<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 JUNE 30, 1997
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 JUNE 30, 1997
COMMON STOCK 3,937,517
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PARIS CORPORATION
CONTENTS
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<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C>
ITEM 1. Financial Statements (Unaudited): PAGE
Consolidated Balance Sheets - June 30, 1997
and September 30, 1996......................................3
Consolidated Statements of Income
Three months ended June 30, 1997 and 1996
Nine months ended June 30, 1997 and 1996....................4
Consolidated Statements of Cash Flows -
Nine months ended June 30, 1997 and 1996....................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
</TABLE>
2
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PARIS CORPORATION
CONSOLIDATED BALANCE SHEET
Unaudited
(in thousands)
<TABLE>
<CAPTION>
ASSETS
9/30/96
6/30/97 (Audited)
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,753 $ 650
Marketable securities 3,610 5,036
Accounts receivable 6,023 6,696
Inventories 5,679 6,686
Recoverable income taxes 873 1,871
Prepaid expenses 314 314
Deferred income taxes 1,223 1,223
-------- --------
Total current assets 19,475 22,476
Property, plant and equipment, net 5,352 6,107
Other assets 201 154
-------- --------
Total Assets $25,028 $28,737
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Note payable, bank $ 3,033 $ 3,927
Accounts payable and accrued expenses 5,391 6,200
Accrued payroll and related expenses 349 309
-------- --------
Total current liabilities 8,773 10,436
Deferred income taxes 713 1,125
-------- --------
Total Liabilities 9,486 11,561
-------- --------
Commitments:
Shareholders' equity:
Common stock 16 16
Additional paid in capital 8,588 8,588
Retained earnings 8,669 10,282
Unrealized gain on marketable
securities 24 16
Treasury stock (1,755) (1,726)
-------- --------
Total Shareholders' Equity 15,542 17,176
-------- --------
Total Liabilities and
Shareholders' Equity $25,028 $28,737
======== ========
</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
6/30/97 6/30/96 6/30/97 6/30/96
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Sales $ 12,468 $ 14,218 $ 40,192 $ 44,321
Cost of products sold 12,006 14,254 38,345 42,655
---------- ---------- ---------- ----------
Gross profit 462 (36) 1,847 1,666
---------- ---------- ---------- ----------
Selling expenses 469 844 1,671 2,347
General and administrative expenses 826 879 2,498 2,492
Interest expense 70 52 230 286
Other (income) expense 17 61 (124) (91)
---------- ---------- ---------- ----------
Income (loss) before taxes (920) (1,872) (2,428) (3,368)
Provision (benefit) for income taxes (302) (636) (815) (1,145)
---------- ---------- ---------- ----------
Net Income (loss) $ (618) $ (1,236) $ (1,613) $ (2,223)
========== ========== ========== ==========
Weighted average common and 3,650,000 3,690,531 3,650,000 3,690,531
equivalent shares outstanding
Earnings per share $ (0.17) $ (0.33) $ (0.44) $ (0.60)
========== ========== ========== ==========
</TABLE>
4
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PARIS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited
(in thousands)
<TABLE>
<CAPTION>
Nine Nine
Months Months
Ended Ended
CASH FLOWS FROM OPERATING ACTIVITIES: 6-30-97 6-30-96
---------------------
<S> <C> <C>
Net income (loss) $(1,613) $ (2,223)
---------- --------
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 832 835
(Gain) loss on sale of property,
plant and equipment (71) (36)
(Gain) on sale of marketable
securities (41) (251)
Decrease (increase) in deferred
income taxes (412) 382
Provision for losses on accounts
receivable 180 (20)
Provision for equity in loss on
investment in joint venture --- 304
(Increase) decrease in:
Accounts receivable 494 623
Inventories 1,007 9,427
Recoverable income taxes 992 (1,563)
Prepaid expenses 1 (32)
Other assets 91 (54)
Increase (decrease) in:
Accounts payable and accrued
expenses (939) (4,844)
Accrued payroll and related expenses 37 (89)
Income taxes payable, current --- (1,105)
---------- --------
Total adjustments 2,171 3,577
---------- --------
Net cash provided by operating
activities 558 1,354
---------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in joint venture (390)
Proceeds from sale of marketable
securities 2,057 784
Purchase of marketable securities (582) (1,583)
Proceeds from sale of property,
plant, and equipment 85 16
Purchase of property, plant and
equipment (91) (435)
---------- --------
Net cash provided by (used in)
investing activities 1,469 (1,608)
---------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt --- (1,650)
Purchase of treasury stock (30) (235)
Repayments of working capital line of
credit (894) (2,000)
---------- --------
Net cash used in financing activities (924) (3,885)
Net increase (decrease) in cash and
cash equivalents 1,103 (4,139)
Cash and cash equivalents at beginning
of period 650 5,227
---------- --------
Cash and cash equivalents at end of
period $ 1,753 $ 1,088
========== ========
Supplemental disclosures of cash flow
information:
Cash paid for interest expense $ 230 $ 286
Cash paid for income taxes $ 16 $ 1,086
</TABLE>
5
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PARIS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
ACCOUNTING POLICIES:
1. 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, 1996 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.
2. The Company has agreements with certain customers and vendors which include
potential rebates, commissions, and other liabilities upon the fulfillment
of certain terms and conditions. Management had estimated and recorded
contingent liabilities of approximately $690,000 as of September 30, 1996
related to these agreements and other potential liabilities. During the
nine months ended June 30, 1997, management reduced the liability to
$400,000, reflecting lower obligations.
3. As of March 25, 1997, the Company established a new $7,500,000 revolving
credit facility with a new bank in order to refinance the previous line of
credit balance in the amount of $3,927,000 and to provide additional
working capital. The borrowing base under the new credit facility is
limited to 80% of eligible trade receivables and 50% of eligible
inventories. Borrowings on inventory are capped at $1,500,000. All trade
receivables, inventories and equipment are collateral on the note. Maturity
is December 31, 1998. Interest rate is 1/2% over prime on receivables
borrowings, and 1% over prime on inventory borrowings. As of June 30, 1997,
the loan balance with the new bank was $3,033,000; availability on the new
credit facility was $2,907,000.
4. In February, 1997, the FASB issued Statement No. 128, "Earnings per Share",
which requires the presentation of basic and fully diluted earnings per
share. The Company will adopt Statement No. 128 in the fourth quarter of
fiscal 1997 and, based on current circumstances, does not believe the
effect of the adoption will require the presentation of fully diluted
earnings per share due to the anti-dilutive effect.
6
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PARIS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
---------------------
JUNE 30, 1997
-------------
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<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Three Months Nine Months
- -----------------------------------------------------------------------------------------------------------------------------
$ % $ %
1997 1996 Change Change 1997 1996 Change Change
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $12,468 $14,218 ($1,750) (12%) $40,192 $44,321 ($4,129) (9%)
- -----------------------------------------------------------------------------------------------------------------------------
Cost of sales 12,006 14,254 (2,248) (16%) 38,345 42,655 (4,310) (10%)
- -----------------------------------------------------------------------------------------------------------------------------
Gross profit 462 (36) 498 138% 1,847 1,666 181 11%
- -----------------------------------------------------------------------------------------------------------------------------
Sales and marketing expenses 469 844 (375) (44%) 1,671 2,347 (676) (29%)
- -----------------------------------------------------------------------------------------------------------------------------
General and administrative expenses 826 879 (53) (6%) 2,498 2,492 (6) (0%)
- -----------------------------------------------------------------------------------------------------------------------------
Interest expense 70 52 18 35% 230 286 (56) (20%)
- -----------------------------------------------------------------------------------------------------------------------------
Other (income) expense 17 61 (44) (72%) (124) (91) (33) (36%)
- -----------------------------------------------------------------------------------------------------------------------------
Pretax loss (920) (1,872) 952 51% (2,428) (3,368) 940 28%
- -----------------------------------------------------------------------------------------------------------------------------
Income taxes (302) (636) 334 53% (815) (1,145) 330 29%
- -----------------------------------------------------------------------------------------------------------------------------
Net loss ($618) ($1,236) $618 50% ($1,613) ($2,223) $610 27%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Gross Profit
------------
Three Months Comparison
Gross profit for the three months ended June 30, 1997 of $462M increased
$498M or 138% as compared to the same quarter in the prior year. Sales of
$12468M decreased $1750M or 12% and cost of sales of $12006M decreased
$2248M or 16%.
Sales factors
-------------
Sales of stock continuous forms of $9189M decreased $217M or 2% due to a
decline in average selling prices of 6%, partially offset by an increase in
unit volume of 3%. The weakness in paper products pricing was industry-
wide, resulting principally from excessive user inventory levels and excess
manufacturing capacity. Despite lower demand, the Company maintained unit
volume levels by aggressively meeting competition pricing.
Commodity cut sheet sales of $1178M decreased $1227M or 50% due to
unfavorable pricing arrangements with the Company's paper mill suppliers
resulting in uncompetitive product pricing.
Value added cut sheet sales of $775M representing an increase of $65M or
9%, were strong due to the continued growth of the installed base of inkjet
and laser printers.
Custom forms sales of $1468M decreased $451M or 24% due to the decline in
demand for multi-part forms.
7
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Cost factors
- ------------
The cost of stock continuous forms sales of $7591M decreased $1063M or 12%
disproportionate to the sales decline of 2% due to improved price management,
continuing cost reduction programs, and more efficient manufacturing.
The cost of sales of commodity cut sheets of $1121M decreased $1290M or 53%
proportionate to the decrease in sales.
The cost of sales of value added cut sheets of $600M increased $118M or 24%
disproportionate to the increase in sales due to competitive price pressures.
The cost of sales of custom forms of $1183M was lower than the comparable period
last year by $142M due to the lower sales volume and lower sell prices.
Freight and distribution costs of $792M were $90M higher principally due to
expansion of the Company's market area to the west coast.
Nine Months Comparison
Gross profit for the nine months ended June 30, 1997 of $1847M represented an
increase of $181M or 11% as compared to the same period in the prior year.
Sales of $40192M decreased $4129M or 9% and cost of sales of $38345M decreased
$4310M or 10%.
Sales factors
- -------------
Sales of stock continuous forms of $27428M decreased $3872M or 12% due to a
decline in prices of 19% partially offset by volume gains of 10%.
Commodity cut sheet sales of $3441M decreased $2151M or 39% due to non-
competitive mill pricing.
Value added cut sheet sales were $2508M as compared to $1960M last year
representing an increase of 28% or $548M due to continued strong demand from
inkjet/laser printer users.
Custom forms sales of $4708M decreased $1082M or 19% principally due to lower
demand for multi-part forms.
Hardware sales of $3494M increased $2899M with a unit volume increase of 25,000
scanners due to (1) expansion of the product offering and (2) the purchase of
18,000 scanners by two major customers.
Cost factors
- ------------
The cost of stock continuous forms sales of $23270M decreased $5120M or 18%
disproportionate to the sales decline of 11% due to the same factors noted above
for the third quarter.
The cost of sales of commodity cut sheets of $3263M were $2228M lower than 1996
proportionate to the sales increase.
The cost of value added cut sheets sales for 1997 were $1845M as compared to
$1305M last year representing an increase of $540M or 41% approximately
equivalent to the increase in unit volume.
Custom forms cost of sales of $3721M decreased $856M or 19% proportionate to the
decline in sales.
Freight and distribution costs of $2639M were $429M higher than last year due to
the west coast expansion and increased retail volume.
8
<PAGE>
Cost of hardware sales increased $2369M from $506M to $2875 proportionate to the
increase in sales volume.
Greater labor efficiencies and capacity utilization yielded a $51M decrease in
manufacturing costs for the current period.
Operating Expenses
- ------------------
Three Months and Nine Months Comparison
Sales and marketing expenses decreased $375M for the quarter and $676M year to
date due to a cost reduction program principally targeted at marketing salaries,
show expenses, advertising, direct mail costs, promotional literature, and
public relations costs.
General and administrative expenses remained relatively consistent with the
prior year during the quarter and nine month period.
Interest Expense
- ----------------
Interest expense increased $18,000 in the quarter due to greater utilization of
the working capital line and a higher interest rate and decreased $56,000 in the
nine months ended June 30, 1997 due to the payoff of mortgage debt in the third
quarter of last year.
Other (Income) Expenses
- -----------------------
During the nine month period ended June 30, 1997, compared to the comparable
period last year, other income, net increased $33M resulting from (1) an
increase in investment income of $50M, (2) the elimination of joint venture
losses in the previous year of $220M offset by (3) the cost of early termination
of a warehouse services contract of $150M incurred in June 1997 and (4) lower
interest income of $70M due to a decrease in cash available for investments.
LIQUIDITY AND CAPITAL RESOURCES:
--------------------------------
Working capital decreased $1338M from $12.04 million to $10.70 million and cash
and cash equivalents increased $1.10 million during the nine months ended June
30, 1997. Inventories were lowered $1.01 million from $6.7 million to $5.7
million during the nine months ended June 30, 1997. Trade payables and accrued
expenses were reduced $769 million from $6.5 million to $5.7 million. Trade
receivables decreased from $6.7 million to $6.0 million for the nine month
period.
The Company has a new $7.5 million line of credit, based on trade receivables
and inventory, available through a commercial bank at prime plus one-half
percent effective April 1997 (Prime 8 1/2%). The current loan balance is
approximately $3 million with additional availability of approximately $3
million.
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 $304,000 of the
9
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$390,000 investment due to the continuing operating losses of the joint venture.
Due to profitable operations of Signature during the nine months ended June 30,
1997, there has been no additional writedown of the investment.
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 3,650,000
=========
(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 7, 1997
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> SEP-30-1997 SEP-30-1997
<PERIOD-START> APR-01-1997 OCT-01-1996
<PERIOD-END> JUN-30-1997 JUN-30-1997
<CASH> 0 1,753,134
<SECURITIES> 0 3,610,269
<RECEIVABLES> 0 6,856,397
<ALLOWANCES> 0 833,780
<INVENTORY> 0 5,678,954
<CURRENT-ASSETS> 0 19,475,000
<PP&E> 0 14,226,618
<DEPRECIATION> 0 8,874,556
<TOTAL-ASSETS> 0 25,028,000
<CURRENT-LIABILITIES> 0 8,773,000
<BONDS> 0 0
0 0
0 0
<COMMON> 0 16,851
<OTHER-SE> 0 15,524,368
<TOTAL-LIABILITY-AND-EQUITY> 0 25,028,000
<SALES> 12,468,000 40,192,000
<TOTAL-REVENUES> 12,468,000 40,192,000
<CGS> 12,006,000 38,345,000
<TOTAL-COSTS> 13,301,000 42,514,000
<OTHER-EXPENSES> 17,000 (124,000)<F1>
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 70,000 230,000
<INCOME-PRETAX> (920,000) (2,428,000)
<INCOME-TAX> (302,000) (815,000)
<INCOME-CONTINUING> (618,000) (1,613,000)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (618,000) (1,613,000)
<EPS-PRIMARY> (.17) (.44)
<EPS-DILUTED> (.17) (.44)
<FN>
<F1>OTHER INCOME
</FN>
</TABLE>
