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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE PERIOD ENDED MARCH 31, 1996
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
Commission File Number 0- 21750
PrimeSource Corporation
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1430030
(State of incorporation) (I.R.S. Employer
Identification No.)
4350 Haddonfield Road, Suite 222, Pennsauken, NJ 08109
(Address of principal executive offices) (Zip Code)
(609) 488-4888
(Registrant's telephone number, including area code)
Indicate by a 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 (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 (X) No ( )
Indicate the number of shares outstanding of each of the issuer's classes of
common stock:
Class Outstanding at May 8, 1996
Common stock, par value $.01 6,552,279 shares
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PRIMESOURCE CORPORATION AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION
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<CAPTION>
Item 1 - Financial Statements Page No.
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Consolidated Condensed Balance Sheets
March 31, 1996 and December 31, 1995 3
Consolidated Condensed Statements of Income
Three Months Ended March 31, 1996 and 1995 4
Consolidated Condensed Statements of Cash Flows
Three Months Ended March 31, 1996 and 1995 5
Notes to Consolidated Condensed Financial Statements 6
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
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<TABLE>
<CAPTION>
PART II - OTHER INFORMATION
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Item 6 - Exhibits and Reports on Form 8-k 9
SIGNATURES 9
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PRIMESOURCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
(Thousands of dollars) (Unaudited)
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<S> <C> <C>
ASSETS
Current Assets:
Receivables $ 53,549 $ 57,474
Inventories 39,052 41,581
Other 2,900 2,466
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Total Current Assets 95,501 101,521
Property and equipment, net 9,988 10,358
Excess of cost over net assets
of businesses acquired, net 4,994 4,942
Other assets 3,180 2,983
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Total Assets $ 113,663 $ 119,804
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term obligations $ 1,210 $ 1,206
Accounts payable 27,064 28,624
Other accrued liabilities 5,534 6,523
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Total Current Liabilities 33,808 36,353
Long-term obligations, net of current portion 28,378 32,202
Accrued pension liabilities and other liabilities 5,215 5,677
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Total Liabilities 67,401 74,232
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Commitments and contingencies
Shareholders' Equity:
Common stock, $.01 par value 66 65
Additional paid in capital 25,680 25,543
Retained earnings 20,571 20,036
Unamortized restricted stock awards (55) (72)
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Total Shareholders' Equity 46,262 45,572
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Total Liabilities and Shareholders' Equity $ 113,663 $ 119,804
==============================================================================
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See notes to consolidated condensed financial statements.
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PRIMESOURCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
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<CAPTION>
Three Months Ended March 31,
(Thousands of dollars, except per share amounts) 1996 1995
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<S> <C> <C>
Net sales $ 86,959 $ 89,577
Cost of sales 71,777 73,707
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Gross profit 15,182 15,870
Selling, general, and administrative expenses 13,353 14,358
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Income from operations 1,829 1,512
Interest expense (520) (452)
Other income, net 96 17
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Income before provision for income taxes 1,405 1,077
Provision for income taxes 576 451
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Net income $ 829 $ 626
==============================================================================
Average number of shares outstanding 6,552,279 6,573,231
Per share of common stock:
Net income $ .13 $ .10
Cash dividend .045 .1125
==============================================================================
</TABLE>
See notes to consolidated condensed financial statements.
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PRIMESOURCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
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<CAPTION>
Three Months Ended March 31,
(Thousands of dollars) 1996 1995
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<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 829 $ 626
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation 493 505
Amortization 142 147
Changes in assets and liabilities affecting operations 3,009 2,247
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Net cash provided by operating activities 4,473 3,525
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INVESTING ACTIVITIES:
Acquisition of Litho Supply (112)
Additions to property and equipment (123) (275)
Net increase in other assets (236) (65)
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Net cash used in investing activities (359) (452)
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FINANCING ACTIVITIES:
Net decrease in short-term borrowings (3,000)
Proceeds from long-term obligations 23,150 28,700
Repayment of long-term obligations (26,970) (28,677)
Dividends paid (294) (734)
Proceeds from exercise of stock options 20
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Net cash used in financing activities (4,114) (3,691)
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Net decrease in cash --- (618)
Cash, beginning of year 618
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Cash, end of period $ --- $ ---
==============================================================================
Supplemental disclosures of cash flow information
Cash paid (received) during the period for:
Interest $ 526 $ 537
Income taxes 135 (892)
==============================================================================
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See notes to consolidated condensed financial statements.
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PRIMESOURCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. Adjustments
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information pursuant to the rules and regulations of the
Securities and Exchange Commission and instructions to Form 10-Q. While these
statements reflect all adjustments (which consist of normal recurring
accruals) which are, in the opinion of management, necessary to a fair
presentation of the results for the interim periods presented, they do not
include all of the information and disclosures required by generally accepted
accounting principles for complete financial statements. These statements
should be read in conjunction with the consolidated financial statements and
footnotes thereto included in the Company's 1995 Annual Report on Form 10-K
for further information.
The results of operations for the three months ended March 31, 1996 are not
necessarily indicative of the results to be expected for the full year.
2. Inventory Pricing
Inventories consist primarily of purchased goods for sale. Inventories are
stated at the lower of cost or market. Cost is determined using the last-in,
first-out (LIFO) and first-in, first-out methods of accounting. Because the
inventory determination under the LIFO method can only be made at the end of
each fiscal year, interim financial results are based on estimated LIFO
amounts and are subject to final year-end LIFO inventory adjustments.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Consolidated net income for the three-months ended March 31, 1996 was $829,000
($.13 per share) on sales of $86,959,000 compared to net income of $626,000
($.10 per share) on sales of $89,577,000 for the same quarter last year.
Sales for the quarter decreased 3% compared to the same quarter last year.
Unusually harsh weather in the Northeast and Southeast United States
significantly affected sales in January. Sales for January compared to
January of last year decreased approximately $3.4 million compared to a net
decrease for the quarter of $2.6 million.
Gross profit as a percent of sales remained relatively constant at 17.5%
compared to 17.7% for the same quarter last year. There continues to be
competitive pressures on margins, which will require the Company to emphasize
value-added solutions to its customers, combined with products which provide
the best returns to the customer and the Company, in order to maintain or
improve existing margins.
Selling, general, and administrative expenses as a percent of sales were 15.4%
compared to 16% in the same quarter last year. This decrease is primarily due
to the restructuring program completed in 1995 which consolidated five
distribution centers, realigned two others and centralized certain financial
and information services.
Interest expense was $520,000 for the quarter compared to $452,000 for the
same quarter last year. This increase is primarily due to a modest increase
in interest rates in the first quarter compared to the same period last year.
The effective tax rates for the quarters ended March 31, 1996 and 1995 were
41% and 41.9%, respectively. The lower rate in 1996 is primarily due to non-
deductible expenses being a lower percent to income in 1996 compared to 1995.
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Financial Condition and Liquidity
Net cash provided by operating activities for the three-months ended March 31,
1996 was $4,473,000 compared to $3,525,000 for the same quarter last year.
Improvements in working capital levels created over $3 million of cash flow in
1996 and over $2 million in 1995. Excluding the effect of changes in assets
and liabilities, the cash flow was $1,464,000 in 1996 compared to $1,278,000
for the same quarter last year.
Net cash used in investing activities was $359,000 for the quarter compared to
$452,000 for the same quarter last year. Expenditures in 1996 consisted of
property and equipment additions and increases in long-term assets, primarily
long-term receivables. Additional capital expenditures in 1996, for which
there are no material commitments, are anticipated to be approximately $2
million. In addition, the Company's business strategy includes continuing to
acquire regional distributors within the Company's current markets or
companies that offer new products and services to the printing and imaging
industries.
Net cash used in financing activities was $4,114,000 for the quarter compared
to $3,691,000 for the same quarter last year. Due to the cash flow generated
from operations, the Company was able to reduce debt by approximately $3.8
million during the quarter. The balance of the outflow for the quarter was
for dividend payments. For the same quarter last year, debt was reduced by
approximately $3.0 million with the balance of the outflow primarily for
dividend payments.
The Company has a strong and liquid balance sheet. At March 31, 1996, the
Company's current ratio was 2.8 to 1, with current assets, consisting
primarily of accounts receivable and branded inventory, representing over 80%
of the total assets. The debt to equity ratio was .64 to 1.
The Company's primary source of debt financing is three revolving credit
agreements with a total commitment of $27.5 million of which $4.0 million was
unused at March 31, 1996. In addition, the Company has uncommitted and short-
term lines of $10.7 million of which none was outstanding. The Company
believes these facilities combined with the cash flow from operations will be
adequate to meet the ongoing capital requirements of the Company.
<PAGE> 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 11 -- Earnings per share information.
b. Reports on Form 8-k
The Registrant did not file a report on Form 8-k during the quarter
ended March 31, 1996.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRIMESOURCE CORPORATION
(REGISTRANT)
BY /s/ William A. DeMarco
William A. DeMarco
Vice President of Finance and
Chief Financial Officer
(principal financial and accounting officer)
DATE May 13, 1996
<PAGE>
EXHIBIT 11
COMPUTATION OF INCOME PER SHARE
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<CAPTION>
Three Months
(Amounts in thousands, Ended March 31,
except per share data ) 1996 1995
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<S> <C> <C>
PRIMARY
Average shares outstanding 6,552 6,520
Net effect of dilutive stock options-
based on the treasury stock method
using average market price 53
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6,552 6,573
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Net income $ 829 $ 626
=============================================================================
Per share amount $ .13 $ .10
=============================================================================
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