<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, MARCH 31, 2000
COMMISSION FILE NUMBER 0-14358
-------
PARIS CORPORATION
-----------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
PENNSYLVANIA 23-1645493
------------ ----------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
122 KISSEL ROAD, BURLINGTON, 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 MARCH 31, 2000
COMMON STOCK 3,278,435
<PAGE>
PARIS CORPORATION
CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited): PAGE
<S> <C>
Consolidated Balance Sheets - March 31, 2000
and September 30, 1999 (audited) ................................ 3
Consolidated Statements of Income
Three months ended, March 31, 2000 and 1999
Six months ended, March 31, 2000 and 1999 ....................... 4
Consolidated Statements of Cash Flows -
Six months ended, March 31, 2000 and 1999 ....................... 5
Consolidated Statement of Changes in Stockholders' Equity -
September 30, 1999 and March 31, 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>
2
<PAGE>
PARIS CORPORATION
CONSOLIDATED BALANCE SHEET
(in thousands)
ASSETS
3-31-00 9-30-99
(Unaudited) (Audited)
----------- ---------
Current assets:
Cash and cash equivalents $ 1,353 $ 3,880
Investments:
Marketable Securities 3,191 3,567
Other 386 0
Accounts receivable 5,085 5,959
Inventories 4,940 4,167
Refundable Income Taxes 0 190
Prepaid expenses 268 242
Deferred income taxes 359 396
-------- --------
Total current assets 15,582 18,401
Investments held to maturity 500 500
Property and equipment, net 1,804 1,941
Deferred tax asset 196 196
Other assets 241 381
-------- --------
Total Assets $ 18,323 $ 21,419
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Note payable $ 44 $ 92
Accounts payable and accrued expenses 3,349 5,197
Accrued payroll and related expenses 373 700
Income taxes payable 73 44
Deferred revenue 421 486
-------- --------
Total current liabilities 4,260 6,519
Deferred revenue, net of current portion 40 219
-------- --------
Total Liabilities 4,300 6,738
-------- --------
MINORITY INTEREST 32 94
-------- --------
Shareholders' equity:
Common stock 16 16
Additional paid in capital 8,588 8,588
Retained earnings 8,051 8,049
Unrealized loss on marketable securities (187) (66)
Treasury stock (2,477) (2,000)
-------- --------
Total Shareholders' equity 13,991 14,587
-------- --------
Total Liabilities and Shareholders' Equity $ 18,323 $ 21,419
======== ========
See Accompanying Notes
3
<PAGE>
PARIS CORPORATION
CONSOLIDATED STATEMENT OF INCOME
Unaudited
(in thousands, except per share data)
<TABLE>
<CAPTION>
THREE THREE SIX SIX
MONTHS MONTHS MONTHS MONTHS
ENDED ENDED ENDED ENDED
3-31-00 3-31-99 3-31-00 3-31-99
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales $ 10,678 $ 9,815 $ 21,860 $ 17,802
Cost of products sold 9,543 8,506 19,569 15,536
----------- ----------- ----------- -----------
Gross profit 1,135 1,309 2,291 2,266
----------- ----------- ----------- -----------
Selling expenses 429 429 915 870
General and administrative expenses 647 555 1,297 1,051
Interest expense 2 15 5 58
Gain on sale of building (89) (89) (178) (178)
Other (income) expense (143) (48) (291) (136)
----------- ----------- ----------- -----------
Income before minority interest 289 447 543 601
Minority Interest (7) 0 62 0
Provision for Income Taxes 108 188 264 240
----------- ----------- ----------- -----------
Net Income $ 174 $ 259 $ 341 $ 361
=========== =========== =========== ===========
Weighted average common and 3,278,435 3,535,645 3,278,435 3,535,645
equivalent shares outstanding
Earnings per share - basic $ 0.05 $ 0.07 $ 0.10 $ 0.10
=========== =========== =========== ===========
Earnings per share - diluted $ 0.05 $ 0.07 $ 0.10 $ 0.10
=========== =========== =========== ===========
</TABLE>
See Accompanying Notes
4
<PAGE>
PARIS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited
<TABLE>
<CAPTION>
(in thousands) SIX MONTHS SIX MONTHS
ENDED ENDED
3-31-00 3-31-99
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 341 $ 361
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 257 273
Gain on sale of property, and equipment (178) (178)
Loss on sale of investments 1 53
Equity in limited partnership interests (99) (54)
Provision for bad debts 57 60
Deferred income tax expense 37 0
Minority interest (62) 0
(Increase) decrease in assets:
Accounts receivable 817 (1,750)
Inventories (773) (845)
Recoverable income taxes 190 0
Prepaid expenses (26) (24)
Other assets 140 (16)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (1,913) 1,384
Accrued payroll and related expenses (327) 106
Income taxes payable 29 1
------- -------
Total adjustments (1,850) (990)
------- -------
Net cash provided by (used in) operating activities (1,509) (629)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in restricted cash 0 2,140
Proceeds from sale of investments 120 414
Purchase of investments (152) (944)
Purchase of property and equipment (122) (134)
------- -------
Net cash provided by (used in) investing activities (154) 1,476
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sales of treasury stock 4 21
Purchase of treasury stock (481) (92)
Dividend Paid (339) (711)
Proceeds Repayments of note payable, bank 0 (2,459)
Repayments of note payable (48) 0
------- -------
Net cash used in financing activities (864) (3,241)
Net decrease in cash and cash equivalents (2,527) (2,394)
Cash and cash equivalents, at beginning of period 3,880 4,073
------- -------
Cash and cash equivalents, at end of period $ 1,353 $ 1,679
======= =======
Supplemental disclosures of cash flow information:
Cash paid for interest expense $ 5 $ 58
Cash paid for income taxes $ 45 $ 241
</TABLE>
See Accompanying Notes
5
<PAGE>
PARIS CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDRES' EQUITY
FOR THE YEAR ENDED SEPTEMBER 30, 1999 AND SIX MONTHS ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
Accumulated
Other
Common Stock Additional Retained Comprehensive
Shares Amount Paid in Capital Earnings Income
----- ------ --------------- -------- ------
<S> <C> <C> <C> <C> <C>
Balance at October 1, 1998 3,937,517 $ 15,751 $ 8,588,243 $ 7,797,181 ($ 163,412)
--------- ----------- ----------- ----------- ------------
Net income 960,370
Other comprehensive income,
Reclassification entry 38,541
Unrealized gain on securities,
during the period,
net of tax $39,400 58,525
---------------------------------------------------------------------------------
Comprehensive income
Purchase of 61,800 treasury shares
Sales of 11,400 treasury shares
Dividend Paid (708,825)
---------------------------------------------------------------------------------
Balance at September 30, 1999 3,937,517 $ 15,751 $ 8,588,243 $ 8,049,086 ($ 66,346)
--------- ----------- ----------- ----------- ------------
Net Income 340,830
Other comprehensive income,
Unrealized gain on securities, net of
reclassification adjustment of gains
included in net income (120,453)
---------------------------------------------------------------------------------
Comprehensive income
Purchase of 227,810 treasury shares
Sale of 2,000 treasury shares
Dividend Paid (339,165)
---------------------------------------------------------------------------------
Balance at March 31, 2000 3,937,517 $ 15,751 $ 8,588,243 $ 8,050,751 ($ 186,799)
<CAPTION>
Treasury Stock
Shares Amount Total
------ ------ -----
<S> <C> <C> <C>
Balance at October 1, 1998 (382,872) ($ 1,882,237) $ 14,355,526
---------------------------------------------------------------------------------
Net income 960,370
Other comprehensive income,
Reclassification entry 38,541
Unrealized gain on securities,
during the period,
net of tax $39,400 58,525
---------------------------------------------------------------------------------
Comprehensive income $ 1,057,796
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)
---------------------------------------------------------------------------------
Balance at September 30, 1999 (433,272) ($ 2,000,191) $ 14,586,543
--------- ------------- ------------
Net Income 340,830
Other comprehensive income,
Unrealized gain on securities, net of
reclassification adjustment of gains
included in net income (120,453)
---------------------------------------------------------------------------------
Comprehensive income 220,377
Purchase of 227,810 treasury shares (227,810) (480,882) (480,882)
Sale of 2,000 treasury shares 2,000 4,000 4,000
Dividend Paid (339,165)
---------------------------------------------------------------------------------
Balance at March 31, 2000 (659,082) ($ 2,477,073) $ 13,990,873
</TABLE>
<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 six
months ended March 31, 2000, management increased the liability to
$294,000, 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 March 31, 2000 and September 30,
1999:
3/31/00 9/30/99
------- -------
Raw Materials $1,432,246 $1,370,474
Work in Progress 74,869 61,562
Finished Goods 3,432,670 2,734,854
---------- ----------
$4,939,785 $4,166,890
========== ==========
<PAGE>
PARIS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
---------------------
MARCH 31, 2000
--------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Three Months Six Months
- ------------------------------------------------------------------------------------------------------------------------------------
$ % $ %
2000 1999 Change Change 2000 1999 Change Change
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $10,678 $9,815 $863 9% $21,860 $17,802 $4,058 23%
- ------------------------------------------------------------------------------------------------------------------------------------
Cost of sales 9,543 8,506 1,037 12% 19,569 15,536 4,033 26%
- ------------------------------------------------------------------------------------------------------------------------------------
Gross profit 1,135 1,309 (174) -13% 2,291 2,266 25 1%
- ------------------------------------------------------------------------------------------------------------------------------------
Selling 429 429 0 0% 915 870 45 5%
- ------------------------------------------------------------------------------------------------------------------------------------
General and administrative expenses 647 555 92 17% 1,297 1,051 246 23%
- ------------------------------------------------------------------------------------------------------------------------------------
Interest expense 2 15 (13) -87% 5 58 (53) -91%
- ------------------------------------------------------------------------------------------------------------------------------------
Other (income) expense (225) (137) (88) 64% (531) (314) (217) 69%
- ------------------------------------------------------------------------------------------------------------------------------------
Pretax income (loss) 282 447 (165) -37% 605 601 4 1%
- ------------------------------------------------------------------------------------------------------------------------------------
Income taxes 108 188 (80) -43% 264 240 24 10%
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $174 $259 ($85) -33% $341 $361 ($20) -6%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Gross Profit
- ------------
Three Months Comparison
Gross profit for the three months ended March 31, 2000 of $1135M decreased $174M
as compared to the same quarter in the prior year. Sales of $10678M increased
$863M or 9% and cost of sales of $9543M increased $1037M or 12%.
Sales Factors
- -------------
Sales of stock continuous forms of $2761M decreased $590M or 18%. The unit
volume decreased 30% while the average sell price increased.
The sales of continuous custom products of $565M decreased $113M or 17%. The
trend is similar to the stock continuous forms as the sales quantity of custom
continuous forms declined 24%, while the average sell price increased slightly.
The sales of custom cutsheet products of $1025M increased $133M or 15% on lower
unit volume of 8%.
Sales of the Company's Laser3, DocuGard and HCFA product lines have increased
$140M or 18%, from $760M to $900M. Sales of these product lines continue to
trend upward as the Company continues to focus on sales and marketing promotions
in these areas.
The consumer oriented products continue to gain strength as sales increased
$659M or 18% from $3560M to $4219M. The increase is primarily attributed to an
increase in value-added products of $372M and mill cutsheets of
8
<PAGE>
$309M. The revenue of these products distributed through the retail channel
continues to grow as the Company is expanding its product mix and customer base.
If not for a non-recurring order of $627M in March of 1999, the increase in
revenue would have been $1286M or 43%. The order was in relation to a special
promotion.
The effect of consolidating the results of operations of Signature Corporation
increase revenue $930M for the quarter ending March 31, 2000.
Cost Factors
- ------------
The cost of sales for stock continuous forms of $2357M decreased $522M or 18%
consistent with the decline in revenue.
The cost of sales for custom continuous forms of $464M decreased $99 or 17%
consistent with the decline in revenue.
The cost of sales for the Company's Laser3, DocuGard and HCFA product lines of
$619M increased $110M or 22% consistent with the increase in revenue and
material cost.
The cost of sales for consumer products of $3336M increased $635M or 24%. The
24% increase is slightly higher than the 18% revenue increase reflecting a
change in product mix.
The effect of consolidating the results of operations of Signature Corporation
increased cost of sales $794M for the quarter ended March 31, 2000.
Six Months Comparison
Gross profit for the six months ended March 31, 2000 of $2291M represented an
increase of $25M or 1% as compared to the same period in the prior year. Sales
of $21860M increased $4058M or 23% and cost of sales of $19569M increased $4033M
or 26%.
Sales Factors
- -------------
Sales of stock continuous forms of $5608M decreased $1167M or 17%. The decline
in sales was due to a decline in unit volume of 29% offset by an increase in
average sell price of 17%. The decrease in unit volume is consistent with the
industry trend for this product line while the higher average sell price is
reflective of increased paper costs.
Sales of continuous custom products of $1339M remained relatively flat in
comparison to FY 99 sales of $1328M.
Sales of custom cutsheet products of $1960M increased $204M or 12% on lower unit
volume of 5%.
Sales of the Company's Laser3, DocuGard and HCFA product lines has increased
$371M or 26%, from $1418M to $1789M. The factors for the increase are consistent
with the three month comparison.
Sales of consumer products increased 56% during the period, reflecting strong
demand for all key product lines. Revenue of value-added products increased
$1515M or 57%. Burlington Inkjet papers continued to gain market share as a
result of higher sell through in retail stores.
Revenue of paper reams increased $1484M or 55% as a result of strong sales of
the Champion and Hewlett Packard brand paper reams to key retailers.
9
<PAGE>
The effect of consolidating the results of operations of Signature Corporation
increased revenue $1817M for the six months ending March 31, 2000.
Cost Factors
- ------------
The cost of stock continuous forms sales of $4769M decreased $1097M or 19%
consistent with the decline in revenue.
The cost of sales for custom continuous forms of $1120M remained relatively flat
in comparison to the FY 99 cost of $1106M, consistent with sales.
The cost of sales for custom cutsheets increased $313M or 24%. The increase in
cost of 24% accelerated quicker than the revenue increase of 12% due to
competitive pricing within the industry.
The cost of sales for the Company's Laser 3, DocuGard and HCFA product lines of
$1217M increased $267M or 28% consistent with the revenue and material cost.
The cost of sales for consumer products increased $2654M or 64%. The increase in
cost of sales was higher than the 56% increase in revenue reflecting a change in
the product mix.
The effect of consolidating the results of operations of Signature Corporation
increased cost of sales $1650M for the six months ended March 31, 2000.
Operating Expenses
- ------------------
Three Months Comparison
Operating expenses of $1076M increased $92M or 17%. Selling expenses of $429M
remained flat while General & Administrative expenses comprised the increase on
a consolidated basis. The effect of consolidating Signature Corporation
increased selling expenses $30M and General and Administrative expenses $120M
for the quarter. These increases were offset primarily by a decrease in Y2K
expenses incurred in FY99.
Six Months Comparison
Operating Expenses of $2212M increased $291 or 15%. Selling expenses increased
$45M or 5% while General Administrative expenses increased $246M or 23%.
The increase in sales expense is due to the effect on consolidating Signature
Corporation of $92M offset by a reduction in salary and benefits of $47M.
The effect of consolidating Signature Corporation resulting in an increase in
General and Administrative expenses of $249M.
10
<PAGE>
OTHER INCOME AND EXPENSES
-------------------------
Other income, net increased $95M or 69% and $155M or 49% for three month and six
month period ending March 31, 2000. The increase is a result of increased
investment income.
Interest expense decreased $13M or 87% for the quarter ending March 31, 2000 and
$53M or 91% for the six months ending March 31, 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 $560M from $11882M to $11322M and cash and cash
equivalents decreased $2527M during the six months ended March 31, 2000.
Net cash used in operating activities was $1509M. Accounts Receivable decreased
$817M as the terms on special seasonal dating became due. Inventories increased
$773M due to the consolidation of Signature Corporation of $951M, while other
inventories declined $178M. Accounts payable and accrued expenses decreased
$1913M reflecting the payments on past obligations as the cash became available
via the collections of the seasonal dating.
Net cash used in investing activities was $154M.
During the six months ended March 31, 2000 the Company purchased net shares of
225,810 of its common stock at a cost of $477M. 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 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.
11
<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 3,278,435
=========
(b) Reports on Form 8-K
None.
12
<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: May 11, 2000
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,377,000
<SECURITIES> 3,191,000
<RECEIVABLES> 5,474,000
<ALLOWANCES> 355,000
<INVENTORY> 3,988,000
<CURRENT-ASSETS> 15,582,000
<PP&E> 9,708,000
<DEPRECIATION> 7,907,000
<TOTAL-ASSETS> 18,323,000
<CURRENT-LIABILITIES> 4,260,000
<BONDS> 0
0
0
<COMMON> 16,000
<OTHER-SE> 13,975,000
<TOTAL-LIABILITY-AND-EQUITY> 18,323,000
<SALES> 10,678,000
<TOTAL-REVENUES> 0
<CGS> 9,543,000
<TOTAL-COSTS> 10,619,000
<OTHER-EXPENSES> (230,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,000
<INCOME-PRETAX> 282,000
<INCOME-TAX> 108,000
<INCOME-CONTINUING> 174,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 174,000
<EPS-BASIC> .05
<EPS-DILUTED> .05
</TABLE>
