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, 1997
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
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(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, 9 1997
- ----- --------------------------
Common stock, par value $.01 6,514,779 shares
<PAGE>
PRIMESOURCE CORPORATION
INDEX
PART I - FINANCIAL STATEMENTS
Item 1 - Financial Statements Page No.
--------
Consolidated Condensed Balance Sheets
March 31, 1997 and December 31, 1996 3
Consolidated Condensed Statements of Income
Three Months Ended March 31, 1997 and 1996 4
Consolidated Condensed Statements of Cash Flows
Three Months Ended March 31, 1997 and 1996 5
Notes to Consolidated Condensed Financial Statements 6
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-k 9
SIGNATURES 10
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
PRIMESOURCE CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
<CAPTION>
March 31, December 31,
1997 1996
(Thousands of dollars) (Unaudited)
- --------------------------------------------------------------------------------
ASSETS
Current Assets:
<S> <C> <C>
Receivables ........................................ $ 59,856 $ 60,656
Inventories ........................................ 50,238 48,741
Other .............................................. 3,048 2,653
- --------------------------------------------------------------------------------
Total Current Assets ................................. 113,142 112,050
Property and equipment, net .......................... 13,701 13,719
Excess of cost over net assets
of businesses acquired, net ....................... 4,404 4,487
Other assets ......................................... 3,693 3,919
- --------------------------------------------------------------------------------
Total Assets ......................................... $ 134,940 $ 134,175
================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term obligations ........... $ 1,542 $ 1,550
Accounts payable ................................... 31,722 33,628
Other accrued liabilities .......................... 7,862 9,832
- --------------------------------------------------------------------------------
Total Current Liabilities ............................ 41,126 45,010
Long-term obligations, net of current portion ........ 40,078 36,250
Accrued pension liabilities and other liabilities .... 4,725 4,732
- --------------------------------------------------------------------------------
Total Liabilities .................................... 85,929 85,992
- --------------------------------------------------------------------------------
Commitments and contingencies
Shareholders' Equity:
Common stock, $.01 par value ....................... 65 65
Additional paid in capital ......................... 25,533 25,533
Retained earnings .................................. 23,439 22,628
Unamortized restricted stock awards ................ (26) (43)
- --------------------------------------------------------------------------------
Total Shareholders' Equity ........................... 49,011 48,183
- --------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity ........... $ 134,940 $ 134,175
================================================================================
<FN>
See notes to consolidated condensed financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
PRIMESOURCE CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited)
<CAPTION>
Three Months
(Thousands of dollars, Ended March 31,
except per share amounts) 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Net sales ...................................... $ 103,388 $ 86,959
Cost of sales .................................. 85,085 71,777
- --------------------------------------------------------------------------------
Gross profit ................................... 18,303 15,182
Selling, general and administrative expenses ... 15,771 13,353
- --------------------------------------------------------------------------------
Income from operations ......................... 2,532 1,829
Interest expense ............................... (750) (520)
Other income (expense), net .................... 85 96
- --------------------------------------------------------------------------------
Income before provision
for income taxes .............................. 1,867 1,405
Provision for income taxes ..................... 762 576
- --------------------------------------------------------------------------------
Net income ..................................... $ 1,105 $ 829
================================================================================
Average number of shares outstanding ........... 6,610,130 6,552,279
Per share of common stock:
Net income ..................................... $ .17 $ .13
Cash dividends ................................. $ .045 $ .045
================================================================================
<FN>
See notes to consolidated condensed financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
PRIMESOURCE CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
<CAPTION>
Three Months Ended March 31,
(Thousands of dollars) 1997 1996
- --------------------------------------------------------------------------------
Operating Activities:
<S> <C> <C>
Net income ............................................. $ 1,105 $ 829
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation ....................................... 518 493
Amortization ....................................... 114 142
Changes in assets and liabilities affecting operations . (4,975) 3,009
- --------------------------------------------------------------------------------
Net cash provided by (used in) operating activities .... (3,238) 4,473
- --------------------------------------------------------------------------------
Investing Activities:
Additions to property and equipment .................... (500) (123)
Net increase (decrease) in other assets ................ 212 (236)
- --------------------------------------------------------------------------------
Net cash used in investing activities .................. (288) (359)
- --------------------------------------------------------------------------------
Financing Activities:
Proceeds from long-term obligations .................... 22,700 23,150
Repayment of long-term obligations ..................... (18,880) (26,970)
Dividends paid ......................................... (294) (294)
- --------------------------------------------------------------------------------
Net cash provided by (used in) financing activities .... 3,526 (4,114)
- --------------------------------------------------------------------------------
Net change in cash ..................................... -- --
Cash, beginning of year ................................ -- --
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Cash, end of period .................................... $ -- $ --
================================================================================
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest .......................................... $ 689 $ 526
Income taxes ...................................... 460 135
================================================================================
<FN>
See notes to consolidated condensed financial statements.
</FN>
</TABLE>
<PAGE>
PRIMESOURCE CORPORATION
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 1996 Annual Report on Form 10-K for further information.
The results of operations for the three months ended March 31, 1997 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.
3. Income Per Common Share
Income per common share is based on the weighted average number of common shares
and equvalent common shares outstanding during the period.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS 128). This
Statement establishes standards for computing and presenting earnings per share
(EPS) and applies to entities with publicly held common stock or potential
common stock. This Statement is effective for financial statements issued for
periods ending after December 15, 1997, earlier application is not permitted.
This statement requires restatement of all prior-period EPS data presented. The
Company is currently evaluating the impact, if any, adoption of SFAS 128 will
have on its financial statements.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations Results of Operations
Net income for the quarter ended March 31, 1997 was $1,105,000 ($.17 per share)
on sales of $103,388,000 compared to $829,000 ($.13 per share) on sales of
$86,959,000 for the same period last year.
Sales for the quarter increased 18.9% compared to the same quarter last year.
This increase is primarily the result of the acquisition of five VGC Corporation
locations, one in August 1996 and four in November 1996. Excluding the effect of
this acquisition, sales increased modestly during the quarter.
Gross profit and selling, general and administrative expenses as a percent of
sales showed modest improvements over the same periods last year. Gross profit
as a percent of sales increased from 17.5% to 17.7%. Selling, general and
administrative expenses decreased from 15.4% to 15.3%.
Interest expense was $750,000 for the quarter ended March 31, 1997 compared to
$520,000 for the same period last year. This increase is due to increased debt
from the VGC acquisition.
The effective tax rates for the quarter ended March 31, 1997 was 40.8% compared
to 41% the same period last year. The lower rate in 1997 is primarily due to
non-deductible expenses being a lesser percent to income.
Financial Condition and Liquidity
Net cash used in operating activities for the three months ended March 31, 1997
was $3,238,000 compared to cash provided of $4,473,000 for the same period last
year. For the quarter ended March 31, 1997, increases in working capital levels
decreased the cash flow by approximately $5 million, while in the same period
last year decreases in working capital increased the cash flow by approximately
$3 million. The increase in 1997, in part, reflects the adjustment of working
capital levels for the VGC acquisition to ongoing operating levels. Excluding
the effect of changes in assets and liabilities, the cash provided was
$1,737,000 in 1997 compared to $1,464,000 in 1996.
Net cash used in investing activities was $288,000 for the three months ended
March 31, 1997 compared to $359,000 for the same period last year. Capital
expenditures for the three months in 1997 were $500,000 compared to $123,000 for
the same period last year. Additional capital expenditures for the year, for
which there are no material commitments, are anticipated to be approximately
$1,500,000.
Net cash provided from financing activities was $3,526,000 for the three-month
period ended March 31, 1997 compared to $4,114,000 used in financing activities
for the same period last year. During the quarter ended March 31, 1997, debt
increased $3.8 million, which is primarily attributable to the cash required for
operating activities as a result of the increase in working capital. For the
same period last year, debt decreased $3.8 million, which reflects the effect of
cash generated from operating activities. The balance of the cash used for both
periods was for dividend payments.
<PAGE>
The Company's primary source of debt financing is a revolving credit agreement
with a commitment of $50 million of which $14 million was unused at March 31,
1997. The Company believes this facility combined with future cash flow from
operations will be adequate to meet the ongoing capital requirements of the
Company.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 11 -- Earnings per share information.
Exhibit 27 -- Financial data schedule
b. Reports on Form 8-K
The Registrant did not file a report on Form 8-K during the quarter
ended March 31, 1997.
<PAGE>
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 9, 1997
<TABLE>
<CAPTION>
Three Months
Ended March 31,
1997 1996
- -------------------------------------------------------------------------------
PRIMARY
<S> <C> <C>
Average shares outstanding ..................... 6,514,779 6,552,279
Net effect of dilutive stock options-
based on the treasury stock method
using average market price ..................... 95,351
- --------------------------------------------------------------------------------
6,610,130 6,552,279
================================================================================
Net income (in thousands) ...................... $ 1,105 $ 829
================================================================================
Per share amount ............................... $ .17 $ .13
================================================================================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> MAR-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 54,662
<ALLOWANCES> 1,702
<INVENTORY> 50,238
<CURRENT-ASSETS> 113,142
<PP&E> 23,249
<DEPRECIATION> 9,548
<TOTAL-ASSETS> 134,940
<CURRENT-LIABILITIES> 41,126
<BONDS> 40,078
0
0
<COMMON> 65
<OTHER-SE> 48,946
<TOTAL-LIABILITY-AND-EQUITY> 134,940
<SALES> 103,388
<TOTAL-REVENUES> 103,388
<CGS> 85,085
<TOTAL-COSTS> 85,085
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 113
<INTEREST-EXPENSE> 750
<INCOME-PRETAX> 1,867
<INCOME-TAX> 762
<INCOME-CONTINUING> 1,105
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,105
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
</TABLE>
