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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 June 30, 1994
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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
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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
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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
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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 July 31, 1994
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Common Stock $.125 par value 13,365,777 shares
Class B - Common Stock $.125 par value 2,398,275 shares
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GENERAL BINDING CORPORATION
INDEX
<TABLE>
<CAPTION>
PART I. Financial Information: Page No.
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<S> <C> <C>
Consolidated Condensed Balance Sheets -
June 30, 1994 and December 31, 1993 1
Consolidated Condensed Statements of Income -
Three and Six Months Ended June 30, 1994 and 1993 2
Consolidated Condensed Statements of Cash Flows -
Six Months Ended June 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
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</TABLE>
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PART I. FINANCIAL INFORMATION
GENERAL BINDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(000 Omitted)
<TABLE>
<CAPTION>
June 30, 1994 December 31,
ASSETS (unaudited) 1993
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<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,457 $ 4,462
Receivables, net 73,959 63,701
Inventories -
Raw materials 20,562 19,912
Work in process 4,829 4,176
Finished goods 52,717 41,548
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Total inventories 78,108 65,636
Deferred tax assets 8,032 7,756
Other 5,027 3,796
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Total current assets 166,583 145,351
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Property, plant and equipment 129,296 124,599
Less - accumulated depreciation and amortization (66,001) (62,504)
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Net property, plant and equipment 63,295 62,095
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Other long-term assets:
Cost in excess of fair value of assets
of acquired companies, net of amortization 29,736 29,912
Other 14,446 13,751
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Total other long-term assets 44,182 43,663
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Total assets $ 274,060 $ 251,109
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
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Current liabilities:
Notes payable $ 24,451 $ 9,625
Current maturities of long-term obligations 431 433
Accounts payable 22,843 22,124
Accrued liabilities 32,644 32,511
Taxes on income -- 67
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Total current liabilities 80,369 64,760
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Long-term obligations, less current maturities:
Long-term debt 38,350 38,350
Capital leases 82 214
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Total long-term obligations 38,432 38,564
Other long-term liabilities 9,165 8,252
Deferred tax liabilities 6,107 6,002
Stockholders' equity:
Common stock 1,962 1,962
Class B common stock 300 300
Additional paid-in capital 6,211 6,133
Cumulative translation adjustments 444 101
Retained earnings 150,161 144,011
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159,078 152,507
Less - Treasury stock (19,091) (18,976)
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Total stockholders' equity 139,987 133,531
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Total liabilities and stockholders' equity $ 274,060 $ 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 SIX MONTHS ENDED
JUNE 30 JUNE 30
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1994 1993 1994 1993
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<S> <C> <C> <C> <C>
Sales $105,162 $93,742 $201,389 $182,900
Costs and expenses:
Cost of sales, including research, development
and engineering 59,210 52,061 112,331 100,464
Selling, service and administrative 36,697 33,745 71,202 66,974
Interest expense 838 928 1,600 1,864
Other expense, net 208 147 762 554
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Total costs and expenses 96,953 86,881 185,895 169,856
Income before taxes 8,209 6,861 15,494 13,044
Income taxes 3,259 2,660 6,191 5,133
Net income $ 4,950 $ 4,201 $ 9,303 $ 7,911
======= ======= ======= =======
Net income per common share $ .31 $ .26 $ .59 $ .50
====== ====== ====== ======
Dividends per common share $ .10 $ .10 $ .20 $ .20
====== ====== ====== ======
Average common shares outstanding 15,765 15,784 15,765 15,783
======== ======= ======== ========
</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>
SIX MONTHS ENDED
JUNE 30
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1994 1993
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 9,303 $ 7,911
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 5,893 5,510
Increase (decrease) in non-current deferred
tax liabilities 182 (156)
Provision for doubtful accounts 937 720
(Increase) in other long-term assets (1,632) (2,181)
Other 1,118 581
Changes in current assets and liabilities:
(Increase) in receivables (10,856) (6,250)
(Increase) decrease in inventories (12,263) 933
(Increase) decrease in deferred tax assets (277) 99
(Increase) in other current assets (1,173) (1,372)
(Decrease) in accounts payable and
accrued expenses (665) (1,120)
(Decrease) in taxes on income (123) (1,709)
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Net cash (used in) provided by
operating activities (9,556) 2,966
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Cash flows from investing activities:
Capital expenditures (6,998) (4,219)
Proceeds from sale of plant and equipment 2,255 62
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Net cash (used in) investing activities (4,743) (4,157)
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Cash flows from financing activities:
Increase (reduction) in notes payable 14,553 (3,012)
(Reduction) in current portion of
long-term obligations (2) (32)
(Reduction) in long-term obligations (131) (111)
Dividends paid (3,153) (3,157)
Purchases of treasury stock (143) (37)
Proceeds from the exercise of stock options 78 42
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Net cash provided by (used in)
financing activities 11,202 (6,307)
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Effect of exchange rates on cash 92 95
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Net (decrease) in cash
and cash equivalents (3,005) (7,403)
Cash and cash equivalents at beginning of the year 4,462 10,769
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Cash and cash equivalents at June 30 $ 1,457 $ 3,366
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Supplemental Disclosure of Cash Flow Information
Cash Paid During the Period for:
Interest $ 1,607 $ 1,800
Income taxes, net of refunds 6,931 7,321
</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 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 June 30, 1994 and
December 31, 1993, and the results of their operations for the three and six
month periods ended June 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 June 30, 1994 $ (57,000)
==========
Three months ended June 30, 1993 $ (84,000)
==========
Six months ended June 30, 1994 $ (149,000)
==========
Six months ended June 30, 1993 $ (27,000)
==========
</TABLE>
(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:
JUNE 30, DECEMBER 31,
1994 1993
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<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 4.0% at June 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 2.8% at June 30, 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
======== ========
</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.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company's second quarter sales increased 12% compared to the prior year
while sales for the six month period ended June 30, 1994 increased 10% over the
prior year. Results for both periods were positively impacted by the
acquisition of Bates Manufacturing in July of 1993. Excluding the impact of
Bates, sales increased 7% and 5%, 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 and office products
divisions. The film products division's increase resulted from continued growth
in its Domestic, European and Canadian markets while the office products
division was bolstered by the Bates product line. Another notable increase for
both periods was recorded in the Company's international operations, despite
the negative effect of translating foreign currencies into U.S. dollars.
On a worldwide basis, sales of the Company's equipment product lines increased
19% and 13%, respectively, for the second quarter and the first six 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 10% and 9%, respectively. Without the impact of Bates, equipment
sales for the second quarter and first six months increased 7% and 2%,
respectively, while sales of supplies and service increased 8% and 7%,
respectively.
Worldwide gross profit margins for both the second quarter and six months ended
June 30, 1994 decreased 1 point when compared to the same periods in
1993. Without the impact of Bates, gross profit margins for both the second
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 weaker foreign currencies continued to have a
negative effect on margins.
Consolidated selling, service and administrative expenses for the second
quarter and six months ended June 30, 1994 increased 9% and 6%, respectively,
when compared to the same periods in 1993. Without the impact of Bates, these
expenses increased approximately 6% and 4%, respectively, primarily as a result
of increased sales. Consolidated selling, service and administrative expenses
as a percentage of consolidated sales declined to 34.9% in the 1994 second
quarter period from 36.0% in the 1993 second quarter period and for the six
month period declined to 35.4% in 1994 from 36.6% in 1993.
Interest expense for the second quarter and six months ended June 30, 1994
decreased 10% and 14%, respectively, when compared to the same periods in 1993.
The decrease in expense for both periods was primarily due to 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. Partially
offsetting the decrease was higher domestic interest expense due to higher
interest rates and higher debt levels. The financing of the recent acquisition
of Bates and significantly higher inventory levels are the primary reasons for
the increase in debt.
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Other expense for the second quarter of 1994 was $208,000 compared to $147,000
for the same period in 1993. The increase was primarily due to lower income of
$177,000 from the Company's investments in joint ventures which was partially
offset by higher interest income of $111,000. Other expense for the six months
ended June 30, 1994 was $762,000 compared to $554,000 for the same period in
1993. This increase was primarily attributed to higher currency losses of
$122,000 and lower income from the Company's investments in joint ventures of
$109,000, partially offset by higher interest income of $68,000.
The company's effective tax rate for the second quarter of 1994 was 39.7%
compared to 38.8% for the same period in 1993. For the six months ended June
30, 1994, the effective tax rate was 40.0% compared to 39.4% for the same
period in 1993. For both periods 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.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital totaled $86.2 million at June 30, 1994, an
increase of $5.6 million from December 31, 1993. The Company's current ratio
at June 30, 1994 was 2.1 to 1.0 compared to 2.2 to 1.0 at December 31, 1993.
Cash dividends paid during the second quarter and first six months of 1994 were
$.10 and $.20 per share, as they were for the comparable periods in 1993.
Total plant and equipment expenditures for the second quarter and first six
months of 1994 were $4,365,000 and $6,998,000, respectively, compared to
$1,844,000 and $4,219,000 for the same periods in 1993. Major projects in 1994
include the expansion of the film products division into Europe and the
establishment of a ringmetals manufacturing operation in Costa Rica.
As of June 30, 1994, the Company had access to $65.6 million in short-term
credit lines and had $24.5 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 June 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 including foreseeable acquisition requirements.
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PART II. OTHER INFORMATION
Item 5: Other Information
On July 12, 1994, the Company announced that it had signed a
letter of intent to purchase the Sickinger Company located in
Auburn Hills, Michigan. Consummation of the transaction
remains subject to the execution of a definitive purchase
agreement and the completion of a due diligence review. The
Company expects to finalize the acquisition on or before
August 26, 1994.
The Sickinger Company, which has annual sales of approximately
$8 million, manufactures paper punching machines and wire and
plastic coil binding supplies. 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 second quarter ended June 30, 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
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Edward J. McNulty
Vice President and
Chief Financial Officer
