----------------------------
Michael J. Birck, Director
By /s/ John C. Colman
-----------------------------
John C. Colman, Director
By /s/ David J. Eskra
-----------------------------
David J. Eskra, Director
By /s/ W. Robert Reum
-----------------------------
W. Robert Reum, Director
9
<PAGE> 10
REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENT SCHEDULE
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 6, 1995,
we have also audited Schedule II for each of the three years in the period
ended October 28, 1995. In our opinion, this schedule presents fairly, in all
material respects, the information required to be set forth therein.
/s/ GRANT THORNTON LLP
GRANT THORNTON LLP
Chicago, Illinois
December 6, 1995
10
<PAGE> 11
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
(Dollar amounts in thousands)
Additions Deductions
Balance at charged to from reserves Balance
beginning costs and ---------------------- at end
of year expenses Description Amount of year
---------- ---------- ----------- ------ -------
<S> <C> <C> <C> <C> <C>
Year ended October 28, 1995
Allowance for doubtful Accounts
accounts $715 $550 charged off $358 $907
Reserve for inventory 1,350 -- Inventories 233 1,117
charged off
<CAPTION>
Year ended October 29, 1994
- ---------------------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful Accounts
accounts $800 $367 charged off $452 $715
Reserve for inventory -- 1,350 -- 1,350
<CAPTION>
Year ended October 30, 1993
- ---------------------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful Accounts
accounts $900 $256 charged off $356 $800
</TABLE>
11
<PAGE> 12
INDEX OF EXHIBITS
3(a) Composite of the Registrant's Restated Certificate of
Incorporation as amended, including amendment filed March 15, 1990
with the Secretary of the State of Delaware.*
3(b) By-Laws of the Registrant as amended, incorporated by reference to
the Registrant's Annual Report on Form 10-K for the fiscal year
ended October 29, 1994.
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.
10(c) Agreement made and entered into as of June 15, 1995 between
Registrant and John C. Colman.*
10(d) Agreement made and entered into as of November 15, 1994 between
Registrant and Andrew A. Campbell.*
11 Computation of Earnings (Loss) Per Share.*
13 Portions (pages 12 through 29) of the 1995 Annual Report to
Shareholders for the fiscal year ended October 28, 1995.*
23 Consent of Independent Auditors.*
27 Financial Data Schedule.*
*Filed electronically herewith.
<PAGE> 1
EXHIBIT 3(a)
Composite of the Registrant's Restated Certificate of
Incorporation as amended, including amendment filed March 15, 1990
with the Secretary of the State of Delaware.*
COMPOSITE
CERTIFICATE OF INCORPORATION
OF
DUPLEX PRODUCTS INC.
*******
FIRST. The name of the corporation is
DUPLEX PRODUCTS INC.
SECOND. Its principal office in the State of Delaware is located at No.
100 West Tenth Street, in the City of Wilmington 99, County of New Castle. The
name and address of its resident agent is The Corporation Trust Company, No.
100 West Tenth Street, Wilmington 99, Delaware.
THIRD. The nature of the business, or objects or purposes to be
transacted, promoted or carried on are:
To manufacture, purchase, print, engrave, acquire, own, use, sell,
distribute, and otherwise dispose of and deal in printed forms and printed
material of all kinds.
To engage in and transact the business of printing, engraving, and to
manufacture, purchase, lease, acquire, own, maintain, use, operate and deal in
printing machines, composing machines, binding machines, type, metal, ink,
paper and any articles, materials, products, machinery, equipment and property
related or incidental to or useful in connection with the business of printing
and engraving.
To build, purchase, lease, acquire, own, occupy, maintain, improve, use
and operate printing plants, print shops, printeries, binderies, shops,
studios, factories, laboratories, offices, buildings, structures, and works
suitable, necessary or convenient to any of the business of the corporation.
To establish, maintain, conduct and carry on a general merchandising
business; and in conjunction therewith to manufacture, produce, buy, import and
otherwise acquire, own, store, hold, use, sell, export, distribute, lease,
pledge and otherwise dispose of and generally deal in and with, at wholesale or
retail, as principal or agent for others, upon commission, consignment or
otherwise, goods, wares, commodities, merchandise and personal property of
every class, name, nature and description.
To manufacture, purchase or otherwise acquire, invest in, own, mortgage,
pledge, sell, assign and transfer or otherwise dispose of, trade, deal in and
deal with goods, wares and merchandise and personal property of every class and
description.
To acquire, and pay for in cash, stock or bonds of this corporation or
otherwise, the good will, rights, assets and property, and to undertake or
assume the whole or any part of the obligations or liabilities of any person,
firm, association or corporation.
To acquire, hold, use, sell, assign, lease, grant licenses in respect of,
mortgage or otherwise dispose of letters patent of the United States or any
foreign country, patent rights, licenses and privileges, inventions,
improvements and processes, copyrights, trade-marks and trade names, relating
to or useful in connection with any business of this corporation.
To acquire by purchase, subscription or otherwise, and to receive, hold,
own, guarantee, sell, assign, exchange, transfer, mortgage, pledge or otherwise
dispose of or deal in and with any of the shares of the capital stock, or any
voting trust certificates in respect of the shares of capital stock, scrip,
warrants, rights, bonds, debentures, notes, trust receipts, and other
securities, obligations,
<PAGE> 2
chooses in action and evidence of indebtedness or interest issued or created by
any corporations, joint stock companies, syndicates, associations, firms,
trusts or persons, public or private, or by the government of the United States
of America, or by any foreign government, or by any state, territory, province,
municipality or other political subdivision or by any governmental agency, and
as owner thereof to possess and exercise all the rights, powers and privileges
of ownership, including the right to execute consents and vote thereon, and to
do any and all acts and things necessary or advisable for the preservation,
protection, improvement and enhancement in value thereof.
To enter into, make and perform contracts of every kind and description
with any person, firm, association, corporation, municipality, county, state,
body politic or government or colony or dependency thereof.
To borrow or raise moneys for any of the purposes of the corporation and,
from time to time without limit as to amount, to draw, make, accept, endorse,
execute and issue promissory notes, drafts, bills of exchange, warrants, bonds,
debentures and other negotiable or non-negotiable instruments and evidences of
indebtedness, and to secure the payment of any thereof and of the interest
thereon by mortgage upon or pledge, conveyance or assignment in trust of the
whole or any part of the property of the corporation, whether at the time owned
or thereafter acquired, and to sell, pledge or otherwise dispose of such bonds
or other obligations of the corporation for its corporate purposes.
To loan to any person, firm or corporation any of its surplus funds,
either with or without security.
To purchase, hold, sell and transfer the shares of its own capital stock;
provided it shall not use its funds or property for the purchase of its own
shares of capital stock when such use would cause any impairment of its capital
except as otherwise permitted by law, and provided further that shares of its
own capital stock belonging to it shall not be voted upon directly or
indirectly.
To have one or more offices, to carry on all or any of its operations and
business and without restriction or limit as to amount to purchase or otherwise
acquire, hold, own, mortgage, sell, convey or otherwise dispose of, real and
personal property of every class and description in any of the states,
districts, territories or colonies of the United States, and in any and all
foreign countries, subject to the laws of such state, district, territory,
colony or country.
In general, to carry on any other business in connection with the
foregoing, and to have and exercise all the powers conferred by the laws of
Delaware upon corporations formed under the General Corporation Law of the
State of Delaware, and to do any or all of the things hereinbefore set forth to
the same extent as natural persons might or could do.
The objects and purposes specified in the foregoing clauses shall, except
where otherwise expressed, be in nowise limited or restricted by reference to,
or inference from, the terms of any other clause in this certificate of
incorporation, but the objects and purposes specified in each of the foregoing
clauses of this article shall be regarded as independent objects and purposes.
FOURTH. The total number of shares of stock which the Corporation shall
have authority to issue is twenty-one million (21,000,000) of which twenty
million (20,000,000) shares shall be Common Stock having a par value of One
Dollar ($1.00) per share, amounting in the aggregate to Twenty Million Dollars
($20,000,000), and of which one million (1,000,000) shares shall be Preferred
Stock having a par value of One Dollar ($1.00) per share, amounting in the
aggregate to One Million Dollars ($1,000,000). The Preferred Stock shall be
issuable in series.
The board of directors shall have authority to authorize the issuance,
from time to time without any vote or other action by the stockholders, of any
or all shares of stock of the corporation of any class at any time authorized,
and any securities convertible into or exchangeable for any such shares, in
each case to such persons and for such consideration and on such terms as the
board of directors from time to time in its discretion lawfully may determine;
provided, however, that the consideration for the issuance of shares of stock
of the corporation having par value shall not be less than such par value.
Shares so issued, for which the consideration has been paid to the corporation,
shall be fully paid stock, and the holders of such stock shall not be liable to
any further call or assessments thereon.
<PAGE> 3
1. Common Stock
(a) Dividend rights. Subject to provisions of law and the preferences of
the Preferred Stock, the holders of the Common Stock shall be entitled to
receive dividends at such times and in such amounts as may be determined by the
board of directors.
(b) Liquidation rights. In the event of any liquidation, dissolution or
winding up of the corporation, whether voluntary or involuntary, after payment
or provision for payment of the debts and other liabilities of the corporation
and the preferential amounts to which the holders of the Preferred Stock shall
be entitled, the holders of the Common Stock shall be entitled to share ratably
in the remaining assets of the corporation.
2. Preferred Stock
(a) General provisions fixed by Certificate of Incorporation. The
Preferred Stock of each series (which may have varying dividend rates) shall
rank on a parity with the Preferred Stock of every other series in priority of
payment of dividends and in the distribution of assets in the event of any
liquidation, dissolution or winding up of the corporation, whether voluntary or
involuntary, to the extent of the preferential amounts (which amounts may be
variable by series) to which the Preferred Stock of the respective series shall
be entitled under the provisions of the certificate of incorporation or any
amendment thereto or the resolution or resolutions of the board of directors
providing for the issue of such series. All shares of any one series of
Preferred Stock shall be identical except as to the dates of issue and the
dates from which dividends on shares of the series issued on different dates
shall accumulate (if cumulative).
Shares of Preferred Stock purchased, redeemed or converted into or
exchanged for shares of any other class or series shall be deemed to be
authorized but unissued shares of Preferred Stock undesignated as to series.
The board of directors may set a record date in the manner and for the
purposes authorized in the by-laws of the corporation, with respect to shares
of stock of the corporation of any class or series.
(b) Authority of the board of directors to issue in series. The
Preferred Stock may be issued from time to time in one or more series. Subject
to the limitations prescribed by law and to the provisions of the certificate
of incorporation or any amendment thereto, authority is expressly granted to
the board of directors to authorize the issue of one or more series of
Preferred Stock, and to fix by resolution or resolutions providing for the
issue of each such series the designations, preferences and relative,
participating, optional or other special rights and qualifications, limitations
and restrictions thereof (sometimes referred to as powers, preferences and
rights) to the full extent now or hereafter permitted by law, including but not
limited to the following:
(1) the number of shares of such series (which may subsequently be
increased by resolutions of the Board of Directors) and the distinctive
designation thereof;
(2) the dividend rate of such series and any limitations, restrictions or
conditions on the payment of such dividends;
(3) the price or prices at which, and the terms and conditions on which,
the shares of such series may be redeemed;
(4) the amounts which the holders of the shares of such series are
entitled to receive upon any liquidation, dissolution or winding up of the
corporation;
<PAGE> 4
(5) the terms of any purchase, retirement or sinking fund to be provided
for the shares of such series;
(6) the terms, if any, upon which the shares of such series shall be
convertible into or exchangeable for shares of any other series, class or
classes, or other securities, and the terms and conditions of such conversion
or exchange; and
(7) the voting powers, if any (not to exceed one vote per share), of the
shares of such series.
The provisions set forth in this paragraph and in the first two paragraphs
of this ARTICLE FOURTH and in subparagraphs 1 and 2 thereof, may be changed,
altered or amended upon approve by affirmative vote of the holders of a
majority of the stock issued and outstanding having voting power given at a
stockholders' meeting duly called for such purpose, provided, always,
(1) That such change, alteration or amendment shall not affect adversely
the provisions of previously issued Preferred Stock;
(2) That the shareholders of the $1.00 par value Cumulative Convertible
Preferred Shares, Series A, voting as a class, must approve the authorization
of any additional class of preferred shares by the affirmative vote of a
majority of the Series A shares if the additional class of preferred shares is
equal in preference to the Series A shares or by the affirmative vote of at
least two-thirds of the Series A shares if the additional class of preferred
shares is senior to the Series A shares.
(3) That in the event there is a default for a period of two years in the
payment of the fixed dividend requirements of the Cumulative Convertible
Preferred Shares, Series A, the holders of Series A shares, voting as a class,
shall have the right to elect two members of the Board of Directors of the
Corporation at the first annual meeting of stockholders (or any adjournment
thereof) immediately following such two year period.
The designations and the powers, preferences and rights, and the
qualifications, limitations or restrictions thereof are as follows:
No stockholder of this corporation shall by reason of his holding shares
of any class have any preemptive or preferential right to purchase or subscribe
to any shares of any class of this corporation, now or hereafter to be
authorized, or any notes, debentures, bonds, or other securities convertible
into or carrying options or warrants to purchase shares of any class, now or
hereafter to be authorized, whether or not the issuance of any such shares, or
such notes, debentures, bonds or other securities, would adversely affect the
dividend or voting rights of such stockholder, other than such rights, if any,
as the board of directors, in its discretion from time to time may grant and at
such price as the board of directors in its discretion may fix; and the board
of directors may issue shares of any class of this corporation, or any notes,
debentures, bonds, or other securities convertible into or carrying options or
warrants to purchase shares of any class, without offering any such shares of
any class, either in whole or in part, to the existing stockholders of any
class.
Each shareholder of this corporation, unless otherwise restricted by
statute or this Certificate of Incorporation, shall be entitled to one vote for
each share of capital stock held by such stockholder. There shall be no
cumulative voting of shares of this corporation and any rights thereto are
expressly denied by this Certificate of Incorporation.
Any amendment to this Certificate of Incorporation which would change any
of the provisions of this ARTICLE, except as has been hereinabove otherwise
provided in paragraph 3 thereof, shall not be made except upon the approval by
affirmative vote of the holders of not less than SEVENTY-FIVE percent (75%) of
the stock issued and outstanding, having voting power given at a stockholders'
meeting duly called for such purpose.
<PAGE> 5
FIFTH. The minimum amount of capital with which the corporation will
commence business is One Thousand Dollars ($1,000.00).
SIXTH. The names and places of residence of the incorporators are as
follows:
NAMES RESIDENCES
R. F. Westover Wilmington, Delaware
H. C. Broadt Wilmington, Delaware
A. D. Atwell Wilmington, Delaware
SEVENTH. The corporation is to have perpetual existence.
EIGHTH. The private property of the stockholders shall not be subject to
the payment of corporate debts to any extent whatever.
NINTH. In furtherance and not in limitation of the powers conferred by
statute, the board of directors is expressly authorized:
To make, alter or repeal the By-laws of the corporation.
To authorize and cause to be executed mortgages and liens upon the real
and personal property of the corporation.
To set apart out of any of the funds of the corporation available for
dividends a reserve or reserves for any proper purpose and to abolish any such
reserve in the manner in which it was created.
By resolution passed by a majority of the whole board, to designate one or
more committees, each committee to consist of two or more of the directors of
the corporation, which, to the extent provided in the resolution or in this
Certificate of Incorporation, shall have and may exercise the powers of the
Board of Directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it. Such committee or committees shall have such name
or names as may be stated in the By-laws of the corporation or as may be
determined from time to time by resolution adopted by the Board of Directors.
By resolution approved by the affirmative vote of the holders of a
majority of the stock issued and outstanding having voting power given at a
stockholders' meeting duly called for that purpose:
(a) to merge or consolidate the corporation with or into any other
corporation or business entity;
(b) to sell, lease or exchange all or substantially all of the property
and assets of the corporation;
(c) to dissolve or liquidate the corporation;
(d) in any manner to amend this Certificate of Incorporation;
provided, however, that, unless any such action shall have been first
authorized by the unanimous vote of all directors then in office, no such
action may be taken except upon approval by affirmative vote of the holders of
not less than SEVENTY-FIVE PER CENT (75%) of the stock issued and outstanding
having voting power given at a stockholders' meeting duly called for such
purpose, in the case of:
(i) any merger or consolidation of the corporation with or into any
Related Person or an affiliate of a Related Person;
(ii) any sale, lease or exchange of all or substantially all of the
property and assets of the corporation to a Related Person or an affiliate of a
Related Person;
(iii) any dissolution or liquidation of the corporation at a time when
there exists a Related Person; or
(iv) any amendment to this Certificate of Incorporation which would
change any of the provisions of this Article.
For purposes of this paragraph:
<PAGE> 6
(v) The term "Related Person" shall mean a corporation, entity or
individual which, together with its affiliates and associates (as defined
below), owns of record or beneficially FIVE PER CENT (5%) or more of the stock
of the corporation issued and outstanding having voting power with respect to
the proposed transaction; and any determination made in good faith by the Board
of Directors of the corporation, on the basis of information available to it,
as to whether any corporation, entity or individual is a Related Person within
the meaning hereof shall be final and binding;
(vi) Any corporation, entity or individual shall be deemed to be the
beneficial owner of any issued and outstanding stock of the corporation (a)
which it has the right to acquire pursuant to any agreement or upon exercise of
conversion rights, warrants or options, or otherwise, or (b) which are
beneficially owned, directly or indirectly, by any other corporation, entity or
individual with which it has any agreement, arrangement or understanding with
respect to the acquisition, holding, voting or disposition of stock of the
corporation, or which is its "affiliate" or "associate."
(vii) An "affiliate" of any specified corporation, entity or individual
is any person, other corporation, or entity that directly, or indirectly
through one of more intermediaries, controls, or is controlled by, or is under
common control with the corporation, entity or individual specified.
(viii) The term "associate" used to indicate a relationship with any
specified person, corporation or entity, means (1) any corporation, entity, or
person of which such specified person, corporation, or entity is an officer or
partner or is, directly or indirectly, the beneficial owner of TEN PER CENT
(10%) or more of any class of equity securities, (2) any trust or other estate
in which such specified person, corporation or entity has a substantial
beneficial interest or as to which said specified person, corporation or entity
serves as Trustee or in a similar fiduciary capacity, and (3) any relation or
spouse of such specified person, corporation or entity, or any relation of such
spouse.
To manage the business of the corporation and exercise all such powers of
the corporation and do all such lawful acts and things as are not by statute or
by this Certificate of Incorporation directed or required to be exercised or
done by the stockholders.
TENTH. Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this corporation under
the provisions of section 291 of Title 8 of the Delaware Code, or on the
application of trustees in dissolution or of any receiver or receivers
appointed for this corporation under the provisions of section 279 of Title 8
of the Delaware Code, order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this corporation, as the
case may be, to be summoned in such manner as the said court directs. If a
majority in number representing three-fourths in value of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
<PAGE> 7
ELEVENTH. The books of the corporation may be kept (subject to any provisions
contained in the statutes) outside the State of Delaware at such place or
places as may be designated from time to time by the Board of Directors.
Meetings of the stockholders for the election of the directors or for any
other purpose shall be held on such date and at such time and place within or
without the State of Delaware as shall be determined by a majority vote of all
directors then in office, provided, however, that the Annual Meeting of
Stockholders in each year shall be held within 150 days after the end of the
corporation's fiscal year.
At the Annual Meeting of Stockholders the stockholders shall elect, by a
plurality vote, by ballot, a class of directors, and transact such other
business as may properly be brought before the meeting.
Special meetings of the stockholders, for any proper purpose or purposes,
unless otherwise prescribed by statue or by this Certificate of Incorporation,
may be called by the President and shall be called by the President or
Secretary at the request in writing of a majority of all directors then in
office, or at the request in writing of stockholders owning SEVENTY-FIVE PER
CENT (75%) in amount of the entire capital stock of the corporation issued and
outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting and the determination of the propriety of such
purpose made in good faith by a majority of the Board of Directors then in
office shall be final and binding.
No action required to be taken or which may be taken at any annual or
special meeting of stockholders of the corporation may be taken without a
meeting and the power of stockholders to consent in writing to the taking of
any action is specifically denied.
Commencing with the adoption of this amendment at the annual meeting of
stockholders in 1976, and the filing of a Certificate of amendment with the
Secretary of State, the Board of Directors shall be divided into three classes,
identified as Class I, Class II, and Class III, respectively.
The term of office of the directors in one class shall expire each year.
Each director shall serve for a term ending on the third annual meeting
following the annual meeting at which such director was elected; provided,
however, that the director or directors first elected to Class I shall serve
for a term ending on the annual meeting next ensuing; the directors first
elected to Class II shall serve for a term ending on the second annual meeting
following the annual meeting at which such directors were first elected; and
the directors first elected to Class III shall serve a full term as hereinabove
provided. Notwithstanding the foregoing, each director shall serve until his
successor shall have been duly elected and qualified unless he shall resign or
become disqualified, disabled or shall otherwise be removed.
Vacancies and newly created directorships resulting from any increase in
the authorized number of directors shall be filled by a majority of the
directors then in office, though less than a quorum, and the directors so
chosen shall hold office until the next election of the Class for which such
directors shall have been chosen and until their successors are duly elected
and shall qualify, unless sooner displaced.
Any amendment to this Certificate of Incorporation which would change any
of the provisions of this Article shall not be made except upon approval by
affirmative vote of the holders of not less than SEVENTY-FIVE PER CENT (75%) of
the stock issued and outstanding having voting power given at a stockholders'
meeting duly called for such purpose.
TWELFTH. The corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
<PAGE> 8
THIRTEENTH. 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 the
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 as a quorum of
disinterested directors so direct, by independent legal counsel in a written
opinion, or (3) by the stockholders. 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 herein. The foregoing rights
of indemnification shall not be deemed exclusive of any other rights to which
those seeking indemnification shall not be deemed exclusive of any other rights
to which those seeking indemnification may be entitled under any by-law,
agreement, vote of stockholders 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, executors and
administrators of such person.
FOURTEENTH. To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or may hereafter be amended, a director of
this corporation shall not be liable to this corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director.
FIFTEENTH. New by-laws may be adopted or the by-laws may be amended or
repealed by affirmative vote of the holders of not less than SEVENTY-FIVE PER
CENT (75%) of the stock issued and outstanding having voting power given at a
stockholders' meeting duly called for such purpose. By-laws may also be
adopted, amended, or repealed by the Board of Directors.
Any amendment to this Certificate of Incorporation which would change any
of the provisions of this Article shall not be made except upon approval by
affirmative vote of the holders of not less than SEVENTY-FIVE PER CENT (75%) of
the stock issued and outstanding having voting power given at a stockholders'
meeting duly called for such purpose.
WE, THE UNDERSIGNED, being each of the incorporators hereinbefore named,
for the purpose of forming a corporation pursuant to the General Corporation
law of the State of Delaware, do make this certificate, hereby declaring and
certifying that the facts herein stated are true, and accordingly have hereunto
set our hands and seals this 11th day of June A.D. 1958.
R. F. Westover (SEAL)
-------------------------
H. C. Broadt (SEAL)
<PAGE> 9
--------------------------
A. D. Atwell (SEAL)
--------------------------
STATE OF DELAWARE )
) SS:
COUNTY OF NEW CASTLE )
BE IT REMEMBERED that on this 11th day of June A.D. 1958, personally came
before me, a Notary Public for the State of Delaware, R. F. Westover, H. C.
Broadt and A. C. Atwell, all of the parties to the foregoing certificate of
incorporation, known to me personally to be such, and severally acknowledged
the said certificate to be the act and deed of the signers respectively and
that the facts therein stated are truly set forth.
GIVEN under my hand and seal of office the day and year aforesaid.
/s/Harold E. Grantland
--------------------
Notary Public
Harold E. Grantland
Notary Public
Appointed Jan. 12, 1957
State of Delaware
Term 2 Years
<PAGE> 1
EXHIBIT 10(c)
CONSULTING AGREEMENT
This Agreement is made as of the 15th of June 1995 by and between DUPLEX
PRODUCTS INC., a Delaware corporation with its principal place of business at
1947 Bethany road, Sycamore, Illinois 60178 ("DUPLEX") and JOHN C. COLMAN, an
individual, whose principal place of residence is 4 Briar Lane, Glencoe, IL
60022-1801 ("CONSULTANT").
DUPLEX wishes to contract with CONSULTANT for services including management
consulting services, and CONSULTANT is willing and qualified to perform such
services.
In consideration of the above recitals, the terms and covenants of this
Agreement, and other valuable consideration, the receipt of which is
acknowledged, the parties agree as follows:
1. SERVICES. CONSULTANT shall supply DUPLEX with management consulting
services ("Services").
It is understood that Services provided by CONSULTANT pursuant to this
Agreement shall be so provided on a day-to-day, as-needed basis. DUPLEX shall
have sole discretion to determine the need for the continued provision of such
Services. CONSULTANT agrees to perform such additional Services as may be
requested in writing by DUPLEX and agreed to by the parties.
2. COMPENSATION. DUPLEX shall compensate CONSULTANT as follows:
A. The equivalent of Two Hundred Thousand ($200,000) Dollars per year, payable
in equal monthly installments payable by wire transfer via Account No.
51-55754, Bank of America, IL, 231 South LaSalle Street, Chicago, IL 60697, ABA
071-000039, for the effort actually expended by CONSULTANT pursuant to this
Agreement ("Consulting Fee"). Such payments shall be made by the 10th day of
each month, with the first of such payment being made by July 10, 1995, and by
the 10th day of each month thereafter during the existence of this Agreement.
B. Actual reasonable expenses incurred by CONSULTANT and approved by DUPLEX
that are directly related to CONSULTANT'S performance under and pursuant to
this Agreement.
C. DUPLEX shall provide general office space, supplies and support in addition
to the expense amount listed herein.
D. It is understood that CONSULTANT will receive the compensation outlined
herein in lieu of any of the Director's fees that CONSULTANT would otherwise be
entitled to as a member of the DUPLEX Board of Directors, with the exception of
actual expenses related to Directors' meetings.
3. CONFIDENTIALITY.
CONSULTANT agrees that (a) all knowledge and information that CONSULTANT may
receive from DUPLEX or from its employees or other consultants of DUPLEX, or by
virtue of the performance of services under and pursuant to this Agreement,
relating to inventions, products, processes, machinery, apparatus, prices,
discounts, costs, business affairs, future plans, or technical data that belong
to DUPLEX or to those with whom DUPLEX has contracted regarding such
information, and (b) all information provided by CONSULTANT to DUPLEX in
reports of work done, together with any other information acquired by or as
direct result of employment as a consultant by DUPLEX and during the term of
such employment, shall for all time and for all purposes be regarded by
CONSULTANT as strictly confidential and held by CONSULTANT in confidence, and
solely for DUPLEX'S benefit and use, and shall not be used by CONSULTANT or
directly or indirectly disclosed by CONSULTANT to any person whatsoever except
to DUPLEX or with DUPLEX's prior written permission.
<PAGE> 2
4. CONSULTANT REPRESENTATIONS.
CONSULTANT represents and warrants that CONSULTANT has the right to perform the
services required under and pursuant to this Agreement without violation of
obligations to others, and that CONSULTANT has the right to disclose to DUPLEX
all information transmitted to DUPLEX in the performance of services under and
pursuant to this Agreement, and CONSULTANT agrees that any information
submitted to DUPLEX, whether patentable or not, may be utilized fully and
freely by DUPLEX.
5. COVENANT NOT TO COMPETE.
During the term of this Agreement with DUPLEX, CONSULTANT shall not engage in
nor service or assist anyone engaged in a business which is directly or
indirectly competitive with the business of DUPLEX or the services provided to
DUPLEX by CONSULTANT. In addition, for a period of one (1) year after
termination of this Agreement, CONSULTANT shall not directly or indirectly, by
himself or in conjunction with any other person, firm, corporation or business
enterprise, engage in a business or industry that is competitive with that part
of the business of DUPLEX with which CONSULTANT is associated during the term
of this Agreement. This covenant not to compete shall be for the Continental
United States. CONSULTANT acknowledges the national scope of DUPLEX's business
interests. The parties stipulate that the matters covered in this Agreement
are important material, confidential and gravely affect the successful conduct
of business and good will of DUPLEX. CONSULTANT acknowledges that DUPLEX will
suffer irreparable injury in the event that CONSULTANT violates this Agreement.
The parties agree that DUPLEX may enforce this Agreement by seeking equitable
and injunctive relief, as well as monetary damages, attorney's fees and costs
of suit.
6. DURATION AND TERMINATION.
This Agreement shall become effective on the date stated above and shall
continue at the discretion of the parties. This agreement may be terminated
pursuant to the following:
A Immediately by DUPLEX on the death or incapacity of CONSULTANT;
B. By either party, at any time, on five (5) days' prior written notice;
The obligations of CONSULTANT under Sections 3, 4 and 5 above shall survive any
expiration or termination of this Agreement. On termination of this Agreement,
CONSULTANT will return to DUPLEX all written information, drawings, models, and
other materials or files supplied to CONSULTANT or created by CONSULTANT at the
direction or expense of DUPLEX.
7. LIMITATION OF DAMAGES.
CONSULTANT waives any rights to recovery from DUPLEX for any injuries that
CONSULTANT may sustain while performing services under and pursuant to this
Agreement and that are a result of CONSULTANT's own negligence. CONSULTANT
shall be responsible for and shall reimburse DUPLEX for all loss or damage to
DUPLEX's property, property of third parties, or personal injury caused by the
acts or omissions of CONSULTANT during the term of this Agreement.
<PAGE> 3
8. ASSIGNMENT/MODIFICATION/MERGER
The rights of CONSULTANT under this Agreement are personal to CONSULTANT and
may not be assigned or transferred to any other person, firm, or corporation
without the prior, express, and written consent of DUPLEX. This Agreement
shall constitute the entire Agreement between the parties and any prior
understanding or representation of any kind preceding the date of this
Agreement shall not be binding upon either party except to the extent
incorporated in this Agreement. Any modification of this Agreement or
additional obligation assumed by either party in connection with this Agreement
shall be binding only if evidenced in writing signed by each party or an
authorized representative of each party.
9. NOTICES.
Any notice provided for or concerning this Agreement shall be in writing and be
deemed sufficiently given when sent by certified or registered mail if sent to
the respective address of each party as set forth at the beginning of this
Agreement.
10. GOVERNING LAW/ARBITRATION.
It is agreed that this Agreement shall be governed by, construed, and enforced
in accordance with the laws of the State of Illinois.
11. EFFECT OF PARTIAL INVALIDITY.
The invalidity of any portion of this Agreement will not and shall not be
deemed to affect the validity of any other provision. In the event that any
provision of this Agreement is held to be invalid, the parties agree that the
remaining provisions shall be deemed to be in full force and effect as if they
had been executed by both parties subsequent to the expungement of the invalid
provision.
IN WITNESS WHEREOF, the parties have executed this Agreement on this 16th day
of October, 1995.
DUPLEX PRODUCTS INC.
By: A.A. Campbell John C. Colman
Its: President
<PAGE> 1
EXHIBIT 10(d)
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT ("Agreement") is entered into as of the 15th day
of November, 1994, by and between DUPLEX PRODUCTS INC., a corporation,
("DUPLEX") and ANDREW CAMPBELL ("CAMPBELL").
WHEREAS, DUPLEX desires to hire CAMPBELL in the position of Vice President
and Chief Financial Officer.
WHEREAS, CAMPBELL desires employment with DUPLEX in the position of Vice
President and Chief Financial Officer.
NOW THEREFORE, in consideration of the promises set forth in this
Agreement, and in further consideration of CAMPBELL's employment by DUPLEX, the
parties agree as follows:
1. Definitions. The terms defined below shall have the following meanings
throughout this Agreement:
1.1 Base Annual Salary. For purposes of this Agreement, "Base Annual
Salary" shall be equal to the greater of:
1.1.1 CAMPBELL's annual salary excluding bonuses or other similar
payments as of the date of a Change of Control; or
1.1.2 CAMPBELL's annual salary excluding bonuses or other similar
payments as of the date of a Qualifying Termination.
1.2 Change of Control. A "Change of Control" shall exist upon the first
of the following to occur:
1.2.1 Any tender offer, merger or other business combination, sale
of assets, contested election or any combination of the foregoing
transactions (a "Transaction"), which results in the persons who
were directors of DUPLEX before the Transaction ceasing to
constitute a majority of the Board of Directors of DUPLEX or any
successor to DUPLEX after the Transaction;
<PAGE> 2
1.2.2 DUPLEX merges or consolidates with another corporation and as
a result of the merger or consolidation fifty percent (50%) or less
of the outstanding voting securities of the surviving or resulting
corporation shall then be owned in the aggregate by former
stockholders of DUPLEX;
1.2.3 A tender offer or exchange offer is made and consummated for
the ownership of securities of DUPLEX representing more than fifty
percent (50%) of the combined voting power of DUPLEX's then
outstanding voting securities; or
1.2.4 DUPLEX transfers substantially all of its assets to another
corporation which is not a wholly-owned subsidiary of DUPLEX.
1.3 QUALIFYING TERMINATION. A "Qualifying Termination" is a termination of
CAMPBELL's employment qualifying him for Severance Consideration under
this Agreement and shall mean:
1.3.1 Any termination of CAMPBELL's employment by DUPLEX or any
successor to DUPLEX without cause;
1.3.2 Any resignation from employment by CAMPBELL within 90 days
following a Change of Control;
1.3.3 Any significant diminution of CAMPBELL's responsibilities as
Vice President and Chief Financial Officer of DUPLEX; or
1.3.4 Any reduction in CAMPBELL's Base Annual Salary.
1.4 SEVERANCE CONSIDERATION. "Severance Consideration" shall be equal to
one year's Base Annual Salary, plus a pro rata share of any earned bonus
based upon performance. Severance Consideration shall be paid from the
general assets of DUPLEX, or any successor of DUPLEX. DUPLEX, or any
successor of DUPLEX, shall not establish a separate trust, account or plan
for the payment of Severance Consideration.
<PAGE> 3
2. PAYMENT OF SEVERANCE CONSIDERATION. If CAMPBELL's employment with DUPLEX,
or any successor of DUPLEX, is subject to a Qualifying Termination, then
DUPLEX, or any successor of DUPLEX, shall pay to CAMPBELL Severance
Consideration pursuant to the terms of this Agreement. Severance Consideration
shall be paid to CAMPBELL in substantially equal installments over the course
of 12 months in keeping with DUPLEX's standard payroll practice. In the event
of CAMPBELL's death prior to the entire Severance Consideration being paid, any
remaining amounts due shall be paid to CAMPBELL's estate in the same manner
provided for herein.
3. OUTPLACEMENT SERVICES. In addition to Severance Consideration, if CAMPBELL
experiences a Qualifying Termination, then DUPLEX, or any successor of DUPLEX,
shall provide CAMPBELL with outplacement services. Outplacement services shall
be provided by a firm mutually agreed upon by both CAMPBELL and DUPLEX. In all
other respects, the duration, arrangements and amounts expended for such
services shall be determined by DUPLEX, or any successor of DUPLEX; provided,
however, that such outplacement services shall continue for a minimum of 6
months.
4. WITHHOLDING OF TAXES. DUPLEX shall withhold from any Severance
Consideration payable under this Agreement all federal, state, city or other
taxes as may be required by law.
5. NOT AN EMPLOYMENT AGREEMENT. Nothing in this Agreement shall give CAMPBELL
any right to continued employment with DUPLEX or any successor of DUPLEX, nor
shall it give DUPLEX any rights to the continued performance of duties by
CAMPBELL for DUPLEX or any successor of DUPLEX.
6. NOTICES. Notices under this Agreement shall be in writing and shall be
deemed given when mailed by United States registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to DUPLEX to:
Duplex Products Inc.
1947 Bethany Road
Sycamore, Illinois 60178
Attention: Chairman of the Board
<PAGE> 4
If to CAMPBELL to:
Andrew Campbell
---------------
---------------
or to such other address as either party may furnish to the other in writing,
except that notices of changes of address shall be effective only upon receipt.
7. APPLICABLE LAW. The performance and interpretation of this Agreement shall
be construed in accordance with the laws of the State of Illinois.
8. SEVERABILITY. If a court of competent jurisdiction determines that any
provision of this Agreement is invalid or unenforceable, then the invalidity or
unenforceability of that provision shall not affect the validity or
enforceability of any other provision of this Agreement and all other
provisions shall remain in full force and effect.
9. NO ASSIGNMENT. CAMPBELL's rights to receive payments or benefits under this
Agreement shall not be assignable or transferable whether by pledge, creation
of a security interest or otherwise. DUPLEX shall have no liability to pay any
amount so attempted to be assigned or transferred.
10. SUCCESSORS. This Agreement shall be binding upon and inure to the benefit
of DUPLEX, its successors and assigns (including, without limitation, any
company into or with which DUPLEX may merge or consolidate). DUPLEX agrees
that it will not effect a Change of Control unless either: the person or
entity acquiring control of DUPLEX shall expressly assume by an instrument in
writing all duties and obligations of DUPLEX under this Agreement; or DUPLEX
shall provide for the payment in full of all amounts which are payable to
CAMPBELL under this Agreement.
11. AGREEMENT AND RELEASE. CAMPBELL's right to receive and DUPLEX's obligation
to pay Severance Consideration shall be contingent upon CAMPBELL executing a
binding agreement setting forth a release of any and all claims arising from
his employment and/or termination of employment with DUPLEX or any successor of
DUPLEX.
<PAGE> 5
Such agreement shall also contain covenants of confidentiality and
non-competition. Said non-competition covenant shall be for a period of
one year following a Qualifying Termination and shall provide, in part, that
CAMPBELL shall not, directly or indirectly, either for himself or for any other
person, firm, partnership, agency, corporation or other entity, compete with
DUPLEX, or any successor of DUPLEX, in its lines of business or solicit, call
upon, divert or take away or attempt to solicit, divert or take away from
DUPLEX any customers of DUPLEX or any potential customers of DUPLEX nor assist
any other person or entity in doing so within the United States of America.
12. Entire Agreement. This Agreement represents the entire agreement of the
parties regarding the severance pay arrangements between them. This Agreement
may not be modified except by a writing signed by both parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered as of the day and year first written.
DUPLEX PRODUCTS INC.,
By: John A. Bacon, Jr. /s/Andrew A. Campbell
------------------ ---------------------
ANDREW CAMPBELL
Its: Chairman of the Compensation Committee
<PAGE> 1
EXHIBIT 11 - COMPUTATION OF EARNINGS (LOSS) PER SHARE
[CAPTION]
<TABLE>
Fiscal year ended
--------------------------------------
October 28, October 29, October 30,
1995 1994 1993
----------- ----------- ----------
<S> <C> <C> <C>
Net earnings (loss) $(1,872) $(16,127) $2,454
Weighted average number of common shares
outstanding used in computing earnings
per share 7,516,328 7,593,625 7,731,740
Primary and fully diluted earnings
(loss) per share before accounting
changes $(0.25) $(1.19) $0.19
Cumulative effect of accounting
changes per share -- - (0.93) 0.13
------ ----- -----
Earnings (loss) per share $(0.25) $(2.12) $0.32
====== ===== =====
</TABLE>
<PAGE> 1
EXHIBIT 13 - PORTIONS OF THE 1995 ANNUAL REPORT TO SHAREHOLDERS FOR THE FISCAL
YEAR ENDED OCTOBER 28, 1995
<PAGE> 2
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For years ended (In thousands, except per share data) OCTOBER 28, 1995 October 29, 1994 October 30, 1993
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $275,728 $265,791 $258,867
Cost of goods sold 210,931 204,062 194,977
-------- -------- --------
GROSS PROFIT 64,797 61,729 63,890
Selling, general, and administrative expenses 68,733 66,020 61,039
Restructuring costs -- 10,500 1,500
-------- -------- --------
OPERATING PROFIT (LOSS) (3,936) (14,791) 1,351
Other income (expense)
Interest expense (517) (469) (590)
Investment income 796 491 632
Other 615 22 838
-------- -------- --------
894 44 880
-------- -------- --------
EARNINGS (LOSS) BEFORE INCOME TAXES
AND ACCOUNTING CHANGES (3,042) (14,747) 2,231
Provision for income taxes (credits) (1,170) (5,704) 777
-------- -------- --------
EARNINGS (LOSS) BEFORE ACCOUNTING CHANGES (1,872) (9,043) 1,454
Cumulative effect of accounting changes -- (7,084) 1,000
-------- -------- --------
NET EARNINGS (LOSS) $(1,872) $(16,127) $ 2,454
======== ======== ========
EARNINGS (LOSS) PER SHARE BEFORE
ACCOUNTING CHANGES $ (0.25) $ (1.19) $ 0.19
Cumulative effect of accounting changes -- (0.93) 0.13
-------- -------- --------
NET EARNINGS (LOSS) PER SHARE $ (0.25) $ (2.12) $ 0.32
======== ======== ========
Shares used in per share calculation 7,516 7,594 7,732
</TABLE>
The following pro forma information reflects the Company's results for 1993 as
if the revenue recognition change discussed in note 1 to the consolidated
financial statements had been retroactively applied.
<TABLE>
<CAPTION>
(In thousands, except per share data) October 30, 1993
- -----------------------------------------------------------------------------------------------------------
<S> <C>
Net earnings $1,966
Net earnings per share 0.25
</TABLE>
The notes to consolidated financial statements on pages 18-25 are an integral
part of this statement.
12
<PAGE> 3
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
<TABLE>
<CAPTION>
(In thousands) OCTOBER 28, 1995 October 29, 1994
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents $8,368 $16,337
U.S. Treasury obligations (note 4) 8,149 --
Accounts and notes receivable (note 2) 46,224 48,046
Inventories (note 3) 21,975 27,530
Income tax refund receivable 1,699 2,998
Deferred income taxes (note 9) 9,831 10,245
--------- ----------
TOTAL CURRENT ASSETS 96,246 105,156
PROPERTY, PLANT, AND EQUIPMENT, NET (NOTE 5) 38,815 37,000
OTHER ASSETS (NOTE 4) 5,248 4,052
--------- ----------
TOTAL ASSETS $140,309 $146,208
========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt (note 6) $1,233 $1,222
Accounts payable 13,973 11,526
Accrued expenses (note 8) 16,593 20,894
--------- ----------
TOTAL CURRENT LIABILITIES 31,799 33,642
--------- ----------
LONG-TERM DEBT (NOTE 6) 4,695 5,928
--------- ----------
DEFERRED LIABILITIES AND CREDITS
Compensation plan cost (note 12) 2,493 2,411
Income taxes (note 9) 3,684 4,188
--------- ----------
TOTAL DEFERRED LIABILITIES AND CREDITS 6,177 6,599
--------- ----------
SHAREHOLDERS' EQUITY
Common stock 8,242 8,304
Additional paid-in capital 3,565 4,333
Common stock held in treasury (5,809) (5,809)
Unamortized value of restricted stock issued (347) (648)
Retained earnings 91,987 93,859
--------- ----------
TOTAL SHAREHOLDERS' EQUITY (NOTES 10, 11, AND 12) 97,638 100,039
--------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $140,309 $146,208
========= ==========
</TABLE>
The notes to consolidated financial statements on pages 18-25 are an integral
part of this statement.
13
<PAGE> 4
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For years ended (In thousands) OCTOBER 28, 1995 October 29, 1994 October 30, 1993
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $ (1,872) $ (16,127) $ 2,454
Adjustments to reconcile net earnings (loss) to
cash provided (used) by operating activities
Depreciation and amortization 5,410 5,613 6,578
Restructuring costs -- 10,500 1,500
Deferred income taxes (50) (6,569) 485
Provision for doubtful accounts 546 348 256
Gain on sale of fixed assets (568) (115) (732)
Purchase of U.S. Treasury obligations (8,149) -- --
(Increase) decrease in accounts and notes receivable 1,276 27,627 (8,261)
(Increase) decrease in inventories 5,555 (18,423) 1,399
(Increase) decrease in income tax refund receivable 1,299 (1,461) (1,537)
Increase in accounts payable 2,447 1,021 1,155
Decrease in accrued restructuring costs (4,834) (3,759) (4,921)
Increase (decrease) in other accrued expenses 533 1,008 (905)
Other operating activities 58 552 1,206
-------- -------- ---------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 1,651 215 (1,323)
-------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of long-term investments (2,544) -- --
Capital expenditures (7,747) (2,848) (3,716)
Net proceeds from sale of assets 2,422 3,528 3,715
-------- -------- ---------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (7,869) 680 (1)
-------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long-term debt (1,222) (1,562) (1,731)
Restricted stock repurchased, net (529) (1,415) (852)
-------- -------- ---------
NET CASH USED BY FINANCING ACTIVITIES (1,751) (2,977) (2,583)
-------- -------- ---------
DECREASE IN CASH AND EQUIVALENTS DURING YEAR (7,969) (2,082) (3,907)
Cash and equivalents at beginning of year 16,337 18,419 22,326
-------- -------- ---------
CASH AND EQUIVALENTS AT END OF YEAR $8,368 $16,337 $18,419
======== ======== =========
Other cash flow information
Cash paid for interest $483 $509 $637
Cash paid for income taxes -- -- 103
</TABLE>
The notes to consolidated financial statements on pages 18-25 are an integral
part of this statement.
14
<PAGE> 5
MANAGEMENT'S DISCUSSION OF OPERATIONS
1995 VERSUS 1994
The Company reported a net loss of $1.9 million ($0.25 per share) in 1995
compared with a net loss of $16.1 million ($2.12 per share) in 1994. The 1995
net loss of $1.9 million was an improvement over the 1994 net loss of $2.6
million after adjusting for the negative impact on 1994's results of
restructuring charges ($6.4 million after taxes) and the cumulative effect of
an accounting change ($7.1 million after taxes), which is further discussed on
page 18.
The improved operating performance was due to higher sales, continued
improvement in manufacturing efficiencies, and gains on the sale of property
and equipment. These favorable items were partially offset by costs related to
the expansion of product and service offerings, and a significant increase in
bond paper costs and related LIFO inventory provision. The LIFO inventory
provision had a negative impact on net earnings per share of $0.46 in 1995
compared with a positive impact of $0.11 per share in 1994.
Net sales increased for the second consecutive year, growing from $265.8
million in 1994 to $275.7 million in 1995. The revenue growth was attributable
to higher selling prices related to paper cost increases, partially offset by
a decline in unit volume. This unit volume decrease was driven by a decline in
sales force coverage. Currently, an aggressive recruiting program is underway
to rebuild and expand the field sales organization.
The U.S. business forms industry continues to be an approximately $8.0 billion
market. Within this market, certain traditional product segments (primarily
custom continuous and stock forms and unit sets) are in decline, while demand
for products such as pressure-sensitive labels, preprinted laser cut-sheets,
rolls, and form/label combinations is growing at a brisk pace.
Duplex is aggressively pursuing product and service opportunities in other
growth areas, including electronic printing and mailing, forms management
services, promotional printing, electronic forms, workflow automation, and
quick turnaround/short-run printing.
Niche areas within the market are also being explored by the Company.
Responding to customer needs for promotional and market research tools, Duplex
introduced a prepaid phone card program in 1995. During the year, the Company's
check fraud prevention program saw growth in both market interest and
engagement levels.
Results for the Company's electronic printing and mailing business fell below
expectations and had a negative effect on financial performance in 1995.
Revenues were lower than anticipated primarily because of shortcomings in
sales focus and training. In addition, the unit encountered some operational
difficulties, including underutilization of capacity. Programs to resolve
these issues are underway.
The Company's focus on the financial services market, initially banking,
resulted in sales gains of about 20% in 1995 in this segment. Continued sales
force training and development of products for this market are expected to
enhance performance in 1996.
Sales of outsourced products increased to $78.7 million in 1995 from $69.3
million in 1994, and margins improved. In 1995, the Company continued to
expand its network of strategic alliances with outside vendors. The number of
such alliances increased to twenty-eight from fifteen last year. The alliance
offerings complement Duplex's internal capabilities, providing customers with
a full range of information management solutions at competitive prices.
Gross profit as a percentage of sales improved to 23.5% in 1995 from 23.2% in
1994. During 1995, the Company benefited from significant cost reductions in
manufacturing as a result of restructuring and productivity improvement
actions. Unfortunately, these reductions were partially offset by costs related
to the expansion of product and service offerings and higher healthcare costs.
Additionally, the LIFO inventory provision represented a cost of $5.7 million
in 1995 as contrasted with a benefit of $1.4 million in 1994 as a result of the
significant increase in bond paper prices.
Since June of 1994, bond paper prices have increased about 115%. The Company
adjusted selling prices to reflect the rise in paper costs; however, pressure
on margins was encountered, reflecting the highly competitive nature of the
marketplace. Paper demand has softened recently, and prices are expected to
stabilize in 1996. The supply of bond paper has improved, and Duplex has been
successful in satisfying customer requirements. The Company does not
anticipate a material change in this situation in the near future.
Selling, general, and administrative expenses were $68.7 million in 1995, an
increase of $2.7 million from the $66.0 million in 1994. As a percentage of
sales, these expenses increased slightly, from 24.8% in 1994 to 24.9% in 1995.
15
<PAGE> 6
MANAGEMENT'S DISCUSSION OF OPERATIONS
Higher costs related to healthcare, realigning the sales force, and expanding
products and services were the main reasons for the increase.
Other income for the year increased $0.9 million over 1994 primarily due to
gains on the sale of property and equipment associated with restructuring
activities.
The 1995 income tax provision was a credit of $1.2 million ($1.1 million
current; $0.1 million deferred). The Company has net operating loss
carry-forwards of $14.6 million available to it to apply against future
taxable income. These loss carry-forwards will expire in 2010. The effective
tax rate for both 1995 and 1994 was a credit of 39%. (see note 9 to the
consolidated financial statements.)
1994 VERSUS 1993
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. 1994 and
1993 results were impacted by restructuring provisions and accounting changes.
Restructuring provisions of $10.5 million and $1.5 million before taxes were
recorded in 1994 and 1993, 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. In 1994, the Company changed its revenue
recognition policy for certain custom forms, which increased the net loss for
the year by $7.1 million. 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 $2.6 million as contrasted with net income of
$2.4 million in 1993. 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.
Net sales during 1994 totaled $265.8 million, up 3% from $258.9 million 1993.
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.
Gross profit as a percentage of net sales was 23.2% in 1994 compared with 24.7%
in 1993. 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.
Over the 1992-1994 period, the Company significantly reduced manufacturing and
operating expenses by closing 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 1994, the Company expanded its program of using outside strategic
partners. Reflecting this, sales of outsourced products in 1994 ($69.3
million -- 26% of total revenues) increased 47% from 1993.
During 1994, inroads were made in reducing paper waste, and efforts to improve
plant labor productivity delivered positive results. The cost of paper
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.
Selling, general, and administrative expenses aggregated $66.0 million in 1994,
an increase of $5.0 million from $61.0 million in 1993. The increase in 1994
reflected higher selling and training expenses and incremental costs related to
the development and management of new products and services.
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.
The 1994 income tax provision was a credit balance of $5.7 million ($3.1
million current; $2.6 million deferred). The effective tax rate for 1994 was a
credit of 39% compared with a charge of 35% in 1993.
16
<PAGE> 7
MANAGEMENT'S DISCUSSION OF LIQUIDITY
AND CAPITAL RESOURCES
Net working capital at October 28, 1995 was $64.4 million compared with $71.5
million at the previous year end. The 1995 decline in working capital was
primarily attributable to reductions in inventory and accounts receivable
balances and an increase in accounts payable levels. The inventory reduction
was due to an increase in the LIFO reserve and a reduction in units on hand.
The favorable movement in accounts receivable and payable balances reflected
more concentrated collection efforts and the Company's attempt to better match
receivable and payable cash flows.
The current ratio at the end of 1995 remained strong at 3.0 to 1, down
slightly from 3.1 to 1 at the conclusion of 1994. Management believes the
level of working capital will be adequate to cover the Company's liquidity
requirements 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 1995 was $5.9 million compared with $7.2
million at the previous year end. Total debt as a percentage of total capital
was 5.7% at year end 1995, 1.0 point lower than at the end of 1994.
Cash and equivalents aggregated $8.4 million at the end of 1995, down $8.0
million from year end 1994. The decrease was due to the establishment of a
managed investment program in U.S. Treasury obligations of varying maturities
to improve yields. These investments are classified as trading securities
rather than cash equivalents. Cash and marketable securities totaled $19.1
million at year end 1995, up $2.7 million from the previous year end.
During 1995, the Company generated $1.7 million in cash from operating
activities, up $1.5 million from 1994's $0.2 million, which represented a $1.5
million improvement compared with the previous year. Operating cash flow
increased in 1995 principally because of positive changes in accounts
receivable, inventory, and accounts payable balances, partially offset by the
purchase of U.S. Treasury obligations. 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 discussed
previously), partially offset by the decline in earnings before restructuring
costs and accounting changes.
Investment activities consumed $7.8 million in cash in 1995 and generated $0.7
million the previous year. In 1993, cash inflows and outflows from investment
activities were approximately equal. Capital expenditures totaled $7.7
million in 1995 compared with $2.8 million and $3.7 million in 1994 and 1993,
respectively. Expenditures for plant and equipment are expected to total about
$12.0 million for 1996. In addition, long-term bonds totaling $2.5 million
were purchased in 1995.
Net cash used by financing activities in 1995, 1994, and 1993 was $1.8 million,
$3.0 million, and $2.6 million, respectively. Year-to-year cash flow changes
were driven primarily by variances in the level of restricted stock
repurchases.
17
<PAGE> 8
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 28, 1995, October 29, 1994, and October 30, 1993
each contained fifty-two weeks.
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 stored
custom forms upon completion of the production process and customer acceptance.
In 1994, 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.
This had the effect of increasing the Company's 1994 net loss by $7,084 ($0.93
per share), which represented the cumulative impact of the change for periods
prior to 1994.
Cash Equivalents. The Company considers all highly liquid debt instruments
purchased with original maturities of three months or less to be cash
equivalents.
Inventories. Inventories are stated at the lower of cost or market. For
substantially all of the Company's inventories, cost 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 over the estimated useful lives of the
assets, primarily using the straight-line method. Depreciation for income tax
purposes is computed using accelerated methods.
Earnings (loss) per Share. Earnings (loss) 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 Company's allowance for doubtful accounts and notes receivable at October
28, 1995 and October 29, 1994 was $907 and $715, respectively.
NOTE 3 -- INVENTORIES
<TABLE>
<CAPTION>
Oct. 28, 1995 Oct. 29, 1994
<S> <C> <C>
Raw materials $7,496 $7,380
Work in process 1,502 2,419
Finished goods 25,629 24,680
------- -------
34,627 34,479
Less reserve for LIFO (12,652) (6,949)
------- -------
$21,975 $27,530
======= =======
</TABLE>
The reserve for LIFO increased $5,703 in 1995 compared with decreases of $1,385
and $55 in 1994 and 1993, respectively. The 1995 increase resulted from price
increases totaling $5,910, which were partially offset by quantity decreases of
$207.
NOTE 4 -- INVESTMENTS
Effective October 30, 1994, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," which requires that trading securities and
securities available for sale be carried at fair value, and investments held
to maturity be carried at amortized cost. The adoption of this standard did
not have a material impact on the financial statements.
At October 28, 1995, trading securities, consisting of U.S. Treasury
obligations carried at fair value (approximately cost), amounted to $8,149.
Held-to-maturity securities aggregated $2,544 at October 28, 1995 and consisted
of municipal and corporate obligations with five- to ten-year maturities. These
securities were carried at amortized cost, which approximated fair value, and
were included in "Other Assets."
18
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 5 -- PROPERTY, PLANT, AND EQUIPMENT
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Oct. 28, 1995 Oct. 29, 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ORIGINAL COST
Land, improvements,
and leaseholds $ 2,370 $ 2,393
Buildings and improvements 27,028 25,944
Machinery and equipment 76,248 72,834
-------- --------
105,646 101,171
LESS ACCUMULATED
DEPRECIATION AND
AMORTIZATION
(66,831) (64,171)
-------- --------
$ 38,815 $ 37,000
======== ========
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
For financial reporting purposes, depreciation is based on the following
estimated useful lives of assets:
Land improvements................................. 5 to 10 years
Leasehold improvements............................ Lives of leases
Building and improvements......................... 5 to 40 years
Machinery and equipment........................... 3 to 15 years
NOTE 6 -- DEBT
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Oct. 28, Oct. 29,
1995 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MORTGAGE NOTES
Interest rate Maturities
8 1/4% to 8 7/10% 1996-1997 $ 540 $ 790
2% 1996-1997 38 60
75% of prime rate (a) 1996-2001 3,150 3,750
------ ------
3,728 4,600
CAPITALIZED LEASE 2,200 2,550
------ ------
5,928 7,150
LESS CURRENT MATURITIES (1,233) (1,222)
------ ------
$4,695 $5,928
====== ======
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Prime rate at October 28, 1995 was 8 3/4%.
Aggregate amounts of long-term borrowings (excluding the capitalized lease)
that mature during the next five years are as follows:
1996....................$883
1997.................... 895
1998.................... 600
1999.................... 600
2000.................... 600
At October 28, 1995, a revolving line of credit of $10,000 was available to the
Company. During 1995, the Company did not borrow under this credit facility,
and related commitment fees were immaterial. Borrowings under this line are
available to the Company until October 28, 1997, and are subject, at the
Company's option, to interest at either the bank's certificate of deposit rate
plus 0.85%, LIBOR (London Interbank Offered Rate) plus 0.75%, or the bank's
prime rate. The terms of this agreement contain, among other provisions,
requirements for maintaining certain financial ratios and tangible net worth.
NOTE 7 -- LEASE COMMITMENTS
The Company has entered into operating leases, which expire over the next seven
years, for certain plant and office facilities and equipment. Rental expenses
under these leases aggregated $6,662, $6,400, and $6,110 in 1995, 1994, and
1993, respectively.
Shown below are minimal rental commitments under capital and operating leases
at October 28, 1995.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
Capitalized Operating
lease leases
- ------------------------------------------------------------------
<S> <C> <C>
1996 $ 508 $ 7,203
1997 483 5,696
1998 458 3,629
1999 433 1,959
2000 408 1,551
Later years 490 1,084
------ -------
Total minimum lease payments 2,780 $21,122
====== =======
Less interest at 7.25% (580)
Present value of minimum
lease payments $2,200
======
- ------------------------------------------------------------------
</TABLE>
19
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 8 -- ACCRUED EXPENSES
<TABLE>
Oct. 28, 1995 Oct. 29, 1994
<S> <C> <C>
Restructuring costs $5,715 $10,549
Compensation 5,820 7,145
Insurance 1,150 800
Other 3,908 2,400
------- -------
$16,593 $20,894
======= =======
</TABLE>
In 1994, the Company recorded a $10,500 restructuring charge consisting of
$7,544 of anticipated cash payments related to employee termination benefits
and $2,956 of non-cash write-downs of real estate and operating assets. The
charge covered costs associated with enhancing cost competitiveness,
streamlining sales, manufacturing and administrative functions, and sharpening
marketing and product focus.
In 1994, two manufacturing facilities and nine sales offices were closed and
150 positions were eliminated. In 1995, an additional fourteen sales offices
were closed and fifty positions were eliminated, and the Company initiated an
order fulfillment reengineering project to streamline sales and administrative
functions. Also during 1995, management, in light of current operating
circumstances, elected to modify the facility consolidation segment of the
plan. No additional charge was required as a result of this change. It is
estimated that an additional 250 positions will be eliminated in connection
with completing the remaining phases of the restructuring plan. The remaining
expenditures and non-cash transactions are expected to occur over the next two
years. A summary of 1995 and 1994 activity related to the 1994 provision
appears in the following table.
<TABLE>
Cash payments Non-cash transactions
<S> <C> <C>
1995 $4,518 $ --
1994 1,688 214
</TABLE>
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. This restructuring was completed in 1994. Cash outlays in 1995,
1994, and 1993 totaled $21, $677, and $770, respectively.
In the fourth quarter of 1992, a restructuring reserve of $7,000 was recorded
to cover costs associated with closing two manufacturing plants and scaling
back other operations. A summary of 1995, 1994, and 1993 activity related to
the 1992 provision appears in the following table.
<TABLE>
Cash payments Non-cash transactions
<S> <C> <C>
1995 $ 295 $ --
1994 1,173 --
1993 3,576 321
</TABLE>
The Company expects to incur future expenditures of approximately $1,635,
primarily related to long-term leases.
Management believes that the remaining accrual for restructuring costs at
October 28, 1995 of $5,715 is adequate to complete its current restructuring
plans.
20
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 9 -- INCOME TAXES
PROVISION FOR INCOME TAXES (CREDITS)
<TABLE>
<CAPTION>
Oct. 28, Oct. 29, Oct. 30,
For years ended 1995 1994 1993
<S> <C> <C> <C>
CURRENT
Federal $ (732) $(3,203) $ (427)
State (388) 55 (206)
Puerto Rico -- 47 25
------- ------- ------
(1,120) (3,101) (608)
------- ------- ------
DEFERRED
Federal (39) (2,017) 1,074
State (11) (586) 311
------- ------- ------
(50) (2,603) 1,385
------- ------- ------
$(1,170) $(5,704) $ 777
======= ======= ======
</TABLE>
SFAS No. 109, "Accounting for Income Taxes," was adopted in November 1992.
<TABLE>
<CAPTION>
Oct. 28, Oct. 29,
For years ended 1995 1994
<S> <C> <C>
DEFERRED TAX ASSETS
Accounting change $ -- $ 4,723
Loss carry-forward 5,839 --
Restructuring costs 1,193 3,283
Insurance 460 320
Vacation pay 536 584
Inventory obsolescence 447 540
Inventory capitalization 680 --
Other 676 795
------- -------
9,831 10,245
Restructuring costs classified
as other assets 1,000 1,000
------- -------
$10,831 $11,245
======= =======
DEFERRED TAX LIABILITIES
Depreciation $ 4,898 $ 4,882
Compensation costs (997) (964)
Other (217) 270
------- -------
$ 3,684 $ 4,188
======= =======
</TABLE>
The effective tax rate for 1995, 1994, and 1993 was (38.5)%, (38.7)%, and
34.8%, respectively. Reconciliation of the U.S. federal statutory rate (34.0)%
with the effective tax rate appears in the following table.
<TABLE>
<CAPTION>
Oct. 28, Oct. 29, Oct. 30,
1995 1994 1993
<S> <C> <C> <C>
PROVISION FOR INCOME
TAXES (CREDITS) AT U.S.
FEDERAL STATUTORY RATE $(1,034) $(4,980) $ 758
INCREASE (DECREASE)
IN TAXES
State taxes, net of
federal benefits (256) (510) 171
Investment tax credit (41) (94) (122)
Other 161 (120) (30)
------- ------- -----
$(1,170) $(5,704) $ 777
======= ======= =====
</TABLE>
The Company expects to have available net operating loss carry-forwards of
$14,598 to apply against future taxable income. These loss carry-forwards will
expire in October 2010. Based on the Company's historical taxable income
record, when adjusted for non-recurring items such as accounting changes and
restructuring charges, and estimates of future profitability, management has
concluded that operating income will more likely than not be sufficient to
give rise to tax expense to cover all deferred tax assets.
21
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 10 -- 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 31, 1992 $8,510 $5,985 $(5,809) $(1,793) $107,532 $114,425
Net earnings -- -- -- -- 2,454 2,454
Stock 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 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
Net loss -- -- -- -- (1,872) (1,872)
Stock redemption and amortization
under stock plans, net (62) (768) -- 301 -- (529)
- --------------------------------------------------------------------------------------------------------------------------
BALANCE AT OCTOBER 28, 1995 $8,242 $3,565 $(5,809) $(347) $91,987 $97,638
</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. 28, 1995 Oct. 29, 1994 Oct. 30, 1993
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
SHARES OF COMMON STOCK
Issued 8,242 8,304 8,449
In treasury (753) (753) (753)
----- ----- -----
Outstanding 7,489 7,551 7,696
===== ===== =====
</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> 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 11 -- 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 ($1.00 par value) 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 12 -- 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.
A summary of stock option activity under these plans is shown in the table on
page 24.
23
<PAGE> 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 12 -- EMPLOYEE BENEFIT PLANS (CONTINUED)
<TABLE>
<CAPTION>
1995 1994 1993
-----------------------------------------------------------------
Average Average Average
Shares Price Shares Price Shares Price
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
STOCK OPTIONS
Outstanding at beginning of year 200,000 $10.56 77,700 $11.39 2,700 $11.88
Granted 62,500 8.28 190,000 10.22 75,000 11.38
Exercised -- -- -- -- -- --
Canceled (145,000) 10.63 (67,700) 10.55 -- --
--------- -------- -------
Outstanding at end of year 117,500 9.28 200,000 10.56 77,700 11.39
========= ======== =======
Exercisable at end of year 12,000 15,000 2,700
Available for grant at end of year 427,500 440,000 178,000
</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 1995, 1994, and 1993, 62,400, 145,074, and 60,700 shares, respectively,
of stock previously issued under the plan were repurchased at a cost of $529,
$1,415, and $852, respectively. Plan expense amounted to $64, $102, and $187 in
1995, 1994, and 1993, respectively.
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 28, 1995, the projected benefit obligation associated
with the plan totaled $916, all of which has been recognized. Plan expense was
$234, $209, and $140 in 1995, 1994, and 1993, respectively.
During October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation," which establishes a fair
value-based method for accounting for stock-based compensation plans. It
encourages, but does not require, the adoption of the fair value method;
however, it requires pro forma disclosure of the effect of the fair value
method by those entities that do not elect to change to this method of
accounting for stock plans. SFAS No. 123 will become effective for the Company
in 1997. The Company has not yet determined the impact of implementing this
new standard.
24
<PAGE> 15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
NOTE 13 -- QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
First Quarter Second Quarter Third Quarter Fourth Quarter
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995
Net sales $73,337 $69,568 $64,388 $68,435
Gross profit 18,119 15,820 13,831 17,027
Operating profit (loss) 1,027 (692) (2,864) (1,407)
Net earnings (loss) 649 (382) (1,529) (610)
Net earnings (loss) per share 0.09 (0.05) (0.20) (0.08)
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) (8,907) (744) 570
Per share
Earnings (loss) before accounting changes (1.17) (0.10) 0.08
Net earnings (loss) (0.92) (1.17) (0.10) 0.08
</TABLE>
Second quarter 1994 operating profit was reduced by restructuring provisions of
$12,000 ($7,303 after taxes, or $0.96 per share). In the fourth quarter of
1994, these provisions were reduced by $1,500, resulting in a corresponding
increase ($900 after taxes, or $0.12 per share) in operating profit.
25
<PAGE> 16
MANAGEMENT'S DISCUSSION OF FINANCIAL RESPONSIBILITY
The consolidated financial statements of Duplex Products Inc. and Subsidiary
have been prepared by management in conformity with generally accepted
accounting principles, based upon currently available facts and circumstances
and management's best estimates and judgments of known conditions. It is the
responsibility of management to assure the integrity and objectivity of such
financial statements and to assure that these statements fairly report the
Company's financial position and the results of its operations.
To meet this responsibility, management maintains a high standard of record
keeping and an effective system of internal controls, including a program of
internal audits, written administrative policies and procedures, and programs
to assure the selection and training of qualified personnel.
These financial statements have been audited by the Company's independent
auditors, Grant Thornton LLP, whose report appears on this page. Their audit
was conducted in accordance with generally accepted auditing standards. Such
standards include the evaluation of internal accounting controls to establish a
basis for developing the scope of the audit, as well as any other procedures
deemed necessary for expressing an opinion as to whether the financial
statements are presented fairly.
The Board of Directors, through its Audit Committee consisting solely of
outside directors, meets with Grant Thornton LLP, representatives of
management, and the Company's internal auditor to evaluate the activities of
each, and to discuss accounting, auditing, and financial matters and the
carrying out of responsibilities and duties of each group. Both the internal
and independent auditors have unrestricted access to the Audit Committee to
discuss their audits and the quality of the Company's financial reporting and
internal control system.
/s/ Andrew A. Campbell
Andrew A. Campbell
President
/s/ James R. Ramig
James R. Ramig
Vice President, Finance and Administration,
and Chief Financial Officer
REPORT OF INDEPENDENT AUDITORS
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 28, 1995 and October 29,
1994, and the related consolidated statements of operations and cash flows for
the years ended October 28, 1995, October 29, 1994, and October 30, 1993. 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 28, 1995 and October 29, 1994 and the
consolidated results of their operations and their consolidated cash flows for
the years ended October 28, 1995, October 29, 1994, and October 30, 1993 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.
/s/ Grant Thornton LLP
Grant Thornton LLP
Chicago, Illinois
December 6, 1995
26
<PAGE> 17
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(Dollar amounts in thousands, except per share data) 1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $275,728 $265,791 $258,867 $270,093 $285,271
Earnings (loss) before accounting changes (1,872) (9,043) 1,454 (563) 4,269
Net earnings (loss) (1,872) (16,127) 2,454 (563) 4,269
Per share
Earnings (loss) before accounting changes (0.25) (1.19) 0.19 (0.07) 0.55
Net earnings (loss) (0.25) (2.12) 0.32 (0.07) 0.55
Dividends declared 0.48 0.69
Common stock price range 9 5/8-6 3/4 11 3/4-8 5/8 11 7/8-9 1/4 13 3/4-10 15 1/2-9 3/4
Cash and equivalents 8,368 16,337 18,419 22,326 22,639
Marketable securities 10,693
Working capital 64,447 71,514 83,372 77,479 81,370
Current ratio 3.0:1 3.1:1 4.3:1 3.7:1 3.9:1
Total assets 140,309 146,208 156,059 159,138 165,112
Short-term debt 1,233 1,222 1,562 1,731 2,117
Long-term debt 4,695 5,928 7,150 8,712 10,443
Shareholders' equity 97,638 100,039 117,263 114,425 118,553
Total debt as a percentage of total capital 5.7% 6.7% 6.9% 8.4% 9.6%
Common shares outstanding (thousands) 7,489 7,551 7,696 7,757 7,756
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following pro forma information reflects the Company's results for
fiscal years 1993, 1992, and 1991 as if the revenue recognition change
discussed in note 1 had been retroactively applied.
<TABLE>
<CAPTION>
(Dollar amounts in thousands, except per share data) 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net earnings (loss) $1,966 $(462) $4,247
Net earnings (loss) per share 0.25 (0.06) 0.55
</TABLE>
27
<PAGE> 18
DIRECTORS AND OFFICERS
BOARD OF DIRECTORS
John A. Bacon, Jr.
Private Investor. Trustee of Stein Roe Variable Investment
Trust and Keyport Variable Investment Trust.
Director since 1967. (1) (3)
Michael J. Birck
President, Chief Executive Officer, and Director
of Tellabs, Inc., a manufacturer of telecommunications
products. Director of USF&G Corporation and Molex Inc.
Director since 1990. (2)
Andrew A. Campbell
President of Duplex Products Inc.
Director since 1995.
John C. Colman
Private Investor and Consultant.
Director of Orion Capital Corporation
and Premier Industrial Corporation.
Director 1978 - 1994 and since 1995. (3)
David J. Eskra
Private Investor. Former Chairman of the Board and Chief Executive Officer of
Duplex Products Inc. and Pansophic Systems Inc., a computer software
company.
Director since 1990. (1) (3)
W. Robert Reum
Chairman of the Board, President, and Chief Executive
Officer of The Interlake Corporation, a manufacturer of
special materials, aerospace components, and handling
and packaging equipment. Director of Amsted Industries.
Director since 1994. (1) (2)
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
(3) Member of the Executive Committee.
CORPORATE OFFICERS
Andrew A. Campbell
President
Marc A. Loomer
Vice President,
Operations
David B. Preston
Vice President,
Sales
James R. Ramig
Vice President,
Finance and Administration,
and Chief Financial Officer
Mark A. Robinson
Secretary and General Counsel
28
<PAGE> 19
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 1996 Annual Shareholders Meeting of Duplex Products Inc. will be held on
March 7, 1996 at 10 a.m., in the Assembly Room of The Northern Trust Company,
50 S. LaSalle Street, Chicago, Illinois.
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.
INDEPENDENT AUDITORS
Grant Thornton LLP
Chicago, Illinois
OUTSIDE COUNSEL
Hinshaw & Culbertson
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> <C>
1995 Fourth quarter 8 6 7/8
Third quarter 9 1/8 7 4/5
Second quarter 9 1/4 7 1/4
First quarter 9 5/8 6 3/4
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
</TABLE>
Dividends were not declared in 1994 or 1995. As of October 28, 1995, there
were about 1,197 shareholder accounts of record.
TRADEMARK OWNERSHIP
The following are trademarks of Duplex Products Inc.:
DUPLEX(TM), Duplex Direct(TM), NaviGator by Duplex(TM),
and The Sextant by Duplex(TM).
LABELMAX(TM) is a trademark of Advanced Labeling Systems, Inc.
Rolodex(R) is a trademark of Rolodex Corporation.
Windows(TM) is a trademark of Microsoft Corporation.
29
<PAGE> 1
EXHIBIT 23 - CONSENT OF INDEPENDENT AUDITORS
We have issued our reports dated December 6, 1995 accompanying the
consolidated financial statements and schedule incorporated by reference or
included in the Annual Report of Duplex Products Inc. on Form 10-K for the year
ended October 28, 1995. 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).
/s/ GRANT THORNTON LLP
GRANT THORNTON LLP
Chicago, Illinois
January 24, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-28-1995
<PERIOD-START> OCT-29-1994
<PERIOD-END> OCT-28-1995
<CASH> 8,368
<SECURITIES> 8,149
<RECEIVABLES> 47,131
<ALLOWANCES> 907
<INVENTORY> 21,975
<CURRENT-ASSETS> 96,246
<PP&E> 105,646
<DEPRECIATION> 66,831
<TOTAL-ASSETS> 140,309
<CURRENT-LIABILITIES> 31,799
<BONDS> 4,695
<COMMON> 8,242
0
0
<OTHER-SE> 89,396
<TOTAL-LIABILITY-AND-EQUITY> 140,309
<SALES> 275,728
<TOTAL-REVENUES> 275,728
<CGS> 210,931
<TOTAL-COSTS> 210,931
<OTHER-EXPENSES> 68,187
<LOSS-PROVISION> 546
<INTEREST-EXPENSE> 517
<INCOME-PRETAX> (3,042)
<INCOME-TAX> (1,170)
<INCOME-CONTINUING> (1,872)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,872)
<EPS-PRIMARY> (0.25)
<EPS-DILUTED> (0.25)
</TABLE>
