-----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, TNAyeHQhnnzwmNRWtBLwNAAV4YdK35pG9j7qgpiPRkVUTOlt61tNsOORY4zt6yTM KzOOCfQeJFkZ39PpBuXqzQ== 0000950124-94-001697.txt : 19941121 0000950124-94-001697.hdr.sgml : 19941121 ACCESSION NUMBER: 0000950124-94-001697 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941114 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENERAL BINDING CORP CENTRAL INDEX KEY: 0000040461 STANDARD INDUSTRIAL CLASSIFICATION: 3579 IRS NUMBER: 360887470 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-02604 FILM NUMBER: 94558938 BUSINESS ADDRESS: STREET 1: ONE GBC PLZ CITY: NORTHBROOK STATE: IL ZIP: 60062 BUSINESS PHONE: 7082723700 MAIL ADDRESS: STREET 1: ONE GBC PLZ CITY: NORHBROOK STATE: IL ZIP: 60062 10-Q 1 FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-Q (Mark One) (X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1994 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 0-2604 GENERAL BINDING CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 36-0887470 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) One GBC Plaza, Northbrook, Illinois 60062 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (708) 272-3700 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 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, as of the close of the latest practicable date.
Class Outstanding at October 31, 1994 - - ------------------------------------------- ------------------------------- Common Stock $.125 par value 13,366,631 shares Class B - Common Stock $.125 par value 2,398,275 shares
2 GENERAL BINDING CORPORATION INDEX
PART I. Financial Information: Page No. ---------- Consolidated Condensed Balance Sheets - September 30, 1994 and December 31, 1993 1 Consolidated Condensed Statements of Income - Three and Nine Months Ended September 30, 1994 and 1993 2 Consolidated Condensed Statements of Cash Flows - Nine Months Ended September 30, 1994 and 1993 3 Notes to Consolidated Condensed Financial Statements 4 Management's Discussion and Analysis of Financial Condition and Results of Operations 6 PART II. Other Information 8 Signature 9
3 - 1 - PART I. FINANCIAL INFORMATION GENERAL BINDING CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (000 Omitted)
September 30, 1994 December 31, ASSETS (unaudited) 1993 ------------------ ------------ Current assets: Cash and cash equivalents $ 3,354 $ 4,462 Receivables, net 76,293 63,701 Inventories - Raw materials 21,180 19,912 Work in process 5,282 4,176 Finished goods 55,923 41,548 --------- --------- Total inventories 82,385 65,636 Deferred tax assets 7,991 7,756 Other 6,632 3,796 --------- --------- Total current assets 176,655 145,351 --------- --------- Property, plant and equipment 137,301 124,599 Less - accumulated depreciation and amortization (69,821) (62,504) --------- --------- Net property, plant and equipment 67,480 62,095 --------- --------- Other long-term assets: Cost in excess of fair value of assets of acquired companies, net of amortization 29,854 29,912 Other 14,964 13,751 --------- --------- Total other long-term assets 44,818 43,663 --------- --------- Total assets $ 288,953 $ 251,109 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable $ 34,143 $ 9,625 Current maturities of long-term obligations 399 433 Accounts payable 22,841 22,124 Accrued liabilities 33,869 32,511 Taxes on income -- 67 --------- --------- Total current liabilities 91,252 64,760 --------- --------- Long-term obligations, less current maturities: Long-term debt 39,109 38,350 Capital leases 19 214 --------- --------- Total long-term obligations 39,128 38,564 Other long-term liabilities 9,473 8,252 Deferred tax liabilities 6,040 6,002 Stockholders' equity: Common stock 1,962 1,962 Class B common stock 300 300 Additional paid-in capital 6,260 6,133 Cumulative translation adjustments 896 101 Retained earnings 152,838 144,011 --------- --------- 162,256 152,507 Less - Treasury stock (19,196) (18,976) --------- --------- Total stockholders' equity 143,060 133,531 --------- --------- Total liabilities and stockholders' equity $ 288,953 $ 251,109 ========= =========
The accompanying notes to consolidated condensed financial statements are an integral part of these statements. 4 - 2 - GENERAL BINDING CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited) (000 Omitted Except Per Share Data)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 ------------------------ ------------------------ 1994 1993 1994 1993 --------- --------- --------- --------- Sales $108,576 $96,441 $309,965 $279,341 Costs and expenses: Cost of sales, including research, development and engineering 61,692 54,634 174,023 155,098 Selling, service and administrative 38,439 34,614 109,641 101,588 Interest expense 991 932 2,591 2,796 Other expense, net 370 247 1,132 801 -------- ------- -------- -------- Total costs and expenses 101,492 90,427 287,387 260,283 Income before taxes 7,084 6,014 22,578 19,058 Income taxes 2,831 2,456 9,022 7,589 Net income $ 4,253 $ 3,558 $ 13,556 $ 11,469 ======= ======= ======== ======== Net income per common share $ .27 $ .23 $ .86 $ .73 ======= ======= ====== ====== Dividends per common share $ .10 $ .10 $ .30 $ .30 ======= ======= ====== ====== Average common shares outstanding 15,761 15,780 15,763 15,782 ======= ======= ======= =======
The accompanying notes to consolidated condensed financial statements are an integral part of these statements. 5 - 3 - GENERAL BINDING CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (000 Omitted)
NINE MONTHS ENDED SEPTEMBER 30 -------------------------- 1994 1993 -------- -------- Cash flows from operating activities: Net income $13,556 $11,469 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 8,907 8,202 Increase (decrease) in non-current deferred tax liabilities 95 (369) Provision for doubtful accounts 1,346 1,128 (Increase) in other long-term assets (2,662) (2,590) Other 1,463 821 Changes in current assets and liabilities: (Increase) in receivables (12,128) (10,652) (Increase) decrease in inventories (13,874) 3,124 (Increase) decrease in deferred tax assets (227) 22 (Increase) in other current assets (2,636) (1,168) (Decrease) in accounts payable and accrued expenses (1,351) (461) (Decrease) in taxes on income (232) (1,654) ------- ------- Net cash (used in) provided by operating activities (7,743) 7,872 ------- ------- Cash flows from investing activities: Purchase of Sickinger Corporation, net of cash acquired (3,481) -- Purchase of Bates Manufacturing -- (5,642) Capital expenditures (10,722) (7,162) Proceeds from sale of plant and equipment 2,640 62 ------- ------- Net cash (used in) investing activities (11,563) (12,742) ------- ------- Cash flows from financing activities: Increase (reduction) in notes payable 23,831 (2,053) (Reduction) increase in current portion of long-term obligations (34) 94 (Reduction) increase in long-term obligations (882) 5,720 Dividends paid (4,729) (4,735) Purchases of treasury stock (249) (406) Proceeds from the exercise of stock options 95 113 ------- ------- Net cash provided by (used in) financing activities 18,032 (1,267) ------- ------- Effect of exchange rates on cash 166 (62) ------- ------- Net (decrease) in cash and cash equivalents (1,108) (6,199) Cash and cash equivalents at beginning of the year 4,462 10,769 ------- ------- Cash and cash equivalents at September 30 $3,354 $ 4,570 ======= ======= Supplemental Disclosure of Cash Flow Information Cash Paid During the Period for: Interest $ 2,559 $ 2,726 Income taxes, net of refunds 10,309 10,034
The accompanying notes to consolidated condensed financial statements are an integral part of these statements. 6 - 4 - GENERAL BINDING CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited) (1) Basis of Presentation The consolidated condensed financial statements included herein have been prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The Company believes that the disclosures included in these consolidated condensed financial statements are adequate to make the information presented not misleading. It is suggested that these consolidated condensed financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's 1993 annual report on Form 10-K. In the opinion of the Company, all adjustments necessary to present fairly the financial position of General Binding Corporation and Subsidiaries as of September 30, 1994 and December 31, 1993, and the results of their operations for the three and nine month periods ended September 30, 1994 and 1993 have been included. The results of operations for such interim periods are not necessarily indicative of the results for the full year. (2) Foreign Currency Exchange and Translation Foreign currency translation adjustments have been excluded from the Consolidated Condensed Statements of Income and are recorded in a cumulative translation adjustment account as a separate component of stockholders' equity. The accompanying Consolidated Condensed Statements of Income include net gains and losses on foreign currency transactions, which are reported as other income/expense and summarized as follows:
Foreign Currency Transaction Gain/(Loss) (a) --------------- Three months ended September 30, 1994 $ 63,000 =========== Three months ended September 30, 1993 $ (69,000) =========== Nine months ended September 30, 1994 $ (86,000) =========== Nine months ended September 30, 1993 $ (96,000) ===========
(a) Foreign currency transaction gains/losses are subject to income taxes at the respective country's effective tax rate. 7 - 5 -
(3) Long-Term Debt Long-term debt consists of the following: (000 OMITTED) SEPTEMBER 30, DECEMBER 31, 1994 1993 ------------- ------------ Revolving Credit Agreement (portion classified as long-term on the basis of the Company's intention to refinance these borrowings: interest rate 5.7% at September 30, 1994 and 3.9% at December 31, 1993) $ 36,000 $ 36,000 Industrial Revenue Bond, due annually from July 1, 1994 to July 1, 2008 (floating interest rate 3.45% at September 30, 1994 and 3.0% at December 31, 1993) 2,350 2,530 Industrial Revenue Bonds due annually from June 26, 2002 to June 26, 2007 (floating interest rate 3.75% at September 30, 1994) 909 - -------- -------- 39,259 38,530 Less current maturities (150) (180) -------- -------- $ 39,109 $ 38,350 ======== =========
(4) Net Income per Common Share Net income per common share is based on the weighted average number of common shares outstanding during the period. Assuming exercise of all outstanding options pursuant to the Company's stock option plans for key employees, net income per common share would not be materially different from net income per common share as reported. 8 - 6- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The Company's third quarter sales increased 13% compared to the prior year while sales for the nine month period ended September 30, 1994 increased 11%. Results for both periods were positively impacted by the acquisitions of the Sickinger Corporation in August of 1994 (See Item 5) and the business of Bates Manufacturing Company in July of 1993. Excluding the impact of acquisitions, sales increased 10% and 7%, respectively. With the exception of the ringmetals business, increases in sales for both periods were recorded in all of the Company's major channels of distribution with the most significant increases recorded in the Company's worldwide film products division, office products group, international operations and domestic branch/telemarketing operations. The film products division's increase resulted from continued growth in its Domestic, European and Canadian markets while the office products group was bolstered by the Bates product line. Sales were up in the Company's international distributor export group and in the majority of the Company's international subsidiaries. Sales increases recorded in the domestic/direct branch telemarketing operations partly resulted from sales of the Company's new high capacity punch product, the AP-1. On a worldwide basis, sales of the Company's equipment product lines increased 29% and 18%, respectively, for the third quarter and the first nine months of 1994 over the same periods last year, while sales of supplies and service (which for discussion purposes includes the Company's ringmetals business) increased 8% and 9%, respectively. Without the impact of acquisitions, equipment sales for the third quarter and first nine months increased 22% and 8%, respectively, while sales of supplies and service increased 7% for both periods. Worldwide gross profit margins remained flat for the third quarter period and decreased 1 point for the nine month period. Without the impact of acquisitions, gross profit margins for both the third quarter and year-to-date period remained flat. An erosion in margins experienced by the Company's international and domestic core operations was offset by an improvement in margins in the ringmetals business. Worldwide competitive pressures and an increase in certain raw material costs had a negative effect on margins. Consolidated selling, service and administrative expenses for the third quarter and nine months ended September 30, 1994 increased 11% and 8%, respectively, when compared to the same periods in 1993. Without the impact of acquisitions, these expenses increased approximately 10% and 6%, respectively, primarily as a result of increased sales and profits. Consolidated selling, service and administrative expenses as a percentage of sales remained relatively flat for the third quarter period and for the nine month period declined to 35.4% in 1994 from 36.4% in 1993. Interest expense for the third quarter increased 6% over the same period in 1993, while interest expense for the nine months ended September 30, 1994 decreased 7% when compared to the same period in 1993. The primary reason for the increase in expense in the third quarter period was higher domestic interest rates and debt levels. The higher debt levels resulted primarily from significantly higher inventory and receivable levels along with the financing of the Sickinger and Bates acquisitions. The increase in interest expense resulting from higher interest 9 -7- rates and higher debt levels was partially offset by lower debt levels in the Company's Mexican subsidiary and the expiration of several of the Company's interest rate swaps during the fourth quarter of 1993. These events were the primary reasons for the decrease in interest expense in the year-to-date period. Other expense for the third quarter of 1994 was $370,000 compared to $247,000 for the same period in 1993. The increase in the third quarter expense was primarily due to an unfavorable change in gains/losses on sales of fixed assets of $85,000, increased losses of $41,000 from the Company's investment in a joint venture and higher stock option compensation expense of $30,000. Partially offsetting this were higher currency gains of $132,000. Other expense for the nine months ended September 30, 1994 was $1,132,000 compared to $801,000 for the same period in 1993. The nine month increase was primarily due to an unfavorable change in gains/losses on sales of fixed assets of $109,000 and reduced income from the Company's investments in joint ventures of $150,000. The Company's effective tax rate for the third quarter of 1994 was 40.0% compared to 40.8% for the same period in 1993. For the nine months ended September 30, 1994, the effective tax rate was 40.0% compared to 39.8% for the same period in 1993. Included in both 1994 periods was a federal income tax benefit of $109,000 or $.01 per share resulting from a tax allocation agreement between the Company and Lane Industries, Inc.. Lane Industries, Inc. is the Company's majority stockholder. This income tax benefit was the primary reason for the decrease in the third quarter rate. Offsetting this decrease for both periods and the primary reason for the increase in the year-to-date effective tax rate was an increase in state income taxes due to higher domestic income. LIQUIDITY AND CAPITAL RESOURCES The Company's working capital totaled $85.4 million at September 30, 1994, an increase of $4.8 million from December 31, 1993. The Company's current ratio at September 30, 1994 was 1.9 to 1.0 compared to 2.2 to 1.0 at December 31, 1993. Cash dividends paid during the third quarter and first nine months of 1994 were $.10 and $.30 per share, as they were for the comparable periods in 1993. Total plant and equipment expenditures for the third quarter and first nine months of 1994 were $3,724,000 and $10,722,000, respectively, compared to $2,943,000 and $7,162,000 for the same periods in 1993. Major plant and equipment projects in 1994 include the expansion of the film products division in Europe and the establishment of a ringmetals manufacturing operation in Costa Rica. As of September 30, 1994, the Company had access to $70.4 million in short-term credit lines and had $34.1 million in outstanding borrowings against these lines. The Company also had access to a $62.5 million credit agreement to fund both working capital and acquisition requirements. As of September 30, 1994, the Company had $36 million in borrowings against this agreement classified as long-term debt on the balance sheet. The Company believes that funds generated from operations combined with existing credit facilities are more than sufficient to meet currently anticipated needs. 10 - 8 - PART II. OTHER INFORMATION Item 5: Other Information On August 26, 1994, the Company purchased the Sickinger Company located in Auburn Hills, Michigan. The Sickinger Company, which has annual sales of approximately $8 million, manufactures paper punching machines and wire and plastic coil binding supplies. The acquisition has been accounted for as a purchase transaction with the results of operations included in the financial statements since the date of acquisition. The Company does not expect the acquisition to have a material effect on its financial results. Item 6: Exhibits (a) Exhibits: None (b) Reports on Form 8-K: No reports on Form 8-K were filed by the Registrant during the third quarter ended September 30, 1994. 11 - 9 - SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GENERAL BINDING CORPORATION AND SUBSIDIARIES By EDWARD J. MCNULTY ---------------------------------- Edward J. McNulty Vice President and Chief Financial Officer EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GENERAL BINDING CORPORATION'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1994 SEP-30-1994 3,354 0 76,293 5,234 82,385 176,655 137,301 69,821 288,953 91,252 39,128 2,262 0 0 140,798 288,953 309,965 309,965 174,023 174,023 0 1,346 2,591 22,578 9,022 13,556 0 0 0 13,556 .86 .86 Notes and accounts receivable-trade are stated net of allowances for doubtful accounts and sales returns.
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