FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from to
Commission file number 0-5610
Paxar Corporation
(Exact name of registrant as specified in its charter)
New York 13-5670050
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
105 Corporate Park Drive, White Plains, N.Y. 10604
(Address of principal executive offices)
(914) 697-6800
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. (March 31, 1996)
Common Stock, $0.10 par value: 22,225,322 shares<PAGE>
<PAGE>
PART 1. FINANCIAL INFORMATION
_____________________________
The financial statements included herein have been prepared by Paxar
Corporation (the "Company"), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. While certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, the Company believes that the disclosures made herein are
adequate to make the information presented not misleading. It is
recommended that these condensed financial statements be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995.
In the opinion of the Company, all adjustments, consisting only of normal
recurring accruals and adjustments, necessary to present fairly the
financial information contained herein, have been included.
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<PAGE>
Item 1. Financial Statements
PAXAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended March 31
___________________________
1996 1995
____________ ____________
(in thousands, except per
share amounts)
Sales $52,750 $50,524
Cost of sales 33,256 32,032
________ ________
Gross profit 19,494 18,492
Selling, general and
administrative expenses 13,503 12,378
________ ________
Operating income 5,991 6,114
Equity in net income of affiliate 552 -
Interest expense, net (512) (402)
________ ________
Income before taxes 6,031 5,712
Taxes on income 1,688 1,771
________ ________
Net income $ 4,343 $ 3,941
________ ________
Weighted average shares
outstanding 22,576 22,190
________ ________
Earnings per share $0.19 $0.18
________ ________
See Notes to Consolidated Financial Statements
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<PAGE>
PAXAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Mar. 31, 1996 Dec. 31, 1995
_____________ _____________
(unaudited)
(in thousands, except
share amounts)
ASSETS
Current assets:
Cash $ 3,268 $ 3,466
Short-term investments 1,319 3,219
Receivables, less allowance for doubtful
accounts of $672 in 1996 and $585 in
1995 37,061 31,321
Inventories 29,198 29,322
Other current assets 4,449 3,082
Deferred income taxes 527 527
_________ _________
Total current assets 75,822 70,937
_________ _________
Property, plant and equipment, at cost 89,185 83,918
Accumulated depreciation (31,919) (30,062)
_________ _________
Net property, plant and equipment 57,266 53,856
_________ _________
Investment in affiliate 16,529 15,969
Goodwill 18,968 15,802
Other assets 544 576
_________ _________
$169,129 $157,140
_________ _________
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Due to banks $ 2,548 $ 2,991
Current maturities of long-term debt 546 529
Accounts payable and accrued liabilities 22,472 19,143
Accrued taxes on income 2,969 1,595
_________ _________
Total current liabilities 28,535 24,258
_________ _________
Long-term debt 26,221 23,121
Deferred income taxes 11,192 11,136
Other liabilities 3,486 3,429
Shareholders' equity:
Preferred Stock, $0.01 par value,
5,000,000 shares authorized, none
issued and outstanding - -<PAGE>
Common Stock, $0.10 par value,
30,000,000 shares authorized,
22,225,322 and 22,207,820 shares
issued and outstanding in 1996 and
1995, respectively 2,223 2,221
Paid-in capital 36,931 36,723
Retained earnings 61,345 57,002
Foreign currency translation adjustments (804) (750)
_________ _________
Total shareholders' equity 99,695 95,196
_________ _________
$169,129 $157,140
_________ _________
See Notes to Consolidated Financial Statements
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<PAGE>
PAXAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the Three Months Ended March 31, 1996 and 1995
(in thousands, except share amounts)
(Unaudited)
Foreign
Currency
Common Stock Paid-in Retained Translation
Shares Amount Capital Earnings Adjustments
______ ______ _______ ________ ___________
Balance December
31, 1994 17,556,061 $1,756 $35,432 $41,742 $(1,077)
Net income - - - 3,941 -
Exercise of
stock options 65,844 6 107 - -
Employee stock
purchase plan 14,062 1 152 - -
Translation
adjustments - - - - (96)
__________ ______ _______ _______ ________
Balance, March 31,
1995 17,635,967 $1,763 $35,691 $45,683 $(1,173)
__________ ______ _______ _______ ________
Balance, December
31, 1995 22,207,820 $2,221 $36,723 $57,002 $ (750)
Net income _ _ _ 4,343 -
Exercise of
stock options 6,122 1 50 - -
Employee stock
purchase plan 11,380 1 158 - -
Translation
adjustments - - - - (54)
__________ ______ _______ _______ ________
Balance, March 31,
1996 22,225,322 $2,223 $36,931 $61,345 $ (804)
__________ ______ _______ _______ ________
See Notes to Consolidated Financial Statements
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<PAGE>
PAXAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months
Ended March 31
1996 1995
________ ________
(in thousands)
OPERATING ACTIVITIES:
Net income $ 4,343 $ 3,941
________ ________
Depreciation and amortization 2,106 2,141
Deferred income taxes 56 246
Equity in net income of affiliate (552) -
Changes in assets and liabilities, net of
business acquired:
Receivables (5,116) (2,999)
Inventories 415 (1,040)
Other current assets (1,144) (1,198)
Accounts payable and accrued liabilities 2,101 1,961
Taxes on income 1,330 1,354
Other liabilities 57 29
________ ________
(747) 494
________ ________
Net cash provided by operating activities 3,596 4,435
________ ________
INVESTING ACTIVITIES:
Decrease of short-term investments 1,900 183
Purchases of property, plant and equipment (4,072) (1,633)
Acquisition of Brian Pulfrey Ltd. (4,601) -
Other 71 (63)
________ ________
Net cash used in investing activities (6,702) (1,513)
________ ________
FINANCING ACTIVITIES:
Increase (decrease) of short-term debt (426) (371)
Additions of long-term debt 8,254 1,200
Reductions of long-term debt (5,154) (2,700)
Exercise of stock options/stock purchase
plan 210 266
________ ________
Net cash provided by financing activities 2,884 (1,605)
________ ________
OTHER ACTIVITIES:
Effect of exchange rate on cash 24 7
________ ________<PAGE>
Increase (decrease) in cash (198) 1,324
Cash, at beginning of year 3,466 3,136
________ ________
Cash at end of period $ 3,268 $ 4,460
________ ________
See Notes to Consolidated Financial Statements
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<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dollars in thousands, except share data.
NOTE 1: GENERAL
The accounting policies followed during interim periods are in conformity
with generally accepted accounting principles, and are consistent with
those applied for annual periods as described in the Company's Annual
Report on Form 10-K for the year ended December 31, 1995. Other than
Balance Sheet amounts as of December 31, 1994 and 1995, all amounts
contained herein are unaudited.
RECLASSIFICATIONS
Certain reclassifications have been made to prior year amounts to conform
to the current year presentation.
NOTE 2: BUSINESS ACQUISITION
On January 22, 1996, the Company, through its United Kingdom subsidiary,
purchased the outstanding capital stock of Brian Pulfrey Limited(Pulfrey).
The purchase price was approximately $4.6 million and is subject to
adjustment for changes in shareholders equity, as defined. Pulfrey
manufactures printed labels and tags principally for U.K. apparel and
retail companies. The acquisition is not expected to have a material
effect on the Company s financial statements.
The acquisition is being accounted for as a purchase with assets acquired
and liabilities assumed recorded at their estimated fair values at the date
of acquisition. The excess of the purchase price and transaction costs
over the fair value of net assets acquired is recorded as goodwill.
NOTE 3: INVESTMENT IN AFFILIATE
On June 29, 1995, the Company invested $15.0 million in a new joint venture
company, which simultaneously acquired Monarch Marking Systems, Inc. and
related companies (Monarch). Monarch manufactures and markets marking
equipment and supplies in the U.S., United Kingdom, Germany, France,
Mexico, Canada, Hong Kong and Australia, and sells and distributes marking
equipment and supplies in 75 other countries around the world. The
Company s investment, which represents a 49% interest (initially 49.5%) is
being accounted for using the equity method. As of March 31, 1996, the
Company s investment in Monarch represents the initial investment, together
with related costs and expenses, plus the Company s equity in Monarch's net
income for the period June 29, 1995 to March 31, 1996.
The following unaudited proforma results of operations assume the
investment and acquisition occurred at the beginning of 1995. The Monarch
purchase price allocation is not complete, and adjustments, which are not
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<PAGE>
expected to be material to the Company s share of Monarch s net income, may
be necessary. In the 1995 period, Monarch s results include $6.1 million
of non-recurring charges for adjustments to operating items and
accordingly, the proforma results shown below reflect the Company s share
of these charges. These proforma results do not purport to be indicative
of the results of operations which may result in the future.
Three Months
Ended March 31
1995
(Unaudited)
______________
Sales $50,524
_______
Net income $ 3,281
_______
Earnings per share $0.15
_______
NOTE 4: INVENTORIES
The components of inventories are set forth below:
March 31, 1996 Dec. 31, 1995
______________ _____________
Raw materials $16,267 $16,603
Work-in-Process 3,103 2,850
Finished goods 9,828 9,869
_______ _______
$29,198 $29,322
_______ _______
NOTE 5: LONG-TERM DEBT
An analysis of long-term debt is set forth below:
March 31, 1996 Dec. 31, 1995
______________ _____________
Unsecured revolving bank
facility $23,762 $20,900
Secured and unsecured loans on
foreign property, plant and
machinery 2,267 2,309
Other 738 441
_______ _______
26,767 23,650
Less current maturities 546 529
_______ _______
$26,221 $23,121
_______ _______
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<PAGE>
NOTE 6: ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
A summary of accounts payable and accrued liabilities is set forth below:
March 31, 1996 Dec. 31, 1995
______________ _____________
Accounts payable $12,157 $ 9,984
Accrued payroll costs 3,857 4,729
Other accrued liabilities 6,458 4,430
_______ _______
$22,472 $19,143
_______ _______
NOTE 7: SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest and income taxes is set forth below:
Three Months Ended
March 31, 1996 March 31, 1995
______________ ______________
Interest $471 $363
Income Taxes $263 $111
Cash paid for business acquisition and the fair value of assets acquired
and liabilities assumed is set forth below:
March 31, 1996
______________
Estimated fair value of assets
acquired, including goodwill of
$3,266 $ 5,795
Liabilities assumed (1,194)
________
Cash paid $ 4,601
________
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
OPERATING RESULTS
The following table shows each element of the income statement as a percent
of sales for the periods indicated:
Three Months
Ended March 31
______________
1996 1995
____ ____
Sales 100.0% 100.0%
Cost of Sales 63.0 63.4
_____ _____
Gross Profit 37.0 36.6
Selling, general and administrative
expenses 25.6 24.5
_____ _____
Operating income 11.4 12.1
Equity in net income of affiliate 1.0 -
Interest expense, net (1.0) (0.8)
_____ _____
Income before taxes 11.4 11.3
Taxes on income 3.2 3.5
_____ _____
Net income 8.2% 7.8%
_____ _____
Sales were $52.7 million for the three months ended March 31, 1996 compared
to $50.5 million for the three months ended March 31, 1995, an increase of
4%. Foreign-based and export sales increased from $17.1 million for the
three months ended March 31, 1995 to $20.9 million for the comparable
period in 1996. The Company's apparel identification systems business grew
10% in the three months ended March 31, 1996 as compared with the three
months ended March 31, 1995. The Company s apparel identification products
business was approximately equal to the three months ended March 31, 1995.
The gross profit was $19.5 million in the three months ended March 31, 1996
compared to $18.5 million in the comparable period of 1995, an increase of
5%. The gross profit margin was 37.0% for the current period compared to
36.6% for the three months ended March 31, 1995.
Selling, general and administrative ( SG&A ) expenses were $13.5 million
for the three months ended March 31, 1996 compared to $12.4 million for the
comparable period of 1995, an increase of 9%. As a percentage of sales,
SG&A expenses were 25.6% for the three months ended March 31, 1996 compared
to 24.5% for the comparable period in 1995.
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<PAGE>
Operating income was $6.0 million or 11.4% of sales for the three months
ended March 31, 1996 compared to $6.1 million or 12.1% of sales for the
three months ended March 31, 1995.
Equity in net income of affiliate was $552,000 for the three months ended
March 31, 1996. (See Note 3 of Notes to Consolidated Financial
Statements.)
Interest expense, net was $512,000 for the three months ended March 31,
1996 compared to $402,000 for March 31, 1995.
Income before taxes was $6.0 million (11.4% of sales) for the three months
ended March 31, 1996 as compared to $5.7 million (11.3% of sales) for the
three months ended March 31, 1995. The increase in pretax profit for the
three months ended March 31, 1996 compared to March 31, 1995 is summarized
as follows:
(in millions)
Sales increase, net of increased SG&A
expenses $(0.3)
Improvement in gross margin 0.2
Equity in net income of affiliate 0.5
Increased interest expense, net (0.1)
_____
Net increase $0.3
_____
The effective income tax rate was 28% for the three months ended March 31,
1996 compared to 31% for the three months ended March 31, 1995. The
overall effective tax rate is impacted by many factors including different
statutory rates on foreign income. The lower rate is attributable to the
addition of equity in net income of affiliate. The tax rate is below the
U.S. statutory federal income tax rate of 35% due to lower rates on income
derived from foreign sources, particularly from Hong Kong and in Italy
where the companies acquired in 1994 receive special tax abatement
incentives which expire from 1996 through 1999.
Net income for the three months ended March 31, 1996 increased 10% to $4.3
million (8.2% of sales) from $3.9 million (7.8% of sales) in the 1995
period. Net income per share was $0.19 for the three months ended March
31, 1996 from $0.18 for the three months ended March 31, 1995.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES:
The table below presents the summary of cash flow for the periods
indicated:
(in millions)
Three Months
Ended March 31
______________
1996 1995
____ ____
Net cash provided by operating
activities $ 3.6 $ 4.4
Net cash used in investing activities (6.7) (1.5)
Net cash provided by (used in)
financing activities 2.9 (1.6)
______ ______
Total change in cash $(0.2) $ 1.3
______ ______
Operating activities:
Cash provided by operating activities continues to be the Company's primary
source of funds to finance operating needs and capital expenditures.
During the first quarter of 1996, cash provided by operating activities was
$3.6 million. Cash provided by operating activities in the first quarter
of 1995 was $4.4 million. Depreciation and amortization was $2.1 million
during the first quarters of 1996 and 1995.
Investing activities:
During the first quarter of 1996 capital expenditures were $4.1 million
compared to $1.6 million during the first quarter of 1995. Other than
projects for employee safety and environmental improvement, all new capital
projects are carefully analyzed and are required to make a positive
contribution on a net present value basis, generating an attractive
internal rate of return on invested capital. The Company currently
anticipates capital expenditures of $15 million for the year ended December
31, 1996. In addition, the Company intends to continue its growth, in part
by acquisitions of other complementary or related businesses and believes
that further acquisitions outside the United States would be of important
strategic value.
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<PAGE>
Financing activities:
The table below shows the components of total capital at:
(in millions)
March 31, Dec. 31,
1996 1995
________ _______
Long-term debt $ 26.2 $ 23.1
Shareholder's equity 99.7 95.2
______ ______
Total capital $125.9 $118.3
______ ______
Long-term debt as a percent of total
capital 20.8% 19.5%
______ ______
Long-term debt increased to $26.2 million at March 31, 1996 from $23.1
million at December 31, 1995. At March 31, 1996, long-term debt as a
percent of total capital was 20.8% compared to 19.5% at December 31, 1995.
The Company has a revolving credit agreement allowing it to borrow up to
$41.7 million. At March 31, 1996, there was $18.0 million available under
the revolving credit agreement. The revolving credit agreement provides
for the reduction of the commitment at the rate of $1.25 million per
quarter commencing on March 30, 1996. Any remaining balance outstanding
will be due March 30, 1999. At March 31, 1996, the Company was in
compliance with all provisions of the loan agreement.
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<PAGE>
PART II. OTHER INFORMATION
___________________________
Item 6. Exhibits and Reports on Form 8-K
a) Exhibit Index. None.
b) Reports on Form 8-K. No reports were filed on Form 8-K during the
first quarter of 1996.
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<PAGE>
PAXAR CORPORATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
PAXAR CORPORATION
______________________________
Registrant
/s/ Jack R. Plaxe
______________________________
Signature
Jack R. Plaxe
______________________________
Full Name of Signing Officer
Vice President and
Chief Financial Officer *
______________________________
Title of Signing Officer
May 13, 1996
______________________________
Date
*Mr. Plaxe has signed this Report in the dual capacity of duly authorized
officer and Chief Financial Officer.
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<ARTICLE> 5
<CIK> 0000075681
<NAME> PAXAR CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 3,268
<SECURITIES> 0
<RECEIVABLES> 37,061
<ALLOWANCES> 0
<INVENTORY> 29,198
<CURRENT-ASSETS> 75,822
<PP&E> 89,185
<DEPRECIATION> 31,919
<TOTAL-ASSETS> 169,129
<CURRENT-LIABILITIES> 28,535
<BONDS> 0
0
0
<COMMON> 2,223
<OTHER-SE> 97,472
<TOTAL-LIABILITY-AND-EQUITY> 169,129
<SALES> 52,750
<TOTAL-REVENUES> 52,750
<CGS> 33,256
<TOTAL-COSTS> 33,256
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 512
<INCOME-PRETAX> 6,031
<INCOME-TAX> 1,688
<INCOME-CONTINUING> 4,343
<DISCONTINUED> 0
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