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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 March 31, 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
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(Exact name of registrant as specified in its charter)
DELAWARE 36-0887470
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One GBC Plaza, Northbrook, Illinois 60062
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (708) 272-3700
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the latest practicable date.
Class Outstanding at April 30, 1994
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Common Stock $.125 par value 13,368,214 shares
Class B - Common Stock $.125 par value 2,398,275 shares
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GENERAL BINDING CORPORATION
INDEX
PART I. Financial Information: Page No.
------------
Consolidated Condensed Balance Sheets -
March 31, 1994 and December 31, 1993 1
Consolidated Condensed Statements of Income -
Three Months Ended March 31, 1994 and 1993 2
Consolidated Condensed Statements of Cash Flows -
Three Months Ended March 31, 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
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PART I. FINANCIAL INFORMATION
GENERAL BINDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(000 Omitted)
<TABLE>
<CAPTION>
March 31, 1994 December 31,
ASSETS (unaudited) 1993
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<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,128 $ 4,462
Receivables, net 68,668 63,701
Inventories -
Raw materials 19,817 19,912
Work in process 4,223 4,176
Finished goods 48,130 41,548
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Total inventories 72,170 65,636
Deferred tax assets 7,885 7,756
Other 4,644 3,796
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Total current assets 157,495 145,351
-------- --------
Property, plant and equipment 125,397 124,599
Less - accumulated depreciation and amortization (64,164) (62,504)
-------- --------
Net property, plant and equipment 61,233 62,095
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Other long-term assets
Cost in excess of fair value of assets
of acquired companies, net of amortization 29,945 29,912
Other 13,821 13,751
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Total other long-term assets 43,766 43,663
-------- --------
Total assets $262,494 $251,109
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
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Current liabilities:
Notes payable $ 14,564 $ 9,625
Current maturities of long-term obligations 431 433
Accounts payable 22,631 22,124
Accrued liabilities 33,492 32,511
Taxes on income 1,778 67
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Total current liabilities 72,896 64,760
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Long-term obligations, less current maturities:
Long-term debt 38,350 38,350
Capital leases 147 214
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Total long-term obligations 38,497 38,564
Other long-term liabilities 8,783 8,252
Deferred tax liabilities 6,148 6,002
Stockholders' equity:
Common stock 1,962 1,962
Class B common stock 300 300
Additional paid-in capital 6,192 6,133
Cumulative translation adjustments (35) 101
Retained earnings 146,788 144,011
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155,207 152,507
Less - Treasury stock (19,037) (18,976)
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Total stockholders' equity 136,170 133,531
-------- --------
Total liabilities and stockholders' equity $262,494 $251,109
-------- --------
-------- --------
</TABLE>
The accompanying notes to consolidated condensed financial statements are an
integral part of these statements.
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GENERAL BINDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(000 Omitted Except Per Share Data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
-----------------------
1994 1993
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<S> <C> <C>
Sales $96,227 $89,158
Costs and expenses:
Cost of sales, including research, development
and engineering 53,121 48,403
Selling, service and administrative 34,505 33,229
Interest expense 762 936
Other expense, net 554 407
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Total costs and expenses 88,942 82,975
Income before taxes 7,285 6,183
Income taxes 2,932 2,473
Net income $ 4,353 $ 3,710
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Net income per common share $ .28 $ .24
------- --------
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Dividends per common share $ .10 $ .10
------- --------
------- --------
Average common shares outstanding 15,764 15,782
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------- --------
</TABLE>
The accompanying notes to consolidated condensed financial statements are an
integral part of these statements.
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GENERAL BINDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(000 Omitted)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
------------------------------
1994 1993
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<S> <C> <C>
Cash flows from operating activities:
Net income $4,353 $3,710
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,923 2,683
Increase (decrease) in non-current deferred
tax liabilities 224 (17)
Provision for doubtful accounts 381 410
(Increase) in other long-term assets (676) (1,246)
Other 763 203
Changes in current assets and liabilities:
(Increase) in receivables (5,434) (3,972)
(Increase) decrease in inventories (6,627) 1,385
(Increase) in deferred tax assets (141) (150)
(Increase) in other current assets (847) (733)
Increase (decrease) in accounts payable and
accrued expenses 291 (1,187)
Increase in taxes on income 1,696 363
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Net cash (used in) provided by
operating activities (3,094) 1,449
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Cash flows from investing activities:
Capital expenditures (2,633) (2,375)
Proceeds from sale of plant and equipment 2,185 41
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Net cash (used in) investing activities (448) (2,334)
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Cash flows from financing activities:
Increase (reduction) in notes payable 4,829 (4,838)
(Reduction) in current portion of
long-term obligations (2) (12)
(Reduction) in long-term obligations (66) (53)
Dividends paid (1,576) (1,578)
Purchases of treasury stock (83) (25)
Proceeds from the exercise of stock options 69 19
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Net cash provided by (used in)
financing activities 3,171 (6,487)
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Effect of exchange rates on cash 37 (86)
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Net (decrease) in cash
and cash equivalents (334) (7,458)
Cash and cash equivalents at beginning of the year 4,462 10,769
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Cash and cash equivalents at March 31 $ 4,128 $ 3,311
------- -------
------- -------
Supplemental Disclosure of Cash Flow Information:
Cash Paid During the Period for:
Interest $ 786 $ 889
Income taxes, net of refunds 1,212 2,292
</TABLE>
The accompanying notes to consolidated condensed financial statements are
an integral part of these statements.
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GENERAL BINDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(1) Basis of Presentation
The 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 footnote 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, although the Company believes that the disclosures are adequate to
make the information presented not misleading. It is suggested that these
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 March 31, 1994 and December 31, 1993, and the results of
their operations for the three months ended March 31, 1994 and 1993 have been
included. The results of operations for such interim periods are not
necessarily indicative of the results for the full year.
(2) Foreign Currency Exchange and Translation
Foreign currency translation adjustments have been excluded from the
Consolidated Condensed Statements of Income and are recorded in a cumulative
translation adjustment account as a separate component of stockholders' equity.
The accompanying Consolidated Condensed Statements of Income include net gains
and losses on foreign currency transactions which are reported as other
income/expense and summarized as follows:
Foreign Currency
Transaction
Gain/(Loss) (a)
---------------
Three months ended March 31, 1994 $ (92,000)
Three months ended March 31, 1993 $ 57,000
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(a) Foreign currency transaction gains/losses are subject to income taxes
at the respective country's effective tax rate.
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<TABLE>
<CAPTION>
(3) Long-Term Debt (000 OMITTED)
Long-term debt consists of the following:
MARCH 31, 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 3.8% at March 31, 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 2.1% at March 31, 1994
and 3.0% at December 31, 1993) 2,530 2,530
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38,530 38,530
Less current maturities (180) (180)
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$ 38,350 $ 38,350
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-------- --------
</TABLE>
(4) Net Income per Common Share
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.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company's 1994 first quarter sales increased 8% when compared to the
same period in 1993. Results were positively impacted by the acquisition of
Bates Manufacturing (Bates) in July of 1993 which accounted for
approximately 60% of the quarter increase. The Company's worldwide film
products division also recorded significant increases in sales resulting from
continued growth in its European, Canadian, and Domestic markets. Other modest
increases in sales were recorded in the Company's international operations,
despite the negative effect of weaker foreign currencies, and in the Company's
domestic branch/telemarketing sales operations, and domestic OEM and ringmetals
businesses. The Company believes international results will improve if the
worldwide economies continue to improve. Future results should also be
favorably impacted by the planned introduction of new products in the latter
half of 1994, most notably in the Bates and VeloBind product lines.
On a worldwide basis, sales of the Company's equipment product lines increased
7% in the first quarter of 1994 over the same period last year, while sales of
supplies and service (which for discussion purposes, include the Company's
ringmetals business) increased 8%. Without the impact of Bates, equipment
sales decreased 4%, while supplies sales increased 5%.
Worldwide gross profit margins for the first quarter of 1994 decreased 1 point
when compared to the first quarter of 1993. Without the impact of Bates, gross
profit margins remained flat . An erosion in margins experienced by the
Company's international operations was offset by an improvement in margins in
the worldwide film products and ringmetals divisions. Worldwide competitive
pressures and weaker foreign currencies continued to affect the international
operations.
Selling, service and administrative expenses for the 1994 first quarter
increased 4% when compared to the same period in 1993. The primary reason for
the increase was the addition of Bates which accounted for approximately 70% of
this quarter's increase. In addition, higher expenses were recorded in the
Company's worldwide film products and domestic office products divisions. These
were partially offset by lower expenses in the Company's international
operations which partially resulted from weaker foreign currencies.
Interest expense for the first quarter of 1994 decreased 19% when compared to
the first quarter of 1993. This decrease was primarily due to lower debt
levels in the Company's Mexican subsidiary and significantly lower effective
interest rates in its Company's international operations.
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Other income and expense for the first quarter of 1994 was $554,000 of expense
compared to $407,000 of expense for the same period in 1993. The increase was
primarily due to an unfavorable change in currency transaction gains/losses of
$149,000 and lower interest income of $43,000, partially offset by a $68,000
decrease in losses recorded by the Company relating to its investments in joint
ventures.
The company's effective tax rate for the first quarter of 1994 was 40.3%
compared to 40.0% for the same period in 1993. The increase was primarily
attributed to an increase in the statutory Federal income tax rate as a result
of the enactment of the Omnibus Budget Reconciliation Act of 1993 and an
increase in state income taxes due to higher domestic income. Partially
offsetting this was a decrease in foreign income taxes due to lower foreign
earnings.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital totaled $85 million at March 31, 1994, an
increase of $4.0 million from December 31, 1993. The company's current ratio
at March 31, 1994 and December 31, 1993 was 2.2 to 1.0.
Cash dividends of $.10 per share were paid during the first quarter of 1994 and
fourth quarter of 1993. Total plant and equipment expenditures for the first
quarter of 1994 were $2,633,000 compared to $2,375,000 for the same period in
1993.
As of March 31, 1994, the Company had access to $61.7 million in short-term
credit lines and had $14.6 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 March 31, 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 along with foreseeable acquisition requirements.
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PART II. OTHER INFORMATION
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 first quarter ended March 31, 1994.
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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
