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, 1999
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, 1999
COMMON STOCK 3,937,517
PARIS CORPORATION
CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited): PAGE
Consolidated Balance Sheets - December 31, 1999
and September 30, 1999 (audited)................................. 3
Consolidated Statements of Income
Three months ended, December 31, 1999 and 1998................... 4
Consolidated Statements of Cash Flows -
Three months ended, December 31, 1999 and 1998................... 5
Consolidated Statement of Changes in Stockholders' Equity -
September 30, 1999 and December 31, 1999......................... 6
Notes to Consolidated Condensed
Financial Statements............................................. 7
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.................... 8 - 10
PART II. OTHER INFORMATION (Items 1 through 5 - not applicable)
ITEM 6. Exhibits and Reports on Form 8-K................................. 11
Signatures of Registrant.......................................... 12
PARIS CORPORATION
CONSOLIDATED BALANCE SHEET
(in thousands)
ASSETS
12-31-99 9-30-99
(UNAUDITED) (AUDITED)
----------- ---------
Current assets:
Cash and cash equivalents $ 1,959 $ 3,880
Investments:
Marketable securities 3,629 3,567
Other 286 0
Accounts receivable 7,302 5,959
Inventories 4,939 4,167
Refundable income taxes 35 190
Prepaid expenses 271 242
Deferred income taxes 359 396
--------- --------
Total current assets 18,780 18,401
Investments held to maturity 500 500
Property and equipment, net 1,882 1,941
Deferred tax asset 196 196
Other assets 299 381
--------- --------
Total Assets $ 21,657 $ 21,419
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Note payable $ 69 $ 92
Accounts payable and accrued expenses 6,203 5,197
Accrued payroll and related expenses 534 700
Income taxes payable 0 44
Deferred revenue 454 486
--------- --------
Total current liabilities 7,260 6,519
Deferred revenue, net of current portion 130 219
--------- --------
Total Liabilities 7,390 6,738
--------- --------
MINORITY INTEREST 25 94
--------- --------
Shareholders' equity:
Common stock 16 16
Additional paid in capital 8,588 8,588
Retained earnings 8,216 8,049
Unrealized (loss) gain on marketable securities (104) (66)
Treasury stock (2,474) (2,000)
--------- --------
Total Shareholders' equity 14,242 14,587
--------- --------
Total Liabilities and Shareholders' Equity $ 21,657 $ 21,419
========= ========
See Accompanying Notes
3
PARIS CORPORATION
CONSOLIDATED STATEMENT OF INCOME
UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE THREE
MONTHS MONTHS
ENDED ENDED
12-31-99 12-31-98
---------- ----------
Net Sales $ 11,182 $ 7,987
Cost of products sold 10,026 7,029
---------- ----------
Gross profit 1,156 958
---------- ----------
Selling expenses 486 440
General and administrative expenses 650 496
Interest expense 3 43
Gain on sale of building (89) (89)
Other (income) expense (148) (86)
---------- ----------
Income before minority interest 254 154
Minority Interest 69 0
Provision for income taxes 156 52
---------- ----------
Net Income $ 167 $ 102
========== ==========
Weighted average common and 3,278,535 3,538,645
equivalent shares outstanding
Earnings per share - basic $0.05 $0.03
========== ==========
Earnings per share - diluted $0.05 $0.03
========== ==========
See Accompanying Notes
4
PARIS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
UNAUDITED
(in thousands) THREE MONTHS THREE MONTHS
ENDED ENDED
12-31-99 12-31-98
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) $ 167 $ 102
-------- --------
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation 131 141
Gain on sale of property, and equipment (89) (89)
(Gain) loss on sale of investments 0 27
Equity in limited partnership interests (86) (34)
Provision for bad debts 27 30
Deferred income tax (benefit) expense 37 0
Minority Interest (69) 0
(Increase) decrease in assets:
Accounts receivable (1,370) (1,548)
Inventories (772) (155)
Recoverable income taxes 155 0
Prepaid expenses (29) (31)
Other assets 82 (22)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 974 958
Accrued payroll and related expenses (166) (78)
Income taxes payable (44) (187)
-------- --------
Total adjustments (1,219) (988)
-------- --------
Net cash provided by (used in) operating activities (1,052) (886)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in restricted cash 0 (28)
Proceeds from sale of investments 0 313
Purchase of investments (300) (341)
Purchase of property and equipment (72) (37)
-------- --------
Net cash provided by (used in) investing activities (372) (93)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sales of treasury stock 0 1
Purchase of treasury stock (474) (37)
Dividend Paid 0 (711)
Proceeds (repayments) of note payable, bank 0 1,206
Repayments of note payable (23) 0
-------- --------
Net cash provided by (used in) financing activities (497) 459
Net decrease in cash and cash equivalents (1,921) (520)
Cash and cash equivalents, at beginning of period 3,880 4,073
-------- --------
Cash and cash equivalents, at end of period $ 1,959 $ 3,553
======== ========
Supplemental disclosures of cash flow information:
Cash paid for interest expense $ 3 $ 43
Cash paid for income taxes $ 45 $ 241
See Accompanying Note
5
PARIS CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDRES' EQUITY
FOR THE YEAR ENDED SEPTEMBER 30, 1999 AND THREE MONTHS ENDED DECEMBER 31, 1999
Accumulated
Other
Common Stock Additional Retained Comprehensive
Shares Amount Paid in Capital Earnings Income
------ ------ --------------- -------- ------
Balance at October 1, 1998 .................. 3,937,517 $15,751 $8,588,243 $7,797,181 $(163,412)
--------- ------- ---------- ---------- ---------
Net Income ............................. 960,730
Other comprehensive income,
Reclassification entry ............... 38,541
Unrealized gain on securities,
during the peroid,
net of tax $39,400................. 58,525
--------------------------------------------------------------------------------------
Comprehensive income .............
Purchase of 61,800 treasury shares ..........
Sale of 11,400 treasury shares ..............
Dividend Paid ............................... (708,825)
--------------------------------------------------------------------------------------
Balance at September 30, 1999 ............... 3,937,517 $15,751 $8,588,243 $ (66,346) $8,049,086
Net Income .................................. 166,821
Other comprehensive income,
Unrealized loss on securities, net of
reclassification adjustment of gains
included in net income ............ (37,132)
--------------------------------------------------------------------------------------
Comprehensive income
Purchase of 225,710 treasury shares .........
--------------------------------------------------------------------------------------
Balance at December 31, 1999 ................ 3,937,517 $15,751 $ 8,588,243 $ 8,215,907 $(103,478)
Treasury Stock
Shares Amount Total
-------- -------- -----
Balance at October 1, 1998 .................. (382,872) $(1,882,237) $14,355,526
Net Income .............................
960,730
Other comprehensive income,
Reclassification entry ............... 38,541
Unrealized gain on securities,
during the peroid,
net of tax $39,400................. 58,525
-------------------------------------------------------
Comprehensive income ............. 1,057,796
Purchase of 61,800 treasury shares .......... (61,800) (141,454) (141,454)
Sale of 11,400 treasury shares .............. 11,400 23,500 23,500
Dividend Paid ............................... (708,825)
-------------------------------------------------------
Balance at September 30, 1999 ............... (433,272) $(2,000,191) $14,586,543
Net Income .................................. 166,821
Other comprehensive income,
Unrealized loss on securities, net of
reclassification adjustment of gains
included in net income ............ (37,132)
-------------------------------------------------------
Comprehensive income 129,689
Purchase of 225,710 treasury shares ......... (225,710) (473,848) (473,848)
-------------------------------------------------------
Balance at December 31, 1999 ................ (658,982) (2,474,039) $14,242,384
6
PARIS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
ACCOUNTING POLICIES:
1. The accompanying unaudited interim consolidated financial statements were
prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. The Summary of Accounting
Policies and Notes to Consolidated Financial Statements included in the
September 30, 1999 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 $237,000 as of September 30, 1999
related to these agreements and other potential liabilities. During the three
months ended December 31, 1999, management increased the liability to
$273,000, 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, 1999 and September 30,
1999:
12/31/99 9/30/99
-------- -------
Raw Materials $1,555,717 $1,370,474
Work in Progress 119,496 61,502
Finished Goods 3,264,110 2,734,854
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$4,939,323 $4,166,890
========== ==========
7
PARIS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
---------------------
DECEMBER 31, 1999
-----------------
THREE MONTHS
- --------------------------------------------------------------------------------
$ %
1999 1998 CHANGE CHANGE
- --------------------------------------------------------------------------------
Net Sales $11,182 $7,987 $3,195 40%
- --------------------------------------------------------------------------------
Cost of sales 10,026 7,029 2,997 43%
- --------------------------------------------------------------------------------
Gross profit 1,156 958 198 21%
- --------------------------------------------------------------------------------
Selling 486 440 46 10%
- --------------------------------------------------------------------------------
General and administrative 650 496 154 31%
expenses
- --------------------------------------------------------------------------------
Interest expense 3 43 (40) -93%
- --------------------------------------------------------------------------------
Other (income) expense (236) (175) (61) 35%
- --------------------------------------------------------------------------------
Pretax income (loss) 253 154 99 64%
- --------------------------------------------------------------------------------
Minority interest 69 0 69 -
- --------------------------------------------------------------------------------
Income taxes (156) 52 (208) -400%
- --------------------------------------------------------------------------------
Net income (loss) $ 166 $ 102 $ 64 63%
- --------------------------------------------------------------------------------
GROSS PROFIT
- ------------
Gross profit for the three months ended December 31, 1999 of $1156M increased
$198M as compared to the same quarter in the prior year. Sales of $11,182M
increased $3195M or 40% and cost of sales of $10,026M increased $2997M or 43%.
Sales factors
- -------------
Sales of stock continuous forms of $2847M decreased $577M or 16%. The decline
in sales was due to a decline in unit volume of 29% offset by an increase in
average sell price of 16%. The decrease in unit volume is consistent with
industry trend for this product line while the higher average sell price is
reflective of increased paper costs.
Sales of custom products of $1758M increased $216M or 14%. Revenue from custom
forms increased $145M or 21% while custom cut sheet revenue increased $71M or
8%. The increased revenue in custom forms was consistent with the unit volume
increase while the increased revenue in custom cut sheets was derived primarily
from an increase in average sell price.
Sales of the Company's Laser3, DocuGard and HCFA product lines have increased
$231M or 35%. The increased revenue is consistent with the increase in unit
volume of 30% and increase in average sell price of 4%. The Company continues
to increase focus on this line of paper products through sales and marketing
promotions.
Consumer product sales increased 123% during the quarter, reflecting strong
demand for all key product lines.
8
Revenue of value added paper products increased $1206M or 134%. Burlington ink
jet papers continued to gain market share as a result of higher sell through in
retail stores.
Revenue of paper reams increased $1116 or 103% as a result of strong sales of
the Champion and Hewlett Packard brand paper reams to key retailers.
The effect of consolidating the results of operations of Signature Corporation
increased revenue $856M for the quarter ending December 31, 1999.
Cost Factors
- ------------
The cost of stock continuous forms sales of $2412 decreased $575M or 20%. The
decrease in cost on a percentage basis was higher then the decrease in sales due
to slightly improved margins.
The cost of custom product sales of $1367 increased $173M or 14% compared to the
same period last year. The increase is consistent with the sales increase.
The cost of sales for the Company's Laser3, DocuGard and HCFA product lines
increased $156m or 35% compared to the same period last year. The increase is
consistent with the sales increase.
The cost of sales for consumer products increased $2019M or 137%. The increase
in cost of sales was higher then the 103% increase in revenue reflecting a
change in the product mix.
The effect of consolidating the results of operations of Signature Corporation
increased cost of sales $856M for the quarter ended December 31, 1999.
OPERATING EXPENSES
- ------------------
THREE MONTHS COMPARISON
Operating expenses of $1136 increased $200M or 21%. Selling expenses increased
$46M or 10% while General and Administrative expenses increased $154M or 31%.
The effect of consolidating the results of operations of Signature Corporation
increased selling, general and administrative expenses $191M. Other SG&A
expenses remained flat in comparison to the same quarter last year.
OTHER INCOME AND EXPENSES
-------------------------
Other income, net increased $61M or 35% due primarily to increased investment
income.
Interest expense decreased $40M or 93% as a result of operating without a
working capital line of credit during the quarter.
9
LIQUIDITY AND CAPITAL RESOURCES:
--------------------------------
Working capital decreased $362M from $11,882M to $11520M and cash and cash
equivalents decreased $1921M during the three months ended December 31, 1999.
Net cash used in operating activities was $1052M. Accounts receivable increased
$1370M due to the special seasonal dating and increased sales volume.
Inventories increased $772M composed of an increase in finished goods of $529M,
raw materials of $185M and an increase of work in process of $58M. The increase
in finished goods is due to the consolidation of Signature Corporation.
Accounts payable and accrued expenses increased $974M reflecting slower payment
cycles related to the slower collections. Also, the Signature consolidation
contributed to the increased payables.
Working Capital decreased $362M from $11,882M to $11,520M and cash and cash
equivalents decreased $1921M during the three months ended December 31, 1999.
Net cash used in operating activities was $1052M. Accounts receivable increased
$1370M due to special seasonal dating and increased sales volume. Inventories
increased $772M composed of an increase in finished goods of $529M, raw
materials of $189M and an increase of work in process of $58M. The increase in
finished goods is due to the consolidation of Signature Corporation. Accounts
payable and accrued expenses increased $974M reflecting slower payment cycles
related to the slower collections. Also, the Signature consolidation
contributed to the increased payables.
Net cash used in investing activities was $372M. The Company purchased $300M of
investments and $72M in property and equipment.
During the quarter ended December 31, 1999 the Company purchases 225,710 shares
of its common stock at a cost of $474M. Prior to the "Year 2000" the Company
conducted a comprehensive review of their computer systems to identify the
systems that could be affected by the "Year 2000" issue and developed an
implementation plan to resolve the issues. Currently, the Company has had no
adverse effects from the "Year 2000" internally nor have they discovered any
problems externally with major customers or vendors.
10
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 3,278,535
---------
(b) Reports on Form 8-K
None.
11
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
___________________________
Dominic P. Toscani, Sr.
Chairman of
the Board of Directors
____________________________
William L. Lomanno
Chief Financial Officer
DATE: February 14, 2000
12