<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 March 31, 1996
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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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: (847) 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
------ ------
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, 1996
- --------------------------------------- -----------------------------
Common Stock $.125 par value 13,344,693 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
March 31, 1996 and December 31, 1995
Consolidated Condensed Statements of Income - 2
Three Months Ended March 31, 1996 and 1995
Consolidated Condensed Statements of Cash Flows - 3
Three Months Ended March 31, 1996 and 1995
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
<PAGE> 3
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PART I. FINANCIAL INFORMATION
GENERAL BINDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(000 OMITTED)
<TABLE>
<CAPTION>
March 31, 1996 December 31,
ASSETS (unaudited) 1995
- ------ ---------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 6,409 $ 6,864
Receivables, net 94,208 79,942
Inventories -
Raw materials 19,302 20,142
Work in process 7,664 5,473
Finished goods 57,925 53,990
-------- --------
Total inventories 84,891 79,605
Deferred tax assets 10,763 10,412
Other 5,743 3,825
-------- --------
Total current assets 202,014 180,648
-------- --------
Property, plant and equipment 131,332 126,671
Less - accumulated depreciation and amortization (67,102) (65,210)
-------- --------
Net property, plant and equipment 64,230 61,461
-------- --------
Other long-term assets:
Cost in excess of fair value of assets
of acquired companies, net of amortization 43,101 31,363
Other 27,222 25,400
-------- --------
Total other long-term assets 70,323 56,763
-------- --------
Total assets $336,567 $298,872
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Notes payable $ 28,935 $ 17,428
Current maturities of long-term obligations 499 505
Accounts payable 27,545 23,600
Accrued liabilities 42,718 42,295
-------- --------
Total current liabilities 99,697 83,828
-------- --------
Long-term debt 61,695 43,890
Other long-term liabilities 9,700 9,855
Deferred tax liabilities 7,118 7,158
Stockholders' equity:
Common stock 1,962 1,962
Class B common stock 300 300
Additional paid-in capital 8,239 7,267
Cumulative translation adjustments (2,682) (2,723)
Retained earnings 172,583 168,219
-------- --------
180,402 175,025
Less - Treasury stock (22,045) (20,884)
-------- --------
Total stockholders' equity 158,357 154,141
-------- --------
Total liabilities and stockholders' equity $336,567 $298,872
======== ========
</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
MARCH 31
1996 1995
------- ------
<S> <C> <C>
Sales $126,346 $109,252
Costs and expenses:
Cost of sales, including research,
development and engineering 75,677 61,624
Selling, service and administrative 39,145 36,862
Interest expense 1,330 1,074
Other expense, net 15 967
-------- --------
Total costs and expenses 116,167 100,527
-------- --------
Income before taxes 10,179 8,725
Income taxes 4,173 3,490
-------- --------
Net income $ 6,006 $ 5,235
======== ========
Net income per common share $ .38 $ .33
======== ========
Dividends per common share $ .105 $ .105
======== ========
Average common shares outstanding 15,739 15,751
======== ========
</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>
THREE MONTHS ENDED
MARCH 31
1996 1995
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 6,004 $ 5,235
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,264 3,202
(Decrease) in non-current deferred tax liabilities (41) (476)
Provision for doubtful accounts 671 467
(Increase) in other long-term assets (977) (280)
Other 46 1,164
Changes in current assets and liabilities:
(Increase) in receivables (12,936) (2,432)
Decrease (increase) in inventories 1,292 (1,137)
(Increase) in deferred tax assets (346) (54)
(Increase) decrease in other current assets (1,649) 724
Increase (decrease) in accounts payable and
accrued expenses 1,495 (1,115)
Increase in taxes on income 1,829 517
(Decrease) increase in deferred income on
service agreements (1,582) 11
-------- --------
Net cash provided by (used in)
operating activities (2,930) 5,826
-------- -------
Cash flows from investing activities:
Purchase of Pro-Tech Engineering Inc., net of cash
acquired (7,149) -
Purchase of Fordigraph, net of cash acquired (10,992) -
Capital Expenditures (6,946) (1,738)
Proceeds from sale of plant and equipment 39 110
-------- --------
Net cash (used in) investing activities (25,048) (1,628)
-------- --------
Cash flows from financing activities:
Increase (reduction) in notes payable 11,584 (5,068)
(Reduction) in current portion of
long-term obligations (13) (65)
Increase (Reduction) in long-term obligations 17,824 (57)
Dividends paid (1,640) (1,655)
Purchases of treasury stock (1,322) (394)
Proceeds from the exercise of stock options 1,076 277
-------- --------
Net cash (used in) provided by
financing activities 27,509 (6,962)
-------- --------
Effect of exchange rates on cash 14 53
-------- --------
Net decrease in cash
and cash equivalents (455) (2,711)
Cash and cash equivalents at beginning of the year 6,864 5,569
-------- --------
Cash and cash equivalents at March 31 $ 6,409 $ 2,858
======== ========
Supplemental Disclosure of Cash Flow Information
Cash Paid During the Period for:
Interest $ 1,194 $ 1,155
Income taxes, net of refunds 1,772 690
</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 1995 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, 1996 and December 31, 1995, and the results of
their operations for the three months ended March 31, 1996 and 1995 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 March 31, 1996 $ 114,000
===========
Three months ended March 31, 1995 $ (291,000)
===========
</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)
MARCH 31, DECEMBER 31,
1996 1995
----------- -------------
<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 5.74% at
March 31, 1996 and 6.25% at
December 31, 1995) $50,700 $36,000
Note Payable, due monthly from November, 1994
to October, 2004 (interest rate 8.85% at
March 31, 1996 and December 31, 1995) 2,672 3,137
Term Loan, maturity date June, 2000
(interest rate 7.05% at March 31, 1996 and
at December 31, 1995) 1,970 2,008
Industrial Revenue Bond, due annually to July, 2008
(floating interest rate 3.40% at March 31, 1996
and 5.00% at December 31, 1995) 2,050 2,200
Industrial Revenue Bond, due annually from
June, 2002 to June, 2007 (floating
interest rate 3.60% at March 31, 1996
and 5.20% at December 31, 1995) 1,050 1,050
International
Australia Revolving Credit Agreement 3,252 --
------- -------
61,694 44,395
Less current maturities (499) (505)
------- -------
Total Long-Term Debt $61,195 $43,890
======= =======
</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 first quarter 1996 sales exceeded $126 million
increasing 16% over the prior year quarter. The most significant factors
contributing to the growth of sales were increases in the Company's: a)
worldwide film products division; b) worldwide office products/dealer
business; c) domestic direct branch/telemarketing operations; d) automated
finishing division; and e) export business. The sales results were also
positively affected by the December 1995 acquisition of Pro-Tech and the
January 1996 acquisition of Fordigraph. Excluding acquisitions, the Company's
sales increased 10%, compared to 1995.
Significant improvement in the following product lines helped to
achieve the first quarter 1996 sales increase: a) shredder products; b)
laminating film and pouch products; c) commercial laminating equipment; and d)
graphics products.
Gross profit margins decreased 4 percentage points from the prior year
quarter. The erosion in margins was evident in nearly all of the Company's
operations. The primary reasons for the decrease in margins were: a) worldwide
competitive pricing pressures, most notably in the ring metals business; b)
increases in the cost of raw materials for film products; and c) an increase in
sales mix to lower margin products (e.g., personal shredders, laminating film,
and graphics products).
Selling, service, and administrative expenses increased 6% in the
first quarter of 1996 over the prior year quarter. The primary reasons for the
increase in expenses were increased sales volumes and the inclusion of the
recently acquired companies, Pro-Tech and Fordigraph. Without the impact of
acquisitions, expenses increased 2% over the prior quarter year. Selling,
service and administrative expenses declined as a percentage of total sales to
31% in 1996 from 34% in 1995.
Interest expense increased by 24% in the first quarter of 1996
compared to the 1995. The primary reason for the increase was higher average
debt levels resulting from the financing of acquisitions, capital expenditures,
and higher levels of receivables.
Other expense was $15,000 compared to $967,000 in 1995. The most
significant factors affecting the decrease were: a) a gain on the sale of a
parcel of land in Japan; b) an increase in interest income; c) a significant
improvement in currency transactional gains and losses.
<PAGE> 9
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Liquidity and Capital Resources
Working capital totaled $102.3 million at March 31, 1996, an increase
of $5.5 million from December 31, 1995. The change was primarily caused by an
increase in receivables, including those generated by Pro-Tech and Fordigraph
since date of acquisition.
Net cash flows used in investing activities amounted to $25.0 million
during the first quarter of 1996. Capital expenditures were $6.9 million in
the first quarter compared to $1.7 million in 1995. Major projects during the
quarter included the continued development of a new company-wide business
information system and continued investment in the film products division,
including construction of a new plant in Maryland. Acquisitions used $18.1
million in cash during the first quarter. Capital expenditures and
acquisitions were funded through use of the Company's credit agreements and
short-term borrowings.
The Company had access to $55.7 million in short term credit lines as
of March 31, 1996 and $28.9 million in outstanding borrowings against these
lines. During the first quarter, the Company also had access to a $140.0
million credit agreement to fund both working capital and acquisition
requirements. As of March 31, 1996 the Company had $50.7 million in borrowings
against this agreement classified as long-term borrowings on the Company's
balance sheet.
Cash dividends of $.105 per share were paid in both the first quarters
of 1996 and 1995.
The Company believes that funds generated from operations combined
with existing credit facilities are more than sufficient to meet currently
anticipated capital needs along with any foreseeable acquisition requirements.
<PAGE> 10
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PART II. OTHER INFORMATION
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, 1996.
<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 information extracted from General Binding
Corporation's Form 10-Q for the quarter ended March 31, 1996 and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 6,409
<SECURITIES> 0
<RECEIVABLES> 94,208<F1>
<ALLOWANCES> 5,345
<INVENTORY> 84,891
<CURRENT-ASSETS> 202,014
<PP&E> 131,332
<DEPRECIATION> 67,102
<TOTAL-ASSETS> 336,567
<CURRENT-LIABILITIES> 99,697
<BONDS> 61,695
<COMMON> 2,262
0
0
<OTHER-SE> 156,095
<TOTAL-LIABILITY-AND-EQUITY> 336,567
<SALES> 126,346
<TOTAL-REVENUES> 126,346
<CGS> 75,677
<TOTAL-COSTS> 75,677
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 671
<INTEREST-EXPENSE> 1,330
<INCOME-PRETAX> 10,179
<INCOME-TAX> 4,173
<INCOME-CONTINUING> 6,006
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,006
<EPS-PRIMARY> .38
<EPS-DILUTED> .38
<FN>
<F1>Notes and accounts receivable - trade are stated net of allowances for doubtful
accounts and sales returns.
</FN>
</TABLE>
