<PAGE> 1
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<CAPTION>
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, 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
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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
---------------
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, 1996
- --------------------------------------- ----------------------------------------
<S> <C>
Common Stock $.125 par value 13,345,956 shares
Class B - Common Stock $.125 par value 2,398,275 shares
</TABLE>
<PAGE> 2
GENERAL BINDING CORPORATION
INDEX
PART I. Financial Information Page No.
--------
Consolidated Condensed Balance Sheets - 1
September 30, 1996 and December 31, 1995
Consolidated Condensed Statements of Income - 2
Three and Nine Months Ended
September 30, 1996 and 1995
Consolidated Condensed Statements of Cash Flows - 3
Nine Months Ended September 30, 1996 and 1995
Notes to Consolidated Condensed 4
Financial Statements
Management's Discussion and Analysis of 7
Financial Condition and Results of
Operations
PART II. Other Information 9
Signature 10
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<CAPTION>
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PART I. FINANCIAL INFORMATION
GENERAL BINDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(000 Omitted)
September 30, December 31,
1996 1995
ASSETS (unaudited)
- ------ ------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 8,245 $ 6,864
Receivables, net 102,449 79,942
Inventories -
Raw materials 23,661 20,142
Work in process 7,795 5,473
Finished goods 67,599 53,990
--------- -------
Total inventories 99,055 79,605
Deferred tax assets 10,868 10,412
Other 6,509 3,825
------- -------
Total current assets 227,126 180,648
------- -------
Property, plant and equipment 140,542 126,671
Less - accumulated depreciation and
amortization (71,554) (65,210)
------- --------
Net property, plant and equipment 68,988 61,461
Other long-term assets: ------- --------
Cost in excess of fair value of assets
of acquired companies, net of
amortization 43,507 31,363
Other 31,077 25,400
------- -------
Total other long-term assets 74,584 56,763
------- -------
Total assets $370,698 $298,872
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Notes payable $ 30,595 $ 17,428
Current maturities of
long-term obligations 496 505
Accounts payable 30,462 23,600
Accrued liabilities 48,294 42,295
-------- --------
Total current liabilities 109,847 83,828
-------- --------
Long-term debt 75,641 43,890
Other long-term liabilities 10,170 9,855
Deferred tax liabilities 7,398 7,158
Stockholders' equity:
Common stock 1,962 1,962
Class B common stock 300 300
Additional paid-in capital 8,364 7,267
Cumulative translation adjustments (2,440) (2,723)
Retained earnings 181,656 168,219
------- --------
189,842 175,025
Less - Treasury stock (22,200) (20,884)
-------- --------
Total stockholders' equity 167,642 154,141
Total liabilities and stockholders' -------- --------
equity $370,698 $298,872
======== ========
</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 NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1996 1995 1996 1995
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<S> <C> <C> <C> <C>
Sales $132,996 $112,993 $394,680 $339,855
Costs and expenses:
Cost of sales, including research,
development and engineering 77,891 64,709 233,334 192,679
Selling, service and administrative 42,790 38,416 124,218 115,720
Interest expense 1,526 1,052 4,389 3,240
Other expense, net 723 595 1,425 1,328
--- --- ----- -----
Total costs and expenses 122,930 104,772 363,366 312,967
------- ------- ------- -------
Income before taxes 10,066 8,221 31,314 26,888
Income taxes 4,127 3,288 12,839 10,755
------ ----- ------ ------
Net income $ 5,939 $4,933 $18,475 $16,133
======== ====== ======= =======
Net income per common share $ .37 $ .31 $ 1.17 $ 1.02
======== ====== ======= =======
Dividends per common share $ .110 $ .105 $ .320 $ .315
======== ====== ======= =======
Average common shares outstanding 15,743 15,737 15,742 15,742
======== ====== ====== ======
</TABLE>
The accompanying notes to consolidated condensed financial statements are an
integral part of these statements.
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<TABLE>
<CAPTION>
GENERAL BINDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(000 Omitted)
NINE MONTHS ENDED
SEPTEMBER 30
1996 1995
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<S> <C> <C>
Cash flows from operating activities:
Net income $18,475 $16,133
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 10,735 9,783
Increase (decrease) in noncurrent deferred
tax liabilities 262 (46)
Provision for doubtful accounts 1,700 1,303
(Increase) in other long-term assets (1,216) (3,385)
Other (744) 256
Changes in current assets and liabilities:
(Increase) in receivables (22,098) (7,236)
(Increase) in inventories (12,778) (6,243)
(Increase) decrease in deferred tax assets (448) 137
(Increase) decrease in other current assets (2,381) 1,934
Increase in accounts payable and
accrued expenses 5,975 5,161
Increase in taxes on income 4,185 0
Net cash provided by (used in) ------- -------
operating activities 1,667 17,797
------- -------
Cash flows from investing activities:
Purchase of Pro-Tech, net of cash acquired (7,149) -
Purchase of Fordigraph, net of cash acquired (11,784) -
Capital Expenditures (22,539) (10,095)
Proceeds from sale of plant and equipment 1,399 2,347
Government training subsidy from new plant investment - 665
------- -------
Net cash (used in) investing activities (40,073) (7,083)
------- -------
Cash flows from financing activities:
Increase (reduction) in notes payable 13,216 (7,221)
(Reduction) in current portion of
long-term obligations - (130)
Increase in long-term obligations 31,803 1,726
Dividends paid (5,024) (4,959)
Purchases of treasury stock (1,498) (1,063)
Proceeds from the exercise of stock options 1,221 567
------- -------
Net cash (used in) provided by
financing activities 39,718 (11,080)
-------- -------
Effect of exchange rates on cash 69 (11)
------- -------
Net increase (decrease) in cash
and cash equivalents 1,381 (377)
Cash and cash equivalents at beginning of the year 6,864 5,569
-------- -------
Cash and cash equivalents at September 30 $8,245 $5,192
======== =======
Supplemental Disclosure of Cash Flow Information
Cash Paid During the Period for:
Interest $3,895 $3,198
Income taxes, net of refunds 7,962 8,642
</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 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 September 30, 1996 and December 31, 1995, and the results of
their operations for the three and nine months ended September 30, 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:
Foreign Currency
Transaction
Gain/(Loss)(a)
----------------
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<CAPTION>
<S> <C>
Three months ended September 30, 1996 $ 4,000
============
Three months ended September 30, 1995 $ (82,000)
=============
Nine months ended September 30, 1996 $ 234,000
=============
Nine months ended September 30, 1995 $ (380,000)
=============
</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
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Long-term debt consists of the following:
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<CAPTION>
(000 OMITTED)
SEPTEMBER 30, DECEMBER 31,
1996 1995
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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:
weighted average interest rate 6.05% at
September 30, 1996 and 6.25% at December 31, 1995) $60,700 $36,000
Note Payable, due monthly from November, 1994
to October, 2004 (interest rate 8.85% at
September 30, 1996 and December 31, 1995) 2,826 3,137
Term Loan, maturity date June, 2000
(interest rate 7.05% at September 30, 1996 and
at December 31, 1995) 1,956 2,008
Industrial Revenue Bond, due annually to July, 2008
(floating interest rate 3.65% at September 30, 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 3.90% at September 30, 1996
and 5.20% at December 31, 1995) 1,050 1,050
Industrial Revenue Bond, maturity date,
March, 2026 (floating interest rate 4.0%
at Sept. 30, 1996) 4,197 ---
International
Australia Revolving Credit Agreement 3,358 ---
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76,137 44,395
Less current maturities (496) (505)
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Total Long-Term Debt $75,641 $43,890
======= =======
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(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> 9
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
The Company's third quarter and nine month sales reached record levels
increasing 18% and 16%, respectively, when compared to the same periods in the
prior year. The most significant factors contributing to the growth of sales
for both the quarter and nine month periods were: a) the acquisitions of
Protech and Fordigraph, which together represented approximately 40% of the
sales growth for the third quarter and year to date periods; and b) increases
in the domestic office products/dealer business, the domestic direct
branch/telemarketing operations, and the worldwide film products division.
Significant increases in the following product lines helped to achieve the
third quarter and the nine month sales increases: a) shredders; b) laminating
film and pouches; c) graphics products; and d) commercial and office laminating
equipment.
Gross profit margins for the third quarter and nine months period of 1996
decreased 1.2 and 2.4 percentage points, respectively, when compared to the
same periods in 1995. The primary reasons for the decrease in margins were: a)
worldwide competitive pricing pressures, most notably in the ring metals
business; and b) an increase in sales mix to lower margin channels of
distribution and products (e.g., personal shredders, laminating film, and
graphics products).
Selling, service, and administrative expenses for the third quarter and
nine month period increased 11.4% and 7.3%, respectively, when compared to the
same periods in 1995. The most significant reasons for the increase in
expenses were increased sales volumes and the inclusion of the recently
acquired companies, Pro-Tech and Fordigraph. Selling, service and
administrative expenses as a percentage of total sales declined in both the
third quarter and nine month periods to 32% in 1996 from 34% in 1995.
Interest expense for the third quarter and nine month period of 1996
increased 45% and 35%, respectively, when compared to the same periods in 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 and inventories.
Other expense for the third quarter was $723,000 compared to $595,000 in
1995. The most significant factors affecting the quarter change was the
increase costs associated with the recently acquired companies, Protech and
Fordigraph. Other expense for the nine month period was $1,425,000 compared to
$1,328,000 in 1995. The unfavorable impact was due to a loss from the Company's
Indian joint venture and costs associated with the acquisitions which were
offset by favorable currency transaction gains and a gain on the sale of a
parcel of land in Japan.
<PAGE> 10
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Liquidity and Capital Resources
Working capital totaled $117.3 million at September 30, 1996, an increase
of $20.5 million from December 31, 1995. The change was primarily impacted by
an increase in receivables and inventories, including those generated by
Pro-Tech and Fordigraph since date of acquisition.
Net cash flows used in investing activities amounted to $40.1 million
through the third quarter of 1996. Capital expenditures for the third quarter
and first nine months of 1996 were $7.7 million and $22.6 million,
respectively, compared to $3.2 million and $10.3 million, respectively, for the
same periods in 1995. Major projects in 1996 include: a) development of a new
business information system; and b) continued investment in the film products
division, including construction of a new plant in Maryland and additional
capacity in Europe. The Company paid $18.9 million in cash through the third
quarter of 1996 for the acquisitions of Pro-Tech and Fordigraph. Capital
expenditures and acquisitions were funded through use of the Company's credit
agreements and short-term borrowings, while working capital requirements were
funded through operations.
The Company had access to $63.0 million in short term credit lines as of
September 30, 1996 and $30.6 million in outstanding borrowings against these
lines. During the third quarter, the Company also had access to a $140.0
million credit agreement to fund both working capital and acquisition
requirements. As of September 30, 1996 the Company had $60.7 million in
borrowings against this agreement classified as long-term borrowings on the
Company's balance sheet.
Cash dividends paid during the third quarter and first nine months of 1996
were $.110 and $.320 per share while dividends for the comparable periods in
1995 were $.105 and $.315 per share, respectively.
The Company believes that funds generated from operations combined with
existing credit facilities are more than sufficient to meet currently
anticipated capital and operating requirements.
<PAGE> 11
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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, 1996.
<PAGE> 12
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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 /s/ Edward J. McNulty
-----------------------
Edward J. McNulty
Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 8,245
<SECURITIES> 0
<RECEIVABLES> 102,449<F1>
<ALLOWANCES> 6,263
<INVENTORY> 99,055
<CURRENT-ASSETS> 227,126
<PP&E> 140,542
<DEPRECIATION> 71,554
<TOTAL-ASSETS> 370,698
<CURRENT-LIABILITIES> 109,847
<BONDS> 75,641
<COMMON> 2,262
0
0
<OTHER-SE> 165,380
<TOTAL-LIABILITY-AND-EQUITY> 370,698
<SALES> 394,680
<TOTAL-REVENUES> 394,680
<CGS> 233,334
<TOTAL-COSTS> 233,334
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,700
<INTEREST-EXPENSE> 4,389
<INCOME-PRETAX> 31,314
<INCOME-TAX> 12,839
<INCOME-CONTINUING> 18,475
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,475
<EPS-PRIMARY> 1.17
<EPS-DILUTED> 1.17
<FN>
<F1>(A) Notes and accounts receivable-trade are stated net of allowances for
doubtful accounts and sales returns.
</FN>
</TABLE>
