UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
( X ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
( ) 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 of Incorporation) (I.R.S. Employer Identification No.)
One GBC Plaza
Northbrook, Illinois 60062
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 272-3700
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
Common Stock, $.125 par value NASDAQ
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment
to this Form 10-K.____
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
---- ----
As of February 29, 1996, the aggregate market value of the Common Stock (based
upon the average bid and asked prices of these shares on the Over-The-Counter
Market - NASDAQ) of the company held by nonaffiliates was approximately
$123,719,000. (Estimated solely for the purpose of completing this cover page.)
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Outstanding at
Class February 29, 1996
----- ------------------
Common Stock, $.125 par value 13,339,895
Class B Common Stock, $.125 par value 2,398,275
Documents Incorporated by Reference Where Incorporated
----------------------------------- ------------------
Annual Report to Stockholders for the fiscal year
ended December 31, 1995 Parts II and IV
Definitive Proxy Statement for the Annual Meeting
of Stockholders to be held May 14, 1996 Parts III and IV
<PAGE>
<TABLE>
GENERAL BINDING CORPORATION AND SUBSIDIARIES
FORM 10-K - FISCAL YEAR ENDED DECEMBER 31, 1995
Contents and Cross Reference Sheet
Furnished Pursuant to General Instruction G(4) of Form 10-K
<CAPTION>
Annual Report
Form 10-K Form 10-K Form 10-K to Stockholders
Part No. Item No. Description Page No. Page No.<F1>
- --------- --------- ----------- --------- ---------------
<S> <C> <C> <C> <C>
I 1 Business 1
2 Properties 3
3 Legal Proceedings 3
4 Submission of Matters to a Vote of Security Holders 3
II 5 Market for Registrant's Common Equity and Related
Stockholder Matters 4 19
6 Selected Financial Data 4 12
7 Management's Discussion and Analysis of Financial Condition
and Results of Operations 4 13-16
8 Financial Statements and Supplementary Data 4 16-32
9 Disagreements on Accounting and Financial Disclosure 4
III 10 Directors and Executive Officers of the Registrant 5 <F2>
11 Executive Compensation 5 <F2>
12 Security Ownership of Certain Beneficial Owners and
Management 5 <F2>
13 Certain Relationships and Related Transactions 5 <F2>
IV 14 Exhibits, Financial Statement Schedules, and Reports on
Form 8-K 6
Signatures 7
- ----------
<FN>
<F1>References are to pages in the Registrant's Annual Report to Stockholders for the fiscal year ended December 31,
1995 which are incorporated herein by reference. See Part IV, Exhibit 13.
<F2>Incorporated by reference from the Registrant's definitive Proxy Statement for the Annual Meeting of Stockholders to
be held on May 14, 1996 to be filed within 120 days after the end of the Registrant's fiscal year.
</FN>
</TABLE>
i
<PAGE>
PART I
Item 1. Business
General Development and Description of Business and Segment Information
General Binding Corporation, incorporated in 1947, and its subsidiaries (herein
referred to as "GBC" or "Company") are engaged predominantly in one line of
business, namely the design, manufacture and distribution of a broad line of
business machines and related supplies. This broad line includes system
applications in the areas of binding, laminating, shredding, and security
identification. These products are manufactured in nineteen plants in the
United States and abroad. GBC products are sold through a network of direct
sales and telemarketing personnel, dealers, distributors and wholesale
stationers. The Company provides maintenance and repairs on the machines it
sells through a trained field service organization and through trained dealers.
The following table illustrates the ratio of revenue contribution of business
machines, supplies and service for the last three fiscal years:
1995 1994 1993
---- ---- ----
Business machines 24% 25% 24%
Related supplies and service<F3> 76% 75% 76%
<F3>Includes ring metal business
On December 21, 1995, the Company acquired Pro-Tech Engineering Co., Inc.,
headquartered in Madison, Wisconsin. Pro-Tech manufactures equipment and
distributes supplies used in the digital printing market. The consideration
paid for Pro-Tech was $7.3 million. Compensation will also be paid contingent
upon the achievement of specified levels of earnings through December 31, 1998.
On August 26, 1994, the Company completed its acquisition of the Sickinger
Company located in Auburn Hills, Michigan. Sickinger manufactures paper
punching machines as well as wire and plastic coil binding supplies. The
total consideration paid for the Sickinger Company was $4.9 million.
On July 29, 1993, the Company finalized the purchase of the business and certain
assets of Bates Manufacturing Company, located in Hackettstown, New Jersey.
Bates manufactures and distributes staplers, numbering systems, card files and
other office products through a large network of dealers and wholesalers. The
total consideration paid for the Bates Manufacturing Company was $5.0 million.
Additional information related to the Company's acquisitions is included in Note
13 to the Consolidated Financial Statements of the Company's 1995 Annual Report
to Stockholders.
Customers
The Company's machines and supplies are sold worldwide to users in the business,
education, graphic arts, health, recreation and government markets. With this
broad base of customers, GBC is not dependent upon any single customer for
a significant portion of its business.
Competition
Although there is active competition with respect to each GBC product, GBC is
not aware of any major company competing in all its products. The Company
believes that it has a leadership position for its binding and laminating
products and a strong market share for most of its other products. To maintain
its competitive position, GBC relies primarily on product quality, marketing
strength and customer service.
Backlog and Seasonal Variations
Backlog of orders is not considered a material factor in GBC's business, nor is
the business seasonal in any material respect.
1
<PAGE>
Materials
Materials and parts used in the manufacture of GBC's products are available from
a number of sources. In general, the Company has not experienced any shortages
in materials or parts. During 1994 a worldwide shortage of polyester developed
and continued through 1995. Polyester is used in the manufacture of
the Company's film products. Due to the volume of the Company's purchases of
polyester and its strong relationships with suppliers; the Company believes that
it will continue to be able to purchase adequate volumes of polyester to meet
demand.
Patents and Trademarks
Many of the equipment and supply products manufactured and/or sold by the
Company and certain application methods related to such products are covered by
United States and foreign patents. The Company's U.S. patent on the basic hot-
knife plastic VeloBind strip binding element expires in the year 2000 and the
proprietary nature of that product is important to the Company's ability to
effectively compete in its markets. Although the other patents owned by the
Company are also highly important to its business, the Company does not consider
its business dependent on any of those patents.
The Company has registered the GBC, VeloBind and Bates trademarks in the United
States and numerous foreign countries and considers those trademarks material to
its business. The Company has also registered numerous other trademarks related
to specific products in the United States and many foreign countries.
Environment
Although the Company has no known operations which have a significant impact
upon the environment, GBC continuously takes active steps to ensure that all of
its operations comply with local, state and federal regulations relating
to environmental protection and occupational safety hazards. These steps have
not had a material effect upon operating results or the Company's competitive
position.
Research and Development
Research and development expenditures amounted to approximately $6,218,000 in
1995, $5,069,000 in 1994, and $4,949,000 in 1993. All research is Company
funded.
Employees
As of December 31, 1995, GBC employed 3,197 people worldwide. Employee
relations are considered to be excellent.
Geographical Information
Financial information by geographical area is incorporated herein by reference
from pages 29-30 of the Registrant's Annual Report to Stockholders for the
fiscal year ended December 31, 1995, Note 11.
2
<PAGE>
Item 2. Properties
In addition to the manufacturing locations listed below, the Company operates
sales and service offices throughout the world, five regional warehouses in the
United States, and a 60,000 sq. ft. world headquarters building in
Northbrook, Illinois. Management believes that the Company's manufacturing
facilities are suitable and adequate for its operations and are maintained in a
good state of repair.
Major manufacturing is conducted at the following plant locations:
Approximate Area
in Thousand
Sq. Ft. Including
Location Office Space Ownership
-------- ----------------- ---------
Northbrook, Illinois...................... 190 GBC owned
Addison, Illinois......................... 91 GBC owned
Sparks, Nevada............................ 82 Leased
Basingstoke, England...................... 80 Leased
St. Louis, Missouri....................... 73 GBC owned
Lincolnshire, Illinois.................... 64 Leased
Nuevo Laredo, Mexico...................... 49 Leased
Phoenix, Arizona.......................... 40 GBC owned
Amelia, Virginia.......................... 39 GBC owned
Kerkrade, Holland......................... 37 GBC owned
Auburn Hills, Michigan.................... 35 Leased
Madison, Wisconsin........................ 26 Leased
San Jose, Costa Rica...................... 23 Leased
Tornaco, Italy............................ 22 GBC owned
Noda, Japan............................... 18 GBC owned
Don Mills, Ontario, Canada................ 13 Leased
Castle Hill, Australia.................... 12 GBC owned
Hoofddorp, Holland........................ 11 GBC owned
Mexico City, Mexico....................... 10 GBC owned
Item 3. Legal Proceedings
The Company is not a party to any material pending legal proceedings, and
neither the Company nor any of its officers or directors are aware of any
material contemplated proceeding.
Item 4. Submission of Matters to a Vote of Security Holders During the Fourth
Quarter of 1995
None.
3
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Incorporated herein by reference from page 19 of the Registrant's Annual Report
to Stockholders for the year ended December 31, 1995, section entitled "Market
for Registrant's Common Stock and Related Stockholder Matters" and Note 12 from
page 31 of the notes to consolidated financial statements entitled "Quarterly
Financial Data".
Item 6. Selected Financial Data
Incorporated herein by reference from page 12 of the Registrant's Annual Report
to Stockholders for the fiscal year ended December 31, 1995, section entitled
"Ten Year Summary - Financial Highlights".
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Incorporated herein by reference from pages 13 through 16 of the Registrant's
Annual Report to Stockholders for the fiscal year ended December 31, 1995,
section entitled "Management's Discussion and Analysis of Financial Condition
and Results of Operations".
Item 8. Financial Statements and Supplementary Data
Incorporated herein by reference from pages 16 through 32 of the Registrant's
Annual Report to Stockholders for the fiscal year ended December 31, 1995.
Item 9. Disagreements on Accounting and Financial Disclosure
None.
4
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
Information required under this Item is contained in the Registrant's 1996
Definitive Proxy Statement, which is incorporated herein by reference.
Item 11. Executive Compensation
Information required under this Item is contained in the Registrant's 1996
Definitive Proxy Statement, which is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information required under this Item is contained in the Registrant's 1996
Definitive Proxy Statement, which is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Information required under this Item is contained in the Registrant's 1996
Definitive Proxy Statement, which is incorporated herein by reference.
5
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K
(a) List of Documents Filed as part of this Report
The following consolidated statements, schedule and exhibits of General Binding
Corporation and its subsidiaries are filed as part of this report:
<TABLE>
(1) Financial Statements
<CAPTION>
Location
--------
<S> <C>
Report of Independent Public Accountants Annual Report Page 32<F4>
Consolidated balance sheets - December 31, 1995
and 1994 Annual Report Page 17<F4>
Consolidated statements of income for the years ended
December 31, 1995, 1994 and 1993 Annual Report Page 16<F4>
Consolidated statements of stockholders' equity for the
years ended December 31, 1995, 1994 and 1993 Annual Report Page 19<F4>
Consolidated statements of cash flows for the years ended
December 31, 1995, 1994 and 1993 Annual Report Page 18<F4>
Notes to consolidated financial statements Annual Report Pages 19-32<F4>
<FN>
<F4>These consolidated Financial Statements, related Notes, and Report of Independent Public Accountants, appearing in the
Registrant's Annual Report to Stockholders for the fiscal year ended December 31, 1995, pages 16-32, which are filed as
Exhibit 13 to the Form 10-K, are incorporated by reference.
</FN>
(2) Financial statement schedule
<CAPTION>
Page Number
-----------
<S> <C>
Report of Independent Public Accountants on Schedule 9
II. Valuation and Qualifying Accounts 10
All other financial statements and schedules not listed have been omitted because they are not applicable, not required,
or because the required information is included in the consolidated financial statements or notes thereto.
<CAPTION>
(3) Exhibits (numbered in accordance with Item 601 of Regulation S-K)
<S> <C>
No. 3: Certificate of Incorporation, as amended May 11, 1988. Incorporated by reference
to Exhibit 3 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1993.
No. 4: Consent agreement to provide the Commission upon written request a copy of the
Registrant's long-term debt agreements.
No. 13: Annual Report to Stockholders for the fiscal year ended December 31, 1995
(Pages 12 through 32).
No. 21: Subsidiaries of the Registrant.
No. 22: Definitive proxy statement to be filed with the Securities and Exchange
Commission on or about April 8, 1996.
No. 27: Financial Data Schedule.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant during the last quarter of the fiscal year ended December 31, 1995.
</TABLE>
6
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By: /s/ GOVI C. REDDY
--------------------------------------
Govi C. Reddy
President and Chief
Executive Officer
By: /s/ EDWARD J. MCNULTY
--------------------------------------
Edward J. McNulty
Vice President and Chief
Financial Officer
Dated: March 25, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
/s/ WILLIAM N. LANE III Chairman of the Board March 25, 1996
- ------------------------------- and Director
William N. Lane III
/s/ GOVI C. REDDY President, Chief Executive March 25, 1996
- ------------------------------- Officer and Director
Govi C. Reddy
/s/ ARTHUR C. NIELSEN, JR. Director March 25, 1996
- -------------------------------
Arthur C. Nielsen, Jr.
/s/ THOMAS V. KALEBIC Director March 25, 1996
- -------------------------------
Thomas V. Kalebic
/s/ WARREN R. ROTHWELL Director March 25, 1996
- -------------------------------
Warren R. Rothwell
7
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports in this Form 10-K, into the Company's previously filed Registration
Statement File No. 2-70047. It should be noted that we have not audited any
financial statements of the Company subsequent to December 31, 1995 or performed
any audit procedures subsequent to the date of our report.
Arthur Andersen LLP
Chicago, Illinois,
March 25, 1996.
8
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
We have audited in accordance with generally accepted auditing standards, the
financial statements included in General Binding Corporation's Annual Report to
Stockholders incorporated by reference in this Form 10-K, and have issued our
report thereon dated January 31, 1996. Our audits were made for the purpose of
forming an opinion on those statements taken as a whole. Schedule II is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. This schedule has been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
Arthur Andersen LLP
Chicago, Illinois,
January 31, 1996.
9
<PAGE>
GENERAL BINDING CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Allowances for Doubtful Accounts and Sales Returns
Changes in the allowances for doubtful accounts and sales returns were as
follows (000 omitted):
1995 1994 1993
---- ---- ----
Balance at beginning of year ................ $ 4,840 $ 4,821 $ 4,504
Additions charged to expense ................ 1,729 1,804 1,478
Deductions - write offs .................... (1,203) (1,643) (1,068)
Other <F5> .................................. (180) (142) (93)
------- ------- -------
Balance at end of year ...................... $ 5,186 $ 4,840 $ 4,821
------- ------- -------
<F5>Amounts primarily relate to the effects of foreign currency exchange rate
changes and the acquisition of Sickinger in 1994.
10
<PAGE>
GENERAL BINDING CORPORATION AND SUBSIDIARIES
INDEX TO EXHIBITS
Exhibit No. and
Applicable Section
of Item 601 of
Regulation S-K
- ------------------
3 Certificate of Incorporation, as amended May 11, 1988,
filed as Exhibit 3 to the Company's 1993 Annual Report
on Form 10-K, and incorporated herein by reference.
4 Consent agreement to provide the Commission upon
written request a copy of the Registrant's
long-term debt agreements included herein.
13 Annual Report to Stockholders for the fiscal year ended
December 31, 1995 (Pages 12 through 32) included herein.
21 Subsidiaries of the Registrant included herein.
22 Definitive proxy statement to be filed with the
Securities and Exchange Commission on or about
April 8, 1996, and incorporated herein by
reference.
27 Financial Data Schedule included herein.
<PAGE>
March 25, 1996 Exhibit 4
VIA EDGAR
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-1004
Re: General Binding Corporation
Commission File No. 0-2604
Form 10-K for the fiscal year ended December 31, 1995
Item No. 14(a)(3)
Ladies and Gentlemen:
This letter is to advise you that General Binding Corporation
hereby consents to provide you, upon written request, copies of
its long-term loan agreements which contain certain restrictive
covenants and define the rights of security holders. Copies of
any such loan agreement will be supplied to you within 10 days
upon receipt of request.
Sincerely,
GENERAL BINDING CORPORATION
Edward J. McNulty
Edward J. McNulty
Vice President and
Chief Financial Officer
EJM:rf
<PAGE>
<TABLE>
Exhibit 13
Ten Year Summary Financial Highlights
General Binding Corporation and Subsidiaries
(000 omitted except per share and ratio data)
<CAPTION>
1995 1994 1993 1992<F1> 1991<F1> 1990<F1> 1989 1988 1987 1986
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales from
Continuing Operations
Domestic $293,188 $274,319 $246,790 $235,927 $188,930 $188,198 $178,266 $156,061 $139,249 $124,725
International 165,203 146,130 129,348 132,716 122,269 115,472 105,425 94,565 72,756 56,660
Total 458,391 420,449 376,138 368,643 311,199 303,670 283,691 250,626 212,005 181,385
- -------------------------------------------------------------------------------------------------------------------------
Income from
Continuing Operations 21,500 15,703 14,994 16,380 12,599 13,655 20,105 14,856 9,599 5,001
- -------------------------------------------------------------------------------------------------------------------------
Discontinued Operations --- --- --- --- --- --- --- --- 1,274 1,029
- -------------------------------------------------------------------------------------------------------------------------
Cumulative Effect
of Change In Accounting
for Income Taxes --- --- --- --- --- (1,134) --- --- --- ---
Net Income 21,500 15,703 14,994 16,380 12,599 12,521 20,105 14,856 10,873 6,030
- -------------------------------------------------------------------------------------------------------------------------
Income per
Common Share-
Continuing Operations<F2> 1.37 1.00 .95 1.04 .80 .86 1.26 .92 .60 .31
- -------------------------------------------------------------------------------------------------------------------------
Cash Dividends per Share
of Common Stock<F2> .420 .405 .400 .370 .330 .290 .274 .186 .130 .119
- -------------------------------------------------------------------------------------------------------------------------
Depreciation and
Amortization 12,814 12,081 10,747 10,775 8,239 7,439 6,131 5,878 5,480 5,034
- -------------------------------------------------------------------------------------------------------------------------
Capital Expenditures 15,046 12,788 10,595 9,795 13,076 7,678 6,289 7,174 5,519 6,682
- -------------------------------------------------------------------------------------------------------------------------
Current Assets 180,648 171,154 145,351 141,234 139,550 134,575 120,366 117,980 102,769 90,605
- -------------------------------------------------------------------------------------------------------------------------
Current Liabilities 83,828 84,604 64,760 67,045 71,708 63,149 54,021 56,474 49,330 39,610
- -------------------------------------------------------------------------------------------------------------------------
Working Capital 96,820 86,550 80,591 74,189 67,842 71,426 66,345 61,506 53,439 50,995
Current Ratio 2.2 2.0 2.2 2.1 1.9 2.1 2.2 2.1 2.1 2.3
- -------------------------------------------------------------------------------------------------------------------------
Total Assets 298,872 284,278 251,109 241,807 240,688 190,891 173,437 161,227 144,369 133,280
- -------------------------------------------------------------------------------------------------------------------------
Long-Term Obligations 43,890 42,020 38,564 32,966 35,574 2,794 5,142 5,182 5,127 17,029
- -------------------------------------------------------------------------------------------------------------------------
Stockholders' Equity 154,141 141,089 133,531 126,130 117,913 112,486 104,534 92,163 83,613 71,516
Per Share of
Common Stock<F2> 9.80 8.96 8.47 7.99 7.46 7.09 6.56 5.77 5.19 4.45
- -------------------------------------------------------------------------------------------------------------------------
<FN>
<F1>The Company adopted SFAS No. 109, "Accounting for Income Taxes," in 1993 by restating financial statements beginning
in 1990.
<F2>All per share data for 1986 through 1988 is restated for the 1989 three-for-two stock split.
</FN>
</TABLE>
<PAGE>
Financial Review
Management's Discussion and Analysis of Financial
Condition and Results of Operations
General Binding Corporation and Subsidiaries
Results of Operations
Sales
The Company's 1995 sales exceeded the $450 million mark for the first time,
reaching a new record of $458 million. Sales increased $38 million or 9% over
1994 compared to an increase of $44 million or 12% over 1993. With the exception
of Mexico (where sales declined solely as a result of the devaluation of the
peso) and the Company's ringmetals business, sales continued to grow in 1995.
The most significant factors contributing to the growth of sales were increases
in the Company's worldwide: a) film products division; b) office products/dealer
business; and c) its direct branch/telemarketing operations.
Significant improvement in the following product lines helped to achieve the
1995 record sales level: a) shredder products; b) laminating film and pouch
products; c) commercial laminating equipment; d) graphics products; and e) the
Sickinger product lines.
Sales in 1994 compared to 1993 showed increases in all major channels of
distribution with the exception of the ringmetals business which experienced
relatively flat sales. The most significant factors contributing to the growth
were increases in the Company's: a) worldwide film products division; b)
domestic office products division; and c) international subsidiaries'
distributor/dealer operations. Additionally, another factor contributing to the
increase was higher sales in the domestic direct/telemarketing operation which
partially resulted from increased market penetration in the graphic products
business coupled with sales of a new high capacity punch product, the AP-1.
The August 1994 acquisition of the Sickinger Company had an immaterial impact
on the Company's 1994 sales.
Gross Margins, Costs and Expenses
Gross profit margins decreased 1 percentage point from 1994 to 1995 and 1
percentage point from 1993 to 1994. During 1995, the erosion in margins affected
nearly all of the Company's operations and was primarily attributed to: a)
worldwide competitive pricing pressures; b) operating inefficiencies and excess
plant capacity at the Sparks, Nevada manufacturing facility; c) higher
provisions for excess and obsolete inventory; d) substantial increases in raw
material prices, particularly for film products; e) a mix change towards lower
margin businesses; and f) higher outlays for research and development. In 1994,
an erosion in margins experienced by the Company's international and domestic
core operations was partially offset by an improvement in margins in the
ringmetals business. Worldwide competitive pressures, increases in certain raw
material costs, and a mix change towards the Company's growth in lower margin
film, dealer businesses, and graphics products had a negative effect on margins
in 1994.
<PAGE>
Selling, service, and administrative expenses increased 4% in 1995 and 7% in
1994. Without the impact of acquisitions, 1995 expenses increased 3%, while 1994
expenses increased approximately 5%. These expenses as a percentage of total
sales have declined over the past two years and were 33.5% and 35.1%,
respectively, in 1995 and 1994. The increase in expenses in 1995 primarily
resulted from: a) increased sales volume; b) the addition of the Sickinger
Company for all of 1995; c) increased expenditures for the European Distribution
Center; and d) studies to evaluate the restructuring of the Company's European
distribution and information systems functions. These increases were partially
offset by lower expenses in the Company's Mexican operations as a result of the
devaluation of the peso, and efficiencies achieved in the domestic direct
branch/telemarketing operations. The 1994 increase primarily resulted from
increased sales in the Company's worldwide operations. Additional expenses were
incurred to consolidate several of the Company's distribution operations,
increase its marketing and advertising expenditures, and expand its support for
its export businesses.
A pre-tax restructuring charge of $4.0 million was recorded in 1994. See Note 14
to the Consolidated Financial Statements for additional information.
Interest expense increased by 13% in 1995 over 1994 compared to a 5% increase in
1994 over 1993. The primary reason for the 1995 increase was higher average
interest rates, as the Company's average debt level decreased slightly in 1995.
The primary reason for the 1994 increase was higher average debt levels. The
higher debt levels resulted primarily from significantly higher inventory and
receivable levels along with the financing of the Sickinger and Bates
acquisitions. This increase was partially offset by the expiration of several of
the Company's interest rate swaps in the fourth quarter of 1993 and lower debt
levels in the Company's Mexican subsidiary.
Other income and expense netted to $903,000, $1,842,000, and $1,210,000 of
expense in 1995, 1994, and 1993, respectively. The most significant factors
affecting the favorable change in 1995 were a gain on the sale of the Company's
manufacturing facility in Germany and a gain on the sale of stock received when
an insurance company in which GBC holds policies converted from a mutual company
to a stock company. The most significant factors affecting the unfavorable
change in 1994 were higher currency losses primarily resulting from the
devaluation of the Mexican peso and losses on sales of fixed assets.
Income Taxes
The Company's effective tax rate increased to 40.0% from 38.9% in 1994. The 1995
rate increased primarily as a result of a reduction in the tax benefit received
from a tax allocation agreement between the Company and Lane Industries, Inc..
Numerous other items enter into the development of the Company's effective tax
rate. Additional information is included in Note 10 to the Consolidated
Financial Statements.
<PAGE>
Net Income
The Company's net income per share increased 37% to $1.37 compared to 1994 net
income per share of $1.00. Excluding the impact of the $2.5 million or $.16 per
share after-tax restructuring charge in 1994, the Company's net income per share
increased 18% or $.21 per share. Despite a decline in gross margins, as
discussed above, net income improved on the strength of increased sales (up 9%)
and a lower growth in selling, general and administrative expense (up 4%). The
Company experienced improved profitability in all major channels of
distribution with the exception of the ringmetals and the Mexican operations.
The Company's net income per share increased $.05 to $1.00 in 1994. This
increase was primarily attributed to continued growth in the worldwide film
products operations and international and domestic core businesses along with
improved performance in the Company's ringmetals division. This increase was
partially offset by an after-tax restructuring charge of $2,504,000 or $.16 per
share. Additional information is included in Note 14 to the Consolidated
Financial Statements.
Other Events
During December 1994 the Mexican peso was devalued. The value of the Mexican
peso compared to the U.S. dollar continued to weaken throughout 1995. The effect
of the devaluation on the Company's results of operations for 1995 was
approximately $.06 per share, however, the impact on 1994 was not material.
Without the impact of the devaluation in 1995, the Company's Mexican operations
sales and operating income would have been flat compared to 1994. The assets
and liabilities of the Company's Mexican operations were translated into U.S.
dollars in 1995 and 1994 resulting in unfavorable adjustments of $1,793,000
and $2,053,000, respectively. In accordance with SFAS No. 52, "Foreign Currency
Translation," this adjustment is reflected in the Company's equity section of
the balance sheet.
Liquidity and Capital Resources
Cash provided by operating activities increased to $26.9 million in 1995
compared with $5.2 million in 1994 and $15.0 million in 1993. The increase in
cash flow in 1995 was primarily due to increased operating earnings and smaller
increases in inventory and accounts receivable. Cash provided by operating
activities decreased to $5.2 million in 1994 compared with $15.0 million in
1993. The decline in cash flow in 1994 was primarily due to an increase in
inventory and accounts receivable levels.
Capital expenditures were $15.0 million in 1995 compared to $12.8 million in
1994, and $10.6 million in 1993. Major projects in 1995 included the first phase
of the implementation of a new company-wide business enterprise information
system and the continued investment in the film products division. 1995 capital
expenditures on the new information system totaled $7.2 million. Also, an
additional $1.9 million was expended by the film products division. Major
projects in 1994 included the completion of a European production facility for
the film products division and the construction of a ringmetals manufacturing
operation in Costa Rica. Capital expenditures for 1993 included the expansion of
the plant and production capacity of the Company's graphic operations, the
expansion of the film products division into Europe, tooling for new products,
and the renovation and remodeling of the Company's research and development
facility in Northbrook.
<PAGE>
Cash dividends paid in 1995 increased to $.42 per share compared to $.405 per
share in 1994 and $.40 per share in 1993.
The Company had access to $50.7 million in short term credit lines and as of
December 31, 1995 had $17.4 million in outstanding borrowings against these
lines.
During 1995, the Company also had access to a $140.0 million credit agreement to
fund both working capital and acquisition requirements. At the end of 1995, the
Company had $36.0 million in borrowings against this agreement classified as
long-term borrowings on the Company's balance sheet. Additional information is
included in Note 6 to the Consolidated Financial Statements.
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.
Acquisitions
In December of 1995, the Company acquired Pro-Tech Engineering Inc., a leading
manufacturer and distributor of equipment and supplies to the rapidly growing
digital graphics market. Pro-Tech had approximately $11 million in sales during
fiscal 1995. In January 1996, GBC completed the acquisition of the T.A.C. Group,
a leading distributor of office products in Australia. This company, which
operates under the name Fordigraph, is a market leader in the sale of paper
shredders, mail room equipment, laminating machines and supplies, presentation
products, and binding systems. Fordigraph had sales of approximately U.S. $22
million in fiscal 1995. On August 26, 1994, the Company completed the purchase
of the Sickinger Company. Sickinger manufactures paper punching machines as
well as wire and plastic coil binding supplies.
Prospective Accounting Standard
In March 1995, the Financial Accounting Standards Board issued Statement No. 121
(the "Statement") on accounting for the impairment of long-lived assets, certain
identifiable intangibles, and goodwill related to assets to be held and used.
The Statement also establishes accounting standards for long-lived assets and
certain identifiable intangibles to be disposed of. The Company is required to
adopt the Statement no later than January 1, 1996, although earlier
implementation is permitted. The Statement is required to be applied
prospectively for assets to be held and used. The initial application of the
Statement to assets held for disposal is required to be reported as the
cumulative effect of a change in accounting principle.
The Company plans to adopt the Statement as of January 1, 1996. At this time,
the Company cannot reasonably estimate the impact the adoption of this standard
will have on its financial statements.
<PAGE>
Consolidated Statements of Income
(000 omitted except per share data)
<TABLE>
<CAPTION>
Year Ended December 31 1995 1994 1993
<S> <C> <C> <C>
Sales:
Domestic $293,188 $274,319 $246,790
International 165,203 146,130 129,348
- -------------------------------------------------------------------------------------------------------------------------
Total sales 458,391 420,449 376,138
- -------------------------------------------------------------------------------------------------------------------------
Costs and Expenses:
Cost of sales, including development and engineering 263,706 237,492 209,340
Selling, service and administrative 153,690 147,639 137,674
Restructuring -- 4,000 --
Interest 4,259 3,776 3,609
Other expense, net 903 1,842 1,210
- -------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 422,558 394,749 351,833
- -------------------------------------------------------------------------------------------------------------------------
Income Before Taxes 35,833 25,700 24,305
- -------------------------------------------------------------------------------------------------------------------------
Income Taxes 14,333 9,997 9,311
- -------------------------------------------------------------------------------------------------------------------------
Net Income $ 21,500 $ 15,703 $ 14,994
-------- -------- --------
Net Income Per Common Share $ 1.37 $ 1.00 $ .95
-------- -------- --------
Dividends Per Common Share $ .42 $ .405 $ .40
-------- -------- --------
Average Number of Common Shares Outstanding 15,740 15,763 15,777
-------- -------- --------
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
Consolidated Balance Sheets
General Binding Corporation and Subsidiaries
(000 omitted except share data)
<CAPTION>
December 31 1995 1994
<S> <C> <C>
Assets
- -------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $ 6,864 $ 5,569
Receivables, less allowances for doubtful
accounts and sales returns: 1995 - $5,186, 1994 - $4,840 79,942 74,413
Inventories, at lower of cost or market 79,605 76,010
Deferred tax assets 10,412 8,807
Other 3,825 6,355
- -------------------------------------------------------------------------------------------------------------------------
Total current assets 180,648 171,154
- -------------------------------------------------------------------------------------------------------------------------
Plant and Equipment, at cost:
Land and land improvements 5,025 4,920
Buildings and leasehold improvements 26,316 28,893
Machinery and equipment 95,330 95,986
Assets under capital leases -- 826
- -------------------------------------------------------------------------------------------------------------------------
126,671 130,625
Less-Accumulated depreciation and amortization (65,210) (65,095)
- -------------------------------------------------------------------------------------------------------------------------
Net plant and equipment 61,461 65,530
-------- --------
Other Assets:
Cost in excess of fair value of assets
of acquired companies, net of amortization 31,363 31,099
Other 25,400 16,495
- -------------------------------------------------------------------------------------------------------------------------
Total other assets 56,763 47,594
- -------------------------------------------------------------------------------------------------------------------------
Total Assets $298,872 $284,278
-------- --------
- -------------------------------------------------------------------------------------------------------------------------
<PAGE>
<S> <C> <C>
Liabilities and Stockholders' Equity
- -------------------------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable $ 17,428 $ 23,814
Current maturities of long-term obligations 505 674
Accounts payable 23,600 20,647
Accrued liabilities-
Salaries, wages and profit sharing contributions 11,293 9,939
Taxes, other than income taxes 2,761 2,839
Deferred income on maintenance agreements 8,556 8,426
Other 19,685 18,265
- -------------------------------------------------------------------------------------------------------------------------
Total current liabilities 83,828 84,604
- -------------------------------------------------------------------------------------------------------------------------
Long-Term Debt, less current maturities 43,890 42,020
-------- --------
Other Long-Term Liabilities 9,855 9,340
-------- --------
Deferred Tax Liabilities 7,158 7,225
-------- --------
Stockholders' Equity:
Common stock, $.125 par value, shares authorized 20,000,000;
shares issued 15,693,747 in 1995 and 1994 1,962 1,962
Class B common stock, $.125 par value; shares authorized
2,398,275; shares issued 2,398,275 in 1995 and 1994 300 300
Additional paid-in-capital 7,267 6,562
Cumulative translation adjustments (2,723) (1,204)
Retained earnings 168,219 153,330
- -------------------------------------------------------------------------------------------------------------------------
175,025 160,950
Less-Treasury stock - 2,357,910 shares in 1995
and 2,344,235 shares in 1994 (20,884) (19,861)
- -------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 154,141 141,089
-------- --------
Total Liabilities and Stockholders' Equity $298,872 $284,278
-------- --------
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
<PAGE>
Consolidated Statements of Cash Flows
General Binding Corporation and Subsidiaries
(000 omitted)
<TABLE>
<CAPTION>
Year Ended December 31 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $21,500 $15,703 $14,994
------- ------- -------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 12,814 12,081 10,747
Increase (decrease) in non-current deferred taxes 240 1,280 (1,902)
Provision for doubtful accounts 1,584 1,774 1,303
(Increase) in other long-term assets (4,209) (5,154) (2,733)
Other 878 1,483 871
Changes in current assets and liabilities:
(Increase) in receivables (8,074) (12,071) (8,600)
(Increase) in inventories (4,154) (8,870) (206)
Decrease (increase) in other current assets 2,501 (2,313) (259)
(Increase) decrease in deferred tax assets (1,681) (1,123) 436
Increase in accounts payable and accrued liabilities 5,585 2,732 1,955
(Decrease) in taxes on income -- (301) (1,588)
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 26,984 5,221 15,018
------- ------- -------
Cash Flows from Investing Activities:
Capital expenditures (15,046) (12,788) (10,595)
Payments on acquisitions (net of cash acquired) (1,458) (3,453) (4,985)
Proceeds from sale of plant and equipment 2,380 3,279 130
Government training subsidy from new plant investment 746 -- --
- -------------------------------------------------------------------------------------------------------------------------
Net cash (used in) investing activities (13,378) (12,962) (15,450)
------- ------- -------
Cash Flows from Financing Activities:
(Reduction) increase in notes payable (6,429) 13,651 (4,826)
Increase in long-term obligations 2,147 2,802 6,022
(Reduction) of long-term obligations (535) (901) (424)
(Reduction) increase in current portion of long-term obligations (196) 236 160
Dividends paid (6,611) (6,384) (6,312)
Purchases of treasury stock (1,141) (975) (507)
Proceeds from the exercise of stock options 624 438 113
- -------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities (12,141) 8,867 (5,774)
------- ------- -------
Effect of exchange rates on cash (170) (19) (101)
- -------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash & cash equivalents 1,295 1,107 (6,307)
Cash and cash equivalents at beginning of the year 5,569 4,462 10,769
------- ------- -------
Cash and cash equivalents at end of the year $ 6,864 $ 5,569 $ 4,462
------- ------- -------
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest $ 4,180 $ 3,667 $ 3,702
Income taxes, net of refunds 13,240 11,986 11,814
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
<PAGE>
Consolidated Statements of Stockholders' Equity
General Binding Corporation and Subsidiaries
(000 omitted, except number of shares and per share data)
<TABLE>
<CAPTION>
Additional Cumulative
Common Stock Treasury Stock Paid-In Translation Retained
Shares Amount Shares Amount Capital Adjustments Earnings Total
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992 18,092,022<F3> $2,262<F3> (2,310,301) $(18,505) $6,013 $ 1,031 $135,329 $126,130
1993 translation adjustment -- -- -- -- -- (930) -- (930)
Exercise of stock options -- -- 15,182 36 120 -- -- 156
Purchase of treasury stock -- -- (35,493) (507) -- -- -- (507)
Net income in 1993 -- -- -- -- -- -- 14,994 14,994
Dividends paid ($.40 per share) -- -- -- -- -- -- (6,312) (6,312)
- ----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993 18,092,022<F3> $2,262<F3> (2,330,612) $(18,976) $6,133 $ 101 $144,011 $133,531
1994 translation adjustment -- -- -- -- -- (1,305) -- (1,305)
Exercise of stock options -- -- 38,098 90 429 -- -- 519
Purchase of treasury stock -- -- (51,721) (975) -- -- -- (975)
Net income in 1994 -- -- -- -- -- -- 15,703 15,703
Dividends paid ($.405 per share) -- -- -- -- -- -- (6,384) (6,384)
- ----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 18,092,022<F3> $2,262<F3> (2,344,235) $(19,861) $6,562 $(1,204) $153,330 $141,089
1995 translation adjustment -- -- -- -- -- (1,519) -- (1,519)
Exercise of stock options -- -- 49,722 118 705 -- -- 823
Purchase of treasury stock -- -- (63,397) (1,141) -- -- -- (1,141)
Net income in 1995 -- -- -- -- -- -- 21,500 21,500
Dividends paid ($.42 per share) -- -- -- -- -- -- (6,611) (6,611)
- ----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 18,092,022<F3> $2,262<F3> (2,357,910) $(20,884) $7,267 $(2,723) $168,219 $154,141
---------- ------ ----------- --------- ------ -------- -------- --------
<FN>
<F3>Includes Class B Common Stock for the years ended December 31, 1992 through 1995--Shares 2,398,275, Amount $300,000.
</FN>
</TABLE>
<PAGE>
Market for Registrant's Common Stock and Related Stockholder Matters
Principal Market and Price Range
The following table shows the range of closing prices for the common stock in
the NASDAQ National Market System for the calendar quarters indicated below:
Prices 1995 1994
High Low High Low
---- --- ---- ---
First Quarter $20 $14 1/4 $16 1/4 $14 3/8
Second Quarter 19 1/4 16 18 3/8 14 3/4
Third Quarter 22 1/4 16 20 3/4 17
Fourth Quarter 23 19 1/4 22 18
Dividends
The following table shows the dividends paid per share during the calendar
quarters indicated below:
Dividends Paid 1995 1994
---- ----
First Quarter $ .105 $ .10
Second Quarter .105 .10
Third Quarter .105 .10
Fourth Quarter .105 .105
------ ------
Total $ .420 $ .405
Cash dividends have been paid each quarter commencing with the fourth quarter
of 1975. The future payment of dividends and any increases therein are within
the discretion of the Company's Board of Directors and will depend, among other
factors, on working capital requirements, capital expenditures and earnings
growth of the Company. On March 21, 1996, the Company paid a quarterly dividend
of $.105 per share.
Approximate Number of Equity Security Holders
Number of Record Holders
Title of Class as of February 29, 1996
- -------------- ------------------------
Common Stock, $.125 par value 709<F4>
Class B Common Stock, $.125 par value 1
<F4>Per latest report of Transfer Agent. Each security dealer holding shares in
a street name for one or more individuals is counted as only one record holder.
<PAGE>
Notes to Consolidated Financial Statements
General Binding Corporation and Subsidiaries
(1) Summary of Significant Accounting Policies
(A) Consolidation
The consolidated financial statements include the accounts of the Company and
its domestic and international subsidiaries. All of these international
subsidiaries have November 30 fiscal year-ends except for Canada and Mexico.
Intercompany accounts and transactions have been eliminated in consolidation.
Investments in significant companies which are 20% to 50% owned are treated as
equity investments and the Company's share of earnings is included in income.
(B) Cash and Cash Equivalents
The Company considers temporary cash investments with an original maturity of
three months or less to be cash equivalents.
(C) Inventory Valuation
Inventories are valued at the lower of cost or market on a first-in, first-out
basis. Inventory costs include labor, material and factory overhead.
(D) Depreciation of Plant and Equipment
Depreciation of plant and equipment is computed using principally the straight-
line method over the following estimated lives:
Buildings 30-40 years
Machinery and equipment 3-20 years
Leasehold improvements Term of lease
The cost and accumulated depreciation of items sold or retired are removed from
the asset accounts and the resulting gain or loss is recognized in income.
(E) Goodwill and Other Intangible Assets
Goodwill and other intangibles are generally amortized using the straight-line
method over their estimated useful lives, not exceeding 40 years. Accumulated
amortization of goodwill amounted to $5,684,000 in 1995 and $4,788,000 in 1994.
(F) Compensated Absences
The Company follows the policy of accruing vacation pay for all employees.
(G) Income Taxes
Since 1986, the Company's policy for earnings from its international
subsidiaries has been to provide appropriate income taxes on the earnings
expected to be distributed to the Company. In 1995, 1994 and 1993, current
earnings of all international subsidiaries other than GBC Canada and Mexico
were considered remitted to the United States for the purpose of determining
income tax expense for the year. In addition, in 1988, the Company implemented
a balance sheet hedging strategy for its international operations and as a
result provided appropriate income taxes on approximately $4,449,000 of pre-1986
earnings of its international subsidiaries. Approximately $1,835,000 of these
earnings were remitted in the years 1988 through 1995, and the balance is
expected to be remitted in future years.
<PAGE>
As of December 31, 1995, the cumulative amount of undistributed earnings of
international subsidiaries upon which income taxes have not been provided was
approximately $14.7 million. In the opinion of management, this amount remains
indefinitely reinvested by the international subsidiaries.
(H) Net Income per Common Share
Net income per common share is based on the weighted average number of common
shares outstanding for each year. Assuming exercise of all outstanding stock
options, net income per common share would not be materially different from net
income per common share as reported.
(I) Stock Option Compensation
Stock option compensation cost applicable to the non-qualified restricted plans
is valued at the date of the grant and recorded as compensation expense as the
options become exercisable.
(J) Deferred Service Income
Income under maintenance agreements is deferred and recognized over the term
(primarily 1 to 2 years) of the agreements on a straight-line basis.
(K) Prospective Accounting Standard
In March 1995, the Financial Accounting Standards Board issued Statement No.
121 (the "Statement") on accounting for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to assets to be held and
used. The Statement also establishes accounting standards for long-lived assets
and certain identifiable intangibles to be disposed of. The Company is required
to adopt the Statement no later than January 1, 1996, although earlier
implementation is permitted. The Statement is required to be applied
prospectively for assets to be held and used. The initial application of the
Statement to assets held for disposal is required to be reported as the
cumulative effect of a change in accounting principle.
The Company plans to adopt the Statement on January 1, 1996. At this time,
the Company cannot reasonably estimate the impact the adoption of this
standard will have on its financial statements.
(L) Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles required the use of certain estimates by management in
determining the entity's assets, liabilities, revenue and expenses. Actual
results could differ from those estimates.
<PAGE>
(2) Foreign Currency Exchange and Translation
Foreign currency translation adjustments have been excluded from the
Consolidated Statements of Income and are recorded in a cumulative translation
adjustment account as a separate component of stockholders' equity. The
accompanying Consolidated Statements of Income include net gains and losses on
foreign currency transactions. Such amounts are reported as other income/expense
and are summarized as follows (000 omitted):
Foreign Currency
Year Ended Transaction
December 31 Gain/(Loss)<F5>
----------------
1995 $(612)
1994 $(329)
1993 $(155)
----------------
<F5>Foreign currency transaction gains/losses are subject to income taxes at
the respective country's effective tax rate.
(3) Inventories
Inventories are summarized as follows (000 omitted):
Finished Work in Raw
December 31 Total Goods Process Materials
- ----------- ------- --------- ------- ---------
1995 $79,605 $53,990 $5,473 $20,142
1994 $76,010 $49,090 $6,092 $20,828
------- ------- ------- -------
(4) Profit Sharing and Pension Plans
Substantially all full-time domestic employees (excluding U.S. RingBinder union
employees, Sickinger employees and Pro-Tech employees) are eligible to
participate in a defined contribution profit sharing plan. The Company is
required to make annual contributions, as defined, to a trust fund for employees
participating in the plan. The Company may make additional contributions for any
year and has done so annually, except in 1968, since establishment of the plan.
Contributions charged to expense were $2,147,000 in 1995, $2,092,000 in 1994,
and $2,122,000 in 1993. Employee participation in the plan is optional.
Participating employees must contribute 2%, but cannot contribute more than 12%
of total compensation. As of January 1, 1996, the defined contribution profit
sharing plan was converted to a 401(K) plan.
The Company also has one separate active domestic defined benefit pension plan
(U.S. RingBinder Company Pension Plan for Union Member Employees) and two frozen
domestic defined benefit pension plans (The Guaranteed Retirement Income Plan
and the U.S. RingBinder Corporation Defined Benefit Pension Plan). The active
defined benefit plan covers substantially all U.S. RingBinder union member
employees. The plan provides benefits that are based on the employee's years of
credited service. The Company's funding policy towards all domestic plans is to
fund the plans annually in accordance with ERISA and Federal tax regulations.
All domestic plans utilize the entry age normal funding actuarial method to
calculate the annual normal cost. The plans' assets consist of cash and cash
equivalents, debt, equity and government securities.
<PAGE>
VeloBind was acquired by the Company on November 1, 1991. On this date, all of
VeloBind's full-time employees became eligible for the same profit sharing and
pension plans as the Company's domestic employees. Prior to acquisition,
VeloBind maintained a 401(K) Savings Incentive Plan. Upon acquisition, this plan
was frozen with all Company and employee contributions suspended. Distributions
from the Savings Incentive Plan are made upon retirement, death or disability,
termination of employment or exercise of the limited withdrawal rights provided
under the Savings Incentive Plan.
The Company's international subsidiaries have adopted a variety of defined
benefit and defined contribution plans. These plans provide benefits that are
based upon the employee's years of credited service. The benefits payable under
these plans, for the most part, are provided by the establishment of trust
funds or the purchase of insurance annuity contracts.
<TABLE>
Net periodic pension expense for the pension plans for the years 1995, 1994 and 1993
was as follows (000 omitted):
<CAPTION>
1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic pension plans $ 117 $ 199 $ 39
International subsidiary pension plans 1,194 1,247 786
- ----------------------------------------------------------------------------------------------------------------------
Total expense $1,311 $1,446 $ 825
----- ------ -----
The following rates were used in determining the actuarial present value of accumulated
plan benefits for the Company's pension plans:
<CAPTION>
1995 1994
Domestic International Domestic International
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Discount rate 8.0% 4.0%-15.0% 8.0% 4.0%-15.0%
Weighted average investment return rate 9.5% 4.5%-16.0% 9.5% 4.5%-16.0%
Salary increase rate 4.5%-5.0% 4.0%-12.0% 4.5%-5.0% 4.0%-12.0%
-------- ---------- -------- ----------
Net periodic pension expense/(income) for 1995, 1994 and 1993 includes the following
components (000 omitted):
<CAPTION>
1995 1994 1993
Domestic International Domestic International Domestic International
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost-
benefits earned during the period $237 $1,102 $167 $1,087 $128 $ 758
Interest cost on projected
benefit obligations 281 940 297 866 277 701
Actual return on assets (288) (1,173) (21) (509) (255) (1,505)
Net amortization and deferral (113) 325 (244) (197) (111) 832
----- ------- ----- ------- ----- -------
Net periodic pension expense $117 $1,194 $199 $1,247 $ 39 $ 786
----- ------- ----- ------- ----- -------
<PAGE>
The following table sets forth the plans' funded status at
December 31, 1995 and 1994 (000 omitted):
<CAPTION>
December 31, 1995 December 31, 1994
Projected Assets Exceed Projected Assets Exceed
Benefit Projected Benefit Projected
Obligations Benefit Obligations Benefit
Exceed Assets Obligations Exceed Assets Obligations
- --------------------------------------------------------------------------------------------------------------------------
Domestic International International Domestic International International
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits $3,457 $ 7,739 $1,495 $2,890 $ 7,412 $1,741
Non-vested benefits 64 233 266 54 111 144
------ ------- ------ ------ ------- ------
Accumulated benefit obligations 3,521 7,972 1,761 2,944 7,523 1,885
Effect of projected future compensation levels 866 3,778 672 467 3,984 714
------ ------- ------ ------ ------- ------
Projected benefit obligations 4,387 11,750 2,433 3,411 11,507 2,599
Plan assets at fair value 3,169 9,159 3,333 2,940 8,198 3,485
------ ------- ------ ------ ------- ------
Plan assets (less than) in excess of projected
benefit obligations (1,218) (2,591) 900 (471) (3,309) 886
Unrecognized net loss (gain) due to past
experience different from assumptions 1,612 2,157 (260) 1,137 3,361 (187)
Unrecognized prior service cost 141 421 -- 64 463 25
Adjustment to recognize minimum liability (357) (368) -- (724) (196) --
Unrecognized net (asset) obligation
at October 1, 1986 to be amortized over
average remaining service of participants (251) (959) 66 (267) (1,103) 13
------ ------- ------ ------ ------- ------
(Accrued) prepaid pension cost $ (73) $(1,340) $ 706 $ (261) $ (784) $ 737
------ ------- ------ ------ ------- ------
</TABLE>
<PAGE>
(5) Postretirement Benefits other than Pensions
The Company currently provides certain health care benefits for eligible
domestic retired employees. Employees may become eligible for those benefits
if they have fulfilled specific age and service requirements.
In 1993, the Company adopted the Statement of Financial Accounting Standards
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions." This statement requires companies to accrue the cost of
postretirement benefits during the service lives of employees. The Company
elected to amortize over a twenty year period the accumulated liability,
measured as of December 31, 1992, of $1,905,000. The accumulated liability was
subsequently increased by $757,000 in 1995 and will be amortized over the
remaining 17 years. Prior to adopting this standard, the Company recognized
these costs as the benefits were paid.
Net periodic postretirement benefit expense consisted of the following
components (000 omitted):
1995 1994 1993
---- ---- ----
Service cost $123 $194 $173
Interest cost 158 163 152
Net amortization of initial
transition obligation 95 95 95
---- ---- ----
Net periodic postretirement
benefit costs $376 $452 $420
---- ---- ----
The projected liabilities which are not funded are as follows (000 omitted):
1995 1994
---- ----
Accumulated postretirement
benefit obligations:
Retired participants
and beneficiaries $2,074 $1,094
Active participants eligible
for retirement 371 270
Other active participants 1,175 805
------ ------
Total benefit obligation 3,620 2,169
Experience (loss) gain (665) 26
Unrecognized transition
obligation (2,376) (1,714)
------ ------
Accrued postretirement
benefit cost $ 579 $ 481
------ ------
The following assumptions used in determining the expense and obligation
are listed below:
1995 1994
---- ----
Discount rate 8% 8%
Health care cost increase 9% 10%
The rate of increase in the per capita cost of covered health benefits
was assumed to be 9% in 1995, decreasing gradually to 6% by the year 2000
and remaining at that level thereafter.
<PAGE>
The effect of a 1% increase in the medical trend assumption would increase the
accumulated postretirement benefit obligation as of December 31, 1995 by
$236,000 and increase the net periodic cost by $47,000.
The Company monitors the cost of the plan, and has, from time to time, changed
the benefits provided under this plan. The Company reserves the right to make
additional changes or terminate these benefits in the future. Any changes in
the plan or revisions of the assumptions affecting expected future benefits
may have a significant effect on the amount of the obligation and annual
expense.
(6) Debt and Credit Arrangements
Information regarding short-term debt for the three years ended December 31,
1995, 1994, and 1993, is as follows (000 omitted):
<TABLE>
<CAPTION>
Maximum Weighted
Weighted month-end Average average
average balance amount interest
Balance interest outstanding outstanding rate
at end rate at end during during during
of year of year the year the year the year
<F6> <F7> <F8> <F9> <F10>
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995
Notes payable to banks $17,428 7.8% $19,012 $17,045 8.5%
1994
Notes payable to banks 23,814 6.4% 34,143 22,875 6.4%
1993
Notes payable to banks 9,625 9.2% 14,282 12,176 9.8%
<FN>
<F6>Notes payable by the Company's foreign subsidiaries were $9,588,000 in 1995, $9,443,000 in 1994, and $9,625,000
in 1993.
<F7>The rate for 1994 and 1993 includes Mexican borrowings at a rate which is influenced by the rate of inflation in that
country. The weighted average interest rate for notes payable to banks, excluding such borrowings, for the years ended
December 31, 1994 and 1993 would be 6.3% and 8.2%, respectively. The weighted average interest rate is computed by
dividing the annualized interest expense for the short-term debt outstanding by the short-term debt outstanding at
December 31.
<F8>The composition of the Company's short-term debt will vary by category at any point in time during the year.
<F9>Average amount outstanding during the year is computed by dividing the total daily outstanding principal balances
by 365 days.
<F10>The weighted average interest rate during the year for notes payable to banks excluding Mexican borrowings, for
the years ended December 31, 1994 and 1993 would be 6.1% and 7.4%, respectively. The weighted average interest rate
during the year is computed by dividing the actual short-term interest expense by the average short-term debt
outstanding.
</FN>
</TABLE>
<PAGE>
Long-term debt consists of the following at December 31, 1995 and 1994
(000 omitted):
<TABLE>
<CAPTION>
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 December 31, 1995 and 5.7% at December 31, 1994) $36,000 $36,000
Note payable, due monthly November 1994 to October 2004
(interest rate--8.85% at December 31, 1995 and 1994) 3,137 3,237
Note payable, due June 2000
(interest rate--7.05% at December 31, 1995) 2,008 --
Industrial revenue bond, due annually from July 1994 to July 2008
(floating interest rate--5.0% at December 31, 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--5.20% at December 31, 1995 and 5.65% at December 31, 1994) 1,050 909
------ ------
44,395 42,496
Less--current maturities 505 476
------ ------
Total long-term debt $43,890 $42,020
------ ------
</TABLE>
The Company has short-term lines of credit aggregating $50.7 million from
various banks worldwide, of which $35.7 million are with foreign banks or
foreign branches of banks. Interest rates on these lines of credit are primarily
at the prime rate or the lender's cost of funds plus margin. These arrangements
are reviewed annually for renewal.
During the first half of the year, the Company had access to a $62.5 million
revolving credit agreement to fund both working capital and acquisition
requirements. Interest was payable at varying rates provided for in these
agreements and the Company paid a commitment fee of 15/100 of one percent on the
total commitment amount of $62.5 million. This agreement was terminated July 25,
1995.
In July of 1995, the Company entered into a new revolving credit agreement with
a group of lenders under which the Company can borrow up to $140.0 million under
a bid option facility at any time until July 2000. Interest is payable at
varying rates provided for in the loan agreement. The Company agreed to pay an
annual facility fee of 1/10 of one percent on the total commitment amount of
$140.0 million.
The revolving credit agreement contains, among other things, certain restrictive
covenants. Under the most restrictive of the covenants, the Company and its
subsidiaries must maintain a funded debt ratio at not more than 0.55 to 1.0, an
interest coverage ratio of not less than 4.0 to 1.0, and a fixed charge
coverage ratio of not less than 1.5 to 1.0. The Company was in compliance
with these covenants at December 31, 1995.
<PAGE>
As of December 31, 1995, the Company had $36.0 million in borrowings against
this agreement classified as long-term borrowings on the Company's balance
sheet.
The scheduled maturities of long-term debt for each of the five years
subsequent to December 31, 1995, are as follows (000 omitted):
Year Ending December 31 Amount
-------
1996 $505
1997 505
1998 505
1999 505
2000 505
(7) Financial Instruments
Many of the Company's financial instruments (including cash and cash
equivalents, accounts and notes receivable, notes payable and other accrued
liabilities) carry short-term maturities. As such instruments have short-term
maturities, their fair values approximate the carrying values. Substantially
all of the Company's long-term obligations, including current maturities of
long-term obligations, have floating interest rates. The fair value of these
instruments also approximates the carrying values.
Interest Rate Swaps and Caps
The Company enters into interest rate swap and interest rate cap agreements to
hedge interest rate exposure on floating rate debt. At December 31, 1995, the
Company had outstanding five interest rate swaps with commercial banks
("counterparties"), having a total notional principal amount of $23 million
(no exchange of principal was involved) with various maturity dates through
September 1999.
Under these agreements, the Company is obligated at a weighted average interest
rate of 6.5% with payments due quarterly until maturity. The floating rate from
counterparties is based on the three month U.S. dollar LIBOR rate (5.656% at
December 31, 1995).
The Company accounts for its swaps by accruing the differential to be paid or
received as interest rates change over the life of the agreements.
At December 31, 1995, the fair value of the interest rate swaps was ($589,000)
and represented the amounts the Company would have had to pay to terminate the
agreements. At December 31, 1994, the fair value of the interest rate swaps was
$427,000 and represented the amounts the counterparties would pay the Company if
the agreements were terminated.
During 1994, the Company entered into three interest rate cap agreements with
commercial banks having a total notional principal amount of $15 million. The
beginning effective date for these agreements was September 30, 1994 with
various maturity dates through September 1998. The Company was required to pay
a one-time fee in exchange for the counterparties' obligation to pay the Company
the difference between the three month U.S. dollar LIBOR interest rate and 7.5%
in the event that the LIBOR interest rate exceeds 7.5%. Fees for interest rate
caps are capitalized and amortized over the life of the cap agreement. At
December 31, 1995, and 1994, the carrying values in the Company's balance
sheet for interest rate caps was $145,000 and $218,000, respectively. Fair
values of the interest rate caps at December 31, 1995, and 1994 were $12,000
and $345,000, respectively, and represented the amounts the counterparties
would pay the Company if the agreements were terminated.
<PAGE>
The Company is exposed to credit loss in the event of nonperformance by the
other parties to the interest rate swap and cap agreements, however, the
Company believes that the risk of loss is remote.
Foreign Exchange Contracts
The Company also enters into foreign exchange contracts to hedge foreign
currency exchange risk. These contracts primarily hedge inventory purchases,
royalties and management fees. The hedged transactions are recorded based upon
the nature of the transaction (e.g., costs related to inventory purchases are
recorded to inventory and recognized in cost of sales). At December 31, 1995,
the Company had foreign exchange contracts with various dates of maturity
through December 31, 1996, to purchase $518,000 in foreign currency and
$14.2 million in U.S. dollars. The fair market value of the contracts at the
1995 year-end end spot rate was approximately $350,000 greater than the
contracted amounts. At December 31, 1994, the Company had foreign exchange
contracts with various dates of maturity through December 31, 1995 to
purchase $31.2 million in U.S. dollars. The fair market value of the
contracts at the 1994 year-end spot rate was approximately $400,000 greater
than the contracted amount.
(8) Rents and Leases
Following is a schedule summarizing, by year, the future minimum rental payments
and guaranteed residual payments required for all noncancelable lease terms in
excess of one year as of December 31, 1995 (000 omitted):
Year Ending December 31 Operating
Leases
---------
1996 $ 9,470
1997 7,257
1998 5,027
1999 3,655
2000 2,986
Future years 14,136
--------
Total minimum lease payments $42,531
--------
Total rental expense for the years ended December 31, 1995, 1994 and 1993
was $8,235,000, $7,693,000, and $7,442,000, respectively.
(9) Common Stock and Stock Options
The Company's Certificate of Incorporation provides for 20,000,000 authorized
shares of common stock, $.125 par value per share and 2,398,275 shares of
Class B common stock, $.125 par value per share. Each Class B share is entitled
to 15 votes and is to be automatically converted into one share of common stock
upon transfer thereof. All of the Class B shares are owned by Lane Industries,
Inc., the Company's majority stockholder.
<PAGE>
The Company has two non-qualified stock option plans adopted in 1980 and 1989
for officers, including officers who are directors, and other key employees of
the Company. The 1980 plan terminated in 1990, however the options granted under
this plan may be exercised at various times until January 1998. Under both
plans, options may be granted during a ten-year period at a purchase price of
not less than 85% of the fair market value on the date of the grant. Options
granted may be exercised in four equal parts over a period not to exceed eight
years from the date of grant, except that no part of an option may be exercised
until at least one year from the date of grant has elapsed. In addition, the
1989 plan also provides that any option granted under the 1989 plan may include
a grant of stock appreciation rights simultaneously with the grant of the option
or any time within six months thereafter prior to the exercise, termination or
expiration of such option. The Company did not grant any stock appreciation
rights during 1995 or 1994. The Company reserved 1,050,000 shares of its common
stock for subsequent issuance pursuant to the 1989 plan. At December 31, 1995,
263,050 shares and 36,833 shares, respectively, were available for purchase
pursuant to the 1989 and 1980 plans.
A summary of the stock option activity under the 1980 and 1989 plans is as
follows:
Year Ended December 31 1995 1994
---- ----
Shares under option at
beginning of year 281,355 291,876
Options granted 78,200 44,000
Options exercised (49,722) (38,098)
Options expired/canceled (9,950) (16,423)
------- -------
Shares under option
at end of year 299,883 281,355
------- -------
Options exercisable 57,204 59,239
------- -------
Option prices per common share
Granted during the year $15 to $18 $15 to $21
Exercised during the year $ 6 to $20 $ 4 to $17
Expired/canceled
during the year $15 to $20 $16 to $20
Exercise price of options
outstanding at year-end $ 8 to $21 $ 6 to $21
Upon the exercise of options, the proceeds are credited to the treasury stock
and additional paid-in capital accounts. Compensation costs previously accrued
are credited to additional paid-in capital upon the exercise of
non-qualified options.
<PAGE>
(10) Income Taxes
Effective January 1, 1993, the Company changed its method of accounting for
income taxes from the deferred method to the liability method required by
the Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes." The provisions of SFAS 109 were applied retroactively to
January 1, 1990. SFAS 109 requires the recognition of deferred tax assets
and liabilities for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. In addition, the accounting
standard requires the recognition of future tax benefits, such as net
operating loss carryforwards, to the extent that realization of such
benefits is more likely than not. The adoption of SFAS 109 resulted in a
cumulative effect charge of $1,134,000 or $.07 per common share at
January 1, 1990. The provision for income taxes was as
follows (000 omitted):
1995 1994 1993
---- ---- ----
Currently payable:
Federal $10,449 $5,975 $ 6,393
State 1,576 1,092 1,043
Foreign 3,671 2,294 3,770
------ ------ ------
Total current $15,696 $9,361 $11,206
------ ------ ------
Deferred payable:
Federal $(1,672) $ 195 $ (764)
Foreign 309 441 (1,131)
------ ------ ------
Total deferred (1,363) 636 (1,895)
------ ------ ------
Total provision $14,333 $9,997 $ 9,311
------ ------ ------
<PAGE>
The Company's effective income tax rate varies from the statutory Federal
income tax rate as a result of the following factors:
1995 1994 1993
----- ----- ----
U.S. statutory rate 35.0% 35.0% 35.0%
Tax allocation benefit<F11> 0.0% ( 2.8)% ( 2.1)%
State income taxes, net of
Federal income tax benefit 2.9% 2.8% 2.8%
Net effect of international
subsidiaries' foreign tax
rates after balance sheet
translation gains and losses 0.3% 2.0% 2.0%
Net effect of remission of
foreign earnings 1.1% 0.5% ( 0.2)%
VeloBind non-tax
deductible purchase
accounting adjustments 0.7% 1.0% 1.1%
Other, net 0.0% 0.4% ( 0.3)%
----- ----- ------
Effective tax rate 40.0% 38.9% 38.3%
----- ----- ------
<F11>The benefit results from a tax allocation agreement between the Company and
Lane Industries, Inc. entered into in 1978. Under the terms of the agreement,
Lane Industries, Inc. has agreed to share with the Company a portion of the
Federal income tax savings, if any, resulting from filing consolidated income
tax returns. Lane Industries, Inc. is the Company's majority stockholder.
Income before taxes was as follows (000 omitted):
1995 1994 1993
------- ------- -------
United States $24,542 $19,507 $18,532
Foreign 11,291 6,193 5,773
------- ------- -------
Total income
before taxes $35,833 $25,700 $24,305
------- ------- -------
<PAGE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities are as follows (000 omitted):
Year Ended December 31 1995 1994
------ ------
Deferred tax assets:
Inventory $2,553 $ 2,412
Foreign 1,111 1,207
Worker's compensation 841 750
Restructuring reserves 2,639 2,089
Vacation pay 799 753
Other 2,470 1,596
Foreign tax credits 3,592 3,317
Capital loss carryovers 313 496
Net operating loss carryovers 2,123 2,200
------ ------
Gross deferred tax assets 16,441 14,820
------ ------
Valuation allowance (6,029) (6,013)
------ ------
Total deferred tax assets $10,412 $ 8,807
------ ------
Deferred tax liabilities:
Depreciation $ 3,168 $ 3,493
Amortization 534 688
Foreign 2,204 1,995
Withholding taxes 847 569
Other 405 480
------ ------
Total deferred tax liabilities 7,158 7,225
------ ------
Net deferred tax assets $ 3,254 $ 1,582
------ ------
A valuation allowance is provided to reduce the deferred tax assets to a level
which, more likely than not, will be realized. The net deferred tax assets
reflect management's estimate of the amount which will be realized from future
profitability which can be predicted with reasonable accuracy.
The Company provides U.S. income taxes on the earnings expected to be
distributed by its foreign subsidiaries. Under the current remitter concept,
the Company has excess foreign tax credits available to reduce Federal income
taxes in future years. The Company has established a valuation allowance for
the foreign tax credits that the Company anticipates will expire unutilized
five years after cash dividends are actually paid.
At December 31, 1995, the Company had $2,123,000 of net operating loss
carryforwards available to reduce future taxable income of certain international
subsidiaries. These loss carryforwards expire in the years 1996 through 2002 or
have an unlimited carryover period. A valuation allowance has been provided for
a portion of the deferred tax assets related to those loss carryforwards which
will most likely expire unutilized.
<PAGE>
(11) Business Segments and Foreign Operations
General Binding Corporation, incorporated in 1947, and its subsidiaries (herein
referred to as "GBC" or "Company") are engaged predominantly in one line of
business, namely the design, manufacture and distribution of a broad line of
business machines and related supplies. This broad line includes system
applications in the areas of binding, laminating, shredding and security
identification. These products are manufactured in nineteen plants in the United
States and abroad. GBC products are sold through a network of direct sales and
telemarketing personnel, dealers, distributors and wholesale stationers. The
Company provides maintenance and repairs on the machines it sells through a
trained field service organization and through trained dealers.
The Company's machines and supplies are sold primarily in North America, Europe,
Japan and Australia to users in the business, education, graphic arts, health,
recreation and government markets. With this broad base of customers, GBC is not
dependent upon any single customer for a significant portion of its business.
Financial information for the three years ended December 31, 1995, 1994 and
1993, by geographical area is summarized below. Sales between geographic areas
are made at market value less allowances for additional manufacturing, marketing
and administrative costs to be incurred by the affiliated company. For purposes
of complying with Statement of Financial Accounting Standards No. 14, export
sales to foreign customers ($15,039,000 in 1995, $12,773,000 in 1994 and
$11,163,000 in 1993) have been classified in the following tables as part of
the United States sales.
<TABLE>
<CAPTION>
(000 omitted):
United Other
Year Ended December 31, 1995 Total Eliminations States Europe International
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales:
Unaffiliated customers $458,391 $ -- $308,220 $87,202 $62,969
Between geographic areas -- (42,485) 37,983 1,639 2,863
-------- -------- -------- ------- -------
458,391 (42,485) 346,203 88,841 65,832
-------- -------- -------- ------- -------
Operating income 40,995 603 25,782 9,902 4,708
Other income (expense)<F12> (903) (2,446) 3,654 (1,715) (396)
Interest (expense) (4,259) 203 (3,385) (808) (269)
-------- -------- -------- ------- -------
Income before taxes $ 35,833 $ (1,640) $ 26,051 $ 7,379 $ 4,043
-------- -------- -------- ------- -------
Assets $298,872 $(21,532) $239,152 $44,801 $36,451
Depreciation and amortization $ 12,814 $ -- $ 10,300 $ 1,981 $ 533
-------- -------- -------- ------- -------
Capital expenditures $ 15,046 $ -- $ 13,591 $ 1,077 $ 378
-------- -------- -------- ------- -------
<PAGE>
<CAPTION>
United Other
Year Ended December 31, 1994 Total Eliminations States Europe International
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales:
Unaffiliated customers $420,449 $ -- $287,091 $71,397 $61,961
Between geographic areas -- (39,385) 36,560 692 2,133
-------- -------- -------- ------- -------
420,449 (39,385) 323,651 72,089 64,094
-------- -------- -------- ------- -------
Operating income<F13> 31,318 633 20,851 5,310 4,524
Other income (expense)<F12> (1,842) (2,239) 2,837 (1,821) (619)
Interest (expense) (3,776) 89 (2,995) (683) (187)
-------- -------- -------- ------- -------
Income before taxes $ 25,700 $ (1,517) $ 20,693 $ 2,806 $ 3,718
-------- -------- -------- ------- -------
Assets $284,278 $(27,463) $230,576 $45,792 $35,373
-------- -------- -------- ------- -------
Depreciation and amortization $ 12,081 $ -- $ 9,994 $ 1,440 $ 647
-------- -------- -------- ------- -------
Capital expenditures $ 12,788 $ -- $ 6,459 $ 5,457 $ 872
-------- -------- -------- ------- -------
<CAPTION>
United Other
Year Ended December 31, 1993 Total Eliminations States Europe International
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales:
Unaffiliated customers $376,138 $ -- $257,953 $63,576 $54,609
Between geographic areas -- (41,377) 35,955 202 5,220
-------- -------- -------- ------- -------
376,138 (41,377) 293,908 63,778 59,829
-------- -------- -------- ------- -------
Operating income 29,124 171 19,870 5,117 3,966
Other income (expense)<F12> (1,210) (1,451) 1,990 (1,507) (242)
Interest (expense) (3,609) -- (2,483) (622) (504)
-------- -------- -------- ------- -------
Income before taxes $ 24,305 $ (1,280) $ 19,377 $ 2,988 $ 3,220
-------- -------- -------- ------- -------
Assets $251,109 $(14,985) $203,895 $30,327 $31,872
-------- -------- -------- ------- -------
Depreciation and amortization $ 10,747 $ -- $ 8,660 $ 1,011 $ 1,076
-------- -------- -------- ------- -------
Capital expenditures $ 10,595 $ -- $ 9,064 $ 812 $ 719
-------- -------- -------- ------- -------
<FN>
<F12>Other income (expense) is comprised principally of foreign currency
transaction gains and losses, interest income, dividend and royalty income,
gains and losses on the disposal of capital assets, amortization of goodwill,
patents and other transactions.
<F13>Operating income for the United States, Europe and Other International
includes restructuring charges of $3.4 million, $.2 million and $.4 million,
respectively, for the year ended December 31, 1994.
</FN>
</TABLE>
<PAGE>
This table illustrates the ratio of revenue contribution of business machines,
supplies and service for the last three fiscal years:
1995 1994 1993
---- ---- ----
Business machines 24% 25% 24%
Related supplies
and service<F14> 76% 75% 76%
<F14>Includes the ringmetal business.
(12) Quarterly Financial Data (Unaudited)
Summarized quarterly financial data for 1995 and 1994 was as follows
(000 omitted, except per share data):
<TABLE>
<CAPTION>
1995 Three Months Ended March 31 June 30 Sept. 30 Dec. 31
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $109,252 $117,610 $112,993 $118,536
Gross profit 47,628 51,264 48,284 47,509
Income before taxes 8,725 9,942 8,221 8,945
Net income 5,235 5,965 4,933 5,367
Net income per common share $ .33 $ .38 $ .31 $ .35
<CAPTION>
1994 Three Months Ended March 31 June 30 Sept. 30 Dec. 31
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $ 96,227 $105,162 $108,576 $110,484
Gross profit 43,106 45,952 46,884 47,015
Income before taxes 7,285 8,209 7,084 3,122
Net income 4,353 4,950 4,253 2,147
Net income per common share $ .28 $ .31 $ .27 $ .14
</TABLE>
<PAGE>
(13) Acquisitions
On December 21, 1995, the Company acquired Pro-Tech Engineering Co., Inc.,
headquartered in Madison, Wisconsin. Pro-Tech manufactures equipment and
distributes supplies used in the digital printing market. The consideration
paid for Pro-Tech was $7.3 million. Compensation will also be paid contingent
upon the achievement of specified levels of earnings through December 31, 1998.
On August 26, 1994, the Company completed the purchase of Sickinger Company,
headquartered in Auburn Hills, Michigan. Sickinger manufactures paper punching
machines as well as wire and plastic coil binding supplies. The total
consideration paid for the Sickinger Company was $4.9 million.
On July 29, 1993, the Company finalized the purchase of the business and certain
assets of Bates Manufacturing Company. Bates Manufacturing Company, located in
Hackettstown, New Jersey, manufactures and distributes staplers, numbering
systems, card files and other office products through a large network of dealers
and wholesalers. The total consideration paid for the Bates Manufacturing
Company was $5.0 million.
The acquisitions of Pro-Tech, Sickinger and Bates have been accounted for as
purchase transactions with the results of operations included in the financial
statements since the date of acquisition. The excess of the purchase price over
fair value of the net assets acquired is estimated to be $6.3 million, $1.4
million and $2.3 million, respectively.
(14) Restructuring Charge
A pre-tax restructuring charge of $4.0 million was recorded in 1994. The charge
reflected costs associated with discontinuing manufacturing in certain locations
along with an overall downsizing of the Company's infrastructure. The
restructuring charge consisted primarily of the following: a) write-down of
properties to their estimated net realizable values; b) costs associated with
freezing a defined benefit pension plan; and c) termination benefits paid and
payable to certain former employees. The liability established for the
termination benefits, which is not material to the Company's financial
statements, reflected the costs associated with providing benefits to former
employees that were terminated and notified of their benefit arrangement prior
to December 31, 1994. Substantially all benefits were paid to the group of
former employees by December 31, 1995. The Company does not believe that the
activities that will not be continued are significant to the Company's revenue
or operating results.
(15) Subsequent Events
In January 1996, GBC completed the acquisition of the T.A.C. Group, a leading
distributor of office products in Australia. This company, which operates under
the name Fordigraph, is a market leader in the sale of paper shredders, mail
room equipment, laminating machines and supplies, presentation products and
binding systems. Fordigraph had sales of approximately U.S. $22 million in
fiscal 1995.
<PAGE>
Report of Independent Public Accountants
To the Board of Directors and Stockholders
of General Binding Corporation:
We have audited the accompanying consolidated balance sheets of General Binding
Corporation (a Delaware corporation) and Subsidiaries as of December 31, 1995
and 1994, and the related consolidated statements of income, stockholders'
equity and cash flows for each of the three years in the period ended
December 31, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of General Binding
Corporation and Subsidiaries as of December 31, 1995 and 1994, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1995, in conformity with generally accepted
accounting principles.
As explained in Note 5 to the consolidated financial statements, in 1993 the
Company changed its method of accounting for postretirement benefits and, as
explained in Note 10, in 1993 the Company gave retroactive effect to the
change in accounting for income taxes.
Arthur Andersen LLP
Chicago, Illinois
January 31, 1996
<PAGE>
SUBSIDIARIES OF THE REGISTRANT <F7>
Exhibit No. 21
Corporate Name Incorporated In Ownership
-------------- --------------- ---------
GBC Business Equipment Inc.................... Florida 100%
GBC International, Inc........................ Nevada 100% <F1>
U.S. RingBinder Corp.......................... Massachusetts 100%
GBC Australia Pty. Ltd........................ Australia 100% <F2>
GBC/Fordigraph Pty. Ltd....................... Australia 100% <F3>
GBC Canada, Inc............................... Canada 100% <F2>
GBC United Kingdom Limited.................... England 100% <F2>
GBC France S.A................................ France 100% <F4>
GBC Deutschland GmbH.......................... Germany 100%
GBC Nederland B.V............................. Holland 100% <F2>
General Binding Corporation Italia S.p.A...... Italy 100% <F2>
GBC Japan K.K................................. Japan 100% <F2>
Grupo GBC S.A. de C.V. (Mexico)............... Mexico 100%
GBC Schweiz A.G............................... Switzerland 100% <F2>
VeloBind, Incorporated........................ Delaware 100%
GBC Metals Corp............................... Nevada 100%
Sun Kwong Metal Manufacturer Co., LTD......... China 40% <F5>
Champion Stationery Manufacturing Company,
Limited..................................... China 36% <F5>
PBB&R S.A. de C.V............................. Mexico 100%
Pro-Tech Engineering Co., Inc................. Wisconsin 100%
Sickinger..................................... Michigan 100%
USRB S.A...................................... Costa Rica 100% <F6>
<F1>Subsidiary of GBC Business Equipment Inc.
<F2>Subsidiary of GBC International, Inc.
<F3>Subsidiary of GBC Australia Pty. Ltd.
<F4>Subsidiary of GBC Schweiz A.G.
<F5>Subsidiary of GBC Metals Corp.
<F6>Subsidiary of U.S. RingBinder Corp.
<F7>Certain insignificant subsidiaries have been excluded from Exhibit No. 21
under Rule 1-02(v) of Regulation S-X. These excluded subsidiaries considered
in the aggregate as a single subsidiary would not constitute a significant
subsidiary.
<TABLE> <S> <C>
<ARTICLE>5
<LEGEND>
This schedule contains summary financial information extracted from General
Binding Corporation's Form 10-K for the fiscal year ended December 31, 1995 and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 6,864
<SECURITIES> 0
<RECEIVABLES> 79,942 <F1>
<ALLOWANCES> 5,186
<INVENTORY> 79,605
<CURRENT-ASSETS> 180,648
<PP&E> 126,671
<DEPRECIATION> 65,210
<TOTAL-ASSETS> 298,872
<CURRENT-LIABILITIES> 83,828
<BONDS> 43,890
0
0
<COMMON> 2,262
<OTHER-SE> 151,879
<TOTAL-LIABILITY-AND-EQUITY> 298,872
<SALES> 458,391
<TOTAL-REVENUES> 458,391
<CGS> 263,706
<TOTAL-COSTS> 263,706
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,584
<INTEREST-EXPENSE> 4,259
<INCOME-PRETAX> 35,833
<INCOME-TAX> 14,333
<INCOME-CONTINUING> 21,500
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,500
<EPS-PRIMARY> 1.37
<EPS-DILUTED> 1.37
<FN>
<F1>Notes and accounts receivable-trade are stated net of allowances for
doubtful accounts and sales returns.
</FN>
