<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 June 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 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.
Class Outstanding at July 31, 1995
- ----------------------------------------- ----------------------------
Common Stock $.125 par value 13,338,485 shares
Class B - Common Stock $.125 par value 2,398,275 shares
<PAGE> 2
GENERAL BINDING CORPORATION
INDEX
<TABLE>
<CAPTION>
PART I. Financial Information Page No.
----------
<S> <C> <C>
Consolidated Condensed Balance Sheets - 1
June 30, 1995 and December 31, 1994
Consolidated Condensed Statements of Income - 2
Three and Six Months Ended June 30, 1995 and 1994
Consolidated Condensed Statements of Cash Flows - 3
Six Months Ended June 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
- ---------
</TABLE>
<PAGE> 3
- 1-
PART I. FINANCIAL INFORMATION
GENERAL BINDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(000 OMITTED)
<TABLE>
<CAPTION>
June 30, 1995 December 31,
ASSETS (unaudited) 1994
- ------ ---------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,348 $ 5,569
Receivables, net 80,371 74,413
Inventories -
Raw materials 20,576 20,828
Work in process 6,352 6,092
Finished goods 51,745 49,090
-------- --------
Total inventories 78,673 76,010
Deferred tax assets 8,706 8,807
Other 4,623 6,355
-------- --------
Total current assets 177,721 171,154
-------- --------
Property, plant and equipment 130,251 130,625
Less - accumulated depreciation and amortization (68,130) (65,095)
-------- --------
Net property, plant and equipment 62,121 65,530
-------- --------
Other long-term assets:
Cost in excess of fair value of assets
of acquired companies, net of amortization 30,663 31,099
Other 20,277 16,495
-------- --------
Total other long-term assets 50,940 47,594
-------- --------
Total assets $290,782 $284,278
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Notes payable $ 16,000 $ 23,814
Current maturities of long-term obligations 579 674
Accounts payable 24,178 20,647
Accrued liabilities 41,649 39,469
Taxes on income 153 -
-------- --------
Total current liabilities 82,559 84,604
-------- --------
Long-term debt 42,126 42,020
Other long-term liabilities 10,506 9,340
Deferred tax liabilities 7,090 7,225
Stockholders' equity:
Common stock 1,962 1,962
Class B common stock 300 300
Additional paid-in capital 6,988 6,562
Cumulative translation adjustments (1,362) (1,204)
Retained earnings 161,223 153,330
-------- --------
169,111 160,950
Less - Treasury stock (20,610) (19,861)
-------- --------
Total stockholders' equity 148,501 141,089
-------- --------
Total liabilities and stockholders' equity $290,782 $284,278
======== ========
</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 SIX MONTHS ENDED
JUNE 30 JUNE 30
1995 1994 1995 1994
------- ------ ------- -------
<S> <C> <C> <C> <C>
Sales $117,610 $105,162 $226,862 $201,389
Costs and expenses:
Cost of sales, including research,
development and engineering 66,346 59,210 127,970 112,331
Selling, service and administrative 40,442 36,697 77,304 71,202
Interest expense 1,114 838 2,188 1,600
Other (income)/expense, net (234) 208 733 762
-------- -------- -------- --------
Total costs and expenses 107,668 96,953 208,195 185,895
Income before taxes 9,942 8,209 18,667 15,494
Income taxes 3,977 3,259 7,467 6,191
Net income $ 5,965 $ 4,950 $ 11,200 $ 9,303
======== ======== ======== =========
Net income per common share $ .38 $ .31 $ .71 $ .59
======== ======== ======== ========
Dividends per common share $ .105 $ .10 $ .21 $ .20
======== ======== ======== ========
Average common shares outstanding 15,738 15,765 15,744 15,765
======== ======== ======== ========
</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>
SIX MONTHS ENDED
JUNE 30
1995 1994
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $11,200 $9,303
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 6,532 5,893
(Decrease) increase in non-current deferred
tax liabilities (27) 182
Provision for doubtful accounts 942 937
(Increase) in other long-term assets (4,878) (1,632)
Other 847 1,118
Changes in current assets and liabilities:
(Increase) in receivables (5,817) (10,856)
(Increase) in inventories (2,451) (12,263)
Decrease (increase) in deferred tax assets 108 (277)
Decrease (increase) in other current assets 1,711 (1,173)
Increase (decrease) in accounts payable and
accrued expenses 4,004 (665)
Increase (decrease) in taxes on income 40 (123)
------- ------
Net cash provided by (used in)
operating activities 12,211 (9,556)
------- ------
Cash flows from investing activities:
Capital expenditures (3,125) (6,998)
Proceeds from sale of plant and equipment 2,274 2,255
Government training subsidy from new plant investment 665 -
------- ------
Net cash (used in) investing activities (186) (4,743)
------- ------
Cash flows from financing activities:
(Reduction) increase in notes payable (8,370) 14,553
(Reduction) in current portion of
long-term obligations (130) (2)
(Reduction) in long-term obligations (224) (131)
Dividends paid (3,307) (3,153)
Purchases of treasury stock (839) (143)
Proceeds from the exercise of stock options 450 78
------- ------
Net cash (used in) provided by
financing activities (12,420) 11,202
------- ------
Effect of exchange rates on cash 174 92
------- ------
Net (decrease) in cash
and cash equivalents (221) (3,005)
Cash and cash equivalents at beginning of the year 5,569 4,462
------- ------
Cash and cash equivalents at June 30 $ 5,348 $1,457
======= ======
Supplemental Disclosure of Cash Flow Information
Cash Paid During the Period for:
Interest $ 2,276 $ 1,607
Income taxes, net of refunds 4,962 6,931
</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 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 June 30, 1995 and December 31, 1994, and the results of
their operations for the three and six months ended June 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 June 30, 1995 $ (7,000)
=========
Three months ended June 30, 1994 $ (57,000)
=========
Six months ended June 30, 1995 $(298,000)
=========
Six months ended June 30, 1994 $(149,000)
=========
</TABLE>
(a) Foreign currency transaction gains/losses are subject to income taxes at
the respective country's effective tax rate.
<PAGE> 7
- 5 -
(3) Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
(000 OMITTED)
JUNE 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 7.0% at
June 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
June 30, 1995 and December 31, 1994) 3,420 3,237
Industrial Revenue Bond, due annually from
July, 1994 to July, 2008 (floating
interest rate 4.25% at June 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 4.05% at June 30, 1995
and 5.65% at December 31, 1994) 1,019 909
------- -------
42,639 42,496
Less current maturities (513) (476)
------- -------
Total Long-Term Debt $42,126 $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
- 6 -
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company's sales and earnings for the quarter and six month periods ended
June 30, 1995 set new records. Sales increased 12% and 13% for the quarter and
six month periods compared to last year. Excluding the results of the August
1994 acquisition of Sickinger Company, sales increased 10% for the quarter and
11% for the six month period. Sales growth was realized in all major channels
of the Company's business except for the ringmetals operations. The most
significant contributors to the increases were the Company's: a) worldwide film
products division; b) international operations; and c) domestic direct branch/
telemarketing operations.
On a worldwide basis, sales of the Company's equipment product lines increased
13% and 16%, respectively, for the second quarter and the first six months of
1995 over the same periods last year. Sales of supplies and service (which for
discussion purposes includes the Company's ringmetals business) increased 11%
for both periods. Without the impact of Sickinger, equipment sales for the
second quarter and first six months increased 10% and 13%, respectively, while
sales of supplies and service increased 10% for both periods.
Worldwide gross profit margins remained flat for the 1995 second quarter and
decreased 1 percentage point for six month period when compared to the prior
year periods. The primary reasons for the erosion in gross margins were higher
manufacturing costs and competitive pressures on the Company's worldwide core
operations. The decrease in margins was partially offset by improved margins
in the Company's worldwide film products division. The Sickinger acquisition
had a relatively insignificant impact on the margins for both periods.
Consolidated selling, service and administrative expenses for the second
quarter and first six months ended June 30, 1995 increased 10% and 9%,
respectively, when compared to the same periods in 1994. Without the impact of
Sickinger, expenses increased 8% and 7%, respectively. The increase was
primarily due to: a) increased sales and profits; b) the expansion of the
Company's European film products operations; and c) the expansion of the
Company's European distribution network. Consolidated selling, service and
administrative expenses as a percentage of sales decreased in the second
quarter of 1995 to 34.4.% compared to 34.9% in 1994 and for the six month
period of 1995 decreased to 34.1% compared to 35.4% in 1994.
Interest expense for the second quarter and six months ended June 30, 1995
increased 33% and 37%, 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
- 7 -
Other income and expense for the second quarter of 1995 was $234,000 of income
compared to $208,000 of expense for the same period in 1994. The income in the
second quarter was due to a $350,000 gain on the sale of a plant in Germany and
higher income from a joint venture of $95,000. Other income and expense for
the six months ended June 30, 1995 was $733,000 of expense compared to $762,000
of expense for the same period in 1994. This decrease was attributable to the
$350,000 gain on the sale of the Germany plant partially offset by: a)
$149,000 of higher currency losses; b) $90,000 of increased stock option
compensation expense; and c) higher royalty expense of $54,000.
The Company's effective tax rate for the second quarter of 1995 was 40.0%
compared to 39.7% for the same period in 1994. For both the six months ended
June 30, 1995 and 1994, the effective tax rate was 40.0%. Various insignificant
items contributed to the increase for the quarter.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital totaled $95.2 million at June 30, 1995, an
increase of $8.6 million from December 31, 1994. The Company's current ratio
at June 30, 1995 was 2.2 to 1.0 compared to 2.0 to 1.0 at December 31, 1994.
Cash dividends paid during the second quarter and first six months of 1995 were
$.105 and $.21 per share while dividends for the comparable periods in 1994
were $.10 and $.20, respectively. Total plant and equipment expenditures for
the second quarter and first six months of 1995 were $1,717,000 and $3,125,000,
respectively, compared to $4,365,000 and $6,998,000, 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 $3,615,000 and $3,945,000 during the 1995 quarter and year-to-date
periods on this project. These expenditures were classified as long-term
assets on the Company's balance sheet.
As of June 30, 1995, the Company had access to $68.1 million in short-term
credit lines and had $16.0 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, 1995, the
Company had $36 million in borrowings against this agreement classified as
long-term debt on the balance sheet.
On July 25, 1995 the Company replaced its $62.5 million credit agreement with
an $140 million credit agreement. The Company believes that funds generated
from operations combined with the $140 million credit facility are more than
sufficient to meet currently anticipated needs.
<PAGE> 10
- 8 -
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 second quarter ended June 30, 1995.
<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 period ended June 30, 1995 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 5,348
<SECURITIES> 0
<RECEIVABLES> 80,371<F1>
<ALLOWANCES> 5,280
<INVENTORY> 78,673
<CURRENT-ASSETS> 177,721
<PP&E> 130,251
<DEPRECIATION> 68,130
<TOTAL-ASSETS> 290,782
<CURRENT-LIABILITIES> 82,559
<BONDS> 42,126
<COMMON> 2,262
0
0
<OTHER-SE> 146,239
<TOTAL-LIABILITY-AND-EQUITY> 290,782
<SALES> 226,862
<TOTAL-REVENUES> 226,862
<CGS> 127,970
<TOTAL-COSTS> 127,970
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 942
<INTEREST-EXPENSE> 2,188
<INCOME-PRETAX> 18,667
<INCOME-TAX> 7,467
<INCOME-CONTINUING> 11,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,200
<EPS-PRIMARY> .71
<EPS-DILUTED> .71
<FN>
<F1>
Notes and accounts receivable-trade are stated net of allowances for doubtful
accounts and sales returns.
</FN>
</TABLE>
