<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
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FOR QUARTER ENDED DECEMBER 31, 1996
COMMISSION FILE NUMBER 0-14358
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PARIS CORPORATION
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
PENNSYLVANIA 23-1645493
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
5 RADNOR CORPORATE CENTER, 100 MATSONFORD ROAD, SUITE 105, RADNOR, PA 19087
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE 610-964-0758
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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 DECEMBER 31, 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 - December 31, 1996
and September 30, 1996 (audited) 3
Consolidated Statements of Income
Three months ended, December 31, 1996 and 1995 4
Consolidated Statements of Cash Flows -
Three months ended, December 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 - 8
PART II. OTHER INFORMATION (Items 1, 2, 3, & 5 - not applicable)
ITEM 4. Submission of Matters to a Vote of Security Holders 9
ITEM 6. Exhibits and Reports on Form 8-K 9
Signatures of Registrant 10
2
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PARIS CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
(in thousands)
ASSETS
12-31-96 9-30-96
(Unaudited) (Audited)
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<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,436 $ 916
Marketable securities 4,431 4,778
Accounts receivable 7,248 6,696
Inventories 5,371 6,686
Recoverable income taxes 2,069 1,866
Prepaid expenses 298 315
Deferred income taxes 1,223 1,223
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Total current assets 22,076 22,480
Property, plant and equipment, net 5,882 6,107
Other assets 245 154
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Total Assets $ 28,203 $ 28,741
========= ========
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Current liabilities:
<S> <C> <C>
Note payable, bank 3,926 3,926
Accounts payable and accrued expenses 5,888 6,194
Accrued payroll and related expenses 512 312
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Total current liabilities 10,326 10,432
Deferred income taxes 1,125 1,125
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Total Liabilities 11,451 11,557
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Commitments:
Shareholders' equity:
Common stock 16 16
Additional paid in capital 8,588 8,588
Retained earnings 9,879 10,282
Unrealized gain on marketable securities 24 24
Treasury stock (1,755) (1,726)
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Total Shareholders' Equity 16,752 17,184
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Total Liabilities and Shareholders' Equity $28,203 $28,741
======= =======
</TABLE>
See accompanying notes.
3
<PAGE>
PARIS CORPORATION
CONSOLIDATED STATEMENT OF LOSS
Unaudited
(in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
12-31-96 12-31-95
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<S> <C> <C>
Net sales $ 14,928 $ 16,603
Cost of products sold 13,902 15,767
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Gross profit 1,026 836
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Selling expenses 680 619
General and administrative expenses 884 660
Interest expense 81 140
Other income, net (9) (196)
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Loss before taxes (610) (387)
Income tax benefit (207) (132)
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Net loss /(1)/ $ (403) $ (255)
============= ============
Weighted average common and
equivalent shares outstanding 3,636,459 3,824,132
Earnings per share $ (0.11) $ (0.07)
============= ============
</TABLE>
See accompanying notes.
4
<PAGE>
PARIS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited
<TABLE>
<CAPTION>
(in thousands) THREE MONTHS THREE MONTHS
ENDED ENDED
12-31-96 12-31-95
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (403) $ (255)
--------- ---------
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation 276 277
Gain on sale of marketable securities (25) (111)
Provision for losses on accounts receivable 60 (140)
Provision for equity in loss on investment
in joint venture 0 98
Deferred income tax expense 0 382
(Increase) decrease in:
Accounts receivable (612) (1,157)
Inventories 1,315 7,318
Prepaid expenses 16 (165)
Other assets (90) (49)
Increase (decrease) in:
Accounts payable and accrued expenses (304) (7,251)
Accrued payroll and related expenses 200 (200)
Income taxes payable, current (204) (775)
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Total adjustments 632 (1,773)
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Net cash provided by (used in) operating
activities 229 (2,028)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in joint venture 0 (390)
Proceeds from sale of marketable securities 904 79
Purchase of marketable securities (266) (886)
Purchase of property, plant and equipment (51) (66)
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Net cash provided by (used in) investing
activities 587 (1,263)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt 0 (37)
Purchase of treasury stock (30) (9)
Proceeds of working capital line of credit 0 400
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Net cash provided by (used in) financing
activities (30) 354
Net increase (decrease) in cash and cash
equivalents 786 (2,937)
Cash and cash equivalents at beginning of period 650 5,227
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Cash and cash equivalents at end of period $ 1,436 $ 2,290
========= =========
Supplemental disclosures of cash flow
information:
Cash paid for interest expense $ 81 $ 140
Cash paid for income taxes $ 0 $ (236)
</TABLE>
See accompanying notes.
5
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PARIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying consolidated financial statements for the three month
periods ended December 31, 1996 and December 31, 1995 are unaudited and
reflect all adjustments (consisting only of normal recurring accruals) which
the Company believes necessary for a fair presentation of the financial
position and operating results for the interim periods. The Summary of
Accounting Policies and Notes to the Consolidated Financial Statements
included in the September 30, 1996 Form 10-K should be read in conjunction
with the accompanying statements. The interim operating results are not
necessarily indicative of the results for a full year.
2. Net income for the quarter ended December 31, 1995, previously reported as
$405 is restated to a net loss of ($255) and earnings per share were restated
from $.11 to ($.07) due to the correction of an error.
3. 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 at September 30, 1996
related to these agreements and other potential liabilities. During the
three months ended December 31, 1996 management reduced the liability to
$473,000 reflecting reduced obligations.
6
<PAGE>
PARIS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
---------------------
DECEMBER 31, 1996
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<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Three Months
- ------------------------------------------------------------------------------
$ %
1996 1995 Change Change
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales $14,928 $16,603 $(1,675) -10%
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Cost of sales 13,902 15,767 (1,865) -12%
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Gross profit 1,026 836 190 23%
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Selling 680 619 61 10%
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General and administrative 884 660 224 34%
expenses
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Interest expense 81 140 (59) -42%
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Other (income) expense (9) (196) 187 -95%
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Pretax loss (610) (387) (223) 58%
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Income tax benefit (207) (132) (75) 57%
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Net loss $ (403) $ (255) $ (148) 58%
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</TABLE>
Gross Profit
- ------------
Gross profit for the three months ended December 31, 1996 of $1026M increased
$190M or 23% as compared to the same quarter in the prior year. Sales of
$14928M decreased $1675M or 10% and cost of sales of $13902M decreased $1865M or
12%.
Sales Factors
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Sales of stock continuous forms of $9581M decreased $2898M or 23% due to a
decline in average selling prices of 32%, partially offset by an increase in
unit volume of 6%. Competitive pressure on stock form prices to gain market
share as well as high inventory levels in the distribution channel continued to
negatively effect selling prices in the fiscal first quarter.
Commodity cut sheet sales of $1025M decreased $496M or 33% due to decline in
average selling prices of 46%, offset by an increase in unit volume of 6%.
Weakness in cut sheet pricing is reflective of new productive capacity in the
industry as well as high inventory levels in the distribution channel.
New product sales of $3360M were $2236M higher than last year due to strong
demand for the Company's scanner products and inkjet/laser paper offerings.
Custom forms sales of $1711M decreased $214M or 11% due to the Company's focus
on higher margin business resulting in a 19% increase in margin despite lower
sales volume.
Sales discounts, rebates, and allowances of $184M increased $111M due to greater
proportion of the Company's sales directed to the retail channel as well as a
temporary rebate program with a major stock forms customer.
Cost factors
- ------------
Product costs for the Company's commodity offerings, viz. stock forms and cut
sheets, decreased 33% compared to a sales decline of 24% due to paper purchases
from mill suppliers at lower than market price.
7
<PAGE>
The cost of the value-added cut sheet line of products and hardware products
were consistent with the prior year.
Operating Expenses
- ------------------
Sales and marketing expenses increased $61M or 10% principally due to
advertising and direct mail costs associated with the launch of a new software
product. General and administrative expenses increased $224M or 34% for the
quarter ending December 31, 1996, primarily due to an increase in the allowance
for doubtful accounts of $200M due to greater credit exposure in the retail
channel and, in particular, bankruptcy filings by two customers.
Interest Expense
- ----------------
Interest expense decreased $59M or 42%. Working capital interest expense of
$81M decreased $32M as a result of decreased borrowings on the line of credit.
During the quarter ended December 31, 1995, the company incurred $27M of
interest expense related to mortgage debt. The loan was subsequently repaid
during the second quarter of fiscal 1996.
Other (Income) Expenses
- -----------------------
Other income decreased $187M principally due to lower returns on the Company's
investments.
LIQUIDITY AND CAPITAL RESOURCES:
--------------------------------
Working capital decreased $298M from $12048 to $11750M and cash and cash
equivalents increased $520M during the three months ended December 31, 1996.
Inventories were lowered $1315M from $6686M to $5371M during the three months
ended December 31, 1996 primarily due to the reduction in scanner products
inventory resulting from the increased sales volume during the quarter. The
increased sales volume of the scanner products increased trade receivables $552M
during the quarter due to the longer payment cycles in the retail market
channel. Trade payables were reduced $306M from $6194M to $5888.
The Company had a line of credit available through a commercial bank at prime
rate less one half percent (8% at December 31, 1996). The outstanding balance
on the line of credit at December 31, 1996 was $3926M. The line of credit
expired on December 31, 1996 and was extended until March 31, 1997. The Company
is currently negotiating alternate financing and anticipates reaching an
agreement in February 1997.
No significant investments in property, plant or equipment was made in the first
fiscal quarter.
INVESTMENTS
-----------
In October 1995 the Company invested an additional $390M in Signature
Corporation, a joint venture corporation that markets office products through
the supermarket and drugstore retail chains. The Company accounts for its
investment through the equity method. The Company's original investment of
$333M for 33% of the common stock of the joint venture in December, 1992, has
been completely eliminated by the recognition of the Company's shares in the
operating losses of Signature of $129M and $204M 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 fiscal 1996, the
Company recognized operating losses of the joint venture in the amount of $303.
8
<PAGE>
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 principal 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 3,636,459
=========
(b) Reports on Form 8-K
None.
9
<PAGE>
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
___________________________
Dominic P. Toscani, Sr.
President and Chairman of
the Board of Directors
____________________________
John A. Whiteside
Chief Financial Officer
DATE: January 31, 1997
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,436,264
<SECURITIES> 4,431,187
<RECEIVABLES> 7,900,843
<ALLOWANCES> 652,833
<INVENTORY> 5,371,087
<CURRENT-ASSETS> 22,077,164
<PP&E> 14,610,437
<DEPRECIATION> 8,728,513
<TOTAL-ASSETS> 28,203,724
<CURRENT-LIABILITIES> 10,327,158
<BONDS> 0
0
0
<COMMON> 16,851
<OTHER-SE> 16,734,639
<TOTAL-LIABILITY-AND-EQUITY> 28,203,724
<SALES> 14,927,855
<TOTAL-REVENUES> 14,927,855
<CGS> 15,465,884
<TOTAL-COSTS> 15,465,844
<OTHER-EXPENSES> 72,416
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 81,148
<INCOME-PRETAX> (610,445)
<INCOME-TAX> (207,552)
<INCOME-CONTINUING> (402,893)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (402,893)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> (.11)
</TABLE>
