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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
[X] Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (fee required)
FOR FISCAL YEAR ENDED SEPTEMBER 30, 1999
OR
[ ] Transaction Report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 (no fee required)
COMMISSION FILE NUMBER 0 - 14358
PARIS CORPORATION
(Exact name of Registrant as specified in its Charter)
PENNSYLVANIA 23-1645493
(State or other Jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
122 KISSEL ROAD, BURLINGTON, NEW JERSEY 08016
(Address of principal executive office) (zip code)
Telephone: (609) 387-7300
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the act: None
Securities registered pursuant to section 12(g) of the act:
TITLE
Capital Stock, $.004/par value per share
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 twelve months (or for 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 No
[X] [_]
The aggregate market value of the voting stock held by nonaffiliates of
the registrant as of November 15, 1999 was $2,361,465.
Number of shares of outstanding common stock as of November 15, 1999:
3,504,245 shares.
Definitive Proxy Statement for the February 11, 2000 annual meeting of
the stockholders has been filed within 120 days after the end of the fiscal year
covered by this annual report.
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ITEM 1 - BUSINESS
GENERAL
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Paris Corporation ("Paris"), formerly Paris Business Forms, Inc., incorporated
in 1964 under the laws of the Commonwealth of Pennsylvania, is a holding company
with four wholly-owned subsidiaries: two active operating companies in New
Jersey and Texas, one inactive Florida corporation, and a Delaware corporation
which owns the Company's trademarks. Paris Business Products, Inc., a New
Jersey corporation and Paris Business Forms, Inc., a Texas corporation (dba,
Paris Business Products, Inc.), are the two operating companies, with plants in
New Jersey and Texas, respectively. PBF Corporation is the Delaware
corporation. The Texas and Florida corporations are both wholly-owned
subsidiaries of the New Jersey corporation. Paris also has a 57% interest in a
corporation, Signature Corporation, formed in 1992, to market office products
through the supermarket and drug chain channels. Two individuals own the
remainder of the interest in Signature Corporation.
In January 1996, Paris changed its corporate name to Paris Corporation from
Paris Business Forms, Inc.
The Company converts mill paper rolls to business forms at its two
manufacturing and distribution plants in New Jersey and Texas and distributes
office products, through a number of market channels including forms dealers,
paper merchants, stationers, office product and computer superstores, consumer
electronics retailers, buying groups, supermarkets, and drugstore chains.
Products include stock and custom continuous forms; mill cut, value added, and
custom cut sheets; paper handling products for small offices and home offices.
Geographically the Company markets its products throughout the United States and
Canada through Company sales representatives, independent representatives,
brokers, dealers, and distributors.
Traditionally, the principal focus of the business was the manufacturing of
continuous forms designed to run on dot matrix and high speed impact printers.
The Company serves the stock continuous forms market and the custom forms
market, providing business forms to commercial businesses to specification.
Laser and inkjet printer technology continues to replace impact printers and,
accordingly, the Company's market for continuous forms is shrinking at a pace
estimated at 10% per year. The negative growth is more accelerated in the
retail market serving small business/home business customers since the printer
equipment investment is minimal and easy to replace. As a result, the Company
has been shifting its focus to the development, manufacture, and sale of value-
added and custom cut sheet products used on laser and inkjet printers. Perfed,
punched, lined, collated, colored, photo quality, and novelty cut sheet products
have been added to the product line. The continuous forms products segment as a
percentage of total sales has decreased from 70% to 50% to 43% in fiscal years
1997, 1998, and 1999, respectively. It is estimated that this segment will only
account for 35% of total sales in fiscal 2000.
The Burlington product line of value-added cut sheet products targeted to the
small office and home office user has continued to expand with various offerings
to meet the everyday needs of inkjet and laser printer paper demand as well as
specialty products for photographic quality and other applications requiring
maximum color contrast and optimal ink absorption. Growth in this product
segment is expected to be 15% in FY 2000.
Signature Corporation ("Signature"), the 57% owned joint venture, distributes
office products to the food and drug store markets. Formed in late 1992,
Signature has continued to increase their stores served from 6,800 in 1996 to
14,000 in 1999. In August 1999, as a result of a stock tender by a Signature
minority shareholder, the Company's interest in Signature increased to 57%.
This change in ownership percentage in Signature was accounted for as a purchase
and Signature has been consolidated in the accompanying financial statements.
The results of operations of Signature have been included in the accompanying
statement of operations for the one month period of September 30, 1999.
Signature Corporation does
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experience seasonal fluctuation in their sales revenue. June, July and August
represent approximately 35% of Signature's annual revenue.
3
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COMPETITION
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The business forms market is divided into two major segments. One segment
sells directly to end users, principally the 500 to 1,000 largest corporations.
The other segment, which Paris serves, distributes forms through resellers and
retailers. In the reseller market, there are three or four major competitors in
stock continuous forms who are larger than Paris and committed to stock computer
paper for the foreseeable future due to capital investment, albeit the negative
growth rate. The Company does not compete directly with the approximate dozen
direct sellers. There have been a number of acquisitions and mergers within the
industry and the consolidation mode is expected to continue going forward to
lower unit costs. Paris does not expect to pursue any acquisitions within this
business segment and will continue to shrink capacity commensurate with the
reduced demand for stock continuous forms.
The cut sheet market is growing at a rapid pace fueled by the installation of
laser and inkjet printers throughout the major U.S. corporations and home and
small businesses. Sales volume is expected to grow due to the Company's
penetration of the retail market, serving a number of major retail stores.
However, competition in this market is increasing rapidly. The major paper
mills have developed marketing subsidiaries to serve the retail market.
SUPPLIERS
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The Company purchases registered bond paper, (consisting of a wide variety of
weights, widths, colors, sizes and qualities), cut sheet, and carbonless paper
principally from the major United States paper mills. The Company believes that
it has good relationships with all of its suppliers.
Boise Cascade, one of the Company's paper suppliers, has indicated plans to
significantly reduce its capacity, by the year 2000, of forms bond rolls which
are used by Paris in the production of continuous forms. The Company believes
that the reduced supply available will be consistent with its plans to shrink
this business segment. However, the Company has expanded its source of
suppliers in the past year to ensure adequate paper supply in the near future.
The Company has partnered or formed strategic alliances to provide raw
material, market support, and/or name recognition for its value added cut sheet
product and non-paper products. Currently, the Company represents the largest
volume customer of Boise Cascade for certain specialty retail cut sheet
products. The Company believes the strong relationship between Paris and Boise
Cascade will provide the Company a solid footing for future cut sheet supply.
SEGMENTS AND MAJOR CUSTOMERS
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The Company operates in three segments or lines of business, including stock
continuous forms and cut sheets; custom continuous forms and cut sheets; retail
papers and office products. Financial information for each of the Company's
segments including net sales, operating income, total assets, capital
expenditures and sales to major customers, are included in the accompanying
financial statements.
No customer accounts for more than 10% of stock shipments in FY99, but two
customers accounted for more than 10% of the Company's stock computer business
in fiscal 1997: Office Depot (14%) and Corporate Express (28%). Both accounts
were lost to competition during the latter part of the year. Although the loss
of these two major accounts had a material adverse effect on sales revenue, the
margin loss is no longer significant since competitive pricing reached a level
that provided little profit on either account.
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Two customers Best Buy (32%) and Comp USA (17%) that accounted for more then
10% of the Company's retail business in FY99. There was one customer that
accounted for 14% of the custom business in FY99.
EMPLOYEES
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As of September 30, 1999, the Company employed approximately 105 people in
manufacturing, sales and administrative functions in its corporate offices and
plants in New Jersey and Texas.
DISTRIBUTION AND MARKETING
- --------------------------
The Company markets the custom and stock forms products through approximately
2,500 independent dealers in the United States and Canada, as well as through
retail superstores. The independent distributors rely on several manufacturers,
like the Company, to supply these end users. The distributors range in size
from a single individual to a distributorship with several offices and an
extensive sales force. The Company operates, or contracts for storage space, in
several strategically located warehouses along the east coast, southeast and
southwest regions of the country. These locations are used as the storage and
shipping points for its stock forms. Currently, the Company's primary method of
generating sales contacts is through its own sales force, sales representatives,
extensive marketing programs, referral and reputation.
The sales force consists of seven salespersons covering New England, Mid-
Atlantic, Southeast, Midwest and Southwest regions of the United States. A
network of independent sales representatives covering the entire United States
has been assembled over the past few years to sell the new non-paper products
through major resellers and retailers.
MANUFACTURING
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The Company's custom paper products are manufactured in the New Jersey plant
with five rotary presses, two cut sheet presses and one collator. The rotary
presses provide the Company with the ability to produce a broad spectrum of form
sizes. Each piece of machinery requires a skilled operator; support personnel
are required on some equipment. The custom forms operation runs primarily three
shifts per day, with individual equipment varying. The estimated capacity of the
custom business is approximately $12.5 million in sales at current prices.
The Company's stock form business is manufactured from two locations. The New
Jersey facility has four presses and one collator, and Texas has one press as of
September 30, 1999. The majority of the stock forms are produced to be sold
from inventory. Each plant is also capable of producing customized computer
paper or stock forms upon order. The stock operation is three shifts per day,
five days per week, with overtime on an as-needed basis. The estimated annual
capacity of the stock business is approximately $30 million in sales at current
prices
The Company's equipment is very well suited to produce nearly all of the forms
products required by a forms distributor or retailer. The Company continues to
monitor any new product requirements of its forms distributors and assess what
new equipment or equipment modifications are required to produce the products.
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OPERATIONS
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The Company rents a 125,000 square foot plant and corporate office in
Burlington, New Jersey and leases a 20,000 square foot plant in Fort Worth,
Texas, with 5% devoted to offices, 45% to paper conversion, and 50% to
warehouse. There are no union affiliations among employees at the two
locations.
During the year ended September 30, 1999, the Company operated 7 custom
presses, 5 stock presses, and 2 collators. The Company is evaluating the needs
for an additional press to increase capacity in the custom plant.
Utilization of production capacity approximated 60% in New Jersey and 50% in
Texas during the year.
Custom forms capacity continues to be converted from roll to sheeting
capability as demand shifts from continuous to cut sheet custom forms.
Currently, 60% of custom capacity is directed to cut sheets.
The Company has adequate domestic paper supply sources with paper mills and
brokers at the present time. However, the mills are reallocating capacity to
higher grade papers and are de-emphasizing forms bond used in continuous form
production.
Inventory levels were maintained at approximately two weeks supply for raw
material and 4-6 weeks supply for finished goods during the year.
OTHER MATTERS
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The corporate structure of the Company's legal entities was reorganized in
fiscal 1995. Paris Business Forms, Inc. (PBFI), the public company, transferred
substantially all of the operating assets and liabilities to a newly formed
subsidiary corporation, Paris Business Products, Inc. (PBP). The Texas
operating corporation, Paris Business Forms, Inc. (PBFITX) and a newly formed
Florida corporation, Paris Business Products, Inc. (PBPFL), are subsidiaries of
PBP. PBP, PBFITX and PBPFL are operating corporations. PBF Corporation, a
Delaware corporation, owns the Company trademarks and remains a subsidiary of
PBFI.
In April 1997, the former President resigned his position with a severance and
consulting agreement at full salary for two years guaranteed and the third year
dependent on profitability of the Company. The total cost of the severance
package was expensed in fiscal 1997 in the amount of $328,000.
ITEM 2 - PROPERTIES
In May 1998, the Company entered into a contract to sell the office and
production facility in New Jersey for a total price of $4,500,000. In addition,
the Company entered into an agreement to lease the facility back for a period of
three years plus, at the Company's option, an additional two three-year renewal
periods. The Company has no obligation to renew the lease beyond its original
term. The total gain of $1,070,661 has been deferred and is being recognized
over the term of the original lease in the monthly amount of $29,741. The
amount of the gain deferred at September 30, 1999 was $575,778. The total gain
recognized to date was $494,883 at September 30, 1999. The lease calls for
monthly rental payments of $41,667 over the term of the lease.
The Fort Worth, Texas facility was sold in June 1994 and replaced by a 45,000
square foot leased facility. In October 1999 the lease was modified, and the
Company signed a three year lease reducing the facility to 20,000 square feet.
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ITEM 3 - LEGAL PROCEEDINGS
There are no material legal proceedings in process as of the date of this
filing.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the year
ended September 30, 1999.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDERS
MATTERS
(A) The Company's common stock is traded on the over-the-counter market and is
listed on the National Association of Stock Dealers Daily Quotation Service
(NASDAQ) National Market System. The Symbol for the Company is PBFI. The
registrar and transfer agent is Chase Mellon Shareholder Services. The table
below shows the high and low closing sale prices as reported by the National
Daily Quotation Service.
<TABLE>
<CAPTION>
RANGE OF SALE PRICES
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1999 FISCAL YEAR 1998 FISCAL YEAR
---------------- ----------------
HIGH LOW HIGH LOW
<S> <C> <C> <C> <C>
First Quarter 2.3750 1.750 2.125 1.5000
Second Quarter 2.2190 1.750 2.250 1.5625
Third Quarter 2.3125 2.000 2.375 1.5625
Fourth Quarter 2.4375 2.125 3.125 2.1250
</TABLE>
The approximate number of shareholders of record as of December 17, 1999 was
200.
The Company's common stock trades on the NASDAQ stock market under the symbol
PBFI. The registrar and transfer agent is Chase Mellon Shareholder Services.
In January of 1999 the Company issued a $0.20 per share special dividend.
Currently it is undetermined if the Company will declare any future dividends.
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ITEM 6 - SELECTED FINANCIAL DATA
The following selected financial data are derived from the financial
statements of the Company. The data should be read in conjunction with
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations" and the financial statements and related notes thereto included
herein in Item 8.
FOR THE YEAR ENDED SEPTEMBER 30,
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
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<S> <C> <C> <C> <C> <C>
NET SALES $35,433 $34,864 $51,674 $57,442 $64,916
INCOME (LOSS)
FROM OPERATIONS 266 (763) (3,372) (5,495) 5,722
NET INCOME (LOSS) 961 (16) (2,469) (3,401) 3,451
BASIC EARNINGS (LOSS)
PER SHARE .246 (0.004) (0.68) (.92) .91
DILUTED EARNINGS (LOSS)
PER SHARE .235 (0.004) (0.68) (.92) .91
TOTAL ASSETS 21,419 20,570 23,477 28,741 41,188
WORKING CAPITAL 11,881 12,426 9,999 12,048 15,255
LONG TERM DEBT
(excluding current portion) 0 0 0 0 0
SHAREHOLDERS' EQUITY 14,587 14,356 $14,701 $17,184 $21,108
CASH DIVIDENDS PER SHARE .20 NONE NONE NONE NONE
</TABLE>
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. ($ in thousands, except statistical data)
The following discussion should be read in conjunction with the financial
statements, including the related notes.
Liquidity and Capital Resources
Working capital at the end of fiscal years 1999,1998 and 1997 was $11,881,
$12,426 and $9,999, respectively. Working capital decreased $545 during the
fiscal year ended September 30, 1999.
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Net cash provided by operating activities was $628. Accounts receivable
increased $1,289 due to increased sales volume during September 1999 and
extended payment terms to some customers. Accounts payable and accrued expenses
increased $1,213 due to a slower payment cycle during the last quarter of the
fiscal year. Inventories were maintained at normal supply levels during 1999,
increasing beginning inventories of $3,456 to $4,167 by year-end.
Net cash provided by investing activities was $2,472. Restricted cash
decreased $2,140 when the Company paid off the bank loan relieving the bank of
their security interest in a money market account. The Company had proceeds
from the sale of investments of $3,965 due primarily to the liquidation of
limited partnership interests. The amount of cash invested during the year was
$2,760. The Company expended $912 for the purchase of property and equipment.
The Company purchased a new sheeter press in the amount of $659. The new press
will support the growth of the Company's cut sheet products and value-added
retail papers. Other sundry purchases in the amount of $253 were related to
additions and improvements in production equipment and our Information Service
department.
Net cash used in financing activities was $3,294. The bank line of credit
expired on January 31, 1999 and the balance of $2,459 was paid off. The Company
will meet future liquidity needs through cash provided by operations and
investing activities while alternative financing sources are considered.
In January 1999, the Company paid a special dividend. The special dividend
resulted in a reduction of shareholders equity of $709.
In September 1998, the Company began a buy-back program of up to 100,000
shares of its common stock at prevailing market prices. During the year the
Company purchased approximately 62,000 shares at $141, offset by the sale of
approximately 11,000 shares at $24.
"Year 2000" Issue
The Company has conducted a comprehensive review of its computer systems to
identify the systems that could be affected by the "Year 2000" issue and has
developed an implementation plan to resolve the issues. Items that were
addressed under the Company's "Year 2000" compliance program are as follows:
Replacement of the main business application software and hardware with "Year
2000" compliant hardware and software retooling.
Replacement of our Electronic Data Interchange application with "Year 2000"
compliant software.
The upgrade of our automated call-processing and voice-mail software to a
"Year 2000" compliant release.
We believe all other manufacturing, computer systems and communications
equipment are "Year 2000" compliant.
The Company modified the current software application to be "Year 2000
compliant". The cost for the modification was $40.
The conversion of the Electronic Data Interchange application is complete.
The Company expects the conversion of the automated call processing /voice mail
software to be completed before the new calendar year begins. Any future
activities are not expected to result in significant costs.
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The Company has completed a "Year 2000" compliance survey of all vendors and
has not identified any exposure to non "Year 2000" compliance.
1999 compared to 1998
Net sales for the fiscal year ended September 30, 1999 increased 1.63% or
$569 due to (1) increased revenue from the retail segment (value added papers,
mill cut sheets, RCI and Poly products) of $4,400 (2) increased revenue in other
products such as custom cutsheets, Laser 3 and DocuGard of $985 (3) lower sales
allowances and rebates of $184 and (4) offset by decreased revenue in the stock
segment of $5,000.
Cost of sales for the fiscal year ended September 30, 1999 decreased 1.55%,
or $494 compared to the previous year. The lower cost in comparison to 1998 is
a result of the sales of higher margin product as evidenced by the changing
product mix above. In addition, despite the increased sales volume, freight
expense declined $89 or 6.5% due to better management in controlling these
costs. Offsetting these cost reductions was increased overhead expense due to
production inefficiencies and excess capacity.
Gross profit increased $1,062 or 35% in fiscal 1999 as compared to fiscal
1998 from $3,012 to $4,074 due to the above factors.
Selling expenses, marketing costs and administrative expenses increased $33
in 1999 from $3,775 to $3,808. Sales and marketing expenses were $162 higher
due principally to increased salary and benefit expenses. During the year, the
Company hired a National Sales Manager to lead the Commercial sales effort and a
Vice President of Sales and Marketing to lead the Retail segment. General and
administrative expenses decreased $130 due to a favorable settlement of a sales
and use tax audit. The Company received final notice from the taxing authority
during the third quarter with no additional sales or use tax due.
Interest expense decreased $214 due to the pay off of the working capital
line of credit in January 1999.
Other income, net in fiscal 1999 exceeded fiscal 1998 by $376 due to (1)
income recognized on the liquidation of the limited partnerships of $189 (2)
amortization on the gain on the sale of the building of $157 and (3) other net
income of $30.
Inflation is not expected to have a material adverse effect on future sales
earnings.
1998 compared to 1997
Net sales for the fiscal year ended September 30, 1998 decreased 33% or
$16,810 due to (1) a 49% decline in stock forms ($17,172), attributable to the
loss of two major customers and lower overall demand for these products; (2) the
Company's decision to exit the computer hardware business resulted in a sales
decline of $2,912 for this product line; (3) sales of miscellaneous business
products decreased $262 as a result of an increased focus on other product
lines; (4) offsetting these decreases was a 27% increase in custom forms,
Laser3/DocuGard and Burlington, the retail line; (5) sales discounts, rebates
and allowances were reduced $893, or 66% due to lower rebate expense due to the
loss of the two major stock forms customers and the decision to exit the
hardware business.
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Cost of sales for the fiscal year ended September 30, 1998 decreased 35%
($17,564) compared to last year. The decrease in the cost of sales is relative
to the decrease in sales of 33%. The incremental decrease in cost of sales
relative to the sales decline is due to (1) favorable paper costs; (2) decreased
freight and distribution costs due to tighter management controls on both the
costs of shipping and the pass-through of freight cost to the customer; (3)
offsetting these cost reductions was increased overhead expense due to
production inefficiencies and excess capacity.
Gross profit increased $754 in fiscal 1998 as compared to fiscal 1997 from
$2,258 to $3,012 due to the above factors.
Selling expenses, marketing costs and administration expenses decreased $1,855
this year, from $5,630 to $3,775. Sales and marketing expenses were $487 lower
in fiscal 1998 due principally to the reduction of salary and benefit expenses
as a result of head count reductions, and general and administrative expenses
decreased $1,367 on a comparative basis due to (1) decreased salary and benefits
of $728; (2) a reduction in professional fees of $133; (3) lower depreciation of
$132; (4) decreased telephone expenses of $77; (5) reduced bad debt expense of
$128, and a reduction in other sundry expenses of $177.
Interest expense decreased $44, or 14%, due to a reduced level of bank debt
maintained over the last two years.
Other income, net in fiscal 1998 exceeded fiscal 1997 by $483 due to (1)
increased investment income and lower investment fees, net, of $250; (2) the
settlement of a third-party warehouse services contract in 1997 of $150; (3)
increased gain on fixed asset disposal of $108 due to the amortization of the
gain on the sale of the New Jersey production facility.
1997 compared to 1996
Net sales for the fiscal year ended September 30, 1997 decreased 10% or $5,769
due to (1) a 16% decline in stock and custom continuous forms volume ($7,287),
attributable to the lower overall market demand for these products and 13% lower
sell prices; (2) 9% lower year to year sales of cut sheet products despite value
added stock and custom products gains of 28% ($1,348) due to offsetting 35%
lower sales of commodity cut sheets ($2,470); and (3) an increase in hardware
(primarily computer scanners) sales ($2,417) primarily reflecting purchases by
one major retail store.
Fiscal 1997 was characterized by significant price pressure with average sell
prices dropping 21% across all paper products, both continuous and cut sheet.
Cut sheet unit volume was up 44% due to greater market demand for inkjet and
laser printer papers. Continuous form unit volume was down 16% if sales to two
major former accounts are excluded, but down only 4% overall.
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Cost of sales for the fiscal year ended September 30, 1997 decreased 13%
($7,370) compared to last year. The lower product costs this year relative to
sales (costs decreased 13% vs. a sales decrease of 10%) were primarily due, on a
comparative basis, to the buying and inventory problems of the prior year which
had caused disproportionately high product costs. Normal inventory levels were
maintained throughout fiscal 1997 and sell prices moved in unison with lower raw
paper costs. In addition, the company reduced product costs at a faster rate
than the decrease in sales by increasing factory productivity and by
implementing cost reduction programs in the company's two plants. Freight costs
as a percentage of sales increased 21% due to the cost of distributing to the
west coast in support of the company's former largest customer.
Gross profit increased $1,601 in fiscal 1997 as compared to FY96 from $656 to
$2,257. The disproportionately high product costs of last year, due to the
effect of the excessive inventories, contributed approximately $2,500 of the
gross profit gain. This comparative gain was offset by the effect of sell
prices dropping at a faster rate than the cost of raw paper ($600), lower unit
volumes ($600), and higher freight costs ($260). Labor productivity and cost
reduction programs added $300 of gross profit to fiscal 1997. In addition,
hardware sales contributed approximately $260 to the gross profit increase.
Selling expenses, marketing costs, and administration expenses decreased $522
this year, from $6,151 to $5,629.
Sales and marketing expenses were $833 lower in fiscal 1997 due principally to
the elimination or reduction of advertising, promotion, direct mail campaigns,
public relations, travel and entertainment expenses deemed unnecessary to
support our new product offerings, as well as the reduction of payroll costs.
General and administrative expenses increased $417 on a comparative basis due
(1) to the termination of a deferred compensation plan in FY96 resulting in a
reversal of accrued liabilities ($400) in that year; (2) an increase in the
required bad debt reserve ($240) due to customer bankruptcies; (3) offset by a
reduction in payroll cost ($183).
Interest expense in the comparative years was relatively flat proportionate to
the equal level of bank debt maintained over the last two years.
Other income, net in FY96 exceeded fiscal 1997 by $294 due to (1) lower
investment income this year ($479); (2) the settlement of a third party
warehouse services contract ($150), offset by (3) equity in the earnings of
Signature Corp., a 44% owned affiliate ($279); and (4) gains on the sale of
equipment ($56).
Income tax benefit in fiscal 1997 is at an effective tax rate of 25% due to
the lack of assurance of realization of the loss carryforward benefits for state
income taxes. All operating losses for federal income taxes can be carried back
and fully utilized.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Refer to Management's Discussion and Analysis of Financial Condition and
Results of Operations.
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ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED FINANCIAL STATEMENTS: PAGE
CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1999
AND 1998 13
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEARS
ENDED SEPTEMBER 30, 1999, 1998, AND 1997 14
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR
THE YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997 15
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS
ENDED SEPTEMBER 30, 1999, 1998 AND 1997 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 17 - 28
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS 29
INDEPENDENT AUDITORS' REPORT 30
FINANCIAL STATEMENT SCHEDULES NOT INCLUDED IN THIS FORM 10-K HAVE BEEN OMITTED
BECAUSE THEY ARE NOT APPLICABLE OR THE REQUIRED INFORMATION IS SHOWN IN THE
FINANCIAL STATEMENTS OR NOTES THERETO.
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Consolidated Balance Sheet
--------------------------
<TABLE>
<CAPTION>
September 30,
-------------
1999 1998
---- ----
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 3,879,929 $ 4,073,427
Restricted cash - 2,140,338
Investments:
Available for sale 1,569,927 1,466,654
Held to maturity 1,996,960 -
Other - 2,903,559
Accounts receivable, less allowance for doubtful accounts of
$453,600 in 1999 and $317,500 in 1998 5,958,605 3,664,242
Inventories 4,166,890 3,455,799
Refundable income taxes 190,252 -
Prepaid expenses 241,611 225,033
Deferred tax asset 396,400 135,600
----------- -----------
Total current assets 18,400,574 18,064,652
Investments held to maturity 500,000 -
Property and equipment, net 1,941,572 1,560,554
Deferred tax asset 196,270 786,400
Other assets 380,437 158,200
----------- -----------
Total assets $21,418,853 $20,569,806
=========== ===========
Liabilities and Shareholders' Equity
Current Liabilities:
Note payable, bank $ - $ 2,459,052
Note payable 92,787 -
Accounts payable and accrued expenses 5,196,803 2,301,903
Accrued payroll and related expenses 699,554 264,208
Income taxes payable 44,400 237,875
Deferred revenue 485,886 375,464
----------- -----------
Total current liabilities 6,519,430 5,638,502
Deferred revenue, net of current portion 218,891 575,778
----------- -----------
Total liabilities 6,738,321 6,214,280
----------- -----------
Minority interest 93,989 -
----------- -----------
Shareholders' Equity:
Common stock, $.004 par value; authorized 10,000,000
shares; issued 3,937,517 shares 15,751 15,751
Additional paid-in capital 8,588,243 8,588,243
Accumulated other comprehensive income (66,346) (163,412)
Retained earnings 8,049,086 7,797,181
----------- -----------
16,586,734 16,237,763
Common stock held in treasury, at cost; 433,272
shares in 1999 and 382,872 shares in 1998 2,000,191 1,882,237
----------- -----------
Total shareholders' equity 14,586,543 14,355,526
----------- -----------
Total $21,418,853 $20,569,806
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
14
<PAGE>
Consolidated Statement of Operations
------------------------------------
<TABLE>
<CAPTION>
Year ended September 30,
-----------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net sales $35,432,551 $34,863,609 $51,673,925
----------- ----------- -----------
Costs and expenses:
Cost of products sold 31,358,303 31,851,996 49,416,175
Selling expenses 1,802,100 1,639,866 2,127,330
General and administrative expenses 2,005,711 2,135,234 3,502,307
Interest expense 57,995 272,473 316,807
Other income, net (1,250,466) (874,617) (391,293)
----------- ----------- -----------
Total costs and expenses 33,973,643 35,024,952 54,971,326
----------- ----------- -----------
Income (loss) before income taxes and minority interest 1,458,908 (161,343) (3,297,401)
Income tax (expense) benefit (547,759) 145,562 828,654
----------- ----------- -----------
Income (loss) before minority interest 911,149 (15,781) (2,468,747)
Minority interest 49,581 - -
----------- ----------- -----------
Net income (loss) $ 960,730 $ (15,781) $(2,468,747)
=========== =========== ===========
Basic earnings (loss) per share $ 0.246 $ (0.004) $ (0.680)
=========== =========== ===========
Diluted earnings (loss) per share $ 0.235 $ (0.004) $ (0.680)
=========== =========== ===========
Weighted average shares outstanding:
Basic 3,911,165 3,554,654 3,629,431
Diluted 4,086,465 3,554,654 3,629,431
</TABLE>
See Notes to Consolidated Financial Statements
15
<PAGE>
Consolidated Statement of Changes in Shareholder's Equity
----------------------------------------------------------
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER
COMMON STOCK PAID-IN COMPREHENSIVE RETAINED TREASURY STOCK
SHARES AMOUNT CAPITAL INCOME EARNINGS SHARES AMOUNT TOTAL
--------- ------- ---------- --------- ----------- --------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1996 3,937,517 $15,751 $8,588,243 $ 24,070 $10,281,709 (304,986) $(1,725,761) $17,184,012
Purchase of 13,100 treasury shares (13,100) (33,975) (33,975)
Sale of 10,000 treasury shares 10,000 20,000 20,000
Net loss (2,468,747) (2,468,747)
--------- ------- ---------- --------- ----------- --------- ------------ -----------
Balance at September 30, 1997 3,937,517 15,751 8,588,243 24,070 7,812,962 (308,086) (1,739,736) 14,701,290
Purchase of 86,786 treasury shares (86,786) (166,501) (166,501)
Sale of 12,000 treasury shares 12,000 24,000 24,000
Comprehensive loss:
Net loss (15,781) (15,781)
Other comprehensive loss,
Unrealized loss on securities during
the period, net of tax of $100,100 (227,983) (227,983)
Reclassification entry 40,501 40,501
-----------
Comprehensive loss (203,263)
--------- ------- ---------- --------- ----------- --------- ------------ -----------
Balance at September 30, 1998 3,937,517 15,751 8,588,243 (163,412) 7,797,181 (382,872) (1,882,237) 14,355,526
--------- ------- ---------- --------- ----------- --------- ------------ -----------
Purchase of 61,800 treasury shares (61,800) (141,454) (141,454)
Sale of 11,400 treasury shares 11,400 23,500 23,500
Dividends paid (708,825) (708,825)
Comprehensive income:
Net income 960,730 960,730
Other comprehensive income:
Unrealized gain on securities during
the period, net of tax of $39,400 58,525 58,525
Reclassification entry 38,541 38,541
-----------
Comprehensive income 1,057,796
--------- ------- ---------- --------- ----------- --------- ------------ -----------
Balance at September 30, 1999 3,937,517 $15,751 $8,588,243 $ (66,346) $ 8,049,086 (433,272) $(2,000,191) $14,586,543
========= ======= ========== ========= =========== ========= ============ ===========
</TABLE>
See Notes to Consolidated Financial Statements
17
<PAGE>
Consolidated Statement of Changes in Shareholder's Equity
---------------------------------------------------------
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER
COMMON STOCK PAID-IN COMPREHENSIVE RETAINED TREASURY STOCK
SHARES AMOUNT CAPITAL INCOME EARNINGS SHARES AMOUNT TOTAL
--------- ------- ---------- --------- ----------- --------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1996 3,937,517 $15,751 $8,588,243 $ 24,070 $10,281,709 (304,986) $(1,725,761) $17,184,012
Purchase of 13,100 treasury shares (13,100) (33,975) (33,975)
Sale of 10,000 treasury shares 10,000 20,000 20,000
Net loss (2,468,747) (2,468,747)
--------- ------- ---------- --------- ----------- --------- ------------ -----------
Balance at September 30, 1997 3,937,517 15,751 8,588,243 24,070 7,812,962 (308,086) (1,739,736) 14,701,290
Purchase of 86,786 treasury shares (86,786) (166,501) (166,501)
Sale of 12,000 treasury shares 12,000 24,000 24,000
Comprehensive loss:
Net loss (15,781) (15,781)
Other comprehensive loss,
Unrealized loss on securities during
the period, net of tax of $100,100 (227,983) (227,983)
Reclassification entry 40,501 40,501
-----------
Comprehensive loss (203,263)
--------- ------- ---------- --------- ----------- --------- ------------ -----------
Balance at September 30, 1998 3,937,517 15,751 8,588,243 (163,412) 7,797,181 (382,872) (1,882,237) 14,355,526
--------- ------- ---------- --------- ----------- --------- ------------ -----------
Purchase of 61,800 treasury shares (61,800) (141,454) (141,454)
Sale of 11,400 treasury shares 11,400 23,500 23,500
Dividends paid (708,825) (708,825)
Comprehensive income:
Net income 960,730 960,730
Other comprehensive income:
Unrealized gain on securities during
the period, net of tax of $39,400 58,525 58,525
Reclassification entry 38,541 38,541
-----------
Comprehensive income 1,057,796
--------- ------- ---------- --------- ----------- --------- ------------ -----------
Balance at September 30, 1999 3,937,517 $15,751 $8,588,243 $ (66,346) $ 8,049,086 (433,272) $(2,000,191) $14,586,543
========= ======= ========== ========= =========== ========= ============ ===========
</TABLE>
See Notes to Consolidated Financial Statements
17
<PAGE>
Consolidated Statement of Cash Flows
------------------------------------
<TABLE>
<CAPTION>
September 30,
-------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 960,730 $ (15,781) $(2,468,747)
----------- ----------- -----------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 555,660 769,618 1,089,003
Gain on sale of property and equipment (371,718) (122,975) (88,453)
Gain on sale of investments (366,683) (61,366) (72,132)
Equity in limited partnership interests (168,500) (461,316) (401,108)
Provision for bad debts 115,100 120,000 240,000
Equity in (gain) loss of investment in joint venture (75,183) 46,958 (74,843)
Deferred income tax (benefit) expense 266,650 (581,000) (142,871)
Minority interest (49,581) - -
(Increase) decrease in assets:
Accounts receivable (1,289,244) 989,923 1,682,009
Inventories 103,424 1,136,036 2,093,917
Recoverable income taxes (190,252) 922,078 943,424
Prepaid expenses (15,867) 41,606 47,725
Other assets (45,506) 39,669 11,430
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 1,213,260 (1,057,674) (2,833,935)
Accrued payroll and related expenses 179,238 (72,669) 24,974
Income taxes payable (193,475) 237,875 -
----------- ----------- -----------
Total adjustments (332,677) 1,946,763 2,519,140
----------- ----------- -----------
Net cash provided by operating activities 628,053 1,930,982 50,393
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in restricted cash 2,140,338 (2,140,338) -
Proceeds from sale of investments 3,964,583 588,635 2,478,627
Purchase of investments (2,760,065) (1,274,464) (703,274)
Proceeds from sale of property and equipment - 4,310,688 130,000
Purchase of property and equipment (911,904) (468,481) (121,855)
Acquisition of majority interest in investee, net of cash acquired 39,171 - -
----------- ----------- -----------
Net cash provided by investing activities 2,472,123 1,016,040 1,783,498
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of note payable (7,843) - -
Sales of treasury stock 23,500 24,000 20,000
Purchase of treasury stock (141,454) (166,501) (33,975)
Proceeds (repayments) of note payable, bank (2,459,052) (1,472,968) 5,520
Dividends paid (708,825) - -
----------- ----------- -----------
Net cash used in financing activities (3,293,674) (1,615,469) (8,455)
----------- ----------- -----------
Net (decrease) increase in cash and cash equivalents (193,498) 1,331,553 1,825,436
CASH AND CASH EQUIVALENTS, beginning of year 4,073,427 2,741,874 916,438
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of year $ 3,879,929 $ 4,073,427 $ 2,741,874
----------- ----------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest paid $ 59,211 $ 272,473 $ 316,807
----------- ----------- -----------
Income taxes paid (refunded) $ 430,684 $ (740,465) $(1,650,419)
----------- ----------- -----------
</TABLE>
See Notes to Consolidated Financial Statements
18
<PAGE>
NOTE 1 - NATURE OF OPERATIONS
Paris Corporation and subsidiaries (collectively, the "Company") manufacture
stock and custom business forms, provide value added services to cut sheet
products, and distributes plastic and office products and computer/printer
peripheral products. The Company manufactures stock and custom forms in
Burlington, New Jersey and stock forms in Fort Worth, Texas. The Company markets
through retailers, resellers, and dealers throughout the United States and
Canada.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Actual results could differ
from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash on deposit and money market accounts.
Financial Instruments
The carrying amounts of cash and cash equivalents, restricted cash, accounts
receivable, prepaid expenses, accounts payable and accrued expenses, note
payable and note payable, bank approximate their fair values at September 30,
1999 and 1998.
Investments
Management determines the appropriate classification of investment securities at
the time they are acquired and evaluates the appropriateness of such
classifications at each balance sheet date. The classification of those
securities and the related accounting policies are as follows:
Available-for-sale securities: Available-for-sale securities consist of
marketable equity and debt securities not classified as trading securities.
Available-for-sale securities are stated at fair value based on quoted market
prices and unrealized holding gains and losses are reported as a separate
component of shareholders' equity, net of tax, except for permanent impairments
in value which are recognized in current earnings. Realized gains and losses are
included in income.
Held-to-Maturity securities: Held-to Maturity securities consist of marketable
debt securities that the Company has the intent and ability to hold to maturity
and are reported at amortized cost.
The Company accounts for investments in limited partnerships under the equity
method of accounting.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined by
the first-in, first-out method (FIFO).
Property and Equipment
Property and equipment are stated at cost. Expenditures for renewals and
betterments which increase the useful life or capacity of property and equipment
are also capitalized at cost. Expenditures for repairs and maintenance are
charged to expense as incurred. Gain or loss on the retirement or disposal of
capital assets is reflected in income in the period of disposal.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets. The estimated useful lives of the property and
equipment range from three to seven years. Depreciation expense was $531,817,
$769,618 and $1,089,003 in 1999, 1998 and 1997, respectively.
19
<PAGE>
Other Assets
The Company provides display racks to its resellers for the display of its goods
in stores. These display racks are amortized on the straight-line basis over
eighteen months commencing when the display racks are shipped to the resellers.
Amortization expense was $23,843 in 1999.
Per Share Data
In 1998, the Company adopted Statement of Financial Accounting Standards No.
128, "Earnings Per Share" ("SFAS No. 128"). Earnings per share information has
been restated for all prior periods presented as prescribed by SFAS No. 128. The
adoption of SFAS No. 128 had no effect on previously reported loss per share.
The anti-dilutive effect of conversion of the Company's stock options causes
such conversion to be excluded from the computation of diluted loss per share
for the years ended September 30, 1998 and 1997.
The following table sets forth the computation of basic earnings (loss) per
share:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Numerator:
Net income (loss) available
to common shareholders $ 960,730 $ (15,781) $(2,468,747)
Denominator:
Weighted-average shares 3,911,165 3,554,654 3,629,431
Basic earnings (loss) per share $ .246 $ (.004) $ (.680)
</TABLE>
The following table sets forth the computation of diluted earnings (loss) per
share:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Numerator:
Net income (loss) available
to common shareholders $ 960,730 $ (15,781) $(2,468,747)
Denominator:
Adjusted weighted-average shares 4,086,465 3,554,654 3,629,431
Diluted earnings (loss) per share $ .235 $ (.004) $ (.680)
</TABLE>
Stock-Based Compensation
As permitted by Statement of Financial Accounting Standards No. 123 "Accounting
For Stock-Based Compensation," the Company has elected to follow Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees,"
("APB 25"). Under APB 25, no compensation expense is recognized at the time of
option grant because the exercise price of the Company's employee stock option
equals the fair market value of the underlying common stock on the date of
grant.
Income Taxes
The Company accounts for income taxes under the liability method. Under this
method, deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
20
<PAGE>
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned and majority owned subsidiaries. All intercompany transactions
and balances have been eliminated.
Comprehensive Income
At October 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"). SFAS No.
130 established new standards for reporting and display of comprehensive income
and its components. Comprehensive income consists of net income and unrealized
gains and losses on certain investments in marketable debt and equity securities
and is presented in the statement of changes in shareholders' equity. The
adoption of SFAS No. 130 had no effect on the Company's net income or equity.
Prior year financial statements have been reclassified to conform to SFAS No.
130 requirements.
Accounting Pronouncements
In May 1999, the Financial Accounting Standards Board issued Statement No. 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133" ("SFAS No. 137"), which defines the
effective date of Statement No. 133, "Accounting for Derivative Instruments and
Hedging Activities" ("SFAS No. 133"). SFAS No. 133 establishes standards for
derivative instruments and hedging activities to be recognized as either assets
or liabilities and to measure those instruments at fair value. The amended SFAS
No. 133 is effective for financial statements relating to fiscal years beginning
after June 15, 2000. The adoption of SFAS No. 133 will have no impact on the
Company's results of operations, financial position or cash flows.
Reclassifications
Certain amounts reported in the 1998 and 1997 financial statements have been
reclassified to conform to the 1999 presentation.
NOTE 3 - INVESTMENT IN SIGNATURE CORPORATION
Prior to August 31, 1999, Paris Corporation held a 44% interest in Signature
Corporation ("Signature") which was accounted for using the equity method of
accounting. Subsequent to August 31, 1999, as a result of a stock tender by a
Signature minority shareholder, the Company's interest in Signature increased to
57%. This change in ownership percentage in Signature was accounted for as a
purchase and Signature has been consolidated in the accompanying financial
statements. The results of operations of Signature have been included in the
accompanying statement of operations for the one month period of September 30,
1999. Signature is a wholesaler of plastic and other office products.
The following proforma results of operations information has been prepared to
give effect to the purchase as if such transaction had occurred at the beginning
of the period presented. The information presented is not necessarily indicative
of results of future operations of the combined companies.
21
<PAGE>
PROFORMA RESULTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Years Ended September 30,
1999 1998
---- ----
<S> <C> <C>
Net sales $41,489,656 $40,254,723
Net income $ 924,482 $ 1,115
Basic earnings (loss) per share $ .236 $ .0003
Diluted earnings (loss) per share $ .226 $ .0003
Weighted average shares - basic 3,911,165 3,554,654
Weighted average shares - diluted 4,086,465 3,554,654
</TABLE>
NOTE 4 - INVESTMENTS
Investments at September 30, 1999 and 1998, are summarized as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
Fair Value Cost Fair Value Cost
---------- ---- ---------- ----
<S> <C> <C> <C> <C>
Available for sale:
Stocks $1,030,534 $1,052,374 $1,037,005 $1,080,483
Mutual funds 539,393 621,219 429,649 649,583
---------- ---------- --------- ----------
Total $1,569,927 $1,673,593 $1,466,654 $1,730,066
========== ========== ========== ==========
Amortized Amortized
Cost Fair Value Cost Fair Value
---- ---------- ---- ----------
Held to maturity:
Current:
US treasuries and bonds $1,486,417 $1,486,417 $ - $ -
Corporate bonds and
notes 510,043 510,043 $ - $ -
---------- ---------- ---------- ----------
Total $1,996,460 $1,996,460 $ - $ -
========== ========== ========== ==========
Noncurrent:
Corporate bonds and
notes $ 500,000 $ 500,000 $ - $ -
========== ========== ========== ==========
The maturities of investments held to maturity are as follows:
Due within one year $1,996,960
Due within two years 500,000
----------
Total $2,496,960
==========
</TABLE>
22
<PAGE>
Gross unrealized holding gains and losses at September 30, 1999 and 1998, are as
follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Gross unrealized gains:
Stocks $ 18,516 $ -
Mutual funds 872
Gross unrealized losses:
Stocks (41,228) (43,478)
Mutual funds (81,826) (219,934)
--------- ---------
Total $(103,666) $(263,412)
========= =========
</TABLE>
Proceeds from the sale of securities classified as available-for-sale for the
years ended September 30, 1999 and 1998 were $460,699 and $588,635,
respectively. For the purpose of determining gross realized gains and losses,
the cost of securities sold is based upon specific identification.
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Gross realized gains $ 4,614 $ 85,701
======== ========
Gross realized losses $(69,755) $(24,335)
======== ========
</TABLE>
Other Investments
Other investments consist of interests in limited partnerships. The limited
partnerships invest in publicly traded securities with readily determinable
market values. The Company accounts for these investments utilizing the equity
method of accounting. Income and losses are recorded based on the Company's
beneficial interest. The limited partnership interests were $2,903,559 in 1998.
The limited partnership interests were sold during 1999 for gross proceeds of
$3,503,884 which resulted in a gross realized gain of $431,824.
NOTE 5 - INVENTORIES
Inventories consist of the following at September 30, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Raw materials $1,370,474 $ 819,331
Work in progress 61,562 47,594
Finished goods 2,734,854 2,588,874
---------- ----------
Total $4,166,890 $3,455,799
========== ==========
</TABLE>
23
<PAGE>
NOTE 6 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following at September 30, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Building improvements $ 18,445 $ -
Machinery and equipment 9,065,261 8,177,427
Furniture and fixtures 377,095 366,285
Automobiles and trucks 155,055 159,309
---------- ----------
Total property and equipment 9,615,856 8,703,021
Less accumulated depreciation 7,674,284 7,142,467
---------- ----------
Property and equipment, net $1,941,572 $1,560,554
========== ==========
</TABLE>
NOTE 7 - NOTE PAYABLE, BANK
The Company had a revolving line of credit with a bank that expired in
January 1999. Borrowings at September 30, 1998 were $2,459,052.
NOTE 8 - NOTE PAYABLE
In connection with the Signature stock tender (Note 3), Signature converted
$100,630 of accounts payable into a promissory note. The note is payable in
monthly installments of $9,059 with interest at 14.5%. The note matures in
August 2000. At September 30, 1999, the outstanding balance was $92,787.
NOTE 9 - INCOME TAXES
The composition of the (expense) benefit for income taxes for the years ended
September 30, 1999, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $(206,709) $(237,875) $701,765
State (74,400) - (15,983)
--------- --------- --------
Total current (281,109) (237,875) 685,782
--------- --------- --------
Deferred:
Federal (196,077) 234,068 119,864
State (70,573) 149,369 23,008
--------- --------- --------
Total deferred (266,650) 383,437 142,872
--------- --------- --------
Total $(547,759) $ 145,562 $828,654
========= ========= ========
</TABLE>
The 1997 federal tax benefit reflects the realization of the Company's net
deferred tax assets due to the carryback of the taxable loss. The Company has
state net operating loss carryforwards of approximately $12,265,000, available
to offset future state taxable income. The state net operating loss
carryforwards expire in the years 2000 through 2004.
24
<PAGE>
Reconciliations of income taxes with the amounts that would result from applying
the U.S statutory rate are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
(Expense) benefit at statutory rates $(481,740) $ 54,858 $1,121,116
State income taxes, net of federal
income tax benefit (74,400) 11,650 -
Prior year over (under) accruals (11,250) 79,054 (292,462)
Other, net 19,631 - -
--------- -------- ----------
Income tax (expense) benefit $(547,759) $145,562 $ 828,654
========= ======== ==========
</TABLE>
The components of the net deferred tax asset at September 30, 1999 and 1998 are
as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Inventory reserves $ 231,300 $ 289,000
Allowance for doubtful accounts 143,000 133,600
Reserve accruals 42,400 112,900
Gain on sale of building 218,800 805,800
Unrealized loss on securities 39,400 100,100
Other 222,300 246,400
Limited partnership income (80,600) (39,500)
Depreciation (241,800) (251,000)
State net operating loss 1,030,400 505,500
Federal net operating loss 630,250 -
---------- ----------
Total 2,235,450 1,902,800
Less valuation allowance 1,642,780 980,800
---------- ----------
Net deferred tax asset $ 592,670 $ 922,000
========== ==========
</TABLE>
These amounts have been presented in the financial statements as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Current deferred tax asset $396,400 $135,600
Noncurrent deferred tax asset 196,270 786,400
-------- --------
$592,670 $922,000
======== ========
</TABLE>
The increase in the valuation allowance is related to the increase in state and
federal loss carryforwards in part resulting from the Signature transaction.
25
<PAGE>
NOTE 10 - SHAREHOLDERS' EQUITY
In November 1995, the Board of Directors adopted the Company's 1995 Stock Option
Plan to permit the issuance of incentive stock options under Section 422 of the
Internal Revenue Code. There are 500,000 shares of common stock authorized for
non-qualified and incentive stock options under the plan, which are subject to
adjustment in the event of stock splits, stock dividends and other situations.
Under the plan, no options may be granted more than ten years after the
effective date of the plan. The exercise price of all incentive stock options
granted under the option plan may be no less than fair market value of such
shares on the date of grant. Stock option activity for 1999, 1998 and 1997 is
as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Outstanding at beginning of year 370,300 347,300 316,300
Granted 44,000 61,000 115,000
Expired/Exercised (20,000) (38,000) (84,000)
-------- -------- --------
Outstanding at end of year 394,300 370,300 347,300
======== ======== ========
Exercisable at end of year 350,300 309,300 347,300
======== ======== ========
Available for grant at end of year 232,000 276,000 337,000
======== ======== ========
Option price range at September 30 $1.875 to $1.875 to $1.875 to
$7.975 $7.975 $7.975
</TABLE>
Options outstanding at September 30, 1999 have an average exercise price of
$3.50 and a remaining contractual life of 6.1 years. Options outstanding at
September 30, 1998 have an average exercise price of $3.65 and a remaining
contractual life of 5.8 years. Options outstanding at September 30, 1997 have
an average exercise price of $3.97 and a remaining contractual life of 6.8
years.
Statement of Financial Accounting Standards No. 123 ("SFAS No. 123") requires
pro forma information regarding net income (loss) and earnings (loss) per share
as if the Company has accounted for its employee stock options granted under the
fair value method of SFAS No. 123. The fair value of these equity awards was
estimated at the date of grant using the Black-Scholes option pricing methods.
The weighted average assumptions used were: risk free interest rate of 6.00%;
expected volatility of 1.08%; expected option life of five to ten years and an
expected dividend rate of 0.0%.
The proforma effect on net income (loss) and earnings (loss) per share is as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss): As reported $960,730 $ (15,781) $(2,468,747)
Proforma 907,877 (102,582) (2,589,424)
Basic earnings (loss)
per share: As reported .246 (.004) (.680)
Proforma .232 (.03) (.71)
Diluted earnings
(loss) per share: As reported .235 (.004) (.680)
Proforma .222 (.03) (.71)
</TABLE>
26
<PAGE>
NOTE 11 - COMMITMENTS AND CONTINGENCIES
Leases
The Company has certain operating leases, primarily for its New Jersey and Texas
operating facilities, expiring at various dates.
Rental expense amounted to $562,919 in 1999; $372,773 in 1998; and $323,076 in
1997.
As of September 30, 1999, minimum rental payments under noncancelable operating
leases were as follows:
<TABLE>
<CAPTION>
Year Ending September 30, Amount
------------------------- ------
<S> <C>
2000 $550,004
2001 357,800
2002 45,837
--------
Total $953,641
========
</TABLE>
In May 1998, the Company entered into a contract to sell its office and
production facility in New Jersey for a total price of $4,500,000. In addition,
the Company entered into an agreement to lease the facility back for a period of
three years plus, at the Company's option, an additional two three year renewal
periods. The Company has no obligation to renew the lease beyond its original
term. The total gain of $1,070,661 has been deferred and is being recognized
over the term of the original lease in the monthly amount of $29,741. The
amount of the gain deferred was $575,778 and $932,664 at September 30, 1999 and
1998, respectively. The total gain recognized to date was $494,883 and $137,997
at September 30, 1999 and 1998, respectively. The lease calls for monthly
rental payments of $41,667 over the term of the lease.
Service Contract
The Company had an agreement with an outside contractor to perform warehousing
and distribution services for the Fort Worth, Texas facility. The services
included staffing and managing personnel, provision of all equipment, material,
and services in order to maintain the facility, and the design of a warehouse
management system. The agreement was terminated in May 1997. The Company
incurred a charge of $150,000 which is classified in other income, net related
to the early termination of the contract. Service contract expense was $91,322
in 1997.
Contingencies
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 has estimated and recorded contingent
liabilities of approximately $237,000 and $54,000 at September 30, 1999 and
1998, respectively, related to these agreements and other potential liabilities.
Purchase Commitment
During 1999, the Company amended a previous sales agreement with Boise Cascade
Corporation. The amendment calls for the Company to purchase a minimum of
$11,000,000 of office papers from Boise Cascade for resale to Best Buy by
September 30, 2001. Cumulative purchase levels are set forth in the agreement.
If the Company does not reach these interim totals or the minimum cumulative
total, the Company will be subject to penalties.
27
<PAGE>
NOTE 12 - PROFIT SHARING AND DEFERRED COMPENSATION PLAN
The Company has a defined contribution plan covering substantially all
employees. Employer contributions were $66,213 in 1999, $73,591 in 1998 and
$105,262 in 1997.
In April 1997, the Board of Directors approved a severance and consulting
agreement with the former President upon his resignation. The agreement
provides for guaranteed payments for two years aggregating $164,000 for
severance and $164,000 for consulting services, respectively. The Company
expensed the entire $328,000 liability in fiscal 1997.
NOTE 13 - SEGMENT INFORMATION
The Company operates in three basic segments or lines of business. These
segments are (1) stock continuous forms and cutsheets, (2) custom continuous
forms and cutsheets, and (3) retail papers and office products, including
computer/printer hardware and software products. The following table sets forth
certain financial information with respect to these segments and reconciles such
information to the consolidated financial statements.
<TABLE>
<CAPTION>
Years Ended September 30,
1999 1998 1997
--- ---- ----
<S> <C> <C> <C>
Net sales of products and services:
Stock forms $15,185,170 $19,108,304 $41,855,871
Custom forms 6,359,148 6,208,368 5,938,617
Retail, office products,
13,888,233 9,546,937 3,879,437
hardware/software ---------- ----------- -----------
Total $35,432,551 $34,863,609 $51,673,925
=========== =========== ===========
Segment operating income (loss):
Stock forms $(1,096,045) $(1,673,109) $(2,742,349)
Custom forms 214,422 189,875 291,784
Retail, office products,
hardware/software 1,275,077 620,575 (492,929)
Corporate (127,017) 99,173 (428,393)
----------- ----------- -----------
Total $ 266,437 $ (763,486) $(3,371,887)
=========== =========== ===========
Corporate consolidated income
(loss) before income taxes and
minority interest:
Segment operating income
(loss) $ 266,437 $ (763,486) $(3,371,887)
Interest expense (57,995) (272,473) (316,807)
Other income, net 1,250,466 874,616 391,293
----------- ----------- -----------
Total $ 1,458,908 $ (161,343) $(3,297,401)
=========== =========== ===========
</TABLE>
28
<PAGE>
<TABLE>
<S> <C> <C> <C>
Assets:
Stock forms $ 6,817,640 $ 6,319,829 $ 8,458,771
Custom forms 3,762,796 2,339,987 2,028,064
Corporate 10,838,417 11,909,990 12,483,928
----------- ----------- -----------
Total consolidated $21,418,853 $20,569,806 $22,970,763
=========== =========== ===========
Capital expenditures:
Stock forms $ 20,099 $ 334,549 $ 64,134
Custom forms 716,477 113,159 8,697
Corporate 175,328 20,773 49,024
----------- ----------- -----------
Total consolidated $ 911,904 $ 468,481 $ 121,855
=========== =========== ===========
Depreciation and amortization expense:
Stock forms $ 324,855 $ 372,453 $ 425,974
Custom forms 146,575 154,808 227,020
Corporate 84,230 242,357 436,009
----------- ----------- -----------
Total consolidated $ 555,660 $ 769,618 $ 1,089,003
=========== =========== ===========
</TABLE>
Segment operating income (loss) is determined by deducting from sales of
products and services, cost of products sold, and selling, general and
administrative expenses directly related or allocable to the segment. Not
included in segment operating income are certain income and expense items such
as interest income and expense, other income, minority interest and income
taxes.
The reporting segments follow the same accounting policies used for the
Company's consolidated financial statements and described in the summary of
significant accounting policies. Management evaluates a segment's performance
based on profit or loss from operations before income taxes and minority
interest.
NOTE 14 - OTHER EXPENSE (INCOME), NET
Other expense (income), net, consists of the following for the years ended
September 30, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Equity in limited partnership interests $ (168,500) $(461,316) $(401,108)
Gain on sale of investments (366,683) ( 61,366) (72,132)
Gain on sale of property and
equipment (371,718) (122,975) (88,453)
Interest income (238,266) (247,928) (124,713)
Service contract settlement - - 150,000
Other, net (105,299) 18,968 145,113
----------- --------- ---------
Total $(1,250,466) $(874,617) $(391,293)
=========== ========= =========
</TABLE>
29
<PAGE>
NOTE 15: CONCENTRATIONS OF CREDIT RISK
The Company maintains investment accounts with several stock brokerage firms.
The accounts contain cash and securities. Balances are insured up to $500,000
(with a limit of $100,000 for cash) by the Securities Investor Protection
Corporation.
During the year ended September 30, 1999, approximately 20% of the Company's
sales were to two customers in the retail segment, including sales of $4,498,063
to one customer in this segment.
NOTE 16: STOCK BUY-BACK PROGRAM
In September 1998, the Company began a buy-back program of up to 100,000 shares
of its common stock at prevailing market prices. At September 30, 1999, the
Company purchased 61,800 shares of its common shares under this program.
30
<PAGE>
PARIS CORPORATION
-----------------
SCHEDULE II
-----------
VALUATION AND QUALIFYING ACCOUNTS
---------------------------------
<TABLE>
<CAPTION>
Balance at beginning Additions charged to Balance at
of period cost and expenses Deductions end of period
-------------------- -------------------- ---------- -------------
<S> <C> <C> <C> <C>
For the year ended
September 30, 1999:
Allowance for
doubtful accounts: $ 317,458 $157,184 $ 21,042 $ 453,600
Allowance for
inventory obsolescence $ 760,591 $ 0 $200,039 $ 560,552
For the year ended
September 30, 1998:
Allowance for
doubtful accounts: $ 627,039 $120,000 $429,539 $ 317,500
Allowance for
contingency reserve: $ 98,362 $ 0 $ 98,362 $ 0
Allowance for
inventory obsolescence: $1,314,919 $ 0 $554,328 $ 760,591
For the year ended
September 30, 1997:
Allowance for
doubtful accounts: $ 415,536 $240,000 $ 28,497 $ 627,039
Allowance for
contingency reserve: $ 690,000 $ 0 $591,638 $ 98,362
Allowance for
inventory obsolescence $ 989,990 $406,164 $ 81,235 $1,314,919
</TABLE>
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
31
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
To The Shareholders and
Board of Directors of
Paris Corporation
Burlington, New Jersey:
We have audited the accompanying consolidated balance sheet of Paris
Corporation and subsidiaries as of September 30, 1999 and 1998, and the related
consolidated statements of operations, changes in shareholders' equity and cash
flows for each of the three years in the period ended September 30, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Paris
Corporation and subsidiaries as of September 30, 1999 and 1998, and the results
of their operations and their cash flows for each of the three years in the
period ended September 30, 1999 in conformity with generally accepted accounting
principles.
Our audits referred to above also included audits of the financials statement
schedules listed under Item 14(a) (2). In our opinion, those financial
statement schedules present fairly, in all material respects, in relation to the
basic consolidated financial statements taken as a whole, the information
required to be stated therein.
/s/ Parente, Randolph, Orlando, Carey & Associates, LLC
Philadelphia, Pennsylvania
November 19, 1999
32
<PAGE>
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors of the Company are elected for a term of one year. The current
Directors and Officers of the Company, together with their ages, positions,
backgrounds, and business experiences are set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ---- --- --------------------------
<S> <C> <C>
Dominic P. Toscani, Sr. 71 President, Chief Executive
(4) Officer, Treasurer and
Chairman of the Board of
Directors
Gerard M. Toscani 39 Senior Vice President
(3), (4) and Director
Palmer E. Retzlaff 68 Director
(2), (3)
Frank A. Mattei, M.D. 78 Director
(1), (2)
Oscar Tete 75 Director
(1)
John V. Petrycki 59 Director
(1), (3)
William L. Lomanno 32 Chief Financial Officer
</TABLE>
(1) Member of Compensation and Stock Option Committee
(2) Member of Audit Committee
(3) Member of the Investment and Finance Committee
(4) Dominic P. Toscani, Sr. is the father of Gerard M. Toscani
Dominic P. Toscani, Sr. is the founder of the Company, has served as a
Director and has been responsible for its management since its inception.
Prior to the founding of the Company, Mr. Toscani was a practicing attorney.
Gerard M. Toscani became a Director of the Company in 1992. He was appointed
Senior Vice President during fiscal 1990 and was the Company's Vice President
of Sales and Marketing since January 1987. He previously served as Sales and
Marketing Manager since September 1982.
Palmer E. Retzlaff became a Director in November 1993. He has been President
of Southwest Grain Co., Inc. since 1973. Previously he was the General Manager
of the Philadelphia Eagles.
Frank A. Mattei was elected to the Board of Directors in March 1986. He has
been a practicing orthopedic surgeon over the past five years and is
associated with North Philadelphia Health System, (formerly Girard Medical
Center), and St. Agnes Medical Center in Philadelphia.
33
<PAGE>
Oscar Tete was elected to the Board of Directors in March 1986. Mr. Tete
retired in 1990. He was an Executive Vice President of First Fidelity Bank in
Burlington, New Jersey since 1972.
John Petrycki was elected to the Board of Directors in August 1995. Mr.
Petrycki retired in 1995. He was President and CEO of PNC Bank in south
central Pennsylvania.
William L. Lomanno became Chief Financial Officer in April 1998. He has been
with the Company for eight years and has previously served as the Controller
and Accounting Manager for the Company.
34
<PAGE>
ITEM 11 - SUMMARY COMPENSATION
The following table contains information regarding the individual compensation
of the two most highly compensated officers of the Company in fiscal years 1999,
1998 and 1997.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
-----------------------------------------------------
Name and Fiscal Other
Principal Position Year Salary Bonus Annual
Compensation (1)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dominic P. Toscani, Sr. 1999 $268,367 $ 0 $ 0
Chairman of the Board 1998 $262,415 $2,521 $2,604
and President 1997 $268,040 $ 0 $5,630
Gerard M. Toscani 1999 $180,654 $ 0 $ 0
Senior Vice President 1998 $164,008 $1,577 $3,164
1997 $177,622 $ 0 $4,625
</TABLE>
(1) Represents the use of a company car.
35
<PAGE>
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
(AS NOVEMBER 15, 1999)
<TABLE>
<CAPTION>
Title of Name and Address of Amount and Nature of Percent of
Class Beneficial Owner Beneficial Ownership (1) Class (1)
- ------------- -------------------------- ------------------------ -----------
<S> <C> <C> <C>
Common Dominic P. Toscani (2) 1,147,988 32.7%
Stock and Nancy C. Toscani
122 Kissel Road
Burlington, NJ 08016
Common Frank A. Mattei 1,064,831 30.4%
Stock 1016 Mercer Street
Cherry Hill, NJ 08034
Common The Caritas Foundation (3) 383,835 11.0%
Stock 700 Hobbs Road
Wayne, PA 19087
Common Henry Partners, L.P. 187,000 5.3%
Stock
Common Gerard M. Toscani 160,487 4.6%
Stock
Common Palmer E. Retzlaff 11,000 *
Stock
Common Oscar Tete 9,012 *
Stock
Common John Petrycki 7,000 *
Stock
All Directors (present and proposed) and
officers as a group (10 persons) (4) 2,424,718 69.2%
</TABLE>
* Less than 1%
(1) Based on 3,504,245 shares outstanding and 364,300 options currently
exercisable on November 15, 1999.
(2) Includes 1,019,237 shares personally held; 47,006 shares held by Paris
Corporation Profit Sharing Plan of which Mr. Toscani is the Plan Trustee;
14,745 shares held by Toscani Investment Company, a family partnership; and
67,000 options exercisable as of November 15, 1999.
(3) The Caritas Foundation, a tax exempt organization formed under Section
501(C)(3) of the Internal Revenue Code of 1954, as amended, was organized
in 1984 by Dominic P. Toscani, Sr. to promote the objectives of free
enterprise and to support individual freedom. At the present time Reverend
Peter Toscani, O.S.A., is sole trustee of the foundation.
(4) Includes options currently exercisable individually and all officers as a
group (217,000).
36
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
AS OF NOVEMBER 15, 1999
<TABLE>
<CAPTION>
Number of
Shareholder Shares owned (1) Percent (1)
<S> <C> <C>
Dominic P. Toscani, Sr. (2) (4) 1,147,988 32.7%
and Nancy C. Toscani
122 Kissel Road
Burlington, NJ 08016
Frank A. Mattei 1,064,831 30.4%
122 Kissel Rd.
Burlington, NJ 08016
The Caritas Foundation (3) 383,835 11.0%
Henry Partners, L.P. 187,000 5.3%
Gerard M. Toscani (4) 135,487 4.6%
Palmer E. Retzlaff 11,000 *
Oscar Tete 9,102 *
John Petrycki 7,000 *
All Directors (present and proposed)
and officers as a group (10 persons) (4) 2,424,718 69.2%
</TABLE>
* Less than 1%
(1) Based on 3,504,245 shares outstanding and 364,300 options currently
exercisable on November 15, 1999.
(2) Includes 1,019,237 shares personally held; 47,006 shares held by Paris
Corporation Profit Sharing Plan of which Mr. Toscani is the Plan Trustee;
14,745 shares held by Toscani Investment Company, a family partnership; and
67,000 options exercisable as of November 15, 1999.
(3) The Caritas Foundation, a tax exempt organization formed under Section
501(C)(3) of the Internal Revenue Code of 1954, as amended, was organized
in 1984 by Dominic P. Toscani, Sr. to promote the objectives of free
enterprise and to support individual freedom. At the present time Reverend
Peter Toscani, O.S.A., is sole trustee of the foundation.
(4) Includes options currently exercisable individually and all officers as a
group (217,000).
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There are no other material relationships or transactions which qualify for
disclosure under this caption.
37
<PAGE>
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
This consolidated financial statements and related schedules filed as part of
this Annual Report on Form 10-K are included in Part II, Item 8.
REPORTS ON FORM 8-K
None.
EXHIBITS:
The following exhibits (with the exception of Exhibit 3.4, 10.5(b), 10.7 and
22(a)) are incorporated by reference to the Company's registration statement on
Form S-18 (no.-3-3344-W) filed February 13, 1986 with the Securities and
Exchange Commission and effective March 25, 1986. Exhibit 3.4, 10.5(b) and 10.7
are incorporated by reference to the Company's fiscal 1989 Form 10-K filed with
the Securities and Exchange Commission on December 19, 1989. Exhibit 22(a) is
incorporated by reference to the Company's fiscal 1990 Form 10-K filed with the
Securities and Exchange Commission on December 27, 1991.
3.1 Articles of Incorporation of the Company.
3.2 Amendment to Articles of Incorporation, dated January 6, 1986.
3.3 Amendment to Articles of incorporation, dated January 7, 1986.
3.4 By-laws of Company, as amended.
4.2(a) Form of Warrant to Purchase Common Stock of Company.
10.5 Company's Profit Sharing Plan, dated October 1, 1979.
10.5(a) Amendment to Profit Sharing Plan, dated October 2, 1985.
10.5(b) Amendment to Profit Sharing Plan, dated October 1, 1986.
10.6 Company's Stock Option Plan, dated October 1, 1985.
10.7 Line of Credit (loan agreement) of $2,000,000 from the Fidelity
Bank.
10.9 Bucks County Industrial Development Authority Loan Agreement for
1,500,000 dated April 10, 1985.
10.9(a) Letter Amendment, dated March 4, 1986 from Special Counsel to
Fidelity Bank.
10.9(b) Letter Amendment, dated March 5, 1986 from Fidelity Bank to
Special Counsel.
10.10 New Jersey Economic Development Authority Note for 3,000,000 by
Company, dated September 10, 1985.
10.10(a) Letter Agreement, dated March 4,1986 from Special Counsel to
Fidelity Bank.
10.10(b) Letter Amendment dated March 5, 1986 from Fidelity Bank to
Special Counsel.
10.10(c) Letter dated, March 24, 1986 from Special Counsel to Fidelity
Bank with respect to the New Jersey Economic Development
Authority Loan.
21(a) List of Subsidiaries.
38
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on behalf
by the undersigned, thereunto duly authorized.
PARIS CORPORATION
Date: December 29, 1999 By: /s/ Dominic P. Toscani, Sr.
---------------------- ---------------------------------------
Dominic P. Toscani, Sr.
(President, Chairman Board of Directors)
Date: December 29, 1999 By: /s/ William L. Lomanno
---------------------- ---------------------------------------
William L. Lomanno
(Chief Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURES
<TABLE>
<S> <C>
/s/ Dominic P. Toscani, Sr. 12/29/99 /s/ Frank A. Mattei 12/29/99
- ------------------------------------------------ ----------------------------------------------------
Dominic P. Toscani, Sr. (Date) Frank A. Mattei (Date)
(President, Chairman Board of Directors) (Director)
/s/ William L. Lomanno 12/29/99 /s/ Palmer E. Retzlaff 12/29/99
- ------------------------------------------------ ----------------------------------------------------
William L. Lomanno (Date) Palmer E. Retzlaff (Date)
(Chief Financial Officer) (Director)
/s/ Gerard M. Toscani 12/29/99 /s/ Oscar Tete 12/29/99
- ------------------------------------------------ ----------------------------------------------------
Gerard M. Toscani (Date) Oscar Tete (Date)
(Director) (Director)
/s/ John V. Petrycki 12/29/99
- ------------------------------------------------
John V. Petrycki (Date)
(Director)
</TABLE>
39
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 3,879,929
<SECURITIES> 3,566,887
<RECEIVABLES> 6,412,205
<ALLOWANCES> 453,600
<INVENTORY> 4,166,890
<CURRENT-ASSETS> 18,400,574
<PP&E> 9,615,856
<DEPRECIATION> 7,674,284
<TOTAL-ASSETS> 21,418,853
<CURRENT-LIABILITIES> 6,519,430
<BONDS> 0
0
0
<COMMON> 15,751
<OTHER-SE> 14,570,792
<TOTAL-LIABILITY-AND-EQUITY> 21,418,853
<SALES> 35,432,551
<TOTAL-REVENUES> 35,432,551
<CGS> 31,358,303
<TOTAL-COSTS> 33,973,643
<OTHER-EXPENSES> (1,250,466)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 57,995
<INCOME-PRETAX> 1,458,908
<INCOME-TAX> 547,759
<INCOME-CONTINUING> 960,730
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 960,730
<EPS-BASIC> .246
<EPS-DILUTED> .235
</TABLE>
