<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 QUATER ENDED, JUNE 30, 1996
COMMISSION FILE NUMBER 0-14358
-------
PARIS CORPORATION
-----------------
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 JUNE 30, 1996
COMMON STOCK 3,937,517
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PARIS CORPORATION
CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited): PAGE
Consolidated Balance Sheets - June 30, 1996
and September 30, 1995 (audited).......................3
Consolidated Statements of Income
Three months ended, June 30, 1996 and 1995
Nine months ended, June 30, 1996 and 1995..............4
Consolidated Statement of Cash Flows-
Nine months ended, June 30, 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 1,2,3, & 5 - not applicable)
ITEM 4. Submission of Matters to a Vote of Security Holders....10
ITEM 6. Exhibits and Reports on Form 8-K.......................10
Signatures of Registrant...............................11
2
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PARIS CORPORATION
CONSOLIDATED BALANCE SHEET
Unaudited
(in thousands)
<TABLE>
<CAPTION>
ASSETS 9-30-95
6/30/96 (Audited)
------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,088 $ 5,227
Marketable securities 4,657 3,658
Accounts receivable 5,947 6,549
Inventories 7,920 17,348
Recoverable income taxes 1,563 0
Prepaid expenses 332 300
Deferred income taxes 825 1,233
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Total current assets 22,332 34,315
Property, plant and equipment, net 6,421 6,800
Other assets 212 73
------- -------
Total Assets $28,965 $41,188
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt $ 0 $ 1,650
Note payable, bank 2,927 4,926
Accounts payable and accrued expenses 5,931 10,776
Accrued payroll and related expenses 514 603
Income taxes payable 0 1,105
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Total current liabilities 9,372 19,060
Deferred income taxes 994 1,020
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Total Liabilities 10,366 20,080
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Commitments:
Shareholders' equity:
Common stock 16 16
Additional paid in capital 8,588 8,588
Retained earnings 11,460 13,683
Unrealized gain on marketable securities 70 121
Treasury stock (1,535) (1,300)
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Total Shareholders' Equity 18,599 21,108
------- -------
Total Liabilities and Shareholders' Equity $28,965 $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 Nine Nine
Months Months Months Months
Ended Ended Ended Ended
6/30/96 6/30/95 6/30/96 6/30/95
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales $ 14,218 $ 16,741 $ 44,321 $ 50,161
Cost of products sold 14,254 13,181 42,655 40,692
--------- --------- --------- ---------
Gross profit (36) 3,560 1,666 9,469
--------- --------- --------- ---------
Selling expenses 844 585 2,347 1,746
General and administrative expenses 879 844 2,492 2,908
Restructuring costs, net 0 0 0 538
Interest expense 52 33 286 107
Other (income) expense 61 183 (91) 255
--------- --------- --------- ---------
Income (loss) before taxes (1,872) 1,915 (3,368) 3,915
Provision (benefit) for income taxes (636) 751 (1,145) 1,431
--------- --------- --------- ---------
Net Income (loss) $ (1,236) $ 1,164 $ (2,223) $ 2,484
========= ========= ========= =========
Weighted average common and 3,690,531 3,715,317 3,690,531 3,715,317
equivalent shares outstanding
Earnings per share $ (0.33) $ 0.31 $ (0.60) $ 0.67
========= ========= ========= =========
</TABLE>
4
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PARIS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOW
Unaudited
<TABLE>
<CAPTION>
(in thousands) Nine Nine
Months Months
Ended Ended
CASH FLOWS FROM OPERATING ACTIVITIES: 6-30-96 6-30-95
---------------------
<S> <C> <C>
Net income (loss) $ (2,223) $ 2,484
-------- -------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 835 863
(Gain) loss on sale of property, plant and
equipment (36) 373
(Gain) on sale of marketable securities (251) (142)
Decrease (increase) in deferred income taxes 382 (315)
Provision for losses on accounts receivable (20) 270
Provision for equity in loss on investment in
joint venture 304 129
(Increase) decrease in:
Accounts receivable 623 (1,742)
Inventories 9,427 (5,951)
Recoverable income taxes (1,563) 0
Prepaid expenses (32) (2)
Other assets (54) (93)
Increase (decrease) in:
Accounts payable and accrued expenses (4,844) 3,812
Accrued payroll and related expenses (89) 405
Income taxes payable, current (1,105) (6)
-------- -------
Total adjustments 3,577 (2,399)
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Net cash provided by operating activities 1,354 85
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CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in joint venture (390) 0
Proceeds from sale of marketable securities 784 280
Purchase of marketable securities (1,583) (262)
Proceeds from sale of property, plant, and
equipment 16 978
Purchase of property, plant and equipment (435) (725)
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Net cash provided by (used in) investing
activities (1,608) 271
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt (1,650) (699)
Purchase of treasury stock (235) 23
Repayments of working capital line of credit (2,000) 0
-------- -------
Net cash used in financing activities (3,885) (676)
Net decrease in cash and cash equivalents (4,139) (320)
Cash and cash equivalents at beginning of
period 5,227 1,579
-------- -------
Cash and cash equivalents at end of period $ 1,088 $ 1,259
======== =======
Supplemental disclosures of cash flow
information:
Cash paid for interest expense $ 286 $ 107
Cash paid for income taxes $ 1,086 $ 1,452
</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 are necessary for a fair presentation
of the financial 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
---------------------
JUNE 30, 1996
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<TABLE>
<CAPTION>
Three Months Nine Months
- ----------------------------------------------------------------------------------------------------------------------------------
$ % $ %
1996 1995 Change Change 1996 1995 Change Change
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $14,218 $16,741 ($2,523) -15% $44,321 $50,161 ($5,840) -12%
- ----------------------------------------------------------------------------------------------------------------------------------
Cost of sales 14,254 13,181 1,073 8% 42,655 40,692 1,963 5%
- ----------------------------------------------------------------------------------------------------------------------------------
Gross profit (36) 3,560 (3,596) -101% 1,666 9,469 (7,803) -82%
- ----------------------------------------------------------------------------------------------------------------------------------
Selling 844 585 259 44% 2,347 1,746 601 34%
- ----------------------------------------------------------------------------------------------------------------------------------
General and administrative expenses 879 844 35 4% 2,492 2,908 (416) -14%
- ----------------------------------------------------------------------------------------------------------------------------------
Restructuring costs 0 0 0 0 538 (538) -100%
- ----------------------------------------------------------------------------------------------------------------------------------
Interest expense 52 33 19 58% 286 107 179 167%
- ----------------------------------------------------------------------------------------------------------------------------------
Other (income) expense 61 183 (122) -67% (91) 255 (346) -136%
- ----------------------------------------------------------------------------------------------------------------------------------
Pretax income (1,872) 1,915 (3,787) -198% (3,368) 3,915 (7,283) -186%
- ----------------------------------------------------------------------------------------------------------------------------------
Income taxes (636) 751 (1,387) -185% (1,145) 1,431 (2,576) -180%
- ----------------------------------------------------------------------------------------------------------------------------------
Net income ($ 1,236) $ 1,164 ($2,400) -206% ($2,223) $ 2,484 ($4,707) -189%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Gross Profit
- ------------
Three Months Comparison
Gross profit for the three months ended June 30, 1996 of $(36M) declined $3596M
or 101% as compared to the same quarter in the prior year. Sales of $14218M
decreased $2523M or 15% and cost of sales of $14254M increased $1073M or 8%.
Sales factors
- -------------
Sales of stock continuous forms of $9283M decreased $3718M or 29% due to a
decline in average selling prices of 33%, partially offset by an increase in
unit volume of 9%. The weakness in paper products pricing was industry-wide,
resulting principally from excessive user inventory levels. Despite lower
demand, the Company maintained unit volume levels by aggressively meeting
competition pricing.
Commodity cut sheet sales of $2401M increased $1078M or 81% due to favorable
pricing arrangements with the Company's paper mill suppliers resulting in very
competitive product pricing, albeit at 37% lower pricing as compared to the
third quarter of the prior year.
New product offerings resulted in higher sales of $1044M representing an
increase of $540M or 107%, particularly in value added cut sheets due to the
inkjet/laser printer demand.
Custom forms sales of $1895M decreased $419M or 18%.
Sales discounts, rebates and allowances of $611M were $90M lower.
Cost factors
- ------------
The cost of stock continuous forms sales of $8654M increased $47M or 0.5%
disproportionate to the sales decline of 29% due to excess inventory levels of
higher priced raw paper purchased at the end of the previous fiscal year that
were not exhausted until the middle of the third quarter. The high priced
7
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inventories were sold at falling selling prices during the quarter. Accordingly
sales prices dropped much faster than unit costs.
The cost of sales of commodity cut sheets of $2411M increased $1195M or
98% proportionate to the increase in sales.
The cost of sales of new product offerings of $706M increased $422M or 60%
proportionate to the increase in sales.
The cost of sales of custom forms of $1325M was lower than the comparable
period last year by $746M due to the lower sales volume and the quoting
of higher margin jobs.
Freight costs were $130M higher principally due to the cost of importation
of some of the company's new products.
Nine Months Comparison
Gross profit for the nine months ended June 30, 1996 of $1666M represented
a decline of $7803M or 82% as compared to the same quarter in the prior
year. Sales of $44321M decreased $5840M or 12% and cost of sales of $42655M
increased $1963M or 5%.
Sales factors
- -------------
Sales of stock continuous forms of $30906M decreased $9264M or 23% due to
a decline in unit volume of 17% and lower selling prices of 8%. The unit
volume decline for the nine month period resulted from the same factors
that effected the third quarter.
Commodity cut sheet sales of $5166M increased $1550M or 43% due to an increase
in unit volume of 57% offset by lower pricing of 4%.
New product sales were $3389M as compared to $1133M last year representing
an increase of 200% Custom forms sales decreased $853M or 13%.
Sales discounts, rebates and allowances were $340M lower than last year.
Cost factors
- ------------
The cost of stock continuous forms sales of $28390M increased $111M or 0.5%
disproportionate to the sales decline of 23% due to the same factors noted
above for the third quarter.
The cost of sales of commodity cut sheets of $5491M were $2149M higher than
1995 proportionate to the sales increase.
New product cost of sales for 1996 was $2226M as compared to $654M last
year representing an increase of $1572M or 240% approximately equivalent
to the increase in unit volume.
Custom forms costs of sales decreased $1126M or 20% on unit volume decrease
of 13%.
Freight and distribution costs were $165M higher than last year due to store
direct rather than distribution center shipments to the Company's largest
customer plus higher importation costs for new products.
Greater labor efficiencies and capacity utilization yielded a $1201M decrease
in manufacturing costs for the current period.
All other factors combined accounted for the remainder of the increase in
cost of sales of $230M.
Operating Expenses
- ------------------
Three Months Comparison
Sales and marketing expenses increased $259,000 (44%) due primarily to the
additional staffing costs associated with our new products. Newly created
positions that include National Sales Manager, Director of Marketing, Product
Managers, and support staff represented increased costs of $187,000. Marketing
expenses that include promotional brochures, advertising, and trade shows
represent the remaining increase of $72,000. General and administrative
expenses increased $35,000 (4%) for the quarter ending June 30, 1996. The
change is due to increased salaries of $49,000 offset by a reduction in
fringe benefits of $14,000. The decrease in fringe benefits is due to a
change in health insurance policies.
8
<PAGE>
Nine Months Comparison
Sales and marketing expenses increased $601,000 (34%), for the nine months
ending June 30, 1996. The following factors represented the increased cost:
Salaries $233,000; advertising and public relations $168,000; artwork and
brochures $80,000; trade shows $61,000; and other miscellaneous expenses of
$59,000. General and administrative expenses decreased $416,000 (14%) primarily
due to a decrease in allowance for doubtful accounts of $290,000. Other factors
were the reduction in fringe benefits of $182,000; the decrease in expense of
$75,000 related to a provision for estimated federal and state tax audit
deficiencies; other sundry reductions of $43,000; offset by increased salaries
of $174,000.
Restructuring Cost
- ------------------
The company incurred $538,000 in restructuring costs during the nine months
ended June 30, 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 restucturing costs were completed in the second
quarter of fiscal 1995.
Interest Expense
- ----------------
Interest expense increased $19,000 in the quarter and $179,000 in the nine
months ended June 30, 1996, respectively, as compared to the comparable periods
the previous year. Working capital interest increased $52,000 and $238,000,
respectively, for the three month and nine month periods ended June 30, 1996
and 1995. These increases were offset by reductions of $33,000 and $59,000,
respectively, due to the paydown of mortgage debt.
Other (Income) Expenses
- -----------------------
In the third quarter, other net expense decreased ($122,000) in comparison to
the corresponding quarter one year ago. The change is represented by a decrease
in the loss on the sale of fixed assets of ($311,000) due to the sale and
retirement of dormant or underutilized assets in fiscal 1995. Offsetting the
change in fixed assets were the decrease in income related to interest,
dividends, and sale of securities of $70,000 and the increase in expenses
related to an investment in a joint venture of $119,000.
For the nine months ending June 30, 1996 other net income items increased
$346,000 primarily due to the change in the gain on sale of fixed assets of
$335,000 for the reasons stated above.
LIQUIDITY AND CAPITAL RESOURCES:
--------------------------------
Working capital decreased $2.3 million from $15.26 million to $12.96 million and
cash and cash equivalents decreased $4.13 million during the nine months ended
June 30, 1996. Inventories were lowered $9.4 million from $17.3 million to $7.9
million during the nine months ended June 30, 1996 in reaction to the steady
decline in paper prices. Trade payables were reduced $4.8 million from $10.7
million to $5.9 million. The reduction in payables is due to the Company
decreasing inventories and 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 $5.9 million for the nine month period.
The Company has a $6 million line of credit available through a commercial bank
at prime less one half percent (8% at June 30, 1996). The Company repaid $2.0
million during the nine months ended June 30, 1996, reducing the outstanding
balance form $4.9 million to $2.9 million.
9
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The Company expended $1.65 million for payoff of an industrial revenue note. The
note was secured by a first mortgage on the Company's Burlington, New Jersey
facility.
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 nine
months ended June 30, 1996, the Company wrote off $303,500 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 3,690,531
=========
(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
/s/ Dominic P. Toscani, Sr.
---------------------------
Dominic P. Toscani, Sr.
President and Chairman of
the Board of Directors
/s/ John A. Whiteside
--------------------------
John A. Whiteside
Chief Financial Officer
DATE: August 1, 1996
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,088,173
<SECURITIES> 4,657,077
<RECEIVABLES> 6,582,569
<ALLOWANCES> 635,923
<INVENTORY> 7,920,441
<CURRENT-ASSETS> 22,332,116
<PP&E> 14,659,531
<DEPRECIATION> 8,238,867
<TOTAL-ASSETS> 28,965,421
<CURRENT-LIABILITIES> 6,249,111
<BONDS> 0
0
0
<COMMON> 15,751
<OTHER-SE> 18,583,513
<TOTAL-LIABILITY-AND-EQUITY> 28,965,421
<SALES> 14,218,231
<TOTAL-REVENUES> 14,218,231
<CGS> 14,254,250
<TOTAL-COSTS> 14,254,250
<OTHER-EXPENSES> 1,783,646
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 52,405
<INCOME-PRETAX> (1,872,069)
<INCOME-TAX> (636,504)
<INCOME-CONTINUING> (1,235,566)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,235,566)
<EPS-PRIMARY> (.33)
<EPS-DILUTED> (.33)
</TABLE>
