UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
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For the year ended December 31, 2000 Commission file Number 000-21750
PRIMESOURCE CORPORATION
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1430030
- ------------ ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
4350 Haddonfield Road, Suite 222, Pennsauken, N.J. 08109
- -------------------------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
(856)488-4888
Registrant's Telephone Number
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
- ------------------- -----------------------------------------
Common Stock $.01 par value per share Nasdaq
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 (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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ( _ )
As of March 26, 2001 the aggregate market value of the voting stock held by
nonaffiliates was approximately $25.7 million.
As of March 26, 2001 there were 6,357,806 shares of common stock issued and
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The definitive Proxy Statement to be filed pursuant to Regulation 14A under the
Securities Exchange Act of 1934 (Item 10- Directors Only, and Items 11, 12 and
13 of Part III). The index of exhibits is located on page 34 of this document.
PART I.
Certain statements contained in this annual report are forward-looking. Such
forward-looking statements are subject to a number of factors, including
material risks, uncertainties and contingencies, which could cause actual
results to differ materially from those set forth in the forward-looking
statements. These risks and uncertainties include, but are not limited to, the
Company's ability to successfully implement its business strategies including
successfully integrating business acquisitions, the effect of general economic
conditions and technological, competitive and other changes in the industry and
other risks and uncertainties as set forth in the Company's periodic reports and
other filings with the Securities and Exchange Commission.
ITEM I. BUSINESS
PrimeSource Corporation (the "Company") is a major national distributor serving
the printing and publishing industry. For approximately 135 years, the Company
or its unincorporated predecessor has been servicing this industry. The Company,
which was incorporated under the laws of the Commonwealth of Pennsylvania in
1954, was acquired as a wholly-owned subsidiary of Tasty Baking Company ("TBC"),
Philadelphia, Pennsylvania in 1965. On August 1, 1993, TBC spun off 100% of the
ownership of the Company in a dividend distribution of the Company common stock
to the shareholders of TBC. As a result, the Company became an independent
publicly-owned company whose shares are traded on the Nasdaq National Market.
Since becoming a public company, the Company has had three significant business
combinations. In 1994, Momentum Corporation with sales of approximately $165
million merged into the Company. In 1996, the Company acquired five of VGC
Corporation's branch operations with sales of approximately $55 million. In
1998, the Company acquired the graphic imaging group of Bell Industries, Inc.
with sales of approximately $135 million. With these acquisitions, the Company
has a significant presence in all of the major regions in the United States. In
addition, in 2000, the Company entered into a joint venture with Xeikon, a
leading manufacturer of on-demand and variable-data digital printing systems, to
form Canopy, LLC ("Canopy"). The Company's ownership interest in Canopy is 74%,
with Xeikon owning the remaining 26%. Canopy's business focuses on the sales,
installation, training and ongoing service and support of Xeikon printing
systems in the United States and Canada.
The Company is headquartered in Pennsauken, New Jersey. The Company utilizes a
decentralized structure that allows management broad discretion in the conduct
of their respective responsibilities, including management of their suppliers,
customers and employees. Management is evaluated against their financial and
non-financial goals which are established on an annual basis. The Company
emphasizes sales growth and return on sales and net assets. The Company believes
it must strive to maximize its long-term return on capital employed by
quantifying this objective and applying it at the operating level. Management
believes a key factor in the Company's future success is the continued fostering
and perpetuating of this entrepreneurial drive.
The Company presently represents over 500 suppliers, provides more than 200,000
line items and has a customer base in excess of 20,000. No customer accounted
for more than 5% of the Company's net sales in 2000.
The Company offers consumables, such as films, plates, blankets, papers and
chemistries; scanners, servers, work stations, image setters, computer-to-plate
devices and other digital electronic equipment and the applicable software; and
press, bindery and other finishing machinery. With the product range and
in-house expertise, the Company feels it is a premiere provider of printing
solutions. The printing industry has transitioned and continues to move through
a period of rapid technological change. Accordingly, the Company's product mix
continues to evolve; however, it remains positioned through both product and
process knowledge to fully service this market.
In addition, there has been and continues to be a consolidation of the customer
base. Many printing and imaging customers want a single source for design,
prepress preparation, and printing. Consolidation eliminates duplicate overhead
costs and creates larger entities capable of supporting more sophisticated
management techniques, from strategic planning through actual production.
Management expects to continue to see this consolidation of customers into
larger operations offering more services to their customers.
While for the most part the Company sells primarily the same products as its
competitors, generally at similar prices, the Company attempts to differentiate
itself by providing a value-added approach with products and training and
technical support that can make its customers more efficient and effective. In
addition, the Company's broad geographic presence provides an advantage in
servicing regional and national customers.
There are over 300 independent dealers in the United States competing in this
industry with no dealer accounting for more than 15% of the total industry
sales. The Company believes it is one of the largest dealers in the United
States in terms of annual sales and covers a broader range of geographical
markets in the United States than any of its competitors. The Company has
minimal foreign sales or income.
The Company owns several trademarks and tradenames. To the extent trademarks,
tradenames, or patents are significant to the Company's business, they are owned
by the manufacturers the Company represents.
The Company has minimal backlog. The nature of its business is such that it
maintains substantial inventories in order to supply its customers immediately
upon receipt of an order. Approximately 25% of the Company's inventories are
consigned at various customer locations. Usage of consigned inventories is
monitored at least monthly through a physical inventory taken by Company
personnel.
Company management does not believe that compliance with federal, state or local
laws relating to the protection of the environment will have a material adverse
effect on the Company's consolidated financial position or results of
operations.
The Company including Canopy employed approximately 740 employees at December
31, 2000.
EXECUTIVE OFFICERS OF THE REGISTRANT
BUSINESS EXPERIENCE POSITION HELD
NAME AGE LAST FIVE YEARS SINCE
- ------------------------ ----- ---------------------------- ---------------
James F. Mullan 61 Chairman of the Board, 2000-Present
Chairman of the Board, President and Chief Executive
President and Officer of Registrant
Chief Executive Officer Chairman of the Board of
Canopy, LLC
President and Chief Executive 1991-2000
Officer of Registrant
John H. Goddard, Jr. 53 Executive Vice President 2000-Present
Executive Vice President of Registrant
President and Chief Executive
Officer of Canopy, LLC
Executive Vice President 1994-2000
of Registrant
William A. DeMarco 55 Vice President and Chief Financial 1994-Present
Vice President and Officer of Registrant
Chief Financial Officer
Barry C. Maulding 55 Vice President, General Counsel 1994-Present
Vice President, and Corporate Secretary
General Counsel and of Registrant
Corporate Secretary
ITEM 2. PROPERTIES
The locations and primary use of the physical properties of the Company are as
follows:
Approximate
Square
Location Footage
- ----------------------------------- ------------
Corporate Headquarters
Pennsauken, NJ 8,500
Distribution/Sales Facilities
Atlanta, GA (Norcross) 23,200
Birmingham, AL 37,000
Boston, MA (Hingham) 10,700
Chicago, IL (Itasca) 49,600
Cincinnati, OH 35,000
Cleveland, OH 7,800
Dallas, TX 17,500
Denver, CO 10,000
Des Moines, IA (Ankeny) 15,000
Houston, TX (Bellaire) 10,300
Jackson, MS (Richland) 1,500
Kalamazoo, MI 14,700
Kansas City, KS 16,800
Lancaster, PA (Lititz) 14,300
Las Vegas, NV 6,200
Los Angeles, CA 44,900
Miami, FL (Miramar) 14,700
Milwaukee, WI (New Berlin) 23,300
Minneapolis, MN (Roseville) 76,800
Mobile, AL 8,000
Nashville, TN 16,000
New Orleans, LA (Harahan) 8,800
Omaha, NE 15,000
Orlando, FL 14,400
Pennsauken, NJ 19,500
Phoenix, AZ 11,500
Pittsburgh, PA 15,800
Portland, OR 12,500
Sacramento, CA 7,600
St. Louis, MO 22,000
San Diego, CA 10,600
San Jose, CA 35,300
Seattle, WA (Auburn) 9,600
All of the properties are held under operating leases, except for the
Birmingham, Des Moines and St. Louis facilities which are owned. Management
believes that the Company's properties are generally well maintained and
adequate for current operations and foreseeable expansion. The inability of the
Company to renew any short-term real property lease would not have a material
effect on the Company's results of operations.
ITEM 3. LEGAL PROCEEDINGS
The Company is from time to time involved in litigation incidental to the
conduct of its business. Management believes that none of the litigation in
which the Company is currently involved would, individually or in the aggregate,
have a material effect on the Company's consolidated financial position or
results of operations and cash flows when resolved in a future period.
The Company, along with many other parties, is a defendant in a contribution
action to determine the liability for the state ordered clean up of a landfill.
The Company believes its insurance will cover any costs incurred in this matter.
The Company is also, in general, subject to possible loss contingencies pursuant
to federal or state environmental laws and regulations. Although these
contingencies could result in future expenses or judgments, such expenses or
judgments are not expected to have a material effect on the Company's
consolidated financial position or results of operations.
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth quarter
of the year.
PART II.
ITEM 5.MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock trades on the Nasdaq National Market under the symbol
PSRC.
The following quarterly stock price and dividend information is provided for
2000 and 1999.
Stock Price
---------------------------- Cash Dividends
High Low Per Share
- --------------------------------------------------------------------------------
2000
- -----
First Quarter $ 6.84 $ 5.00 $ .0475
Second Quarter 5.62 4.81 .0475
Third Quarter 5.87 4.00 .0475
Fourth Quarter 5.25 4.06 .0475
1999
- -----
First Quarter $ 7.06 $ 5.25 $ .045
Second Quarter 8.12 4.84 .045
Third Quarter 8.00 4.50 .045
Fourth Quarter 6.50 4.00 .045
The payment of future cash dividends will depend on the level and growth of the
Company's earnings and the Company's needs for cash.
There were approximately 2,800 shareholders of record as of December 31, 2000.
For purposes of computing the aggregate market value of the voting stock of the
Company held by nonaffiliates, as shown on the cover page of this report, it has
assumed that all the outstanding shares were held by nonaffiliates except for
the shares held by directors and officers of the Company. However, this should
not be deemed to constitute an admission that all directors and officers of the
Company are, in fact, affiliates of the Company, or that there are not other
persons who may be deemed to be affiliates of the Company. Further information
concerning shareholdings of officers, directors and principal shareholders is
included in the Company's definitive proxy statement filed with the Securities
and Exchange Commission by April 30, 2001.
ITEM 6. SELECTED FINANCIAL DATA
This information should be read in conjunction with the Company's consolidated
financial statements and notes to such statements included herein.
Years Ended December 31,
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(in thousands, except per share amounts) 2000 1999 1998(1) 1997(2) 1996
- --------------------------------------------------------------------------------------------------------
Statement of Income Data
Net sales .............................. $ 547,558 $ 547,417 $ 454,635 $ 415,913 $ 367,755
Cost of sales .......................... 459,110 459,609 375,609 347,788 305,517
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Gross profit ........................... 88,448 87,808 79,026 68,125 62,238
Operating expenses ..................... 74,819 73,630 68,643 59,631 54,042
Gain on sale of property and equipment . 384 -- -- -- --
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Income from operations ................. 14,013 14,178 10,383 8,494 8,196
Interest expense ....................... (5,913) (5,484) (3,605) (2,913) (1,915)
Gain on sale of capital lease .......... -- -- -- 3,658 --
Loss on business divestiture ........... -- -- -- (401) --
Minority interest ...................... 319 -- -- -- --
Other income-net ....................... 314 78 297 515 421
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Income before provision for income taxes 8,733 8,772 7,075 9,353 6,702
Provision for income taxes ............. 3,655 3,663 2,975 3,862 2,788
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Net income ............................. $ 5,078 $ 5,109 $ 4,100 $ 5,491 $ 3,914
========================================================================================================
Per Share Data
Net income per basic share ............. $ .79 $ .78 $ .63 $ .84 $ .60
Net income per diluted share ........... .79 .78 .62 .83 .60
Cash dividends per share ............... .19 .18 .18 .18 .18
========================================================================================================
Balance Sheet Data
Working capital ........................ $ 93,744 $ 94,236 $ 100,602 $ 69,151 $ 67,040
Total assets ........................... 187,116 196,807 190,697 138,491 134,175
Total long-term debt obligations ....... 55,600 62,500 75,205 32,788 36,250
Shareholders' equity ................... 62,403 59,545 55,611 52,548 48,183
========================================================================================================
<FN>
(1) Income for 1998, includes a one-time restructure and other expense of
$1,050,000 ($634,000 after tax) relating to the reorganization of the
Company into three regions and the integration of an acquisition.
(2) Income for 1997, includes a charge to cost of sales for $2,300,000
($1,381,000 after tax) for the write-down of electronic equipment
inventory, a $3,658,000 ($2,183,000 after tax) gain on the sale of a
capital lease and a $401,000 ($241,000 after tax) loss on a business
divestiture.
</FN>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
The following table sets forth for the years indicated certain items from the
accompanying Consolidated Statements of Income expressed as a percentage of net
sales.
Years Ended December 31,
---------------------------
2000 1999 1998
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Net sales .................................. 100.0% 100.0% 100.0%
Cost of sales .............................. 83.8 83.9 82.6
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Gross profit ............................... 16.2 16.1 17.4
Selling, general and administrative expenses 12.8 12.7 14.2
Depreciation and amortization .............. .6 .6 .6
Provision for doubtful accounts ............ .3 .2 .1
Gain on sale of property and equipment ..... .1 -- --
Restructure and other ...................... -- -- .2
- --------------------------------------------------------------------------
Income from operations ..................... 2.6 2.6 2.3
Interest expense ........................... (1.1) (1.0) (.8)
Gain on sale of capital lease
Minority interest .......................... .1 -- --
Other income-net ........................... -- -- .1
- --------------------------------------------------------------------------
Income before provision for income taxes ... 1.6 1.6 1.6
Provision for income taxes ................. .7 .7 .7
- --------------------------------------------------------------------------
Net income ................................. .9% .9% .9%
==========================================================================
All periods previously reported have a reclassification to comply with revised
accounting standards, requiring freight billed to customers to be included in
sales and freight out expenses to be included in cost of sales. Previously,
freight out expense net of freight billed was included in selling, general and
administrative expenses. This accounting change has no effect on the Company's
current or historical net income or net income per share.
COMPARISON OF 2000 TO 1999
Net income for 2000 was $5,078,000, or $.79 per diluted share, compared to
$5,109,000, or $.78 per diluted share, in 1999. Income in 2000 was negatively
impacted by additional costs incurred by the Company for the expansion of its
digital printing business including the formation of Canopy, LLC ("Canopy"), a
joint venture owned 74% by the Company and 26% by Xeikon, in the second half of
the year.
Sales remained relatively flat between the two years with sales of $547,558,000
in 2000 and $547,417,000 in 1999. During the first nine months of the year,
sales increases were positive. However, beginning at the end of the third
quarter and continuing through the remainder of the year, sales were negatively
impacted by an overall softness in the printing industry.
Gross profit as a percent of sales increased from 16.1% in 1999 to 16.2% in
2000. This increase is primarily due to a positive change in product mix between
the two years.
Selling, general and administrative expenses increased $586,000 in 2000 or as a
percent of sales increased from 12.7% in 1999 to 12.8% in 2000. In 2000, the
Company incurred approximately $1 million of additional expenses as a result of
the formation of Canopy. Excluding this impact, the expenses as a percent of
sales would have been less than in the prior year.
Depreciation and amortization expense decreased from $3,096,000 in 1999 to
$2,998,000 in 2000. This decrease is due to a decline in the Company's
investment in property and equipment.
The provision for doubtful accounts increased from $1,186,000 in 1999 to
$1,887,000 in 2000. In 2000, the Company incurred higher levels of write-offs
than had been experienced in earlier years.
The Company sold two buildings during the year, one in Minneapolis and the other
in Seattle. Total proceeds for the two sales were approximately $4.4 million
with a gain of approximately $380,000.
Interest expense increased from $5,484,000 in 1999 to $5,913,000 in 2000. This
increase is due to higher interest rates during the year that were partially
offset by decreased debt levels.
The effective income tax rate remained relatively constant between the two years
at 41.9% in 2000 and 41.8% in 1999. The difference between the effective tax
rates and the federal statutory rate of 34% is primarily attributable to the
effect of state income taxes and non-deductible expenses.
The Company implemented a dividend increase beginning with the first quarterly
dividend paid in 2000. The quarterly dividend per share was increased from $.045
to $.0475 per share. In addition, because the Company believes its stock is
undervalued in the marketplace and the repurchase of the stock at the current
market levels represents an excellent value for the Company and its
shareholders, the Board of Directors, in March 2000, authorized a stock
repurchase program to acquire up to 325,000 shares of the Company's common
stock. In 2000, the Company acquired and retired 178,406 shares.
For the year 2001, the Company expects to continue to improve its market share,
and expects improved results from Canopy as the market acceptance for digital
printing increases. In addition, the Company expects interest costs to decrease
as a result of lower debt levels and lower interest rates. The Company will,
however, be affected by potential changes in the strength of the economy.
COMPARISON OF 1999 TO 1998
Net income for 1999 was $5,109,000, or $.78 per diluted share, compared to
$4,100,000, or $.62 per diluted share, in 1998. Excluding a one-time pre-tax
restructure and other charge of $1.05 million in 1998, the net income in 1998
was $4,734,000, or $.71 per diluted share.
This increase in net income for 1999 was the result of improved income from
operations. During the year, the Company was able to successfully integrate the
acquisition of Bell Industries' Graphic Imaging Group ("Bell acquisition") and
complete the reorganization of the Company into three regions. Excluding the
1998 one-time charge, income from operations increased 24% in 1999 from
$11,433,000 in 1998 to $14,178,000 in 1999. Including the one-time charge, 1998
income from operations was $10,383,000.
Sales for 1999 were $547,417,000, a 20% increase over 1998 sales of
$454,635,000. This sales increase is primarily the result of the Bell
acquisition, increased national account sales and over a 200% increase in
digital press sales.
Gross profit as a percent of sales was 16.1% in 1999 compared to 17.4% in 1998.
This decrease is primarily the result of changes in product and customer mix and
lower manufacturer rebates.
Selling, general and administrative expenses as a percent of sales decreased
from 14.2% in 1998 to 12.7% in 1999. In 1998, the Company incurred a restructure
and other charge of $1.05 million related to reorganizing the Company into three
regions and integrating the Bell operations. This percentage decrease in
selling, general and administrative expenses reflects the successful
implementation of this reorganization and integration program.
Depreciation and amortization expense increased from $2,507,000 in 1998 to
$3,096,000 in 1999. This increase is due to additional goodwill amortization as
a result of the Bell acquisition.
The provision for doubtful accounts increased from $440,000 in 1998 to
$1,186,000 in 1999. This increase is due to increased sales in 1999, plus,
losses that occurred in transitioning accounts acquired in the Bell acquisition.
Interest expense increased from $3,605,000 in 1998 to $5,484,000 in 1999. This
increase is attributable to the debt associated with the Bell acquisition.
The effective income tax rate remained relatively constant between the two years
at 41.8% in 1999 and 42% in 1998. The difference between the effective tax rates
and the federal statutory rate of 34% is primarily attributable to the effect of
state income taxes and non-deductible expenses.
Financial Condition and Liquidity
Cash flow provided by operating activities was $17,299,000 and $10,196,000 in
2000 and 1999, respectively, and cash used in operating activities was
$2,302,000 in 1998. The improvement in 2000 is due to a continual improvement in
working capital management. In both 2000 and 1999, the change in assets and
liabilities resulted in a positive cash flow from operations. In 2000, the cash
flow was $8.8 million compared to $1.4 million in 1999. Excluding the impact of
changes in assets and liabilities, the cash flow was $8.5, $8.8 and $7.7 million
in 2000, 1999 and 1998, respectively.
Cash flow provided by investing activities was $1,490,000 in 2000 and cash used
in investing activities was $487,000 and $45,618,000 in 1999 and 1998,
respectively. In 2000, the Company had proceeds of $4.4 million on the sale of
two facilities, one in Minneapolis and the other in Seattle. In 1998, the
Company incurred $43.9 million for business acquisitions which was primarily for
the Bell acquisition. Property and equipment expenditures for each of the three
years ranged between $1.5 and $1.7 million. The Company had no material capital
expenditure commitments at December 31, 2000 and expects capital expenditures
for 2001 to be approximately $2 million.
Cash flows used in financing activities were $18,789,000 and $9,709,000 in 2000
and 1999, respectively, and $47,920,000 provided in 1998. The cash used in 2000
and 1999 was primarily provided by the operating and investing activities. The
cash provided in 1998 was used primarily for the Bell acquisition. Debt
decreased by $8 and $16.3 million in 2000 and 1999, respectively. Debt increased
by $45.4 million in 1998, primarily due to the Bell acquisition. The book
overdraft decreased by $9.1 million in 2000 and increased by $7.7 and $3.6
million in 1999 and 1998, respectively. In 2000, the Company received $500,000
cash as part of the minority interest in Canopy and expended $1 million for the
repurchase of Company stock.
The Company's primary source of debt financing is a revolving credit agreement
with a commitment of $75 million and $55.6 million outstanding at December 31,
2000. In March 2001, the existing revolving agreement was replaced with a new
$75 million revolving credit agreement expiring in March 2004. The Company
believes this revolver, combined with cash from operations, is sufficient to
support the current capital requirements of the Company.
New Accounting Standards
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." This
statement establishes accounting and reporting standards for derivatives and
hedging activities. The new standard requires that all derivative instruments be
reported on the balance sheet at their fair values. For derivative instruments
designated as fair value hedges, changes in the fair value of the derivative
instrument will generally be offset on the income statement by changes in the
fair value of the hedged item. For derivative instruments designated as cash
flow hedges, the effective portion of any hedge is reported in other
comprehensive income until it is cleared to earnings during the same period in
which the hedged item affects earnings. The ineffective portion of all hedges
will be recognized in current earnings each period. Changes in the fair value of
derivative instruments that are not designated as a hedge will be recorded each
period in current earnings.
In July 1999, the FASB issued SFAS No. 137, and SFAS No. 138 that deferred the
effective date for implementation of SFAS No. 133 to fiscal years beginning
after June 15, 2000 and which addressed certain issues causing implementation
difficulties for entities that apply SFAS No. 133, respectively. The Company
will adopt SFAS No. 133, including the amendments in SFAS No. 138, on January 1,
2001. Transactions that the Company has entered into that will be accounted for
under SFAS No. 133, as amended, are interest rate exchange agreements and
foreign currency forward exchange contracts. Adoption of these new standards
will not have a material effect on the Company's consolidated results of
operations, financial position or cash flows.
Market Sensitive Instruments and Risk Management
The Company utilizes derivative financial instruments to reduce interest rate
risks. The Company does not hold or issue financial instruments for trading or
speculative purposes. The counterparty is a major commercial bank. At December
31, 2000, the Company had one derivative financial instrument, an interest rate
SWAP agreement with a notional amount of $17 million. This SWAP agreement
effectively fixes the interest rate on a like amount of the Company's floating
rate debt at 6.16% plus the Company's LIBOR spread in effect at the time. The
effective rate was 7.86% at December 31, 2000. The SWAP expires on November 6,
2001. A 100 basis point downward parallel shift in the yield curve would not
have a material effect on the Company's results of operations, liquidity or
financial condition.
Although most purchases for the Company are transacted in US dollars, on
occasion, the Company purchases equipment payable in a foreign currency. For
payments with extended terms, generally up to six months, the Company will enter
into foreign currency forward exchange contracts that minimize the risk of
foreign exchange rate fluctuations on such payments. At December 31, 2000, the
Company had foreign currency forward exchange contracts with a notional value of
approximately $1.1 million.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PRIMESOURCE CORPORATION
Consolidated Statements of Income
Years Ended December 31,
-----------------------------------
(Thousands of dollars, except per share amounts) 2000 1999 1998
- ------------------------------------------------------------------------------------------
Net sales .......................................... $ 547,558 $ 547,417 $ 454,635
Cost of sales ...................................... 459,110 459,609 375,609
- ------------------------------------------------------------------------------------------
Gross profit ....................................... 88,448 87,808 79,026
Selling, general, and administrative expenses....... 69,934 69,348 64,646
Depreciation and amortization ...................... 2,998 3,096 2,507
Provision for doubtful accounts .................... 1,887 1,186 440
Gain on sale of property and equipment ............. 384 -- --
Restructure and other .............................. -- -- 1,050
- ------------------------------------------------------------------------------------------
Income from operations ............................. 14,013 14,178 10,383
Interest expense ................................... (5,913) (5,484) (3,605)
Minority interest .................................. 319 -- --
Other income-net ................................... 314 78 297
- ------------------------------------------------------------------------------------------
Income before provision for income taxes ........... 8,733 8,772 7,075
Provision for income taxes ......................... 3,655 3,663 2,975
- ------------------------------------------------------------------------------------------
Net income ......................................... $ 5,078 $ 5,109 $ 4,100
==========================================================================================
Net income per share
Basic .............................................. $ .79 $ .78 $ .63
Diluted ............................................ .79 .78 .62
==========================================================================================
<FN>
See accompanying notes to consolidated financial statements.
</FN>
PRIMESOURCE CORPORATION
Consolidated Balance Sheets
December 31,
-------------------
(Thousands of dollars, except share information) 2000 1999
- -------------------------------------------------------------------------------------------
Assets
Current Assets
Trade receivables, less allowances of $3,250 and $3,127, respectively $ 80,529 $ 83,012
Other receivables ................................................... 5,897 10,683
Inventories ......................................................... 66,866 68,379
Deferred income taxes ............................................... 3,443 3,228
Other ............................................................... 709 843
- -------------------------------------------------------------------------------------------
Total Current Assets ................................................ 157,444 166,145
Property and equipment, net ......................................... 7,680 12,063
Excess of cost over net assets of businesses acquired,
net of accumulated amortization of $4,114 and $3,043, respectively 18,518 16,427
Deferred income taxes ............................................... 955 977
Long-term receivables ............................................... 508 585
Other assets ........................................................ 2,011 610
- -------------------------------------------------------------------------------------------
Total Assets ........................................................ $187,116 $196,807
===========================================================================================
Liabilities and Shareholders' Equity
Current Liabilities
Current portion of long-term debt obligations ....................... $ -- $ 104
Notes payable ....................................................... -- 953
Accounts payable .................................................... 45,010 45,766
Book overdraft ...................................................... 7,825 16,937
Accrued payroll and benefits ........................................ 4,226 4,241
Other accrued liabilities ........................................... 6,639 3,908
- -------------------------------------------------------------------------------------------
Total Current Liabilities ........................................... 63,700 71,909
Long-term debt obligations, net of current portion .................. 55,600 62,500
Accrued pension, Postretirement and other liabilities ............... 1,832 2,853
- -------------------------------------------------------------------------------------------
Total Liabilities ................................................... 121,132 137,262
- -------------------------------------------------------------------------------------------
Commitments and Contingencies
Minority Interest in Subsidiary ..................................... 3,581 --
Shareholders' Equity
Common stock, $.01 par value, 24,000,000 shares authorized
6,357,806 and 6,536,212 issued and outstanding, respectively ........ 64 65
Additional paid-in capital .......................................... 25,023 25,725
Retained earnings ................................................... 37,316 33,755
- -------------------------------------------------------------------------------------------
Total Shareholders' Equity .......................................... 62,403 59,545
- -------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity .......................... $187,116 $196,807
===========================================================================================
<FN>
See accompanying notes to consolidated financial statements
</FN>
PRIMESOURCE CORPORATION
Consolidated Statements of Cash Flows
Years Ended December 31,
------------------------------------
(Thousands of dollars) 2000 1999 1998
- -----------------------------------------------------------------------------------------------------
Operating Activities
Net income .................................................... $ 5,078 $ 5,109 $ 4,100
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation ............................................... 1,927 2,003 1,957
Amortization ............................................... 1,071 1,093 550
Provision for doubtful accounts ............................ 1,887 1,186 440
Pension benefit ............................................ (848) (959) (218)
Restructure and other expense .............................. -- -- 996
Gain on sale of property and equipment ..................... (384) -- --
Other ...................................................... (186) 406 (112)
Changes in assets and liabilities, net of effects from business
combinations:
Receivables ................................................ 5,382 (11,306) (1,075)
Inventories ................................................ 1,513 732 2,388
Other current assets ....................................... 134 119 278
Income taxes ............................................... (227) 843 (668)
Accounts payable and other accrued liabilities ............. 2,261 11,303 (10,803)
Pension and other postretirement benefits .................. (309) (333) (135)
- ------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities ........... 17,299 10,196 (2,302)
Investing Activities
Proceeds from sales of property and equipment ................. 4,482 67 163
Purchase of property and equipment ............................ (1,642) (1,452) (1,743)
Payments for business acquisitions, net of cash acquired ...... -- (100) (43,946)
Decrease in long-term receivables ............................. 77 112 127
Decrease (increase) in other assets .......................... (1,401) 1,017 (185)
Other, net .................................................... (26) (131) (34)
- ------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities ........... 1,490 (487) (45,618)
Financing Activities
Net increase (decrease) in short-term borrowings .............. (953) (2,547) 3,500
Proceeds from long-term obligations ........................... 278,800 92,600 144,300
Repayment of long-term obligations ............................ (285,804) (106,329) (102,429)
Increase (decrease) in book overdraft ......................... (9,112) 7,742 3,586
Dividends paid ................................................ (1,224) (1,176) (1,175)
Proceeds from minority shareholder investment in subsidiary ... 500 -- --
Purchase of common stock ...................................... (996) -- --
Proceeds from exercise of stock options ....................... -- 1 138
- -----------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities ........... (18,789) (9,709) 47,920
- -----------------------------------------------------------------------------------------------------
Net change in cash ............................................ -- -- --
Cash at beginning of year ..................................... -- -- --
- -----------------------------------------------------------------------------------------------------
Cash at end of year ........................................... $ -- $ -- $ --
=====================================================================================================
<FN>
See accompanying notes to consolidated financial statements.
</FN>
PRIMESOURCE CORPORATION
Consolidated Statements of Shareholders' Equity
Common Stock
-------------------- Additional
(Thousands of dollars, ($.01 Par Value) Paid-in Retained
except share information) Shares Amount Capital Earnings Total
- --------------------------------------------------------------------------------------------
Balance, January 1, 1998 ........... 6,516,620 $65 $25,586 $26,897 $52,548
Net income ......................... 4,100 4,100
Cash dividends paid to
shareholders ($.18 per share) ... (1,175) (1,175)
Stock options exercised and related
tax benefit, net of shares
received as payment upon exercise 19,398 138 138
- --------------------------------------------------------------------------------------------
Balance, December 31, 1998 ......... 6,536,018 65 25,724 29,822 55,611
Net income ......................... 5,109 5,109
Cash dividends paid to
shareholders ($.18 per share) ... (1,176) (1,176)
Stock options exercised ............ 200 1 1
Purchase and retirement
of common stock ................. (6)
- ---------------------------------------------------------------------------------------------
Balance, December 31, 1999 ......... 6,536,212 65 25,725 33,755 59,545
Net income ......................... 5,078 5,078
Cash dividends paid to
shareholders ($.19 per share) ... (1,224) (1,224)
Purchase and retirement
of common stock ................. (178,406) (1) (702) (293) (996)
- ---------------------------------------------------------------------------------------------
Balance, December 31, 2000 ......... 6,357,806 $64 $25,023 $37,316 $62,403
=============================================================================================
<FN>
See accompanying notes to consolidated financial statements.
</FN>
PRIMESOURCE CORPORATION
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Basis of Consolidation
PrimeSource Corporation (the "Company") is a national distributor
serving the printing and publishing industries. The consolidated
financial statements include the accounts of the Company and its
majority-owned subsidiaries. All significant intercompany transactions
and accounts have been eliminated.
Cash and Cash Equivalents
The Company considers all highly liquid temporary cash investments
purchased with a maturity of three months or less to be cash
equivalents. The Company's cash management program utilizes zero
balance accounts. Accordingly, in general, the Company has no or
minimal cash balances. Book overdraft balances have been reclassified
to a current liability in the accompanying Consolidated Balance Sheets.
Inventory Valuation
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
(FIFO) methods.
Property and Equipment
Property and equipment are carried at cost or assigned values as a
result of acquisitions. Costs of major additions, replacements and
betterments are capitalized, and maintenance and repairs, which do not
extend the life of the respective assets, are expensed as incurred.
When property is retired or otherwise disposed, the cost of the
property and the related accumulated depreciation are removed from the
accounts, and any resulting gains or losses are reflected in current
operations. Depreciation is computed by the straight-line method over
the estimated useful lives of the assets which range from three to ten
years for machinery and equipment and ten to forty years for buildings
and improvements.
Capital leases are included under property and equipment with the
corresponding amortization included in depreciation. The related
financial obligations under the capital leases are included in
long-term obligations. Capital leases are amortized over the useful
lives of the respective assets.
Long-lived assets are reviewed for impairment whenever events or
changes in circumstances indicate the carrying amount may not be
recoverable. If the sum of the expected future undiscounted cash flows
is less than the carrying amount of the asset, a loss is recognized for
the difference between the fair value and carrying value of the asset.
Excess of Cost Over Net Assets of Businesses Acquired
The excess of the total acquisition cost over the fair value of net
tangible assets acquired (the "goodwill acquired") is being amortized
by the straight-line method over periods ranging from eight to forty
years. The Company's policy is to record an impairment loss against the
goodwill acquired in the period when it is determined the carrying
amount of the net assets may not be recoverable. The Company performs
this evaluation on a quarterly basis. This determination includes
evaluation of factors such as current market value, future asset
utilization, business climate and future net cash flows (undiscounted
and without interest) expected to result from the use of the net
assets.
Revenue Recognition
Revenue is generally recognized when products are shipped and title is
passed to the customer.
Derivative Financial Instruments
The Company uses derivative financial instruments to manage its
exposure to interest and foreign currency exchange rate fluctuations.
To manage its exposure to fluctuations in interest rates, the Company
uses interest rate exchange agreements ("SWAPS"). These SWAPS are
matched with variable rate debt and periodic cash payments are accrued
on a settlement basis as an adjustment to interest expense. Any
premiums associated with these instruments are amortized over their
term and realized gains or losses as a result of the termination of the
instruments are deferred and amortized over the remaining term of the
underlying debt. Unrealized gains and losses as a result of these
instruments are recognized when the underlying hedged item is
extinguished or otherwise terminated.
Although most purchases for the Company are transacted in US dollars,
on occasion, the Company purchases equipment payable in a foreign
currency. For payments with extended terms, generally up to six months,
the Company will enter into foreign currency forward exchange contracts
that minimize the risk of foreign exchange rate fluctuations on such
payments.
The Company does not hold or issue any derivative financial instruments
for trading purposes and is not a party to leveraged instruments. The
credit risks associated with the Company's derivative financial
instruments are controlled through the evaluation and monitoring of the
creditworthiness of the counterparties. Although the Company may be
exposed to losses in the event of nonperformance by the counterparties,
the Company does not expect such losses, if any, to be significant.
Concentrations of Credit Risk
Concentrations of credit risk with respect to trade receivables are
limited due to a large customer base and its geographic dispersion.
Ongoing credit evaluations of customers' financial condition are
performed and, generally, no collateral is required.
Stock-Based Compensation
The Company applies the intrinsic-value-based method prescribed in
Accounting Principles Board Opinion No. 25 to account for options
granted to employees to purchase common shares. Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation" requires that companies electing to continue using the
intrinsic value method must make pro forma disclosures of net income
and net income per share as if the fair-value-based method of
accounting had been applied.
Freight
In accordance with Emerging Issues Task Force Issue 00-10, Accounting
for Shipping and Handling Costs, freight billed to customers is
included in sales and freight out expenses are included in cost of
sales.
Income Taxes
Income tax expense is based on pretax financial accounting income.
Deferred tax assets and liabilities are recognized for the expected tax
consequences of temporary differences between the tax basis of assets
and liabilities and their reported amounts.
Net Income Per Common Share
Basic net income per share is computed by dividing net income by the
weighted-average number of common shares outstanding during the period.
Diluted net income per share is computed by dividing net income by the
weighted-average number of common shares outstanding during the period
adjusted for the number of shares that would have been outstanding if
the dilutive potential common shares had been issued.
Estimates and Assumptions
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Reclassifications
Certain reclassifications of prior years' amounts have been made to
conform to the current year's presentation.
2. Business Acquisitions
In September 1998, the Company acquired the net assets of Bell
Industries' Graphic Imaging Group ("Bell acquisition") with thirteen
locations in the West, Southwest and Midwest for approximately $42.5
million. The excess of the acquisition costs over the net tangible
assets acquired is included in the Consolidated Balance Sheets and is
being amortized on a straight-line basis over 20 years. Assuming the
acquisition had occurred at the beginning of the year, unaudited
pro-forma sales and net income for the year ended December 31, 1998,
would have been approximately $554.3 million and $4.8 million ($.73 per
basic share and $.72 per diluted share), respectively.
In April 1998, the Company acquired the assets of Joseph Genstein,
Inc., a graphics distributor in the Pittsburgh area, for approximately
$1.5 million. In 1999, an additional $100,000 was paid in accordance
with a contingent incentive provision under the purchase agreement for
obtaining a specified sales level after the acquisition. The excess of
the acquisition costs over the net tangible assets acquired for this
acquisition is included in the Consolidated Balance Sheets and is being
amortized on a straight-line basis over 15 years. The pro-forma results
of this acquisition would not have had a significant impact on the
Company's consolidated results of operations.
These acquisitions have been accounted for as purchases and,
accordingly, are included in operations from their respective
acquisition dates.
3. Joint Venture
Effective July 1, 2000, the Company entered into a joint venture with
Xeikon to form Canopy, LLC ("Canopy"). The Company's ownership share is
74% with Xeikon owning 26%. The Company's contribution to the venture
was a net asset investment consisting primarily of inventory and
equipment of $11.1 million. Xeikon's investment consisted of a
combination of cash and intangibles assets totaling $3.9 million.
Intangibles are being amortized over an expected useful life of eight
years. Canopy's business focuses on the sales, installation, and
ongoing service and support of digital color and monochrome printing
systems in the U.S. and Canada. These systems are utilized
primarily by commercial, database, packaging, and transactional
printers. Canopy is a separate and distinct legal entity from the
Company. For financial reporting purposes, Canopy's assets,
liabilities and earnings are consolidated with those of the Company.
Xeikon's interest in Canopy is reported in the financial statements as
a minority interest.
4. Restructure and Other
In 1998, the Company incurred a restructure and other expense charge of
$1,050,000. At December 31, 1999, the remaining balance was a $430,000
write-down of a building to net realizable value. In February 2000,
this building was sold.
5. Cash Flow Information
Cash payments for interest and income taxes (net of refunds) for the
years ended December 31, consisted of:
(Thousands of dollars) 2000 1999 1998
---------------------------------------------------
Interest.............. $4,947 $5,687 $3,368
Income taxes .............3,928 2,750 3,760
===================================================
Excluded from the accompanying Consolidated Statements of Cash Flows
for the year ended December 31, 2000 are the fair value of the non-cash
assets contributed by the minority shareholder in the Canopy joint
venture of $3,400,000 and for the year ended December 31, 1998, the
assets acquired in the Bell acquisition of $55,314,000 and the
liabilities assumed or created in the same acquisition of $11,368,000.
6. Inventories
Inventories, which are primarily finished goods, at December 31,
consisted of:
(Thousands of dollars) 2000 1999
--------------------------------------------------
Last-in, first-out (LIFO) $27,763 $32,400
First-in, first-out (FIFO) 39,103 35,979
------------------------------------------------
Total inventories ....... $66,866 $68,379
==================================================
The current replacement costs of inventories exceeds LIFO values by
approximately $6,095,000 and $5,785,000 at December 31, 2000 and 1999,
respectively.
7. Property and Equipment
Property and equipment, net, at December 31, consisted of:
(Thousands of dollars) 2000 1999
----------------------------------------------------------------------
Land ....................................... $ 573 $ 1,354
Buildings and improvements ................. 3,871 7,300
Leased property ............................ 399 399
Machinery, equipment and other ............. 14,033 13,707
---------------------------------------------------------------------
18,876 22,760
Less accumulated depreciation and amortization (11,196) (10,697)
---------------------------------------------------------------------
Property and equipment, net ................ $ 7,680 $ 12,063
=====================================================================
8. Notes Payable and Long-Term Debt Obligations
The long-term debt obligations of the Company at December 31, consisted
of:
(Thousands of dollars) 2000 1999
-------------------------------------------------------
Revolving credit agreement .... $ 55,600 $ 62,500
Other miscellaneous obligations -- 104
-------------------------------------------------------
55,600 62,604
Less current portion .......... -- (104)
-------------------------------------------------------
Net long-term obligations ..... $ 55,600 $ 62,500
=======================================================
At December 31, 2000, the Company had a $75 million revolving credit
agreement that would have expired in May 2001. In March 2001, the
Company replaced this revolver with a new revolver that expires in
March 2004, at which time the entire outstanding balance under the
revolver will come due. Under the terms of this new agreement, which
includes five banks, the Company can borrow at the prime rate or the
London Interbank Offered Rate ("LIBOR") plus between 1.25% to 2.25%
depending on certain specified performance levels. The debt is
collateralized by the accounts receivable and inventory of the Company.
If the new agreement had been in place at December 31, 2000, the
applicable LIBOR rate would have been LIBOR plus 2%. As a result of the
new financing, the debt outstanding at December 31, 2000 has been
classified as long term.
The Company had two short-term bank lines with a total availability of
$7.5 million that expired during the year ended December 31, 2000.
Based on anticipated debt levels, the Company believes the amount
available under the revolving credit agreement will be adequate to meet
its ongoing debt requirements and does not plan to replace these lines
or establish any additional lines of credit.
The revolving loan agreement in place on December 31, 2000 and the new
replacement revolving loan agreement provide, among other terms,
various requirements for net worth and leverage and fixed charge
coverage ratios. The Company was in compliance with these requirements
under the revolving credit agreement in place on December 31, 2000 and
would have also been in compliance if the new revolver had been in
place.
In 1997, the Company entered into an interest rate SWAP agreement with
a notional amount of $17 million. This SWAP agreement effectively fixes
the interest rate on a like amount of the Company's floating rate debt
at 6.16% plus the Company's LIBOR spread in effect at the time. The
effective rate was 7.86% at December 31, 2000. The SWAP expires on
November 6, 2001. The fair value of the SWAP agreement, based on the
quoted settlement cost to close the contract at December 31, 2000, is a
liability of $35,000.
9. Provision for Income Taxes
The income tax provision for the years ended December 31, consisted of:
(Thousands of dollars) 2000 1999 1998
-----------------------------------------------------------
Current:
Federal .................. $ 2,899 $ 2,762 $ 2,450
State .................... 785 754 644
-----------------------------------------------------------
3,684 3,516 3,094
Deferred:
Federal .................. (23) 115 (93)
State .................... (6) 32 (26)
-----------------------------------------------------------
(29) 147 (119)
-----------------------------------------------------------
Provision for income taxes $ 3,655 $ 3,663 $ 2,975
===========================================================
Reconciliation of the provision for income taxes computed at the
federal statutory rate of 34% to the actual provision for income taxes
for the years ended December 31, consisted of:
(Thousands of dollars) 2000 1999 1998
--------------------------------------------------------------------------------------
Statutory tax provision ............................. $ 2,969 $ 2,982 $ 2,406
State income taxes, net of federal income tax benefit 518 519 408
Expenses for which there are no tax benefits ........ 191 179 190
Other, net .......................................... (23) (17) (29)
--------------------------------------------------------------------------------------
Provision for income taxes .......................... $ 3,655 $ 3,663 $ 2,975
======================================================================================
Deferred income taxes represent the future tax consequences of
differences between the tax basis of assets and liabilities and their
financial reporting amounts at each year-end. Significant components of
the Company's deferred tax assets (liabilities) at December 31,
consisted of:
(Thousands of dollars) 2000 1999
-----------------------------------------------------------------
Provision for doubtful accounts ........... $ 1,278 $ 1,238
Inventory reserves ........................ 937 857
Postretirement benefits other than pensions 675 707
Vacation accrual .......................... 501 424
Goodwill .................................. 255 277
Pension and employee benefit costs ........ 30 385
Depreciation .............................. (72) (495)
Other, net ................................ 794 812
-----------------------------------------------------------------
Total deferred tax assets ................. $ 4,398 $ 4,205
=================================================================
10. Net Income Per Share
The following is a reconciliation of the average shares of common stock
used to compute basic net income per share to the shares used to
compute diluted net income per share as shown on the Consolidated
Statements of Income for the years ended December 31:
2000 1999 1998
---------------------------------------------------------------------------------
Average shares of common stock outstanding
used to compute basic net income per share . 6,422,015 6,536,098 6,526,805
Dilutive effect of stock options ........... 231 12,842 122,611
---------------------------------------------------------------------------------
Average shares of common stock outstanding
used to compute diluted net income per share 6,422,246 6,548,940 6,649,416
---------------------------------------------------------------------------------
Net income per share:
Basic.............................................. $ .79 $ .78 $ .63
Diluted............................................ .79 .78 .62
----------------------------------------------------------------------------------
At December 31, 2000, there were outstanding options to purchase
569,621 shares of common stock at a range of prices between $5.75 and
$11.18. The dilutive effect of stock options is based on the treasury
method that computes the equivalent dilutive shares as the difference
between the option shares and the amount of assumed common shares that
could be purchased from the proceeds from the exercise of the stock
options at the then current market price. To the extent the option
price exceeds the current common stock price, the options are
excluded, as the effect of including these options would be
anti-dilutive, reducing the number of shares. The calculation for a
year is based on the weighted-average dilutive shares during the year
reflecting both changes in outstanding options during the year and
changes in the common stock's market price. At December 31, 2000, the
option prices were above the common stock's market price, thus none of
the option shares were included in the calculation.
11. Defined Benefit Pension Plans
The Company has a defined benefit pension plan that covers
substantially all of the Company's employees. In general, an employee
becomes vested after completing five years of service, and the benefit
is based on the employee's total years of service and compensation
during the ten years preceding retirement. Contributions to the plan
are based on funding standards established by the Employee Retirement
Income Security Act of 1974. In addition, the Company has a
supplemental executive retirement plan for certain Company executives
that provides certain additional benefits.
The components of the net periodic pension benefit for the years ended
December 31, were:
(Thousands of dollars) 2000 1999 1998
---------------------------------------------------------------------
Service cost ..................... $ 1,172 $ 995 $ 982
Interest cost .................... 2,137 1,874 1,872
Expected return on plan assets ... (3,771) (3,538) (2,980)
Amortization of prior service cost 15 (9) (9)
Transition cost amortization ..... 5 5 5
Recognized net actuarial gain .... (406) (286) (88)
---------------------------------------------------------------------
Net periodic pension benefit ..... $ (848) $ (959) $ (218)
=====================================================================
Assumptions:
Discount rate .................... 7.25% 7.50% 6.50%
Expected return on plan assets ... 10.00% 10.00% 10.00%
Rate of compensation increase..... 4.00% 4.00% 4.00%
====================================================================
The change in the financial status of the plans and amounts recognized
in the Company's Consolidated Balance Sheets at December 31, were:
(Thousands of dollars) 2000 1999
----------------------------------------------------------------------
Change in benefit obligation:
Benefit obligation at beginning of year ...... $ 27,284 $ 30,805
Service cost ................................. 1,172 995
Interest cost ................................ 2,137 1,874
Actuarial loss (gain) ........................ 2,847 (4,811)
Benefits paid ................................ (1,624) (1,579)
----------------------------------------------------------------------
Benefit obligation at end of year ............ $ 31,816 $ 27,284
----------------------------------------------------------------------
Change in Plan assets:
Fair value of plan assets at beginning of year $ 38,526 $ 36,111
Actual return (loss) on plan assets .......... (35) 3,937
Employer contributions ....................... 64 57
Benefits paid ................................ (1,624) (1,579)
----------------------------------------------------------------------
Fair value of plan assets at end of year ..... $ 36,931 $ 38,526
----------------------------------------------------------------------
Reconciliation of funded status:
Funded status ................................ $ 5,115 $ 11,242
Unrecognized net actuarial gain .............. (4,462) (11,279)
Unrecognized prior service cost .............. 26 (200)
Unrecognized transition obligation ........... 5 9
----------------------------------------------------------------------
Accrued pension liability .................... $ 684 $ (228)
======================================================================
The plans' assets are invested in undivided interests in several funds
structured to duplicate the performance of various stock and bond
indexes. The accrued pension liability is included in accrued pension,
postretirement and other liabilities on the Consolidated Balance
Sheets.
12. Defined Contribution Pension Plans
The Company has a defined contribution pension plan in the form of
qualified IRC 401(k) plan. Participation in this plan is available to
substantially all employees. Company contributions to the plan are
based on a percentage of the employee contributions not to exceed
certain maximum levels. The cost of this plan was $262,000, $275,000
and $290,000 for the years 2000, 1999, and 1998, respectively.
13. Postretirement Benefits Other Than Pensions
The Company has two retiree health benefit plans, the Phillips & Jacobs
Retiree Health Plan (the "P/J Retiree Plan") that primarily covers
retirees and employees who previously participated in the Tasty Baking
Company's Retiree Medical Plan prior to the Company's spin-off from
Tasty Baking Company in 1993, and the Momentum Retiree Medical Plan
(the "Momentum Retiree Plan"), that primarily covers retirees and
employees who were previously employed by Momentum Corporation prior to
the merger with the Company in 1994. Both plans provide health care
benefits through a health care administrator and contracts with health
service providers. In addition, the P/J Retiree Plan provides life
insurance benefits through an insurance company. The Company life
insurance premium contribution is limited to $20,000 of coverage per
retiree, with the retiree paying the premium for any coverage beyond
the $20,000. The Company's policy is to fund the plans as benefits are
paid.
The plans are contributory with ceilings on the Company's contribution.
In addition, under the Momentum Retiree Plan, employees who were under
the age of 55 on December 31, 1992 receive no contribution from the
Company under the plan.
Net periodic postretirement benefit expense for the years ended
December 31, included the following components:
(Thousands of dollars) 2000 1999 1998
----------------------------------------------------------------------
Service cost .............................. $ 15 $ 20 $ 20
Interest cost ............................. 109 98 80
Recognized net actuarial gain ............. (19) (31) (76)
----------------------------------------------------------------------
Net periodic postretirement benefit expense $ 105 $ 87 $ 24
======================================================================
The change in the financial status of the plans and amounts recognized
in the Company's Consolidated Balance Sheets at December 31, were:
(Thousands of dollars) 2000 1999
----------------------------------------------------------------
Change in benefit obligation:
Benefit obligation at beginning of year .. $ 1,419 $ 1,526
Service cost ............................. 15 20
Interest cost ............................ 109 98
Actuarial loss (gain) .................... 125 (9)
Benefits paid ............................ (185) (216)
----------------------------------------------------------------
Benefit obligation at end of year ........ $ 1,483 $ 1,419
----------------------------------------------------------------
Fair value of plan assets ................ -- --
----------------------------------------------------------------
Reconciliation of funded status:
Funded status ............................ $(1,483) $(1,419)
Unrecognized net actuarial gain .......... (221) (366)
---------------------------------------------------------------
Postretirement benefits other than pension $(1,704) $(1,785)
===============================================================
Assumptions:
Discount rate
2000 7.25%
1999 7.50%
1998 6.50%
Medical Trend 6.74% in 2000 grading to 5% in 7 years
Due to the ceilings on Company contributions, the effect of increases
in health care cost trend rates do not have a material effect on the
liability or expense.
14. Stock Compensation
Stock Options
The Company's stock incentive plans provide for the awarding of stock
options to directors, officers and other key employees. All granted
options, which vest over a four year period, lapse at the earlier of
the expiration of the option term (not more than ten years from the
grant date) or within three months following the date on which
employment with the Company terminates.
Changes in options outstanding for the three years ended December 31,
2000 are:
Option Prices
-----------------------
Weighted
Options Average Range
---------------------------------------------------------------------
Outstanding at January 1, 1998 . 498,381 $ 6.89 $6.11-11.18
---------------------------------------------------------------------
Granted ........................ 101,500 7.41 6.81-11.18
Exercised ...................... (20,194) 6.25 6.11- 6.97
Canceled ....................... (16,085) 7.58 6.11-11.18
---------------------------------------------------------------------
Outstanding at December 31, 1998 563,602 6.99 6.11-11.18
---------------------------------------------------------------------
Granted ........................ 75,000 5.75 5.75
Exercised ...................... (200) 6.11 6.11
Canceled ....................... (48,910) 6.46 6.11-11.18
---------------------------------------------------------------------
Outstanding at December 31, 1999 589,492 6.88 5.75-11.18
---------------------------------------------------------------------
Canceled ....................... (19,871) 6.50 6.11-11.18
---------------------------------------------------------------------
Outstanding at December 31, 2000 569,621 $ 6.89 $5.75-11.18
=====================================================================
At December 31, 2000, there were 451,371 options exercisable with a
weighted-average option price of $6.86 and a range from $5.75 to $11.18
and 200,976 options available for grant. The weighted-average remaining
contractual life of outstanding options at December 31, 2000 and 1999
was 6 and 6.8 years, respectively.
The Company has not recognized compensation expense in connection with
stock option grants. Had compensation expense been determined based on
the fair value on the grant date of options granted after December 31,
1994, the Company's net income and net income per share on a pro forma
basis would have been reduced for the years ended December 31, as
follows:
(Thousands of dollars,
except per share data) 2000 1999 1998
-----------------------------------------------------
Net Income:
As reported............ $5,078 $5,109 $4,100
Pro forma ............. 4,943 4,906 3,917
=====================================================
Net Income Per Share:
As reported
Basic ................ $ .79 $ .78 $ .63
Diluted .............. .79 .78 .62
Pro forma
Basic ................ .77 .75 .60
Diluted .............. .77 .75 .59
=====================================================
There were no options granted in 2000. The weighted-average fair value
per share for options granted was $1.62 in 1999 and $2.67 in 1998. The
fair value was estimated using the Black-Scholes option-pricing model.
For options granted in 1999, a dividend yield rate of 3.1%, expected
stock volatility of 27% and risk-free interest rate of 6.7% were used
in estimating the value. For options granted in 1998, a dividend yield
rate of 2.8%, expected stock volatility of 45% and risk-free interest
rate of 4.6% were used.
Restricted Stock Awards
The Company's stock incentive plans provide for the awarding of
restricted stock to officers and key employees. The fair market value
of the stock at the date of grant establishes the compensation amount
that is amortized to operations over the restriction period. At
December 31, 2000, all awards were fully amortized and an additional
61,280 shares were available for future awards.
15. Leases
The Company leases certain distribution and office facilities,
machinery and equipment, and vehicles under various noncancelable lease
agreements. The Company expects that in the normal course of business,
leases that expire will be renewed or replaced by other leases.
Minimum annual rentals payable under noncancelable operating leases
with a remaining term of more than one year from December 31, 2000 are
as follows:
Years Ending December 31,
(Thousands of dollars)
2001......................... $ 2,710
2002......................... 2,589
2003......................... 1,839
2004......................... 1,284
2005......................... 831
Thereafter................... 5,102
--------------------------------------
Total minimum lease payments $14,355
======================================
Rent expense, net of noncancelable sublease income of $24,000 in 2000
and 1999 and $10,000 in 1998, was $3,458,000, $3,203,000 and $2,851,000
for 2000, 1999, and 1998, respectively.
16. New Accounting Standards
In June 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities." This statement establishes accounting and reporting
standards for derivatives and hedging activities. The new standard
requires that all derivative instruments be reported on the balance
sheet at their fair values. For derivative instruments designated as
fair value hedges, changes in the fair value of the derivative
instrument will generally be offset on the income statement by changes
in the fair value of the hedged item. For derivative instruments
designated as cash flow hedges, the effective portion of any hedge is
reported in other comprehensive income until it is cleared to earnings
during the same period in which the hedged item affects earnings. The
ineffective portion of all hedges will be recognized in current
earnings each period. Changes in the fair value of derivative
instruments that are not designated as a hedge will be recorded each
period in current earnings.
In July 1999, the FASB issued SFAS No. 137, and SFAS No. 138 that
deferred the effective date for implementation of SFAS No. 133 to
fiscal years beginning after June 15, 2000 and which addressed certain
issues causing implementation difficulties for entities that apply SFAS
No. 133, respectively. The Company will adopt SFAS No. 133, including
the amendments in SFAS No. 138, on January 1, 2001. Transactions that
the Company has entered into that will be accounted for under SFAS No.
133, as amended, are interest rate exchange agreements and foreign
currency forward exchange contracts. Adoption of these new standards
will not have a material effect on the Company's consolidated results
of operations, financial position or cash flows.
17. Commitments and Contingencies
The Company is subject to various legal proceedings and claims which
have arisen in the ordinary course of its business. The Company does
not believe that the ultimate resolution of such matters will have a
material effect on the Company's consolidated financial position or
results of operations.
The Company, along with many other parties, is a defendant in a
contribution action to determine the liability for the state ordered
clean up of a landfill. The Company believes its insurance will cover
any costs incurred in this matter. The Company is also, in general,
subject to possible loss contingencies pursuant to federal or state
environmental laws and regulations. Although these contingencies could
result in future expenses or judgments, such expenses or judgments are
not expected to have a material effect on the Company's consolidated
financial position or results of operations.
18. Quarterly Financial Information (unaudited)
Summarized unaudited quarterly financial data for the years ended
December 31, 2000 and 1999 are:
(Thousands of dollars
except per share data) First Second Third Fourth Total
-------------------------------------------------------------------------------------
Year Ended December 31, 2000
Net sales .................. $141,519 $135,683 $134,034 $136,322 $547,558
Gross profit ............... 22,197 22,223 21,982 22,046 88,448
Net income ................. 1,361 1,397 1,139 1,181 5,078
Net income per share (1)
Basic .................... $ .21 $ .22 $ .18 $ .19 $ .79
Diluted .................. .21 .22 .18 .19 .79
Year Ended December 31, 1999
Net sales .................. $139,988 $133,895 $133,054 $140,480 $547,417
Gross profit ............... 22,212 22,028 21,254 22,314 87,808
Net income ................. 1,235 1,295 1,170 1,409 5,109
Net income per share (1)
Basic .................... $ .19 $ .20 $ .18 $ .22 $ .78
Diluted .................. .19 .20 .18 .22 .78
<FN>
(1) Due to changes in the weighted average number of basic and diluted
shares during the periods and rounding, the sum of the quarterly
net incomes per share will not necessarily be equal to the full
years' income per share.
</FN>
19. Subsequent Event
On February 2, 2001, the Board of Directors of the Company adopted a
Shareholder Rights Plan declaring a dividend of one right for each
share of the Company's common stock outstanding. In the event a person
or group acquires or seeks to acquire 15% or more of the outstanding
common stock of the Company, the rights may be exercised (except by the
acquiring person whose rights are canceled) for $20. Upon exercise,
each right entitles the holder to purchase from the Company common
stock of the Company or the acquiring company having a market value
equivalent to two times the $20 exercise price. Subject to certain
conditions, the rights are redeemable by the Board of Directors for
$.005 per right and are exchangeable for shares of common stock. The
rights have no voting power and expire on February 1, 2011.
Report of Independent Accountants
To the Shareholders and the Board of Directors of PrimeSource Corporation:
In our opinion, the consolidated financial statements listed in the index
appearing under item 14(a)(1) present fairly, in all material respects, the
financial position of PrimeSource Corporation and its subsidiaries (the
"Company") at December 31, 2000 and 1999, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 2000 in conformity with accounting principles generally accepted in the
United States of America. In addition, in our opinion, the financial statement
schedule listed in the index appearing under item 14(a)(2) present fairly, in
all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. These financial
statements and financial statement schedule are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
February 23, 2001, except for the second paragraph of Note 8 for which the date
is March 8, 2001
PART III.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated by reference from the definitive proxy statement to be filed with
the Securities and Exchange Commission by April 30, 2001, except information
regarding executive officers which appears under Part I.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference from the Registrants' definitive proxy statement to be
filed with the Securities and Exchange Commission by April 30, 2001.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference from the Registrants' definitive proxy statement to be
filed with the Securities and Exchange Commission by April 30, 2001.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference from the Registrants' definitive proxy statement to be
filed with the Securities and Exchange Commission by April 30, 2001.
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
The following financial statements have been included as part of this
report:
Form 10-K
Page
---------
Consolidated Statements of Income ............. 13
Consolidated Balance Sheets ................... 14
Consolidated Statements of Cash Flows ......... 15
Consolidated Statements of Shareholders' Equity 16
Notes to Consolidated Financial Statements .... 17
Report of Independent Accountants ............. 29
(a)(2) Financial Statement Schedule
(a) The following financial statement schedule is submitted herewith:
-Schedule II Valuation of Qualifying Accounts and Reserves
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission
are not required under the related instructions or are
inapplicable, and therefore have been omitted.
(a)(3) Exhibits
The required exhibits are included at the back of this Form 10-K and
are described in the Exhibit Index immediately preceding the first
exhibit.
(b) Reports on Form 8-K
The Registrant did not file a report on Form 8-K during the quarter
ended December 31, 2000.
PRIMESOURCE CORPORATION AND SUBSIDIARIES
SCHEDULE II -- VALUATION OF QUALIFYING ACCOUNTS AND RESERVES
Column A Column B Column C Column D Column E
- --------------------------------- ----------- ---------------------------- ------------ ------------
Classification Balance at Charged to Balance
Beginning Charged to Other Deductions at End
(thousands of dollars) of Period Expenses Accounts Write-offs of Period
- --------------------------------------------------------------------------------------------------------------
For the year ended December 31, 2000
Allowance for doubtful accounts..... $ 3,127 $1,887 $(1,764) (A) $ 3,250
Amortization of goodwill............ 3,043 1,071 4,114
Inventory reserves.................. 3,289 647 (306) (B) 3,630
- --------------------------------------------------------------------------------------------------------------
$ 9,459 $3,605 $(2,070) $10,994
- --------------------------------------------------------------------------------------------------------------
For the year ended December 31, 1999
Allowance for doubtful accounts..... $ 3,419 $1,186 $(1,478) (A) $ 3,127
Amortization of goodwill............ 1,958 1,085 3,043
Inventory reserves.................. 5,414 352 (2,477) (B) 3,289
- --------------------------------------------------------------------------------------------------------------
$10,791 $2,623 $(3,955) $ 9,459
- --------------------------------------------------------------------------------------------------------------
For the year ended December 31, 1998
Allowance for doubtful accounts..... $ 1,913 $ 440 $1,295 (C) $ (229) (A) $ 3,419
Amortization of goodwill............ 1,435 523 1,958
Inventory reserves.................. 4,664 233 2,000 (C) (1,483) (B) 5,414
- --------------------------------------------------------------------------------------------------------------
$ 8,012 $1,196 $3,295 $(1,712) $10,791
- --------------------------------------------------------------------------------------------------------------
<FN>
(A) Doubtful accounts written off, net of any recoveries.
(B) The disposal of obsolete inventory, net of any recoveries.
(C) Related to the acquisition of Bell Industries' Graphic Imaging Group.
</FN>
PRIMESOURCE CORPORATION AND SUBSIDIARIES
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 its
behalf by the undersigned, thereunto duly authorized.
Dated March 27, 2001
/s/ James F. Mullan
----------------------
James F. Mullan
President and
Chief Executive Officer
(principal executive officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following person on the behalf of the registrant
and in the capacity and on the date indicated.
Dated March 27, 2001
/s/ William A. DeMarco
------------------------
William A. DeMarco
Vice President, Chief Financial Officer
(principal financial and accounting officer)
DIRECTORS
/s/ William A. DeMarco
----------------------
Fred C. Aldridge, Jr.} William A. DeMarco
Philip J. Baur, Jr.} Attorney in fact
Richard E. Engebrecht} Power of Attorney
John H. Goddard, Jr.} dated March 13, 2001
Gary MacLeod}
James F. Mullan}
Klaus D. Oebel} Date March 27, 2001
Edward N. Patrone}
John M. Pettine}
Exhibit Index
Exhibit Number and Description
The following Exhibit Numbers refer to Regulation S-K, Item 601. All other
exhibits are omitted because they are inapplicable. (Exhibits identified in
parentheses are on file with the Securities and Exchange Commission and are
incorporated herein by reference as exhibits hereto.)
(2.1) Agreement and Plan of Reorganization dated as of May 27, 1994 by and
between MOMENTUM CORPORATION and PHILLIPS & JACOBS, INCORPORATED
(filed as Annex A to the Proxy/Prospectus included within
registration statement No. 33-54913 on Form S-4 filed by the
Registrant on August 4, 1994)
(2.2) Form of Plan of Merger (filed as Annex B to the Proxy/Prospectus
included within registration statement No. 33-54913 on Form S-4 filed
by the Registrant on August 4, 1994)
(2.3) Asset Purchase Agreement By And Among VGC Corp., VGC Holding USA,
Inc., NV Koninklijke KNP BT and PrimeSource dated November 1, 1996,
for the purchase of the operating assets (excluding accounts
receivable) of VGC Corporation's branch operations in Minneapolis,
Minnesota; Milwaukee, Wisconsin; Des Moines, Iowa; and Omaha,
Nebraska. (filed as exhibit 2 to Form 8-K dated November 13, 1996,
File No. 0-21750)
(2.4) Asset Purchase Agreement By And Among Momentum Corporation And TK
Gray, Inc. And Its Shareholders dated April 15, 1994, for the
purchase of substantially all of the assets and certain of the
liabilities of TK Gray, Inc. (filed as exhibit 2(i) to Form 8-K dated
May 2, 1994, File No. 0-18112)
(2.5) Asset Purchase Agreement between PrimeSource Corporation and Bell
Industries, Inc. dated August 28, 1998 for the purchase of
substantially all the assets and certain liabilities of the Graphic
Imaging Group of Bell Industries, Inc.(filed as exhibit 2 to Form 8-K
dated September 28, 1998, File No. 000-21750)
(3.1) Amended and Restated Articles of Incorporation of the Registrant
(filed as Annex C to the Proxy/Prospectus included within
registration statement No. 33-54913 on Form S-4 filed by the
Registrant on August 4, 1994)
(3.2) Restated By-laws of the Registrant effective March 2, 1999 (filed as
Exhibit 3.2 to Form 10-K, File No. 000-21750, dated March 29, 2000)
(4.1) Form of Common Stock Certificate (filed with Form 10 filed by
Registrant on May 12, 1993, (File No. 0-21750 and as subsequently
amended on Form 8 filed on May 28, 1993, Form 8 filed on July 6, 1993
and Form 8 filed on July 13, 1993)
(4.2) Form of Common Stock Certificate, effective September 1, 1994 (filed
as Exhibit 4.2 to Form 10-K, File No. 0-21750, dated
March 30, 1995)
(4.3) RIGHTS AGREEMENT by and between PrimeSource Corporation and American
Stock Transfer & Trust Company dated as of February 1, 2001 (filed as
Exhibit 4.1 to Form 8-K filed on February 9, 2001, File No.
000-21750)
(10.1) Form of Phillips & Jacobs, Inc. 1993 Long Term Incentive Plan (filed
as Exhibit 10.1 to Form 10-K, File No.0-21750, dated March 30, 1995)*
(10.2) Form of Phillips & Jacobs, Incorporated Indemnification Agreement
(filed with Form 10 filed by Registrant on May 12, 1993, (File No.
0-21750) and as subsequently amended on Form 8 filed on May 28, 1993,
Form 8 filed on July 6, 1993 and Form 8 filed on July 13, 1993)*
(10.3) Form of Supplemental Executive Retirement Plan as amended and
effective March 1, 2000 (filed as Exhibit 10.3 to Form 10-K, File No.
000-21750, dated March 29, 2000)*
(10.4) Employment Agreement between the Registrant and W.A. DeMarco dated
December 31, 1996 (filed as Exhibit 10.5 to Form 10-K, File
No.0-21750, dated March 28, 1997)*
(10.5) Employment Agreement between the Registrant and J.F. Mullan dated
December 31, 1996 (filed as Exhibit 10.6 to Form 10-K, File No.
0-21750, dated March 28, 1997)*
(10.6) Form of Tax Matters Agreement (filed with Form 10 filed by Registrant
on May 12, 1993, (File No. 0-21750) and as subsequently amended on
Form 8 filed on May 28, 1993, Form 8 filed on July 6, 1993 and Form 8
filed on July 13, 1993)
(10.7) Amendment No. 1 to Agreement among Employers Participating in
Certain Qualified Plans (filed as Exhibit 10.14 to the Proxy/
Prospectus included within registration statement No. 33-54913 on
Form S-4 filed by the Registrant on August 4, 1994)*
(10.8) 1993 Replacement Option Plan (P&J Spin-off) for Directors (filed
as Annex I to the Proxy/Prospectus included within registration
statement No. 33-54913 on Form S-4 filed by the Registrant on August
4, 1994)*
(10.9) PrimeSource Corporation 401(k) Savings Plan (Amended and Restated
Effective January 1, 1997) (filed as Exhibit 10.9 to Form 10-K, File
No. 000-21750, dated March 29, 2000)*
(10.10) Restated Momentum Distribution Inc. Supplemental Benefits Plan,
effective April 22, 1991 (filed as Exhibit 10.13 to Form 10-K, File
No. 0-18112 dated March 30 1993)*
(10.11) Employment Agreement between the Registrant and John H. Goddard,
Jr. dated December 24, 1996 (filed as Exhibit 10.14 to Form 10-K,
File No. 0-21750 dated March 25, 1998)*
(10.12) Form of Indemnification Agreement for Directors and certain officers
effective September 1, 1994 and executed in January 1996 (filed as
Exhibit 10.22 to Form 10-K, File No. 0-21750, dated March 26, 1996)*
(10.13) PrimeSource Corporation Pension Plan (filed as Exhibit 10.23 to Form
10-K, File No. 0-21750, dated March 26, 1996)*
(10.14) Credit Agreement dated as of November 1,1996 by and among PrimeSource
Corporation, Dixie Type & Supply Company, Inc., Onondaga Litho
Supply Co., Inc. and The Banks Party Hereto and PNC Bank, National
Association, As Agent (filed as Exhibit 10.18 to Form 10-K, File No.
0-21750, dated March 28, 1997)
(10.15) Employment Agreement between the Registrant and Edward Padley dated
December 31, 1997 (filed as Exhibit 10.19 to Form 10-K, File No.
0-21750 dated March 25, 1998)*
(10.16) Employment Agreement between the Registrant and D.James Purcell dated
December 31, 1997(filed as Exhibit 10.20 to Form 10-K, File No.
0-21750 dated March 25, 1998)*
10.17 Credit Agreement dated March 8, 2001 by and among PrimeSource
Corporation and the Banks Party Hereto and PNC, National Association,
as Agent and PNC Capital Markets, Inc. as Lead Arranger.
21 Subsidiaries of the Registrant
23 Consent of PricewaterhouseCoopers LLP, Independent Accountants
27.1 Financial Data Schedule for the year ended December 31, 2000
27.2 Restated Financial Data Schedule for the year ended December 31,
1999**
27.3 Restated Financial Data Schedule for the year ended December 31,
1998 **
27.4 Restated Financial Data Schedule for the nine-months ended September
30, 2000 **
27.5 Restated Financial Data Schedule for the six-months ended June 30,
2000 **
27.6 Restated Financial Data Schedule for the three-months ended March 31,
2000 **
27.7 Restated Financial Data Schedule for the nine-months ended September
30, 1999 **
27.8 Restated Financial Data Schedule for the six-months ended June 30,
1999 **
27.9 Restated Financial Data Schedule for the three-months ended March 31,
1999 **
99 Undertakings
* Management contracts and/or compensatory plans, contracts or arrangements in
which a director and/or a named executive officer participates.
** Financial Data Schedules were restated to to comply with a revised accounting
standard requiring freight billed to customers to be included in sales and
freight out expenses to be included in cost of sales. Previously, freight
out expense net of freight billed was included in selling, general and
administrative expenses. This accounting change has no effect on the
Registrant's current or historical net income or net income per share.