<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2000
Commission File Number 0-2604
GENERAL BINDING CORPORATION
(Exact name of registrant as specified in its charter)
36-0887470
(I.R.S. employer identification No.)
Delaware
(State or other jurisdiction of incorporation or organization)
One GBC Plaza,
Northbrook, Illinois 60062
(Address of principal executive offices, including zip code)
(847) 272-3700
(Registrant's telephone number, including area code)
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.
Outstanding at
Class April 30, 2000
Common Stock, $.125 par value 13,338,898
Class B Common Stock, $.125 par value 2,398,275
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<PAGE> 2
GENERAL BINDING CORPORATION AND SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 2000
Table of Contents
<TABLE>
<CAPTION>
PART I. Financial Information Page
----
<S> <C>
Item 1. Financial statements (unaudited)
Condensed Consolidated Balance Sheets as of
March 31, 2000 and December 31, 1999 2
Condensed Consolidated Statements of Income for the three
months ended March 31, 2000 and 1999 3
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 2000 and 1999 4
Notes to Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 20
</TABLE>
<PAGE> 3
GENERAL BINDING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(000's omitted)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
(unaudited)
---------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 9,934 $ 11,068
Receivables, less allowances for doubtful
accounts and sales returns: 2000 - $15,540,
1999 - $15,164 169,091 163,216
Inventories:
Raw materials 38,574 36,123
Work in process 6,074 6,192
Finished goods 81,820 84,032
--------- ---------
Total inventories 126,468 126,347
Deferred tax assets 30,785 30,816
Other 28,283 27,586
--------- ---------
Total current assets 364,561 359,033
Total capital assets at cost 256,152 254,326
Less - accumulated depreciation (117,347) (112,735)
--------- ---------
Net capital assets 138,805 141,591
Goodwill, net of amortization 279,801 283,059
Other 37,472 38,809
--------- ---------
Total assets $ 820,639 $ 822,492
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 61,424 $ 64,487
Accrued liabilities 89,885 88,702
Notes payable 14,503 13,407
Current maturities of long-term debt 1,991 2,131
--------- ---------
Total current liabilities 167,803 168,727
Long-term debt, less current maturities 456,488 454,459
Other long-term liabilities 20,066 20,296
Deferred tax liabilities 29,391 29,399
Stockholders' equity:
Common stock 1,962 1,962
Class B common stock 300 300
Additional paid-in capital 22,010 22,010
Retained earnings 163,645 163,719
Treasury stock (27,096) (27,096)
Accumulated other comprehensive income (13,930) (11,284)
--------- ---------
Total stockholders' equity 146,891 149,611
--------- ---------
Total liabilities and stockholders' equity $ 820,639 $ 822,492
========= =========
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these statements.
<PAGE> 4
GENERAL BINDING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(000's omitted, except per share data)
<TABLE>
<CAPTION>
Three months ended
March 31,
--------------------
2000 1999
(unaudited)(unaudited)
--------- ---------
<S> <C> <C>
Net sales $ 238,007 $ 221,082
Costs and expenses:
Product cost of sales, including development
and engineering 137,762 127,069
Selling, service and administrative 84,180 78,940
Amortization of goodwill and related intangibles 2,736 2,664
Interest expense 11,633 10,388
Restructuring and other expenses 1,498 -
Other expense (income), net 346 (192)
--------- ---------
(Loss) income before taxes (148) 2,213
Income taxes (74) 897
--------- ---------
Net (loss) income $ (74) $ 1,316
========= =========
Other comprehensive income, net of taxes:
Foreign currency translation adjustments (2,646) (1,997)
--------- ---------
Comprehensive (loss) income $ (2,720) $ (681)
========= =========
Net (loss) income per common share: (1)
Basic $ (0.00) $ 0.08
Diluted (0.00) 0.08
Weighted average number of common shares outstanding: (2)
Basic 15,734 15,729
Diluted 15,734 15,862
</TABLE>
(1) Amounts represent per share amounts for both Common Stock and Class B
Common Stock.
(2) Weighted average shares includes both Common Stock and Class B Common Stock.
The accompanying notes to condensed consolidated financial
statements are an integral part of these statements.
<PAGE> 5
GENERAL BINDING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(000's omitted)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
2000 1999
(unaudited) (unaudited)
------------ -----------
<S> <C> <C>
Operating activities:
Net (loss) income $ (74) $ 1,316
Adjustments to reconcile net (loss) income to
net cash provided by operating activities:
Depreciation 5,650 5,354
Amortization 3,989 3,890
Restructuring and other expenses 1,498 -
Provision for doubtful accounts and sales
returns 1,253 482
Provision for inventory reserves 1,905 1,226
Increase in non-current deferred taxes 9 -
(Increase) in other long-term assets (433) (3,386)
Other (68) 243
Changes in current assets and liabilities:
(Increase)decrease in receivables (8,995) 5,553
(Increase)in inventories (3,661) (9,273)
(Increase) in other current assets (1,043) (2,172)
(Increase) decrease in deferred tax assets (33) 811
Increase (decrease) in accounts payable and
accrued liabilities 232 (372)
(Decrease) increase in income taxes payable (2,104) 476
-------- --------
Net cash (used in) provided by operating
activities (1,875) 4,148
Investing activities:
Capital expenditures (3,728) (5,183)
Proceeds from sale of plant and equipment 153 199
-------- --------
Net cash (used in) investing activities (3,575) (4,984)
Financing activities:
Net change in borrowings-maturities of 90 days
or less 3,845 4,659
(Reduction) in current portion of long-term debt (46) (229)
Payments of debt issuance costs (98) (42)
Dividends paid - (1,887)
Purchases of treasury stock - (429)
Proceeds from the exercise of stock options - 541
------- --------
Net cash provided by financing activities 3,701 2,613
Effect of exchange rates on cash 615 (585)
------- --------
Net (decrease) increase in cash and cash
equivalents (1,134) 1,192
Cash and cash equivalents at the beginning of
the year 11,068 6,095
------- --------
Cash and cash equivalents at the end of the period $ 9,934 $ 7,287
======== ========
Supplemental disclosure:
Interest paid $ 8,284 $ 5,687
Income taxes (refunded) paid (490) 1,250
</TABLE>
The accompanying notes to condensed consolidated financial
statements are an integral part of these statements.
<PAGE> 6
GENERAL BINDING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Basis of Presentation
The condensed consolidated financial statements include the accounts
of General Binding Corporation and its subsidiaries ("GBC" or the
"Company"). These financial statements have been prepared by GBC,
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. GBC believes that the
disclosures included in these condensed consolidated financial
statements are adequate to make the information presented not
misleading. It is suggested that these condensed consolidated
financial statements be read in conjunction with the financial
statements and the notes thereto included in GBC's 1999 Annual
Report on Form 10-K. In the opinion of management, all adjustments
necessary to present fairly the financial position of GBC as of
March 31, 2000 and December 31, 1999 and the results of their
operations for the three months ended March 31, 2000 and 1999 have
been included. Operating results for any interim period are not
necessarily indicative of results that may be expected for the full
year.
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of certain estimates
by management in determining the entity's assets, liabilities,
revenues and expenses. Actual results could differ from those
estimates.
Certain amounts for prior periods have been reclassified to conform
to the 2000 presentation.
(2) Long-term Debt
Long-term debt consists of the following at March 31, 2000 and
December 31, 1999 - outstanding borrowings denominated in foreign
currencies have been converted to U.S. dollars (000's omitted):
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------- ---------
<S> <C> <C>
Revolving Credit Facility
U.S. Dollar borrowings - (weighted average
floating interest rate of 8.67% at March 31,
2000 and 8.58% at December 31, 1999) $ 270,400 $ 266,700
British Pound borrowings - (floating interest
rate of 8.6% at March 31, 2000 and 8.48% at
December 31, 1999) 4,456 5,654
Swiss Franc borrowings - (floating interest
rate of 4.71% at March 31, 2000 and 4.76% at
December 31, 1999) 9,550 9,987
Dutch Guilder borrowings - (floating interest
rate of 6.2% at March 31, 2000 and 6.1% at
December 31, 1999) 3,470 2,741
Australian Dollar borrowings - (floating
interest rate of 8.02% at March 31, 2000 and
7.78% at December 31, 1999) 4,310 4,658
New Zealand Dollar borrowings - (floating
interest rate of 8.5% at March 31, 2000 and
8.42% at December 31, 1999) 1,393 1,464
Industrial Revenue Bonds
Industrial Revenue Bond - due March 2026
(floating interest rate of 4.0% at March 31,
2000 and 5.5% at December 31, 1999) 7,511 7,511
<PAGE> 7
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Industrial Revenue Bond - due annually from
July 1994 to July 2008 (floating interest
rate of 4.4% at March 31, 2000 and 6.5% at
December 31, 1999) 1,600 1,600
Industrial Revenue Bond - due annually from
June 2002 to June 2007 (floating interest
rate of 4.1% at March 31, 2000 and 5.6% at
December 31, 1999) 1,050 1,050
Notes Payable
Senior Subordinated Notes, U.S. Dollar
borrowing - due 2008 (fixed interest rate of
9.375%) 150,000 150,000
Note payable, Dutch Guilder borrowing - due
monthly from November 1994 to October 2004
(fixed interest rate of 8.85%) 894 1,007
Note payable, Dutch Guilder borrowing - due
June 2000 (fixed interest rate of 7.05%) 1,659 1,748
Other borrowings 2,186 2,470
--------- ---------
Total debt 458,479 456,590
Less - current maturities (1,991) (2,131)
--------- ---------
Total long-term debt $ 456,488 $ 454,459
========= =========
</TABLE>
See Item 2. - Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital
Resources for a further discussion of the GBC's credit
facilities.
(3) Earnings Per Share
In accordance with SFAS No. 128, net income per common share was
computed as follows (000's omitted, except per share amounts):
<TABLE>
<CAPTION>
Three months ended
March 31,
2000 1999
-------- ---------
<S> <C> <C>
(A) Net (loss) income
available to common
Shareholders $ (74) $ 1,316
======= =======
(B) Weighted average number of
common shares outstanding (1) 15,734 15,729
Additional common shares
issuable under employee
stock options using the
treasury stock method -- 133
------- -------
(C) Weighted average number of
common shares outstanding
assuming the exercise of
stock options (1) 15,734 15,862
======= =======
Net (loss) income per
common share (2) (A) / (B) $ 0.00 $ 0.08
======= =======
Net (loss) income per common
share, assuming dilution
(2) (A) / (C) $ 0.00 $ 0.08
======= =======
</TABLE>
(1) Weighted average shares includes both Common Stock and Class B
Common Stock.
(2) Amounts represent per share amounts for both Common Stock and Class
B Common Stock.
<PAGE> 8
(4) Restructuring and Other Expenses
During the first quarter of 2000, GBC recorded restructuring and
other expenses of $1.5 million. The restructuring charge primarily
consists of severance costs and early retirement benefits. Other
expenses consist of consulting fees associated with projects to
rationalize GBC's product line offerings and to reorganize its supply
chain management process.
The components of the restructuring and other expenses are as
follows (000's omitted):
<TABLE>
<CAPTION>
Three months ended
March 31, 2000
--------------
<S> <C>
Severance and early retirement benefits $ 421
Consulting expenses 650
All other 427
---------
$ 1,498
=========
</TABLE>
Management believes that the Company is progressing, as originally
planned, on its previously announced restructuring activities, and
that the restructuring provisions recorded will be adequate to cover
estimated restructuring costs.
Changes in the restructuring reserve for the three months ended
March 31, 2000 were as follows (000's omitted):
<TABLE>
<CAPTION>
Three months ended
March 31, 2000
--------------
<S> <C>
Balance - beginning of
period $ 9,884
Provisions 848
Cash restructuring charges (2,325)
Non-cash restructuring charges (493)
Other (1) (124)
---------
Balance - end of period $ 7,790
=========
(1) Amounts primarily relate to the effects of foreign
exchange rate changes.
(5) Business Segments
In accordance with SFAS No. 131, GBC has identified four reportable
operating segments based on the amount of revenues and operating
income of these segments. GBC's operating segments are based on the
organization of GBC into business groups comprised of similar
products and services. The Document Finishing Group's revenues are
primarily derived from sales of binding and punching equipment and
related supplies, custom binders and folders, and maintenance and
repair services. The Films Group's revenues are primarily derived
through sales of thermal films, mid-range and commercial high-speed
laminators and large-format digital print laminators and maintenance/
repair services. The Document Finishing Group and the Films Group's
products and services are sold through direct channels to the general
office markets, commercial reprographic centers, educational
<PAGE> 9
and training markets, commercial printers, and to government agencies.
The Office Products Group's revenues are primarily derived from the
sale of binding and laminating equipment and supplies, document
shredders, visual communications products and desktop accessories
through indirect channels including office product superstores,
contract/commercial stationers, wholesalers, mail order companies and
retail dealers. The European Group sells products similar to those sold
by the Office Products and Document Finishing Groups. Expenses incurred
by the four reportable segments described above relate to costs incurred
to manufacture or purchase products and selling, general and
administrative costs. The All Others category presented below primarily
represents expenses of a corporate nature and revenues and expenses for
certain entities not assigned to one of the other four reportable
segments. For internal management purposes, and the presentation below,
operating income is determined as income before taxes excluding interest
expense, other income and expense, and restructuring expenses.
</TABLE>
<TABLE>
<CAPTION>
Unaffiliated Affiliated
Customer Sales Customer Sales Operating Income
Three months ended Three months ended Three months ended
(000's omitted) March 31, March 31, March 31,
2000 1999 2000 1999 2000 1999
------- -------- ------- -------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Document
Finishing Group $ 52,843 $ 49,885 $ 9,384 $ 12,665 $ 7,496 $ 6,795
Films Group 40,493 36,163 4,724 5,432 8,195 7,172
Office Products Group 98,441 87,719 4,298 7,609 8,688 10,293
Europe Group 32,874 35,861 3,086 16,772 (110) (457)
All Others 13,356 11,454 5 67 (10,940) (11,394)
Eliminations - - (21,497) (42,545) - -
-------- -------- ------- -------- ------- ------
Total $238,007 $221,082 $ - $ - $13,329 $12,409
======== ======== ======= ======== ======= =======
</TABLE>
Sales information for the three months ended March 31, 2000 and 1999
by geographical area is summarized below (000's omitted).
<TABLE>
<CAPTION>
Unaffiliated Customer Sales
Three months ended March 31,
2000 1999
--------- --------
<S> <C> <C>
United States $165,989 $149,843
Europe 39,804 43,614
Other International 32,214 27,625
-------- --------
Total $238,007 $221,082
======== ========
</TABLE>
(6) Subsidiary Guarantor Information
During 1998, GBC issued $150 million of 9.375% Senior Subordinated
Notes due 2008 to finance the acquisition of Ibico AG. Each of GBC's
domestic restricted subsidiaries has jointly and severally, fully and
unconditionally guaranteed the Senior Subordinated Notes. Rather than
filing separate financial statements for each guarantor subsidiary with
the Securities and Exchange Commission, GBC has elected to present the
following condensed consolidating results of operations, financial
position and cash flows of the Parent, Guarantors and Non-Guarantors
(in each case carrying investments under the equity method) and the
eliminations necessary to arrive at the information for GBC on a
consolidated basis:
<PAGE> 10
Condensed Consolidating Balance Sheets (000's omitted):
<TABLE>
<CAPTION>
March 31, 2000
Non- Elimina Consoli
Parent Guarantors Guarantors tions dated
--------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 5,134 $ (735) $ 5,535 $ - $ 9,934
Receivables, net 102,244 888 65,959 - 169,091
Inventories, net 68,885 350 58,770 (1,537) 126,468
Deferred tax assets 28,822 403 1,560 - 30,785
Other 17,291 1,587 9,405 - 28,283
Due from affiliates 43,231 14,438 2,492 (60,161) -
-------- ---------- ---------- ---------- ---------
Total current assets 265,607 16,931 143,721 (61,698) 364,561
Net capital assets 101,842 8,417 28,546 - 138,805
Goodwill, net of
amortization 180,978 25,385 73,438 - 279,801
Other 30,765 1,030 6,871 (1,194) 37,472
Investment in subsidiaries 183,173 142,206 - (325,379) -
-------- --------- ---------- ---------- ---------
Total assets $762,365 $ 193,969 $ 252,576 $(388,271) $ 820,639
======== ========= ========== ========= =========
Liabilities and
Stockholders' Equity
Current liabilities:
Accounts payable $ 41,715 $ 872 $ 18,837 $ - $ 61,424
Accrued liabilities 63,275 2,896 25,855 (2,141) 89,885
Notes payable (1) - 14,504 - 14,503
Current maturities of 1,991
long-term debt 239 - 1,752 - -
Due to affiliates 24,031 - 27,487 (51,518) -
-------- ---------- ---------- --------- ---------
Total current
liabilities 129,259 3,768 88,435 (53,659) 167,803
Long-term debt - affiliated 15,482 (15,482) -
Long-term debt, less
current maturities 451,560 - 4,928 - 456,488
Other long-term liabilities 14,650 332 5,084 - 20,066
Deferred tax liabilities 20,005 5,299 4,087 - 29,391
Stockholders' equity:
Common stock - 1,962 5 3,518 (3,523) 1,962
Class B common stock 300 - - - 300
Additional paid-in capital 22,010 94,060 155,028 (249,088) 22,010
Retained earnings 163,645 94,716 (11,697) (83,019) 163,645
Treasury stock (27,096) - - - (27,096)
Accumulated other
comprehensive income (13,930) (4,211) (12,289) 16,500 (13,930)
-------- -------- ---------- --------- ---------
Total stockholders'
equity 146,891 184,570 134,560 (319,130) 146,891
-------- -------- ---------- --------- ---------
Total liabilities and
stockholders' equity $762,365 $193,969 $ 252,576 $(388,271) $ 820,639
======== ======== ========== ========= =========
</TABLE>
<PAGE> 11
<TABLE>
<CAPTION>
December 31, 1999
Parent Guarantors Non- Elimina- Consoli
Guarantors tions dated
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 4,469 $ (596) $ 7,195 $ - $ 11,068
Receivables, net 97,699 888 64,629 - 163,216
Inventories, net 68,469 308 57,570 - 126,347
Deferred tax assets 28,835 403 1,578 - 30,816
Other 15,480 1,759 10,347 - 27,586
Due from affiliates 49,762 13,934 (5,926) (57,770) -
--------- -------- ------- -------- -------
Total current assets 264,714 16,696 135,393 (57,770) 359,033
Net capital assets 103,514 8,450 29,627 - 141,591
Goodwill, net of
amortization 182,702 25,573 74,784 - 283,059
Other 31,130 954 7,052 (327) 38,809
Investment in subsidiaries 180,867 151,755 - (332,622) -
-------- -------- -------- --------- --------
Total assets $762,927 $203,428 $246,856 $(390,719) $822,492
======== ======== ======== ========= ========
Liabilities and
Stockholders' Equity
Current liabilities:
Accounts payable $42,864 $1,090 $20,533 $ - $ 64,487
Accrued liabilities 61,632 2,791 26,420 (2,141) 88,702
Notes payable (1) - 13,408 - 13,407
Current maturities of
long-term debt 245 - 1,886 - 2,131
Due to affiliates 24,593 - 11,204 (35,797) -
-------- ------- ------- --------- -------
Total current
liabilities 129,333 3,881 73,451 (37,938) 168,727
Long-term debt -
affiliated - - 22,300 (22,300) -
Long-term debt, less
current maturities 449,070 - 5,389 - 454,459
Other long-term liabilities 14,908 332 5,056 - 20,296
Deferred tax liabilities 20,005 5,299 4,095 - 29,399
Stockholders' equity:
Common stock 1,962 5 3,426 (3,431) 1,962
Class B common stock 300 - - - 300
Additional paid-in capital 22,010 95,717 154,695 (250,412) 22,010
Retained earnings 163,719 95,609 (12,339) (83,270) 163,719
Treasury stock (27,096) - - - (27,096)
Accumulated other compre-
hensive income (11,284) 2,585 (9,217) 6,632 (11,284)
--------- -------- -------- --------- --------
Total stockholders'
equity 149,611 193,916 136,565 (330,481) 149,611
--------- -------- -------- --------- -------
Total liabilities and
stockholders' equity $762,927 $203,428 $246,856 $(390,719) $822,492
========= ======== ======== ========= ========
</TABLE>
<PAGE> 12
Condensed Consolidating Statements of Income (000's omitted):
<TABLE>
<CAPTION>
Three months ended March 31, 2000
Parent Guarantors Non- Elimina Consoli
Guarantors tions dated
---------------------------------------------------
<S> <C> <C> <C> <C> <C>
Unaffiliated sales $ 165,989 $ - $ 72,018 $ - $238,007
Affiliated sales 13,678 - 4,227 (17,905) -
--------- --------- ----------- --------- ---------
Net sales 179,667 - 76,245 (17,905) 238,007
Costs and expenses:
Product cost of sales,
including development
and engineering 107,640 (102) 48,075 (17,851) 137,762
Selling, service and
administrative 60,128 11 24,041 - 84,180
Amortization of goodwill
and related intangibles 2,030 188 518 - 2,736
Interest expense 11,177 209 690 (433) 11,633
Restructuring and other
expenses 717 - 781 - 1,498
Other (income) expense (286) (711) 1,050 293 346
-------- -------- ---------- --------- --------
(Loss) income before taxes
and undistributed
earnings of wholly owned
subsidiaries (1,739) 405 1,090 96 (148)
Income taxes (821) 202 545 - (74)
-------- -------- ---------- --------- --------
(Loss) income before
undistributed earnings
of wholly owned
subsidiaries (918) 203 545 96 (74)
Undistributed (loss) earnings
of wholly-owned subsidiaries 844 501 - (1,345) -
------- -------- --------- --------- --------
Net (loss) income $ (74) $ 704 $ 545 $(1,249) $ (74)
======= ======== ========= ========= ========
</TABLE>
<TABLE>
<CAPTION>
Three months ended March 31, 1999
Parent Guarantors Non- Elimina- Consoli
Gurantors tions dated
------- ---------- --------- -------- ----------
<S> <C> <C> <C> <C> <C>
Unaffiliated sales $149,843 $ - $ 71,239 $ - $ 221,082
Affiliated sales 16,574 - 20,314 (36,888) -
-------- -------- -------- ------- ---------
Net sales 166,417 - 91,553 (36,888) 221,082
Costs and expenses:
Product cost of sales,
including development and
engineering 99,683 185 64,123 (36,922) 127,069
Selling, service and
administrative 53,800 27 25,113 - 78,940
Amortization of goodwill and
related intangibles 1,785 331 548 - 2,664
Interest expense 9,708 327 1,015 (662) 10,388
Other (income) expense (852) (56) 54 662 (192)
------ ------ ------ ------- -------
Income (loss) before taxes
and undistributed earnings
of wholly owned
subsidiaries 2,293 (814) 700 34 2,213
Income taxes 929 (330) 284 14 897
------ ----- ------ ------- -------
Income (loss) before undis--
tributed (loss) earnings
of wholly owned
subsidiaries 1,364 (484) 416 20 1,316
Undistributed (loss) earnings
of wholly-owned subsidiaries (48) 594 - (546) -
------ ----- ------ ------- ------
Net income (loss) $1,316 $ 110 $ 416 $ (526) $1,316
====== ===== ====== ======= ======
</TABLE>
<PAGE> 13
Condensed Consolidating Statements of Cash Flows (000's omitted):
<TABLE>
<CAPTION>
Three months ended March 31, 2000
Parent Guarantors Non- Elimina- Consoli-
Guarantors tions dated
------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Net cash (used in) provided
by operating activities $ (847) $ 70 $ (637) $ (425) $ (1,875)
Investing activities:
Capital expenditures (2,527) (209) (992) - (3,728)
Proceeds from sale
of plant and equipment 21 - 132 - 153
------- --------- -------- ------- --------
Net cash (used in) investing
activities (2,506) (209) (860) - (3,375)
Financing activities:
(Reduction) increase in
intercompany borrowings (964) - 964 - -
Net change in borrowings-
maturates greater than
90 days 4,038 - (193) - 3,845
(Reduction) in current
portion of long-term debt (5) - (41) - (46)
Payments for debt issuance
costs (98) - - - (98)
----- -------- -------- --------- -------
Net cash provided by
(used in) financing
activities 2,971 (1,658) (928) - 3,701
Effect of exchange rates on
cash 3,262 - (3,072) 425 615
------ -------- -------- -------- -------
Net increase (decrease) in
cash & cash equivalent 4,538 (139) (5,533) - (1,134)
Cash and cash equivalents at
the beginning of the year 596 (596) 11,068 - 11,068
------- -------- ------- -------- ------
Cash and cash equivalents at
the end of the period $ 5,134 $ (735) $ 5,535 $ - $ 9,934
======= ======== ======= ======== =======
</TABLE>
<PAGE> 14
<TABLE>
<CAPTION>
Three months ended March 31, 1999
Parent Guarantors Non- Elimina Consoli-
Guarantors tions dated
--------- ---------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Net cash provided by
(used in) operating
activities $ 3,972 $ 2,409 $ (2,233) $ - $ 4,148
Investing activities:
Capital expenditures (2,184) (310) (2,689) - (5,183)
Proceeds from sale of plant
and equipment 194 - 5 - 199
-------- --------- --------- -------- ---------
Net cash (used in) invest-
ing activities (1,990) (310) (2,684) - (4,984)
Financing activities:
Net change in borrowings-
maturities of 90 days or
less (1,736) (1,890) 8,285 - 4,659
(Reduction) in current
portion of long-term debt (105) - (124) - (229)
Payments for debt issuance
costs (42) - - - (42)
Dividends paid (1,887) - - - (1,887)
Purchase of treasury stock (429) - - - (429)
Proceeds from the exercise
of stock options 541 - - - 541
------- ------- ------- ------- ------
Net cash (used in) provided by
financing activities (3,658) (1,890) 8,161 - 2,613
Effect of exchange rates on
cash 223 - (808) - (585)
------- ------- -------- ------- ------
Net (decrease) increase in
cash & cash equivalents (1,453) 209 2,436 - 1,192
Cash and cash equivalents at
the beginning of the year 4,049 (650) 2,696 - 6,095
------- ------- -------- ------- ------
Cash and cash equivalents at
the end of the period $2,596 $(441) $5,132 $ - $7,287
====== ======= ======== ====== ======
</TABLE>
<PAGE> 15
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following narrative discusses the results of operations,
liquidity and capital resources for GBC on a consolidated
basis. This section should be read in conjunction with
GBC's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations"
contained therein.
Results of Operations - Quarter Ended March 31, 2000
compared to Quarter Ended March 31, 1999
Sales
Net sales for the first quarter of 2000 increased 7.7% to
$238.0 million compared to the first quarter of 1999.
Net sales by business segment are summarized below (000's omitted):
Net Sales
Quarter ended March 31,
----------------------
2000 1999
------ ------
<TABLE>
<CAPTION>
<S> <C> <C>
Document Finishing Group $ 52,843 $ 49,885
Films Group 40,493 36,163
Office Products Group 98,441 87,719
Europe Group 32,874 35,861
Other 13,356 11,454
-------- --------
Net sales $238,007 $221,082
======== ========
Sales for the Document Finishing Group increased by $3.0 million
or 5.9% in the first quarter of 2000 when compared to the first
quarter of 1999. The increase was primarily driven by higher sales
of stock binders in the Group's Information Packaging division
along with stronger sales in Mexico. The Films Group's sales
increased by $4.3 million or 12.0% in the first quarter of 2000
when compared to the first quarter of 1999 due to significant
increases in the Group's Digital Print Finishing business and
moderate increases in Commercial Films. The Office Products Group's
sales increased by $10.7 million or 12.2% in the first quarter of
2000 when compared to the first quarter of 1999. Sales increases
occurred across most core product catergories as well as different
customers, and are primarily due to stronger market conditions in
the U.S. as well as the "Plan-O-Gram" changes made in 1999. Net
sales in Europe decreased by $3.0 million or 8.3% in the first
quarter of 2000 when compared to the first quarter of 1999. This
decrease was anticipated as a result of the decision to exit the
manufacturing of unprofitable visual communications products in the
United Kingdom in the third quarter of 1999. Other sales increased
primarily due to stronger sales in Japan.
<PAGE> 16
Gross Margins, Costs and Expenses
Gross profit margin in the first quarter of 2000 was 42.1%, which
was relatively flat compared to the 42.5% gross profit margin for
the first quarter of 1999.
Selling, service and administrative expenses increased 6.6% in the
first quarter of 2000 compared to 1999. However, as a percentage
of sales, selling, service and administrative expenses decreased
by 0.3 percentage points to 35.4% in 2000 as compared to 35.7% in
1999. Within the Office Products Group, selling expenses were
negatively impacted by significantly higher customer rebate and
allowance programs during the first quarter of 2000 compared to 1999.
Expenses realted to fiscal year 2000 programs costs are comparable
to the full year 1999 costs (as a percentage of sales), but are
higher in the first quarter of 2000 compared to 1999 due to the
many of the 1999 customer programs not being finalized until mid-
1999. Selling, service and administrative expenses for Document
Finishing and Films Groups were relatively flat in 2000 compared to
1999. Selling, service and adminstrative expenses in Europe also
declined significantly in the first quarter of 2000 when compared
to the first quarter of 1999 as a result of the cost saving
programs discussed above.
Operating Income
Operating income for GBC's business segments is summarized below
(000's omitted). This presentation of operating income excludes
restructuring and other expenses, interest expense, and other
income and expense.
Operating Income
Quarter ended March 31,
----------------------
2000 1999
------- -------
Document Finishing Group $ 7,496 $ 6,795
Films Group 8,195 7,172
Office Products Group 8,688 10,293
Europe Group (110) (457)
Other (10,940) (11,394)
------- -------
Operating income $13,329 $12,409
======= =======
Operating income for the first quarter of 2000 increased 7.4% or
$0.9 million compared to the first quarter of 1999. Operating income
in the Document Finishing and Films groups was favorably impacted by
the higher sales levels while operating expenses were relatively
flat in 2000 when compared to 1999. The Office Products Group's
decrease in operating income was due to the higher program costs
discussed above. Europe's operating loss was reduced by $0.3 million,
which resulted from lower sales and gross profit, which were more
than offset by lower operating expenses as a result of management's
cost saving programs.
Interest expense increased $1.2 million to $11.6 million in the
first quarter of 2000 when compared to $10.4 million in the first
quarter of 1999. Average outstanding borrowings during the first
quarter of 2000 were approximately $54.0 million lower than in the
first quarter of 1999 as a result of repayments made through 1999.
Lower interest expense
<PAGE> 17
resulting from the lower outstanding balances were offset by
higher average interest rates during the first quarter of 2000, as
well as higher interest rate spreads resulting from the amendment of
GBC's revolving credit facility in the fourth quarter of 1999.
Amortization of goodwill and related intangibles was relatively
flat in the first quarter of 2000 compared to the same quarter of
1999. Other expense was $0.3 million in the first quarter of 2000,
compared to income of $0.2 million in 1999. The most significant
factor affecting this decrease was currency gains experienced in
the first quarter of 1999, compared to a slight loss in 2000.
Restructuring and Other Expenses
During the first quarter of 2000, GBC recorded a $0.75 million
after-tax charge ($1.5 million pre-tax), or $.05 per share for
restructuring and related expenses. Included in this charge was
approximately $0.85 million for the restructuring of certain
distribution operations in Europe (primarily employee severance
costs), and $0.65 million related to the supply chain management
program. See Note 4 to the Condensed Consolidated Financial Statements.
Income Taxes
GBC's worldwide effective tax rate for the first quarter of 2000
was a benefit of 50.0%, compared to an expense rate of 40.5% in
1999. The 2000 tax rate is significantly impacted by the mix of
earnings and losses among GBC's foreign subsidiaries and the low
level of pre-tax earnings in the U.S., which has a lower statutory
rate than many foreign countries in which GBC operates. The 1999 tax
rate was based on higher pre-tax rate earnings during the first
quarter of 1999 and anticipated earnings for the 1999 fiscal year.
Net Loss
GBC incurred a net loss of $0.1 million for the first quarter of
2000 ($0.00 per share), which was a decrease of $1.4 from net income
of $1.3 million ($0.08 per share) reported in the first quarter of
1999. The loss experienced during the first quarter of 2000 was
primarily a result of the restructuring and related expenses and
the higher interest costs during the quarter.
Liquidity and Capital Resources
Management assesses the Company's liquidity in terms of its overall
debt capacity and ability to generate cash from operations to fund
its operating and investing activities. Significant factors affecting
the management of liquidity are cash flows generated from operating
activities, capital expenditures, customer financing requirements,
adequate bank lines of credit and financial flexibility to attract
long-term captial with satisfactory terms. GBC's primary sources of
liquidity and capital resources were internally-generated cash flows,
borrowings under GBC's revolving credit facilities and short-term
borrowings from banks.
GBC's cash and cash equivalents decreased by $1.1 million as of
March 31, 2000 as compared to December 31, 1999 primarily due to
cash used to fund operating activities and capital expenditures,
which was partially offset by proceeds generated from additional
borrowings.
<PAGE> 18
Management believes that GBC's SKU rationalization and supply chain
management program may yield significant benefits in future periods,
and may favorably impact cash flows from operating activities.
Cash used in operating activities was $1.9 million for the quarter
ended March 31, 2000, compared to $4.1 million of cash provided by
operating activities for the first quarter of 1999. The primary
uses of cash during the first quarter of 2000 were to fund accounts
receivable levels resulting from higher sales levels. Operating
cash flows for the first quarter of 1999 were favorably impacted by
significant reductions in accounts receivable from a historically
high level at December 1998.
Net cash used in investing activities was $3.6 million for the
first three months of 2000 as compared to $5.0 million in the first
three months of 1999, primarily due to capital expenditures of $3.7
and $5.2 million, respectively.
Net cash provided by financing activities, mainly from increases
in borrowings under GBC's credit facilities, was $3.7 million for
the first three months of 2000 as compared to $2.6 million in the
first three months of 1999. The change between 1999 and 2000 was
primarily due to the Company's dividend policy. Currently, GBC is
restricted from paying dividends under the terms of its Revolving
Credit Facility. Cash dividends paid during the first three months
of 1999 were $1.9 million, or $.12 per share.
GBC has access to various U.S. and international credit facilities,
including a multicurrency revolving credit facility established on
January 13, 1997 (the "Revolving Credit Facility") with a group of
international banks which provide for up to $410 million of revolving
credit borrowings through January 2002. The Revolving Credit Facility
was amended and restated on November 12, 1999 to provide GBC with
additional financial flexibility. Management believes that the
amended facility will provide GBC with the liquidity necessary to
meet currently-anticipated operating and capital requirements.
Outstanding borrowings under the Revolving Credit Facility totaled
$293.6 million at March 31, 2000.
Under the most restrictive of the covenants applicable at March 31,
2000, GBC must meet a specified EBITDA target set for each quarter
through the first fiscal quarter of 2001. The amendment and
restatement also provides for more flexible covenants regarding net
worth levels, future-starting leverage and interest coverage hurdles,
the pledging of substantially all of the assets of General Binding
Corporation and its domestic subsidiaries as collateral, and increases
in interest rate spreads payable under the facility, which vary
depending upon the financial performance of the Company. In addition,
there are certain restrictions on dividend payments, additional
indebtedness, investments and capital expenditures. GBC was in
compliance with these covenants as of March 31, 2000.
<PAGE> 19
Forward Looking Statements
Certain statements under the caption "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and
elsewhere in this Report constitute "forward looking statements"
within the meaning of Section 21E(I)(1) of the Exchange Act. Such
forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause actual results and
performance of GBC to be materially different than anticipated
future results and performance expressed or implied by such
forward-looking statements. Such factors include, among other
things, the following: competition within the office products and
lamination film products markets, the effects of economic conditions,
the issues associated with the restructuring of certain of GBC's
operations, the ability of GBC's distributors to successfully market
and sell the Company's products, the ability of GBC to obtain
capital to finance anticipated operating and capital requirements,
the availability and price of raw materials, dependence on certain
suppliers of manufactured products, the effect of consolidation in
the office products industry and other factors indicated in GBC's
registration statements and reports filed with the SEC. These
important factors may also cause the forward-looking statements made
by GBC in this Report, including but not limited to those contained
under the caption "Management's Discussion and Analysis of Financial
Condition and Results of Operations," to be materially different from
the actual results achieved by the Company. In light of these and
other uncertainties, the inclusion of any forward-looking statements
herein should not be regarded as a representation by GBC that the
Company's plans and objectives will be achieved.
<PAGE> 20
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form-8K
(a) Exhibit 27:
Financial Data Schedule for the three months ended March 31, 2000.
(b Reports on Form 8-K: None.
<PAGE> 21
SIGNATURE
Pursuant to the requirements of Section 13 or 19(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/ Terry G. Westbrook
----------------------
Terry G. Westbrook
Senior Vice President and Chief
Financial Officer
May 15, 2000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 9,934
<SECURITIES> 0
<RECEIVABLES> 184,631
<ALLOWANCES> (15,540)
<INVENTORY> 126,468
<CURRENT-ASSETS> 364,561
<PP&E> 256,152
<DEPRECIATION> (117,347)
<TOTAL-ASSETS> 820,639
<CURRENT-LIABILITIES> 167,803
<BONDS> 456,488
0
0
<COMMON> 2,262
<OTHER-SE> 144,629
<TOTAL-LIABILITY-AND-EQUITY> 820,639
<SALES> 238,007
<TOTAL-REVENUES> 238,007
<CGS> 137,762
<TOTAL-COSTS> 220,689
<OTHER-EXPENSES> 4,580
<LOSS-PROVISION> 1,253
<INTEREST-EXPENSE> 11,633
<INCOME-PRETAX> (148)
<INCOME-TAX> (74)
<INCOME-CONTINUING> (74)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (74)
<EPS-BASIC> (0.00)
<EPS-DILUTED> (0.00)
</TABLE>
