<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
___________________________________________
FOR QUARTER ENDED, JUNE 30, 2000
COMMISSION FILE NUMBER 0-14358
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PARIS CORPORATION
-----------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
PENNSYLVANIA 23-1645493
------------ ----------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
122 KISSEL ROAD, BURLINGTON, NEW JERSEY 08016
-----------------------------------------------
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE 609-387-7300
------------
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES [X] NO [_]
NUMBER OF SHARES OUTSTANDING AS OF JUNE 30, 2000
COMMON STOCK 3,268,535
<PAGE>
PARIS CORPORATION
CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C>
ITEM 1. Financial Statements (Unaudited): PAGE
Consolidated Balance Sheets - June 30, 2000
and September 30, 1999 (audited)....................................................... 3
Consolidated Statements of Income
Three months ended, June 30, 2000 and 1999
Nine months ended, June 30, 2000 and 1999............................................... 4
Consolidated Statements of Cash Flows -
Nine months ended, June 30, 2000 and 1999............................................... 5
Consolidated Statement of Changes in Stockholders' Equity -
September 30, 1999 and June 30, 2000.................................................... 6
Notes to Consolidated Condensed
Financial Statements.................................................................... 7
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations........................................... 8 - 11
PART II. OTHER INFORMATION (Items 1 through 5 - not applicable)
ITEM 6. Exhibits and Reports on Form 8-K........................................................ 12
Signatures of Registrant................................................................ 13
</TABLE>
<PAGE>
PARIS CORPORATION
CONSOLIDATED BALANCE SHEET
(in thousands)
<TABLE>
<CAPTION>
ASSETS
6-30-00 9-30-99
(Unaudited) (Audited)
--------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,689 $ 3,880
Investments:
Marketable Securities 3,078 3,567
Other 511 0
Accounts receivable 5,220 5,959
Inventories 4,696 4,167
Refundable Income Taxes 0 190
Prepaid expenses 239 242
Deferred income taxes 359 396
--------- --------
Total current assets 15,792 18,401
Investments held to maturity 500 500
Property and equipment, net 1,722 1,941
Deferred tax asset 196 196
Other assets 200 381
--------- --------
Total Assets $ 18,410 $ 21,419
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Note payable $ 18 $ 92
Accounts payable and accrued expenses 3,240 5,197
Accrued payroll and related expenses 744 700
Income taxes payable 127 44
Deferred revenue 340 486
--------- --------
Total current liabilities 4,469 6,519
Deferred revenue, net of current portion 0 219
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Total Liabilities 4,469 6,738
--------- --------
MINORITY INTEREST 59 94
--------- --------
Shareholders' equity:
Common stock 16 16
Additional paid in capital 8,588 8,588
Retained earnings 8,166 8,049
Unrealized loss on marketable securities (391) (66)
Treasury stock (2,497) (2,000)
--------- --------
Total Shareholders' equity 13,882 14,587
--------- --------
Total Liabilities and Shareholders' Equity $ 18,410 $ 21,419
========= ========
</TABLE>
See Accompanying Notes
<PAGE>
PARIS CORPORATION
CONSOLIDATED STATEMENT OF INCOME
Unaudited
(in thousands, except per share data)
<TABLE>
<CAPTION>
THREE THREE NINE NINE
MONTHS MONTHS MONTHS MONTHS
ENDED ENDED ENDED ENDED
6-30-00 6-30-99 6-30-00 6-30-99
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Sales $ 10,198 $ 8,019 $ 32,057 $ 25,821
Cost of products sold 9,096 7,189 28,665 22,725
---------- ---------- ---------- ----------
Gross profit 1,102 830 3,392 3,096
---------- ---------- ---------- ----------
Selling expenses 506 470 1,421 1,340
General and administrative expenses 601 291 1,897 1,342
Interest expense 1 0 7 58
Gain on sale of building (89) (89) (268) (268)
Other (income) expense (114) (175) (404) (309)
---------- ---------- ---------- ----------
Income before minority interest 197 333 739 933
Minority Interest (27) 0 35 0
Provision for Income Taxes 54 127 317 367
---------- ---------- ---------- ----------
Net Income $ 116 $ 206 $ 457 $ 566
========== ========== ========== ==========
Weighted average common and 3,268,535 3,526,845 3,268,535 3,526,845
equivalent shares outstanding
Earnings per share - basic $ 0.04 $ 0.06 $ 0.14 $ 0.16
========== ========== ========== ==========
Earnings per share - diluted $ 0.04 $ 0.06 $ 0.14 $ 0.16
========== ========== ========== ==========
</TABLE>
See Accompanying Notes
<PAGE>
PARIS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited
<TABLE>
<CAPTION>
(in thousands) NINE MONTHS NINE MONTHS
ENDED ENDED
6-30-00 6-30-99
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 457 $ 566
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 371 399
Gain on sale of property, and equipment (268) (264)
Loss on sale of investments 7 66
Equity in limited partnership interests (124) (212)
Provision for bad debts 114 85
Deferred income tax expense 0 0
Minority interest (35) 0
(Increase) decrease in assets:
Accounts receivable 625 (607)
Inventories (529) 227
Recoverable income taxes 190 0
Prepaid expenses 2 (23)
Other assets 181 (17)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (1,958) (637)
Accrued payroll and related expenses 45 251
Income taxes payable 82 (137)
-------- --------
Total adjustments (1,297) (869)
-------- --------
Net cash provided by (used in) operating activities (840) (303)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in restricted cash 0 2,140
Proceeds from sale of investments 487 1,838
Purchase of investments (679) (1,160)
Purchase of property and equipment (248) (553)
Proceeds from sale of property and equipment 0 12
-------- --------
Net cash provided by (used in) investing activities (440) 2,277
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sales of treasury stock 4 23
Purchase of treasury stock (501) (116)
Dividend Paid (339) (711)
Proceeds Repayments of note payable, bank 0 (2,459)
Repayments of note payable (75) 0
-------- --------
Net cash used in financing activities (911) (3,263)
Net decrease in cash and cash equivalents (2,191) (1,289)
Cash and cash equivalents, at beginning of period 3,880 4,073
-------- --------
Cash and cash equivalents, at end of period $ 1,689 $ 2,784
======== ========
Supplemental disclosures of cash flow information:
Cash paid for interest expense $ 7 $ 58
Cash paid for income taxes $ 45 $ 506
</TABLE>
See Accompanying Notes
<PAGE>
PARIS CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED SEPTEMBER 30, 1999 AND NINE MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
Accumulated
Additional Other
Common Stock Paid in Retained Comprehensive Treasury Stock
Shares Amount Capital Earnings Income Shares Amount Total
----------- ------- ------------ ----------- -------------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at October 1, 1998 3,937,517 $15,751 $8,588,243 $7,797,181 ($163,412) (382,872) ($1,882,237) $14,355,526
--------- ------- ------------ ---------- ------------- -------- ----------- -----------
Net income 960,370 960,370
Other comprehensive
income,
Reclassification
entry 38,541 38,541
Unrealized gain on
securities,
during the period,
net of tax
$39,400 58,525 58,525
------------- -----------
Comprehensive
income $ 1,057,436
-----------
Purchase of 61,800
treasury shares (61,800) (141,454) (141,454)
Sales of 11,400
treasury shares 11,400 23,500 23,500
Dividend Paid (708,825) (708,825)
---------- -----------
Balance at September 30,
1999 3,937,517 $15,751 $8,588,243 $8,048,726 ($ 66,346) (433,272) ($2,000,191) $14,586,183
--------- ------- ------------ ---------- ------------- -------- ----------- -----------
Net Income 456,571 456,571
Other comprehensive
income,
Unrealized loss on
securities, net of
reclassification
adjustment of
gains
included in net
income (324,744) (324,744)
------------- -----------
Comprehensive
income 131,827
Purchase of 237,710
treasury shares (237,710) (501,131) (501,131)
Sale of 2,000 treasury
shares 2,000 4,000 4,000
Dividend Paid (339,165) (339,165)
---------- -----------
Balance at June 30, 2000 3,937,517 $15,751 $8,588,243 $8,166,132 ($391,090) (668,982) ($2,497,322) $13,881,714
</TABLE>
See Accompanying Notes
<PAGE>
PARIS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
ACCOUNTING POLICIES:
1. The accompanying unaudited interim consolidated financial statements were
prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. The Summary of Accounting
Policies and Notes to Consolidated Financial Statements included in the
September 30, 1999 Form 10-K should be read in conjunction with the
accompanying statements. These statements include all adjustments
(consisting only of normal recurring accruals) which the Company believes
necessary for a fair presentation of the statements. The interim operating
results are not necessarily indicative of the results for a full year.
2. The Company has agreements with certain customers and vendors which include
potential rebates, commissions, and other liabilities upon the fulfillment
of certain terms and conditions. Management had estimated and recorded
contingent liabilities of approximately $237,000 as of September 30, 1999
related to these agreements and other potential liabilities. During the
nine months ended June 30, 2000, management increased the liability to
$279,000, reflecting higher obligations.
3. The Company has adopted FASB #128, "Earnings Per Share" as required. Due to
the anti-dilutive effect of employee stock options outstanding in the
computation of earnings per share, basic and fully diluted earnings per
share are identical.
4. 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 loses on certain investments in marketable debt and equity
securities and its presented in the statement of changes in stockholders'
equity. The adoption of SFAS No. 130 had no effect on the Company's net
income or equity.
5. Inventories consist of the following at June 30, 2000 and September 30,
1999:
<TABLE>
<CAPTION>
6/30/00 9/30/99
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<S> <C> <C>
Raw Materials $1,604,197 $1,370,474
Work in Progress 202,819 61,562
Finished Goods 2,888,643 2,734,854
---------- ----------
$4,695,659 $4,166,890
========== ==========
</TABLE>
<PAGE>
PARIS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
---------------------
JUNE 30, 2000
--------------
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
-------------------------------------------------------------------------------------------------------------
$ % $ %
2000 1999 CHANGE CHANGE 2000 1999 CHANGE CHANGE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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Net Sales $10,198 $8,019 $2,179 27% $32,057 $25,821 $6,236 24%
-------------------------------------------------------------------------------------------------------------
Cost of sales 9,096 7,189 1,907 27% 28,665 22,725 5,940 26%
-------------------------------------------------------------------------------------------------------------
Gross profit 1,102 830 272 33% 3,392 3,096 296 10%
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Selling 506 470 36 8% 1,421 1,340 81 6%
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General and administrative
expenses 601 291 310 107% 1,897 1,342 555 41%
-------------------------------------------------------------------------------------------------------------
Interest expense 1 0 1 7 58 (51) -88%
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Other (income) expense (176) (264) 88 -33% (707) (577) (130) 23%
-------------------------------------------------------------------------------------------------------------
Pretax income (loss) 170 333 (163) -49% 774 933 (159) -17%
-------------------------------------------------------------------------------------------------------------
Income taxes 54 127 (73) -57% 317 367 (50) -14%
-------------------------------------------------------------------------------------------------------------
Net income (loss) $ 116 $ 206 ($90) -44% $ 457 $ 566 ($109) -19%
-------------------------------------------------------------------------------------------------------------
</TABLE>
GROSS PROFIT
------------
Three Months Comparison
Gross Profit for the three months ended June 30, 2000 of $1102M increased $272M
as compared to the same quarter in the prior year. Sales of $10,198M increased
$2179M or 27% and cost of sales of $9096M increased $1907M or 27%.
Sales Factors
-------------
Sales of stock continuous forms of $3227M increased $301M or 10%. The unit
volume decreased 5% while the average sell price increased 16%. The closing of
a competitive supplier has contributed to the increased revenue.
The sale of continuous custom products of $547M decreased $174M or 24%. The
unit volume decreased 19% and the average sell price decreased 6%.
The sale of custom cutsheet products of $939M increased $135M or 17% on lower
unit volume of 6% and increased average sell price of 23%.
Sales of the Company's Laser 3, DocuGard and HCFA product lines have increased
$147K or 19%, from $776M to $923M. The increase in revenue is consistent with
the Company's focus on this product line due to the higher margin and potential
growth.
The consumer oriented products continue to gain strength as sales increased
$995M or 43%. The increase was fueled by the increase in paper reams of $891M
or 87%. This increase is a result of the strong sales of the Champion and
Hewlett Packard brand paper reams to key retailers. The sale of the Burlington
value-added products decreased $113M or 9% during the quarter. This decrease is
viewed as a timing issue as opposed to a trend.
<PAGE>
The effect of consolidating the results of operations of Signature Corporation
increased revenue $1253M for the quarter ending June 30, 2000.
Cost Factors
------------
The cost of sales for stock continuous forms of $2680M increased $198M or 8%.
The increase in cost is slightly lower than the revenue increase reflecting
higher margins of roughly 1.5%.
The cost of sales for custom continuous forms decreased $128M or 22% consistent
with the decline in revenue.
The cost of sales for custom cut-sheet products increased $155M or 25%. The
increase is higher than the revenue increase due to revised overhead rates and
the full effect of increased paper costs not being passed through to the
customers.
The cost of sales for the Laser 3, Docugard and HCFA product lines have
increased $113M or 22%. The increase is slightly higher than the increase in
sales reflecting lower margin due to pricing pressure.
The cost of sales for consumer products of $2648M increased $928M or 54%. The
increased cost is at an accelerated rate in comparison to the revenue due to the
change in product mix to lower margined products.
The effect of consolidating the results of operations of Signature Corporation
increased costs of sales $1118M for the quarter ending June 30, 2000.
Nine Months Comparison
Gross profit for the nine months ended June 30, 2000 of $3392M represented an
increase of $296M or 10% as compared to the same period in the prior year.
Sales of $32,507M increased $6236M or 24% and cost of sales of $28,665M
increased $5940M or 26%.
Sales Factors
-------------
Sales of stock continuous forms of $8834M decreased $866M or 9%. The decline in
sales was due to a decline in unit volume of 22% offset by an increase in
average sell price of 17%.
Sales of continuous custom products of $2030M decreased $92M or 4% consistent
with the decline in unit volume.
Sales of custom cut sheets of $2899M increased $339M or 13% on lower unit volume
of 5%. The increase is reflective of the increased paper costs.
Sales of the Laser 3, Docugard and HCFA product lines have increased $518M or
24%. The increase is due to an increase of 15% unit volume and 7% increase in
sell price.
Sales of consumer products increased 52% during the period. Revenue of value-
added products increased $1403M or 36%. Burlington Inkjet papers continue to
gain market share as a result of higher sell-through in retail stores. Revenue
of paper reams increased $2375M or 64%.
The effect of consolidating the results of operations of Signature Corporation
increased revenue $3491M for the nine months ending June 30, 2000.
Cost Factors
------------
The cost of stock continuous form sales of $7449M decreased $899M or 11%. The
decrease was at a slightly higher percentage than the sales decrease due to more
favorable pricing.
<PAGE>
The cost of sales for custom continuous forms of $1730M decreased $75M or 4%,
consistent with the decline in revenue.
The cost of sales for custom cutsheets increased $468M or 25% on increased
revenue of only 13%. The change is consistent with the reasoning in the three
month comparison.
The cost of sales for consumer products increased $3439M or 59%. The increase
in cost is accelerating at a more rapid pace than sales dollars resulting in a
lower gross margin. This is a result of a change in product mix, primarily the
sales of paper reams.
Labor inefficiencies and under utilization of capacities yielded a $128M
increase in manufacturing costs.
Freight costs decreased $105M or 7% on increased sales of 24% due to tighter
management controls on both the cost of shipping and the pass through of freight
cost to the customer.
The effect of consolidating the results of operations of Signature Corporation
increased cost of sales $3190M for the nine months ending June 30, 2000.
OPERATING EXPENSES
------------------
Three Months Comparison
Operating expenses of $1107M increased $346M or 45%. Selling and marketing
expenses increase $36M or 8% primarily due to the Signature consolidation.
General Administrative expenses increased $310M or 107%. The increase can be
attributed to the reversal of an accrual in the amount of $200M related to a
sales & use tax audit in June of 1999. Other increases can be attributed to
Signature Corporation $58M, salaries $20M, telephone expense $15M and travel and
entertainment of $6M.
Nine Months Comparison
Operating expenses of $3318M increased $636M or 23%. Selling expenses increased
$81M or 6% while General Administrative expenses increased $555M or 41%.
The increase in sales expense is due the effect of consolidating Signature
Corporation of $137M offset by a reduction in salary, benefits and travel
entertainment of $56M.
The increase in General Administrative expenses is due to the sales tax reversal
of $200M, Signature Corporation of $307M and other sundry expenses of $48M.
<PAGE>
OTHER INCOME AND EXPENSES
-------------------------
Other income decreased $61M for the three months ending June 30, 2000. The
decrease is due to lower investment income of $95M offset by other Signature
income of $34M.
During the nine months ending June 30, 2000 other income increased $95M. The
increase is related to higher investment income and other Signature income of
$69M.
Interest expense decreased $51M or 87% for the nine months ending June 30, 2000.
The decrease is a result of the Company operating without a working capital line
of credit during fiscal 2000.
LIQUIDITY AND CAPITAL RESOURCES:
--------------------------------
Working Capital decreased $559M from $11,882M to $11,323M and cash and cash
equivalents decreased $2191M during the nine months ended June 30, 2000.
Net cash used in operating activities was $840M. Accounts receivable decreased
$625M as the terms on special seasonal dating became due and the average "days
sales outstanding" was reduced during the period. Inventories increased $529M
as the average sales increased during the nine months ended June 30, 2000.
Accounts payable and accrued expenses decreased $1958M reflecting payments on
past due obligations as the cash became available via the collections of the
seasonal dating.
Net cash used in investing activities was $440M.
During the nine months ended June 30, 2000, the Company purchased net shares of
235,710 of its common stock at a cost of $497M. In addition, the Company
declared and paid a special dividend which resulted in a reduction of
stockholders equity in the amount of $339M.
The Company believes that it has sufficient resources to satisfy ongoing cash
requirements for the next twelve months. The Company will meet short-term
liquidity needs through cash provided operations and investing activities. This
belief is based on certain assumptions, including the continuation of current
operations and no extraordinary adverse events. On a long-term basis, the
Company plans to continue to meet liquidity needs internally while investing in
the growth of the business. If the Company can not meet these future liquidity
needs internally, then they will seek external financing.
Prior to the "Year 2000", the Company conducted a comprehensive review of their
computer systems to identify the systems that could be effected by the "Year
2000" issue and developed an implementation plan to resolve the issues.
Currently, the company has had no adverse effects from the "Year 2000"
internally nor have they discovered any problems externally with major customers
or vendors.
<PAGE>
PARIS CORPORATION
PART II
OTHER INFORMATION
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 3,268,535
=========
(b) Reports on Form 8-K
<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.
Chairman of
the Board of Directors
____________________________
William L. Lomanno
Chief Financial Officer and
Principal Accounting Officer
DATE: August 11, 2000
