FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
[X] Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (fee required)
FOR FISCAL YEAR ENDED SEPTEMBER 30, 2001
OR
[_] Transaction Report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 (no fee required)
COMMISSION FILE NUMBER 0 - 14358
PARIS CORPORATION
(Exact name of Registrant as specified in its Charter)
PENNSYLVANIA 23-1645493
(State or other Jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
700 HOBBS ROAD, WAYNE PENNSYLVANIA 19087
(Address of principal executive office) (zip code)
Telephone: (609) 387-7300
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the act: None
Securities registered pursuant to section 12(g) of the act:
TITLE
Capital Stock, $.004/par value per share
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 twelve 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 No
[X] [_]
The aggregate market value of the voting stock held by nonaffiliates of
the registrant as of November 15, 2001 was $2,620,075
Number of shares of outstanding common stock as of November 15, 2001:
3,270,535 shares.
1
ITEM 1 - BUSINESS
- -----------------
GENERAL
- -------
Paris Corporation ("Paris"), formerly Paris Business Forms, Inc.,
incorporated in 1964 under the laws of the Commonwealth of Pennsylvania, is a
holding company with four wholly-owned subsidiaries: two active operating
companies in New Jersey and Texas, one inactive Florida corporation, and a
Delaware corporation which owns the Company's trademarks. Paris Business
Products, Inc., a New Jersey corporation and Paris Business Forms, Inc., a Texas
corporation (dba, Paris Business Products, Inc.), are the two operating
companies, with plants in New Jersey and Texas, respectively. PBF Corporation is
the Delaware corporation. The Texas and Florida corporations are both
wholly-owned subsidiaries of the New Jersey corporation. Paris also has a 57%
interest in a corporation, Signature Corporation, formed in 1992, to market
office products through the supermarket and drug chain channels. Two individuals
own the remainder of the interest in Signature Corporation.
In January 1996, Paris changed its corporate name to Paris Corporation from
Paris Business Forms, Inc.
The Company converts mill paper rolls to business forms at its New Jersey
manufacturing facility and distributes office products, through a number of
market channels including forms dealers, paper merchants, stationers, office
product and computer superstores, consumer electronics retailers, buying groups,
supermarkets, and drugstore chains from their New Jersey and Texas facilities.
Products include stock and custom continuous forms; mill cut, value added, and
custom cut sheets; paper handling products for small offices and home offices.
Geographically the Company markets its products throughout the United States and
Canada through Company sales representatives, independent representatives,
brokers, dealers, and distributors.
Traditionally, the principal focus of the business was the manufacturing of
continuous forms designed to run on dot matrix and high speed impact printers.
The Company serves the stock continuous forms market and the custom forms
market, providing business forms to commercial businesses to specification.
Laser and inkjet printer technology continues to replace impact printers and,
accordingly, the Company's market for continuous forms is shrinking at a pace
estimated at 10% per year. The negative growth is more accelerated in the retail
market serving small business/home business customers since the printer
equipment investment is minimal and easy to replace. As a result, the Company
has been shifting its focus to the development, manufacture, and sale of
value-added and custom cut sheet products used on laser and inkjet printers.
Perfed, punched, lined, collated, colored, photo quality, and novelty cut sheet
products have been added to the product line. The continuous forms products
segment as a percentage of total sales has decreased from 43% to 37% to 30% in
fiscal years 1999, 2000, and 2001, respectively. It is estimated that this
segment will only account for 25% of total sales in fiscal 2002.
The Burlington product line of value-added and cut sheet products targeted
to the small office and home office user has continued to expand with various
offerings to meet the everyday needs of inkjet and laser printer paper demand as
well as specialty products for photographic quality and other applications
requiring maximum color contrast and optimal ink absorption. Growth in this
product segment is expected to be 28% in FY 2002.
Signature Corporation ("Signature"), the 57% owned joint venture,
distributes office products to the food and drug store markets. Formed in late
1992, Signature has continued to increase their stores served from 6,800 in 1996
to 12,000 in 2000. In August 1999, as a result of a stock tender by a Signature
minority shareholder, the Company's interest in Signature increased to 57%. This
change in ownership percentage in Signature was accounted for as a purchase and
Signature has been consolidated in the accompanying financial statements.
Signature Corporation does experience seasonal fluctuation in their sales
revenue. June, July and August represent approximately 35% of Signature's annual
revenue.
2
COMPETITION
- -----------
The business forms market is divided into two major segments. One segment
sells directly to end users, principally the 500 to 1,000 largest corporations.
The other segment, which Paris serves, distributes forms through resellers and
retailers. In the reseller market, there are three or four major competitors in
stock continuous forms who are larger than Paris and committed to stock computer
paper for the foreseeable future due to capital investment, albeit the negative
growth rate. The Company does not compete directly with the approximate dozen
direct sellers. There have been a number of acquisitions and mergers within the
industry and the consolidation mode is expected to continue going forward to
lower unit costs. Paris does not expect to pursue any acquisitions within this
business segment and will continue to shrink capacity commensurate with the
reduced demand for stock continuous forms.
The cut sheet market is growing at a rapid pace fueled by the installation
of laser and inkjet printers throughout the major U.S. corporations and home and
small businesses. Sales volume is expected to grow due to the Company's
penetration of the retail market, serving a number of major retail stores.
However, competition in this market is increasing rapidly. The major paper mills
have developed marketing subsidiaries to serve the retail market.
SUPPLIERS
- ---------
The Company purchases registered bond paper, (consisting of a wide variety
of weights, widths, colors, sizes and qualities), cut sheet, and carbonless
paper principally from the major United States paper mills. The Company believes
that it has good relationships with all of its suppliers.
The Company has partnered or formed strategic alliances to provide raw
material, market support, and/or name recognition for its value added cut sheet
product and non-paper products. Currently, the Company represents the largest
volume customer of Boise Cascade for certain specialty retail cut sheet
products. The Company believes the strong relationship between Paris and Boise
Cascade will provide the Company a solid footing for future cut sheet supply.
SEGMENTS AND MAJOR CUSTOMERS
- ----------------------------
The Company operates in three segments or lines of business, including
stock continuous forms and cut sheets; custom continuous forms and cut sheets;
consumer papers and office products. Financial information for each of the
Company's segments including net sales, operating income, total assets, capital
expenditures and sales to major customers, are included in the accompanying
financial statements.
For the years ended September 30, 2001 and 2000, approximately 68% and 56%,
respectively, of the Company's sales were to three customers in the consumer
segment. For the year ended September 30, 1999, approximately 70% of the
Company's sales were to two customers in the consumer segment. No customer
accounted for more than 10% of stock or custom shipments in FY01 or FY00. There
was one customer that accounted for 14% of the custom business in FY99.
EMPLOYEES
- ---------
As of September 30, 2001, the Company employed approximately 100 people in
manufacturing, sales and administrative functions in its corporate offices and
plants in New Jersey and Texas.
DISTRIBUTION AND MARKETING
- --------------------------
The Company markets the custom and stock forms products through many
independent dealers in the United States and Canada, as well as through retail
superstores. The independent distributors rely on several manufacturers, like
the Company, to supply these end users. The distributors range in size from a
single individual to a distributorship with several offices and an extensive
sales force. The Company operates, or contracts for storage space, in
strategically located warehouses along the east coast, southeast and southwest
3
regions of the country. These locations are used as the storage and shipping
points for its stock forms. Currently, the Company's primary method of
generating sales contacts is through its own sales force, sales representatives,
extensive marketing programs, referral and reputation.
The sales force consists of five salespersons covering New England,
Mid-Atlantic, Southeast, Midwest and Southwest regions of the United States. A
network of independent sales representatives covering the entire United States
has been assembled over the past few years to sell the new non-paper products
through major resellers and retailers.
MANUFACTURING
- -------------
The Company's custom paper products are manufactured in the New Jersey
plant on eight presses and one collator. The presses provide the Company with
the ability to produce a wide variety of forms. Each piece of machinery requires
a skilled operator; support personnel are required on some equipment. The custom
forms operation runs primarily two shifts per day, with individual equipment
varying. The estimated capacity of the custom business is approximately $15.0
million in sales at current prices.
The Company's stock form business is manufactured in New Jersey on two
presses. The majority of the stock forms are produced to be sold from inventory.
Each press is also capable of producing customized computer paper or stock forms
upon order. The stock operation is two shifts per day, five days per week, with
overtime on an as-needed basis. The estimated annual capacity of the stock
business is approximately $15 million in sales at current prices
The Company's equipment is very well suited to produce nearly all of the
forms products required by a forms distributor or retailer. The Company
continues to monitor any new product requirements of its forms distributors and
assess what new equipment or equipment modifications are required to produce the
products.
OPERATIONS
- ----------
The Company rents a 125,000 square foot plant and corporate office in
Burlington, New Jersey and leases a 20,000 square foot warehouse in Fort Worth,
Texas. There are no union affiliations among employees at the two locations.
During the year ended September 30, 2001, the Company operated 5 custom
presses, 2 stock presses, and 1 collator. The Company subleased a portion of its
facilities under the terms of an operating lease which expires in January, 2002.
Other income includes $77,000 of rental income for the year ended September 30,
2001.
Utilization of production capacity approximated 60% in New Jersey.
Custom forms capacity continues to be converted from roll to sheeting
capability as demand shifts from continuous to cut sheet custom forms.
Currently, 65% of custom capacity is directed to cut sheets.
The Company has adequate domestic paper supply sources with paper mills and
brokers at the present time. However, the mills are reallocating capacity to
higher grade papers and are de-emphasizing forms bond used in continuous form
production.
Inventory levels were maintained at approximately two weeks supply for raw
material and 4-6 weeks supply for finished goods during the year.
OTHER MATTERS
- -------------
The corporate structure of the Company's legal entities was reorganized in
fiscal 1995. Paris Business Forms, Inc. (PBFI), the public company, transferred
substantially all of the operating assets and liabilities to a newly formed
subsidiary corporation, Paris Business Products, Inc. (PBP). The Texas operating
corporation, Paris Business Forms, Inc. (PBFITX) and a newly formed Florida
corporation, Paris Business Products, Inc.
4
(PBPFL), are subsidiaries of PBP. PBP, PBFITX and PBPFL are operating
corporations. PBF Corporation, a Delaware corporation, owns the Company
trademarks and remains a subsidiary of PBFI.
ITEM 2 - PROPERTIES
In May 1998, the Company entered into a contract to sell the office and
production facility in New Jersey for a total price of $4,500,000. In addition,
the Company entered into an agreement to lease the facility back for a period of
three years plus, at the Company's option, an additional two three-year renewal
periods. During FY01 the Company renewed one of the three year options. The
total gain of $1,070,661 has been deferred and is being recognized over the term
of the original lease in the monthly amount of $29,741. The amount of the gain
deferred at September 30, 2000 was $0. The total gain recognized to date was
$1,070,661 at September 30, 2001. The lease calls for monthly rental payments of
$41,667 and escalating to $46,875 at the end of the lease.
The Fort Worth, Texas facility was sold in June 1994 and replaced by a
45,000 square foot leased facility. In October 1999 the lease was modified, and
the Company signed a three year lease reducing the facility to 20,000 square
feet.
ITEM 3 - LEGAL PROCEEDINGS
None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
year ended September 30, 2001.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDERS
MATTERS
(A) The Company's common stock is traded on the over-the-counter market and is
listed on the National Association of Stock Dealers Daily Quotation Service
(NASDAQ) National Market System. The Symbol for the Company is PBFI. The
registrar and transfer agent is Chase Mellon Shareholder Services. The table
below shows the high and low closing sale prices as reported by the National
Daily Quotation Service.
RANGE OF SALE PRICES
--------------------
2001 FISCAL YEAR 2000 FISCAL YEAR
---------------- ----------------
HIGH LOW HIGH LOW
First Quarter 2.188 1.750 2.250 1.750
Second Quarter 3.125 1.750 2.625 1.938
Third Quarter 3.600 2.438 2.125 1.875
Fourth Quarter 3.700 2.500 2.375 1.781
The approximate number of shareholders of record as of December 15, 2001 was
200.
The registrar and transfer agent is Chase Mellon Shareholder Services.
In January of 1999 the Company issued a $0.20 per share special dividend. In
March of 2000 the company issued a $0.10 per share special dividend. Currently
it is undetermined if the Company will declare any future dividends.
5
ITEM 6 - SELECTED FINANCIAL DATA
The following selected financial data are derived from the financial
statements of the Company. The data should be read in conjunction with
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations" and the financial statements and related notes thereto included
herein in Item 8.
FOR THE YEAR ENDED SEPTEMBER 30,
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
NET SALES $43,050 $43,011 $35,433 $34,864 $51,674
INCOME (LOSS)
FROM OPERATIONS 1,291 253 266 (763) (3,372)
NET INCOME (LOSS) 1,389 663 961 (16) (2,469)
BASIC EARNINGS (LOSS)
PER SHARE .42 .20 .27 (0.004) (0.68)
DILUTED EARNINGS (LOSS)
PER SHARE .42 .20 .27 (0.004) (0.68)
TOTAL ASSETS 22,242 19,278 21,419 20,570 23,477
WORKING CAPITAL 14,368 12,120 11,698 12,426 9,999
LONG TERM DEBT
(excluding current portion) 498 0 0 0 0
SHAREHOLDERS' EQUITY 15,926 14,419 14,587 14,356 $14,701
CASH DIVIDENDS PER SHARE NONE .10 .20 NONE NONE
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. ($ in thousands, except statistical data)
The following discussion should be read in conjunction with the financial
statements, including the related notes.
Liquidity and Capital Resources
Working capital at the end of fiscal years 2001, 2000 and 1999 was $14,368,
$12,120 and $11,698, respectively. Working capital increased $2,248 during the
fiscal year ended September 30, 2001.
Net cash provided by operating activities was $931, primarily generated
from net income of $1389. Accounts receivable increased $444. Inventories
decreased $227 as Paris Business Products reduced inventory $453 through better
management. Conversely, Signature inventory increased $226, as sales were lower
than expected. Accounts payable and accrued expenses decreased $1397 due to
inventory management and an expedited turn around on trade payables to take
advantage of prompt payment terms.
6
Net cash provided by investing activities was $1841 primarily related to
the net investment transactions of $2372 as marketable securities were sold and
moved to a cash position. The purchase of property and equipment of $554 was
primarily the purchase of a batcher sheeter for the conversion of a stock press
in the amount of $271. The sheeter will support the anticipated growth of custom
cut sheets and value-added Consumer papers.
Net cash provided by financing activities was $2411. Proceeds from a
working capital loan were $1705. Proceeds from leases payable were $775. The
company financed the batcher sheeter which was purchased this year in addition
to financing a press purchased in fiscal year 1999 which was originally funded
internally. See Notes 7 and 9 in the Notes to the Consolidated Financial
Statements for additional information on these financing activities.
The Company believes that it has sufficient resources to satisfy ongoing
cash requirements for the next twelve months. The Company will meet short-term
liquidity needs through cash provided by operations and current financing
arrangements.
2001 compared to 2000
Net sales for the fiscal year ended September 30, 2001 were relatively flat
increasing $39. Although revenue was flat the product mix continued to shift.
The Consumer division had increased revenue of $4,828 or 29%. The growth is a
result of continuing to increase distribution, launch new products, and the
brand recognition of Burlington. Signature sales declined $2,480 as the Company
eliminated non-profitable distribution. The Commercial segment had declining
revenues of $2,744 or 12% as stock continuous computer paper and custom forms
declined $2,219.
Cost of sales for the fiscal year ended September 30, 2001 decreased $1,206
or 3%. The decline in cost of goods sold as revenue remained constant is a
direct result of the change in product mix.
Gross profit increased $1,245 or 28% in fiscal 2001 from $4,490 to $5,735
due to the above factors.
Selling expenses, marketing costs and administrative expenses increased
$207 or 5% in fiscal 2001. Selling expenses decreased $229 due to a reduction in
salaries, benefits, and travel expenses. The relationship with Signature
Corporation allowed for a consolidation of sales personnel. Marketing expenses
increased $242 while supporting the growth of the Consumer segment.
Administrative expenses increased $264 due primarily to the reversal of a $200
Federal Tax Audit Reverse in fiscal 2000.
Interest expense increased $183 related to the working capital line the
Company established in October, 2000 and Capital leases.
Other income, net in fiscal 2001 decreased $561 due to (1) lower investment
income of $228, (2) reduced gain on the sale of fixed assets, primarily from the
amortization on the gain on the sale of the building of $133, (3) debt
forgiveness income of $129 in fiscal 2000, and (4) other expenses, net of $11.
2000 compared to 1999
Net sales for the fiscal year ended September 30, 2000 increased 21% or
$7,579. The increase was driven by the continued growth of the Consumer segment,
which had increased revenue of 37% or $4,453. The growth is a result of
increased distribution and the launching of new products. The commercial segment
had a decrease in revenue of 2% or $554. Continuous Forms decreased $704 and
Commercial cut sheets decreased $725. These declines were offset by an increase
in revenue of $875 in the other commercial product lines such as Custom cut
sheets, Laser 3 and DocuGard. Sales allowances and rebates increased $475 due to
the increased revenue in the Consumer Segment. The effect of consolidating the
results of operation of Signature Corporation increased revenue $4,155 for the
year ended September 30, 2000.
7
Cost of sales for the fiscal year ended September 30, 2000 increased 23% or
$7,163. Cost of sales increased 2% over the increase in sales revenue due
primarily to product mix in the Consumer segment. Offsetting these factors was
lower freight costs as a percentage of sales. Freight expense remained flat on
increased sales of 21% due to the better management in controlling these costs.
Gross profit increased $416 or 10% in fiscal 2000 from $4,074 to $4,490 due
to the above factors.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Refer to Management's Discussion and Analysis of Financial Condition and
Results of Operations.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED FINANCIAL STATEMENTS: PAGE
CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 2001
AND 2000 9
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
(LOSS) FOR THE YEARS ANDED SEPTEMBER 30, 2001, 2000, AND 1999 10
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR
THE YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999 11
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS
ENDED SEPTEMBER 30, 2001, 2000, AND 1999 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 13 - 28
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS 29
INDEPENDENT AUDITORS' REPORT 30
FINANCIAL STATEMENT SCHEDULES NOT INCLUDED IN THIS FORM 10-K HAVE BEEN
OMITTED BECAUSE THEY ARE NOT APPLICABLE OR THE REQUIRED INFORMATION IS SHOWN IN
THE FINANCIAL STATEMENTS OR NOTES THERETO.
8
PARIS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- ----------------------------------------------------------------------------------------------------------------------
September 30,
2001 2000
---- ----
Assets
Current Assets:
Cash and cash equivalents $ 8,011,104 $ 2,828,114
Investments:
Available for sale 2,031,817 3,685,739
Other - 611,000
Accounts receivable, net of allowance for doubtful accounts of
$382,911 in 2001 and $373,585 in 2000 5,709,869 5,422,198
Inventories 3,634,852 3,861,964
Prepaid expenses 39,751 321,389
Deferred tax asset 437,200 163,581
----------- -----------
Total current assets 19,864,593 16,893,985
Investments
Available for sales - 250,628
Property and equipment, net 1,664,825 1,590,179
Deferred tax asset 400,900 129,308
Other assets 311,428 413,451
----------- -----------
Total Assets $22,241,746 $19,277,551
=========== ===========
Liabilities and Shareholders' Equity
Current Liabilities:
Note payable, bank $ 1,705,047 -
Note payable - $8,951
Curretn maturities of obligations under capital leases 216,485 -
Accounts payable and accrued expenses 2,749,743 4,146,610
Accrued payroll and related expenses 334,696 297,179
Income taxes payable 235,100 95,134
Deferred tax liability 255,834 7,286
Deferred revenue - 218,891
----------- -----------
Total current liabilities 5,496,905 4,774,051
Long term debt
Obligations under capital leases, net of current maturities 498,404 -
----------- -----------
Total liabilities 5,995,309 4,774,051
----------- -----------
Minority interest 320,706 84,460
----------- -----------
Commitments and Contigencies
Shareholders' Equity:
Common stock, $.004 par value;
Authorized 10,000,000 shares; Issued 3,937,517 shares 15,751 15,751
Additional paid-in capital 8,588,243 8,588,243
Accumulated other comprehensive income (loss) 41,800 (75,800)
Retained earnings 9,772,959 8,383,868
----------- -----------
18,418,753 16,912,062
Less common stock held in treasury, at cost;
666,982 shares 2,493,022 2,493,022
----------- -----------
Total shareholders' equity 15,925,731 14,419,040
----------- -----------
Total Liabilities and Shareholders' Equity $22,241,746 $19,277,551
=========== ===========
See notes to consolidated financial statements
9
PARIS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
- -----------------------------------------------------------------------------------------------------------------------
Year ended September 30
-----------------------
2001 2000 1999
---- ---- ----
Net sales $43,049,923 $43,011,083 $35,432,551
----------- ----------- -----------
Costs and expenses:
Cost of products sold 37,314,488 38,520,851 31,358,303
Selling expenses 2,035,176 2,093,009 1,802,100
General and administrative expenses 2,408,897 2,144,497 2,005,711
Interest expense 189,271 6,754 57,995
Other income, net (454,438) (1,010,246) (1,250,466)
----------- ----------- -----------
Total costs and expenses 41,493,394 41,754,865 33,973,643
----------- ----------- -----------
Income before income tax (expense)
benefit and minority interest 1,556,529 1,256,218 1,458,908
Income tax (expense) benefit 68,808 (602,880) (547,759)
----------- ----------- -----------
Income before minority interest 1,625,337 653,338 911,149
Minority interest (236,246) 9,529 49,581
----------- ----------- -----------
Net income 1,389,091 662,867 960,730
----------- ----------- -----------
Other comprehensive income
Unrealized gain on securities arising during the
period, net of taxes of $36,000 in 2001, $7,600
in 2000, and $39,400 in 1999 58,411 19,785 58,525
Reclassification adjustment for (gains)
losses included in net income 59,189 (29,239) 38,541
----------- ----------- -----------
Total other comprehensive income (loss) 117,600 (9,454) 97,066
----------- ----------- -----------
Total comprehensive income $ 1,506,691 $ 653,413 $ 1,057,796
=========== =========== ===========
Basic earnings per share $ 0.42 $ 0.20 $ 0.27
=========== =========== ===========
Diluted earnings per share $ 0.42 $ 0.20 $ 0.27
=========== =========== ===========
*Restated, Note 2
See notes to consolidated financial statements
10
PARIS CORPORATION AND SUBSIDIARIES
CONSOLIDATION STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999
- --------------------------------------------------------------------------------
Additional Accumulated Other
Common Stock Paid - In Comprehensive Retained Treasury Stock
Shares Amount Capital Income (Loss) Earnings Shares Amount Total
------ ------ ------- ------------- -------- ------ ------ -----
Balance, September 30, 1998 3,937,517 $15,751 $8,588,243 $ (163,412) $7,797,181 (382,872) $(1,882,237) $14,355,526
Purchase of 61,800 treasury shares - - - - - (61,800) (141,454) (141,454)
Issuance of 11,400 treasury shares - - - - - 11,400 23,500 23,500
Dividends paid ($0.20 per share) - - - - (708,825) - - (708,825)
Net income - - - - 960,730 960,730
Other comprehensive income - - - 97,066 - - - 97,066
------------------------------ ----------- ---------------------------------------------
Balance, September 30, 1999 3,937,517 15,751 8,588,243 (66,346) 8,049,086 (433,272) (2,000,191) 14,586,543
Purchase of 237,710 treasury shares - - - - - (237,710) (501,081) (501,081)
-----------
Issuance of 4,000 treasury shares - - - - - 4,000 8,250 8,250
Dividends paid ($0.10 per share) - - - - (328,085) - - (328,085)
Net income - - - - 662,867 - - 662,867
Other comprehensive loss - - - (9,454) - - - (9,454)
------------------------------ ----------- ---------------------------------------------
Balance, September 30, 2000 3,937,517 15,751 8,588,243 (75,800) 8,383,868 (666,982) (2,493,022) 14,419,040
Net income - - - - 1,389,091 - - 1,389,091
Other comprehensive loss - - - 117,600 - - - 117,600
------------------------------ ----------- ---------------------------------------------
Balance, September 30, 2001 3,937,517 $15,751 $8,588,243 $ 41,800 $9,772,959 (666,982) $(2,493,022) $15,925,731
========= ======= ========== =========== ========== ========= =========== ===========
See notes to consolidated financial statements
11
PARIS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
Year Ended September 30
-----------------------
2001 2000 1999
---- ---- ----
Cash flows from operating activities
Net income (loss) $ 1,389,091 $ 662,867 $ 960,730
----------- ----------- -----------
Adjustments to reconcile net income to net cash
cash provided by operating activities:
Depreciation and amortization 477,697 727,684 555,660
Gain on sale of property and equipment (240,351) (372,887) (371,718)
(Gain) Loss on sale of investments 235,350 (48,289) (366,683)
Debt forgiveness income - (128,999) -
Equity (deficiency) in limited partnership interests 25,874 (123,574) (168,500)
Provision for doubtful accounts 156,000 153,065 115,100
Equity in gain of investment in joint venture - - (75,183)
Deferred income tax (benefit) expense (296,663) 307,067 266,650
Minority interest 236,246 (9,528) (49,581)
Noncash compensation - 4,250 -
(Increase) decrease in assets:
Accounts receivable (443,671) 383,342 (1,289,244)
Inventories 227,112 304,926 103,424
Refundable income taxes - 190,252 (190,252)
Prepaid expenses 281,638 (262,859) (15,867)
Other assets 102,024 (26,166) (45,506)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (1,396,869) (1,050,195) 1,213,260
Accrued payroll and related expenses 37,517 (402,375) 179,238
Income taxes payable 139,966 50,734 (193,475)
----------- ----------- -----------
Total adjustments (458,130) (303,552) (332,677)
----------- ----------- -----------
Net cash provided by operating activities 930,961 359,315 628,053
----------- ----------- -----------
Cash flows from investing activities
Decrease in restricted cash - - 2,140,338
Proceeds from sale of investments 3,058,389 968,783 3,964,583
Purchase of investments (686,463) (1,286,853) (2,760,065)
Proceeds from sale of property and equipment 23,175 16,000 -
Purchase of property and equipment (554,057) (200,058) (911,904)
Acquisition of majority interest in investee, net of cash acquired - - 39,171
----------- ----------- -----------
Net cash provided by(used in) investing activities 1,841,044 (502,128) 2,472,123
----------- ----------- -----------
Cash flows from financing activities
Repayment of note payable (8,951) (83,836) (7,843)
Sales of treasury stock - 4,000 23,500
Purchase of treasury stock - (501,081) (141,454)
Proceeds (repayment) of note payable, bank 1,705,047 - (2,459,052)
Proceeds of lease payable, bank 775,000 - -
Repayment of lease payable, bank (60,111) - -
Dividends paid - (328,085) (708,825)
----------- ----------- -----------
Net cash provided by (used in) financing activities 2,410,985 (909,002) (3,293,674)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 5,182,990 (1,051,815) (193,498)
Cash and cash equivalents, beginning of year 2,828,114 3,879,929 4,073,427
----------- ----------- -----------
Cash and cash equivalents, end of year $ 8,011,104 $ 2,828,114 $ 3,879,929
=========== =========== ===========
SUPPLEMENTAL Disclosures of Cash Flow Information
Interest paid $ 181,993 $ 53,754 $ 66,711
Income taxes paid 313,059 45,030 430,684
See notes to consolidated financial statements
PARIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 Paris Corporation and Subsidiaries (collectively,
Nature of the "Company") manufacture stock and Nature of
Operations Operations custom business forms, provide value
added services to cut sheet products, and
distribute plastic and office products and
computer/printer peripheral products. The Company
manufactures stock and custom forms in Burlington,
New Jersey. The Company markets through retailers,
resellers, and dealers throughout the United States
and Canada.
NOTE 2 Principles of Consolidation
---------------------------
Summary of Significant
Accounting Policies The consolidated financial statements include the
accounts of the Company and its wholly-owned and
majority owned subsidiaries. All material
intercompany transactions and balances have been
eliminated.
Use of Estimates
----------------
The preparation of financial statements in
conformity with accounting principles generally
accepted in the United States of America requires
management to make estimates and assumptions that
affect certain reported amounts and disclosures.
Actual results could differ from those estimates.
Revenue Recognition
-------------------
The Company recognizes revenue from product sales
upon delivery to its customer, which is the point
when title passes to the customer.
Cash and Cash Equivalents
-------------------------
Cash and cash equivalents includes cash on deposit,
money market accounts and securities maturing in 90
days or less.
Financial Instruments
---------------------
The carrying amounts of cash and cash equivalents,
accounts receivable, prepaid expenses, accounts
payable and accrued expenses, and note payable
approximate their fair values as of September 30,
2001 and 2000.
Investments
-----------
Management determines the appropriate
classification of investment securities at the time
they are acquired and evaluates the appropriateness
of such classifications at each balance sheet date.
The classification of those securities and the
related accounting policies are as follows:
. Available-for-Sale Securities
Available-for-sale securities consist of marketable
equity and debt securities not classified as
trading securities. Available-for-sale securities
are stated at fair value based on quoted market
prices and unrealized
PARIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 2 Investments (continued)
-----------------------
Summary of Significant
Accounting Policies . Available-for-Sale Securities (continued)
(continued)
holding gains and losses are reported as a separate
component of shareholders' equity, net of tax,
except for permanent impairments in value which are
recognized in current earnings. Realized gains and
losses are included in income.
. Other
The Company accounts for investments in limited
partnerships under the equity method of accounting.
Inventories
-----------
Inventories are stated at the lower of cost or
market. Cost is determined by the first-in,
first-out method (FIFO).
Property and Equipment and Depreciation
---------------------------------------
Property and equipment are stated at cost.
Expenditures for renewals and betterments which
increase the useful life or capacity of property
and equipment are also capitalized at cost.
Expenditures for repairs and maintenance are
charged to expense as incurred. Gain or loss on the
retirement or disposal of capital assets is
included in income in the period of disposal.
Depreciation is computed using the straight-line
method over the estimated useful lives of the
assets. Depreciation was $405,409, $483,841 and
$531,817 for the years ended September 30, 2001,
2000 and 1999, respectively.
Other Assets
------------
The Company provides display racks to its resellers
for the display of its goods in stores. These
display racks are amortized on the straight-line
method over eighteen months commencing when the
display racks are shipped to the resellers.
Amortization was $72,288, $243,843 and $23,843 for
the years ended September 30, 2001, 2000 and 1999,
respectively.
PARIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 2 Per Share Data
Summary of --------------
Significant
Accounting The following table sets forth the computation of
Policies basic earnings per share for the years ended
(continued) September 30, 2001, 2000 and 1999:
2001 2000 1999
-------- -------- --------
Numerator
Net income available to
common shareholders $1,389,091 $ 662,867 $ 960,730
Denominator
Weighted-average shares
outstanding 3,270,535 3,323,811 3,526,087
Basic earnings per share $ 0.42 $ 0.20 $ 0.27
The following table sets forth the computation of diluted
earnings per share for the years ended September 30, 2001,
2000 and 1999:
2001 2000 1999
-------- -------- --------
Numerator
Net income available to
common shareholders $1,389,091 $ 662,867 $ 960,730
Denominator
Adjusted weighted-average
shares outstanding 3,312,901 3,326,647 3,538,398
Diluted earnings per share $ 0.42 $ 0.20 $ 0.27
Stock-Based Compensation
------------------------
As permitted by Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation," the
Company has elected to follow Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees,"
("APB 25"). Under APB 25, no compensation expense is
recognized at the time of option grant because the exercise
price of the Company's employee stock option equals the fair
market value of the underlying common stock on the date of
grant.
PARIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 2 Income Taxes
Summary of Significant ------------
Accounting Policies
(continued) The Company accounts for income taxes under the
liability method. Under this method, deferred tax
assets and liabilities are determined based on
differences between financial reporting and tax
bases of assets and liabilities and are measured
using the enacted tax rates and laws that will be
in effect when the differences are expected to
reverse.
Comprehensive Income
--------------------
Comprehensive income consists of net income and
unrealized gains and losses on certain investments
in marketable debt and equity securities and is
presented in the consolidated statement of
operations and comprehensive income. Other
comprehensive income is net of realized gains and
losses included in net income. Accumulated other
comprehensive income (loss) is net of related
deferred income taxes and is presented as a
component of shareholders' equity.
Accounting Pronouncements
-------------------------
In June, 2001, the Financial Accounting Standards
Board ("FASB") issued SFAS 141, "Business
Combinations", SFAS 142, "Goodwill and Other
Intangible Assets" and SFAS No. 143, "Accounting
for Asset Retirement Obligations". In August, 2001,
the FASB issued SFAS 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". SFAS
141 requires all business combinations initiated
after June 30, 2001 to be accounted for using the
purchase method of accounting. In addition, it
requires application of the provisions of SFAS 142
for goodwill and other intangible assets related to
any business combinations completed after June 30,
2001, but prior to the adoption date of SFAS 142.
SFAS 142 changes the accounting for goodwill and
other intangible assets. Upon adoption, goodwill
will no longer be subject to amortization over its
estimated useful life. Rather, goodwill will be
subject to at least an annual assessment for
impairment by applying a fair-value-based test. All
other acquired intangibles will be separately
recognized if the benefit of the intangible asset
is obtained through contractual or other legal
rights, or if the intangible asset can be sold,
transferred, licensed, or exchanged, regardless of
the Company's intent to do so. Other intangibles
will be amortized over their useful lives. SFAS 142
becomes effective for the Company on October 1,
2002.
SFAS 143 addresses financial accounting and
reporting for obligations associated with the
retirement of tangible long-lived assets and the
associated asset retirement costs. SFAS 143 becomes
effective for the Company on October 1, 2002. SFAS
144 replaces SFAS 121, "Accounting for Impairment
of Long-Lived Assets and for Long-Lived
PARIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 2 Accounting Pronouncements (continued)
Summary of -------------------------------------
Significant
Accounting Assets to be Disposed Of and other related provisions. SFAS
Policies 144 provides updated guidance concerning the recognition
(continued) and measurement of an impairment loss for certain types of
long-lived assets. It also expands the scope of a
discontinued operation to include a component of an entity,
and it eliminates the current exemption to consolidation
when control over a subsidiary is likely to be temporary.
SFAS 144 is effective for financial statements issued for
fiscal years beginning after December 15, 2001, and interim
periods within those years.
The adoption of the provisions of SFAS 141, SFAS 142, SFAS
143 and SFAS 144 will have no impact on the Company's
results of operations, financial position or cash flows.
NOTE 3 Prior to August 31, 1999, Paris Corporation held a 44%
Investment in interest in Signature Corporation ("Signature") which was
Signature accounted for using the equity method of accounting. In
Corporation September, 1999, as a accounted result of a stock tender by
a Signature minority shareholder, the Company's interest in
Signature increased to 57%. This change in ownership
percentage in Signature was accounted for as a purchase and
Signature has been consolidated in the accompanying
financial statements. The results of operations of
Signature have been included in the accompanying 1999
consolidated statement of operations for the month of
September, 1999. Signature is a wholesaler of plastic and
other office products.
The following pro forma results of operations information
has been prepared to give effect to the purchase as if such
transaction had occurred at the beginning of the period
presented. The information presented is not necessarily
indicative of results of future operations of the combined
companies.
Pro forma Results of Operations
(Unaudited)
Year Ended
September 30,
1999
-----------------
Net sales $41,489,656
Net income $ 924,482
Basic earnings per share $ 0.26
Diluted earnings per share $ 0.26
Weighted average shares, basic 3,526,087
Adjusted weighted average shares, diluted 3,538,398
PARIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 4 Investments as of September 30, 2001 and 2000 are summarized
Investments as follows:
2001 2000
-------------------------- -------------------------
Fair Value Cost Fair Value Cost
------------ ----------- ------------- -----------
Available for sale
Stocks $1,471,899 $1,370,375 $1,410,402 $1,367,193
Mutual funds 393,548 429,401 598,166 778,389
U.S. treasuries
and bonds 166,370 164,407 167,655 165,073
Corporate
bonds
and notes - - 1,509,516 1,497,575
---------- ---------- ---------- ----------
Total $2,031,817 $1,964,183 $3,685,739 $3,808,230
========== ========== ========== ==========
Noncurrent
Corporate
notes
maturing
December 19,
2001 $ - $ - $ 250,628 $ 250,937
========== ========== ========== ==========
The fair value of the Companies' available for sale
investments is net of margin loans of $15,425 and $886,554
as of September 30, 2001 and 2000, respectively.
Gross unrealized holding gains and losses as of September
30, 2001 and 2000 are as follows:
2001 2000
-------- --------
Gross unrealized gains
Stocks $243,697 $56,128
Mutual funds - 9,055
U.S. treasury and bonds 1,963 14,524
Gross unrealized losses
Stocks (142,173) (2,049)
Mutual funds (35,853) (200,149)
Corporate bonds and notes - (309)
-------- ---------
Total $ 67,634 ($122,800)
======== =========
PARIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 4 Proceeds from the sale of securities classified as
Investments available-for-sale for the years ended September 30, 2001,
(continued) 2000 and 1999 were $2,612,727, $968,783 and $460,699,
respectively. For the purpose of determining gross
realized gains and losses, the cost of securities sold is
based upon specific identification:
Year Ended September 30
-----------------------------------------------
2001 2000 1999
------------- -------------- ------------
Gross realized gains $465,452 $201,374 $ 4,614
============= ============== ============
Gross realized losses ($561,298) ($153,085) ($ 69,755)
============= ============== ============
Other Investments
-----------------
Other investments as of September 30, 2000 consisted of an
interest in a limited partnership. The limited partnership
invests in publicly traded securities with readily
determinable market values. The Company accounts for these
investments utilizing the equity method of accounting.
Income and losses are recorded based on the Company's
beneficial interest. The limited partnership interests were
sold during 1999 for gross proceeds of $3,503,884 which
resulted in a gross realized gain of $431,824. During 2000,
the Company reinvested $500,000 in one of the Limited
Partnerships which resulted in a recognized gain of
$111,000. The limited partnership interests were sold during
2001 for gross proceeds of $445,662 which resulted in a
recognized loss of $165,378.
NOTE 5 Inventories as of September 30, 2001 and 2000 consist of the
Inventories following:
2001 2000
-------------- --------------
Raw materials $ 810,378 $1,473,441
Work in progress 334,729 180,430
Finished goods 2,489,745 2,208,093
-------------- --------------
$3,634,852 $3,861,964
============== ==============
NOTE 6 Property and equipment as of September 30, 2001 and 2000
Property and consist of the following:
Equipment
2001 2000
--------------- ---------------
Building improvements $ 18,445 $ 18,445
Machinery and equipment 8,821,034 9,071,014
Furniture and fixtures 300,977 377,095
Automobiles and trucks 118,585 154,585
--------------- ---------------
9,259,041 9,621,139
Less accumulated depreciation 7,594,216 8,030,960
--------------- ---------------
$ 1,664,825 $ 1,590,179
=============== ===============
PARIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 7 In October, 2000, Paris Business Products, Inc. agreed to
Note Payable, a revolving line-of-credit with a bank September 30, 2001)
Bank and expires March 31, 2002. The for $3,500,000. The line
bears interest at the prime rate (6.0% as ofline contains
financial covenants including minimumworking capital
requirements, debt to equity limitations, cash flow
requirements, and other covenants and is collateralized by
all of the assets of Paris Business Products, Inc.
NOTE 8 In connection with the Signature stock tender (see
Note Payable Note 3), Signature converted $100,630 of accounts
payable into a promissory note. The note was payable
monthly in installments of $9,059 with interest at
14.5%. The outstanding balance was $-0- and $8,951
as of September 30, 2001 and 2000, respectively.
NOTE 9 The Company is obligated under noncancelable lease
Obligations arrangements for manufacturing equipment which expire at
Under Capital various dates through September, 2006.
Leases and
Subsequent The minimum lease payments are as follows:
Event
Year Ending September 30
------------------------
2002 $260,689
2003 260,689
2004 195,280
2005 64,463
2006 64,463
---------
Total minimum lease payments 845,584
Less amounts representing interest 102,695
---------
Present value of net minimum lease
payments 742,889
Less current maturities 216,485
---------
Obligations under capital leases, net of
current maturities including subsequent
event
526,404
Less subsequent event, lease proceeds
received in October, 2001 (28,000)
---------
Obligations under capital leases, net of
current maturities $498,404
=========
20
PARIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 9 The leased property is included in property and equipment
Obligations as of September 30, 2001 as follows:
Under Capital
Leases and Equipment $930,238
Subsequent Less accumulated amortization 147,020
--------
Event
(continued) $783,218
========
In October, 2001, the Company incurred an additional $28,000
of lease debt. This amount is included in the schedule of
minimum lease payments on the preceding page.
NOTE 10 The composition of the (expense) benefit for income taxes
Income Taxes for the years ended September 30, 2001, 2000 and 1999 is
as follows:
2001 2000 1999
------------- -------------- -------------
Current
Federal ($ 344,483) ($ 181,067) ($ 206,709)
State 43,794 (114,746) (74,400)
------------- -------------- -------------
Total current (300,689) (295,813) (281,109)
------------- -------------- -------------
Deferred
Federal 142,326 (411,480) (196,077)
State 227,171 104,413 (70,573)
------------- -------------- -------------
Total deferred 369,497 (307,067) (266,650)
------------- -------------- -------------
$ 68,808 ($ 602,880) ($ 547,759)
============= ============== =============
The 2001 deferred tax benefit considers the anticipated
realization of the carryforward of certain federal and state
net operating losses. The Company has state net operating
loss carryforwards of approximately $9,400,000, available to
offset future state taxable income. The state net operating
loss carryforwards expire in the years through 2007
The Company's subsidiary, Signature Corporation has federal
and state net operating loss carryforwards of approximately
$1,600,000 and $984,000, respectively, available to offset
future federal and state taxable income. The federal loss
carryforwards expire at various dates through 2020. The
state loss carryforwards expire at various dates through
2007.
PARIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 10 Reconciliations of income taxes with the amounts that would
Income Taxes result from applying the U.S. statutory rate are as follows:
(continued)
2001 2000 1999
----------- ----------- -----------
Expense at statutory rates ($481,590) ($427,114) ($481,740)
State income taxes, net of federal
income tax benefit (92,457) (75,864) (74,400)
Prior year over (under) accruals 59,993 - (11,250)
Tax on deferred partnership
investment income - (109,909) -
Tax benefit of net operating loss
carryforward 258,296 - -
Deferred tax benefits of net
operating loss carryforwards 369,497 - -
Other, net (44,931) 10,007 19,631
----------- ----------- -----------
Income tax (expense) benefit $ 68,808 ($602,880) ($547,759)
=========== =========== ===========
The components of the net deferred tax asset as of
September 30, 2001 and 2000 are as follows:
2001 2000
------------ ------------
Inventory reserves $ 103,200 $ 146,200
Allowance for doubtful accounts 184,000 201,800
Reserve accruals 33,600 40,500
Gain on sale of building - 96,100
Unrealized loss (income) on securities (25,834) 39,300
Limited partnership income - (46,600)
Depreciation (230,000) (325,500)
State net operating loss 882,200 1,047,200
Federal net operating loss 565,900 689,588
------------ ------------
Total 1,513,066 1,888,588
Less valuation allowance 930,800 1,602,985
------------ ------------
Net deferred tax asset $ 582,266 $ 285,603
============ ============
PARIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 10 These amounts have been presented in the consolidated financial
Income Taxes statements as follows:
(continued)
2001 2000
----------- -----------
Current deferred tax asset $ 437,200 $ 163,581
Noncurrent deferred tax asset 400,900 129,308
Current deferred tax liability (255,834) (7,286)
----------- -----------
$ 582,266 $ 285,603
=========== ===========
The change in the valuation allowance is related to the
recognition of the tax benefits of certain federal and state net
operating loss carryforwards. The valuation allowance decreased
$672,185 and $39,795 for the years ended September 30, 2001 and
2000, respectively.
NOTE 11 In November, 1995, the Board of Directors adopted the Company's
Stock Option 1995 Stock Option Plan to permit the issuance of incentive
Plan stock options under Section 422 of the Internal Revenue Code.
There are 500,000 shares of common stock authorized for
non-qualified and incentive stock options under the plan, which
are subject to adjustment in the event of stock splits, stock
dividends and other situations. Under the plan, no options may
be granted more than ten years after the effective date of the
plan. The exercise price of all incentive stock options granted
under the option plan may be no less than fair market value of
such shares on the date of grant. Stock option activity for the
years ended September 30, 2001, 2000 and 1999 is as follows:
2001 2000 1999
---------- ---------- ----------
Outstanding, beginning of year 209,300 364,300 350,300
Granted 92,000 - 44,000
Expired/exercised (40,000) (155,000) (30,000)
---------- ---------- ----------
Outstanding, end of year 261,300 209,300 364,300
========== ========== ==========
Exercisable, end of year 261,300 209,300 320,300
========== ========== ==========
Available for grant, end of year
140,000 232,000 232,000
========== ========== ==========
Option price range as of $1.875 to $1.875 to $1.875 to
September 30 $7.250 $7.250 $7.975
PARIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 11 Options outstanding as of September 30, 2001 have an average
Stock Option exercise price of $3.01 and a remaining contractual life of
Plan 4.80 years. Options outstanding as of September 30, 2000
(continued) have an average exercise price of $3.23 and a remaining
contractual life of 3.83 years. Options outstanding as of
September 30, 1999 have an average exercise price of $3.50 and a
remaining contractual life of 5.1 years.
Statement of Financial Accounting Standards No. 123 ("SFAS No.
123") requires pro forma information regarding net income and
earnings per share as if the Company had accounted for its
employee stock options granted under the fair value method of
SFAS No. 123. The fair value of these equity awards was
estimated at the date of grant using the Black-Scholes option
pricing methods. The weighted average assumptions used were:
risk free interest rate of 4.00% and 6.00%; expected volatility
of 0.18% and 1.08%; expected option life of five to ten years
and expected dividends rate of 0.0% for the years ended
September 30, 2001 and 1999, respectively. No options were
granted during the year ended September 30, 2000.
The pro forma effect on net income and earnings per share for
the years ended September 30, 2001, 2000 and 1999 is as follows:
2001 2000 1999
---------- --------- ----------
Net income As reported $1,389,091 $662,867 $960,730
Pro forma $1,370,532 $662,867 $907,877
Basic earnings per As reported $ 0.42 $ 0.20 $ 0.27
share Pro forma $ 0.42 $ 0.20 $ 0.26
Diluted earnings per As reported $ 0.42 $ 0.20 $ 0.27
share Pro forma $ 0.41 $ 0.20 $ 0.26
NOTE 12 Leases
------
Commitments
and
Contingencies The Company has certain operating leases, primarily for its New
Jersey and Texas operating facilities, expiring at various
dates.
Rental expense amounted to $560,453, $561,756 and $562,919 for
the years ended September 30, 2001, 2000 and 1999, respectively.
PARIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 12 Leases (continued)
------------------
Commitments
and Scheduled minimum rental payments under noncancelable
Contingencies operating leases as of September 30, 2001 were as follows:
(continued)
Year Ending September 30
------------------------
2002 $ 573,000
2003 599,000
2004 328,000
----------
$1,500,000
==========
In May, 1998, the Company entered into a contract to sell its
office and production facility in New Jersey for a total price
of $4,500,000. In addition, the Company entered into an
agreement to lease the facility back for a period of three
years plus, at the Company's option, an additional two
three-year renewal periods. In May, 2001, the Company
exercised the first renewal option. The total gain of
$1,070,661 has been deferred and is being recognized over the
term of the original lease in the monthly amount of $29,741.
The amount of the gain deferred was $-0- and $218,891 as of
September 30, 2001 and 2000, respectively, and is included on
the consolidated balance sheet in liabilities as deferred
revenue. The total gain recognized to date was $1,070,661 and
$851,770 as of September 30, 2001 and 2000, respectively.
During 2001, the Company subleased a portion of its facilities
under the terms of an operating lease which expires in
January, 2002. Other income includes $77,000 of rental income
for the year ended September 30, 2001.
Contingencies
-------------
The Company has agreements with certain customers and vendors
which include potential rebates, commissions and other
liabilities upon the fulfillment of certain terms and
conditions. Management has estimated and recorded contingent
liabilities of approximately $478,000 and $403,000 as of
September 30, 2001 and 2000, respectively, related to these
agreements and other potential liabilities.
NOTE 13 The Company has a defined contribution plan covering
Profit-Sharing substantially all employees. Employer contributions were
and Deferred $65,458, $65,922 and $66,213 for the years ended September 30,
Compensation 2001, 2000 and 1999, respectively.
Plans
PARIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 14 The Company operates in three basic segments or lines of
Segment business. These segments are (1) stock continuous forms and
Information cutsheets, (2) custom continuous forms and cutsheets, and (3)
retail papers and office products, including computer/printer
hardware and software products. The following table sets forth
certain financial information with respect to these segments and
reconciles such information to the consolidated financial
statements.
Years Ended September 30
------------------------------------------------------
2001 2000 1999
---------------- ---------------- ---------------
Net sales of products and
services
Stock forms $ 11,049,288 $ 13,079,349 $ 15,185,170
Custom forms 9,241,307 9,931,876 6,359,148
Consumer products 22,759,328 19,999,858 13,888,233
---------------- ---------------- ---------------
Total $ 43,049,923 $ 43,011,083 $ 35,432,551
================ ================ ===============
Segment operating income (loss)
Stock forms ($ 179,907) ($ 340,116) ($ 1,096,045)
Custom forms 675,842 547,142 214,422
Consumer products 1,142,621 415,134 1,275,077
Corporate (347,195) (369,434) (127,017)
---------------- ---------------- ---------------
Total $ 1,291,361 $ 252,726 $ 266,437
================ ================ ===============
Corporate consolidated income
(loss) before income taxes
and minority interest
Segment operating income
(loss) $ 1,291,361 $ 252,726 $ 266,437
Interest expense (189,271) (6,754) (57,995)
Other income, net 454,438 1,010,246 1,250,466
---------------- ---------------- ---------------
Total $ 1,556,529 $ 1,256,218 $ 1,458,908
================ ================ ===============
Assets
Stock forms $ 2,479,339 $ 3,411,204 $ 6,817,640
Custom forms 3,570,681 3,542,051 3,762,796
Corporate/other 16,191,726 12,324,296 10,838,417
---------------- ---------------- ---------------
Total consolidated $ 22,241,746 $ 19,277,551 $ 21,418,853
================ ================ ===============
PARIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
NOTE 14 Years Ended September 30
------------------------------
Segment
Information (continued) 2001 2000 1999
-------- -------- --------
(continued)
Capital expenditures
Stock forms $ 36,244 $ 5,091 $ 20,099
Custom forms 329,266 62,979 716,477
Corporate/other 188,547 131,988 175,328
-------- -------- --------
Total consolidated $554,057 $200,058 $911,904
======== ======== ========
Depreciation and amortization
expense
Stock forms $ 95,156 $183,891 $324,855
Custom forms 247,767 239,036 146,575
Corporate/other 134,774 304,757 84,230
-------- -------- --------
Total consolidated $477,697 $727,684 $555,660
======== ======== ========
Segment operating income (loss) is determined by deducting
from sales of products and services, cost of products sold,
and selling, general and administrative expenses directly
related or allocable to the segment. Not included in segment
operating income are certain income and expense items such
as interest income and expense, other income, minority
interest and income taxes.
The reporting segments follow the same accounting policies
used for the Company's consolidated financial statements and
described in the summary of significant accounting policies.
Management evaluates a segment's performance based on profit
or loss from operations before income taxes and minority
interest.
NOTE 15 Other income, net, for the years ended September 30, 2001,
Other Income, 2000 and 1999 consists of the following:
Net
2001 2000 1999
--------- ----------- -----------
(Equity) deficiency in limited
partnership interests $25,874 ($123,574) ($168,500)
(Gain) loss on sale of investments 235,350 (48,289) (366,683)
Gain on sale of property and
equipment (240,351) (372,887) (371,718)
Interest income, net (411,555) (261,755) (238,266)
Other, net (63,756) (203,741) (105,299)
--------- ----------- -----------
Total ($454,438) ($1,010,246) ($1,250,466)
========= =========== ===========
Interest income is net of margin interest expense of
approximately $38,500, $47,000 and $7,500 for the fiscal
years ended September 30, 2001, 2000 and 1999, respectively.
PARIS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
NOTE 16 The Company's financial instruments that are exposed to
Concentrations concentrations of credit risk consist primarily of cash,
of Credit Risk cash equivalents, investments and trade accounts receivable.
The Company places its cash and cash equivalents with
commercial credit institutions. At times, the balances may
be in excess of the FDIC insurance limit.
The Company maintains investment accounts with several stock
brokerage firms. The accounts contain cash and securities.
The Securities Investor Protection Corporation insures
balances up to $500,000 (with a limit of $100,000 for cash).
For the years ended September 30, 2001 and 2000,
approximately 68% and 56%, respectively, of the Company's
sales were to three customers in the consumer segment. For
the year ended September 30, 1999, approximately 70% of the
Company's sales were to two customers in the retail segment.
The Company routinely assesses the financial strength of
customers and as a consequence believes that its trade
accounts receivable credit risk exposure is limited.
The Company transacted significant business with two vendors
who provided a combined total of 58% of product purchases
for each of the years ended September 30, 2001, 2000 and
1999.
NOTE 17 In September, 1998, the Company began a buy-back program of
Stock Buy-Back its common stock at prevailing market prices. As of
Program September 30, 2001, the Company had purchased 119,700 of its
common shares under this program.
In December, 1999, the Company purchased 175,500 of its
common shares from one investor in a separate transaction.
NOTE 18 The Company is negotiating a plan to take the Company
Pending private. Although the terms of the plan have not been
Subsequent finalized as of the date of this report, management expects
Event, to redeem all outstanding shares of the Company (except
Privatization those held by Gerard M. Toscani, the Company's Senior Vice
President) at a redemption price of $4.50 per share. Gerard
M. Toscani would then own 100% of the Company's shares.
Management is also negotiating the terms of bank financing
for the expected transaction. No adjustments have been made
to the accompanying financial statements as a result of this
pending transaction.
PARIS CORPORATION
-----------------
SCHEDULE II
-----------
VALUATION AND QUALIFYING ACCOUNTS
---------------------------------
Balance at beginning Additions charged to Balance at
of period cost and expenses Deductions end of period
-------------------- -------------------- ---------- -------------
For the year ended
September 30, 2001:
Allowance for
doubtful accounts: $373,585 $156,000 $146,673 $382,912
Allowance for
contingency reserve: $ 12,500 $ 23,414 $ 0 $ 35,914
Allowance for
inventory obsolescence: $340,000 $117,768 $239,220 $218,548
For the year ended
September 30, 2000:
Allowance for
doubtful accounts: $453,600 $153,065 $233,080 $373,585
Allowance for
contingency reserve: $ 0 $ 0 $ 12,500 $ 12,500
Allowance for
inventory obsolescence $560,552 $ 70,000 $290,552 $340,000
For the year ended
September 30, 1999:
Allowance for
doubtful accounts: $317,458 $157,184 $ 21,042 $453,600
Allowance for
inventory obsolescence $760,591 $ 0 $200,039 $560,552
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
As disclosed in form 8K filed in June 2000, incorporated herein by reference.
Independent Auditor's Report
Board of Directors and Shareholders
Paris Corporation
Burlington, New Jersey
We have audited the accompanying consolidated balance sheets of PARIS
CORPORATION AND SUBSIDIARIES as of September 30, 2001 and 2000 and the related
consolidated statements of operations and comprehensive income, of changes in
shareholders' equity and of cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. The consolidated financial statements
of PARIS CORPORATION AND SUBSIDIARIES for the years ended September 30, 1999,
were audited by other auditors, whose report dated November 19, 1999 expressed
an unqualified opinion on those statements.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the 2001 and 2000 consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of PARIS CORPORATION AND SUBSIDIARIES as of September 30, 2001 and 2000
and the results of their operations and their cash flows for the years then
ended in conformity with accounting principles generally accepted in the United
States of America.
/s/ GOLDENBERG ROSENTHAL, LLP
Jenkintown, Pennsylvania
November 30, 2001
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors of the Company are elected for a term of one year. The current
Directors and Officers of the Company, together with their ages, positions,
backgrounds, and business experiences are set forth below:
NAME AGE POSITION WITH THE COMPANY
- ---- --- -------------------------
Dominic P. Toscani, Sr. 73 President, Chief Executive Officer,
(4) Treasurer and Chairman of the Board of
Directors
Gerard M. Toscani 41 Senior Vice President and Director
(3), (4)
Palmer E. Retzlaff 70 Director
(2), (3)
Frank A. Mattei, M.D. 80 Director
(1)
Oscar Tete 77 Director
(1), (2)
John V. Petrycki 61 Director
(1), (3)
Gerald A. Sandusky 57 Director
(1), (2)
William L. Lomanno 34 Chief Financial Officer
(1) Member of Compensation and Stock Option Committee
(2) Member of Audit Committee
(3) Member of the Investment and Finance Committee
(4) Dominic P. Toscani, Sr. is the father of Gerard M. Toscani
Dominic P. Toscani, Sr. is the founder of the Company, has served as a
Director and has been responsible for its management since its inception.
Prior to the founding of the Company, Mr. Toscani was a practicing
attorney.
Gerard M. Toscani became a Director of the Company in 1992. He was
appointed Senior Vice President during fiscal 1990 and was the Company's
Vice President of Sales and Marketing since January 1987. He previously
served as Sales and Marketing Manager since September 1982.
Palmer E. Retzlaff became a Director in November 1993. He has been
President of Southwest Grain Co., Inc. since 1973. Previously he was the
General Manager of the Philadelphia Eagles.
Frank A. Mattei was elected to the Board of Directors in March 1986. He has
been a practicing orthopedic surgeon and is associated with North
Philadelphia Health System, (formerly Girard Medical Center), and St. Agnes
Medical Center in Philadelphia.
Oscar Tete was elected to the Board of Directors in March 1986. Mr. Tete
retired in 1990. He was an Executive Vice President of First Fidelity Bank
in Burlington, New Jersey since 1972.
John Petrycki was elected to the Board of Directors in August 1995. Mr.
Petrycki retired in 1995. He was President and CEO of PNC Bank in south
central Pennsylvania.
Gerald A. Sandusky was elected to the Board of Directors in February 2000.
He was previously defensive coodinator of Penn State University Football
since 1968. He is the founder and Chairman of the Board of the Second Mile
Foundation.
William L. Lomanno became Chief Financial Officer in April 1998. He has
been with the Company since 1991 and has previously served as the
Controller and Accounting Manager for the Company.
ITEM 11 - SUMMARY COMPENSATION
The following table contains information regarding the individual
compensation of the two most highly compensated officers of the Company in
fiscal years 2001, 2000 and 1999.
Summary Compensation Table
Annual Compensation
---------------------
Name and Fiscal
Principal Position Year Salary Bonus
- --------------------------------- ------ -------- -------
Dominic P. Toscani, Sr. 2001 $269,067 $ 0
Chairman of the Board 2000 $269,557 $ 5,243
and President 1999 $268,367 $ 0
Gerard M. Toscani 2001 $196,597 $ 0
Senior Vice President 2000 $195,707 $28,860
1999 $180,654 $ 0
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
(AS NOVEMBER 15, 2000)
Title of Name and Address of Amount and Nature of Percent of
Class Beneficial Owner Beneficial Ownership (1) Class (1)
- --------- -------------------------- ------------------------ -----------
Common Dominic P. Toscani (2) 1,128,462 32.0%
Stock and Nancy C. Toscani
122 Kissel Road
Burlington, NJ 08016
Common Frank A. Mattei 1,069,831 30.3%
Stock 1016 Mercer Street
Cherry Hill, NJ 08034
Common The Caritas Foundation (3) 383,835 10.9%
Stock 700 Hobbs Road
Wayne, PA 19087
Common Gerard M. Toscani 165,010 4.7%
Stock
Common Palmer E. Retzlaff 16,000 *
Stock
Common Oscar Tete 14,012 *
Stock
Common John Petrycki 13,000 *
Stock
Common Gerald A. Sandusky 6,100 *
Stock
--------- ------
All Directors (present and proposed) and
officers as a group (9 persons) (4) 2,437,505 69.0%
* Less than 1%
(1) Based on 3,270,535 shares outstanding and 261,300 options currently
exercisable on November 15, 2001.
(2) Includes 1,028,197 shares personally held; 35,520 shares held by Paris
Corporation Profit Sharing Plan of which Mr. Toscani is the Plan Trustee;
14,745 shares held by Toscani Investment Company, a family partnership; and
50,000 options exercisable as of November 15, 2001.
(3) The Caritas Foundation, a tax exempt organization formed under Section
501(C)(3) of the Internal Revenue Code of 1954, as amended, was organized
in 1984 by Dominic P. Toscani, Sr. to promote the objectives of free
enterprise and to support individual freedom. At the present time Reverend
Peter Toscani, O.S.A., is sole trustee of the foundation.
(4) Includes options currently exercisable individually and all officers as a
group (215,000).
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There are no other material relationships or transactions which qualify for
disclosure under this caption.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
This consolidated financial statements and related schedules filed as part
of this Annual Report on Form 10-K are included in Part II, Item 8.
REPORTS ON FORM 8-K
As disclosed in form 8K filed in June 2000, incorporated herein by
reference.
EXHIBITS:
The following exhibits (with the exception of Exhibit 3.4, 10.5(b), 10.7
and 22(a)) are incorporated by reference to the Company's registration statement
on Form S-18 (no.-3-3344-W) filed February 13, 1986 with the Securities and
Exchange Commission and effective March 25, 1986. Exhibit 3.4, 10.5(b) and 10.7
are incorporated by reference to the Company's fiscal 1989 Form 10-K filed with
the Securities and Exchange Commission on December 19, 1989. Exhibit 22(a) is
incorporated by reference to the Company's fiscal 1990 Form 10-K filed with the
Securities and Exchange Commission on December 27, 1991.
3.1 Articles of Incorporation of the Company.
3.2 Amendment to Articles of Incorporation, dated January 6, 1986.
3.3 Amendment to Articles of incorporation, dated January 7, 1986.
3.4 By-laws of Company, as amended.
4.2(a) Form of Warrant to Purchase Common Stock of Company.
10.5 Company's Profit Sharing Plan, dated October 1, 1979.
10.5(a) Amendment to Profit Sharing Plan, dated October 2, 1985.
10.5(b) Amendment to Profit Sharing Plan, dated October 1, 1986.
10.6 Company's Stock Option Plan, dated October 1, 1985.
10.7 Line of Credit (loan agreement) of $2,000,000 from the
Fidelity Bank.
10.9 Bucks County Industrial Development Authority Loan Agreement
for 1,500,000 dated April 10, 1985.
10.9(a) Letter Amendment, dated March 4, 1986 from Special Counsel to
Fidelity Bank.
10.9(b) Letter Amendment, dated March 5, 1986 from Fidelity Bank to
Special Counsel.
10.10 New Jersey Economic Development Authority Note for 3,000,000
by Company, dated September 10, 1985.
10.10(a) Letter Agreement, dated March 4,1986 from Special Counsel to
Fidelity Bank.
10.10(b) Letter Amendment dated March 5, 1986 from Fidelity Bank to
Special Counsel.
10.10(c) Letter dated, March 24, 1986 from Special Counsel to Fidelity
Bank with respect to the New Jersey Economic Development
Authority Loan.
21(a) List of 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 behalf
by the undersigned, thereunto duly authorized.
PARIS CORPORATION
Date: January 15, 2002 By: /s/ Dominic P. Toscani, Sr.
-------------------- -----------------------------------------
Dominic P. Toscani, Sr.
(President, Chairman Board of Directors)
Date: January 15, 2002 By: /s/ William L. Lomanno
-------------------- -----------------------------------------
William L. Lomanno
(Chief Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURES
/s/ Dominic P. Toscani, Sr. 1/15/02 /s/ Frank A. Mattei 1/15/02
- ------------------------------------------------- -------------------------------------------------
Dominic P. Toscani, Sr. (Date) Frank A. Mattei (Date)
(President, Chairman Board of Directors) (Director)
/s/ William L. Lomanno 1/15/02 /s/ Palmer E. Retzlaff 1/15/02
- ------------------------------------------------- -------------------------------------------------
William L. Lomanno (Date) Palmer E. Retzlaff (Date)
(Chief Financial Officer) (Director)
/s/ Gerard M. Toscani 1/15/02 /s/ Oscar Tete 1/15/02
- ------------------------------------------------- -------------------------------------------------
Gerard M. Toscani (Date) Oscar Tete (Date)
(Director) (Director)
/s/ John V. Petrycki 1/15/02 /s/ Gerald A. Sandusky 1/15/02
- ------------------------------------------------- -------------------------------------------------
John V. Petrycki (Date) Gerald A. Sandusky (Date)
(Director) (Director)