-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, M7g3cHM7ZT8XIJS5oTTYYZo2inR+wAMS6guSaTTqJOTWz1yX3INRy3zR9KZg5QhR 11tOLZYxVNUcNpWwLEZNVg== 0000950137-98-002176.txt : 19980518 0000950137-98-002176.hdr.sgml : 19980518 ACCESSION NUMBER: 0000950137-98-002176 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENERAL BINDING CORP CENTRAL INDEX KEY: 0000040461 STANDARD INDUSTRIAL CLASSIFICATION: OFFICE MACHINES, NEC [3579] IRS NUMBER: 360887470 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-02604 FILM NUMBER: 98623745 BUSINESS ADDRESS: STREET 1: ONE GBC PLZ CITY: NORTHBROOK STATE: IL ZIP: 60062 BUSINESS PHONE: 7082723700 MAIL ADDRESS: STREET 1: ONE GBC PLZ CITY: NORHBROOK STATE: IL ZIP: 60062 10-Q 1 FORM 10-Q 1 - ------------------------------------------------------------------------------ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998 Commission File Number 0-2604 GENERAL BINDING CORPORATION (Exact name of registrant as specified in its charter) 36-0887470 (I.R.S. Employer Identification No.) DELAWARE (State or Other Jurisdiction of Incorporation or Organization) ONE GBC PLAZA, NORTHBROOK, ILLINOIS 60062 (Address of Principal Executive Offices, Including Zip Code) (847) 272-3700 (Registrant's Telephone Number, Including Area Code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------- ------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the close of the latest practicable date. OUTSTANDING AT CLASS APRIL 30, 1998 Common Stock $.125 par value 13,318,278 Class B - Common Stock $.125 par value 2,398,275 - ------------------------------------------------------------------------------- 2 GENERAL BINDING CORPORATION AND SUBSIDIARIES FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1998 TABLE OF CONTENTS PART I. FINANCIAL INFORMATION
Page No. --------- Item 1. Financial Statements Condensed Consolidated Balance Sheets as of March 31, 1998 and December 31, 1997 2 Condensed Consolidated Statements of Income for the Three Months ended March 31, 1998 and 1997 3 Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1998 and 1997 4 Notes to Condensed Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 10
-1- 3 GENERAL BINDING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (000'S OMITTED)
MARCH 31, 1998 DECEMBER 31, (unaudited) 1997 ---------- ------------ ASSETS Current Assets Cash and cash equivalents $ 13,347 $ 3,753 Receivables, net 184,499 160,787 Inventories -- Raw materials 46,858 53,082 Work in process 10,357 12,693 Finished goods 111,478 77,794 -------------- --------------- Total inventories 168,693 143,569 Deferred tax assets 7,737 9,323 Other 17,963 10,313 -------------- --------------- Total current assets 392,239 327,745 Property, plant and equipment 205,110 190,441 Less - accumulated depreciation (78,991) (77,020) -------------- --------------- Net property, plant and equipment 126,119 113,421 Other long-term assets: Cost in excess of fair value of assets of acquired companies, net of amortization 298,006 204,543 Other 53,025 47,205 -------------- --------------- Total assets $ 869,389 $ 692,914 ============== =============== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Notes payable $ 70,271 $ 40,247 Current maturities of long-term debt 691 722 Accounts payable 57,028 42,979 Accrued liabilities 71,446 68,154 -------------- --------------- Total current liabilities 199,436 152,102 -------------- --------------- Long-term debt 450,023 324,070 Other long-term liabilities 12,398 11,368 Deferred tax liabilities 14,161 14,331 Stockholders' Equity Common stock 1,962 1,962 Class B common stock 300 300 Additional paid-in capital 10,148 9,708 Cumulative translation adjustment (7,046) (6,108) Retained earnings 213,754 208,394 Treasury stock (25,747) (23,213) -------------- --------------- Total stockholders' equity 193,371 191,043 -------------- --------------- Total liabilities and stockholders' equity $ 869,389 $ 692,914 ============== ===============
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements. -2- 4 GENERAL BINDING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (000'S OMITTED, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED MARCH 31, 1998 1997 ------------ ------------- Net Sales $ 213,944 $ 180,505 Cost of sales, including development and engineering 122,004 104,569 Selling, service and administrative 69,664 57,333 Amortization of goodwill and related intangibles 2,470 1,629 ------------ ------------- Operating income 19,806 16,974 Interest expense 7,472 5,228 Other expense, net 509 460 ------------ ------------- Income before taxes 11,825 11,286 Income taxes 4,730 4,514 ------------ ------------- Net income 7,095 6,772 ============ ============= Net income per common share Basic $ 0.45 $ 0.43 Diluted 0.45 $ 0.43 Weighted average number of common shares outstanding Basic 15,761 15,761 Diluted 15,878 15,927
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements. -3- 5 GENERAL BINDING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (000'S OMITTED)
THREE MONTHS ENDED ------------------------------- MARCH 31, MARCH 31, 1998 1997 ------------- ------------- Cash flows from operating activities: Net Income $ 7,095 $ 6,772 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 8,021 7,016 (Decrease) increase in non-current deferred taxes (170) (77) Provision for doubtful accounts 392 601 (Increase) in other long term assets (3,466) (1,334) Other 357 215 Changes in current assets and liabilities: (Increase) in receivables (4,033) (10,264) (Increase) decrease in inventories 4,001 (4,349) (Increase) in other current assets (5,039) (5,162) (Increase) decrease in deferred tax assets 1,558 (415) Increase (decrease) in accounts payable and accrued expenses (5,602) (2,369) Increase in taxes on income 1,365 1,792 Increase in deferred income on service agreements 168 236 ------------- ----------- Net cash provided by (used in) operating activities 4,647 (7,338) ------------- ----------- Cash flows from investing activities: Capital expenditures (6,385) (6,219) Proceeds from sale of plant and equipment 42 - Payments for acquisitions, net of cash acquired (137,983) (214,999) ------------- ----------- Net cash (used in ) investing activities (144,326) (221,218) ------------- ----------- Cash flows from financing activities: Increase (decrease) in notes payable 30,274 19,159 Payments of long term debt (104) - Long term borrowings 122,888 212,000 Increase (decrease) in current portion of long-term obligations (1) 88 Dividends paid (1,736) (1,735) Purchases of treasury stock (2,601) (517) Proceeds from the exercise of stock options 509 539 ------------- ----------- Net cash provided by financing activities 149,229 229,534 ------------- ----------- Effect of exchange rates on cash 44 (255) ------------- ----------- Net increase in cash & cash equivalents 9,594 723 Cash and cash equivalents at the beginning of year 3,753 6,721 ------------- ----------- Cash and cash equivalents at the end of the period $ 13,347 $ 7,444 ============= =========== Supplemental Disclosure of Cash Flow Information Cash Paid During the Period for: Interest $ 6,891 $ 2,952 Income taxes, net of refunds 4,239 4,123
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements. -4- 6 GENERAL BINDING CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (1) BASIS OF PRESENTATION The condensed consolidated financial statements include the accounts of General Binding Corporation and its subsidiaries ("GBC" or the "Company"). These financial statements have been prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The Company believes that the disclosures included in these condensed consolidated financial statements are adequate to make the information presented not misleading. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's 1997 Annual Report on Form 10-K. In the opinion of the Company, all adjustments necessary to present fairly the financial position of GBC and Subsidiaries as of March 31, 1998 and December 31, 1997, and the results of their operations for the three months ended March 31, 1998 and 1997 have been included. Operating results for any interim period are not necessarily indicative of results that may be expected for the full year. (2) LONG-TERM DEBT Long-term debt consists of the following at March 31, 1998 and December 31,1997 - - outstanding borrowings denominated in foreign currencies have been converted to U.S. Dollars (000 omitted):
MARCH 31, DECEMBER 31, 1998 1997 --------- ------------ REVOLVING CREDIT FACILITY Classified as long-term on the basis of the Company's intention to refinance these borrowings U.S. dollar borrowings - (weighted average floating interest rate 6.43% at March 31, 1998 and 6.61% at December 31, 1997) $351,000 $302,400 British pounds borrowings - floating interest rate of 8.25% at March 31, 1998 13,648 - Dutch guilder borrowings - (floating interest rate 4.20% at March 31, 1998 and 4.22% at December 31, 1997) 5,570 4,728 INTERNATIONAL CREDIT AGREEMENT Australian dollar borrowings - due July 2000 (floating interest rate 6.30% at March 31, 1998 and 6.68% at December 31, 1997 2,715 2,722
-5- 7 INDUSTRIAL REVENUE/DEVELOPMENT BONDS Industrial Revenue Bond - due annually from July 1994 to July 2008 (floating interest rate 3.95% at March 31, 1998 and 4.60% at December 31, 1997) 1,750 1,750 Industrial Revenue Bond - due annually from June 2002 to June 2006 (floating interest rate 3.80% at March 31, 1998 and 4.20% at December 31, 1997) 1,056 1,050 Industrial Development Bond - maturity date, March, 2026 (floating interest rate 3.80% at March 31, 1998 and 3.95% at December 31, 1997) 7,510 7,510 Industrial Revenue Bond - due semiannually October 1997 to October 1999 (floating interest rate 6.88% at March 31, 1998 and December 31, 1997) 200 200 Industrial Revenue Bond - Irish punt borrowing, due September 2000 (floating interest rate 6.75% at March 31, 1998 and December 31, 1997) 304 365 NOTES PAYABLES Note Payable-Lane Industries, Inc. due April 2002 (floating interest rate of 7.78% at March 31, 1998) 60,000 - Note Payable, Dutch guilder borrowing - due monthly from November 1994 to October 2004 (fixed interest rate 8.85% at March 31, 1998 and December 31, 1997) 1,593 1,711 Note Payable, Dutch guilder borrowing - due June 2000 (fixed interest rate of 7.05% at March 31, 1998 and at December 31, 1997) 1,588 1,634 Notes Payables - various (weighted average floating interest rate of 10.9% at March 31, 1998) 3,089 - -------- -------- Total Long-Term Debt $450,023 $324,070 ======== ========
(3) COMPREHENSIVE INCOME Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income was adopted during the first quarter 1998. This statement established guidelines for the reporting and display of comprehensive income and its components in financial statements. The currency translation adjustment is the Company's only item which will be classified as comprehensive income. -6- 8 Companies are required to report total comprehensive income for interim periods beginning the first quarter of 1998. Comprehensive income was $6,157,000 and $4,662,000 for the first quarter of 1998 and 1997, respectively. (4) NEW ACCOUNTING STANDARDS The Company will adopt SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information" effective with year-end reporting. This statement will require the Company to present information in the notes to the financial statements regarding reportable operating segments using the same basis as is used for internally evaluating segment performance and deciding how to allocate resources to segments. The Company is currently evaluating the requirements of this standard and, upon adoption, may disclose more than one reportable segment. (5) EARNINGS PER SHARE SFAS No. 128 "Earnings Per Share" was adopted by the Company in the fourth quarter of 1997 and supersedes the Company's previous standards for computing net income per share under APB Opinion No. 15. The new standard requires dual presentation of net income per common share and net income per common share, assuming dilution, on the face of the income statement. All prior year per share data for 1997 has been restated in accordance with the new standard. In accordance with SFAS No. 128, net income per common share was computed as follows (000 omitted, except per share amounts):
FOR THE THREE MONTHS ENDING MARCH 31, MARCH 31, 1998 1997 --------- ---------- (A) Net income available to common shareholders $ 7,095 $ 6,772 ========= ========== (B) Weighted average number of common shares outstanding 15,761 15,761 Additional common shares issuable under employee stock options using the treasury stock method 117 166 --------- ---------- (C) Weighted average number of common shares outstanding assuming the exercise of stock options 15,878 15,927 ========= ========== Net income per common share (A) / (B) $0.45 $0.43 ========= ========== Net income per common share, assuming dilution (A) / (C) $0.45 $0.43 ========= ==========
-7- 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATION The following narrative discusses the results of operations, liquidity and capital resources for the Company on a consolidated basis. This section should be read in conjunction with the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained therein. FORWARD LOOKING STATEMENTS Certain statements under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this Report constitute "forward looking statements" within the meaning of Section 21E(I) (1) of the Exchange Act. Such forward-looking statements involve known and unknown risks and uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different than future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among other things, the following: competition within the office products and lamination film products markets, the effects of economic conditions, the issues associated with the acquisition and integration of recently acquired operations, including Ibico AG ("Ibico"), operating risks, the ability of the Company's distributors to successfully market and sell the Company's products, the ability of the Company to obtain capital to finance planned growth, the availability and price of raw materials, dependence on certain suppliers of manufactured products, the effect of consolidation in the office products industry and other factors indicated in the Company's registration statements and reports filed with the SEC. These important factors may also cause the forward-looking statements made by the Company in this Report, including but not limited to those contained under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" to be materially different from the actual results achieved by the Company. In light of these and other uncertainties, the inclusion of a forward-looking statements herein should not be regarded as a representation by the Company that the Company's plans and objectives will be achieved. RESULTS OF OPERATIONS Net sales for the first quarter of 1998 totaled $213.9 million, an increase of 18.5% over the first quarter of 1997. The Company's first quarter results include the results of Ibico from the date of acquisition, February 27, 1998. Excluding the acquisition of Ibico, GBC's sales were $202.7 million, an increase of 12.3% over the first quarter of 1997. The first quarter 1998 sales increase was primarily due to increased sales of personal shredders and writing boards through the Company's Office Products Group. Sales of writing boards in the first quarter of 1998 benefited from the Company's acquisitions of Baker, Visucom and Allfax. Gross profit margin improved in the first quarter of 1998 to 43.0% compared to 42.1% in the first quarter of 1997. The improvement in gross margin was due principally to higher margins achieved in the Company's commercial laminating business and the Office Products Group. Selling, service, and administrative expenses increased 21.5% in the first quarter of 1998 compared to the first quarter of 1997, primarily due to increased sales resulting in higher related selling expenses. As a percentage of sales, selling, service and administrative expenses increased to 32.5% in 1998 from 31.8% in the first quarter of 1997, principally due to higher rebate programs for certain customers. Amortization of goodwill and intangibles increased to $2.5 million in the first quarter of 1998 compared to $1.6 million in the first quarter of 1997 due to acquisitions. -8- 10 Interest expense for the first quarter of 1998 increased to $7.5 million, compared to $5.2 million in 1997. The primary reason for the increase was higher average debt levels as a result of the financing of the Ibico, Baker and Allfax acquisitions. As a result of the factors described above, net income for the first quarter of 1998 was $7.1 million or $0.45 per share, versus $6.8 million, or $0.43 per share in the first quarter of 1997. The inclusion of Ibico's first quarter results had a dilutive effect on earnings of approximately $0.02 per share. LIQUIDITY AND CAPITAL RESOURCES The Company's cash requirements for operations, acquisitions and capital expenditures during the first quarter of 1998 were financed by internally generated cash flow and borrowings under the Company's revolving credit facilities, short-term borrowings from banks and a $60.0 million borrowing from Lane Industries, Inc., the Company's majority shareholder. Net cash generated from operating activities was $4.6 million for the first quarter of 1998, compared to cash used of $7.3 million for the first quarter of 1997. The favorable swing in 1998 was due primarily to a reduction in inventory and slower growth in receivables. The unfavorable cash flow during the first quarter of 1997 resulted from higher levels of receivables, inventories and advances on product purchased from overseas vendors. Capital expenditures during the first quarter of 1998 were $6.1 million, compared to $4.4 million in the first quarter of 1997. Major expenditures in 1998 include the investments associated with the Company's new custom supplies facility in Wisconsin and new document finishing facility in Illinois. Cash dividends paid during the first quarter of both 1998 and 1997 were $0.11 per share, respectively. As of March 31, 1998, the Company had access to various U.S. and international credit facilities including a multicurrency revolving credit facility (the "Revolving Credit Facility') with a group of international banks providing for up to $475 million of unsecured revolving credit borrowings through January 2002. The revolving credit facility, established on January 13, 1997 contains, among other things, certain restrictive covenants which require the Company to maintain certain ratios regarding current assets and liabilities, leverage and interest coverage. As of March 31, 1998, the Company had $370.2 million outstanding under the revolving facility. As of March 31, 1998, the Company also had access to a credit facility from Lane Industries, Inc. maturing April 2002 that allowed the Company to borrow up to $100.0 million at any time prior to April 30, 1998. The facility, established in February 1998 contains certain covenants which, in aggregate, are less restrictive than those covenants made by the Company under the Revolving Credit Facility, and are subordinated to any other indebtedness of the Company. As of March 31, 1998, $60.0 million was outstanding under this facility. The Company believes that funds generated from operations combined with existing credit facilities are sufficient to meet currently anticipated capital and operating requirements. -9- 11 PART II. OTHER INFORMATION Item 5: Exhibits (a) Exhibits: None (b) Reports on Form 8-K: The Company filed a Form 8-K on January 9, 1998 to report the following information: On January 8, 1998 GBC announced that its planned acquisition of Ibico, based in Zurich, Switzerland had been delayed as a result of a request for additional information concerning the proposed acquisition from the Antitrust Division of the United States Department of Justice. The Company filed a Form 8-K on March 3, 1998 to report the following information: On February 27, 1998, GBC announced that it had completed the acquisition of Ibico, a privately-held manufacturer and marketer of document binding and laminating products. -10- 12 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GENERAL BINDING CORPORATION AND SUBSIDIARIES By /s/ William R. Chambers, Jr. ------------------------------ William R. Chambers, Jr. Vice President and Chief Financial Officer -11- EX-27 2 FINANCIAL DATA SCHEDULE
5 Notes and Accounts Receivables trade are stated net of allowances for doubtful accounts and sales returns. 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 13,347 0 184,499 0 168,693 392,239 205,110 78,991 869,389 199,436 450,023 0 0 2,262 191,109 869,389 213,944 213,944 122,004 194,138 509 0 7,472 11,825 4,730 0 0 0 0 7,095 0.45 0.45
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