Annual Report (Form 10-K), fiscal year 1994

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
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
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



ITEM 2 - PROPERTIES
The following are the principal properties of the Company:
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

ITEM 3 - LEGAL PROCEEDINGS
The Company is not a party to, nor is its property subject to, any material pending legal proceedings.
ITEM 4

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
None. PART II
ITEM 5

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

ITEM 6 - SELECTED FINANCIAL DATA
Reported as "Selected Financial Data" on page 27 of the 1994 Annual Report to Shareholders.
ITEM 7

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


ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See index under Item 14.
ITEM 9

ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH AUDITORS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10



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.
Information pertaining to executive officers as of January 25, 1995, is shown below.
ITEM 11

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

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

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

ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
The following documents are filed as part of this report:
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
*Filed electronically herewith.
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
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
DUPLEX PRODUCTS INC. AND SUBSIDIARY
SCHEDULE V - PROPERTY, PLANT, AND EQUIPMENT
(Dollar amounts in thousands)
DUPLEX PRODUCTS INC. AND SUBSIDIARY
SCHEDULE VI - ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT, AND EQUIPMENT
(Dollar amounts in thousands)
Note: For financial reporting purposes, depreciation is based on the following estimated useful lives of assets:
DUPLEX PRODUCTS INC. AND SUBSIDIARY
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(Dollar amounts in thousands)