-----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, C7WEQeKK/B0RY1cc3PBW/d0nrhYqHa9P6czYlaBF6NeQBRgILNXIsjywfN5qdZzu 3+PbpPrwNeRDVMZm5UeXVg== 0000904816-96-000008.txt : 19961118 0000904816-96-000008.hdr.sgml : 19961118 ACCESSION NUMBER: 0000904816-96-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRIMESOURCE CORP CENTRAL INDEX KEY: 0000904816 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-PROFESSIONAL & COMMERCIAL EQUIPMENT & SUPPLIES [5040] IRS NUMBER: 231430030 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-21750 FILM NUMBER: 96662726 BUSINESS ADDRESS: STREET 1: 4350 HADDONFIELD RD STREET 2: SUITE 222 CITY: PENNSAUKEN STATE: NJ ZIP: 08109 BUSINESS PHONE: 6094884888 MAIL ADDRESS: STREET 1: FAIRWAY CORPORATE CENTER SUITE 222 STREET 2: 4350 HADDONFIELD ROAD CITY: PENNSAUKEN STATE: NJ ZIP: 08109 FORMER COMPANY: FORMER CONFORMED NAME: PHILLIPS & JACOBS INC DATE OF NAME CHANGE: 19930514 10-Q 1 FORM 10-Q FOR PRIMESOURCE CORPORATION UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE PERIOD ENDED SEPTEMBER 30, 1996 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- 21750 PrimeSource Corporation ----------------------- (Exact name of registrant as specified in its charter) Pennsylvania 23-1430030 - ------------ ---------- (State of incorporation) (I.R.S. Employer Identification No.) 4350 Haddonfield Road, Suite 222, Pennsauken, NJ 08109 - -------------------------------------------------- ----- (Address of principal executive offices) (Zip Code) (609) 488-4888 -------------- (Registrant's telephone number, including area code) Indicate by a 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 ( ) Indicate the number of shares outstanding of each of the issuer's classes of common stock: Class Outstanding at November 12, 1996 - ----- -------------------------------- Common stock, par value $.01 6,530,779 shares PRIMESOURCE CORPORATION AND SUBSIDIARIES INDEX PART I - FINANCIAL STATEMENTS Item 1 - Financial Statements Page No. -------- Consolidated Condensed Balance Sheets September 30, 1996 and December 31, 1995 3 Consolidated Condensed Statements of Operations Three and Nine Months Ended September 30, 1996 and 1995 4 Consolidated Condensed Statements of Cash Flows Nine Months Ended September 30, 1996 and 1995 5 Notes to Consolidated Condensed Financial Statements 6 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II - OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-k 9 SIGNATURES 10 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS PRIMESOURCE CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS
September 30, December 31, 1996 1995 (Thousands of dollars) (Unaudited) - -------------------------------------------------------------------------- ASSETS Current Assets: Receivables ................................... $ 52,646 $ 57,474 Inventories ................................... 37,717 41,581 Other ......................................... 2,496 2,466 - -------------------------------------------------------------------------- Total Current Assets ............................ 92,859 101,521 Property and equipment, net ..................... 9,541 10,358 Excess of cost over net assets of businesses acquired, net .................. 4,677 4,942 Other assets .................................... 3,116 2,983 - -------------------------------------------------------------------------- Total Assets .................................... $ 110,193 $ 119,804 ========================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Current portion of long-term obligations ...... $ 1,220 $ 1,206 Accounts payable .............................. 23,893 28,624 Other accrued liabilities ..................... 8,276 6,523 - -------------------------------------------------------------------------- Total Current Liabilities ....................... 33,389 36,353 Long-term obligations, net of current portion ... 24,780 32,202 Accrued pension liabilities and other liabilities 4,626 5,677 - -------------------------------------------------------------------------- Total Liabilities ............................... 62,795 74,232 - -------------------------------------------------------------------------- Commitments and contingencies Shareholders' Equity: Common stock, $.01 par value .................. 65 65 Additional paid in capital .................... 25,596 25,543 Retained earnings ............................. 21,757 20,036 Unamortized restricted stock awards ........... (20) (72) - -------------------------------------------------------------------------- Total Shareholders' Equity ...................... 47,398 45,572 - -------------------------------------------------------------------------- Total Liabilities and Shareholders' Equity ...... $ 110,193 $ 119,804 ==========================================================================
See notes to consolidated condensed financial statements. PRIMESOURCE CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Nine Months (Thousands of dollars, Ended September 30, Ended September 30, except per share amounts) 1996 1995 1996 1995 - ------------------------------------------------------------------------------------------------------- Net sales .................................. $ 89,344 $ 88,156 $ 264,201 $ 266,891 Cost of sales .............................. 73,282 72,908 217,381 219,714 - ------------------------------------------------------------------------------------------------------- Gross profit ............................... 16,062 15,248 46,820 47,177 Selling, general and administrative expenses 14,220 13,955 41,192 42,987 Restructure expense ........................ 1,315 - ------------------------------------------------------------------------------------------------------- Income from operations ..................... 1,842 1,293 5,628 2,875 Interest expense ........................... (348) (611) (1,291) (1,559) Other income (expense), net ................ 60 83 138 66 - ------------------------------------------------------------------------------------------------------- Income before provision for income taxes .......................... 1,554 765 4,475 1,382 Provision for income taxes ................. 630 314 1,806 590 - ------------------------------------------------------------------------------------------------------- Net income ................................. $ 924 $ 451 $ 2,669 $ 792 ======================================================================================================= Average number of shares outstanding ....... 6,552,892 6,569,164 6,553,785 6,570,764 Per share of common stock: Net income ................................. $ .14 $ .07 $ .41 $ .12 Cash dividends ............................. $ .045 $ .1125 $ .135 $ .3375 =======================================================================================================
See notes to consolidated condensed financial statements. PRIMESOURCE CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, (Thousands of dollars) 1996 1995 - ------------------------------------------------------------------------------ Operating Activities: Net income ........................................... $ 2,669 $ 792 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation ..................................... 1,451 1,496 Amortization ..................................... 443 515 Changes in assets and liabilities affecting operations 5,795 1,655 - ----------------------------------------------------------------------------- Net cash provided by operating activities ............ 10,358 4,458 - ----------------------------------------------------------------------------- Investing Activities: Business acquisitions ................................ (3,317) (1,037) Proceeds from sale of business ....................... 2,235 Additions to property and equipment .................. (567) (1,085) Net increase (decrease) in other assets .............. (269) 286 - ----------------------------------------------------------------------------- Net cash used in investing activities ................ (1,918) (1,836) - ----------------------------------------------------------------------------- Financing Activities: Net decrease in short-term borrowings ................ (3,000) Proceeds from long-term obligations .................. 81,955 78,095 Repayment of long-term obligations ................... (89,363) (76,151) Dividends paid ....................................... (883) (2,204) Cost of shares reaquired ............................. (149) Proceeds from exercise of stock options .............. 20 - ----------------------------------------------------------------------------- Net cash used in financing activities ................ (8,440) (3,240) - ----------------------------------------------------------------------------- Net decrease in cash ................................. -- (618) Cash, beginning of year .............................. 618 - ----------------------------------------------------------------------------- Cash, end of period .................................. $ -- $ -- ============================================================================= Supplemental disclosures of cash flow information Cash paid (received) during the period for: Interest $ 1,280 $ 1,488 Income taxes 1,158 (644) =============================================================================
See notes to consolidated condensed financial statements. PRIMESOURCE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 1. Adjustments The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information pursuant to the rules and regulations of the Securities and Exchange Commission and instructions to Form 10-Q. While these statements reflect all adjustments (which consist of normal recurring accruals) which are, in the opinion of management, necessary to a fair presentation of the results for the interim periods presented, they do not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements. These statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company's 1995 Annual Report on Form 10-K for further information. The results of operations for the three and nine months ended September 30, 1996 are not necessarily indicative of the results to be expected for the full year. 2. Inventory Pricing Inventories consist primarily of purchased goods for sale. Inventories are stated at the lower of cost or market. Cost is determined using the last-in, first-out (LIFO) and first-in, first-out methods of accounting. Because the inventory determination under the LIFO method can only be made at the end of each fiscal year, interim financial results are based on estimated LIFO amounts and are subject to final year-end LIFO inventory adjustments. 3. Acquisitions In May 1996, the Company acquired the operating assets of KPM, a distributor of photographic and graphic arts supplies and equipment in Michigan and portions of northern Indiana, for approximately $2.4 million. In August 1996, the Company acquired the operating assets (excluding accounts receivable) of VGC Corporation's St. Louis, Missouri operation for approximately $900,000. This operation, which is a distributor of photographic and graphic arts supplies and equipment in the St. Louis area, was combined into the Company's existing St. Louis operation. These acquisitions have been accounted for as purchases, and, accordingly, the consolidated financial statements include the operations since the acquisition date. The pro-forma results of these acquisitions would not have had a significant impact on the Company's consolidated results of operations. 4. Disposition In July 1996, the Company sold substantially all the assets of its Rochester, New York operation for approximately $2.2 million which approximated the financial basis of the assets at the time of the sale. The pro-forma results of operations, assuming the disposition had occurred at the beginning of the period, would not have been materially effected by this disposition. 5. Subsequent Events On November 1, 1996, the Company acquired the operating assets (excluding accounts receivable) of VGC Corporation's Minneapolis, Minnesota; Milwaukee, Wisconsin; Des Moines, Iowa; and Omaha, Nebraska operations for approximately $11.2 million. This acquisition will be accounted for as a purchase and will be included in the Company's operating results from the date of the acquisition. Historical annual sales of these operations are approximately $60 million. On November 1, 1996, the Company entered into a three year revolving credit agreement with a total commitment of $50 million. Borrowing rates available to the Company under this agreement are at prime rate or less. In conjunction with obtaining this facility, the Company terminated its prior three revolving credit agreements which had a total commitment of $27.5 million. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - --------------------- Net income for the quarter ended September 30, 1996 was $924,000 ($.14 per share) on sales of $89,344,000 compared to $451,000 ($.07 per share) on sales of $88,156,000 for the same period last year. For the nine months ended September 30, 1996, net income was $2,669,000 ($.41 per share) on sales of $264,201,000 compared to net income of $792,000 ($.12 per share) on sales of $266,891,000 for the same period last year. The net income for the nine months ended September 30, 1995 included a one-time restructuring charge of $1,315,000 ($794,000 after tax) relating to the consolidation of five distribution centers, realigning two others, and the centralizing of certain financial and information services. Excluding this charge, the net income for the nine months ended September 30, 1995 would be $1,586,000 ($.24 per share) . Sales for the quarter increased 1% compared to the same quarter last year and increased 2% over the immediately preceding quarter. Sales for the nine month period decreased 1% compared to the same period last year. The increase for the quarter, which reversed the modest declines reported in earlier quarters during the year, was primarily due to increased sales in the midwest and west. Gross profit as a percent of sales was 18% for the quarter and 17.7% for the nine-month period ended September 30, 1996 compared to 17.3% and 17.7%, respectively, for the same periods last year. The increase for the quarter was primarily due to changes in product mix. Selling, general, and administrative expenses as a percent of sales were 15.9% for the quarter and 15.6% for the nine-month period ended September 30, 1996 compared to 15.8% and 16.1%, respectively, for the same periods last year. The decrease for the nine-month period is primarily due to cost savings from the restructuring program described above, which commenced during the third quarter of 1995. Interest expense was $348,000 for the quarter and $1,291,000 for the nine-month period ended September 30, 1996 compared to $611,000 and $1,559,000 for the same quarter and nine-month period last year. This decrease is due to a decline in debt levels as a result of the working capital levels decreasing. The effective tax rates for the quarter and nine-month period ended September 30, 1996 were 40.5% and 40.4%, respectively, compared to 41% and 42.7%, respectively, for the same periods last year. The lower rates in 1996 are primarily due to non-deductible expenses being a lesser percent to income. Financial Condition and Liquidity - --------------------------------- Net cash provided by operating activities for the nine months ended September 30, 1996 was $10,358,000 compared to $4,458,000 for the same period last year. This increase in cash flow is due to both improvements in working capital levels and cash generated from operating income. In 1996, decreases in working capital resulted in an increase in cash flows of $5,795,000 compared to $1,655,000 in 1995. Excluding the effect of changes in assets and liabilities, the cash provided was $4,563,000 in 1996 compared to $2,803,000 in 1995. Net cash used in investing activities was $1,918,000 for the nine months ended September 30, 1996 compared to $1,836,000 for the same period last year. In 1996, the Company incurred a net cash expenditure on the acquisition and sale of businesses of $1,082,000. Capital expenditures for the nine months in 1996 were $567,000. Additional capital expenditures for the year, for which there are no material commitments, are anticipated to be approximately $900,000. In addition, the Company will expend approximately $11.2 million for the acquisition of four locations of VGC Corporation during the fourth quarter of 1996. Net cash used in financing activities was $8,440,000 for the nine-month period ended September 30, 1996 compared to $3,240,000 for the same period last year. As a result of the significant funds generated from operating activities, the Company was able to reduce debt by approximately $7.4 million during 1996. The balance of the cash used was for dividend payments and the repurchase of the Company's common stock. For the same period last year, the outflow was primarily for dividend payments. At September 30, 1996, the Company's primary source of debt financing was three revolving credit agreements with a total commitment of $27.5 million of which $20.7 million was outstanding. In November, 1996, the Company terminated these agreements and executed a three-year revolving credit agreement for $50 million. In addition, the Company has available $10.7 million in uncommitted lines of which none was outstanding at September 30, 1996. The Company believes these ongoing facilities combined with the cash flow from operations will be adequate to meet the capital requirements of the Company. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K a. Exhibits Exhibit 11 -- Earnings per share information. Exhibit 27 -- Financial data schedule b. Reports on Form 8-K The Registrant did not file a report on Form 8-K during the quarter ended September 30, 1996. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PRIMESOURCE CORPORATION (REGISTRANT) BY /s/ WILLIAM A. DEMARCO ---------------------- William A. DeMarco Vice President of Finance and Chief Financial Officer (principal financial and accounting officer) DATE November 12, 1996 EX-11 2 EARNINGS PER SHARE EXHIBIT 11
COMPUTATION OF INCOME PER SHARE Three Months Nine Months Ended September 30, Ended September 30, 1996 1995 1996 1995 - ----------------------------------------------------------------------------------------- PRIMARY Average shares outstanding .......... 6,534,112 6,526,825 6,545,112 6,524,448 Net effect of dilutive stock options- based on the treasury stock method using average market price .......... 18,780 42,339 8,673 46,316 - ----------------------------------------------------------------------------------------- 6,552,892 6,569,164 6,553,785 6,570,764 ========================================================================================= Net income (in thousands) ........... $ 924 $ 451 $ 2,669 $ 792 ========================================================================================= Per share amount .................... $ .14 $ .07 $ .41 $ .12 =========================================================================================
EX-27 3 FDS --
5 1,000 9-MOS DEC-31-1996 SEP-30-1996 0 0 49,185 1,607 37,717 92,859 18,294 8,753 110,193 33,389 24,780 0 0 65 47,333 110,193 264,201 264,201 217,381 217,381 0 545 1,291 4,475 1,806 2,669 0 0 0 2,669 .41 .41
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