<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
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or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-2604
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GENERAL BINDING CORPORATION
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 36-0887470
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One GBC Plaza, Northbrook, Illinois 60062
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 272-3700
------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding at July 31, 1996
- ---------------------------------------------- ----------------------------
<S> <C> <C>
Common Stock $.125 par value 13,344,513 shares
Class B - Common Stock $.125 par value 2,398,275 shares
</TABLE>
<PAGE> 2
GENERAL BINDING CORPORATION
INDEX
<TABLE>
<CAPTION>
PART I. Financial Information Page No.
----------
<S> <C>
Consolidated Condensed Balance Sheets - 1
June 30, 1996 and December 31, 1995
Consolidated Condensed Statements of Income - 2
Three and Six Months Ended
June 30, 1996 and 1995
Consolidated Condensed Statements of Cash Flows - 3
Six Months Ended June 30, 1996 and 1995
Notes to Consolidated Condensed 4
Financial Statements
Management's Discussion and Analysis of 7
Financial Condition and Results of
Operations
PART II. Other Information 9
Signature 10
</TABLE>
<PAGE> 3
- 1-
PART I. FINANCIAL INFORMATION
GENERAL BINDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(000 OMITTED)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
ASSETS (unaudited)
- ------ ------------ ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 6,718 $ 6,864
Receivables, net 100,590 79,942
Inventories -
Raw materials 22,195 20,142
Work in process 6,888 5,473
Finished goods 62,056 53,990
-------- --------
Total inventories 91,139 79,605
Deferred tax assets 10,871 10,412
Other 7,092 3,825
-------- --------
Total current assets 216,410 180,648
-------- --------
Property, plant and equipment 135,379 126,671
Less - accumulated depreciation and amortization (69,340) (65,210)
-------- --------
Net property, plant and equipment 66,039 61,461
-------- --------
Other long-term assets:
Cost in excess of fair value of assets
of acquired companies, net of amortization 43,655 31,363
Other 30,180 25,400
-------- --------
Total other long-term assets 73,835 56,763
-------- --------
Total assets $356,284 $298,872
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Notes payable $ 34,851 $ 17,428
Current maturities of long-term obligations 487 505
Accounts payable 31,391 23,600
Accrued liabilities 44,831 42,295
-------- --------
Total current liabilities 111,560 83,828
-------- --------
Long-term debt 64,353 43,890
Other long-term liabilities 9,916 9,855
Deferred tax liabilities 7,394 7,158
Stockholders' equity:
Common stock 1,962 1,962
Class B common stock 300 300
Additional paid-in capital 8,253 7,267
Cumulative translation adjustments (2,845) (2,723)
Retained earnings 177,450 168,219
-------- --------
185,120 175,025
Less - Treasury stock (22,059) (20,884)
-------- --------
Total stockholders' equity 163,061 154,141
-------- --------
Total liabilities and stockholders' equity $356,284 $298,872
======== ========
</TABLE>
The accompanying notes to consolidated condensed financial statements are an
integral part of these statements.
<PAGE> 4
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GENERAL BINDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(000 OMITTED Except Per Share Data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales $135,338 $117,610 $261,684 $226,862
Costs and expenses:
Cost of sales, including research,
development and engineering 79,766 66,346 155,443 127,970
Selling, service and administrative 42,287 40,442 81,433 77,304
Interest expense 1,533 1,114 2,863 2,188
Other expense, net 682 (234) 697 733
-------- -------- -------- --------
Total costs and expenses 124,268 107,668 240,436 208,195
-------- -------- -------- --------
Income before taxes 11,070 9,942 21,248 18,667
Income taxes 4,539 3,977 8,712 7,467
-------- -------- -------- --------
Net income $ 6,531 $ 5,965 $ 12,536 $ 11,200
======== ======== ======== ========
Net income per common share $ .42 $ .38 $ .80 $ .71
======== ======== ======== ========
Dividends per common share $ .105 $ .38 $ .80 $ .71
======== ======== ======== ========
Average common shares outstanding 15,743 15,738 15,741 15,744
======== ======== ======== ========
</TABLE>
The accompanying notes to consolidated condensed financial statements are an
integral part of these statements.
<PAGE> 5
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GENERAL BINDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(000 OMITTED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
1996 1995
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 12,536 $11,200
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 6,986 6,532
(Decrease) increase in noncurrent deferred
tax liabilities 258 (27)
Provision for doubtful accounts 954 942
(Increase) in other long-term assets (1,511) (4,878)
Other (551) 847
Changes in current assets and liabilities:
(Increase) in receivables (19,773) (5,817)
(Increase) in inventories (4,917) (2,451)
Decrease (increase) in deferred tax assets (450) 108
Decrease (increase) in other current assets (2,997) 1,711
Increase (decrease) in accounts payable and
accrued expenses 6,697 4,004
Increase in taxes on income 1,037 40
------- -------
Net cash provided by (used in)
operating activities (1,731) 12,211
------- -------
Cash flows from investing activities:
Purchase of Pro-Tech, net of cash acquired (7,149) -
Purchase of Fordigraph, net of cash acquired (11,784) -
Capital Expenditures (14,834) (3,125)
Proceeds from sale of plant and equipment 927 2,274
Government training subsidy from new plant investment - 665
------- -------
Net cash (used in) investing activities (32,840) (186)
------- -------
Cash flows from financing activities:
(Reduction) increase in notes payable 17,451 (8,370)
(Reduction) in current portion of
long-term obligations - (130)
Increase (reduction) in long-term obligations 20,565 (224)
Dividends paid (3,306) (3,307)
Purchases of treasury stock (1,338) (839)
Proceeds from the exercise of stock options 1,090 450
------- -------
Net cash (used in) provided by
financing activities 34,462 (12,420)
------- -------
Effect of exchange rates on cash (37) 174
------- -------
Net (decrease) in cash
and cash equivalents (146) (221)
Cash and cash equivalents at beginning of the year 6,864 5,569
------- -------
Cash and cash equivalents at June 30 $ 6,718 $ 5,348
======= =======
Supplemental Disclosure of Cash Flow Information
Cash Paid During the Period for:
Interest $ 2,097 $ 2,276
Income taxes, net of refunds 6,538 4,962
</TABLE>
The accompanying notes to consolidated condensed financial statements are an
integral part of these statements.
<PAGE> 6
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GENERAL BINDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(1) Basis of Presentation
The consolidated condensed financial statements included herein have been
prepared by the Company, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. The Company believes that the disclosures included in
these consolidated condensed financial statements are adequate to make the
information presented not misleading. It is suggested that these consolidated
condensed financial statements be read in conjunction with the financial
statements and the notes thereto included in the Company's 1995 Annual Report
on Form 10-K. In the opinion of the Company, all adjustments necessary to
present fairly the financial position of General Binding Corporation and
Subsidiaries as of June 30, 1996 and December 31, 1995, and the results of
their operations for the three and six months ended June 30, 1996 and 1995 have
been included. The results of operations for such interim periods are not
necessarily indicative of the results for the full year.
(2) Foreign Currency Exchange and Translation
Foreign currency translation adjustments have been excluded from the
Consolidated Condensed Statements of Income and are recorded in a cumulative
translation adjustment account as a separate component of stockholders' equity.
The accompanying Consolidated Condensed Statements of Income include net gains
and losses on foreign currency transactions, which are reported as other
income/expense and summarized as follows:
<TABLE>
<CAPTION>
Foreign Currency
Transaction
Gain/(Loss)(a)
----------------
<S> <C>
Three months ended June 30, 1996 $ 116,000
=========
Three months ended June 30, 1995 $ (7,000)
=========
Six months ended June 30, 1996 $ 230,000
=========
Six months ended June 30, 1995 $(298,000)
=========
</TABLE>
(a) Foreign currency transaction gains/losses are subject to income taxes at
the respective country's effective tax rate.
<PAGE> 7
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(3) Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
(000 OMITTED)
JUNE 30, DECEMBER 31,
1996 1995
-------- ------------
<S> <C> <C>
Revolving Credit Agreement (portion classified as
long-term on the basis of the Company's
intention to refinance these borrowings:
weighted average interest rate 5.74% at
June 30, 1996 and 6.25% at December 31, 1995) $50,700 $36,000
Note Payable, due monthly from November, 1994
to October, 2004 (interest rate 8.85% at
June 30, 1996 and December 31, 1995) 2,838 3,137
Term Loan, maturity date June, 2000
(interest rate 7.05% at June 30, 1996 and
at December 31, 1995) 1,907 2,008
Industrial Revenue Bond, due annually to July, 2008
(floating interest rate 3.55% at June 30, 1996
and 5.00% at December 31, 1995) 2,200 2,200
Industrial Revenue Bond, due annually from
June, 2002 to June, 2007 (floating
interest rate 3.55% at June 30, 1996
and 5.20% at December 31, 1995) 1,050 1,050
Industrial Revenue Bond, maturity date,
March, 2026 (floating interest rate 3.5%
at June 30, 1996) 2,751 ---
International
Australia Revolving Credit Agreement 3,394 ---
------- -------
64,840 44,395
Less current maturities (487) (505)
------- -------
Total Long-Term Debt $64,353 $43,890
======= =======
</TABLE>
<PAGE> 8
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(4) Net Income per Common Share
Net income per common share is based on the weighted average number of
common shares outstanding during the period. Assuming exercise of all
outstanding options pursuant to the Company's stock option plans for key
employees, net income per common share would not be materially different from
net income per common share as reported.
<PAGE> 9
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company's second quarter and six month sales increased 15% over the
prior year. The most significant factors contributing to the growth of sales
were increases in the Company's: a) domestic office products/dealer business;
b) domestic direct branch/telemarketing operations; and c) worldwide film
products division. The sales results were also positively affected by the
December 1995 acquisition of Pro-Tech and the January 1996 acquisition of
Fordigraph, which represented approximately 55% of the sales growth for the
second quarter.
Significant increases in the following product lines helped to achieve the
second quarter and the six month sales increases: a) shredder products; b)
laminating film and pouch products; c) graphics products; and d) commercial and
office laminating equipment.
Gross profit margins for the second quarter and six months period of 1996
decreased 2.5 and 3.0 percentage points, respectively, when compared to the
same periods in 1995. The primary reasons for the decrease in margins were: a)
worldwide competitive pricing pressures, most notably in the ring metals
business; b) an increase in sales mix to lower margin products (e.g., personal
shredders, laminating film, and graphics products); and c) the impact of
acquisitions.
Selling, service, and administrative expenses for the second quarter and
six month period increased 4.6% and 5.3%, respectively, when compared to the
same periods in 1995. The most significant reasons for the increase in expenses
were increased sales volumes and the inclusion of the recently acquired
companies, Pro-Tech and Fordigraph. Selling, service and administrative
expenses as a percentage of total sales declined in both the second quarter and
six month periods to 31% in 1996 from 34% in 1995.
Interest expense for the second quarter and six month period of 1996
increased 38% and 31%, respectively, when compared to the same periods in 1995.
The primary reason for the increase was higher average debt levels resulting
from the financing of acquisitions, capital expenditures, and higher levels of
receivables.
Other expense for the second quarter was $682,000 compared to other income
of $234,000 in 1995. The most significant factors affecting the quarter change
were: a) income from the Company's Indian joint venture in 1995 compared to a
loss in 1996, resulting in an unfavorable swing of $370,000; and b) a gain
recognized in 1995 on the sale of property in Germany. Other expense for the six
month period was $697,000 compared to $733,000 in 1995. The unfavorable impact
of the loss on the Company's Indian joint venture was offset by favorable
currency transaction gains and a gain on the sale of a parcel of land in Japan.
<PAGE> 10
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Liquidity and Capital Resources
Working capital totaled $104.9 million at June 30, 1996, an increase of
$8.1 million from December 31, 1995. The change was primarily caused by an
increase in receivables and inventories, including those generated by Pro-Tech
and Fordigraph since date of acquisition.
Net cash flows used in investing activities amounted to $32.8 million
through the second quarter of 1996. Capital expenditures for the second quarter
and first six months of 1996 were $7.9 million and $14.9 million, respectively,
compared to $5.3 million and $7.1 million, respectively, for the same periods in
1995. Major projects in 1996 include: a) development of a new company-wide
business information system; and b) continued investment in the film products
division, including construction of a new plant in Maryland and additional
capacity in Europe. The Company paid $18.9 million in cash through the second
quarter of 1996 for the acquisitions of Pro-Tech and Fordigraph. Capital
expenditures and acquisitions were funded through use of the Company's credit
agreements and short-term borrowings, while working capital requirements were
funded through operations.
The Company had access to $59.2 million in short term credit lines as of
June 30, 1996 and $34.8 million in outstanding borrowings against these lines.
During the first quarter, the Company also had access to a $140.0 million
credit agreement to fund both working capital and acquisition requirements. As
of June 30, 1996 the Company had $50.7 million in borrowings against this
agreement classified as long-term borrowings on the Company's balance sheet.
Cash dividends of $.105 per share were paid in both the second quarters of
1996 and 1995 while dividends for the six month period in both 1996 and 1995
were $.21 per share.
The Company believes that funds generated from operations combined with
existing credit facilities are more than sufficient to meet currently
anticipated capital and operating requirements.
<PAGE> 11
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PART II. OTHER INFORMATION
Item 5: Exhibits
(a) Exhibits: None
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Registrant during the second
quarter ended June 30, 1996.
<PAGE> 12
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GENERAL BINDING CORPORATION
AND SUBSIDIARIES
By EDWARD J. MCNULTY
-----------------------------------
Edward J. McNulty
Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM GENERAL BINDING
CORPORATION'S FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1996 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 6,718
<SECURITIES> 0
<RECEIVABLES> 100,590 <F1>
<ALLOWANCES> 5,596
<INVENTORY> 91,139
<CURRENT-ASSETS> 216,410
<PP&E> 135,379
<DEPRECIATION> 69,340
<TOTAL-ASSETS> 356,284
<CURRENT-LIABILITIES> 111,560
<BONDS> 64,353
0
0
<COMMON> 2,262
<OTHER-SE> 160,799
<TOTAL-LIABILITY-AND-EQUITY> 356,284
<SALES> 261,684
<TOTAL-REVENUES> 261,684
<CGS> 155,443
<TOTAL-COSTS> 155,443
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 954
<INTEREST-EXPENSE> 2,863
<INCOME-PRETAX> 21,248
<INCOME-TAX> 8,712
<INCOME-CONTINUING> 12,536
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,536
<EPS-PRIMARY> .80
<EPS-DILUTED> .80
<FN>
<F1>
Notes and accounts receivable-trade are stated net of allowances for doubtful
accounts and sales returns.
</FN>
</TABLE>
