FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
___________________________________________
FOR QUARTER ENDED, DECEMBER 31, 2001
COMMISSION FILE NUMBER 0-14358
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PARIS CORPORATION
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
PENNSYLVANIA 23-1645493
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
122 KISSEL ROAD, BURLINGTON, NEW JERSEY 08016
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE 609-387-7300
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INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES [X] NO [_]
NUMBER OF SHARES OUTSTANDING AS OF DECEMBER 31, 2001
COMMON STOCK 3,270,535
1
PARIS CORPORATION
CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited): PAGE
Consolidated Balance Sheets - December 31, 2001 and September 30,
2001 (audited)..................................................................... 3
Consolidated Statements of Income Three months ended, December 31,
2001 and 2000...................................................................... 4
Consolidated Statements of Cash Flows - Three months ended, December 31,
2001 and 2000...................................................................... 5
Consolidated Statement of Changes in Stockholders' Equity - September 30,
2001, 2000 and Three Months Ended December 31, 2001 ............................... 6
Notes to Consolidated Condensed Financial Statements............................... 7
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations...................................................................... 8 - 9
PART II. OTHER INFORMATION (Items 1 through 5 - not applicable)
ITEM 6. Exhibits and Reports on Form 8-K................................................... 10
Signatures of Registrant........................................................... 11
2
PARIS CORPORATION
CONSOLIDATED BALANCE SHEET
(in thousands)
ASSETS
12-31-01 9-30-01
(Unaudited) (Audited)
----------- ---------
Current assets:
Cash and cash equivalents $ 10,035 $ 8,011
Investments:
Marketable Securities 1,602 2,032
Accounts receivable 6,520 5,710
Inventories 3,456 3,635
Prepaid expenses 64 40
Deferred income taxes 437 437
--------- --------
Total current assets 22,114 19,865
Property and equipment, net 1,675 1,665
Deferred tax asset 401 401
Other assets 230 311
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Total Assets $ 24,420 $ 22,242
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Working Capital $ 2,364 $ 1,705
Current Maturities of obligations under capital leases 216 216
Accounts payable and accrued expenses 4,253 2,750
Accrued payroll and related expenses 238 335
Income taxes payable 26 235
Deferred tax liability 256 256
--------- --------
Total current liabilities 7,353 5,497
Long term debt
Obligations under capital leases, net of current maturities 475 498
Total Liabilities 7,828 5,995
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MINORITY INTEREST 296 321
--------- --------
Shareholders' equity:
Common stock 16 16
Additional paid in capital 8,588 8,588
Retained earnings 10,143 9,773
Accumulated other comprehensive income 42 42
Treasury stock (2,493) (2,493)
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Total Shareholders' equity 16,296 15,926
--------- --------
Total Liabilities and Shareholders' Equity $ 24,420 $ 22,242
========= ========
See Accompanying Notes
3
PARIS CORPORATION
CONSOLIDATED STATEMENT OF INCOME
Unaudited
(in thousands, except per share data)
THREE THREE
MONTHS MONTHS
ENDED ENDED
12-31-01 12-31-00
--------- ---------
Net Sales $ 12,356 $ 10,943
Cost of products sold 10,765 9,524
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Gross profit 1,591 1,419
-------- --------
Selling expenses 456 533
General and administrative expenses 574 574
Interest expense 36 50
Gain on sale of building 0 (89)
Other (income) expense (28) (90)
-------- --------
Income before minority interest 553 441
Minority Interest (24) (15)
Provision for Income Taxes 206 166
-------- --------
Net Income $ 371 $ 290
======== ========
Other comprehensive income
Unrealized loss on securities arising during 0 (146)
the period, net of taxes of $72,880 at December 31, 2001
Reclassification adjustment for (gains)
losses included in net income 0 26
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Total other comprehensive income (loss) 0 (120)
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Total comprehensive income $ 0 $ 170
======== ========
Basic earnings (loss) per share $ 0.11 $ 0.09
======== ========
Diluted earnings (loss) per share $ 0.11 $ 0.09
======== ========
See Accompanying Notes
4
PARIS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited
(in thousands) THREE MONTHS THREE MONTHS
ENDED ENDED
12-31-01 12-31-00
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 371 $ 290
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 117 134
Gain on sale of property, and equipment 0 (95)
Loss on sale of investments 28 41
Equity in limited partnership interests 0 0
Provision for bad debts 30 30
Deferred income tax (benefit) expense 0 (73)
Minority interest (26) (15)
(Increase) decrease in assets:
Accounts receivable (840) (143)
Inventories 179 205
Recoverable income taxes 0 0
Prepaid expenses (24) (130)
Other assets 81 48
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 1,503 (364)
Accrued payroll and related expenses (97) (112)
Income taxes payable (209) 136
--------- ---------
Total adjustments 742 (338)
--------- ---------
Net cash provided by (used in) operating activities 1,113 (48)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of investments 429 523
Purchase of investments (27) (605)
Proceeds from the sale of property and equipment 0 6
Purchase of property and equipment (127) (12)
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Net cash provided by (used in) investing activities 275 (88)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Sales of treasury stock 0
Purchase of treasury stock 0 0
Proceeds of note payable, bank 659 2,600
Proceeds lease payable 28
Repayments of note payable (51) (9)
--------- ---------
Net cash used in financing activities 636 2,591
Net increased (decrease) in cash and cash equivalents 2,024 2,455
Cash and cash equivalents, at beginning of period 8,011 2,828
--------- ---------
Cash and cash equivalents, at end of period $ 10,035 $ 5,283
========= =========
Supplemental disclosures of cash flow information:
Cash paid for interest expense $ 36 $ 50
Cash paid for income taxes $ 415 $ 58
See Accompanying Notes
5
PARIS CORPORATION AND SUBSIDIARIES
CONSOLIDATION STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 2001, 2000 AND THREE MONTHS ENDED DECEMBER 31, 2001
- -------------------------------------------------------------------------------
Additional Accumulated Other
Common Stock Paid - In Comprehensive Retained
Shares Amount Capital Income (Loss) Earnings
--------- ------- ---------- ----------------- --------
Balance, September 30, 1999 3,937,517 15,751 8,588,243 (66,346) 8,049,086
Purchase of 237,710 treasury shares - - - - -
Issuance of 4,000 treasury shares - - - - -
Dividends paid ($0.10 per share) - - - - (328,085)
Net income - - - - 662,867
Other comprehensive income - - - (9,454) -
-------------------------------- ----------- -------------
Balance, September 30, 2000 3,937,517 15,751 8,588,243 (75,800) 8,383,868
Net Income 1,389,091
Other comprehensive loss 117,600
-------------------------------- ----------- -------------
Balance, September 30, 2001 3,937,517 15,751 8,588,243 41,800 9,772,959
Net Income 370,545
-------------------------------- ----------- -------------
Balance, December 31, 2001 3,937,517 $15,751 $8,588,243 $ 41,800 $ 10,143,504
=========== ======= ========== =========== =============
Treasury Stock
Shares Amount Total
------- --------- -------
Balance, September 30, 1999 (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)
Net income 662,867
Other comprehensive income - - (9,454)
---------------------------------------
Balance, September 30, 2000 (666,982) (2,493,022) 14,419,040
Net Income 1,389,091
Other comprehensive loss 117,600
---------------------------------------
Balance, September 30, 2001
Net Income (666,982) (2,493,022) 15,925,731
370,545
---------------------------------------
Balance, December 31, 2001 (666,982) $(2,493,022) $16,296,276
=========== =========== ===========
See notes to consolidated financial statements
6
PARIS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
ACCOUNTING POLICIES:
1. The accompanying unaudited interim consolidated financial statements were
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information. Accordingly,
they do not include all of the information and footnotes required by
accounting principles generally accepted in the United Sates of America for
complete financial statements. The Summary of Accounting Policies and Notes
to Consolidated Financial Statements included in the September 30, 2001
Form 10-K should be read in conjunction with the accompanying statements.
These statements include all adjustments (consisting only of normal
recurring accruals) which the Company believes necessary for a fair
presentation of the statements. The interim operating results are not
necessarily indicative of the results for a full year.
2. The Company has agreements with certain customers and vendors which include
potential rebates, commissions, and other liabilities upon the fulfillment
of certain terms and conditions. Management had estimated and recorded
contingent liabilities of approximately $478,000 as of September 30, 2001
related to these agreements and other potential liabilities. During the
three months ended December 31, 2001, management increased the liability to
$753,000, reflecting higher obligations.
3. The Company has adopted FASB #128, "Earnings Per Share" as required. Due to
the anti-dilutive effect of employee stock options outstanding in the
computation of earnings per share, basic and fully diluted earnings per
share are identical.
4. The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS no. 130"). SFAS No. 130 established
new standards for reporting and display of comprehensive income and its
components. Comprehensive income consists of net income and unrealized
gains and loses on certain investments in marketable debt and equity
securities and its presented in the statement of changes in stockholders'
equity. The adoption of SFAS No. 130 had no effect on the Company's net
income or equity.
5. Inventories consist of the following at December 31, 2001 and September 30,
2001:
12/31/01 9/30/01
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Raw Materials $ 999,898 $ 810,378
Work in Progress 260,180 334,729
Finished Goods 2,196,317 2,489,745
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$3,456,395 $3,634,852
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7
PARIS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
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DECEMBER 31, 2001
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- --------------------------------------------------------------------------------
Three Months
- --------------------------------------------------------------------------------
$ %
2001 2000 Change Change
- --------------------------------------------------------------------------------
Net Sales $12,356 $10,943 $1,413 13%
- --------------------------------------------------------------------------------
Cost of sales 10,765 9,524 1,241 13%
- --------------------------------------------------------------------------------
Gross profit 1,591 1,419 172 12%
- --------------------------------------------------------------------------------
Selling 456 533 (77) -14%
- --------------------------------------------------------------------------------
General and administrative expenses 574 574 0 0%
- --------------------------------------------------------------------------------
Interest expense 36 50 (14) -28%
- --------------------------------------------------------------------------------
Other (income) expense (28) (179) 151 -84%
- --------------------------------------------------------------------------------
Pretax income (loss) 553 441 112 25%
- --------------------------------------------------------------------------------
Minority interest (24) (15) (9) 60%
- --------------------------------------------------------------------------------
Income taxes 206 166 40 24%
- --------------------------------------------------------------------------------
Net income (loss) $ 371 $ 290 $ 81 28%
- --------------------------------------------------------------------------------
Gross Profit
- ------------
Three Months Comparison
Gross Profit for the three months ended December 31, 2001 of $1,591M increased
$172M or 12% as compared to the same quarter in the prior year. Net sales of
$12,356M increased $1,413M or 13% and cost of sales increased $1,241M or 13%.
Sales Factors and Cost Factors
- ------------------------------
Sales of stock computer paper $2,410 decreased $318M or 12%. The unit volume
decreased 12% while the average sell price remained flat. The cost of sales for
stock computer paper decreased $322M, which is slightly greater than the decline
in sales due to favorable purchases of raw material.
The sale of continuous custom products of $471M decreased $76M or 14% consistent
with the unit volume decline of 14%. The cost of sales for custom continuous of
$380M decreased $46M or 12% similar to the decline in revenue.
The sale of custom cut sheet products of $843M decreased $139M or 14% while the
unit volume declined 17%. The costs of sales for custom cut sheet products
declined only 9% resulting in margin erosion.
Sales of the Company's Laser3, DocuGard and HCFA product lines have decreased
7% on lower unit volume of 5%. The lower revenue is a timing issue and is not
being interpreted as a trend for the product line. Cost of sales declined 11%,
which is higher than the decline in sales leading to increased margin
percentage.
8
The Consumer segment continues to trend upwards as sales increased from $5,396M
to $7,624M resulting in increased sales of $2,228M or 41%. The Burlington value
added products and Burlington cut sheets sales increased $172M while the Branded
products were the primary contributor of the revenue increase. Cost of sales
increased 40% consistent with the revenue increase.
Freight expense increased $59M or 15% slightly higher then the revenue increase
related to the higher freight cost associated with the Consumer segment.
Operating Expenses
- ------------------
Three Months Comparison
Operating expenses of $1,030M decreased $77M or 14%. Marketing expenses
declined $59M and sales expenses declined $18M. The marketing decline can be
attributed to the expense in FY01 of a joint marketing venture with a third
party, which didn't exist in FY02. There was no change in the total General and
Administrative expense on a year to year basis.
OTHER INCOME AND EXPENSES
- -------------------------
Other income of $28M decreased $151M or 84%. The decrease is related to lower
investment income during the three months ended December 31, 2001.
Interest expense $36M declined $14M or 28% related to lower borrowings
outstanding on the working capital line and lower interest rates.
LIQUIDITY AND CAPITAL RESOURCES:
--------------------------------
Working Capital increased $393M from $14,368M to $14,761M and cash and cash
equivalents increased $2,024M during the three months ended December 31, 2001.
Net cash provided by operating activities was $1,113M. Net income generated
cash flow of $371M. Accounts payable and accrued expenses increased $1503M as
trade payables increased due to the high volume of finished goods purchases
towards the end of the quarter to meet customer demand. Accounts receivable
increased $840M and inventories decreased $179M related to the higher sales
volume.
Net cash provided by investing activities was $275M related to the sale of
investments of $429M and the purchase of equipment of $127M.
Net cash provided by financing activities was $636M related to proceeds of $659M
from a revolving line of credit. In October 2000, Paris Business Products, Inc.
agreed to a revolving line-of-credit with a bank for $3,500M. Borrowings as of
December 31, 2001 were $2,364M. The line bears interest at the prime rate
(4.75% as of December 31, 2001) and expires March 31, 2002. The line contains
financial covenants including minimum working 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.
The Company believes that it has sufficient resources to satisfy ongoing cash
requirements. The Company will meet liquidity needs through the revolving line
of credit, cash provided by operations and investing activities.
9
PARIS CORPORATION
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
Computation of Primary Earnings Per Share
Average Number of Common Shares
Outstanding During the Period 3,270,535
=========
(b) Reports on Form 8-K
10
PARIS CORPORATION
SIGNATURES OF REGISTRANT
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PARIS CORPORATION
/s/ Dominic P. Toscani, Sr.
----------------------------
Dominic P. Toscani, Sr.
Chairman of
the Board of Directors
/s/ William L. Lomanno
----------------------------
William L. Lomanno
Chief Financial Officer and
Principal Accounting Officer
DATE: February 22, 2002
11