-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Gjg4Vff91fu/lK+lLoo71jQwmY/qVUNnssx4coHoIn1egRmO+gWP0mqrXWmjCT/U /slN9Vt5N7yOZNP9XiWvhA== 0000950150-97-001660.txt : 19971113 0000950150-97-001660.hdr.sgml : 19971113 ACCESSION NUMBER: 0000950150-97-001660 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971113 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DATA DOCUMENTS INC CENTRAL INDEX KEY: 0000026994 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-CATALOG & MAIL-ORDER HOUSES [5961] IRS NUMBER: 470714942 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-95804 FILM NUMBER: 97716011 BUSINESS ADDRESS: STREET 1: 4205 S 96TH ST CITY: OMAHA STATE: NE ZIP: 68127 BUSINESS PHONE: 402-339-09 MAIL ADDRESS: STREET 1: 4205 SOUTH 96TH STREET CITY: OMAHA STATE: NE ZIP: 68127 10-Q 1 FORM 10-Q FOR PERIOD ENDED 09/30/97 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549-1004 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended September 30, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 0-26674 DATA DOCUMENTS INCORPORATED (Exact name of registrant as specified in its charter) DELAWARE 47-0714942 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4205 SOUTH 96TH STREET, OMAHA, NEBRASKA (Address of principal executive offices) 68127 (Zip Code) (402) 339-0900 (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ----- ----- The number of shares outstanding of the Registrant's Common Stock, as of September 30, 1997 was 9,710,226 (excluding 269,607 treasury shares). 2 DATA DOCUMENTS INCORPORATED INDEX PART I. FINANCIAL INFORMATION
Page Number ----------- ITEM 1: FINANCIAL STATEMENTS: CONSOLIDATED BALANCE SHEETS - At September 30, 1997 and December 31, 1996 3 CONSOLIDATED STATEMENTS OF OPERATIONS - For the Three and Nine Months Ended September 30, 1997 and 1996 4 CONSOLIDATED STATEMENTS OF CASH FLOWS - For the Nine Months Ended September 30, 1997 and 1996 5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6 - 8 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9 -11 PART II. OTHER INFORMATION ITEM 2: CHANGES IN SECURITIES 12 ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K 12-13 SIGNATURES 14
2 3 PART I - FINANCIAL INFORMATION ITEM I. - FINANCIAL STATEMENTS DATA DOCUMENTS INCORPORATED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 1997 AND DECEMBER 31, 1996 (COLUMNAR AMOUNTS IN THOUSANDS) - --------------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31, -------------------------- 1997 1996 --------- --------- (UNAUDITED) ASSETS CURRENT ASSETS:' Cash and cash equivalents $ 1,371 $ 11,151 Accounts receivable, net of allowance of $ 506,000 and $311,000 36,817 31,459 Inventories (Note B) 39,480 37,979 Other current assets 1,474 898 --------- --------- Total Current Assets 79,142 81,487 PROPERTY, PLANT AND EQUIPMENT 43,632 37,328 GOODWILL, net of accumulated amortization of $3,039,000 and $2,689,000 18,437 9,837 DEFERRED FINANCING COSTS AND OTHER ASSETS 5,441 5,325 --------- --------- $ 146,652 $ 133,977 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued liabilities $ 20,165 $ 18,566 Accrued compensation 3,584 3,453 Accrued interest payable 2,071 4,072 Current maturities of long-term obligations 3,892 934 Current and deferred income taxes 243 1,017 --------- --------- Total Current Liabilities 29,955 28,042 POST-RETIREMENT BENEFITS 1,905 1,881 LONG-TERM OBLIGATIONS, net of current maturities 65,578 63,965 DEFERRED INCOME TAXES 3,040 2,413 COMMITMENTS AND CONTINGENCIES (Note C) COMMON STOCKHOLDERS' EQUITY: Preferred stock, $0.01 par value; 5,000,000 shares authorized; none issued -- -- Common stock, $0.001 par value; 15,000,000 shares authorized; 9,979,833 and 9,564,831 shares issued; 9,710,226 and 9,295,224 shares outstanding, respectively 10 10 Additional paid-in capital 32,024 32,020 Retained earnings 14,328 5,881 Stockholder notes receivable (188) (235) Treasury stock, 269,607 shares acquired at no cost -- -- --------- --------- Total Common Stockholders' Equity 46,174 37,676 --------- --------- $ 146,652 $ 133,977 ========= =========
See Notes to Consolidated Financial Statements. 3 4 DATA DOCUMENTS INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (COLUMNAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) - --------------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, -------------------------- -------------------------- 1997 1996 1997 1996 ----------- ----------- ----------- ----------- (UNAUDITED) (UNAUDITED) NET SALES $ 65,687 $ 59,794 $ 192,081 $ 184,472 COST OF GOODS SOLD 48,677 43,638 142,015 135,880 ----------- ----------- ----------- ----------- Gross Profit 17,010 16,156 50,066 48,592 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 9,927 9,484 28,936 28,286 ----------- ----------- ----------- ----------- Operating Income 7,083 6,672 21,130 20,306 DEBT EXPENSE, including amortization of $203,000, $206,000, $602,000 and $621,000 2,326 2,416 6,933 7,376 ----------- ----------- ----------- ----------- INCOME BEFORE INCOME TAXES 4,757 4,256 14,197 12,930 INCOME TAX EXPENSE 1,932 1,726 5,750 5,246 ----------- ----------- ----------- ----------- INCOME BEFORE EXTRAORDINARY ITEM 2,825 2,530 8,447 7,684 EXTRAORDINARY ITEM, net of tax (Note D) -- -- -- (54) ----------- ----------- ----------- ----------- NET INCOME $ 2,825 $ 2,530 $ 8,447 $ 7,630 =========== =========== =========== =========== EARNINGS PER COMMON SHARE: Primary: Income before extraordinary item $ 0.28 $ 0.25 $ 0.85 $ 0.77 Extraordinary item -- -- -- -- ----------- ----------- ----------- ----------- Net Income $ 0.28 $ 0.25 $ 0.85 $ 0.77 =========== =========== =========== =========== WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING: Primary 10,050,942 9,955,759 9,987,460 9,940,141 =========== =========== =========== ===========
See Notes to Consolidated Financial Statements. 4 5 DATA DOCUMENTS INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (COLUMNAR AMOUNTS IN THOUSANDS) - --------------------------------------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30, --------------------- 1997 1996 -------- -------- (UNAUDITED) (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 8,447 $ 7,630 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation 3,080 3,123 Amortization of intangibles 1,236 1,091 Extraordinary item -- 37 Provision for deferred income taxes (482) (309) Gain on sale of property, plant and equipment (16) (65) Changes in operating assets and liabilities (net of effects from purchase of Moore Labels, Inc.): Accounts receivable (3,954) 2,710 Inventories (787) 994 Other current assets (177) (370) Accounts payable and accrued liabilities 1,272 1,297 Accrued interest (2,001) (1,884) Current taxes on income and other (337) 402 Other assets (283) 380 -------- -------- Net cash flows from operating activities 5,998 15,036 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (3,819) (3,222) Proceeds from the sale of property, plant and equipment 28 117 Investment in Moore Labels, Inc. - net of cash acquired (13,972) -- -------- -------- Net cash flows from investing activities (17,763) (3,105) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from debt 2,790 -- Payment of debt (724) (1,239) Change in liability for outstanding checks (132) (3,034) Payments for stock registration costs -- (142) Proceeds from exchange of stock options and warrants 4 -- Principal receipts on stockholder notes receivable 47 23 -------- -------- Net cash flows from financing activities 1,985 (4,392) -------- -------- NET CHANGE IN CASH (9,780) 7,539 CASH AND CASH EQUIVALENTS, Beginning of period 11,151 2,024 -------- -------- CASH AND CASH EQUIVALENTS, End of period $ 1,371 $ 9,563 ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 8,719 $ 8,822 ======== ======== Income taxes $ 6,573 $ 4,986 ======== ========
See Notes to Consolidated Financial Statements. 5 6 DATA DOCUMENTS INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1997 AND 1996 (UNAUDITED) - -------------------------------------------------------------------------------- A. MANAGEMENT STATEMENTS The consolidated financial statements of DATA DOCUMENTS INCORPORATED (Data Documents) include the accounts of its wholly-owned subsidiaries Data Documents, Inc. (DDI), PBF Washington, Inc. (PBF), Cal Emblem Labels, Inc. (Cal Emblem) and Moore Labels, Inc. (Moore Labels). The summarized financial information of DDI (see Note E) include the accounts of its wholly-owned subsidiaries PBF, Cal Emblem and Moore Labels. All significant intercompany transactions and accounts have been eliminated during consolidation. The consolidated financial statements of the Company contained herein should be read in conjunction with the financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 1996. The consolidated financial statements are unaudited and reflect all adjustments (consisting only of normal and recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods. The results of operations and cash flows for the nine months ended September 30, 1997 are not necessarily indicative of the results for the year ending December 31, 1997. Certain reclassifications have been made to the 1996 financial statements to conform to those classifications used in 1997. B. INVENTORIES Inventories consisted of (in thousands):
SEPTEMBER 30, DECEMBER 31, ---------------------------------------- 1997 1996 (UNAUDITED) Finished goods $ 29,832 $ 28,739 Work in process 1,397 1,264 Raw materials 7,243 7,032 Supplies and spare parts 1,008 944 --------- -------- $ 39,480 $ 37,979 ========= ========
Substantially all inventories were valued using the LIFO method. If the FIFO method of inventory accounting had been used, inventories would have been lower than reported by $4,676,000 and $3,500,000 at September 30, 1997 and December 31, 1996, respectively. On a FIFO basis, operating income would have been lower by $890,000 and $710,000, respectively, for the three months ended September 30, 1997 and September 30, 1996, and $1,176,000 and $1,852,000 for the nine months ended September 30, 1997 and September 30, 1996. The FIFO cost of inventories approximates replacement cost. C. COMMITMENTS AND CONTINGENCIES The Company is subject to lawsuits and claims which arise out of the normal course of its business. In the opinion of management, the disposition of such claims will not have a material adverse effect on the Company's financial position or results of operations. 6 7 D. EXTRAORDINARY ITEM In June 1996, the Company incurred an extraordinary charge of $54,000, net of income tax benefit of $34,000, for the write-off of unamortized deferred financing costs, unamortized original issue discount, and certain premium on reacquisition associated with the repurchase of $500,000 of Senior Notes. E. SUMMARIZED FINANCIAL INFORMATION Following is the summarized financial information of DDI and its subsidiaries (in thousands):
SEPTEMBER 30, DECEMBER 31, ----------------------------------- 1997 1996 (UNAUDITED) Current assets $ 79,142 $ 81,487 Noncurrent assets $ 67,510 $ 52,490 Current liabilities $ 29,955 $ 28,042 Noncurrent liabilities $ 70,523 $ 68,259
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, --------------------------- --------------------------- 1997 1996 1997 1996 (UNAUDITED) (UNAUDITED) Net sales $ 65,687 $ 59,794 $ 192,081 $ 184,472 Gross profit $ 17,010 $ 16,156 $ 50,066 $ 48,592 Net income $ 2,825 $ 2,530 $ 8,447 $ 7,630
Following is the summarized financial information of PBF and Cal Emblem (wholly-owned subsidiaries of DDI), which are guarantors of the Senior Notes.
SEPTEMBER 30, DECEMBER 31, ---------------------------------- 1997 1996 (UNAUDITED) Current assets $ 6,977 $ 6,849 Noncurrent assets $ 9,312 $ 8,813 Current liabilities $ 7,523 $ 7,474 Noncurrent liabilities $ 629 $ 883
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, --------------------------- ------------------------------- 1997 1996 1997 1996 (UNAUDITED) (UNAUDITED) Net sales $ 8,069 $ 8,489 $ 24,814 $ 25,169 Gross profit $ 1,577 $ 1,866 $ 4,950 $ 5,114 Net income $ 229 $ 368 $ 832 $ 755
7 8 F. RECENTLY ISSUED ACCOUNTING STANDARDS In June 1996, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 125, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, which established accounting and reporting standards for such transfers. The Company has adopted SFAS No. 125 effective January 1, 1997 as required. The impact on the Company's financial position and results of operations was not material. In February 1997, the Financial Accounting Standards Board issued SFAS No. 128, Earnings Per Share, which specifies the computation, presentation and disclosure requirements for earnings per share. SFAS No. 128 is applicable for fiscal years ending after December 15, 1997. The objective of the statement is to simplify the computation of earnings per share and replaces primary and fully diluted earnings per share, as disclosed under certain pronouncements, with basic and diluted earnings per share. Pro forma basic earnings per share for the three months and nine months ended September 30, 1997 and 1996 are $0.29, $0.26, $0.85 and $0.77, respectively. Pro forma diluted earnings per share for the three months and nine months ended September 30, 1997 and 1996 are $0.28, $0.25, $0.85 and $0.77, respectively. In June 1997, the Financial Accounting Standards Board issued SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information, which established presentation of financial data based on the "management approach". SFAS No. 131 is applicable for fiscal years beginning after December 15, 1997. The Company is currently in the process of reviewing this new presentation requirement. G. ACQUISITION In July 1997, the Company acquired Moore Labels, Inc. (Moore Labels) of Wichita, Kansas, a privately held supplier of pressure-sensitive labels used in the pharmaceutical, food, plastics and miscellaneous manufacturing industries. The aggregate consideration for the transfer of the capital stock of Moore Labels was approximately $14.4 million paid in cash. The consideration paid was supplied by excess cash and the use of approximately $5.0 million of the Revolving Credit Facility. This acquisition was not material to the Company. H. MERGER AGREEMENT In September 1997, the Company entered a Merger Agreement with Corporate Express, Inc. (Corporate Express), a multi-national corporation headquartered in Broomfield, Colorado. Corporate Express is a publicly traded company traded on the Nasdaq National Market (Nasdaq) and is a provider of non-production goods and services to large corporations. The exchange ratio for the merger has been fixed so that each outstanding share of Data Documents' common stock will be converted into 1.1 shares of Corporate Express common stock. The merger has been approved by the respective Boards of Directors of the companies and is subject to Data Documents stockholders' approval. Data Documents would become a wholly owned subsidiary of Corporate Express upon completion of the merger. I. SUBSEQUENT EVENT A special meeting of stockholders of Data Documents will be held on November 25, 1997 at 10:00 a.m., at which time the stockholders will be asked to approve and accept the Merger Agreement discussed in Note H. 8 9 ITEM 2. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996: NET SALES Net sales were $65.7 million for the quarter ended September 30, 1997, an increase of 9.9% from $59.8 million in 1996. Net sales of business forms, supplies and services increased 4.0% with an increase of 10.3% in custom forms sales and a decrease of 14.4% in stock forms sales. Pressure-sensitive label sales increased 15.7%, partially due to the Moore Labels acquisition and InteliMail(R) sales increased 31.4% due to the addition of new customers and growth from existing customers. GROSS PROFIT Gross profit was $17.0 million for the quarter ended September 30, 1997, an increase of $0.8 million, or 5.0% from $16.2 million in 1996. As a percentage of sales, gross profit was 25.9% compared with 27.0% in 1996. Gross profit margin dollars of business forms, supplies and services increased 0.5% for the third quarter of 1997, primarily as a result of higher sales. Pressure-sensitive label gross profit margin dollars increased 3.9% in the third quarter of 1997, primarily as a result of higher sales. InteliMail gross profit margin dollars increased 10.2%, primarily as a result of increased sales volume. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses were $9.9 million for the quarter ended September 30, 1997, an increase of $0.4 million over 1996. The increase in expenses resulted from the increased sales activity. These expenses decreased as a percentage of sales to 15.1% compared to 15.9% in 1996, as a result of the increased sales on slightly higher operating expenses. DEBT EXPENSE The decrease in debt expense of $0.1 million is due to the combination of lower debt in 1997 and interest income generated from the Company's cash balance, prior to the Moore Labels acquisition. 9 10 COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996: NET SALES Net sales were $192.1 million for the nine months ended September 30, 1997, an increase of 4.1% from $184.5 million in 1996. Paper price decreases in 1997 over 1996 are estimated to have negatively impacted total sales by approximately 3.6%, most of which related to business forms and supplies. Net sales of business forms, supplies and services decreased 2.6% with an increase of 4.5% in custom forms sales and a decrease of 22.6% in stock forms sales. Pressure-sensitive label sales increased 12.4% partially due to the Moore Labels acquisition and InteliMail sales increased 20.0% due to the addition of new customers and growth from existing customers. GROSS PROFIT Gross profit was $50.1 million for the nine months ended September 30, 1997, an increase of $1.5 million, or 3.1% from $48.6 million in 1996. As a percentage of sales, gross profit was 26.1% compared with 26.3% in 1996. Gross profit margin dollars of business forms, supplies and services was maintained at the same dollar level for the first nine months of 1997. Pressure-sensitive label gross profit increased 6.6% in the first nine months of 1997 on more sales volume. InteliMail gross profit margin dollars increased 15.4%, primarily as a result of increased sales volume. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses were $28.9 million for the nine months ended September 30, 1997, an increase of $0.6 million over 1996. These expenses as a percentage of sales were 15.1% compared to 15.3% in 1996, as a result of slightly higher operating expenses on increased sales. DEBT EXPENSE The decrease in debt expense of $0.4 million is due to the combination of lower debt in 1997 and interest income generated from the Company's cash balance prior to the Moore Labels acquisition purchase. EXTRAORDINARY EXPENSE In June 1996, the Company repurchased $500,000 of the Senior Notes at a price of $110. The premium along with the related unamortized debt issuance cost and issuance discount resulted in a charge of $54,000, net of income tax benefit of $34,000. 10 11 LIQUIDITY AND CAPITAL RESOURCES The Company relies primarily upon operating cash flow and borrowings under its revolving credit facilities to finance capital expenditures, increases in working capital and debt service. At September 30, 1997, working capital was $49.2 million, a decrease of $4.2 million from the working capital balance as of December 31, 1996. Operating activities generated cash of approximately $6.0 million during the nine months ended September 30, 1997. The Company had a net cash outflow of approximately $17.8 million from its investing activities during the nine months ended September 30, 1997, primarily as a result of the acquisition of Moore Labels and capital expenditures. The Company estimates that its capital expenditures for fiscal 1997 will be between $6.0 million and $7.0 million. In connection with the 1995 acquisition of Cal Emblem, the Company issued two five-year term promissory notes in the aggregate principal amount of $2.2 million which accrue interest at the rate of 10% per annum. Principal and interest payments are due in approximately equal installments over five years. The tax-exempt industrial revenue bonds in the principal amount of $170 thousand bear an annual interest rate of 10.125% and were paid on October 1, 1997. Monthly sinking fund payments are required. In January 1997, DDI entered into a new revolving facility (the "Revolving Credit Facility") that provides for borrowing of up to $20 million. The Revolving Credit Facility is secured by the Company's accounts receivable and the proceeds thereof and, subject to the first lien of the holders of the Senior Notes, by the Company's inventory and proceeds thereof. Outstanding indebtedness under the Revolving Credit Facility is limited to 80% of eligible accounts receivable (subject to reduction by the lender under certain circumstances). The facility will expire in July 1999. Under the terms of the Indenture governing the Senior Notes, the Company is permitted to incur additional revolving credit indebtedness in an amount equal to 85% of its accounts receivable, and based upon accounts receivable balances at September 30, 1997, the Company was permitted to incur approximately $20 million of revolving credit indebtedness. As of September 30, 1997, there was $2.8 million outstanding under the Company's Revolving Credit Facility. The Facility restricts certain liens, the payment of dividends on, and redemption of, any class of the capital stock of DDI (all of which is currently owned by Data Documents Incorporated), PBF or Cal Emblem and certain other restricted payments, among other things. In connection with the acquisition of Moore Labels, the aggregate consideration for the transfer of the capital stock of Moore Labels was approximately $14.4 million paid in cash. The consideration paid was supplied by excess cash and the use of approximately $5.0 million of the Revolving Credit Facility. The Company expects to satisfy its obligations under the Senior Notes, the promissory notes issued in connection with the Cal Emblem acquisition and the industrial revenue bonds, as well as future capital expenditures and working capital requirements, with cash flow from operations, and believes that this source will provide sufficient liquidity to enable it to meet its working capital requirements for at least the next 12 months. 11 12 PART II. OTHER INFORMATION Item 2. CHANGES IN SECURITIES (a) During the quarter ended September 30, 1997, 71,031 shares of common stock were issued as a result of the exercise of 2,000 Warrants. (b) During the quarter ended September 30, 1997, 98 shares of common stock were issued as a result of the exercise of stock options. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit 11 - Statement Regarding Computation of Per Share Earnings (b) Current Reports on Form 8-K In connection with the acquisition of Moore Labels, a Form 8-K dated August 14, 1997 was filed during the quarter ended September 30, 1997. In connection with the merger transaction of Corporate Express, a Form 8-K dated September 10, 1997 was filed during the quarter ended September 30, 1997. 12 13 EXHIBIT 11 DATA DOCUMENTS INCORPORATED AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS) - --------------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, -------------------------- -------------------------- 1997 1996 1997 1996 ----------- ----------- ----------- ----------- PRIMARY EARNINGS PER SHARE: Common stock outstanding 9,710,226 9,230,261 9,710,226 9,230,261 Common stock equivalents: Common stock warrants, if dilutive 174,902 653,603 174,902 653,603 Common stock options - incremental shares 165,814 71,895 102,332 56,277 ----------- ----------- ----------- ----------- Weighted average shares outstanding 10,050,942 9,955,759 9,987,460 9,940,141 =========== =========== =========== =========== Net income, as adjusted: Before extraordinary item $ 2,825 $ 2,530 $ 8,447 $ 7,684 Extraordinary item available for common stock - - - (54) ----------- ----------- ----------- ----------- Net income available for common stock $ 2,825 $ 2,530 $ 8,447 $ 7,630 =========== =========== =========== =========== Primary earnings per share Before extraordinary item $ 0.28 $ 0.25 $ 0.85 $ 0.77 Extraordinary item available for common stock - - - - ----------- ----------- ----------- ----------- Net income available for common stock $ 0.28 $ 0.25 $ 0.85 $ 0.77 =========== =========== =========== ===========
13 14 SIGNATURES 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. DATA DOCUMENTS INCORPORATED Date: November 12, 1997 By: --------------------------------- A. Robert Thomas, Chief Financial Officer Date: November 12, 1997 By: --------------------------------- Walter J. Kearns, President and Chief Executive Officer 14 15 EXHIBIT 11 DATA DOCUMENTS INCORPORATED AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS) - --------------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 1997 1996 1997 1996 ----------- ----------- ----------- ----------- PRIMARY EARNINGS PER SHARE: Common stock outstanding 8,880,212 8,880,212 8,880,212 8,880,212 Common stock equivalents: Common stock warrants, if dilutive 1,080,163 1,080,163 1,080,16 1,080,16 Common stock options - incremental shares -- -- 60,195 60,195 Weighted average shares outstanding 9,960,375 9,960,375 9,944,059 9,944,059 =========== =========== =========== =========== Net income, as adjusted: Before extraordinary item $ 2,599 $ 2,599 $ 5,154 $ 5,154 Extraordinary item available for common stock (54) (54) (54) (54) ----------- ----------- ----------- ----------- Net income available for common stock 2,545 2,545 5,100 5,100 =========== =========== =========== =========== Primary earnings per share Before extraordinary item $ 0.26 $ 0.26 $ 0.52 $ 0.52 Extraordinary item available for common stock $ (0.01) $ (0.01) $ (0.01) $ (0.01) ----------- ----------- ----------- ----------- Net income available for common stock $ 0.25 $ 0.25 $ 0.51 $ 0.51 =========== =========== =========== =========== FULLY DILUTED EARNINGS PER SHARE: Weighted average shares outstanding 9,960,375 9,960,375 9,983,864 9,983,864 Common stock options - incremental shares 87,345 87,345 87,418 87,418 ----------- ----------- ----------- ----------- Weighted average shares outstanding on fully diluted 9,971,209 9,971,209 9,971,282 9,971,282 =========== =========== =========== =========== earnings per share Net income, as adjusted: Before extraordinary item $ 2,599 $ 2,599 $ 5,154 $ 5,154 Extraordinary item available for common stock (54) (54) (54) (54) ----------- ----------- ----------- ----------- Net income available for common stock 2,545 2,545 5,100 5,100 =========== =========== =========== =========== Fully diluted earnings per share Before extraordinary item $ 0.26 $ 0.26 $ 0.52 $ 0.52 Extraordinary item available for common stock $ (0.01) $ (0.01) $ (0.01) $ (0.01) ----------- ----------- ----------- ----------- Net income available for common stock $ 0.25 $ 0.25 $ 0.51 $ 0.51 =========== =========== =========== =========== NET INCOME AS ADJUSTED PRIMARY EARNINGS PER SHARE: Net income before extraordinary item $ 2,599 $ 2,599 $ 5,154 $ 5,154 Add: amortization of original issue discount of exchangeable warrants -- -- -- -- ----------- ----------- ----------- ----------- Net income before extraordinary item as $ 2,599 $ 2,599 $ 5,154 $ 5,154 =========== =========== =========== =========== adjusted FULLY DILUTED EARNINGS PER SHARE: Net income $ 2,599 $ 2,599 $ 5,154 $ 5,154 Add: amortization of original issue discount of -- -- -- -- ----------- ----------- ----------- ----------- exchangeable warrants Net income before extraordinary item as adjusted $ 2,599 $ 2,599 $ 5,154 $ 5,154 =========== =========== =========== ===========
15 16 ITEM 2. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996: NET SALES Net sales were $124.7 million for the nine months ended September 30, 1996, an increase of 9.1% from $114.2 million in 1995. Paper price decreases in 1996 over 1995 are estimated to have impacted total sales by approximately 1.3%, most of which related to business forms and supplies. Net sales of business forms, supplies and services increased 1.5% with increases of 2.2% in custom forms sales and 1.7% in stock forms sales. The increases include 2.6 million of increased sales to Odyssey Integrated ServicesSM customers. Pressure sensitive labels sales increased 26.1% and include revenues from Cal Emblem acquired in August of 1995. The pressure sensitive labels market was soft throughout the nine months of 1996, partly due to the weaknesses in the retail economy. InteliMail sales increased 15.2% due to the addition of new customers and growth from existing customers. GROSS PROFIT Gross profit was $32.4 million for the nine months ended September 30, 1996, an increase of $5.8 million, or 21.8% from $26.6 million in 1995. Gross profits in 1996 were favorably impacted by approximately $1.9 million in reduced depreciation expense from fully depreciated assets. As a percentage of sales, gross profit was 26.0% compared with 23.3% in 1995. Gross profit margins of business forms, supplies and services increased 4.1% for the nine months of 1996. Pressure sensitive labels gross profit margins decreased 1.8% in the nine months of 1996 primarily as a result of sales mix. InteliMail gross profit margins increased 2.7%, primarily as a result of operating levels from increased sales volume. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses were $18.8 million for the nine months ended September 30, 1996, an increase of $1.6 million over 1995. The increase in expenses resulted from inclusion of the expenses of Cal Emblem These expenses as a percentage of sales were 15.1% and remained unchanged from 1995 despite the impact of lower paper prices on total sales during the second quarter of 1996. DEBT EXPENSE The decrease in debt expense of $1.9 million is primarily attributable to repayment of $24.0 million of the 13.5% Senior Secured Notes, as well as the related reduction in amortization of debt issuance costs and accretion of discount. EXTRAORDINARY EXPENSE In June 1996, the Company repurchased $500,000 of the 13.5% Senior Secured Notes at a price of 110. The premium along with the related unamortized issuance cost and issuance discount resulted in a charge of $54,000, net of income tax benefit of $34,000. 16 17 LIQUIDITY AND CAPITAL RESOURCES The Company relies primarily upon operating cash flow and borrowings under its revolving credit facilities to finance capital expenditures, increases in working capital and debt service. At September 30, 1996, working capital was $49.4 million, an increase of $6.3 million from the working capital balance as of December 31, 1995. Operating activities generated cash of approximately $9.7 million during the quarter nine months ended September 30, 1996. Cash provided by operations during the nine months was primarily the result of increased earnings. The Company had a net cash outflow of approximately $0.9 million from its investing activities during the nine months ended September 30, 1996, for capital expenditures. The Company estimates that its capital expenditures for fiscal 1996 will be approximately $6.0 million. In connection with the acquisition of Cal Emblem Labels, Inc., the Company issued two five-year term promissory notes in the aggregate principle amount of $2.2 million which accrue interest at the rate of 10% per annum. Principal and interest payments will be due in approximately equal installments over five years. The tax-exempt industrial revenue bonds in the principal amount $570 thousand bear an annual interest rate of 10.125% and are due on October 1, 1996 ($400 thousand) and on October 1, 1997 ($170 thousand). Monthly sinking fund payments are required. The Company has a revolving credit facility (the "Revolving Credit Facility"), that provides for borrowing of up to $20 million. The Revolving Credit Facility is secured by the Company's accounts receivable and the proceeds thereof and, subject to the first lien of the Senior Secured Noteholders, by the Company's inventory and proceeds thereof. Outstanding indebtedness under the Revolving Credit Facility is limited to 80% of eligible accounts receivable (subject to reduction by the lender under certain circumstances). The facility will expire in February 1997, subject to automatic annual renewal unless terminated by either party. The Company is obligated to pay certain termination fees in the event the facility is terminated prior to February 1997. Under the terms of the Indenture governing the Senior Secured Notes, the Company is permitted to incur additional revolving credit indebtedness in an amount equal to 85% of its accounts receivable, and based upon accounts receivable balances at September 30, 1996, the Company was permitted to incur approximately $26.1 million of revolving credit indebtedness. As of September 30, 1996, there was no amount outstanding under the Revolving Credit Facility. The facility restricts certain liens and prohibits the payment of dividends on, and redemption of, any class of the capital stock of DDI (all of which is currently owned by the Company), PBF or Cal Emblem Labels, Inc. and certain other restricted payments, among other things. The Company intends to satisfy its obligations under the Senior Secured Notes, the promissory notes issued in connection with the Cal Emblem acquisition and the industrial revenue bonds, as well as future capital expenditures and working capital requirements, with cash flow from operations, and believes that this source will provide sufficient liquidity to enable it to meet its working capital requirements for at least the next 12 months. 17 18 DATA DOCUMENTS INCORPORATED Signatures 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. DATA DOCUMENTS INCORPORATED /s/ A. Robert Thomas Date: November 12, 1997 --------------------------------- A. Robert Thomas Chief Financial Officer /s/ Walter J. Kearns Date: November 12, 1997 --------------------------------- Walter J. Kearns President and Chief Executive Officer 18 EX-27 2 FINANCIAL DATA SCHEDULE
5 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 1,371 0 37,323 506 39,480 79,142 92,941 49,309 146,652 29,955 65,578 0 0 10 46,164 146,652 192,081 192,081 142,015 142,015 0 0 6,933 14,197 5,750 5,750 0 0 0 8,447 .85 0
-----END PRIVACY-ENHANCED MESSAGE-----