-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Mj+p6autkIO+J55SZvNIFCTY/L7+JLnaGrTFu/C4dIGSEcOqyiZYp8bkdBdHuxC5 V3+H34R/ClGuG/v4ygw/fA== 0000950124-95-000058.txt : 19950608 0000950124-95-000058.hdr.sgml : 19950608 ACCESSION NUMBER: 0000950124-95-000058 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19941029 FILED AS OF DATE: 19950127 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: DUPLEX PRODUCTS INC CENTRAL INDEX KEY: 0000030547 STANDARD INDUSTRIAL CLASSIFICATION: MANIFOLD BUSINESS FORMS [2761] IRS NUMBER: 362109817 STATE OF INCORPORATION: DE FISCAL YEAR END: 1025 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-07208 FILM NUMBER: 95503313 BUSINESS ADDRESS: STREET 1: 1947 BETHANY RD CITY: SYCAMORE STATE: IL ZIP: 60178 BUSINESS PHONE: 8158952101 MAIL ADDRESS: STREET 1: PO BOX 1947 CITY: SYCAMORE STATE: IL ZIP: 60178 10-K 1 FORM 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (x) Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended OCTOBER 29, 1994 Commission file number 1-7208 DUPLEX PRODUCTS INC. (Exact name of Registrant as specified in its charter) Delaware 36-2109817 (State of incorporation or organization) (I.R.S. Employer Identification No.) 1947 Bethany Road, Sycamore, Illinois 60178 815/895-2101 (Address of principal executive office) (Zip Code) (Telephone Number) SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: [CAPTION] TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED - ------------------- ------------------------------------------- Common stock, par value $1.00 per share American Stock Exchange
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 ninety days. Yes X No --- --- As of January 6, 1995, 7,543,278 shares of common stock with a par value of $1.00 were outstanding. These shares, which constitute all of the voting stock of the Registrant, had an aggregate market value on January 6, 1995, of approximately $58.5 million based on the closing sale price reported on the American Stock Exchange. All such shares were owned by non-affiliates of the Registrant. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's Annual Report to Shareholders for the fiscal year ended October 29, 1994, are incorporated by reference in Parts II and IV. Portions of the Registrant's Proxy Statement for the 1995 Annual Meeting of Shareholders are incorporated by reference in Part III. 2 PART I ITEM 1 - BUSINESS GENERAL Duplex Products Inc. began operations in 1947 as a designer and manufacturer of business forms primarily focused on government markets. Over the years, Duplex has broadened considerably the scope of its products and services to keep pace with emerging technologies and the changing information management requirements of businesses. Today the Company is positioned as a leader in serving both the business forms and information management needs of customers in financial, industrial, retail, and commercial markets, with the primary objective of assisting them in improving the efficiency of their operations and in lowering their cost of processing business critical information. Financial data and commentary on the Company's recent operating results and financial position are included on pages 12 through 27 of the 1994 Annual Report to Shareholders, which is incorporated herein by reference. The Company's business is predominantly in a single industry segment, with only the business forms class of product exceeding 10% of total sales. PRODUCTS AND SERVICES The Company serves the business information handling needs of customers with a comprehensive array of value-added forms and services that are both paper-based and electronic-based. These include: - - Custom and stock business forms (continuous, unit set, single, and multi-part) in fan-fold, roll, and sheeted stocks. - - Custom and stock pressure sensitive labels in fan-fold, roll, and sheeted stocks for a wide variety of media bases. - - Integrated form/label combinations. - - Forms management services, including storage, distribution, cost center reporting and inventory management. - - Electronic printing and mailing services, including data communication and manipulation, variable and fixed printing, and document distribution. - - Services related to check fraud prevention, electronic forms, and information flow analysis. During fiscal year 1994, the Company expanded its electronic printing and mailing centers in Elgin, Illinois, and Timonium, Maryland, and opened a facility in Sacramento, California, to serve the West Coast market. MANUFACTURING AND DISTRIBUTION Products are produced in ten Company plants in the United States and also sourced through a network of outside strategic partners, whose product offerings and capabilities complement those of Duplex. Products and services are sold primarily in the United States and Puerto Rico 2 3 through the Company's direct sales force of 305 sales consultants. Over the past year, strong emphasis has been placed on providing training to sales consultants on consultative selling techniques and new product and service offerings of the Company. In addition, corporate support of the sales force has been expanded considerably in the areas of market analysis, advertising, and sales promotion. The Company is not dependent upon one customer or related group of customers in that no customer or group of customers under common control accounted for 10% or more of total sales in fiscal year 1994. The Company's order backlog at any time is not material in relation to annual sales volume, and the business is not subject to significant seasonal variances. A large portion of the Company's products are distributed to customers through a network of business service centers. Services provided by these centers include warehousing, customer inventory management and reporting, imprinting services, and certain forms production. MARKET ENVIRONMENT Duplex operates in a highly competitive and mature market, with industry sales of traditional business forms in the United States (estimated at approximately $8 billion in 1994) continuing to decline gradually. This decline reflects (1) a move by large businesses from paper-based information systems as they expand the use of personal computers and other productivity-enhancing tools and (2) a decline in the use of unit sets by small companies. However, certain segments of the marketplace offer growth opportunities, including pressure sensitive labels, short-run preprinted cut sheets, electronic printing and mailing services, demand printing, and forms automation. In this connection, significant opportunities relate to assisting customers to reduce their cost of handling and processing information, including the integration of paper and electronic documents, the enhancement of business processes, and the provision of services that allow businesses to outsource "back room" activities that are not central to the generation of revenues. Also, the increase in information both generated by and required by the expanding electronic age will increase paper-based and paperless communications, providing opportunities for suppliers to supplant declining segments of the traditional business forms market with other products and services. Approximately 20% of the U.S. business forms market is controlled by one competitor, with the remaining market share distributed among approximately 600 companies. Duplex ranks among the six largest of these companies, in an industry where price, quality, on-time delivery, and sales service are the prime competitive factors. Over-capacity in the industry is significant giving rise to pricing pressures. This excess of supply over demand most probably will lead to a reduction in the number of forms suppliers through consolidations and mergers. RAW MATERIALS Duplex's principal raw material is paper, which is purchased in a wide range of sizes, colors, widths, and weights from various paper mills. Other materials used in the manufacturing process include inks and lithographic platemaking materials. After a five-year decline in paper prices, the May through December period of 1994 saw bond paper prices climb about 70%. Selling prices of Company products were adjusted to reflect these increases; however, pressure on margins continues, reflecting the highly competitive nature of the marketplace. In addition, paper is in short supply and supplies are being allocated by domestic vendors. Despite this 3 4 situation, Duplex expects to be able to meet customer requirements as a result of its longstanding vendor relationships and through adjustments to product mix. RESEARCH AND DEVELOPMENT The Company continues to be involved in research activities relating to the development of new products and services. The Company does not regard either the number of people involved in, or amounts expended on, research activities (none of which are customer sponsored) to be material. LICENSES AND PATENTS No material patents, licenses, franchises, or concessions are held which significantly impact the Company's business. ENVIRONMENTAL PROTECTION The Company believes that it is in substantial compliance with all applicable federal, state, and local regulations regarding environmental protection. The Company has not incurred any material costs in this regard. EMPLOYEES As of October 29, 1994, 1,852 people were employed by Duplex, none of whom are covered by a collective bargaining agreement. ITEM 2 - PROPERTIES The following are the principal properties of the Company:
Approximate square Location Description footage Owned/Leased - -------- ----------- ------- ------------ Dillsburg, Pennsylvania Plant and warehouse 38,000 Owned Emigsville, Pennsylvania Plant and warehouse 66,000 Owned Goshen, Indiana Plant and warehouse 140,000 Owned Jacksonville, Florida Plant and warehouse 127,000 Owned Mechanicsburg, Pennsylvania Plant and warehouse 48,000 Owned Newark, Ohio Plant and warehouse 80,000 Owned Orlando, Florida Plant and warehouse 40,000 Owned Salt Lake City, Utah Plant and warehouse 81,000 Owned Santa Ana, California Plant and warehouse 65,000 Owned Sycamore, Illinois Corporate office, plant, and warehouse 191,000 Owned Tucker, Georgia Plant and warehouse 82,000 Leased West York, Pennsylvania Plant and warehouse 73,000 Owned
4 5 The Dillsburg, Pennsylvania, and Orlando, Florida, facilities are vacant and being marketed for sale. The Company believes that its facilities are properly maintained, and that production capacity is adequate for current needs. In addition, the Company leases (1) electronic printing and mailing facilities in Timonium, Maryland, Elgin, Illinois, and Sacramento, California, (2) leases/owns twenty business service centers in various locations across the United States, and (3) leases eighty-three sales offices nationwide and in Puerto Rico. ITEM 3 - LEGAL PROCEEDINGS The Company is not a party to, nor is its property subject to, any material pending legal proceedings. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS None. PART II ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS Reported as "Stock Exchange Information" and "Trading and Dividend Information" on page 29 of the 1994 Annual Report to Shareholders. ITEM 6 - SELECTED FINANCIAL DATA Reported as "Selected Financial Data" on page 27 of the 1994 Annual Report to Shareholders. ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Reported as "Management's Discussion of Operations" and "Management's Discussion of Liquidity and Capital Resources" on pages 15 through 17 of the 1994 Annual Report to Shareholders. ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See index under Item 14. ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH AUDITORS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information regarding directors required by this item is incorporated by reference to the section entitled "Election of Directors" in the Registrant's Proxy Statement for the 1995 Annual Meeting of Shareholders. 5 6 Information pertaining to executive officers as of January 25, 1995, is shown below.
Executive Officer Name Age Since Positions During Last Five Years ---- --- ----- -------------------------------- Ben L. McSwiney 44 1993 President and Chief Executive Officer of the Company since December 1993; Chief Operating Officer of the Company, September to December 1993; President and Chief Executive Officer of WhiteStar Graphics, 1991-1993; Vice President and General Manager of Williamhouse Regency, 1989-1991.
ITEM 11 - EXECUTIVE COMPENSATION Incorporated by reference to the section entitled "Executive Compensation" in the Registrant's Proxy Statement for the 1995 Annual Meeting of Shareholders. ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Incorporated by reference to the section entitled "Beneficial Ownership of Common Stock" in the Registrant's Proxy Statement for the 1995 Annual Meeting of Shareholders. ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Incorporated by reference to the section entitled "Executive Compensation" in the Registrant's Proxy Statement for the 1995 Annual Meeting of Shareholders. PART IV ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K The following documents are filed as part of this report:
Page(s) in (a)(1) Financial Statements Annual Report ------------- Consolidated Statement of Operations 12 Consolidated Statement of Financial Position 13 Consolidated Statement of Cash Flows 14 Notes to Consolidated Financial Statements 18-25 Independent Auditors' Report 26 Selected Financial Information 27
6 7
(a)(2) Financial Statement Schedules Page in Form 10-K --------- Report of Independent Auditors on Financial Statement Schedules 9 Schedule V - Property, Plant, and Equipment 10 Schedule VI - Accumulated Depreciation and Amortization of Property, Plant, and Equipment 11 Schedule VIII - Valuation and Qualifying Accounts and Reserves 12
The schedules listed in Reg. 210.5-04, except those listed above, have been omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. (b) Reports on Form 8-K: None. (c) Exhibits 3(a) Composite of the Registrant's Restated Certificate of Incorporation as amended, incorporated by reference to Exhibit 3 of the Registrant's Annual Report on Form 10-K for the fiscal year ended October 25, 1988. 3(b) By-Laws of the Registrant as amended.* 4 Shareholder Rights Plan, incorporated by reference to the Registrant's Form 8-K dated June 8, 1989. 10(a) 1984 Incentive Stock Option Plan, incorporated by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended October 29, 1983. 10(b) 1993 Incentive Stock Option Plan, incorporated by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended October 30, 1993. 11 Computation of Earnings Per Share.* 13 Portions (pages 12 through 29) of the 1994 Annual Report to Shareholders for the fiscal year ended October 29, 1994.* 18 Letter regarding Change in Accounting Principles.* 23 Consent of Independent Auditors.*
*Filed electronically herewith. 7 8 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form 10-K for the fiscal year ended October 29, 1994, to be signed on its behalf by the undersigned thereunto duly authorized on January 20, 1995. DUPLEX PRODUCTS INC. By /s/ Andrew A. Campbell ---------------------- Andrew A. Campbell Vice-President Finance, Chief Financial Officer, and Secretary (Principal 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 indicated, on January 20, 1995. By /s/ Andrew A. Campbell ----------------------- Andrew A. Campbell Vice-President Finance, Chief Financial Officer, and Secretary (Principal Financial Officer) By /s/ Ben L. McSwiney -------------------- Ben L. McSwiney, President, Chief Executive Officer, and Director (Principal Executive Officer) By /s/ John A. Bacon, Jr. ----------------------- John A. Bacon, Jr., Director By /s/ Michael J. Birck --------------------- Michael J. Birck, Director By /s/ David J. Eskra -------------------- David J. Eskra, Director By /s/ George S. Hoban -------------------- George S. Hoban, Director By /s/ W. Robert Reum ------------------- W. Robert Reum, Director 8 9 REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENT SCHEDULES Board of Directors Duplex Products Inc. In connection with our audit of the consolidated financial statements of Duplex Products Inc. and Subsidiary, referred to in our report dated December 9, 1994, we have also audited Schedules V, VI, and VIII for each of the three years in the period ended October 29, 1994. In our opinion, these schedules present fairly, in all material respects, the information required to be set forth therein. GRANT THORNTON LLP Chicago, Illinois December 9, 1994 9 10 DUPLEX PRODUCTS INC. AND SUBSIDIARY SCHEDULE V - PROPERTY, PLANT, AND EQUIPMENT (Dollar amounts in thousands)
Balance at Balance at beginning Additions end of of year at cost Retirements year --------------- ------------- ----------- ----------- Year ended October 29, 1994 Land and land improvements $ 3,207 $ -- $ 1,067 $ 2,140 Buildings 31,238 232 5,526 25,944 Leasehold improvements 269 4 20 253 Machinery and equipment 74,267 2,612 4,045 72,834 --------- -------- -------- --------- $108,981 $2,848 $10,658 $101,171 ========= ======== ======== ========= Year ended October 30, 1993 Land and land improvements $ 3,768 $ -- $ 561 $ 3,207 Buildings 35,175 202 4,139 31,238 Leasehold improvements 400 11 142 269 Machinery and equipment 76,794 3,503 6,030 74,267 -------- ------- ------- ------- $116,137 $3,716 $10,872 $108,981 ========= ======== ======== ========= Year ended October 31, 1992 Land and land improvements $ 3,768 $ -- $ -- $ 3,768 Buildings 33,989 1,208 22 35,175 Leasehold improvements 351 56 7 400 Machinery and equipment 75,573 3,655 2,434 76,794 ------- ------ ------ ------- $113,681 $4,919 $2,463 $116,137 ========= ======== ======== =========
10 11 DUPLEX PRODUCTS INC. AND SUBSIDIARY SCHEDULE VI - ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT, AND EQUIPMENT (Dollar amounts in thousands)
Additions Balance at charged to Balance at beginning costs and end of of year expenses Retirements year ---------- ----------- ----------- ----------- Year ended October 29, 1994 Land and land improvements $ 720 $ 74 $ 220 $ 574 Buildings 13,900 1,128 2,528 12,500 Leasehold improvements 182 21 17 186 Machinery and equipment 49,668 4,390 3,147 50,911 -------- -------- ---------- --------- $64,470 $5,613 $5,912 $64,171 ======= ======== ========== ========= Year ended October 30, 1993 Land and land improvements $ 750 $ 84 $ 114 $ 720 Buildings 14,428 1,208 1,736 13,900 Leasehold improvements 278 42 138 182 Machinery and equipment 50,325 5,244 5,901 49,668 ------- ------- ------- ------ $65,781 $6,578 $7,889 $64,470 ======= ======= ======= ======= Year ended October 31, 1992 Land and land improvements $ 650 $ 100 $ -- $ 750 Buildings 13,040 1,401 13 14,428 Leasehold improvements 231 52 5 278 Machinery and equipment 47,051 5,630 2,356 50,325 -------- ------ ------ ------- $60,972 $7,183 2,374 $65,781 ======= ====== ====== =======
Note: For financial reporting purposes, depreciation is based on the following estimated useful lives of assets: Land improvements 5 to 10 years Buildings and improvements 5 to 40 years Machinery and equipment 3 to 15 years Furniture and fixtures 5 to 15 years Automotive equipment 4 to 5 years Leasehold improvements Lives of leases
11 12 DUPLEX PRODUCTS INC. AND SUBSIDIARY SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (Dollar amounts in thousands)
Additions Deductions Balance at charged to from reserves Balance beginning costs and ---------------------- at end Description of year expenses Description Amount of year - ----------- ---------- ---------- ----------- ------ -------- Year ended October 29, 1994 Allowance for Accounts doubtful accounts $800 $367 charged off $452 $715 Reserve for inventory -- 1,350 -- 1,350 Year ended October 30, 1993 Allowance for Accounts doubtful accounts 900 256 charged off 356 800 Year ended October 31, 1992 Allowance for Accounts doubtful accounts 1,200 196 charged off 496 900
12 EX-3.B 2 AMENDED BYLAWS 1 DUPLEX PRODUCTS INC. AND SUBSIDIARY EXHIBIT 3(b) BYLAWS ARTICLE I OFFICES SECTION 1. The principal office shall be in the City of Wilmington, County of New Castle, State of Delaware. SECTION 2. The corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the corporation may require. ARTICLE II MEETINGS OF SHAREHOLDERS SECTION 1. Meetings of the shareholders for the election of directors or for any other purpose may be held at such time and place within or without the State of Delaware as shall be determined by the Board of Directors and which shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. SECTION 2. Written notice of the annual meeting shall be given to each shareholder entitled to vote thereat not less than ten nor more than sixty days before the date of the meeting. SECTION 3. The officer, or other person, corporation or company who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every election of directors, a complete list of the shareholders entitled to vote at said election, arranged in alphabetical order, showing the address of and the number of shares registered in the name of each shareholder. Such list shall be open to the examination of any shareholder, during ordinary business hours, for a period of at least ten days prior to the election, either at a place within the city, town, or village where the election is to be held, which place shall be specified in the notice of the meeting, or, if not specified, at the place where said meeting is to be held, and the list shall be produced and kept at the time and place of election during the whole time thereof, and subject to the inspection of any shareholder who may be present. SECTION 4. Written notice of a special meeting of shareholders, stating the time, place and object thereof, shall be given to each shareholder entitled to vote thereat not less than ten nor more than sixty days before the date fixed for the meeting. SECTION 5. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the shareholders for the transaction of business except as otherwise provided by statute or by the Certificate of Incorporation. If, however, such quorum shall not be present or represented at any meeting of the shareholders, the shareholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such 1 2 adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. SECTION 6. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the Certificate of Incorporation, a different vote is required in which case such express provision shall govern and control the decision of such question. SECTION 7. Each shareholder shall at every meeting of the shareholders be entitled to one vote in person or by proxy for each share of the capital stock having voting power held by such shareholder but no proxy shall be voted on after three years from its date, unless the proxy provides for a longer period, and, except where the transfer books of the corporation have been closed or a date has been closed or a date has been filed as a record date for the determination of its shareholders entitled to vote, no share of stock shall be voted on at any election for directors which has been transferred on the books of the corporation within twenty days next preceding such election of directors. ARTICLE III DIRECTORS SECTION 1. The number of directors of the corporation shall be not less than three (3) and not more than fifteen (15) and within that variable range shall be the number of directors set from time to time by resolution of the Board of Directors. Each director shall hold office in accordance with the provisions of Article Eleventh of the Certificate of Incorporation of the corporation and shall serve until his or her successor shall have been duly elected and qualified. SECTION 2. The Board of Directors of the corporation may hold meetings, both regular and special, either within or without the State of Delaware. SECTION 3. The first meeting of each newly elected Board of Directors shall be held without other notice than this bylaw immediately after the annual meeting of shareholders at such place as said directors shall determine. SECTION 4. Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the Board. SECTION 5. Special meetings of the Board may be called by the president on three days' notice to each director, either personally or by mail or by telegram; special meetings shall be called by the president or secretary in like manner and on like notice on the written request of three directors. SECTION 6. At all meetings of the Board, four directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the Certificate of Incorporation. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. 2 3 SECTION 7. Unless otherwise restricted by the Certificate of Incorporation or these bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if a written consent thereto is signed by all members of the Board or of such committee as the case may be, and such written consent is filed with the minutes of proceeding of the Board or committee. SECTION 8. Unless otherwise restricted by the Certificate of Incorporation or these bylaws, members of the Board of Directors, or of any committee thereof, may participate in a meeting of such Board of Directors or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 8 shall constitute presence in person at such meeting. SECTION 9. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any directors from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. ARTICLE IV NOTICES SECTION 1. Notices to directors and shareholders shall be in writing and delivered personally or mailed to the directors or shareholders at their addresses appearing on the books of the corporation. Notice by mail shall be deemed to be given at the time when the same shall be mailed. Notice to directors may also be given by telegram. SECTION 2. Whenever any notice is required to be given under the provisions of the statutes or of the Certificate of Incorporation or of these bylaws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. ARTICLE V OFFICERS SECTION 1. The officers of the corporation shall be chosen by the Board of Directors and shall be a Chairman of the Board, President, a Vice President, a Secretary and a Treasurer. The Board of Directors may also choose additional Vice Presidents, and one or more Assistant Secretaries and Assistant Treasurers. Two or more offices may be held by the same person, except that the same person may not hold the offices of Chairman of the Board and Secretary, or President and Secretary. The Board may from time to time by resolution designate one of the officers of the corporation as Chief Executive Officer (CEO), Chief Operations Officer (COO) or Chief Financial Officer (CFO). SECTION 2. The Board of Directors at its first meeting after each annual meeting of shareholders shall choose a Chairman of the Board and shall choose a President from among the directors, and shall choose one or more Vice Presidents, a Secretary, and a Treasurer, none of whom need be a member of the Board. SECTION 3. The Board of Directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall 3 4 exercise such powers and perform such duties as shall be determined from time to time by the Board. SECTION 4. The salaries of all officers and agents of the corporation shall be fixed by the Board of Directors. SECTION 5. The officers of the corporation shall hold office until their successors are chosen and qualify. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors. Any vacancy occurring in any office of the corporation shall be filled by the Board of Directors. CHAIRMAN OF THE BOARD SECTION 6. The Chairman of the Board shall preside at all meetings of the shareholders and of the directors, except where by law the signature of the President is required. The Chairman shall possess the same power as the President to sign all certificates, contracts, and other instruments of the corporation which may be authorized by the Board of Directors. In the absence or disability of the President, the Chairman of the Board shall assume the duties of the President of the corporation and shall be responsible for the general management of the business of the corporation. THE PRESIDENT SECTION 7. The President shall be responsible for the general management of the business of the corporation. The President shall execute bonds, mortgages, and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the corporation. The President shall vote all shares of any other corporation standing in the name of the corporation. The President shall in the absence of the Chairman of the Board preside at all meetings of the shareholders and the Board of Directors. THE VICE PRESIDENTS SECTION 8. The Vice President, or if there shall be more than one, the Vice Presidents in the order determined by the Board of Directors, shall, in the absence or disability of the President, perform the duties and exercise the powers of the President including the power to vote all shares of stock of any other corporation standing in the name of the corporation and shall perform such other duties and have such powers as the Board of Directors may from time to time prescribe. THE SECRETARY AND ASSISTANT SECRETARIES SECTION 9. The Secretary shall attend all meetings of the Board of Directors and all meetings of the shareholders and record all the proceedings of the meetings of the corporation and of the Board of Directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. The Secretary shall give, or cause to be given, notice of all meetings of the shareholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or President, under whose supervision the Secretary shall be. The Secretary shall keep in safe custody the seal of the corporation and, when authorized by the Board of Directors, affix the same to any instrument requiring it and, when so affixed, it shall be attested by the Secretary's signature or by the signature of an Assistant Secretary. 4 5 SECTION 10. The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the Board of Directors, shall , in the absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. THE TREASURER AND ASSISTANT TREASURERS SECTION 11. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his transactions as Treasurer and of the financial condition of the corporation. If required by the Board of Directors, the Treasurer shall give the corporation a bond (which shall be renewed every six years) in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement, or removal from office, of all books, papers, vouchers, money, and other property of whatever kind in his possession or under his control belonging to the corporation. SECTION 12. The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurers in the order determined by the Board of Directors, shall, in the absence of or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. ARTICLE VI CERTIFICATES OF STOCK SECTION 1. Every holder of stock in the corporation shall be entitled to have a certificate, signed by, or in the name of the corporation by, the Chairman of the Board, the President or a Vice President, and the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the corporation, certifying the number of shares owned by him in the corporation. If the corporation shall be authorized to issue more than one class of stock, or more than one series of any class, the designations, preferences and relative, participating, optional, or other special rights of each class of stock or series thereof and the qualifications, limitations, or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the corporation shall issue to represent such class of stock; provided, however, that except as otherwise provided in Section 194 of the General Corporation Law of Delaware, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, a statement that the corporation will furnish without charge to each stockholder who so requests, the designations, preferences and relative, participating, optional, or other special rights of each class of stock or series thereof and the qualifications, limitations, or restrictions of such preferences and/or rights. 5 6 SECTION 2. Where a certificate is signed (1) by a transfer agent or an assistant transfer agent or (2) by a transfer clerk acting on behalf of the corporation and a registrar, the signature of any such Chairman of the Board, President, Vice President, Treasurer, Assistant Treasurer, Secretary, or Assistant Secretary may be a facsimile. In case any officer or officers who have signed, or whose facsimile signature or signatures have been used on, any such certificate or certificates shall cease to be such officer or officers of the corporation, whether because of death, resignation, or otherwise, before such certificate or certificates have been delivered by the corporation, such certificate or certificates may nevertheless be adopted by the corporation and be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures have been used thereon had not ceased to be such officer or officers of the corporation. LOST CERTIFICATES SECTION 3. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost or destroyed. TRANSFERS OF STOCK SECTION 4. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment, or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction upon its books. CLOSING OF TRANSFER BOOKS SECTION 5. The Board of Directors may close the stock transfer books of the corporation for a period not exceeding sixty days nor less than ten days preceding the date of any meeting of shareholders or the date for payment of any dividend or the date for the allotment of rights or the date when any change or conversion or exchange of capital stock shall go into effect. In lieu of closing the stock transfer books as aforesaid, the Board of Directors may fix in advance a date, not exceeding sixty days nor less than ten days preceding the date of any meeting of shareholders, or the date for the payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, as a record date for the determination of the shareholders entitled to notice of, and to vote at, any such meeting, and any adjournment thereof, or entitled to receive payment of any such dividend, or to any such allotment of rights, or to exercise the rights in respect of any such change, conversion or exchange of capital stock, and in such case such shareholders and only such shareholders as shall be shareholders of record on the date so fixed shall be entitled to such notice of, and to vote at, such meeting and any adjournment thereof, or to receive payment of such dividend, or to receive such allotment of rights, or to exercise such rights, as the case may be notwithstanding any transfer of any stock on the books of the corporation after any such record date fixed as aforesaid. 6 7 REGISTERED STOCKHOLDERS SECTION 6. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. ARTICLE VII GENERAL PROVISIONS DIVIDENDS SECTION 1. Dividends upon the capital stock of the corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation. ANNUAL STATEMENT SECTION 2. The Board of Directors shall present at each annual meeting, and at any special meeting of the shareholders when called for by vote of the shareholders, a full and clear statement of the business and condition of the corporation. CHECKS SECTION 3. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. FISCAL YEAR SECTION 4. The fiscal year of the corporation shall end on the last Saturday of October of each year. Any change in such fiscal year shall be fixed by resolution of the Board of Directors. SEAL SECTION 5. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization, and the words "Corporate Seal, Delaware." The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. 7 8 ARTICLE VIII AMENDMENTS SECTION 1. These bylaws may be altered, amended, or repealed or new bylaws may be adopted by the shareholders or by the Board of Directors, when such power is conferred upon the Board of Directors by the Certificate of Incorporation at any regular meeting of the shareholders or of the Board of Directors, or at any special meeting of the shareholders or of the Board of Directors or at any special meeting of the shareholders or of the Board of Directors or if notice of such alteration, amendment, repeal, or adoption of new bylaws be contained in the notice of such special meeting. If the power to adopt, amend, or repeal bylaws is conferred upon the Board of Directors by the Certificate of Incorporation it shall not divest or limit the power of the shareholders to adopt, amend, or repeal bylaws. ARTICLE IX INDEMNIFICATION SECTION 1. The corporation shall indemnify any and all of its directors or officers or former directors or officers or any person who may have served at its request as a director or officer of another corporation in which it owns shares of capital stock or of which it is a creditor who was or is threatened to be made a party to any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative, or investigative, against expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit, or proceeding, to the extent and under the circumstances permitted by the General Corporation Law of the State of Delaware. Such indemnification (unless ordered by a court) shall be made as authorized in a specific case upon a determination that indemnification of a director, officer, employee, or agent is proper in the circumstances because he has met the applicable standards of conduct set forth in the General Corporation Law of the State of Delaware. Such determination shall be made (1) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit, or proceeding, or (2) if such quorum is not obtainable, or even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (3) by the shareholders. Any and all expenses incurred in defending such action, suit, or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit, or proceeding as authorized by the Board of Directors in the specific case upon receipt of an undertaking by or on behalf of the person or his or her agent to repay such amount unless it shall ultimately be determined that he or she is entitled to be indemnified by the corporation as authorized in this section. The foregoing right of indemnification shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of shareholders or disinterested directors, or otherwise, and shall continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executor and administrator of such a person. 8 EX-11 3 COMPUTATION OF EARNINGS 1 DUPLEX PRODUCTS AND SUBSIDIARY EXHIBIT 11 COMPUTATION OF EARNINGS PER SHARE Fiscal year ended --------------------------------------- October 29, October 30, October 31, 1994 1993 1992 --------- ---------- ---------- Weighted average number of common shares outstanding used in computing 7,593,625 7,731,740 7,765,865 earnings per share Primary and fully diluted earnings (loss) per share before accounting changes $(1.19) $0.19 $(0.07) Cumulative effect of accounting changes per share (0.93) 0.13 -- ----- ---- ------ Earnings (loss) per share $(2.12) $0.32 $(0.07) ====== ===== ======
1 EX-13 4 ANNUAL REPORT FINANCIALS 1 EXHIBIT 13 CONSOLIDATED STATEMENT OF OPERATIONS
For years ended (In thousands, except per-share data) OCTOBER 29, 1994 October 30, 1993 October 31, 1992 ------------------ ---------------- ---------------- NET SALES $265,791 $258,867 $270,093 Cost of goods sold 204,062 194,977 201,853 -------- -------- -------- GROSS PROFIT 61,729 63,890 68,240 Selling, general, and administrative expenses 66,020 61,039 63,119 Restructuring costs 10,500 1,500 7,000 -------- -------- ------- OPERATING PROFIT (LOSS) (14,791) 1,351 (1,879) Other income (expense) Interest expense (469) (590) (712) Investment income 491 632 901 Other 22 838 376 ------- ------- ------ 44 880 565 ------- ------- ------ EARNINGS (LOSS) BEFORE INCOME TAXES AND ACCOUNTING CHANGES (14,747) 2,231 (1,314) Provision for income taxes (credits) (5,704) 777 (751) ------- ------- ------ EARNINGS (LOSS) BEFORE ACCOUNTING CHANGES (9,043) 1,454 (563) Cumulative effect of accounting changes (7,084) 1,000 -- ------- ------- ------ NET EARNINGS (LOSS) $(16,127) $ 2,454 $ (563) ======= ======= ====== EARNINGS (LOSS) PER SHARE BEFORE ACCOUNTING CHANGES $ (1.19) $ 0.19 $ (0.07) Cumulative effect of accounting changes (0.93) 0.13 -- -------- ------- -------- NET EARNINGS (LOSS) PER SHARE $ (2.12) $ 0.32 $ (0.07) ======== ======== ========
The following pro forma information reflects the Company's results for 1993 and 1992 as if the revenue recognition change discussed in note 1 to the consolidated financial statements had been retroactively applied.
For years ended (In thousands, except per-share data) October 30, 1993 October 31, 1992 ---------------- ---------------- Net earnings (loss) $1,966 $(462) Net earnings (loss) per share 0.25 (0.06)
The notes to consolidated financial statements on pages 18-25 are an integral part of this statement. 12 2 CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(In thousands) OCTOBER 29, 1994 October 30, 1993 - ----------------- ---------------- ---------------- ASSETS CURRENT ASSETS Cash and equivalents $ 16,337 $ 18,419 Accounts and notes receivable (note 2) 48,046 76,021 Inventories (note 3) 27,530 9,107 Income tax refund receivable 2,998 1,537 Deferred income taxes (note 8) 10,245 3,500 --------- --------- TOTAL CURRENT ASSETS 105,156 108,584 PROPERTY, PLANT, AND EQUIPMENT--NET (NOTE 4) 37,000 44,511 OTHER ASSETS 4,052 2,964 --------- --------- TOTAL ASSETS $146,208 $156,059 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Current portion of long-term debt (note 5) $ 1,222 $ 1,562 Accounts payable 11,526 10,505 Accrued expenses (note 7) 20,894 13,145 --------- --------- TOTAL CURRENT LIABILITIES 33,642 25,212 --------- --------- LONG-TERM DEBT (NOTE 5) 5,928 7,150 --------- --------- DEFERRED LIABILITIES AND CREDITS Compensation plan cost 2,411 2,328 Income taxes (note 8) 4,148 3,972 Other 40 134 --------- --------- TOTAL DEFERRED LIABILITIES AND CREDITS 6,599 6,434 --------- --------- SHAREHOLDERS' EQUITY Common stock (8,304 and 8,449 shares issued, respectively) 8,304 8,449 Additional paid-in capital 4,333 5,854 Common stock held in treasury (5,809) (5,809) Unamortized value of restricted stock issued (648) (1,217) Retained earnings 93,859 109,986 --------- --------- TOTAL SHAREHOLDERS' EQUITY (NOTES 9, 10, AND 11) 100,039 117,263 --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $146,208 $156,059 ========= =========
The notes to consolidated financial statements on pages 18-25 are an integral part of this statement. 13 3 CONSOLIDATED STATEMENT OF CASH FLOWS
For years ended (In thousands) OCTOBER 29, 1994 October 30, 1993 October 31, 1992 - ------------------------------ ---------------- ---------------- ---------------- CASH FLOWS FROM OPERATING ACTIVITIES Net earnings (loss) $(16,127) $ 2,454 $ (563) Adjustments to reconcile net earnings (loss) to cash provided (used) by operating activities Depreciation and amortization 5,613 6,578 7,183 Restructuring costs 10,500 1,500 7,000 Deferred income taxes (6,569) 485 (2,613) Deferred investment credits (94) (122) (166) Provision for doubtful accounts 348 256 196 Gain on sale of fixed assets (115) (732) (370) (Increase) decrease in accounts and notes receivable 27,627 (8,261) 3,214 (Increase) decrease in inventories (18,423) 1,399 2,153 Increase in income tax refund receivable (1,461) (1,537) -- Increase (decrease) in accounts payable 1,021 1,155 (939) Decrease in accrued restructuring costs (3,759) (4,921) (1,771) Increase (decrease) in other accrued expenses 1,008 (905) (2,263) Decrease in income taxes -- -- (1,426) Other operating activities 646 1,328 574 -------- -------- ------- NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 215 (1,323) 10,209 -------- -------- ------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (2,848) (3,716) (4,919) Net proceeds from sale of assets 3,528 3,715 459 -------- -------- ------- NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 680 (1) (4,460) -------- -------- ------- CASH FLOWS FROM FINANCING ACTIVITIES Repayment of long-term debt (1,562) (1,731) (2,117) Dividends paid -- -- (3,729) Restricted stock repurchased--net (1,415) (852) (216) -------- -------- ------- NET CASH USED BY FINANCING ACTIVITIES (2,977) (2,583) (6,062) -------- -------- ------- DECREASE IN CASH AND EQUIVALENTS DURING YEAR (2,082) (3,907) (313) Cash and equivalents at beginning of year 18,419 22,326 22,639 -------- -------- ------- CASH AND EQUIVALENTS AT END OF YEAR $16,337 $18,419 $22,326 ======== ======== ======= Other cash flow information Cash paid for interest $ 509 $ 637 $ 783 Cash paid for income taxes -- 103 3,621
The notes to consolidated financial statements on pages 18-25 are an integral part of this statement. 14 4 MANAGEMENT'S DISCUSSION OF OPERATIONS The Company reported a net loss of $16.1 million ($2.12 per share) in 1994 compared with net income of $2.5 million ($0.32 per share) in 1993 and a net loss of $0.6 million ($0.07 per share) in 1992. Two important factors should be considered in assessing the Company's results over the past three years--restructuring provisions and the effect of accounting changes. Each of these factors is discussed below. - -- Restructuring provisions of $10.5 million, $1.5 million, and $7.0 million before taxes were recorded in 1994, 1993, and 1992, respectively. These provisions were made to cover costs of programs designed to enhance the Company's competitiveness by closing, downsizing, and streamlining certain production, service, sales, and administrative facilities. See note 7 to the consolidated financial statements for further information on restructuring. - -- In 1994, the Company changed its revenue recognition policy for certain custom forms. The Company elected to make this change, which increased the net loss for the year by $7.7 million, because it more accurately reflects current operations and is expected to improve cash flow. Note 1 to the consolidated financial statements contains additional information regarding this change. Accounting changes also included the 1993 adoption of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," which had the effect of increasing net earnings by $1.0 million. Excluding the effect of the above restructuring provisions and accounting changes, 1994's net loss was $2.0 million ($0.26 per share) as contrasted with net income in 1993 and 1992 of $2.4 million ($0.31 per share) and $3.7 million ($0.48 per share), respectively. The decline in profitability in 1994 from 1993 resulted principally from above-normal price discounting, significant increases in bond paper costs, and higher selling expenses. These items were partially offset by higher sales, improved manufacturing productivity, and margin gains associated with the outsourcing of certain products. Comparing performance in 1993 with 1992, earnings dropped primarily because of a decline in revenues and higher paper costs, which were partially offset by productivity gains in manufacturing and administrative cost reductions. Net sales during 1994 totaled $265.8 million, up 3% from $258.9 million in 1993, which was 4% lower than in 1992. The sales gain in 1994 represented the first year-over-year increase since 1989. The 1994 improvement primarily reflected higher label, custom unit set, and electronic printing and mailing revenues, with volume gains more than offsetting the impact of higher-than-normal price discounting. Net sales in 1993 were down from 1992 primarily because of a decline in physical volume of shipments, principally reflecting a reduction in demand for continuous forms, offset, in part, by higher label and cutsheet volume. The U.S. business forms market (approximately $8 billion currently) has declined moderately over the past three years. This reflects a reduction in the use of paper-based business information systems and growing utilization of laser printers, personal computers, and other office automation technologies. Deflationary pricing conditions in some product lines also have affected revenues during this period, reflecting over-capacity and a heightened level of competitiveness in the forms industry. Demand for continuous forms and unit sets, in particular, has dropped, while revenues for pre-printed cutsheets, pressure-sensitive labels, and forms management, distribution, and reporting services have increased. The Company's historical marketing strategy involved selling business forms to a broad variety of industry segments. Duplex is now transitioning to a markets served strategy in which it will provide a wide spectrum of custom services along with paper and electronic-based solutions to accommodate the efficient and cost-effective flow of business information within specific market areas. Consistent with this change in direction, the Company, in 1994, expanded its electronic printing and mailing centers in Chicago, Illinois and Baltimore, Maryland, and established a West Coast facility through the acquisition of certain assets of Statement Technologies, Inc. based in Sacramento, California. In addition, a broad range of new services and technologies have been added recently to complement the existing spectrum of traditional business forms, including personal computer-based requisitioning software, forms automation solutions, a check fraud prevention program, and information process analysis. 15 5 MANAGEMENT'S DISCUSSION OF OPERATIONS Gross profit as a percentage of net sales was 23.2% in 1994 compared with 24.7% in 1993 and 25.3% the previous year. The gross margin rate decline in 1994 was due primarily to lower selling prices and increases in material costs, particularly paper, which were partially offset by improved manufacturing productivity and the positive impact of increased outsourcing of products. The drop in the gross margin ratio in 1993 versus 1992 was driven primarily by paper cost increases, partially offset by manufacturing productivity gains as well as the benefits of product outsourcing. Over the past three years, the Company significantly reduced manufacturing and operating expenses by closing down six plants, streamlining various business service centers, and reducing administrative employment. These actions resulted in a 27% reduction in the total number of Company employees. During the 1992-1994 period, the Company expanded its program of using outside strategic partners to provide products that are not cost competitive to manufacture in-house. Reflecting this, sales of outsourced products in 1994 ($69.3 million--26% of total revenues) increased 47% from 1993 and 71% from 1992, giving rise to improved margins. During 1994, inroads were made in reducing paper waste, and efforts to improve plant labor productivity delivered good results. Also during the past year, a $6.0 million capital expenditure program to upgrade manufacturing equipment was initiated. This program, which will benefit material and labor cost productivity, will be completed in 1995. The cost of paper, the Company's principal raw material, fluctuated dramatically in 1994, with bond paper prices increasing approximately 70% from May to December. Selling prices of Company products were adjusted to reflect these increases; however, pressure on margins continues, reflecting the highly competitive nature of the marketplace. While bond paper currently is in short supply, the Company expects to be able to meet customer requirements as a result of its long-standing relationship with suppliers and through adjustments to product mix. Selling, general, and administrative expenses aggregated $66.0 million in 1994, an increase of $5.0 million from $61.0 million in 1993, which was $2.1 million lower than in 1992. The increase in 1994 reflected higher selling and training expenses and incremental costs related to the development and management of new products and services. In 1993, expenses decreased from 1992's level primarily as a result of reductions in employment levels at headquarters. Other income was down $0.8 million in 1994 primarily because there was no counterpart to the 1993 gain on the sale of real estate and equipment associated with the closing of certain plants. Other income in 1993 ($0.9 million) was $0.3 million higher than in 1992 principally because of the level of gain related to the disposition of assets. The 1994 income tax provision was a credit balance of $5.7 million ($3.1 million current; $2.6 million deferred), the current portion of which can be applied against prior years' taxable earnings. The effective tax rate for 1994 was a credit of 39% compared with a charge of 35% in 1993 and a credit of 57% in 1992. See note 8 to the consolidated financial statements for a reconciliation of the U.S. federal statutory tax rate with the effective tax rate. 16 6 MANAGEMENT'S DISCUSSION OF LIQUIDITY AND CAPITAL RESOURCES Net working capital at October 29, 1994 was $71.5 million compared with $83.4 million at the previous year-end. The current ratio at the end of 1994 remained strong at 3.1 to 1, although down from 4.3 to 1 at the conclusion of 1993. The decline in net working capital in 1994 was due primarily to the effect of the previously discussed revenue recognition change and increases in restructuring cost accruals. Management believes this lower level of working capital will be adequate to cover the Company's liquidity needs related to normal operations, both currently and in the foreseeable future. Sufficient resources are deemed to exist to support the Company's growth through a combination of currently available cash, cash to be generated from future operations, or additional short-term borrowings. The Company's total debt at the end of 1994 was $7.2 million compared with $8.7 million at the previous year-end. Total debt as a percentage of total capital was 6.7% at year-end 1994, 0.2 points lower than at the end of 1993. Cash and equivalents aggregated $16.3 million at the end of 1994, down $2.1 million from year-end 1993. During 1994, the Company generated $0.2 million in cash from operating activities, up $1.5 million from 1993's usage of $1.3 million, which represented a $11.5 million drop compared with the previous year. Operating cash flow increased in 1994 from the prior year principally because of variations in accounts receivable levels (excluding the effect of the revenue recognition change), partially offset by the decline in earnings before restructuring costs and accounting changes. Higher accounts receivable at year-end 1993 was the main reason for the operating cash flow drop in 1993 compared with 1992. Capital expenditures totaled $2.8 million in 1994 compared with $3.7 million and $4.9 million in 1993 and 1992, respectively. Expenditures for plant and equipment are expected to total about $7.5 million for 1995. Net cash used by financing activities was $3.0 million in 1994, $2.6 million in 1993, and $6.1 million in 1992. Financing activities consumed less cash in 1993 than in 1992 primarily because of the absence of a counterpart to the dividend payment of $3.7 million made in 1992. Dividends were not declared in 1994. 17 7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in thousands, except per-share data) NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Consolidation. The consolidated financial statements represent the accounts of the Company and its wholly-owned subsidiary after elimination of intercompany transactions and balances. Fiscal Year. The Company's fiscal year ends on the last Saturday in October. The fiscal years ended October 29, 1994, October 30, 1993, and October 31, 1992 contained fifty-two, fifty-two, and fifty-three weeks, respectively. Revenue Recognition. The Company recognizes revenue when product is shipped or, for custom forms stored for future delivery, when manufacturing is complete and the product is invoiced, with payment due in the normal course of business. Prior to the year ended October 29, 1994, the Company recorded sales for certain stored custom forms upon completion of the production process and customer acceptance. The Company changed the method of recognizing revenue for certain custom forms in order to better manage cash flow, increase the turnover of working capital, and lower costs associated with managing receivable levels. The Company believes this accounting policy change is preferable in that it more accurately reflects current operations. This change had the effect of increasing the Company's 1994 net loss by $7,719 ($1.02 per share), which consisted of the cumulative effect of the change for periods prior to 1994 of $7,084 ($0.93 per share) plus its impact ($635, or $0.09 per share) on the 1994 loss before the accounting change. Cash Equivalents. The Company considers all highly liquid debt instruments purchased with original maturities of three months and less to be cash equivalents. Inventories. Inventories are stated as the lower of cost or market. Cost for substantially all of the Company's inventories is based on the last-in, first-out (LIFO) method. Depreciation and Amortization. For financial reporting purposes, the cost of plant and equipment is depreciated primarily using the straight-line method over the estimated useful lives of the assets. Depreciation for income tax purposes is computed using accelerated methods. Earnings per Share. Earnings per share are based on the weighted average number of common shares outstanding each period. Fair Value of Financial Instruments. Recorded amounts for financial instruments approximate fair values. NOTE 2--ACCOUNTS AND NOTES RECEIVABLE The decline in the accounts and notes receivable balance from October 30, 1993 to October 29, 1994 occurred primarily because of the revenue recognition change discussed in note 1. The Company's provision for doubtful accounts and notes receivable at October 29, 1994 and October 30, 1993 was $715 and $800, respectively. NOTE 3--INVENTORIES
OCT. 29, 1994 Oct. 30, 1993 ------------- ------------- Raw materials $ 7,380 $10,341 Work in process 2,419 2,652 Finished goods 24,680 4,448 ------- ------- 34,479 17,441 Less revaluation to LIFO (6,949) (8,334) ------- ------- $27,530 $ 9,107 ======= =======
The increase in finished goods inventories at October 29, 1994 compared with October 30, 1993 resulted principally from the revenue recognition change discussed in note 1. The LIFO revaluation decreased $1,385 in 1994 compared with decreases of $55 and $702 in 1993 and 1992, respectively. The 1994 decrease resulted from price decreases totaling $2,034, which were partially offset by quantity increases of $649. 18 8 NOTE 4--PROPERTY, PLANT, AND EQUIPMENT
Oct. 29, 1994 Oct. 30, 1993 ------------- ------------- ORIGINAL COST Land, improvements, and leaseholds $ 2,393 $ 3,476 Buildings 25,944 31,238 Machinery and equipment 72,834 74,267 ---------- ---------- 101,171 108,981 LESS ACCUMULATED DEPRECIATION AND AMORTIZATION (64,171) (64,470) ---------- ---------- $ 37,000 $ 44,511 ========== ==========
Fixed assets ($1,333) which were idle as of October 29, 1994 were classified as other assets. NOTE 5--DEBT
Oct. 29, 1994 Oct. 30, 1993 ------------- ------------- MORTGAGE NOTES Interest rate Maturities 8-1/4% to 8-7/10% 1995-1997 $ 790 $ 1,030 2% 1995-1997 60 82 63% of prime rate (a) 1994 -- 350 75% of prime rate (a) 1995-2002 3,750 4,350 -------- -------- 4,600 5,812 CAPITALIZED LEASE 2,550 2,900 -------- -------- 7,150 8,712 LESS CURRENT MATURITIES (1,222) (1,562) -------- -------- $ 5,928 $ 7,150 ======== ========
(a) Prime rate at October 29, 1994 was 7-3/4%. Aggregate amounts of long-term borrowings (excluding the capitalized lease) that mature during the next five years are as follows: 1995 ................ $872 1998 ................ $600 1996 ................ 883 1999 ................ 600 1997 ................ 895
At October 29, 1994, a revolving line of credit of $10,000 was available to the Company. During 1994, the Company did not borrow under this credit facility, and related commitment fees were immaterial. NOTE 6--LEASE COMMITMENTS The Company has entered into operating leases for certain plant and office facilities and equipment which expire over the next eight years. Rental expenses under these leases aggregated $6,400, $6,110, and $6,021 in 1994, 1993, and 1992, respectively. Shown below are minimal rental commitments under capitalized and operating leases at October 29, 1994.
Capitalized Operating lease leases ----------- --------- 1995 $ 533 $ 7,485 1996 508 6,373 1997 483 4,947 1998 458 3,108 1999 433 1,717 Later years 898 2,274 ------- ------- Total minimum lease payments 3,313 $25,904 ======= Less interest at 7.25% (763) ------- Present value of minimum lease payments $ 2,550 =======
19 9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in thousands, except per-share data) NOTE 7--ACCRUED EXPENSES Oct. 29, 1994 Oct. 30, 1993 ------------- ------------- Restructuring costs $10,549 $ 3,808 Compensation 7,145 5,873 Insurance 800 1,200 Other 2,400 2,264 ------- ------- $20,894 $13,145 ======= =======
During the second quarter of 1994, the Company recorded a $12,000 pretax charge related to the restructuring of the Company's operations. The objectives of this program are to sharpen the Company's marketing and product focus, enhance cost competitiveness, improve margins, and streamline sales, manufacturing, and administrative functions. The restructuring charge consisted of approximately $8,800 of anticipated cash payments related primarily to employee termination benefits associated with staff reductions totaling 15% of the employee workforce, and approximately $3,200 of non-cash write-downs of real estate and operating assets. In the fourth quarter of 1994, the Company reviewed the status of the restructuring plan, and decided to retain certain facilities which previously were planned to be relocated or closed. In addition, it was decided to expand the realignment of the sales and administrative organizations. Based on these decisions, the restructuring charge was reduced by $1,500 (affecting cash and non-cash amounts by $1,256 and $244, respectively). During 1994, cash payments of $1,688 were made, and non-cash transactions aggregated $214. The remaining expenditures and non-cash transactions are expected to occur over the next two years. In the fourth quarter of 1993, a restructuring provision of $1,500 was established to cover severance and other costs associated with corporate staff reductions. Cash outlays in 1994 and 1993 totaled $677 and $770, respectively, and remaining expenditures of approximately $53 are anticipated to be incurred in 1995. In the fourth quarter of 1992, a restructuring reserve of $7,000 was recorded to cover costs associated with closing two manufacturing plants and the scaling back of other operations. A summary of 1994 and 1993 cash and non-cash activity related to the provision appears in the following table. Cash Payments Non-cash transactions ------------- --------------------- 1994 $1,173 $ -- 1993 3,576 321
The Company expects to incur future expenditures of approximately $1,930, primarily related to long-term leases. 20 10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in thousands except per-share data) NOTE 8--INCOME TAXES PROVISION FOR INCOME TAXES (CREDITS)
Oct. 29, Oct. 30, Oct. 31, For years ended 1994 1993 1992 - --------------- -------- -------- -------- CURRENT Federal $(3,203) $ (427) $ 1,453 State 55 (206) 508 Puerto Rico 47 25 18 ------- ------ ------- (3,101) (608) 1,979 ------- ------ ------- DEFERRED Restructuring costs (2,507) 1,368 (2,180) Insurance 160 160 60 Vacation pay 80 153 264 Investment tax credits (94) (122) (166) Depreciation (57) (92) (344) Capital losses -- 86 22 Accrued expenses for closed offices 13 20 107 Other (198) (188) (493) ------- ------ ------- (2,603) 1,385 (2,730) ------- ------ ------- $(5,704) $ 777 $ (751) ======= ====== =======
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," was adopted in November 1992. The cumulative effect of adopting this new standard was recorded in the first quarter of 1993 ($1,000 increase in net earnings).
Oct. 29, Oct. 30, For years ended 1994 1993 - --------------- -------- -------- DEFERRED TAX ASSETS Accounting change $ 4,723 $ -- Restructuring costs 3,283 1,523 Insurance 320 480 Vacation pay 584 666 Inventory obsolescence 540 227 Other 795 604 ------- ------ 10,245 3,500 Restructuring costs classified as other assets 1,000 -- ------- ------ $11,245 $3,500 ------- ------ DEFERRED TAX LIABILITIES Depreciation $ 4,882 $4,939 Compensation costs (964) (931) Other 230 (36) ------- ------ $ 4,148 $3,972 ======= ======
The effective tax rate for 1994, 1993, and 1992 was (38.7)%, 34.8%, and (57.2)%, Respectively. Reconciliation of the U.S. federal statutory tax rate (34.0)% with the effective tax rate appears in the following table.
Oct. 29, Oct.30, Oct. 31, 1994 1993 1992 -------- ------- -------- PROVISION FOR INCOME TAXES AT U.S. FEDERAL STATUTORY RATE $(4,980) $ 758 $(447) INCREASE (DECREASE) IN TAXES State taxes, net of federal benefits (510) 171 (96) Investment tax credit (94) (122) (166) Other (120) (30) (42) ------- ----- ----- $(5,704) $ 777 $(751) ======= ===== =====
21 11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in thousands except per-share data) NOTE 9--CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Unamortized Additional Common value of Common paid-in stock held restricted Retained stock capital in treasury stock earnings Total ------ ---------- ----------- ----------- -------- -------- BALANCE AT OCTOBER 26, 1991 $8,509 $5,931 $(5,809) $(1,902) $111,824 $118,553 Net loss -- -- -- -- (563) (563) Dividends declared ($0.48 Per share) -- -- -- -- (3,729) (3,729) Stock issuance, redemption, and amortization under stock plans, net 1 54 -- 109 -- 164 ------ ---------- ----------- ----------- -------- -------- BALANCE AT OCTOBER 31, 1992 8,510 5,985 (5,809) (1,793) 107,532 114,425 Net Earnings -- -- -- -- 2,454 2,454 Stock issuance, redemption, and amortization under stock plans, net (61) (131) -- 576 -- 384 ------ ---------- ----------- ----------- -------- -------- BALANCE AT OCTOBER 30, 1993 8,449 5,854 (5,809) (1,217) 109,986 117,263 Net loss -- -- -- -- (16,127) (16,127) Stock issuance, redemption, and amortization under stock plans, net (145) (1,521) -- 569 -- (1,097) ------ ---------- ----------- ----------- -------- -------- BALANCE AT OCTOBER 29, 1994 $8,304 $4,333 $(5,809) $ (648) $ 93,859 $ 100,039 ====== ========== =========== =========== ======== ========
Authorized shares of common stock ($1.00 par value) total 20,000,000 shares. Common shares issued and outstanding are summarized in the table below.
(in thousands) Oct. 29, 1994 Oct. 30, 1993 Oct. 31, 1992 ------------- ------------- ------------- SHARES OF COMMON STOCK Issued 8,304 8,449 8,510 In treasury (753) (753) (753) ----- ----- ----- Outstanding 7,551 7,696 7,757 ===== ===== =====
The Company has authorized the issuance of 1,000,000 shares of $1.00 par value cumulative convertible preferred stock and 150,000 shares of $1.00 par value Series A convertible preferred shares, but no such shares have been issued. 22 12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in thousands, except per-share data) NOTE 10--SHAREHOLDERS' RIGHTS PLAN On June 8, 1989, the Board of Directors adopted a Shareholders' Rights Plan to deter coercive takeover tactics and to prevent an acquirer from gaining control of the Company without offering a fair price to all of the Company's shareholders. Under the plan, shareholders of record on June 23, 1989 received a dividend distribution of one right for each outstanding share of the Company's common stock. If an acquiring person becomes the beneficial owner of, or commences a tender or exchange offer for 25% or more of the Company's outstanding common stock, each right will entitle the holder (other than such acquiring person) to purchase a unit consisting of one one-hundredth of a share of Series A convertible preferred stock for $80.00 per unit. In addition, if an acquiring person becomes the beneficial owner of more than 30% of the Company's outstanding common stock, or upon the occurrence of certain other events, each right will entitle the holder (other than such acquiring person) to receive, upon exercise, common stock of the Company having a value equal to two times the exercise price of the right, or $160.00. If the Company is acquired in a merger or other business combination in which the Company would not be the surviving corporation, or if 50% or more of the Company's assets or earning power is sold or transferred, each holder shall have the right to receive, upon exercise, common stock of the acquiring corporation having a value equal to two times the exercise price of the right, or $160.00. The Company may redeem the rights in whole for $0.05 per right, under certain circumstances. The rights will expire on June 23, 1999. NOTE 11--EMPLOYEE BENEFIT PLANS The Company's 1984 Incentive Stock Option Plan (which expired on February 23, 1994) provided for the issuance of shares of Company common stock upon the exercise of stock options at prices not less than the market value of the stock as of the date of grant. Unless otherwise specified at the time of grant, all or any portion of the currently outstanding option shares may be exercised at any time during the period commencing one year from the date of grant and ending ten years from the date of grant. The Company's 1993 Incentive Stock Option Plan provided for 500,000 shares of the Company's common stock to be reserved for options that may be issued. The plan also provided that the options' price shall not be less than the market value of the stock at the date of grant. Options may be granted to any key employee of the Company at any time prior to the tenth anniversary of the effective date of the plan. Unless otherwise specified at the time of grant, all or any portion of the option shares may be exercised at any time during the period commencing one year from the date of grant and ending ten years from the date of grant. Options granted under the plan are treated as either incentive stock options or non-qualified stock options for federal income tax purposes. 23 13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in thousands, except per-share data) NOTE 11--EMPLOYEE BENEFIT PLANS A summary of stock option activity under these plans is shown in the following table.
1994 1993 1992 --------------------- ------------------- ----------------- Average Average Average Shares Price Shares Price Shares Price ------- ------- ------- ------- ------- ------- STOCK OPTIONS Outstanding at beginning of year 77,700 $11.39 2,700 $11.88 2,700 $11.88 Granted 190,000 10.22 75,000 11.38 -- -- Exercised -- -- -- -- -- -- Canceled (67,700) 10.55 -- -- -- -- ------- ------- ------- Outstanding at end of year 200,000 10.56 77,700 11.39 2,700 11.88 ======= ======= ======= Exercisable at end of year 15,000 2,700 2,700 Available for grant at end of year 440,000 178,000 192,300
The Company's Restricted Stock Purchase Plan, which expired on February 23, 1994, provided for the Company's common stock to be purchased by a broad range of management level employees at prices established by the Board of Directors. During 1994 and 1993, 145,074 and 60,700 shares, respectively, of stock previously issued under the plan were repurchased at a cost of $1,415 and $852, respectively. During 1992, 16,100 shares were issued at an aggregate purchase price of $25, and 15,800 shares previously issued were repurchased for $241. Plan expense amounted to $102, $187, and $330 in 1994, 1993, and 1992, respectively. There was no activity in the Stock Appreciation Rights Plan in 1994, 1993, or 1992. This plan expired on February 23, 1994. The Employees' Savings and Profit Sharing Plan provides for contributions from both the Company and eligible employees. Company contributions, which cannot exceed 15% of earnings before such payments and federal income taxes, are at the discretion of the Board of Directors. Company contributions to the plan were last made in 1991. During 1989, the Company adopted an unfunded Supplemental Executive Retirement Plan for certain key executives. The plan provides for benefits to supplement those provided under social security and the Employees' Savings and Profit Sharing Plan. At October 29, 1994, the projected benefit obligation associated with the plan totaled $1,008, all of which has been recognized. Plan expense was $209, $140, and $221 in 1994, 1993, and 1992, respectively. In 1994, the Company adopted SFAS No. 106, "Employers' Accounting for Post-retirement Benefits Other Than Pensions." Adopting this new standard did not impact earnings. 24 14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in thousands, except per-share data) NOTE 12--QUARTERLY FINANCIAL DATA (UNAUDITED)
First Quarter Second Quarter Third Quarter Fourth Quarter ------------- -------------- ------------- -------------- 1994 Net sales $65,352 $66,300 $63,959 $70,180 Gross profit 15,982 14,414 15,384 15,949 Operating profit (loss) 129 (14,587) (1,152) 819 Earnings (loss) before accounting changes 38 (8,907) (744) 570 Net earnings (loss) (7,046)(a) (8,907)(b) (744)(c) 570 Per share Earnings (loss) before accounting changes -- (1.17) (0.10) 0.08 Net earnings (loss) (0.92)(a) (1.17)(b) (0.10)(c) 0.08
(a) Reflects $7,184 ($0.94 per share) reduction due to the revenue recognition change discussed in note 1. Originally, net income of $138, or $0.02 per share, was reported. (b) Reflects $391 ($0.05 per share) reduction due to the revenue recognition change discussed in note 1. Originally, net loss of $8,516, or $1.12 per share, was reported. (c) Reflects $211 ($0.03 per share) reduction due to the revenue recognition change discussed in note 1. Originally, net loss of $533, or $0.07 per share, was reported. 1993 Net sales $64,788 $65,145 $61,870 $67,064 Gross profit 16,332 16,315 15,701 15,542 Operating profit (loss) 586 (851) 912 704 Earnings (loss) before accounting changes 401 (430) 637 846 Net earnings (loss) 1,401 (430) 637 846 Per share Earnings (loss) before accounting changes 0.05 (0.05) 0.08 0.11 Net earnings (loss) 0.18 (0.05) 0.08 0.11
The following pro forma information reflects the Company's results by quarter for 1993 as if the revenue recognition change discussed in note 1 had been retroactively applied.
First Quarter Second Quarter Third Quarter Fourth Quarter ------------- -------------- ------------- -------------- 1993 Net earnings (loss) $1,537 $ (523) $ 323 $ 629 Net earnings (loss) per share 0.20 (0.07) 0.04 0.08
Second quarter 1994 operating profit was reduced by restructuring provisions of $12,000 ($7,303, or $0.96 per share, after taxes). In the fourth quarter of 1994, these provisions were reduced by $1,500 resulting in a corresponding increase ($900, or $0.12 per share, after taxes) in operating profit. Operating profit for the second quarter of 1993 was lowered by restructuring charges of $1,500 ($929, or $0.12 per share, after taxes). The cumulative effect of adopting SFAS No. 109 (see note 8) was recorded in the first quarter of 1993, and resulted in an increase of $1,000 ($0.13 per share) in net earnings. 25 15 INDEPENDENT AUDITOR'S REPORT TO THE SHAREHOLDERS OF DUPLEX PRODUCTS INC. We have audited the accompanying consolidated statement of financial position of Duplex Products Inc. and Subsidiary as of October 29, 1994 and October 30, 1993, and the related consolidated statements of operations and cash flows for the years ended October 29, 1994, October 30, 1993, and October 31, 1992. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Duplex Products Inc. and Subsidiary at October 29, 1994 and October 30, 1993 and the consolidated results of their operations and their consolidated cash flows for the years ended October 29, 1994, October 30, 1993, and October 31, 1992 in conformity with generally accepted accounting principles. As discussed in the footnotes, the Company changed its method of accounting for revenue recognition and income taxes for the years ended October 29, 1994 and October 30, 1993, respectively. Grant Thornton LLP Chicago, Illinois December 9, 1994 26 16 SELECTED FINANCIAL DATA
(Dollar amounts in thousands, except per-share data) 1994 1993 1992 1991 1990 ---- ---- ---- ---- ---- Net sales $265,791 $258,867 $270,093 $285,271 $297,647 Earnings (loss) before accounting changes (9,043) 1,454 (563) 4,269 9,516 Net earnings (loss) (16,127) 2,454 (563) 4,269 9,516 Per share Earnings (loss) before accounting changes (1.19) 0.19 (0.07) 0.55 1.23 Net earnings (loss) (2.12) 0.32 (0.07) 0.55 1.23 Dividends declared -- -- 0.48 0.69 0.75 Common stock price range 11-3/4-8-5/8 11-7/8-9-1/4 13-3/4-10 15-1/2-9-3/4 22-9-3/4 Cash and equivalents 16,337 18,419 22,326 22,639 22,270 Working capital 71,514 83,372 77,479 81,370 84,716 Current ratio 3.1:1 4.3:1 3.7:1 3.9:1 4.0:1 Total assets 146,208 156,059 159,138 165,112 167,784 Short-term debt 1,222 1,562 1,731 2,117 3,164 Long-term debt 5,928 7,150 8,712 10,443 12,560 Shareholders' equity 100,039 117,263 114,425 118,553 119,241 Total debt as a percentage of total capital 6.7% 6.9% 8.4% 9.6% 11.7% Common shares outstanding (thousands) 7,551 7,696 7,757 7,756 7,733
The following pro forma information reflects the Company's results for 1993, 1992, 1991, and 1990 as if the revenue recognition change discussed in note 1 to the consolidated financial statements had been retroactively applied.
(Dollar amounts in thousands, except per-share data) 1993 1992 1991 1990 ---- ---- ---- ---- Net earnings (loss) $1,966 $ (462) $4,247 $9,504 Net earnings (loss) per share 0.25 (0.06) 0.55 1.23
27 17 DIRECTORS AND OFFICERS
BOARD OF DIRECTORS CORPORATE OFFICERS John A. Bacon, Jr. Andrew A. Campbell Private Investor Vice President, Finance and Chief Financial Officer Michael J. Birck President and Sue DuChanois Chief Executive Officer, Vice President, Tellabs, Inc. Human Resources David J. Eskra Gerald L. Glawe Private Investor Treasurer George S. Hoban Marc A. Loomer Retired, Former Partner, Vice President, Law Firm of Hinshaw & Culbertson Operations Ben L. McSwiney Nicholas A. Martellotto President and Chief Executive Officer, Vice President and General Manager, Duplex Products Inc. Research and Technology W. Robert Reum Rose R. Principe Chairman, President, and Vice President, Chief Executive Officer, Marketing The Interlake Corporation Laurence J. Quinn Vice President, Sales Michael E. Wilson Vice President, Information Services
28 18 SHAREHOLDER INFORMATION CORPORATE HEADQUARTERS Duplex Products Inc. 1947 Bethany Road Sycamore, Illinois 60178 PLANT LOCATIONS Elgin, Illinois Emigsville, Pennsylvania Goshen, Indiana (2) Jacksonville, Florida Mechanicsburg, Pennsylvania Newark, Ohio Sacramento, California Salt Lake City, Utah Santa Ana, California Sycamore, Illinois Timonium, Maryland Tucker, Georgia West York, Pennsylvania ANNUAL MEETING The 1995 Annual Shareholders Meeting of Duplex Products Inc. will be held on March 2, 1995 at 10 a.m., in the Assembly Room of The Northern Trust Company, 50 S. LaSalle Street, Chicago, Illinois. TRANSFER AGENT AND REGISTRAR Harris Trust and Savings Bank, Chicago, Illinois STOCK EXCHANGE INFORMATION Duplex common stock is listed on the American Stock Exchange under the symbol DPX. TRADING AND DIVIDEND INFORMATION
Common stock market price ------------------------- (In dollars) High Low ---- --- 1994 Fourth quarter 9-1/2 8-5/8 Third quarter 10 8-5/8 Second quarter 11-1/2 9-5/8 First quarter 11-3/4 10 1993 Fourth quarter 11-1/2 10-1/2 Third quarter 11-7/8 10-3/4 Second quarter 11-7/8 9-5/8 First quarter 11-3/8 9-1/4
Dividends were not declared in 1993 or 1994. As of October 29, 1994, there were 1,297 shareholder accounts of record. FORM 10-K REPORT Shareholders may obtain, without charge, a copy of Form 10-K Report filed with the Securities and Exchange Commission upon written request to the Director of Shareholder Relations, Duplex Products Inc., 1947 Bethany Road, Sycamore, Illinois 60178. OUTSIDE COUNSEL Hinshaw & Culbertson Chicago, Illinois INDEPENDENT AUDITORS Grant Thornton LLP Chicago, Illinois EX-18 5 CHANGE IN ACCOUNTING PRINCIPLES LETTER 1 EXHIBIT 18 LETTER REGARDING CHANGE IN ACCOUNTING PRINCIPLES Board of Directors Duplex Products Inc. As stated in Note 1 to the consolidated financial statements of Duplex Products Inc. and Subsidiary (the Company) for the year ended October 29, 1994, the Company changed its accounting policy for recognizing revenue for certain custom-made business forms. Under the new accounting method, the Company will recognize revenue for certain custom forms stored for future delivery when the product is shipped. Prior to the year ended October 29, 1994, the Company recorded sales for certain stored custom forms upon completion of the production process and customer acceptance. Management believes the newly adopted accounting principle is preferable in the circumstances because of the reasons stated in Note 1. At your request, we have reviewed and discussed with management the circumstances, business judgment, and planning that formed the basis for making this change in accounting principle. It should be recognized that professional standards have not been established for selecting among alternative principles that exist in this area or for evaluating the preferability of alternative accounting principles. Accordingly, we are furnishing this letter solely for purposes of the Company's compliance with the requirements of the Securities and Exchange Commission, and it should not be used or relied on for any other purpose. Based on our review and discussion, we concur with management's judgment that the newly adopted accounting principle is preferable in the circumstances. In formulating this position, we are relying on management's business planning and judgment, which we do not find unreasonable. GRANT THORNTON LLP Chicago, Illinois December 9, 1994 1 EX-23 6 AUDITOR'S CONSENT 1 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We have issued our reports dated December 9, 1994 accompanying the consolidated financial statements and schedules incorporated by reference or included in the Annual Report of Duplex Products Inc. on Form 10-K for the year ended October 29, 1994. We hereby consent to the incorporation by reference of said reports in the Registration Statements of Duplex Products Inc. on Form S-8 (File No. 2-64363, File No. 2-64362, File No. 2-89910, and File No. 33-53507). GRANT THORNTON LLP Chicago, Illinois January 20, 1995 1 -----END PRIVACY-ENHANCED MESSAGE-----