10-K
1
FORM 10-K
1
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
/X/ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
/ /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 of Incorporation) (I.R.S. Employer Identification No.)
ONE GBC PLAZA
NORTHBROOK, ILLINOIS 60062
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code (708) 272-3700
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, $.125 par value NASDAQ
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
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
As of February 28, 1995, the aggregate market value of the Common Stock
(based upon the average bid and asked prices of these shares on the
Over-The-Counter Market -- NASDAQ) of the company held by nonaffiliates was
approximately $82,800,000. (Estimated solely for the purpose of completing this
cover page.)
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
OUTSTANDING AT
CLASS FEBRUARY 28, 1995
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Common Stock, $.125 par value 13,359,380
Class B Common Stock, $.125 par
value............................... 2,398,275
DOCUMENTS INCORPORATED BY REFERENCE WHERE INCORPORATED
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Definitive Proxy Statement for the Annual Meeting of Stockholders to be held May 9, 1995. Part III
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2
TABLE OF CONTENTS
General Binding Corporation and Subsidiaries
PART I PAGE
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Item 1. Business............................................................................. 1
Item 2. Properties........................................................................... 2
Item 3. Legal Proceedings.................................................................... 2
Item 4. Submission of Matters to a Vote of Security Holders.................................. 2
PART II
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Item 5. Market for Registrant's Common Stock and Related Stockholder Matters................. 3
Item 6. Selected Financial Data.............................................................. 3
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations........................................................................... 4
Item 8. Financial Statements and Supplementary Data.......................................... 7
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure........................................................................... 27
PART III
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Item 10. Directors and Executive Officers of the Registrant................................... 27
Item 11. Executive Compensation............................................................... 27
Item 12. Security Ownership of Certain Beneficial Owners and Management....................... 27
Item 13. Certain Relationships and Related Transactions....................................... 27
PART IV
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Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K....................... 28
Signatures......................................................................................... 29
3
PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT AND DESCRIPTION OF BUSINESS AND SEGMENT INFORMATION
General Binding Corporation, incorporated in 1947, and its subsidiaries (herein
referred to as "GBC" or "Company") are engaged predominantly in one line of
business, namely the design, manufacture and distribution of a broad line of
business machines and related supplies. This broad line includes system
applications in the areas of binding, laminating, shredding, and security
identification. These products are manufactured in eighteen plants in the United
States and abroad. GBC products are sold through a network of direct sales and
telemarketing personnel, dealers, distributors and wholesale stationers. The
Company provides maintenance and repairs on the machines it sells through a
trained field service organization and through trained dealers.
The following table illustrates the ratio of revenue contribution of business
machines, supplies and service for the last three fiscal years:
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1994 1993 1992
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Business machines 25% 24% 23%
Related supplies and service* 75% 76% 77%
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* Includes the ringmetal business
On August 26, 1994, the Company completed its acquisition of the Sickinger
Company located in Auburn Hills, Michigan. Sickinger manufactures paper punching
machines as well as wire and plastic coil binding supplies. The total
consideration paid for the Sickinger Company was $4.9 million.
On July 29, 1993, the Company finalized the purchase of the business and
certain assets of Bates Manufacturing Company located in Hackettstown, New
Jersey. Bates manufactures and distributes staplers, numbering systems, card
files and other office products through a large network of dealers and
wholesalers. The total consideration paid for the Bates Manufacturing Company
was $5.0 million.
Additional information related to the Company's acquisitions is included in
Note 13 to the Consolidated Financial Statements.
Customers
The Company's machines and supplies are sold worldwide to users in the business,
education, graphic arts, health, recreation and government markets. With this
broad base of customers, GBC is not dependent upon any single customer for a
significant portion of its business.
Competition
Although there is active competition with respect to each GBC product, GBC is
not aware of any major company competing in all its products. The Company
believes that it has a leadership position for its binding and laminating
products and a strong market share for most of its other products. To maintain
its competitive position, GBC relies primarily on product quality, marketing
strength and customer service.
Backlog and Seasonal Variations
Backlog of orders is not considered a material factor in GBC's business, nor is
the business seasonal in any material respect.
Materials
Materials and parts used in the manufacture of GBC's products are available from
a number of sources. In general, the Company has not experienced any shortages
in materials or parts. During 1994 a worldwide shortage of polyester developed.
Polyester is used in the manufacture of the Company's film products. Due to the
volume of the Company's purchases of polyester and its strong relationships with
suppliers; the Company believes that it will continue to be able to purchase
adequate volumes of polyester to meet demand.
Patents and Trademarks
Many of the equipment and supply products manufactured and/or sold by the
Company and certain application methods related to such products are covered by
United States and foreign patents. The Company's U.S. patent on the basic
hot-knife plastic VeloBind strip binding element expires in the year 2000 and
the proprietary nature of that product is important to the Company's ability to
effectively compete in its markets. Although the other patents owned by the
Company are also highly important to its business, the Company does not consider
its business dependent on any of those patents.
The Company has registered the GBC, VeloBind and Bates trademarks in the
United States and numerous foreign countries and considers those trademarks
material to its business. The Company has also registered numerous other
trademarks related to specific products in the United States and many foreign
countries.
1
4
Environment
Although the Company has no known operations which have a significant impact
upon the environment, GBC continuously takes active steps to ensure that all of
its operations comply with local, state and federal regulations relating to
environmental protection and occupational safety hazards. These steps have not
had a material effect upon operating results or the Company's competitive
position.
Research and Development
Research and development expenditures amounted to approximately $5,069,000 in
1994, $4,949,000 in 1993 and $3,521,000 in 1992. All research is Company funded.
Employees
As of December 31, 1994, GBC employed 3,226 people worldwide. Employee relations
are considered to be excellent.
Geographical Information
Financial information by geographical area is included in Note 11 to the
Consolidated Financial Statements.
ITEM 2. PROPERTIES
In addition to the manufacturing locations listed below, the Company operates
sales and service offices throughout the world, seven regional warehouses in the
United States, and a 60,000 sq. ft. world headquarters building in Northbrook,
Illinois. Management believes that the Company's manufacturing facilities are
suitable and adequate for its operations and are maintained in a good state of
repair.
Major manufacturing is conducted at the following plant locations:
Approximate Area
in Thousand
Sq. Ft.
Including
Location Office Space Ownership
--------------------------- ---------------- ----------
Northbrook, Illinois 190 GBC owned
Sparks, Nevada 92 Leased
Addison, Illinois 91 GBC owned
Basingstoke, England 80 Leased
St. Louis, Missouri 73 GBC owned
Lincolnshire, Illinois 64 Leased
Nuevo Laredo, Mexico 49 Leased
Don Mills, Ontario, Canada 40 Leased
Phoenix, Arizona 40 GBC owned
Amelia, Virginia 39 GBC owned
Kerkrade, Holland 37 GBC owned
Auburn Hills, Michigan 35 Leased
Castle Hill, Australia 26 GBC owned
San Jose, Costa Rica 23 Leased
Tornaco, Italy 22 GBC owned
Hoofddorp, Holland 16 GBC owned
Noda, Japan 11 GBC owned
Mexico City, Mexico 10 GBC owned
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material pending legal proceedings, and
neither the Company nor any of its officers or directors are aware of any
material contemplated proceeding.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS DURING THE FOURTH
QUARTER OF 1994
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
PRINCIPAL MARKET AND PRICE RANGE
The following table shows the range of closing prices for the common stock in
the NASDAQ National Market System for the calendar quarters indicated below:
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Prices
1994 1993
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High Low High Low
First Quarter $16 1/4 $14 3/8 $19 1/4 $16
Second Quarter 18 3/8 14 3/4 17 13 1/4
Third Quarter 20 3/4 17 16 7/8 11 1/2
Fourth Quarter 22 18 15 3/4 12 1/4
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DIVIDENDS
The following table represents dividends paid per share during the calendar
quarters indicated below:
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Dividends Paid
1994 1993
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First Quarter $ .10 $.10
Second Quarter .10 .10
Third Quarter .10 .10
Fourth Quarter .105 .10
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Total $.405 $.40
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Cash dividends have been paid each quarter commencing with the fourth quarter
of 1975. The future payment of dividends and any increases therein are within
the discretion of the Company's Board of Directors and will depend, among other
factors, on working capital requirements, capital expenditures and earnings
growth of the Company. On March 20, 1995, the Company paid a quarterly dividend
of $.105 per share.
Approximate Number of Equity Security Holders
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Number of Record Holders
as of
Title of Class February 28, 1995
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Common Stock, $.125 par value 828*
Class B Common Stock, $.125
par value 1
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*Per latest report of Transfer Agent. Each security dealer holding shares in a
street name for one or more individuals is counted as only one record holder.
ITEM 6. SELECTED FINANCIAL DATA
(000 omitted, except per share and ratio data)
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1994 1993 1992(1) 1991(1) 1990(1)
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Net Sales $420,449 $376,138 $368,643 $311,199 $ 303,670
Income from Continuing Operations 15,703 14,994 16,380 12,599 13,655
Cumulative effect of change in accounting for Income Taxes -- -- -- -- (1,134)
Net Income 15,703 14,994 16,380 12,599 12,521
Income per Common Share -- Continuing Operations 1.00 .95 1.04 .80 .86
Cash Dividends per Share of Common Stock .405 .400 .370 .330 .290
Total Expenditures for Plant and Equipment 12,788 10,595 9,795 13,076 7,678
Current Assets 171,154 145,351 141,234 139,550 134,575
Current Liabilities 84,604 64,760 67,045 71,708 63,149
Working Capital 86,550 80,591 74,189 67,842 71,426
Current Ratio 2.0 2.2 2.1 1.9 2.1
Total Assets 284,278 251,109 241,807 240,688 190,891
Long-Term Obligations 42,020 38,564 32,966 35,574 2,794
Stockholders' Equity 141,089 133,531 126,130 117,913 112,486
Per Share of Common Stock 8.96 8.47 7.99 7.46 7.09
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(1) The Company adopted SFAS No. 109, "Accounting for Income Taxes", in 1993 by
restating financial statements beginning in 1990.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Sales
The Company's 1994 sales exceeded the $400 million mark for the first time
reaching a new record of $420 million. Sales increased $44 million or 12% over
1993 as compared to an increase of $7 million or 2% over 1992. Results for both
years were impacted by acquisitions. Sales in 1994 were positively impacted by
the acquisitions of Sickinger Company in August of 1994 and the business of
Bates Manufacturing Company in July of 1993, while 1993 sales were positively
impacted by the acquisition of the Bates business. Excluding the impact of
acquisitions, 1994 sales increased 8% while 1993 sales were relatively flat.
Increases in sales for 1994 were recorded in all major channels of
distribution with the exception of the ringmetals business which experienced
relatively flat sales. The most significant factors contributing to growth were
increases in the Company's: a) worldwide film products operations; b) domestic
office products division; and c) international subsidiaries' distributor/dealer
operations. Additionally, another factor contributing to the increase was higher
sales in the domestic direct/telemarketing operation which partially resulted
from increased market penetration in the graphic products business coupled with
sales of a new high capacity punch product, the AP-1. Sales in 1993 compared to
1992 were favorably impacted by a 24% increase in the Company's worldwide film
products division. This increase was partially offset by lower sales in the
Company's international operations, ringmetals, and domestic OEM businesses. The
lower sales recorded in 1993 in the Company's international operations were
significantly impacted by weaker foreign currencies and ongoing recessionary
conditions.
On a worldwide basis, sales of the Company's equipment product lines increased
17% in 1994 over 1993 as compared to a 5% increase in 1993 over 1992. Worldwide
sales of supplies and service product lines (which for discussion purposes,
include the Company's ringmetals business) increased 10% in 1994 over 1993
versus a 1% increase in sales in 1993 over 1992. Without the impact of
acquisitions, equipment sales increased 9% in 1994 and remained flat in 1993,
while supply and service sales increased 8% in 1994 and remained flat in 1993.
Gross Margins, Cost and Expenses
Gross profit margins decreased 1 percentage point from 1993 to 1994 and
decreased 2.5 points from 1992 to 1993. Excluding the impact of acquisitions,
margins remained relatively flat from 1993 to 1994 and decreased 2 points from
1992 to 1993. An erosion in margins experienced by the Company's international
and domestic core operations during 1994 was partially offset by an improvement
in margins in the ringmetals business. Worldwide competitive pressures, an
increase in certain raw material costs, and a mix change towards the Company's
growth in lower margin film and dealer businesses had a negative effect on
margins. The decline in margins from 1992 to 1993 was attributed to ongoing
recessionary conditions, worldwide competitive pressures in the Company's
international operations, and weaker foreign currencies coupled with a mix
change towards the Company's growth in lower margin film and dealer businesses.
Also contributing to the decline were higher research and development expenses
which increased 41% over 1992.
Selling, service, and administrative expenses increased 7% in 1994 and
decreased 2% in 1993. Without the impact of acquisitions, 1994 expenses
increased approximately 5% while 1993 expenses decreased 4%. These expenses as a
percentage of total sales have declined over the past two years and were 35.1% ,
36.6%, and 38.2%, respectively, in 1994, 1993, and 1992. The 1994 increase in
expenses primarily resulted from increased sales in the Company's worldwide
operations. Additional expenses were incurred to consolidate several of the
Company's distribution operations, increase its marketing and advertising
expenditures, and expand its support for its export businesses.
The 1993 decrease in expenses predominantly resulted from the effect of weaker
foreign currencies, the consolidation of a number of domestic direct branch
sales operations and a reduction in Corporate support expenses. Partially
offsetting these decreases were higher expenses resulting from higher sales in
the Company's film products and domestic office products divisions and the
adoption of SFAS 106, "Accounting for Postretirement Benefits Other Than
Pensions."
A pretax restructuring charge of $4.0 million was recorded in 1994. See Note
14 to the Consolidated Financial Statements for additional information.
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4
7
Interest expense increased by 5% in 1994 over 1993 compared to a 10% increase
in 1993 over 1992. The primary reason for the 1994 increase was higher average
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. This increase was partially offset by the expiration of
several of the Company's interest rate swaps in the fourth quarter of 1993 and
lower debt levels in the Company's Mexican subsidiary. The increase in interest
expense in 1993 was primarily due to: a) a reduction in the capitalization of
interest due to the completion of the Company's film products plant expansion;
b) an increase in interest expense in the Company's international operations due
to higher borrowing levels as a result of lower overall earnings and dividends
paid in late 1992; and c) higher domestic borrowing levels during the second
half of 1993 resulting from the financing of the Bates acquisition.
Other income and expense in 1994 was $1,842,000 of expense compared to
$1,210,000 of expense in 1993. The most significant factors affecting the
unfavorable change were higher currency losses of $174,000 primarily resulting
from the devaluation of the Mexican peso and losses on sales of fixed assets of
$161,000. Other income and expense in 1993 was $1,210,000 of expense compared to
$1,339,000 of expense in 1992. The favorable change was primarily due to higher
income of $384,000 from investments in joint ventures and a decrease of $281,000
in amortization expense for a non-compete note, goodwill and patents. Partially
offsetting this was higher currency losses of $192,000 and lower interest income
of $164,000.
Income Taxes
The Company's effective tax rate increased slightly to 38.9% from 38.3% in 1993.
The 1993 rate declined 1.8 points from the 1992 rate of 40.1% primarily due to a
decrease in foreign earnings which were subject to higher income taxes coupled
with an increase in the tax benefit received from a tax allocation agreement
between the Company and Lane Industries, Inc. Partially offsetting this was an
increase in the statutory Federal income tax rate as a result of the enactment
of the Omnibus Budget Reconciliation Act of 1993 in August of 1993.
Numerous other items enter into the development of the Company's effective tax
rate. Additional information is included in Note 10 to the Consolidated
Financial Statements.
Net Income
The Company's net income per share increased 5% or $.05 to $1.00 in 1994
compared to 1993 net income per share of $.95. The increase was primarily
attributed to continued growth in the worldwide film products operations and
international and domestic core businesses along with improved performance in
the Company's ringmetals division. This increase was partially offset by an
after-tax restructuring charge of $2,504,000 or $.16 per share. Additional
information is included in Note 14 to the Consolidated Financial Statements.
The Company's 1993 net income per share decreased 9% or $.09 to $.95 compared
to 1992 net income per share of $1.04. The decrease was primarily attributable
to a 43% decrease in earnings in the Company's international operations due to
ongoing recessionary conditions and continuing competitive pressures. Also
contributing to the decrease were higher research and development expenses
relating to new product development. These unfavorable items were partially
offset by increases in income in the Company's domestic direct
branch/telemarketing operations, domestic office products division and film
products division along with a lower effective tax rate.
Other Events
During December 1994 the Mexican peso was devalued. The value of the Mexican
peso compared to the U.S. dollar has continued to weaken since the devaluation.
The effect of the devaluation on the Company's results of operations for the
year ended December 31, 1994 was not material. Translation of the assets and
liabilities of the Company's Mexican operations into U.S. dollars resulted in an
unfavorable adjustment of $2,053,000. In accordance with SFAS No. 52, "Foreign
Currency Translation," this adjustment is reflected in the Company's equity
section of the balance sheet. Continued weakening of the Mexican peso will have
an unfavorable impact on the Company's future results of operations. The
unfavorable impact will result from: a) an anticipated weakening of the Mexican
economy; b) higher costs associated with importing inventory and materials into
Mexico; and c) losses associated with obligations denominated in U.S. dollars
and other foreign currencies. The extent of the impact of these conditions on
the Company's results of operations is not known.
Liquidity and Capital Resources
Cash provided by operating activities decreased to $5.2 million in 1994 compared
with $15.0 million in 1993 and $17.1 million in 1992. The decline in cash flow
in 1994 was primarily due to an increase in inventory and accounts receivable
levels while the decline in 1993 was mainly due to an increase in accounts
receivable levels coupled with an increase in income tax payments.
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8
Capital expenditures were $12.8 million in 1994 compared to $10.6 million in
1993 and $9.8 million in 1992. Major projects in 1994 included the completion of
a European production facility for the film products division and the
construction of a ringmetals manufacturing operation in Costa Rica. Capital
expenditures for 1993 included the expansion of the plant and production
capacity of the Company's graphic operations, the expansion of the film products
division into Europe, tooling for new products, and the renovation and
remodeling of the Company's research and development facility in Northbrook.
Expenditures for 1992 included the expansion of the Company's film products
division domestic plant and production capacity.
Capital expenditures for 1995 are expected to be approximately $17.9 million
and include the purchase and implementation of a company-wide business
enterprise information system along with the upgrading of various domestic and
international manufacturing capabilities.
Cash dividends paid in 1994 increased to $.405 per share compared to $.40 per
share in 1993 and $.37 per share in 1992.
The Company had access to $62.5 million in short-term credit lines and as of
December 31, 1994 had $23.8 million in outstanding borrowings against these
lines.
During 1994, the Company also had access to a $62.5 million credit agreement
to fund both working capital and acquisition requirements. At the end of 1994,
the Company had $36.0 million in borrowings against this agreement classified as
long-term debt on the Company's balance sheet. Additional information is
included in Note 6 to the Consolidated Financial Statements.
The Company believes that funds generated from operations combined with
existing credit facilities are more than sufficient to meet currently
anticipated capital needs along with any foreseeable acquisition requirements.
Acquisitions
The Company acquired Sickinger Company in 1994 and the business and certain
assets of Bates Manufacturing Company in 1993. See Note 13 to the Consolidated
Financial Statements for additional information.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PAGE
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Consolidated Statements of Income................................................................ 8
Consolidated Balance Sheets...................................................................... 9
Consolidated Statements of Cash Flows............................................................ 10
Consolidated Statements of Stockholders' Equity.................................................. 11
Notes to Consolidated Financial Statements....................................................... 12
Report of Independent Public Accountants......................................................... 24
Schedule II -- Valuation and Qualifying Accounts................................................. 25
Report of Independent Public Accountants with Respect to Supplemental Financial Statement
Schedule....................................................................................... 26
All other schedules have been omitted because they are not applicable, are not
required, or the information is included in the consolidated financial
statements or notes thereto.
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10
CONSOLIDATED STATEMENTS OF INCOME
General Binding Corporation and Subsidiaries
(000 omitted except per share data)
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Year ended December 31 1994 1993 1992
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SALES:
Domestic $274,319 $246,790 $ 235,927
International 146,130 129,348 132,716
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Total sales 420,449 376,138 368,643
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COSTS AND EXPENSES:
Cost of sales, including development
and engineering 237,492 209,340 195,831
Selling, service and administrative 147,639 137,674 140,837
Restructuring 4,000 -- --
Interest 3,776 3,609 3,288
Other expense, net 1,842 1,210 1,339
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Total costs and expenses 394,749 351,833 341,295
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INCOME BEFORE TAXES 25,700 24,305 27,348
INCOME TAXES 9,997 9,311 10,968
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NET INCOME $ 15,703 $ 14,994 $ 16,380
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NET INCOME PER COMMON SHARE $ 1.00 $ .95 $ 1.04
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DIVIDENDS PER COMMON SHARE $ .405 $ .40 $ .37
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AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 15,763 15,777 15,797
-------- -------- ---------
The accompanying notes to consolidated financial statements are an integral part
of these statements.
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CONSOLIDATED BALANCE SHEETS
General Binding Corporation and Subsidiaries
(000 omitted except share data)
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December 31 1994 1993
Assets
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CURRENT ASSETS:
Cash and cash equivalents $ 5,569 $ 4,462
Receivables, less allowances for doubtful accounts and sales returns: 1994 -- $4,840,
1993 -- $4,821 74,413 63,701
Inventories, at lower of cost or market 76,010 65,636
Deferred tax assets 8,807 7,756
Other 6,355 3,796
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Total current assets 171,154 145,351
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PLANT AND EQUIPMENT, AT COST:
Land and land improvements 4,920 4,312
Buildings and leasehold improvements 28,893 27,286
Machinery and equipment 95,986 92,175
Assets under capital leases 826 826
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130,625 124,599
Less -- Accumulated depreciation and amortization (65,095) (62,504)
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Net plant and equipment 65,530 62,095
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OTHER ASSETS:
Cost in excess of fair value of assets of acquired companies, net of amortization 31,099 29,912
Other 16,495 13,751
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Total other assets 47,594 43,663
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TOTAL ASSETS $ 284,278 $ 251,109
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Liabilities and Stockholders' Equity
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CURRENT LIABILITIES:
Notes payable $ 23,814 $ 9,625
Current maturities of long-term obligations 674 433
Accounts payable 20,647 22,124
Accrued liabilities --
Salaries, wages and profit-sharing contributions 9,939 8,212
Taxes, other than income taxes 2,839 2,230
Deferred income on maintenance agreements 8,426 7,937
Other 18,265 14,132
Taxes on income -- 67
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Total current liabilities 84,604 64,760
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LONG-TERM OBLIGATIONS, LESS CURRENT MATURITIES:
Long-term debt 42,020 38,350
Capital leases -- 214
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Total long-term obligations 42,020 38,564
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OTHER LONG-TERM LIABILITIES 9,340 8,252
--------- ----------
DEFERRED TAX LIABILITIES 7,225 6,002
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STOCKHOLDERS' EQUITY:
Common stock, $.125 par value; shares authorized 20,000,000; shares issued
15,693,747 in 1994 and 1993 1,962 1,962
Class B common stock, $.125 par value; shares authorized 2,398,275; shares issued
2,398,275 in 1994 and 1993 300 300
Additional paid-in-capital 6,562 6,133
Cumulative translation adjustments (1,204) 101
Retained earnings 153,330 144,011
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160,950 152,507
Less -- Treasury stock -- 2,344,235 shares in 1994 and 2,330,612 shares in 1993 (19,861) (18,976)
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Total stockholders' equity 141,089 133,531
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 284,278 $ 251,109
--------- ----------
The accompanying notes to consolidated financial statements are an integral part
of these statements.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
General Binding Corporation and Subsidiaries
(000 omitted)
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Year ended December 31 1994 1993 1992
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 15,703 $ 14,994 $ 16,380
-------- -------- --------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 12,081 10,747 10,775
Increase (decrease) in non-current deferred taxes 1,280 (1,902) (326)
Provision for doubtful accounts 1,774 1,303 1,307
(Increase) in other long-term assets (5,154) (2,733) (2,039)
Other 1,483 871 1,139
Changes in current assets and liabilities:
(Increase) in receivables (12,071) (8,600) (5,069)
(Increase) in inventories (8,870) (206) (5,248)
(Increase) decrease in other current assets (2,313) (259) 815
(Increase) decrease in deferred tax assets (1,123) 436 311
Increase (decrease) in accounts payable and accrued liabilities 2,732 1,955 (3,419)
(Decrease) increase in taxes on income (301) (1,588) 2,463
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Net cash provided by operating activities 5,221 15,018 17,089
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (12,788) (10,595) (9,795)
Purchase of Sickinger ($3,472, net of cash acquired $19) (3,453) -- --
Purchase of Bates -- (4,985) --
Proceeds from sale of plant and equipment 3,279 130 303
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Net cash (used in) investing activities (12,962) (15,450) (9,492)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (reduction) in notes payable 13,651 (4,826) (1,608)
Increase in long-term obligations 2,802 6,022 492
(Reduction) of long-term obligations (901) (424) (3,098)
Increase in current portion of long-term obligations 236 160 50
Dividends paid (6,384) (6,312) (5,844)
Purchases of treasury stock (975) (507) (1,302)
Proceeds from the exercise of stock options 438 113 434
---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 8,867 (5,774) (10,876)
-------- -------- --------
Effect of exchange rates on cash (19) (101) (418)
---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 1,107 (6,307) (3,697)
Cash and cash equivalents at beginning of the year 4,462 10,769 14,466
-------- -------- --------
Cash and cash equivalents at end of the year $ 5,569 $ 4,462 $ 10,769
-------- -------- --------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash Paid During the Year for:
Interest $ 3,667 $ 3,702 $ 3,552
Income taxes, net of refunds 11,986 11,814 7,782
The accompanying notes to consolidated financial statements are an integral part
of these statements.
10
13
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
General Binding Corporation and Subsidiaries
(000 omitted, except number of shares and per share data)
--------------------------------------------------------------------------------
Additional Cumulative
Common Stock Treasury Stock Paid-In Translation Retained
Shares Amount Shares Amount Capital Adjustments Earnings Total
---------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER
31, 1991 18,092,022* $2,262* (2,278,166) $(17,298) $5,674 $ 2,482 $124,793 $117,913
1992 translation
adjustment -- -- -- -- -- (1,451) -- (1,451)
Exercise of stock
options -- -- 40,123 95 339 -- -- 434
Purchase of treasury
stock -- -- (72,258) (1,302) -- -- -- (1,302)
Net income in 1992** -- -- -- -- -- -- 16,380 16,380
Dividends paid ($.37
per share) -- -- -- -- -- -- (5,844) (5,844)
---------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER
31, 1992 18,092,022* $2,262* (2,310,301) $(18,505) $6,013 $ 1,031 $135,329 $126,130
1993 translation
adjustment -- -- -- -- -- (930) -- (930)
Exercise of stock
options -- -- 15,182 36 120 -- -- 156
Purchase of treasury
stock -- -- (35,493) (507) -- -- -- (507)
Net income in 1993 -- -- -- -- -- -- 14,994 14,994
Dividends paid ($.40
per share) -- -- -- -- -- -- (6,312) (6,312)
---------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER
31, 1993 18,092,022* $2,262* (2,330,612) $(18,976) $6,133 $ 101 $144,011 $133,531
1994 translation
adjustment -- -- -- -- -- (1,305) -- (1,305)
Exercise of stock
options -- -- 38,098 90 429 -- -- 519
Purchase of treasury
stock -- -- (51,721) (975) -- -- -- (975)
Net income in 1994 -- -- -- -- -- -- 15,703 15,703
Dividends paid ($.405
per share) -- -- -- -- -- -- (6,384) (6,384)
---------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER
31, 1994 18,092,022* $2,262* (2,344,235) $(19,861) $6,562 $(1,204) $153,330 $141,089
----------- ------- ---------- -------- ------ ------- -------- --------
* Includes Class B Common Stock for the years ended December 31, 1991 through
1994 -- Shares 2,398,275, Amount $300,000
** The Company adopted SFAS No. 109, "Accounting for Income Taxes", in 1993 by
restating financial statements beginning in 1990.
-
11
14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
General Binding Corporation and Subsidiaries
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) Consolidation
The consolidated financial statements include the accounts of the Company and
its domestic and international subsidiaries. All of these international
subsidiaries have November 30 fiscal year-ends except for Canada and Mexico.
Intercompany accounts and transactions have been eliminated in consolidation.
Investments in significant companies which are 20% to 50% owned are treated as
equity investments and the Company's share of earnings is included in income.
(B) Cash and Cash Equivalents
The Company considers temporary cash investments with an original maturity of
three months or less to be cash equivalents.
(C) Inventory Valuation
Inventories are valued at the lower of cost or market on a first-in, first-out
basis. Inventory costs include labor, material and factory overhead.
(D) Depreciation of Plant and Equipment
Depreciation of plant and equipment is computed using principally the
straight-line method over the following estimated lives:
--------------------------------------------------------------------------------
Buildings 25 - 50 years
Machinery and equipment 1 - 20 years
Leasehold improvements Term of lease
--------------------------------------------------------------------------------
The cost and accumulated depreciation of items sold or retired are removed
from the asset accounts and the resulting gain or loss is recognized in income.
(E) Amortization of Intangibles
Cost in excess of fair value of assets of acquired companies is amortized on the
straight-line basis over estimated periods of benefit ranging up to 40 years.
(F) Compensated Absences
The Company follows the policy of accruing vacation pay for all employees.
(G) Income Taxes
Since 1986, the Company's policy for earnings from its international
subsidiaries has been to provide appropriate income taxes on the earnings
expected to be distributed to the Company. In 1992, 1993 and 1994, current
earnings of all international subsidiaries other than GBC Canada and Mexico were
considered remitted to the United States for the purpose of determining income
tax expense for the year. In addition, in 1988, the Company implemented a
balance sheet hedging strategy for its international operations and as a result
provided appropriate income taxes on approximately $4,449,000 of pre-1986
earnings of its international subsidiaries. Approximately $1,835,000 of these
earnings were remitted in the years 1988 through 1994, and the balance is
expected to be remitted in future years.
As of December 31, 1994, the cumulative amount of undistributed earnings of
international subsidiaries upon which income taxes have not been provided was
approximately $12.9 million. In the opinion of management, this amount remains
indefinitely reinvested by the international subsidiaries.
(H) Net Income per Common Share
Net income per common share is based on the weighted average number of common
shares outstanding for each year. Assuming exercise of all outstanding stock
options, net income per common share would not be materially different from net
income per common share as reported.
(I) Stock Option Compensation
Stock option compensation cost applicable to the non-qualified restricted plans
is valued at the date of the grant and recorded as compensation expense as the
options become exercisable.
(J) Deferred Service Income
Income under maintenance agreements is deferred and recognized over the term
(primarily 1 to 2 years) of the agreements on a straight-line basis.
2. FOREIGN CURRENCY EXCHANGE AND TRANSLATION
Foreign currency translation adjustments, except for those adjustments relating
to Mexican operations during 1992 (a hyperinflated economy), have been excluded
from the Consolidated Statements of Income and are recorded in a cumulative
translation adjustment account as a separate component of stockholders' equity.
Beginning in January of 1993, Mexico is no longer being accounted for as a
hyperinflated economy and accordingly its foreign currency translation
adjustments are recorded in the cumulative translation adjustment account.
12
15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
General Binding Corporation and Subsidiaries
The accompanying Consolidated Statements of Income include net gains and
losses on foreign currency transactions and net gains and losses resulting from
translation of the Mexican balance sheet into U.S. dollars during 1992. Such
amounts are reported as part of cost of sales and other income/expense and are
summarized as follows (000 omitted):
-------------------------------------------------------------------------------
Foreign Foreign Total
Currency Currency Foreign
Year Ended Transaction Translation Exchange
December 31 Gain/(Loss)(a) Gain/(Loss)(b) Gain/(Loss)
-------------------------------------------------------------------------------
1994 $(329) $ (--) $(329)
1993 $(155) $ (--) $(155)
1992 $59 $(293) $(234)
-------------------------------------------------------------------------------
(a) Foreign currency transaction gains/losses are subject to income taxes at the
respective country's effective tax rate.
(b) Relates to operations in Mexico, a hyperinflationary economy in 1992.
3. INVENTORIES
Inventories are summarized as follows (000 omitted):
-------------------------------------------------------------------------------
Finished Work in Raw
December 31 Total Goods Process Materials
-------------------------------------------------------------------------------
1994 $76,010 $49,090 $6,092 $20,828
1993 $65,636 $41,548 $4,176 $19,912
-------------------------------------------------------------------------------
4. PROFIT-SHARING AND PENSION PLANS
Under the provisions of a defined contribution profit sharing plan covering
substantially all full-time domestic employees (excluding U.S. RingBinder union
employees and Sickinger employees), the Company is required to make annual
contributions, as defined, to a trust fund. The Company may make additional
contributions for any year and has done so annually, except in 1968, since
establishment of the plan. Contributions charged to expense were $2,092,000 in
1994, $2,122,000 in 1993 and $1,937,000 in 1992. Employee participation in the
plan is optional. Participating employees must contribute 2%, but cannot
contribute more than 12% of total compensation.
The Company has two separate active domestic defined benefit pension plans and
one frozen domestic defined benefit pension plan. The Company has a Guaranteed
Retirement Income Plan (GRIP) for its domestic employees participating in the
profit sharing plan. The plan provides benefits that are based on the employee's
years of credited service and a percentage of the employee's compensation offset
by a percentage of the employee's social security benefits. Furthermore,
benefits from the GRIP Plan are reduced by the actuarial equivalent of the
participant's profit sharing account. U.S. RingBinder also has a pension plan
covering substantially all of its union member employees. The plan provides
benefits that are based on the employee's years of credited service. As of
September 30, 1994, the Company froze the defined benefit plan for the non-union
employees at U.S. RingBinder and these employees became eligible for the
Company's defined contribution profit sharing plan. The Company's funding policy
towards all domestic plans is to fund the plans annually in accordance with
ERISA and Federal tax regulations. All domestic plans utilize the entry age
normal funding actuarial method to calculate the annual normal cost. The plans'
assets consist of cash and cash equivalents, debt, equity and government
securities.
VeloBind was acquired by the Company on November 1, 1991. On this date, all of
VeloBind's full-time employees became eligible for the same profit sharing and
pension plans as the Company's domestic employees. Prior to acquisition,
VeloBind maintained a 401(K) Savings Incentive Plan. Upon acquisition, this plan
was frozen with all Company and employee contributions suspended. Distributions
from the Savings Incentive Plan are made upon retirement, death or disability,
termination of employment or exercise of the limited withdrawal rights provided
under the Savings Incentive Plan.
The Company's international subsidiaries have adopted a variety of defined
benefit and defined contribution plans. These plans provide benefits that are
based upon the employee's years of credited service. The benefits payable under
these plans, for the most part, are provided by the establishment of trust funds
or the purchase of insurance annuity contracts.
Net periodic pension expense for the pension plans for the years 1994, 1993
and 1992 was as follows (000 omitted):
-------------------------------------------------------------------------------
1994 1993 1992
-------------------------------------------------------------------------------
Domestic Pension Plans $ 199 $ 39 $ 15
International Subsidiary Pension
Plans 1,247 786 738
----- ---- ----
Total Expense $1,446 $825 $753
----- ---- ----
-------------------------------------------------------------------------------
13
16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
General Binding Corporation and Subsidiaries
The following rates were used in determining the actuarial present value of
accumulated plan benefits for the
Company's pension plans.
--------------------------------------------------------------------------------
1994 1993
Domestic International Domestic International
---------------------------------------------------------------------------------------------------------------------------------
Discount Rate 8.0% 4.0%-15.0% 7.0% 4.0%-15.0%
Weighted Average Investment Return Rate 9.5% 4.5%-16.0% 9.5% 4.5%-16.0%
Salary Increase Rate 4.5%-5.0% 4.0%-12.0% 4.5% 4.0%-12.0%
---------------------------------------------------------------------------------------------------------------------------------
Net periodic pension expense/(income) for 1994, 1993 and 1992 includes the
following components (000 omitted):
--------------------------------------------------------------------------------
1994 1993 1992
Domestic International Domestic International Domestic International
---------------------------------------------------------------------------------------------------------------------------------
Service Cost-benefits earned during
the period $ 167 $1,087 $ 128 $ 758 $ 141 $ 775
Interest cost on projected benefit
obligations 297 866 277 701 287 757
Actual return on assets (21) (509) (255) (1,505) (120) (86)
Net amortization and deferral (244) (197) (111) 832 (293) (708)
---- ----- ---- ------ ---- ----
Net periodic pension expense $ 199 $1,247 $ 39 $ 786 $ 15 $ 738
---- ----- ---- ------ ---- ----
---------------------------------------------------------------------------------------------------------------------------------
The following table sets forth the plans' funded status at December 31, 1994
and 1993 (000 omitted):
--------------------------------------------------------------------------------
December 31, 1994 December 31, 1993
Projected Benefit Assets Exceed Projected Benefit Assets Exceed
Obligations Projected Benefit Obligations Projected Benefit
Exceed Assets Obligations Exceed Assets Obligations
---------------------------------------------------------------------------------------------------------------------------------
Domestic International International Domestic International International
---------------------------------------------------------------------------------------------------------------------------------
Actuarial Present Value of
Benefit Obligations:
Vested Benefits $2,890 $ 7,412 $1,741 $3,527 $ 6,155 $1,485
Non-vested Benefits 54 111 144 113 120 110
----- ------ ----- ----- ------ -----
Accumulated Benefit
Obligations $2,944 $ 7,523 $1,885 $3,640 $ 6,275 $1,595
Effect of projected future
compensation levels 467 3,984 714 605 4,035 603
----- ------ ----- ----- ------ -----
Projected Benefit
Obligations $3,411 $11,507 $2,599 $4,245 $10,310 $2,198
Plan Assets at Fair Value 2,940 8,198 3,485 3,679 6,820 2,865
----- ------ ----- ----- ------ -----
Plan Assets (Less Than) in
Excess of Projected
Benefit Obligations $ (471) $ (3,309) $ 886 $ (566) $ (3,490) $ 667
Unrecognized net loss (gain)
due to past experience
different from assumptions 1,137 3,361 (187) 1,311 4,118 (117)
Unrecognized prior service
cost 64 463 25 111 469 27
Adjustment to recognize
minimum liability (724) (196) -- (345) (206) --
Unrecognized net (asset)
obligation at October 1,
1986 to be amortized over
average remaining service
of participants (267) (1,103) 13 (283) (1,160) 19
----- ------ ----- ----- ------ -----
(Accrued) prepaid pension
cost $ (261) $ (784) $ 737 $ 228 $ (269) $ 596
----- ------ ----- ----- ------ -----
---------------------------------------------------------------------------------------------------------------------------------
14
17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
General Binding Corporation and Subsidiaries
5. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company currently provides certain health care benefits for eligible
domestic retired employees. Employees may become eligible for those benefits if
they have fulfilled specific age and service requirements.
In 1993, the Company adopted the Statement of Financial Accounting Standards
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions". This statement requires companies to accrue the cost of
postretirement benefits during the service lives of employees. The Company
elected to amortize over a twenty year period the accumulated liability,
measured as of December 31, 1992, of $1,905,000. Prior to adopting this
standard, the Company recognized these costs as the benefits were paid and
retiree health care benefits expense in 1992 was approximately $280,000.
Net periodic postretirement benefit expense consisted of the following
components (000 omitted):
------------------------------------------------------------
1994 1993
------------------------------------------------------------
Service Cost $194 $173
Interest Cost 163 152
Net Amortization of Initial Transition
Obligation 95 95
------------------------------------------------------------
Net Periodic Postretirement Benefit Costs $452 $420
---- ----
------------------------------------------------------------
The projected liabilities which are not funded are as follows (000 omitted):
------------------------------------------------------------
1994 1993
------------------------------------------------------------
Accumulated Postretirement Benefit
Obligations:
Retired Participants and Beneficiaries $ 1,094 $ 785
Active Participants Eligible for
Retirement 270 226
Other Active Participants 805 1,118
------ ------
Total Benefit Obligation $ 2,169 $ 2,129
Experience Gain (Loss) 26 (154)
Unrecognized Transition Obligation (1,714) (1,810)
------- ---------
Accrued Postretirement Benefit Cost $ 481 $ 165
------ ------
------------------------------------------------------------
The following assumptions used in determining the expense and obligation are
listed below:
------------------------------------------------------------
1994 1993
------------------------------------------------------------
Discount Rate 8% 7%
Health Care Cost Increase 10% 11%
------------------------------------------------------------
The rate of increase in the per capita cost of covered health benefits was
assumed to be 9% in 1995, decreasing gradually to 6% by the year 2000 and
remaining at that level thereafter.
The effect of a 1% increase in the medical trend assumption would increase the
accumulated postretirement benefit obligation as of December 31,1994 by $116,000
and increase the net periodic cost by $17,000.
The Company monitors the cost of the plan and has periodically changed the
benefits provided under this plan. The Company reserves the right to make
additional changes or terminate these benefits in the future. Any changes in the
plan or revisions of the assumptions affecting expected future benefits may have
a significant effect on the amount of the obligation and annual expense.
15
18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
General Binding Corporation and Subsidiaries
6. DEBT AND CREDIT ARRANGEMENTS
Information regarding short-term debt for the three years ended December 31,
1994, 1993, and 1992, is as follows (000 omitted):
--------------------------------------------------------------------------------
Weighted Maximum Weighted
average month-end Average average
interest balance amount interest
Balance rate outstanding outstanding rate
at end at end during during during
of year of year the year the year the year
---------------------------------------------------------------------------------------------------------------------------------
(A) (B) (C) (D) (E)
1994
Notes payable to banks $23,814 6.4% $34,143 $22,875 6.4%
1993
Notes payable to banks 9,625 9.2 14,282 12,176 9.8
1992
Notes payable to banks 14,787 11.2 18,829 12,611 8.9
---------------------------------------------------------------------------------------------------------------------------------
(A) Notes payable by the Company's foreign subsidiaries were $9,443,000 in 1994,
$9,625,000 in 1993 and $11,787,000 in 1992.
(B) The rate for 1994, 1993 and 1992 includes Mexican borrowings at a rate which
is influenced by the rate of inflation in that country. The weighted average
interest rate for notes payable to banks, excluding such borrowings, for the
years ended December 31, 1994, 1993 and 1992 would be 6.3%, 8.2% and 8.1%,
respectively. The weighted average interest rate is computed by dividing the
annualized interest expense for the short-term debt outstanding by the
short-term debt outstanding at December 31.
(C) The composition of the Company's short-term debt will vary by category at
any point in time during the year.
(D) Average amount outstanding during the year is computed by dividing the total
daily outstanding principal balances by 365 days.
(E) The weighted average interest rate during the year for notes payable to
banks excluding Mexican borrowings, for the three years ended December 31, 1994,
1993 and 1992 would be 6.1%, 7.4% and 8.8%, respectively. The weighted average
interest rate during the year is computed by dividing the actual short-term
interest expense by the average short-term debt outstanding.
Long-term debt consists of the following at December 31, 1994 and 1993 (000
omitted):
--------------------------------------------------------------------------------
1994 1993
---------------------------------------------------------------------------------------------------------------------------------
Principal notes payable --
Revolving credit agreement - portion classified as long-term on the basis of the Company's intention to
refinance these borrowings (weighted average interest rate -- 5.7% at December 31, 1994) $36,000 $36,000
Note Payable, due monthly November, 1994 to October, 2004 (interest rate -- 8.85% at December 31, 1994) 3,237 --
Industrial Revenue Bond, due annually from July, 1994 to July, 2008 (floating interest rate -- 5.3% at
December 31, 1994) 2,350 2,530
Industrial Revenue Bond, due annually from June, 2002 to June, 2007 (interest rate -- 5.65% at December 31,
1994) 909 --
------- -------
42,496 38,530
Less - Current maturities 476 180
------ ------
Total long-term debt $42,020 $38,350
------ ------
---------------------------------------------------------------------------------------------------------------------------------
The Company has short-term lines of credit aggregating $62.5 million from
various banks worldwide, of which $34.5 million are with foreign banks or
foreign branches of banks. Interest rates on these lines of credit are primarily
at the prime rate or the lender's cost of funds plus margin. These arrangements
are reviewed annually for renewal.
The Company has access to a $62.5 million revolving credit agreement to fund
both working capital and acquisition requirements. Under the terms of the
agreement, which was entered into with a group of lenders, the Company can
borrow up to $62.5 million under a bid option facility at any time until
December 1995. The Company may convert the revolving credit loan into a five
year term loan on the last day of any quarter during the life of the agreement
and on the termination date of the agreement. Interest is payable at varying
rates provided for in the loan agreement. The Company agreed to pay an annual
facility fee of 15/100 of one percent on the total commitment amount of $62.5
million.
16
19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
General Binding Corporation and Subsidiaries
The revolving credit agreement contains, among other things, certain
restrictive covenants. Under the most restrictive of the covenants, the Company
and its subsidiaries must maintain minimum working capital of $40.0 million, a
debt to tangible net worth ratio not more than 1.15 to 1.0, and an interest
coverage ratio of at least 2.0 to 1.0. The Company was in compliance with these
covenants at December 31, 1994.
As of December 31, 1994, the Company had $36.0 million in borrowings against
this agreement classified as long-term borrowings on the Company's balance
sheet. Although the Company has the ability to convert the revolving credit
agreement to a term loan in 1995, it is the Company's intention to enter into a
new agreement.
The scheduled maturities of long-term debt for each of the five years
subsequent to December 31, 1994, are as follows (000 omitted):
------------------------------------------------------------
Year ending December 31 Amount
------------------------------------------------------------
1995 $476
1996 476
1997 476
1998 476
1999 476
------------------------------------------------------------
7. FINANCIAL INSTRUMENTS
Many of the Company's financial instruments (including cash and cash
equivalents, accounts and notes receivable, notes payable and other accrued
liabilities) carry short-term maturities. As such instruments have short-term
maturities their fair values approximate the carrying values. Substantially all
of the Company's long-term obligations, including current maturities of
long-term obligations have floating interest rates. The fair value of these
instruments also approximates the carrying values.
Interest Rate Swaps and Caps
The Company enters into interest rate swap and interest rate cap agreements to
hedge interest rate exposure on floating rate debt. At December 31, 1994, the
Company had outstanding five interest rate swaps with commercial banks
("counterparties"), having a total notional principal amount of $22 million (no
exchange of principal was involved). Two of the swaps with notional principal
amounts totaling $7 million mature in October 1995. Under these agreements, the
Company is obligated at a fixed rate of 6.31% with payments due quarterly until
maturity. The floating rate from the counterparties is based on the three month
U.S. dollar LIBOR rate (6.5% at December 31, 1994).
The remainder of the swaps with notional principal amounts totaling $15
million have various maturity dates through September 1998. Under these
agreements, the Company is obligated at a weighted average interest rate of
6.99% with payments due quarterly until maturity. The floating rate from the
counterparties is based on the three month U.S. dollar LIBOR rate. The Company
accounts for its swaps by accruing the differential to be paid or received as
interest rates change over the life of the agreements.
At December 31, 1994, the fair value of the interest rate swaps was $427,000
and represents the amounts the counterparties would pay the Company if the
agreements were terminated. At December 31, 1993, the fair value of the interest
rate swaps was ($775,000) and represented the amounts the Company would have had
to pay to terminate the agreements.
During 1994, the Company entered into three interest rate cap agreements with
commercial banks having a total notional principal amount of $15 million. The
beginning effective date for these agreements was September 30, 1994 with
various maturity dates through September 1998. The Company was required to pay a
one-time fee in exchange for the counterparties' obligation to pay the Company
the difference between the three month U.S. dollar LIBOR interest rate and 7.5%
in the event that the LIBOR interest rate exceeds 7.5%. Fees for interest rate
caps are capitalized and amortized over the life of the cap agreement. At
December 31, 1994, the carrying value in the Company's balance sheet for
interest rate caps was $218,000. The related fair value of the interest rate
caps was $345,000 and represents the amounts the counterparties would pay the
Company if the agreements were terminated.
The Company is exposed to credit loss in the event of nonperformance by the
other parties to the interest rate swap and cap agreements, however the Company
believes that the risk of loss is remote.
-
17
20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
General Binding Corporation and Subsidiaries
Foreign Exchange Contracts
The Company also enters into foreign exchange contracts to hedge foreign
currency exchange risk. These contracts primarily hedge inventory purchases,
royalties and management fees. The Company enters into hedges for identifiable
transactions where the foreign currency commitment is firm. The hedged
transactions are recorded based upon the nature of the transaction (e.g., costs
related to inventory purchases are recorded to inventory and recognized in cost
of sales). At December 31, 1994, the Company had foreign exchange contracts with
various dates of maturity through December 31, 1995 to purchase $31.2 million in
U.S. dollars. The fair market value of the contracts at the year end spot rate
was approximately $400,000 greater than the contracted amount. At December 31,
1993, the Company had foreign exchange contracts with various dates of maturity
through December 31, 1994 to purchase $2.3 million in various foreign currencies
and $15.0 million in U.S. dollars. The difference between the contracted amount
and the fair market value of the contracts at the 1993 year end spot rate was
immaterial.
8. RENTS AND LEASES
Following is a schedule summarizing, by year, the future minimum rental payments
and guaranteed residual payments required for all noncancelable lease terms in
excess of one year as of December 31, 1994 (000 omitted):
------------------------------------------------------------
Capital Operating
Year ended December 31 Leases Leases
------------------------------------------------------------
1995 $206 $ 7,856
1996 -- 6,119
1997 -- 4,418
1998 -- 3,361
1999 -- 2,968
Future years -- 16,774
---- ------
Total minimum lease payments $206 $41,496
---- ------
Less - Amount representing interest 8
----
Present value of net minimum lease
payments $198
----
------------------------------------------------------------
Total rental expense for the years ended December 31, 1994, 1993 and 1992 was
$7,693,000, $7,442,000 and $8,129,000, respectively.
9. COMMON STOCK AND STOCK OPTIONS
The Company's Certificate of Incorporation provides for 20,000,000 authorized
shares of common stock, $.125 par value per share and 2,398,275 shares of Class
B common stock, $.125 par value per share. Each Class B share is entitled to 15
votes and is to be automatically converted into one share of common stock upon
transfer thereof. All of the Class B shares are owned by Lane Industries, Inc.,
the Company's majority stockholder.
The Company has two non-qualified stock option plans adopted in 1980 and 1989
for officers, including officers who are directors, and other key employees of
the Company. The 1980 plan terminated in 1990, however the options granted under
this plan may be exercised at various times until January, 1998. Under both
plans, options may be granted during a ten year period at a purchase price of
not less than 85% of the fair market value on the date of the grant. Options
granted may be exercised in four equal parts over a period not to exceed eight
years from the date of grant, except that no part of an option may be exercised
until at least one year from the date of grant has elapsed. In addition, the
1989 plan also provides that any option granted under the 1989 plan may include
a grant of stock appreciation rights simultaneously with the grant of the option
or any time within six months thereafter prior to the exercise, termination or
expiration of such option. The Company did not grant any stock appreciation
rights during 1994 or 1993. The Company reserved 1,050,000 shares of its common
stock for subsequent issuance pursuant to the 1989 plan. At December 31, 1994,
203,100 shares and 78,255 shares, respectively, were available for purchase
pursuant to the 1989 and 1980 plans.
18
21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
General Binding Corporation and Subsidiaries
A summary of the stock option activity under the 1980 and 1989 plans is as
follows:
------------------------------------------------------------
Year ended December 31 1994 1993
------------------------------------------------------------
Shares under option at beginning
of year 291,876 242,643
Options granted 44,000 70,600
Options exercised (38,098) (15,182)
Options expired/canceled (16,423) (6,185)
------ ------
Shares under option at end of
year 281,355 291,876
------ ------
Options exercisable 59,239 63,117
------ ------
Option prices per common share
Granted during the year $15 to $21 $12 & $17
Exercised during the year $ 4 to $17 $6 to $ 9
Expired/canceled during the
year $16 to $20 $16 to $20
Exercise price of options
outstanding at year-end $ 6 to $21 $4 to $20
------------------------------------------------------------
Upon the exercise of options, the proceeds are credited to the treasury stock
and additional paid-in capital accounts. Compensation costs previously accrued
are credited to additional paid-in capital upon the exercise of non-qualified
options.
10. INCOME TAXES
Effective January 1, 1993, the Company changed its method of accounting for
income taxes from the deferred method to the liability method required by the
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes". The provisions of SFAS 109 were applied retroactively to January 1,
1990. SFAS 109 requires the recognition of deferred tax assets and liabilities
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. In addition, the accounting standard requires the
recognition of future tax benefits, such as net operating loss carryforwards, to
the extent that realization of such benefits is more likely than not. The
adoption of SFAS 109 resulted in a cumulative effect charge of $1,134,000 or
$.07 per common share at January 1, 1990. The 1992 financial statements were
restated to reflect the adoption of SFAS 109. As a result of the change in
accounting for income taxes, 1992 net income decreased by $324,000.
The provision for income taxes was as follows (000 omitted):
------------------------------------------------------------
1994 1993 1992
------------------------------------------------------------
Currently payable -
Federal $5,975 $ 6,393 $6,215
State 1,092 1,043 1,015
Foreign 2,294 3,770 4,416
----- ------ ------
Total Current $9,361 $11,206 $11,646
----- ------ ------
Deferred payable -
Federal $ 195 $ (764) $ (662)
Foreign 441 (1,131) (16)
----- ------ ------
Total Deferred 636 (1,895) (678)
----- ------ ------
Total Provision $9,997 $ 9,311 $10,968
----- ------ ------
------------------------------------------------------------
The Omnibus Budget Reconciliation Act of 1993 changed the Company's prevailing
Federal income tax rate from 34% to 35% effective January 1, 1993. The Company's
effective income tax rate varies from the statutory Federal income tax rate as a
result of the following factors:
------------------------------------------------------------
1994 1993 1992
------------------------------------------------------------
U.S. Statutory rate 35.0 % 35.0 % 34.0 %
Tax allocation benefit* (2.8)% (2.1)% (1.1)%
State income taxes, net of Federal
income tax benefit 2.8 % 2.8 % 2.5 %
Net effect of international
subsidiaries' foreign tax rates
after balance sheet translation
gains and losses 2.0 % 2.0 % 2.7 %
Net effect of remission of foreign
earnings 0.5 % (0.2)% (0.5)%
VeloBind non-tax deductible
purchase accounting adjustments 1.0 % 1.1 % 1.4 %
Other, net 0.4 % (0.3)% 1.1 %
---- ----- -----
Effective tax rate 38.9 % 38.3 % 40.1 %
---- ----- -----
------------------------------------------------------------
* The benefit results from a tax allocation agreement between the Company and
Lane Industries, Inc. entered into in 1978. Under the terms of the agreement,
Lane Industries, Inc. has agreed to share with the Company a portion of the
Federal income tax savings, if any, resulting from filing consolidated income
tax returns. Lane Industries, Inc. is the Company's majority stockholder.
19
22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
General Binding Corporation and Subsidiaries
Income before taxes was as follows (000 omitted):
------------------------------------------------------------
1994 1993 1992
------------------------------------------------------------
United States $19,507 $18,532 $16,326
Foreign 6,193 5,773 11,022
------- ------- -------
Total Income before taxes $25,700 $24,305 $27,348
------ ------ ------
------------------------------------------------------------
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities are as follows (000 omitted):
------------------------------------------------------------
Year ended December 31 1994 1993
------------------------------------------------------------
Deferred Tax Assets:
Inventory $ 2,412 $ 1,969
Foreign 1,207 586
Workers' Compensation 750 865
Restructuring Reserves 2,089 723
Vacation Pay 753 707
Other 1,596 2,607
Foreign Tax Credits 3,317 3,462
Capital Loss Carryovers 496 436
Net Operating Loss Carryovers 2,200 1,495
------ ------
Gross Deferred Tax Assets $14,820 $ 12,850
------ ------
Valuation Allowance (6,013) (4,609)
------ ------
Total Deferred Tax Assets $ 8,807 $ 8,241
------ ------
Deferred Tax Liabilities
Depreciation $ 3,493 $ 3,408
Amortization 688 842
Foreign 1,995 1,557
Withholding Taxes 569 505
Other 480 175
------ ------
Total Deferred Tax Liabilities $ 7,225 $ 6,487
------ ------
Net Deferred Tax Assets $ 1,582 $ 1,754
------ ------
------------------------------------------------------------
A valuation allowance is provided to reduce the deferred tax assets to a level
which, more likely than not, will be realized. The net deferred tax assets
reflects management's estimate of the amount which will be realized from future
profitability which can be predicted with reasonable accuracy.
The Company provides U.S. income taxes on the earnings expected to be
distributed by its foreign subsidiaries. Under the current remitter concept, the
Company has excess foreign tax credits available to reduce Federal income taxes
in future years. The Company has established a valuation allowance for the
foreign tax credits that the Company anticipates will expire unutilized five
years after cash dividends are actually paid.
At December 31, 1994, the Company has $2,200,000 of net operating loss
carryforwards available to reduce future taxable income of certain international
subsidiaries. These loss carryforwards expire in the years 1997 through 2001 or
have an unlimited carryover period. A valuation allowance has been provided for
a portion of the deferred tax assets related to those loss carryforwards which
will most likely expire unutilized.
11. BUSINESS SEGMENTS AND FOREIGN OPERATIONS
The Company is engaged predominantly in one line of business, namely the design,
manufacture and distribution of a broad line of business machines and related
supplies. This broad line includes system applications in the areas of binding,
laminating, shredding and security identification. The products are manufactured
in eighteen plants worldwide. GBC products are sold through a common network of
direct sales and telemarketing personnel, dealers, distributors and wholesale
stationers. The Company provides maintenance and repairs on the machines it
sells through a trained field service organization and through trained dealers.
Financial information for the three years ended December 31, 1994, 1993 and
1992, by geographical area is summarized below. Sales between geographic areas
are made at market value less allowances for additional manufacturing, marketing
and administrative costs to be incurred by the affiliated company. For purposes
of complying with Statement of Financial Accounting Standards No. 14, export
sales to foreign customers ($12,773,000 in 1994, $11,163,000 in 1993 and
$11,957,000 in 1992) have been classified in the following tables as part of the
United States sales.
20
23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
General Binding Corporation and Subsidiaries
(000 omitted)
--------------------------------------------------------------------------------
United Other
Year ended December 31, 1994 Total Eliminations States Europe International
---------------------------------------------------------------------------------------------------------------------------------
Sales
Unaffiliated Customers $420,449 $ -- $287,091 $71,397 $61,961
Between Geographic Areas -- (39,385) 36,560 692 2,133
------- ------- ------- ------ ------
420,449 (39,385) 323,651 72,089 64,094
------- ------- ------- ------ ------
Operating Income* 31,318 633 20,851 5,310 4,524
Other Income (Expense)** (1,842) (2,239) 2,837 (1,821) (619)
Interest (Expense) (3,776) 89 (2,995) (683) (187)
------- ------- ------- ------ ------
Income Before Taxes $ 25,700 $ (1,517) $ 20,693 $ 2,806 $ 3,718
------- ------- ------- ------ ------
Assets $284,278 $(27,463) $230,576 $45,792 $35,373
------- ------- ------- ------ ------
Depreciation and Amortization $ 12,081 $ -- $ 9,994 $ 1,440 $ 647
------- ------- ------- ------ ------
Capital Expenditures $ 12,788 $ -- $ 6,459 $ 5,457 $ 872
------- ------- ------- ------ ------
--------------------------------------------------------------------------------
United Other
Year ended December 31, 1993 Total Eliminations States Europe International
---------------------------------------------------------------------------------------------------------------------------------
Sales
Unaffiliated Customers $376,138 $ -- $257,953 $63,576 $54,609
Between Geographic Areas -- (41,377) 35,955 202 5,220
------- ------- ------- ------ ------
376,138 (41,377) 293,908 63,778 59,829
------- ------- ------- ------ ------
Operating Income 29,124 171 19,870 5,117 3,966
Other Income (Expense)** (1,210) (1,451) 1,990 (1,507) (242)
Interest (Expense) (3,609) -- (2,483) (622) (504)
------- ------- ------- ------ ------
Income Before Taxes $ 24,305 $ (1,280) $ 19,377 $ 2,988 $ 3,220
------- ------- ------- ------ ------
Assets $251,109 $(14,985) $203,895 $30,327 $31,872
------- ------- ------- ------ ------
Depreciation and Amortization $ 10,747 $ -- $ 8,660 $ 1,011 $ 1,076
------- ------- ------- ------ ------
Capital Expenditures $ 10,595 $ -- $ 9,064 $ 812 $ 719
------- ------- ------- ------ ------
--------------------------------------------------------------------------------
United Other
Year ended December 31, 1992 Total Eliminations States Europe International
---------------------------------------------------------------------------------------------------------------------------------
Sales
Unaffiliated Customers $368,643 $ -- $247,513 $71,161 $49,969
Between Geographic Areas -- (45,799) 32,937 125 12,737
------- ------- ------- ------ ------
368,643 (45,799) 280,450 71,286 62,706
------- ------- ------- ------ ------
Operating Income 31,975 551 18,127 9,353 3,944
Other Income (Expense)** (1,339) (5,456) 5,392 (1,315) 40
Interest (Expense) (3,288) -- (2,304) (722) (262)
------- ------- ------- ------ ------
Income Before Taxes $ 27,348 $ (4,905) $ 21,215 $ 7,316 $ 3,722
------- ------- ------- ------ ------
Assets $241,807 $(12,802) $190,638 $33,499 $30,472
------- ------- ------- ------ ------
Depreciation and Amortization $ 10,775 $ -- $ 8,023 $ 1,259 $ 1,493
------- ------- ------- ------ ------
Capital Expenditures $ 9,795 $ -- $ 8,665 $ 628 $ 502
------- ------- ------- ------ ------
---------------------------------------------------------------------------------------------------------------------------------
* Operating income for the United States, Europe and Other International
includes restructuring charges of $3.4 million, $.2 million and $.4 million,
respectively, for the year ended December 31, 1994.
** Other income (expense) is comprised principally of foreign currency
transaction and translation gains and losses, interest income, dividend and
royalty income, gains and losses on the disposal of capital assets,
amortization of goodwill, patents and a non-compete note and other
transactions.
21
24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
General Binding Corporation and Subsidiaries
All subsidiaries were 100% owned during the three year period, except for
Grupo GBC, S.A. de C.V. (Grupo GBC) which was not 100% owned until August of
1992. In prior years, a majority of the issued shares of the capital stock of
Grupo GBC were controlled by Mexican nationals and were essentially equivalent
to preferred stock having fixed dividend rights and fixed rights upon any
subsequent liquidation of the subsidiary. In view of the nature of the rights
prescribed, the operations of the subsidiary were consolidated for financial
reporting purposes.
The following table illustrates the ratio of revenue contribution of business
machines, supplies and service for the last three fiscal years:
-------------------------------------------------------------------------------
1994 1993 1992
-------------------------------------------------------------------------------
Business machines 25% 24% 23%
Related supplies and service* 75% 76% 77%
-------------------------------------------------------------------------------
* Includes the ringmetal business.
12. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for 1994 and 1993 was as follows (000
omitted, except per share data):
--------------------------------------------------------------------------------
1994 Three Months Ended March 31 June 30 Sept. 30 Dec. 31
---------------------------------------------------------------------------------------------------------------------------------
Sales $ 96,227 $105,162 $108,576 $110,484
Gross Profit 43,106 45,952 46,884 47,015
Income Before Taxes 7,285 8,209 7,084 3,122
Net Income 4,353 4,950 4,253 2,147
Net Income Per Common Share $ .28 $ .31 $ .27 $ .14
---------------------------------------------------------------------------------------------------------------------------------
1993 Three Months Ended March 31 June 30 Sept. 30 Dec. 31
---------------------------------------------------------------------------------------------------------------------------------
Sales $ 89,158 $ 93,742 $ 96,441 $ 96,797
Gross Profit 40,755 41,681 41,807 42,555
Income Before Taxes 6,183 6,861 6,014 5,247
Net Income 3,710 4,201 3,558 3,525
Net Income Per Common Share $ .24 $ .26 $ .23 $ .22
---------------------------------------------------------------------------------------------------------------------------------
13. ACQUISITIONS
On August 26, 1994, the Company completed the purchase of the Sickinger Company,
headquartered in Auburn Hills, Michigan. Sickinger manufactures paper punching
machines as well as wire and plastic coil binding supplies. The total
consideration paid for the Sickinger Company was $4.9 million.
The acquisition has been accounted for as a purchase transaction with the
results of operations included in the consolidated financial statements since
the date of acquisition. The excess of the purchase price over the fair value of
the net assets acquired is estimated to be $1.2 million.
On July 29, 1993, the Company finalized the purchase of the business and
certain assets of Bates Manufacturing Company. Bates Manufacturing Company,
located in Hackettstown, New Jersey, manufactures and distributes staplers,
numbering systems, card files and other office products through a large network
of dealers and wholesalers. The total consideration paid for the Bates
Manufacturing Company was $5.0 million.
The acquisition has been accounted for as a purchase transaction with the
results of operations included in the consolidated financial statements since
the date of acquisition. The excess of the purchase price over the fair value of
the net assets acquired was $1.3 million.
22
25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
General Binding Corporation and Subsidiaries
14. RESTRUCTURING CHARGE
A restructuring charge of $4.0 million ($2.5 million after-tax) was recorded in
1994. The charge reflected costs associated with discontinuing manufacturing in
certain locations along with an overall downsizing of the Company's
infrastructure. The restructuring charge consisted primarily of the following:
a) write-down of properties to their estimated net realizable values; b) costs
associated with freezing a defined benefit pension plan; and c) termination
benefits paid and payable to certain former employees. The liability established
for the termination benefits, which is not material to the Company's financial
statements, reflects the costs associated with providing benefits to former
employees that were terminated and notified of their benefit arrangement prior
to December 31, 1994. All benefits will be paid to the group of former employees
by December 31, 1995. The Company does not believe that the activities that will
not be continued are significant to the Company's revenue or operating results.
23
26
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF GENERAL BINDING CORPORATION:
We have audited the accompanying consolidated balance sheets of General
Binding Corporation (a Delaware corporation) and Subsidiaries as of December 31,
1994 and 1993, and the related consolidated statements of income, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1994. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of General
Binding Corporation and Subsidiaries as of December 31, 1994 and 1993, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1994, in conformity with generally accepted
accounting principles.
As explained in Note 5 to the consolidated financial statements, in 1993 the
Company changed its method of accounting for postretirement benefits and, as
explained in Note 10, in 1993 the Company gave retroactive effect to the change
in accounting for income taxes.
Arthur Andersen LLP
Chicago, Illinois
February 21, 1995
24
27
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
General Binding Corporation and Subsidiaries
ALLOWANCES FOR DOUBTFUL ACCOUNTS AND SALES RETURNS
Changes in the allowances for doubtful accounts and sales returns were as
follows (000 omitted):
--------------------------------------------------------------------------------
1994 1993 1992
---------------------------------------------------------------------------------------------------------------------------------
Balance at beginning of year $ 4,821 $ 4,504 $ 4,377
Additions charged to expense 1,804 1,478 1,469
Deductions -- write offs (1,643) (1,068) (1,255)
Other* (142) (93) (87)
------ ------ ------
Balance at end of year $ 4,840 $ 4,821 $ 4,504
------ ------ ------
---------------------------------------------------------------------------------------------------------------------------------
*Amounts primarily relate to the effects of foreign currency exchange rate
changes, the acquisition of Sickinger in 1994 and final purchase accounting
adjustments for VeloBind in 1992.
25
28
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
We have audited in accordance with generally accepted auditing standards, the
financial statements included in General Binding Corporation's Form 10-K, and
have issued our report thereon dated February 21, 1995. Our audits were made for
the purpose of forming an opinion on those statements taken as a whole. Schedule
II is the responsibility of the Company's management and is presented for
purposes of complying with the Securities and Exchange Commission's rules and is
not part of the basic financial statements. This schedule has been subjected to
the auditing procedures applied in the audits of the basic financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
Arthur Andersen LLP
Chicago, Illinois
February 21, 1995
26
29
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required under this Item is contained in the Registrant's 1995
Definitive Proxy Statement, which is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information required under this Item is contained in the Registrant's 1995
Definitive Proxy Statement, which is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required under this Item is contained in the Registrant's 1995
Definitive Proxy Statement, which is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required under this Item is contained in the Registrant's 1995
Definitive Proxy Statement, which is incorporated herein by reference.
27
30
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements. See Index to Financial Statements and
Supplementary Data.
2. Financial Statement Schedule. See Index to Financial Statements
and Supplementary Data.
3. Exhibits
3. Certificate of Incorporation, as amended May 11, 1988.
Incorporated by reference to Exhibit 3 to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1993.
4. Consent agreement to provide the Commission upon
written request a copy of the
Registrant's long-term debt agreements.
21. Subsidiaries of the Registrant
27. Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the registrant during the
last quarter of the fiscal year ended December 31, 1994.
28
31
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By: /s/ GOVI C. REDDY
---------------------------------------
Govi C. Reddy
President and Chief
Executive Officer
By: /s/ EDWARD J. MCNULTY
---------------------------------------
Edward J. McNulty
Vice President and Chief
Financial Officer
Dated: March 29, 1995
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 and on the dates indicated.
/s/ WILLIAM N. LANE III Chairman of the Board and Director March 29, 1995
------------------------------------------
William N. Lane III
/s/ GOVI C. REDDY President, Chief Executive Officer and March 29, 1995
------------------------------------------ Director
Govi C. Reddy
/s/ ARTHUR C. NIELSEN, JR. Director March 29, 1995
------------------------------------------
Arthur C. Nielsen, Jr.
/s/ THOMAS V. KALEBIC Director March 29, 1995
------------------------------------------
Thomas V. Kalebic
/s/ WARREN R. ROTHWELL Director March 29, 1995
------------------------------------------
Warren R. Rothwell
29
EX-4
2
CONSENT AGREEMENT
1
EXHIBIT 4
March 29, 1995
VIA EDGAR
Securities and Exchange Commission
450 Fifth Street N.W.
Washington, D.C. 20549-1004
RE: General Binding Corporation
Commission File No. 0-2604
Form 10-K for fiscal year ended December 31, 1994
Item No. 14(a)(3)
Gentlemen:
This letter is to advise you that General Binding Corporation hereby consents
to provide you, upon written request, copies of its long-term loan agreements
which contain certain restrictive covenants and define the rights of security
holders. Copies of any such loan agreement will be supplied to you within 10
days upon receipt of request.
Sincerely,
GENERAL BINDING CORPORATION
Edward J. McNulty
Edward J. McNulty
Vice President and
Chief Financial Officer
EJM:tp
EX-21
3
SUBSIDIARIES OF THE REGISTRANT
1
SUBSIDIARIES OF THE REGISTRANT(7)
EXHIBIT NO. 21
Corporate Name Incorporated In Ownership
-------------- --------------- ---------
GBC Business Equipment Inc. Florida 100%
GBC International, Inc. Nevada 100%(1)
U.S. RingBinder Corp. Massachusetts 100%
GBC Australia Pty. Ltd. Australia 100%(2)
GBC Canada, Inc. Canada 100%(2)
GBC United Kingdom Limited England 100%(2)
GBC France S.A. France 100%(3)
GBC Deutschland GmbH Germany 100%
GBC Nederland B.V. Holland 100%(2)
General Binding Corporation Italia S.p.A. Italy 100%(2)
GBC Japan K.K. Japan 100%(2)
Grupo GBC S.A. de C.V. (Mexico) Mexico 100%(4)
GBC Schweiz A.G. Switzerland 100%(2)
U.S. RingBinder (Singapore) Pte. Ltd. Singapore 100%(2)
VeloBind, Incorporated Delaware 100%
GBC Metals Corp. Nevada 100%
Sun Kwong Metal Manufacturer Company, LTD. China 40%(5)
Champion Stationery Manufacturing Company,
Limited China 36%(5)
PBB&R S.A. de C.V. Mexico 100%
USRB S.A. Costa Rica 100%(6)
Sickinger Company Michigan 100%
(1) Subsidiary of GBC Business Equipment Inc.
(2) Subsidiary of GBC International, Inc.
(3) Subsidiary of GBC Schweiz A.G.
(4) See Note 11 to Consolidated Financial Statements of the Company's 1994
Annual Report to Stockholders
(5) Subsidiary of GBC Metals Corp.
(6) Subsidiary of U.S. RingBinder Corp.
(7) Certain insignificant subsidiaries have been excluded from Exhibit No. 21
under Rule 1-02(v) of Regulation S-X. These excluded subsidiaries
considered in the aggregate as a single subsidiary would not constitute a
significant subsidiary.
EX-27
4
FINANCIAL DATA SCHEDULE
5
1,000
YEAR
DEC-31-1994
DEC-31-1994
5,569
0
74,413
4,840
76,010
171,154
130,625
65,095
284,278
84,604
42,020
2,262
0
0
138,827
284,278
420,449
420,449
237,492
237,492
4,000
1,774
3,776
25,700
9,997
15,703
0
0
0
15,703
1.00
1.00
Notes and accounts receivable - trade are stated net of allowances for doubtful
accounts and sales returns.