-----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, WaR459CiEsQL7mihmG+IHzQudnsw6QMhoKw4vgiMN8qc4J8tH/bqVq6Jv45BvmRf kwiFyc3aLVuwYFG6DwdVgA== 0000904816-97-000006.txt : 19971111 0000904816-97-000006.hdr.sgml : 19971111 ACCESSION NUMBER: 0000904816-97-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971110 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: SEC FILE NUMBER: 000-21750 FILM NUMBER: 97711793 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 PRIMESOURCE CORP. 10-Q FOR PERIOD ENDED 9/30/97 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, 1997 or ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM -------- TO -------- Commission File Number 0- 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 10, 1997 - ------ ---------------------------------- Common stock, par value $.01 6,503,720 shares PRIMESOURCE CORPORATION INDEX PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements Page No. -------- Consolidated Condensed Balance Sheets September 30, 1997 and December 31, 1996 ............................. 3 Consolidated Condensed Statements of Income Three and Nine Months Ended September 30, 1997 and 1996 .............. 4 Consolidated Condensed Statements of Cash Flows Nine Months Ended September 30, 1997 and 1996 ........................ 5 Notes to Consolidated Condensed Financial Statements ...................... 6 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations ...................... 8 PART II - OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-k ................................. 10 SIGNATURES ................................................................ 11
PART I. FINANCIAL INFORMATION Item 1. Financial Statements PRIMESOURCE CORPORATION CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)
September 30, December 31, (Thousands of dollars) 1997 1996 - ------------------------------------------------------------------------------------- ASSETS Current Assets: Receivables .............................................. $ 62,816 $ 60,656 Inventories .............................................. 50,828 48,741 Other .................................................... 2,437 2,653 ------------------------------------------------------------------------------------ Total Current Assets ....................................... 116,081 112,050 Property and equipment, net ................................ 13,316 13,719 Excess of cost over net assets of businesses acquired, net ............................. 4,540 4,487 Other assets ............................................... 4,032 3,919 - ------------------------------------------------------------------------------------- Total Assets ............................................... $ 137,969 $ 134,175 ===================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Current portion of long-term obligations ................. $ 1,514 $ 1,550 Accounts payable ......................................... 33,337 33,628 Other accrued liabilities ................................ 8,700 9,832 - ------------------------------------------------------------------------------------- Total Current Liabilities .................................. 43,551 45,010 Long-term obligations, net of current portion .............. 38,470 36,250 Accrued pension and other liabilities ...................... 5,174 4,732 - ------------------------------------------------------------------------------------- Total Liabilities .......................................... 87,195 85,992 - ------------------------------------------------------------------------------------- Commitments and contingencies Shareholders' Equity: Common stock, $.01 par value, 24,000,000 shares authorized 6,503,720 and 6,514,779 issued, respectively .......... 65 65 Additional paid in capital ............................... 25,497 25,533 Retained earnings ........................................ 25,212 22,628 Unamortized restricted stock awards ...................... (43) - ------------------------------------------------------------------------------------- Total Shareholders' Equity ................................. 50,774 48,183 - ------------------------------------------------------------------------------------- Total Liabilities and Shareholders' Equity ................. $ 137,969 $ 134,175 ===================================================================================== See notes to consolidated condensed financial statements.
PRIMESOURCE CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited)
Three Months Nine Months (Thousands of dollars, Ended September 30, Ended September 30, except per share amounts) 1997 1996 1997 1996 - ------------------------------------------------------------------------------------------------------- Net sales .................................. $ 102,462 $ 89,344 $ 309,020 $ 264,201 Cost of sales .............................. 84,183 73,282 254,031 217,381 - ------------------------------------------------------------------------------------------------------- Gross profit ............................... 18,279 16,062 54,989 46,820 Selling, general and administrative expenses 15,560 14,220 46,958 41,192 - ------------------------------------------------------------------------------------------------------- Income from operations ..................... 2,719 1,842 8,031 5,628 Interest expense ........................... (779) (348) (2,335) (1,291) Sale of assets ............................. 121 5 127 64 Other income (expense), net ................ 37 55 164 74 - ------------------------------------------------------------------------------------------------------- Income before provision for income taxes .......................... 2,098 1,554 5,987 4,475 Provision for income taxes ................. 865 630 2,473 1,806 - ------------------------------------------------------------------------------------------------------- Net income ................................. $ 1,233 $ 924 $ 3,514 $ 2,669 ======================================================================================================= Average number of shares outstanding ....... 6,647,837 6,552,892 6,612,934 6,553,785 Per share of common stock: Net income ................................. $ .19 $ .14 $ .53 $ .41 Cash dividends ............................. .045 .045 .135 .135 ======================================================================================================= See notes to consolidated condensed financial statements.
PRIMESOURCE CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, (Thousands of dollars) 1997 1996 - ------------------------------------------------------------------------------ Net income ........................................... $ 3,514 $ 2,669 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation ..................................... 1,551 1,451 Amortization ..................................... 333 443 Other ............................................ (127) Changes in assets and liabilities affecting operations (5,012) 5,795 - ----------------------------------------------------------------------------- Net cash provided by operating activities ............ 259 10,358 - ----------------------------------------------------------------------------- Investing Activities: Business acquisitions ................................ (3,317) Proceeds from sale of business ....................... 2,235 Proceeds from sale of property and equipment ......... 547 Additions to property and equipment .................. (1,568) (567) Net increase in other assets ......................... (456) (269) - ----------------------------------------------------------------------------- Net cash used in investing activities ................ (1,477) (1,918) - ----------------------------------------------------------------------------- Financing Activities: Proceeds from long-term obligations .................. 61,700 81,955 Repayment of long-term obligations ................... (59,516) (89,363) Purchase of common stock ............................. (106) (149) Stock options exercised .............................. 19 Dividends paid ....................................... (879) (883) - ----------------------------------------------------------------------------- Net cash provided by (used in) financing activities .. 1,218 (8,440) - ----------------------------------------------------------------------------- Net change in cash ................................... -- -- Cash, beginning of year .............................. -- -- - ----------------------------------------------------------------------------- Cash, end of period .................................. $ -- $ -- ============================================================================= Supplemental disclosures of cash flow information Cash paid during the period for: Interest ........................................ $ 2,465 $ 1,280 Income taxes .................................... 2,937 1,158 ============================================================================= 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 1996 Annual Report on Form 10-K for further information. The results of operations for the three and nine months ended September 30, 1997 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. Income Per Common Share Income per common share is based on the weighted average number of common shares and equivalent common shares outstanding during the periods. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS 128). This Statement establishes standards for computing and presenting earnings per share (EPS) and applies to entities with publicly held common stock or potential common stock. This Statement is effective for financial statements issued for periods ending after December 15, 1997, including interim periods. This statement requires restatement of all prior-period EPS data presented. Although the Company is not permitted to adopt this statement in an earlier period, pro-forma disclosures as if the Company had adopted the requirements beginning in 1996 are presented below: Three Months Nine Months Ended September 30, Ended September 30, 1997 1996 1997 1996 - -------------------------------------------------------------------------------- Basic earnings per share ........ $ .19 $ .14 $ .54 $ .41 Dilutive: Dilutive earnings per share ..... $ .19 $ .14 $ .53 $ .41 4. Acquisitions The Company acquired the operating assets of KPM in May 1996, and the operating assets (excluding accounts receivable) of VGC Corporation's St. Louis, Missouri operation in August 1996 for approximately $3.3 million. 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 operations, assuming the acquisitions had occurred at the beginning of the period, would not have had a significant impact on the Company's consolidated results of operations. 5. 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 had a significant impact on the Company's consolidated results of operations. 6. Subsequent Events In October 1997, the Company sold a capital lease in Cerritos, California at a gain. In addition, the Company commenced disposing of other assets of the business, consisting primarily of inventories associated with branch electronic showrooms and certain other discontinued operations of the business, which the Company believes were not providing an adequate return. The estimated net effect of these transactions is expected to result in an increase to net income in the fourth quarter of 1997 of approximately $500,000 or $.07 per share. 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, 1997 was $1,233,000 ($.19 per share) on sales of $102,462,000 compared to $924,000 ($.14 per share) on sales of $89,344,000 for the same period last year. For the nine-month period ended September 30, 1997, net income was $3,514,000 ($.53 per share) on sales of $309,020,000 compared to net income of $2,669,000 ($.41 per share) on sales of $264,201,000 for the same period last year. Sales increased 14.7% for the quarter and 17.0% for the nine-month period ended September 30, 1997. This increase is primarily the result of the acquisition of five VGC Corporation locations, one in August 1996 and four in November 1996. Excluding the effect of this acquisition, sales remained at approximately 1996 levels. The gross profit as a percent of sales remained relatively constant between the periods at 17.8% for the three and nine-month period ended September 30, 1997 compared to 18.0% and 17.7%, respectively, for the same periods last year. Selling, general and administrative expenses as a percent of sales decreased from 15.9% to 15.2% for the quarter and 15.6% to 15.2% for the nine-month period. This improvement reflects the benefit of the integration of the VGC operations into the Company and the continuing improvement in operating efficiency. Interest expense was $779,000 for the quarter and $2,335,000 for the nine-month period ended September 30, 1997 compared to $348,000 and $1,291,000 for the same quarter and nine-month period last year. This increase is primarily due to increased debt from the VGC acquisition. The effective tax rates for the quarter and nine-month period ended September 30, 1997 were 41.2% and 41.3%, respectively, compared to 40.5% and 40.4% for the same periods last year. The higher rate in 1997 is primarily due to nondeductible expenses being a higher percent to income. Financial Condition and Liquidity Net cash provided by operating activities for the nine months ended September 30, 1997 was $259,000 compared to cash provided of $10,358,000 for the same period last year. For the period ended September 30, 1997, increases in net asset levels decreased the cash flow by approximately $5 million, while in the same period last year decreases in net assets increased the cash flow by approximately $5.8 million. The increase in 1997, in part, reflects the adjustment of working capital levels for the VGC acquisition to ongoing operating levels. Excluding the effect of changes in assets and liabilities, the cash provided was $5,271,000 in 1997 compared to $4,563,000 in 1996. Net cash used in investing activities was $1,477,000 for the nine months ended September 30, 1997 compared to $1,918,000 for the same period last year. In the nine-month period ended September 30, 1996, the Company expended $3.3 million for the operating assets of KPM, a graphics distributor in Michigan and northern Indiana, and VGC Corporation's St. Louis business. In addition, during this period, the Company sold its Rochester, New York operation for approximately $2.2 million. Capital expenditures for the nine months in 1997 were $1.6 million compared to $.6 million for the same period last year. Capital expenditures for the remainder of the year, for which there are no material commitments, are anticipated to be approximately $400,000. Net cash provided from financing activities was $1,218,000 for the nine-month period ended September 30, 1997 compared to $8,440,000 used in financing activities for the same period last year. During the period ended September 30, 1997, debt increased $2.2 million, which is primarily attributable to the net cash used in investing activities and dividend payments during the period. As discussed above, significant increases in working capital resulted in minimal cash being generated from operating activities for this period. For the same period last year, debt decreased $7.4 million, which reflects the effect of cash generated from operating activities. The Company's primary source of debt financing is a revolving credit agreement with a commitment of $50 million of which $14.2 million was unused at September 30, 1997. The Company believes this facility combined with future cash flow from operations will be adequate to meet the current 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, 1997. 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 10, 1997 EX-11 2 COMPUTATION OF INCOME PER SHARE COMPUTATION OF INCOME PER SHARE
Three Months Nine Months Ended September 30, Ended September 30, 1997 1996 1997 1996 - ----------------------------------------------------------------------------------------- PRIMARY Average shares outstanding .......... 6,503,470 6,534,112 6,508,398 6,545,112 Net effect of dilutive stock options- based on the treasury stock method using average market price .......... 144,367 18,780 104,536 8,673 - ----------------------------------------------------------------------------------------- 6,647,837 6,552,892 6,612,934 6,553,785 ========================================================================================= Net income (in thousands) ........... $ 1,233 $ 924 $ 3,514 $ 2,669 ========================================================================================= Per share amount .................... $ .19 $ .14 $ .53 $ .41 =========================================================================================
EX-27 3 FDS --
5 1,000 9-MOS DEC-31-1997 JAN-1-1997 SEP-30-1997 0 0 57,536 1,770 50,828 116,081 23,342 10,026 137,969 43,551 38,470 0 0 65 50,709 137,969 309,020 309,020 254,031 254,031 0 385 2,335 5,987 2,473 3,514 0 0 0 3,514 .53 .53
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