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The Company has a strong financial position, with excellent liquidity. On October 31, 1996, the Company had a working capital ratio of 2.68 to 1 and working capital of $147,362,000. Cash generated from operations, available working capital and borrowings have been used to finance acquisitions, capital expenditures, payment of debt, purchase of treasury stock and payment of dividends. It is expected that such funds and the Company's borrowing capacity will be sufficient to finance the Company's growth, future capital expenditures, acquisition of treasury stock, payment of dividends and possible acquisitions. Inflation The Company has experienced the effects of inflation through increases in the costs of employee compensation and related fringe benefits, facilities, outside services, raw materials and other supplies. Due to price competition, the Company may not always fully recover all of its increased costs. Results of Operations The Company primarily provides printing and other related services to produce the varied documentation required by major financial transactions, corporate periodic reports, restructuring plans for bankrupt companies, communication to shareholders and mutual fund participants, and commercial printing. The sales value of each project is dependent, among other things, upon the size, complexity and type of document printed or service performed, the time allowed for completion and the level of changes required, and may be further impacted by the level of competition. Some of the Company's sources of revenues are affected by cyclical conditions in the capital markets. For certain sources of revenue, rapid document processing after delivery of copy by its customers requires that the Company maintain physical plant and customer service staff sufficient to meet maximum work loads. The costs for facilities, labor and equipment constitute a major portion of the costs of goods sold. 1996 compared with 1995 Sales increased 28% to $501,369,000. The increase was attributable to a greater demand for transactional sales resulting from the continued strength in the capital markets along with the continued growth in our non-transactional printing markets related to mutual funds, specialized commercial printing clients, digital services and other corporate printing needs. The margins attributable to transactional sales are greater than margins related to non-transactional sales. As a result, the gross margin percentage increased 4%, to 45% and the gross margin increased 41%, or $66,008,000. Other revenue increased 32% to $4,905,000 as a result of higher capital gains from the sale of securities. Selling and administrative expenses increased 30% to $133,194,000 primarily as a result of increases in sales commissions and incentive compensation and other expenses related to higher sales and profitability, and increases in the number of employees and cost of facilities. Depreciation and amortization increased $3,395,000, or 19%, primarily due to the continued expansion of facilities and the acquisition of equipment. Interest expense decreased $207,000 due to lower levels of debt. The effective overall income tax rate decreased from 44% to 43% due to the change in the geographic distribution of pre-tax income from jurisdictions with higher tax rates to those with lower tax rates. Consequently, income before income taxes was $75,015,000, an increase of 80%, and net income increased 83% to $42,503,000. 1995 compared with 1994 Sales increased 3% to $392,713,000. The increase was primarily attributable to the continued increase in sales of non-transactional printing to corporate, mutual funds and specialized commercial printing clients. The margins attributable to non-transactional sales are normally lower than transactional sales. Consequently, gross margin percentage decreased 1% to 41% and gross margin, despite higher sales, was up slightly. Other revenue decreased 29% to $3,706,000 principally as a result of lower capital gains from the sale of securities. Selling and administrative expenses increased $8,987,000 to $102,439,000 due to general increases in the cost of labor and facilities, continued expansion of domestic and overseas operations and the expense related to the unexpected retirement of the former President. Depreciation and amortization increased $2,694,000, or 18%, primarily due to the expansion of facilities and the acquisition of equipment. Interest expense decreased $246,000 due to the payment of senior notes in 1994. The effective overall income tax rate increased from 42% to 44% primarily as a result of a change in the deductibility of certain expenses for tax purposes. As a result of the foregoing, income before income taxes was $41,751,000, a decrease of 23%, and net income decreased 25% to $23,286,000. |