<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission File Number 0-2604
GENERAL BINDING CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 36-0887470
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One GBC Plaza, Northbrook, Illinois 60062
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (708) 272-3700
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the close of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding at October 31, 1994
- - ------------------------------------------- -------------------------------
<S> <C> <C>
Common Stock $.125 par value 13,366,631 shares
Class B - Common Stock $.125 par value 2,398,275 shares
</TABLE>
<PAGE> 2
GENERAL BINDING CORPORATION
INDEX
<TABLE>
<CAPTION>
PART I. Financial Information: Page No.
----------
<S> <C> <C> <C>
Consolidated Condensed Balance Sheets -
September 30, 1994 and December 31, 1993 1
Consolidated Condensed Statements of Income -
Three and Nine Months Ended September 30, 1994 and
1993 2
Consolidated Condensed Statements of Cash Flows -
Nine Months Ended September 30, 1994 and 1993 3
Notes to Consolidated Condensed
Financial Statements 4
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 6
PART II. Other Information 8
Signature 9
</TABLE>
<PAGE> 3
- 1 -
PART I. FINANCIAL INFORMATION
GENERAL BINDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(000 Omitted)
<TABLE>
<CAPTION>
September 30, 1994 December 31,
ASSETS (unaudited) 1993
------------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,354 $ 4,462
Receivables, net 76,293 63,701
Inventories -
Raw materials 21,180 19,912
Work in process 5,282 4,176
Finished goods 55,923 41,548
--------- ---------
Total inventories 82,385 65,636
Deferred tax assets 7,991 7,756
Other 6,632 3,796
--------- ---------
Total current assets 176,655 145,351
--------- ---------
Property, plant and equipment 137,301 124,599
Less - accumulated depreciation and amortization (69,821) (62,504)
--------- ---------
Net property, plant and equipment 67,480 62,095
--------- ---------
Other long-term assets:
Cost in excess of fair value of assets
of acquired companies, net of amortization 29,854 29,912
Other 14,964 13,751
--------- ---------
Total other long-term assets 44,818 43,663
--------- ---------
Total assets $ 288,953 $ 251,109
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 34,143 $ 9,625
Current maturities of long-term obligations 399 433
Accounts payable 22,841 22,124
Accrued liabilities 33,869 32,511
Taxes on income -- 67
--------- ---------
Total current liabilities 91,252 64,760
--------- ---------
Long-term obligations, less current maturities:
Long-term debt 39,109 38,350
Capital leases 19 214
--------- ---------
Total long-term obligations 39,128 38,564
Other long-term liabilities 9,473 8,252
Deferred tax liabilities 6,040 6,002
Stockholders' equity:
Common stock 1,962 1,962
Class B common stock 300 300
Additional paid-in capital 6,260 6,133
Cumulative translation adjustments 896 101
Retained earnings 152,838 144,011
--------- ---------
162,256 152,507
Less - Treasury stock (19,196) (18,976)
--------- ---------
Total stockholders' equity 143,060 133,531
--------- ---------
Total liabilities and stockholders' equity $ 288,953 $ 251,109
========= =========
</TABLE>
The accompanying notes to consolidated condensed financial statements are
an integral part of these statements.
<PAGE> 4
- 2 -
GENERAL BINDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(000 Omitted Except Per Share Data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------------ ------------------------
1994 1993 1994 1993
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Sales $108,576 $96,441 $309,965 $279,341
Costs and expenses:
Cost of sales, including research, development
and engineering 61,692 54,634 174,023 155,098
Selling, service and administrative 38,439 34,614 109,641 101,588
Interest expense 991 932 2,591 2,796
Other expense, net 370 247 1,132 801
-------- ------- -------- --------
Total costs and expenses 101,492 90,427 287,387 260,283
Income before taxes 7,084 6,014 22,578 19,058
Income taxes 2,831 2,456 9,022 7,589
Net income $ 4,253 $ 3,558 $ 13,556 $ 11,469
======= ======= ======== ========
Net income per common share $ .27 $ .23 $ .86 $ .73
======= ======= ====== ======
Dividends per common share $ .10 $ .10 $ .30 $ .30
======= ======= ====== ======
Average common shares outstanding 15,761 15,780 15,763 15,782
======= ======= ======= =======
</TABLE>
The accompanying notes to consolidated condensed financial statements are
an integral part of these statements.
<PAGE> 5
- 3 -
GENERAL BINDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(000 Omitted)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
--------------------------
1994 1993
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $13,556 $11,469
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 8,907 8,202
Increase (decrease) in non-current deferred
tax liabilities 95 (369)
Provision for doubtful accounts 1,346 1,128
(Increase) in other long-term assets (2,662) (2,590)
Other 1,463 821
Changes in current assets and liabilities:
(Increase) in receivables (12,128) (10,652)
(Increase) decrease in inventories (13,874) 3,124
(Increase) decrease in deferred tax assets (227) 22
(Increase) in other current assets (2,636) (1,168)
(Decrease) in accounts payable and
accrued expenses (1,351) (461)
(Decrease) in taxes on income (232) (1,654)
------- -------
Net cash (used in) provided by
operating activities (7,743) 7,872
------- -------
Cash flows from investing activities:
Purchase of Sickinger Corporation, net of cash acquired (3,481) --
Purchase of Bates Manufacturing -- (5,642)
Capital expenditures (10,722) (7,162)
Proceeds from sale of plant and equipment 2,640 62
------- -------
Net cash (used in) investing activities (11,563) (12,742)
------- -------
Cash flows from financing activities:
Increase (reduction) in notes payable 23,831 (2,053)
(Reduction) increase in current portion of
long-term obligations (34) 94
(Reduction) increase in long-term obligations (882) 5,720
Dividends paid (4,729) (4,735)
Purchases of treasury stock (249) (406)
Proceeds from the exercise of stock options 95 113
------- -------
Net cash provided by (used in)
financing activities 18,032 (1,267)
------- -------
Effect of exchange rates on cash 166 (62)
------- -------
Net (decrease) in cash
and cash equivalents (1,108) (6,199)
Cash and cash equivalents at beginning of the year 4,462 10,769
------- -------
Cash and cash equivalents at September 30 $3,354 $ 4,570
======= =======
Supplemental Disclosure of Cash Flow Information
Cash Paid During the Period for:
Interest $ 2,559 $ 2,726
Income taxes, net of refunds 10,309 10,034
</TABLE>
The accompanying notes to consolidated condensed financial statements are an
integral part of these statements.
<PAGE> 6
- 4 -
GENERAL BINDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(1) Basis of Presentation
The consolidated condensed financial statements included herein have
been prepared by the Company, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. The Company believes that the
disclosures included in these consolidated condensed financial statements are
adequate to make the information presented not misleading. It is suggested
that these consolidated condensed financial statements be read in conjunction
with the financial statements and the notes thereto included in the Company's
1993 annual report on Form 10-K. In the opinion of the Company, all
adjustments necessary to present fairly the financial position of General
Binding Corporation and Subsidiaries as of September 30, 1994 and December
31, 1993, and the results of their operations for the three and nine month
periods ended September 30, 1994 and 1993 have been included. The results of
operations for such interim periods are not necessarily indicative of the
results for the full year.
(2) Foreign Currency Exchange and Translation
Foreign currency translation adjustments have been excluded from the
Consolidated Condensed Statements of Income and are recorded in a cumulative
translation adjustment account as a separate component of stockholders'
equity. The accompanying Consolidated Condensed Statements of Income include
net gains and losses on foreign currency transactions, which are reported as
other income/expense and summarized as follows:
<TABLE>
<CAPTION>
Foreign Currency
Transaction
Gain/(Loss) (a)
---------------
<S> <C>
Three months ended September 30, 1994 $ 63,000
===========
Three months ended September 30, 1993 $ (69,000)
===========
Nine months ended September 30, 1994 $ (86,000)
===========
Nine months ended September 30, 1993 $ (96,000)
===========
</TABLE>
(a) Foreign currency transaction gains/losses are subject to income taxes at
the respective country's effective tax rate.
<PAGE> 7
- 5 -
<TABLE>
<CAPTION>
(3) Long-Term Debt
Long-term debt consists of the following: (000 OMITTED)
SEPTEMBER 30, DECEMBER 31,
1994 1993
------------- ------------
<S> <C> <C>
Revolving Credit Agreement (portion classified as
long-term on the basis of the Company's
intention to refinance these borrowings:
interest rate 5.7% at September 30, 1994 and
3.9% at December 31, 1993) $ 36,000 $ 36,000
Industrial Revenue Bond, due annually from
July 1, 1994 to July 1, 2008 (floating
interest rate 3.45% at September 30, 1994
and 3.0% at December 31, 1993) 2,350 2,530
Industrial Revenue Bonds due annually from
June 26, 2002 to June 26, 2007 (floating
interest rate 3.75% at September 30, 1994) 909 -
-------- --------
39,259 38,530
Less current maturities (150) (180)
-------- --------
$ 39,109 $ 38,350
======== =========
</TABLE>
(4) Net Income per Common Share
Net income per common share is based on the weighted average number of
common shares outstanding during the period. Assuming exercise of all
outstanding options pursuant to the Company's stock option plans for key
employees, net income per common share would not be materially different
from net income per common share as reported.
<PAGE> 8
- 6-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company's third quarter sales increased 13% compared to the prior year while
sales for the nine month period ended September 30, 1994 increased 11%. Results
for both periods were positively impacted by the acquisitions of the Sickinger
Corporation in August of 1994 (See Item 5) and the business of Bates
Manufacturing Company in July of 1993. Excluding the impact of acquisitions,
sales increased 10% and 7%, respectively. With the exception of the ringmetals
business, increases in sales for both periods were recorded in all of the
Company's major channels of distribution with the most significant increases
recorded in the Company's worldwide film products division, office products
group, international operations and domestic branch/telemarketing operations.
The film products division's increase resulted from continued growth in its
Domestic, European and Canadian markets while the office products group was
bolstered by the Bates product line. Sales were up in the Company's
international distributor export group and in the majority of the Company's
international subsidiaries. Sales increases recorded in the domestic/direct
branch telemarketing operations partly resulted from sales of the Company's new
high capacity punch product, the AP-1.
On a worldwide basis, sales of the Company's equipment product lines increased
29% and 18%, respectively, for the third quarter and the first nine months of
1994 over the same periods last year, while sales of supplies and service (which
for discussion purposes includes the Company's ringmetals business) increased 8%
and 9%, respectively. Without the impact of acquisitions, equipment sales for
the third quarter and first nine months increased 22% and 8%, respectively,
while sales of supplies and service increased 7% for both periods.
Worldwide gross profit margins remained flat for the third quarter period
and decreased 1 point for the nine month period. Without the impact of
acquisitions, gross profit margins for both the third quarter and year-to-date
period remained flat. An erosion in margins experienced by the Company's
international and domestic core operations was offset by an improvement in
margins in the ringmetals business. Worldwide competitive pressures and an
increase in certain raw material costs had a negative effect on margins.
Consolidated selling, service and administrative expenses for the third quarter
and nine months ended September 30, 1994 increased 11% and 8%, respectively,
when compared to the same periods in 1993. Without the impact of acquisitions,
these expenses increased approximately 10% and 6%, respectively, primarily as a
result of increased sales and profits. Consolidated selling, service and
administrative expenses as a percentage of sales remained relatively flat for
the third quarter period and for the nine month period declined to 35.4% in 1994
from 36.4% in 1993.
Interest expense for the third quarter increased 6% over the same period
in 1993, while interest expense for the nine months ended September 30, 1994
decreased 7% when compared to the same period in 1993. The primary reason for
the increase in expense in the third quarter period was higher domestic interest
rates and debt levels. The higher debt levels resulted primarily from
significantly higher inventory and receivable levels along with the financing of
the Sickinger and Bates acquisitions. The increase in interest expense resulting
from higher interest
<PAGE> 9
-7-
rates and higher debt levels was partially offset by lower debt levels
in the Company's Mexican subsidiary and the expiration of several of the
Company's interest rate swaps during the fourth quarter of 1993. These events
were the primary reasons for the decrease in interest expense in the
year-to-date period.
Other expense for the third quarter of 1994 was $370,000 compared to
$247,000 for the same period in 1993. The increase in the third quarter expense
was primarily due to an unfavorable change in gains/losses on sales of fixed
assets of $85,000, increased losses of $41,000 from the Company's investment in
a joint venture and higher stock option compensation expense of $30,000.
Partially offsetting this were higher currency gains of $132,000. Other expense
for the nine months ended September 30, 1994 was $1,132,000 compared to $801,000
for the same period in 1993. The nine month increase was primarily due to an
unfavorable change in gains/losses on sales of fixed assets of $109,000 and
reduced income from the Company's investments in joint ventures of $150,000.
The Company's effective tax rate for the third quarter of 1994 was 40.0%
compared to 40.8% for the same period in 1993. For the nine months ended
September 30, 1994, the effective tax rate was 40.0% compared to 39.8% for the
same period in 1993. Included in both 1994 periods was a federal income tax
benefit of $109,000 or $.01 per share resulting from a tax allocation agreement
between the Company and Lane Industries, Inc.. Lane Industries, Inc. is the
Company's majority stockholder. This income tax benefit was the primary reason
for the decrease in the third quarter rate. Offsetting this decrease for both
periods and the primary reason for the increase in the year-to-date effective
tax rate was an increase in state income taxes due to higher domestic income.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital totaled $85.4 million at September 30, 1994, an
increase of $4.8 million from December 31, 1993. The Company's current
ratio at September 30, 1994 was 1.9 to 1.0 compared to 2.2 to 1.0 at December
31, 1993.
Cash dividends paid during the third quarter and first nine months of 1994
were $.10 and $.30 per share, as they were for the comparable periods in 1993.
Total plant and equipment expenditures for the third quarter and first nine
months of 1994 were $3,724,000 and $10,722,000, respectively, compared to
$2,943,000 and $7,162,000 for the same periods in 1993. Major plant and
equipment projects in 1994 include the expansion of the film products division
in Europe and the establishment of a ringmetals manufacturing operation in Costa
Rica.
As of September 30, 1994, the Company had access to $70.4 million in
short-term credit lines and had $34.1 million in outstanding borrowings against
these lines. The Company also had access to a $62.5 million credit agreement to
fund both working capital and acquisition requirements. As of September 30,
1994, the Company had $36 million in borrowings against this agreement
classified as long-term debt on the balance sheet.
The Company believes that funds generated from operations combined with
existing credit facilities are more than sufficient to meet currently
anticipated needs.
<PAGE> 10
- 8 -
PART II. OTHER INFORMATION
Item 5: Other Information
On August 26, 1994, the Company purchased the Sickinger Company
located in Auburn Hills, Michigan. The Sickinger Company, which
has annual sales of approximately $8 million, manufactures paper
punching machines and wire and plastic coil binding supplies.
The acquisition has been accounted for as a purchase transaction
with the results of operations included in the financial
statements since the date of acquisition. The Company does not
expect the acquisition to have a material effect on its financial
results.
Item 6: Exhibits
(a) Exhibits: None
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Registrant during
the third quarter ended September 30, 1994.
<PAGE> 11
- 9 -
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GENERAL BINDING CORPORATION
AND SUBSIDIARIES
By EDWARD J. MCNULTY
----------------------------------
Edward J. McNulty
Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GENERAL
BINDING CORPORATION'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30,
1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 3,354
<SECURITIES> 0
<RECEIVABLES> 76,293 <F1>
<ALLOWANCES> 5,234
<INVENTORY> 82,385
<CURRENT-ASSETS> 176,655
<PP&E> 137,301
<DEPRECIATION> 69,821
<TOTAL-ASSETS> 288,953
<CURRENT-LIABILITIES> 91,252
<BONDS> 39,128
<COMMON> 2,262
0
0
<OTHER-SE> 140,798
<TOTAL-LIABILITY-AND-EQUITY> 288,953
<SALES> 309,965
<TOTAL-REVENUES> 309,965
<CGS> 174,023
<TOTAL-COSTS> 174,023
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,346
<INTEREST-EXPENSE> 2,591
<INCOME-PRETAX> 22,578
<INCOME-TAX> 9,022
<INCOME-CONTINUING> 13,556
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,556
<EPS-PRIMARY> .86
<EPS-DILUTED> .86
<FN>
<F1>
Notes and accounts receivable-trade are stated net of allowances for doubtful
accounts and sales returns.
</FN>
</TABLE>
