<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, 1995
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
incorporation or organization) 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
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 October 31, 1995
- ----------------------------------------- -------------------------------
Common Stock $.125 par value 13,336,865 shares
Class B - Common Stock $.125 par value 2,398,275 shares
<PAGE> 2
GENERAL BINDING CORPORATION
INDEX
PART I. Financial Information Page No.
--------
Consolidated Condensed Balance Sheets - 1
September 30, 1995 and December 31, 1994
Consolidated Condensed Statements of Income - 2
Three and Nine Months Ended
September 30, 1995 and 1994
Consolidated Condensed Statements of Cash Flows - 3
Nine Months Ended September 30, 1995 and 1994
Notes to Consolidated Condensed 4
Financial Statements
Management's Discussion and Analysis of 6
Financial Condition and Results of
Operations
PART II. Other Information 8
Signature 9
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-1-
PART I. FINANCIAL INFORMATION
GENERAL BINDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(000 OMITTED)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
ASSETS (unaudited)
- ------ -------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,192 $ 5,569
Receivables, net 80,222 74,413
Inventories -
Raw materials 19,936 20,828
Work in process 6,350 6,092
Finished goods 55,781 49,090
-------- --------
Total inventories 82,067 76,010
Deferred tax assets 8,644 8,807
Other 4,365 6,355
-------- --------
Total current assets 180,490 171,154
-------- --------
Property, plant and equipment 127,457 130,625
Less - accumulated depreciation and amortization (66,285) (65,095)
-------- --------
Net property, plant and equipment 61,172 65,530
-------- --------
Other long-term assets:
Cost in excess of fair value of assets
of acquired companies, net of amortization 31,442 31,099
Other 22,113 16,495
-------- --------
Total other long-term assets 53,555 47,594
-------- --------
Total assets $295,217 $284,278
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Notes payable $ 16,802 $ 23,814
Current maturities of long-term obligations 566 674
Accounts payable 22,567 20,647
Accrued liabilities 43,362 39,469
-------- --------
Total current liabilities 83,297 84,604
Long-term debt 43,937 42,020
Other long-term liabilities 9,894 9,340
Deferred tax liabilities 6,996 7,225
Stockholders' equity:
Common stock 1,962 1,962
Class B common stock 300 300
Additional paid-in capital 7,085 6,562
Cumulative translation adjustments (1,942) (1,204)
Retained earnings 164,504 153,330
-------- --------
171,909 160,950
Less - Treasury stock (20,816) (19,861)
-------- --------
Total stockholders' equity 151,093 141,089
-------- --------
Total liabilities and stockholders' equity $295,217 $284,278
======== ========
</TABLE>
The accompanying notes to consolidated condensed financial statements are an
integral part of these statements.
<PAGE> 4
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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 NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1995 1994 1995 1994
---------- ---------- ------- -------
<S> <C> <C> <C> <C>
Sales $112,993 $108,576 $339,855 $309,965
Costs and expenses:
Cost of sales, including research,
development and engineering 64,709 61,692 192,679 174,023
Selling, service and administrative 38,416 38,439 115,720 109,641
Interest expense 1,052 991 3,240 2,591
Other expense, net 595 370 1,328 1,132
------- ------- ------- -------
Total costs and expenses 104,772 101,492 312,967 287,387
Income before taxes 8,221 7,084 26,888 22,578
Income taxes 3,288 2,831 10,755 9,022
Net income $4,933 $4,253 $16,133 $13,556
======== ======== ========= =========
Net income per common share $ .31 $ .27 $ 1.02 $ .86
======== ======== ========= =========
Dividends per common share $ .105 $ .10 $ .315 $ .30
======= ======== ========= =========
Average common shares outstanding 15,737 15,761 15,742 15,763
====== ====== ======= =======
</TABLE>
The accompanying notes to consolidated condensed financial statements are an
integral part of these statements.
<PAGE> 5
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GENERAL BINDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(000 OMITTED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
1995 1994
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $16,133 $13,556
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 9,783 8,907
(Decrease) increase in non-current deferred
tax liabilities (46) 95
Provision for doubtful accounts 1,303 1,346
(Increase) in other long-term assets (3,385) (2,662)
Other 256 1,463
Changes in current assets and liabilities:
(Increase) in receivables (7,236) (12,128)
(Increase) in inventories (6,243) (13,874)
Decrease (increase) in deferred tax assets 137 (227)
Decrease (increase) in other current assets 1,934 (2,636)
Increase (decrease) in accounts payable and
accrued expenses 5,161 (1,351)
Increase (decrease) in taxes on income 0 (232)
-------- -------
Net cash provided by (used in)
operating activities 17,797 (7,743)
-------- -------
Cash flows from investing activities:
Purchase of Sickinger Corporation, net of cash
acquired - (3,481)
Capital Expenditures (10,095) (10,722)
Proceeds from sale of plant and equipment 2,347 2,640
Government training subsidy from new plant investment 665 -
-------- -------
Net cash (used in) investing activities (7,083) (11,563)
-------- -------
Cash flows from financing activities:
(Reduction) increase in notes payable (7,221) 23,831
(Reduction) in current portion of
long-term obligations (130) (34)
Increase (Reduction) in long-term obligations 1,726 (882)
Dividends paid (4,959) (4,729)
Purchases of treasury stock (1,063) (249)
Proceeds from the exercise of stock options 567 95
-------- -------
Net cash (used in) provided by
financing activities (11,080) 18,032
-------- -------
Effect of exchange rates on cash (11) 166
-------- -------
Net (decrease) in cash
and cash equivalents (377) (1,108)
Cash and cash equivalents at beginning of the year 5,569 4,462
-------- -------
Cash and cash equivalents at September 30 $5,192 $3,354
======= =======
Supplemental Disclosure of Cash Flow Information
Cash Paid During the Period for:
Interest $ 3,198 $ 2,559
Income taxes, net of refunds 8,642 10,309
</TABLE>
The accompanying notes to consolidated condensed financial statements are an
integral part of these statements.
<PAGE> 6
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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 1994 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, 1995 and December 31, 1994, and the results of
their operations for the three and nine months ended September 30, 1995 and
1994 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, 1995 $ (82,000)
==========
Three months ended September 30, 1994 $ 63,000
==========
Nine months ended September 30, 1995 $(380,000)
==========
Nine months ended September 30, 1994 $ (86,000)
==========
</TABLE>
(a) Foreign currency transaction gains/losses are subject to income taxes at
the respective country's effective tax rate.
<PAGE> 7
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(3) Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
(000 OMITTED)
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- -------------
<S> <C> <C>
Revolving Credit Agreement (portion classified as
long-term on the basis of the Company's
intention to refinance these borrowings:
weighted average interest rate 6.25% at
September 30, 1995 and 5.7% at December 31, 1994) $36,000 $36,000
Note Payable, due monthly from November, 1994
to October, 2004 (interest rate 8.85% at
September 30, 1995 and December 31, 1994) 3,187 3,237
Term Loan, maturity date June, 2000
(interest rate 7.05% at September 30, 1995) 2,000 ---
Industrial Revenue Bond, due annually to July, 2008
(floating interest rate 4.1% at September 30, 1995
and 5.3% at December 31, 1994) 2,200 2,350
Industrial Revenue Bond, due annually from
June, 2002 to June, 2007 (floating
interest rate 4.3% at September 30, 1995
and 5.65% at December 31, 1994) 1,050 909
------- -------
44,437 42,496
Less current maturities (500) (476)
------- -------
Total Long-Term Debt $43,937 $42,020
======= =======
</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
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company's sales and earnings for the nine month period ended September 30,
1995 set new records. Sales increased 4% and 10% for the quarter and nine
month periods compared to last year. The most significant contributors to the
increase in sales for the quarter and nine month period were increases in the
company's: a) worldwide film products division; b) dealer/distributor
operations of international subsidiaries; c) domestic direct
branch/telemarketing operations; and d) the addition of Sickinger Company.
These increases were significantly impacted by decreases in the ringmetals and
Mexican operations.
On a worldwide basis, sales of the Company's equipment product lines decreased
2% and increased 10%, respectively, for the third quarter and the first nine
months of 1995. Sales of supplies and service (which for discussion purposes
includes the Company's ringmetals business) increased 6% and 10% for the
quarter and nine month period respectively. Without the impact of Sickinger,
equipment sales for the third quarter and first nine months decreased 5% and
increased 7%, respectively, while sales of supplies and service increased 5%
and 8% for both periods.
Despite continued worldwide competitive pressures, gross profit margins
remained flat for the 1995 third quarter and nine month periods when compared
to the prior year periods.
Consolidated selling, service and administrative expenses remained flat for the
1995 third quarter and increased 6% for the first nine months ended September
30, 1995. The increase in expenses for the nine month period was primarily
due to: a) higher sales volumes; b) the addition of Sickinger company; and c)
an increase in spending for studies conducted in the area of logistics and
management information systems for the company's European operations.
Consolidated selling, service and administrative expenses as a percentage of
sales decreased in the third quarter of 1995 to 34.0.% compared to 35.4% in
1994 and for the nine month period of 1995 decreased to 34.1% compared to 35.4%
in 1994.
Interest expense for the third quarter and nine months ended September 30, 1995
increased 6% and 25%, respectively, when compared to the same periods in 1994.
The primary reasons for the increase were higher interest rates and higher
average debt levels. The higher debt levels resulted primarily from: a) higher
inventory and receivable levels; b) the financing of the Sickinger
acquisition; and c) the expansion of the European film products operations.
This increase was partially offset by the expiration of one of the Company's
interest rates swaps in the fourth quarter of 1994.
<PAGE> 9
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Other income and expense for the third quarter and nine month periods of 1995
was $595,000 and $1,328,000 compared to $370,000 and $1,132,000 in the prior
year periods. The increase in expense for both periods was primarily due to
currency losses. For the nine month period of 1995, the increased expenses
were partially offset by a gain on the sale of the company's manufacturing
facility in Germany.
The Company's effective tax rate for both the 1995 and 1994 third quarter
periods was 40.0%. For both the nine months ended September 30, 1995 and 1994,
the effective tax rate was 40.0%.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital totaled $97.2 million at September 30, 1995, an
increase of $10.6 million from December 31, 1994. The Company's current ratio
at September 30, 1995 was 2.2 to 1.0 compared to 2.0 to 1.0 at December 31,
1994.
Cash dividends paid during the third quarter and first nine months of 1995 were
$.105 and $.315 per share while dividends for the comparable periods in 1994
were $.10 and $.30, respectively. Total plant and equipment expenditures for
the third quarter and first nine months of 1995 were $1,562,000 and $4,687,000,
respectively, compared to $3,724,000 and $10,722,000, respectively, for the
same periods in 1994. In addition , the Company is currently in the process of
implementing a new company-wide business enterprise information system and
spent $1,463,000 and $5,408,000 during the 1995 quarter and year-to-date
periods on this project. Excluding $224,000 of hardware purchases, these
expenditures were classified as long-term assets on the Company's balance
sheet.
As of September 30, 1995, the Company had access to $60.0 million in short-term
credit lines and had $16.8 million in outstanding borrowings against these
lines. The Company also had access to a $140.0 million credit agreement to
fund both working capital and acquisition requirements. As of September 30,
1995, the Company had $36 million in borrowings against this agreement
classified as long-term debt on the balance sheet.
<PAGE> 10
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PART II. OTHER INFORMATION
Item 5: 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, 1995.
<PAGE> 11
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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
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from General
Binding Corporation's Form 10-Q for the period ended September 30, 1995 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 5,192
<SECURITIES> 0
<RECEIVABLES> 80,222 <F1>
<ALLOWANCES> 5,275
<INVENTORY> 82,067
<CURRENT-ASSETS> 180,490
<PP&E> 127,457
<DEPRECIATION> 66,285
<TOTAL-ASSETS> 295,217
<CURRENT-LIABILITIES> 83,297
<BONDS> 43,937
<COMMON> 2,262
0
0
<OTHER-SE> 148,831
<TOTAL-LIABILITY-AND-EQUITY> 295,217
<SALES> 339,855
<TOTAL-REVENUES> 339,855
<CGS> 192,679
<TOTAL-COSTS> 192,679
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,303
<INTEREST-EXPENSE> 3,240
<INCOME-PRETAX> 26,888
<INCOME-TAX> 10,755
<INCOME-CONTINUING> 16,133
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,133
<EPS-PRIMARY> $1.02
<EPS-DILUTED> $1.02
<FN>
<F1>
Notes and accounts receivable-trade are stated net of allowances for doubtful
accounts and sales returns.
</FN>
</TABLE>
