<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
________________________________________
FOR QUARTER ENDED, MARCH 31,1996
COMMISSION FILE NUMBER 0-14358
-------
PARIS CORPORATION
-----------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
PENNSYLVANIA 23-1645493
------------ ----------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
122 KISSEL ROAD, BURLINGTON, NJ 08016
--------------------------------------
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE 609-387-7300
------------
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 AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES [X] NO [_]
NUMBER OF SHARES OUTSTANDING AS OF MARCH 31,1996
COMMON STOCK 3,745,306
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PARIS CORPORATION
CONTENTS
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<CAPTION>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited): PAGE
<S> <C> <C> <C>
Consolidated Balance Sheets - March 31, 1996
and September 30, 1995 (audited) 3
Consolidated Statements of Income
Three months ended, March 31, 1996 and 1995
Six months ended, March 31, 1996 and 1995 4
Consolidated Statements of Cash Flows -
Six months ended, March 31, 1996 and 1995 5
Notes to Consolidated Condensed
Financial Statements 6
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7 - 10
PART II. OTHER INFORMATION (Items 1 through 5 - not applicable)
ITEM 6. Exhibits and Reports on Form 8-K 10
Signatures of Registrant 11
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2
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PARIS CORPORATION
CONSOLIDATED BALANCE SHEET
UNAUDITED
<TABLE>
<CAPTION>
(IN THOUSANDS)
ASSETS
3-31-96 9-30-95
(AUDITED)
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<S> <C> <C>
Current assets:
Cash and cash equivalents $ 463 $ 5,227
Marketable securities 4,727 3,658
Accounts receivable 6,337 6,549
Inventories 9,906 17,348
Recoverable income taxes 897 0
Prepaid expenses 373 300
Deferred income taxes 825 1,233
-------- --------
Total current assets 23,528 34,315
Property, plant and equipment, net 6,465 6,800
Other assets 343 73
-------- --------
Total Assets $ 30,336 $ 41,188
======== ========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Current portion of long term debt $ 0 $ 1,650
Note payable, bank 3,126 4,926
Accounts payable and accrued expenses 5,754 10,776
Accrued payroll and related expenses 324 603
Income taxes payable 0 1,105
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Total current liabilities 9,204 19,060
Deferred income taxes 994 1,020
-------- --------
Total liabilities 10,198 20,080
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Commitments:
Shareholders' equity:
Common stock 16 16
Additional paid in capital 8,588 8,588
Retained earnings 12,696 13,683
Unrealized gain on marketable securities 70 121
Treasury stock (1,232) (1,300)
-------- --------
Total shareholders' equity 20,138 21,108
-------- --------
Total Liabilities and Shareholders' Equity $ 30,336 $ 41,188
======== ========
</TABLE>
3
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PARIS CORPORATION
CONSOLIDATED STATEMENT OF INCOME
UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE THREE SIX SIX
MONTHS MONTHS MONTHS MONTHS
ENDED ENDED ENDED ENDED
3-31-96 3-31-95 3-31-96 3-31-95
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Net Sales $ 13,500 $ 19,403 $ 30,103 $ 33,420
Cost of products sold 13,634 15,333 28,401 27,512
-------- -------- -------- ---------
Gross profit (134) 4,070 1,702 5,908
--------- -------- -------- ---------
Selling expenses 885 625 1,504 1,161
General and administrative expenses 953 1,302 1,613 2,064
Interest expense 94 53 234 89
Restructuring costs 0 538 0 538
Other (income) expense 43 100 (153) 57
-------- -------- --------- ---------
Income (loss) before taxes (2,109) 1,452 (1,496) 1,999
Provision (benefit) for income taxes (717) 494 (509) 680
--------- -------- --------- ---------
Net Income (loss) $ (1,392) $ 958 $ (987) $ 1,319
========= ======== ========= =========
Weighted average common and 3,787,237 3,715,317 3,787,237 3,715,317
equivalent shares outstanding
Earnings per share $ (0.37) $ 0.26 $ (0.26) $ 0.36
============ ========= ========= =========
</TABLE>
4
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PARIS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
(IN THOUSANDS) SIX MONTHS SIX MONTHS
ENDED ENDED
<S> <C> <C>
3-31-96 3-31-95
------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (987) $ 1,319
-------- --------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 553 596
(Gain) loss on sale of property, plant and equipment (10) 89
(Gain) loss on sale of marketable securities (199) (71)
Decrease (increase) in deferred income taxes 382 (264)
Provision for losses on accounts receivable (80) 210
Provision for equity in loss on investment in joint venture 195 129
(Increase) decrease in:
Accounts receivable 293 (2,587)
Inventories 7,441 (1,133)
Recoverable income taxes (897) 0
Prepaid expenses (73) (32)
Other assets (75) (25)
Increase (decrease) in:
Accounts payable and accrued expenses (5,021) 1,968
Accrued payroll and related expenses (279) 228
Income taxes payable, current (1,105) 192
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Total adjustments 1,125 (700)
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Net cash provided by (used in) operating activities 138 619
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CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in joint venture (390) 0
Proceeds from sale of marketable securities 521 220
Purchase of marketable securities (1,442) (952)
Purchase of property, plant and equipment (208) (702)
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Net cash provided by (used in) investing activities
(1,519) (1,434)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt (1,650) (163)
Issuance of treasury stock 67 18
Repayments of working capital line of credit (1,800) 0
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Net cash provided by (used in) financing activities (3,383) (145)
Net decrease in cash and cash equivalents (4,764) (960)
Cash and cash equivalents at beginning of period 5,227 2,081
-------- --------
Cash and cash equivalents at end of period $ 463 $ 1,121
======== ========
Supplemental disclosures of cash flow information:
Cash paid for interest expense 234 89
Cash paid for income taxes $ 1,086 $ (128)
</TABLE>
5
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PARIS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
ACCOUNTING POLICIES:
The accompanying unaudited interim consolidated financial statements were
prepared in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. The Summary of Accounting Policies and Notes to
Consolidated Financial Statements included in the September 30, 1995 Form 10-K
should be read in conjunction with the accompanying statements. These statements
include all adjustments (consisting only of normal recurring accruals) which the
Company believes necessary for a fair presentation of the statements. The
interim operating results are not necessarily indicative of the results for a
full year .
6
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PARIS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
---------------------
MARCH 31, 1996
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<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
THREE MONTHS SIX MONTHS
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$ % $ %
1996 1995 CHANGE CHANGE 1996 1995 CHANGE CHANGE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $13,500 $19,403 ($5,903) -30% $30,103 $33,420 ($3,317) -10%
- ------------------------------------------------------------------------------------------------------------------------------
Cost of sales 13,634 15,333 (1,699) -11% 28,401 27,512 889 3%
- ------------------------------------------------------------------------------------------------------------------------------
Gross profit (134) 4,070 (4,204) -103% 1,702 5,908 (4,206) -71%
- ------------------------------------------------------------------------------------------------------------------------------
Selling 885 625 260 42% 1,504 1,161 343 30%
- ------------------------------------------------------------------------------------------------------------------------------
General and administrative expenses 953 1,302 (349) -27% 1,613 2,064 (451) -22%
- ------------------------------------------------------------------------------------------------------------------------------
Restructuring costs 0 538 (538) -100% 0 538 (538) -100%
- ------------------------------------------------------------------------------------------------------------------------------
Interest expense 94 53 41 77% 234 89 145 163%
- ------------------------------------------------------------------------------------------------------------------------------
Other (income) expense 43 100 (57) -57% (153) 57 (210) -368%
- ------------------------------------------------------------------------------------------------------------------------------
Pretax income (2,109) 1,452 (3,561) -245% (1,496) 1,999 (3,495) -175%
- ------------------------------------------------------------------------------------------------------------------------------
Income taxes (717) 494 (1,211) -245% (509) 680 (1,189) -175%
- ------------------------------------------------------------------------------------------------------------------------------
Net income ($ 1,392) $ 958 ($2,350) -245% ($ 987) $ 1,319 ($2,306) -175%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
GROSS PROFIT
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THREE MONTHS COMPARISON
Gross profit for the three months ended March 31, 1996 of $(134M) declined
$4204M or 103% as compared to the same quarter in the prior year. Sales of
$13500M decreased $5903M or 30% and cost of sales of $13634M decreased $1699M or
11%.
Sales factors
- -------------
Sales of stock continuous forms of $9326M decreased $7046M or 43% due to a
decline in unit volume of 34% and lower average selling prices of 13%. Unit
volume decline resulted from the following factors:
1) Decrease in overall demand for continuous forms due to the continuing
replacement of the impact printer installed base with laser and inkjet
printers.
2) Temporary decline in demand due to overstocked inventory positions of
the company's distributor base of customers.
3) Company's major customer reorganized its paper vendor base resulting
in lower sales.
Commodity cut sheet sales of $1666M increased $910M or 120% due to favorable
pricing arrangements with the company's paper mill suppliers resulting in very
competitive product pricing.
New product offerings resulted in higher sales of $1150M representing an
increase of $683M or 146%, particularly in value added cut sheets due to the
inkjet/laser printer demand.
Custom forms sales of $1946M decreased $262M or 12%.
Sales discounts, rebates, and allowances of $582M were $188M higher.
7
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Cost factors
- ------------
The cost of stock continuous forms sales of $8583M decreased $2478M or 22%
disproportionate to the sales decline of 43% due to (1) excess inventory levels
of raw paper at the end of the first quarter immediately preceding a significant
drop in pricing in the second quarter resulting in smaller margins as the high
priced inventories were sold at falling selling prices, and (2) significant
price reductions competitively due to the temporary decline in demand resulting
from the oversupply condition in the market. Accordingly sales prices dropped
much faster than unit costs.
The cost of sales of commodity cut sheets, custom forms, and new product
offerings of $4002M were $1047M higher, proportionate to the increase in product
sales.
The reorganization of the manufacturing plant and head count reductions resulted
in greater labor efficiencies and capacity utilization yielding a $443M decrease
in unfavorable manufacturing variances to standard as compared to the same
quarter in the preceding year.
Freight costs were $165M higher principally due to the cost of importation of
some of the company's new products.
SIX MONTHS COMPARISON
Gross profit for the six months ended March 31, 1996 of $1702M represented a
decline of $4206M or 71% as compared to the same period in the prior year.
Sales of $30103M decreased $3317M or 10% and cost of sales of $28401M increased
$889M or 3%.
Sales factors
- -------------
Sales of stock continuous forms of $21597M decreased $5658M or 21% due to a
decline in unit volume of 26% offset by higher average selling prices of 8%.
The unit volume decline for the six month period resulted from the same factors
that effected the second quarter.
Commodity cut sheet sales of $3187M increased $894M or 39% and new product sales
of $2274M increased $1576M or 226% due to the same factors noted above for the
three month comparison.
Custom forms sales decreased $449M or 10%.
Sales discounts, rebates, and allowances were $90M lower.
Cost factors
- ------------
The cost of stock continuous forms sales of $18273M decreased $545M or 3%
disproportionate to the sales decline of 21% due to the same factors noted above
for the second quarter.
The cost of sales of commodity cut sheets, custom forms, and new product
offerings as a group of $7852M were $1739M higher, proportionate to the increase
in product sales.
Greater labor efficiencies and capacity utilization yielded a $552M decrease in
manufacturing variances to standard for the same reasons noted above for the
second quarter.
All other factors combined accounted for the remainder of the increase in cost
of sales of $247M.
OPERATING EXPENSES
- ------------------
THREE MONTHS COMPARISON
Sales and marketing expenses increased $260,000 (42%) due primarily to the
catalog advertising of our new office products. Advertising expense increased
$194,000 or 430% for the three months ended March 31, 1996 in comparison to the
corresponding quarter a year ago. The addition of personnel to market and
support our new products represented an additional expense of $82,000 or 1010%
in comparison to the prior fiscal quarter. The decrease in other sundry
expenses of $14,000 represents the remaining difference in selling and marketing
expenses. General and administration expenses decreased $349,000 or 27%
primarily due to a reserve of $150,000 for estimated federal and state tax audit
deficiencies set up in fiscal 1994. The allowance for doubtful accounts
decreased $100,000. Also, salaries and benefits decreased $45,000
8
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primarily due to a change in health insurance policies. The remaining change
consisted of sundry expenses of $54,000.
SIX MONTHS COMPARISON
Sales and marketing expenses increased $343,000 (30%), while general and
administrative expenses decreased $451,000 (22%), primarily due to the same
reasons as explained above.
RESTRUCTURING COST
- ------------------
The company incurred $538,000 in restructuring costs during the three months
ended March 31, 1995 in order to consolidate manufacturing capacity to meet
market demand and to provide lower fixed costs to permit competitive pricing.
The cost included plant and equipment shutdown, move and relocation, and
reassembly and start up. All restructuring costs were completed in the second
quarter of fiscal 1995.
INTEREST EXPENSE
- ----------------
Interest expense increased $41,000 in the quarter and $145,000 in the six months
ended March 31, 1996, respectively, as compared to the comparable periods the
previous year. Working capital interest increased $73,000 and $186,000,
respectively, for the three month and six month periods ended March 31, 1996 and
1995. These increases were off set by reductions of $32,000 and $41,000,
respectively, due to the paydown of mortgage debt.
OTHER (INCOME) EXPENSES
- -----------------------
Other income increased $57,000 (57%), and $210,000 ($368%) for the three months
and six months, respectively, ended March 31, 1996. Interest and dividend
income, as well as gains from the sale of securities, accounted for the majority
of the increase.
LIQUIDITY AND CAPITAL RESOURCES:
--------------------------------
Working capital decreased $932,000 from $15.25 million to $14.32 million and
cash and cash equivalents decreased $4.76 million during the six months ended
March 31, 1996. Inventories were lowered $7.4 million from $17.3 million to
$9.9 million during the six months ended March 31, 1996 in reaction to the
steady decline in paper prices. Trade payables were reduced $5 million from
$10.7 million to $5.7 million. The reduction in payables is due to the Company
decreasing trade payables outstanding from 85 days to the Company's normal 30
day cycle for raw materials. The reduction in inventories and payables due to
raw material inventory was offset by the purchase of $2 million in office
products inventory. Trade receivables decreased slightly from $6.5 million to
$6.3 million for the six month period.
The Company has a $6 million line of credit available through a commercial bank
at prime less one half percent (8% at March 31, 1996). The Company repaid $1.8
million during the six months ended March 31, 1996, reducing the outstanding
balance from $4.9 million to $3.1 million.
The Company expended $1.65 million for the payoff of an industrial revenue note.
The note was secured by a first mortgage on the Company's Burlington, New Jersey
facility.
9
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INVESTMENTS
-----------
In October 1995 the Company invested an additional $390,000 in Signature
Corporation, a joint venture corporation that markets office products through
the supermarket and drugstore retail chains. The Company's original investment
of $333,334 for 33% of the common stock of the joint venture in December, 1992
has been written off completely by the recognition of the Company's equity in
the operating losses of Signature of $129,334 and $204,000 in fiscal 1995 and
1994, respectively. With the additional capital investment, the Company has
increased its ownership to 44% of the common stock of Signature. During the six
months ended March 31, 1996, the Company wrote off $195,000 of the $390,000
investment due to the continuing operating losses of the joint venture.
PARIS CORPORATION
PART II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Effective January 1996, by stockholder approval at the Annual Meeting,
the Company changed its name from Paris Business Forms, Inc. to Paris
Corporation. The name change reflects the Company's commitment to
diversifying from its core business of stock and custom business forms
to new channels with a broader base of products including computer
products, office products, software and value added cut sheet paper
products.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
Computation of Primary Earnings Per Share
Average Number of Common Shares
Outstanding During the Period 3,787,237
=========
(b) Reports on Form 8-K
None.
10
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PARIS CORPORATION
SIGNATURES OF REGISTRANT
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PARIS CORPORATION
[SIGNATURE ILLEGIBLE]
-----------------------------
Dominic P. Toscani, Sr.
President and Chairman of
the Board of Directors
/s/ John A. Whiteside
-----------------------------
John A. Whiteside
Chief Financial Officer
DATE: May 3, 1996
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 462,502
<SECURITIES> 4,726,996
<RECEIVABLES> 6,933,273
<ALLOWANCES> 596,703
<INVENTORY> 9,906,353
<CURRENT-ASSETS> 23,527,762
<PP&E> 14,512,823
<DEPRECIATION> 8,048,097
<TOTAL-ASSETS> 30,335,800
<CURRENT-LIABILITIES> 9,210,070
<BONDS> 0
0
0
<COMMON> 15,751
<OTHER-SE> 20,121,403
<TOTAL-LIABILITY-AND-EQUITY> 30,335,800
<SALES> 13,500,366
<TOTAL-REVENUES> 13,500,366
<CGS> 13,633,914
<TOTAL-COSTS> 13,633,914
<OTHER-EXPENSES> 1,975,626
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 94,015
<INCOME-PRETAX> (2,109,174)
<INCOME-TAX> (717,119)
<INCOME-CONTINUING> (1,971,376)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,392,055)
<EPS-PRIMARY> (.37)
<EPS-DILUTED> (.37)
</TABLE>
