<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
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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
incorporation or organization) Identification No.)
One GBC Plaza, Northbrook, Illinois 60062
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 272-3700
------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding at April 30, 1997
- --------------------------------------- ------------------------------
<S> <C> <C>
Common Stock $.125 par value 13,365,497 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
March 31, 1997 and December 31, 1996
Consolidated Condensed Statements of Income - 2
Three Months Ended March 31, 1997 and 1996
Consolidated Condensed Statements of Cash Flows - 3
Three Months Ended March 31, 1997 and 1996
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)
March 31, December 31,
1997 1996
ASSETS (unaudited)
----------- ------------
Current assets:
Cash and cash equivalents $ 7,444 $ 6,721
Receivables, net 143,649 115,865
Inventories -
Raw materials 32,880 21,198
Work in process 11,501 7,410
Finished goods 78,738 68,126
--------- ---------
Total inventories 123,119 96,734
Deferred tax assets 11,784 11,453
Other 12,074 6,441
--------- ---------
Total current assets 298,070 237,214
--------- ---------
Property, plant and equipment 183,000 140,951
Less - accumulated depreciation
and amortization (74,589) (71,940)
--------- ---------
Net property, plant and equipment 108,411 69,011
--------- ---------
Other long-term assets:
Cost in excess of fair value of assets
of acquired companies, net of amortization 186,710 43,510
Other 46,255 43,971
--------- ---------
Total other long-term assets 232,965 87,481
--------- ---------
Total assets $639,446 $393,706
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 50,075 $ 31,700
Current maturities of long-term obligations 627 483
Accounts payable 34,757 28,506
Accrued liabilities 57,904 51,440
--------- ---------
Total current liabilities 143,363 112,129
--------- ---------
Long-term debt 298,832 87,029
Other long-term liabilities 10,060 10,229
Deferred tax liabilities 12,110 12,187
Stockholders' equity:
Common stock 1,962 1,962
Class B common stock 300 300
Additional paid-in capital 9,031 8,564
Cumulative translation adjustments (5,145) (3,035)
Retained earnings 191,700 186,663
197,848 194,454
--------- ---------
Less - Treasury stock (22,767) (22,322)
--------- ---------
Total stockholders' equity 175,081 172,132
--------- ---------
Total liabilities and stockholders' equity $639,446 $393,706
========= =========
The accompanying notes to consolidated condensed financial statements are an
integral part of these statements.
<PAGE> 4
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GENERAL BINDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(000 Omitted Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended
March 31
1997 1996
---- ----
<S> <C> <C>
Sales $180,505 $126,346
Costs and expenses:
Cost of sales, including research,
development and engineering 104,569 75,677
Selling, service and administrative 57,333 39,145
Interest expense 5,228 1,330
Other expense, net 2,089 15
-------- --------
Total costs and expenses 169,219 116,167
-------- --------
Income before taxes 11,286 10,179
Income taxes 4,514 4,173
-------- --------
Net income $ 6,772 $ 6,006
======== ========
Net income per common share $ .43 $ .38
======== ========
Dividends per common share $ .11 $ .105
======== ========
Average common shares outstanding 15,761 15,739
======== ========
</TABLE>
The accompanying notes to consolidated condensed financial statements are an
integral part of these statements.
<PAGE> 5
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GENERAL BINDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(000 OMITTED)
<TABLE>
<CAPTION>
Three Months Ended
March 31
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $6,772 $ 6,004
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 7,016 3,264
(Decrease) in noncurrent deferred tax liabilities (77) (41)
Provision for doubtful accounts 601 671
Decrease (increase) in other long-term assets (1,334) (977)
Other 215 46
Changes in current assets and liabilities:
(Increase) in receivables (10,264) (12,936)
(Increase) in inventories (4,349) 1,292
(Increase) decrease in deferred tax assets (415) (346)
(Increase) decrease in other current assets (5,162) (1,649)
(Decrease) increase in accounts payable and
accrued expenses (2,369) 1,495
Increase in taxes on income 1,792 1,829
Increase (decrease) in deferred income on
service agreements 236 (1,582)
--------- -------
Net cash provided by (used in)
operating activities (7,338) (2,930)
--------- -------
Cash flows from investing activities:
Purchase of acquisitions, net of cash acquired (214,999) (18,141)
Capital expenditures (6,219) (6,946)
Proceeds from sale of plant and equipment - 39
--------- -------
Net cash (used in) investing activities (221,218) (25,048)
--------- -------
Cash flows from financing activities:
Increase (reduction) in notes payable 19,159 11,584
Increase (reduction) in current portion of
long-term obligations 88 (13)
Increase in long-term obligations 212,000 17,824
Dividends paid (1,735) (1,640)
Purchases of treasury stock (517) (1,322)
Proceeds from the exercise of stock options 539 1,076
--------- -------
Net cash provided by (used in)
financing activities 229,534 27,509
--------- -------
Effect of exchange rates on cash (225) 14
--------- -------
Net increase (decrease) in cash
and cash equivalents 723 (455)
Cash and cash equivalents at beginning of the year 6,721 6,864
--------- -------
Cash and cash equivalents at March 31 $7,444 $ 6,409
========= =======
Supplemental Disclosure of Cash Flow Information
Cash Paid During the Period for:
Interest $2,952 $ 1,194
Income taxes, net of refunds 4,123 1,772
</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 1996 Annual Report
on Form 10-K. In the opinion of the Company, all adjustments necessary to
present fairly the financial position of General Binding Corporation and
Subsidiaries as of March 31, 1997 and December 31, 1996, and the results of
their operations for the three months ended March 31, 1997 and 1996 have been
included. The results of operations for such interim periods are not
necessarily indicative of the results for the full year.
(2) Foreign Currency Exchange and Translation
Foreign currency translation adjustments have been excluded from the
Consolidated Condensed Statements of Income and are recorded in a cumulative
translation adjustment account as a separate component of stockholders' equity.
The accompanying Consolidated Condensed Statements of Income include net gains
and losses on foreign currency transactions, which are reported as other
income/expense and summarized as follows:
<TABLE>
<CAPTION>
Foreign Currency
Transaction
Gain/(Loss)(a)
----------------
<S> <C>
Three months ended March 31, 1997 $ (76,000)
================
Three months ended March 31, 1996 $ 114,000
================
</TABLE>
(a) Foreign currency transaction gains/losses are subject to income taxes at
the respective country's effective tax rate.
(3) Other Expense
Included in other expense is amortization of goodwill. Such
amortization was $1,595K and $306K for the three month periods ending
March 31, 1997 and 1996, respectively.
<PAGE> 7
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(4) Long-Term Debt
<TABLE>
<CAPTION>
Long-term debt consists of the following: (000 OMITTED)
MARCH 31, DECEMBER 31,
1997 1996
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<S> <C> <C>
Revolving Credit Agreement-portion classified as
long-term on the basis of the Company's
intention to refinance these borrowings
(weighted average interest rate 6.23% at
March 31, 1997 and 6.08% at December 31, 1996) $282,800 $70,700
Note Payable, due monthly from November, 1994
to October, 2004 (interest rate 8.85% at
March 31, 1997 and December 31, 1996) 2,318 2,637
Term Loan, maturity date June, 2000
(interest rate 7.05% at March 31, 1997 and
at December 31, 1996) 1,709 1,883
Industrial Revenue Bond, due annually from July, 1994
to July 2008 (floating interest rate 3.30% at
March 31, 1997 and 4.00% at December 31, 1996) 2,050 2,050
Industrial Revenue Bond, due annually from
June, 2002 to June, 2007 (floating
interest rate 3.70% at March 31, 1997
and 4.35% at December 31, 1996) 1,050 1,050
Industrial Revenue Bond, maturity date,
March, 2026 (floating interest rate 3.65% at
March 31, 1997 and 4.30% at December 31, 1996) 5,724 5,724
Industrial Revenue Bond, semi-annual payments
October, 1987 to October 1999 (interest rate 6.88%
at March 31, 1997) 500 ----
International
Australia Revolving Credit Agreement (floating
interest rate 6.80% at March 31, 1997 and
7.85% at December 31, 1996) 3,308 3,468
-------- -------
299,459 87,512
Less current maturities (627) (483)
-------- -------
Total Long-Term Debt $298,832 $87,029
======== =======
</TABLE>
<PAGE> 8
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(5) 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.
(6) Subsequent Events
On April 23, 1997, the Company announced it has completed the
purchase of Baker School Specialty Co., Inc. for an undisclosed
amount of cash. Located in Orange, Massachusetts, Baker
manufactures and distributes office and school supplies. The
Company expects to leverage Baker's distribution capabilities
to further strengthen its position in the office products
market. Baker's sales in 1996 were approximately $17
million.
<PAGE> 9
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company's first quarter 1997 sales increased 43% compared to the
prior year. Excluding the January 1997 acquisition of Quartet, the Company's
sales increased 11%. The most significant factors contributing to the sales
growth were the acquisition of Quartet and increases in the Company's worldwide
direct branch/telemarketing and office products/dealer businesses.
Significant increases in the following product lines helped to achieve
the first quarter sales increase: a) shredders; b) laminating film and pouches;
c) graphics products; d) binding equipment; and e) commercial and office
laminating equipment.
Gross profit margins increased approximately 2 percentage points from
the prior year. The gross margin improvement was realized in all of the
Company's major channels of distribution with the exception of GBC's domestic
film products division. In addition, the margin improvement was enhanced by the
inclusion of Quartet in GBC's family of businesses. The two most significant
factors impacting the domestic film products division margin were: 1) the
inefficiencies associated with the start-up of the new Hagerstown, Maryland
film manufacturing facility and 2) competitive pricing pressures in the
domestic market.
Selling, service, and administrative expenses increased 43.4% in the
first quarter. The most significant reasons for the increase were the
inclusion of Quartet, increased sales volume, and expenses associated with the
implementation of the Company's domestic business information system. Without
the impact of Quartet, expenses increased 11.3% over the prior year and were
flat as a percentage of sales.
Interest expense for the first quarter of 1997 increased to $5.2
million compared to $1.3 million. The primary reasons for the increase were
higher average debt levels as a result of the financing of the Quartet
acquisition, higher levels of receivables and inventories, and a higher
overall effective borrowing rate.
Other expense for the first quarter was $2,089,000 compared to $15,000
in 1996. The primary factors affecting the change were: a) increased
amortization of goodwill as a result of the Quartet acquisition and b)
currency losses in 1997 compared to gains in 1996. Further, the Company's
1996 results were significantly impacted by a gain on the sale of a parcel of
land in Japan.
<PAGE> 10
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Liquidity and Capital Resources
Cash used in the first quarter by operating activities was $7.3 million
compared to cash used of $2.9 million in 1996. The use of cash during the first
quarter of 1997 resulted from higher levels of receivables, inventories, and
advances on product purchased from overseas vendors.
Capital expenditures were $6.2 million compared to $6.9 million in the
first quarter of 1996. Major expenditures in 1997 include the continued
development of the company's domestic business information system, the
development of a European business information system, and various projects
for Quartet.
Cash dividends paid during the first quarters of 1997 and 1996 were
$.110 and $.105 per share, respectively.
As of March 31, 1997, the Company had access to a $400 million
revolving credit facility as well as various other smaller, short-term
international and domestic lines of credit. The revolving credit facility was
established on January 13, 1997 with a group of domestic and international
banks and contains, among other things, certain restrictive covenants which
require the Company to maintain certain ratios regarding current assets and
liabilities, leverage and interest coverage. As of March 31, 1997, the Company
had $289.7 million and $43.2 million outstanding under the revolving facility
and the short-term lines of credit, respectively.
The Company believes that funds generated from operations combined with
existing credit facilities are sufficient to meet currently anticipated capital
and operating requirements.
<PAGE> 11
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PART II. OTHER INFORMATION
Item 5: Exhibits
(a) Exhibits: None
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Registrant
during the third quarter ended September 30, 1996.
<PAGE> 12
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GENERAL BINDING CORPORATION
AND SUBSIDIARIES
/s/ Edward J. McNulty
By_____________________
Edward J. McNulty
Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from General
Binding Corporation's Form 10-Q for the quarter ended March 31, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 7,444
<SECURITIES> 0
<RECEIVABLES> 143,649<F1>
<ALLOWANCES> 6,513
<INVENTORY> 123,119
<CURRENT-ASSETS> 298,070
<PP&E> 183,000
<DEPRECIATION> 74,589
<TOTAL-ASSETS> 639,446
<CURRENT-LIABILITIES> 143,363
<BONDS> 298,832
0
0
<COMMON> 2,262
<OTHER-SE> 172,819
<TOTAL-LIABILITY-AND-EQUITY> 639,446
<SALES> 180,505
<TOTAL-REVENUES> 180,505
<CGS> 104,569
<TOTAL-COSTS> 104,569
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 601
<INTEREST-EXPENSE> 5,228
<INCOME-PRETAX> 11,286
<INCOME-TAX> 4,514
<INCOME-CONTINUING> 6,772
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,772
<EPS-PRIMARY> .43
<EPS-DILUTED> .43
<FN>
<F1>Notes and accounts receivable-trade are stated net of allowances for doubtful
accounts and sales returns.
</FN>
</TABLE>
