<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1994 Commission file number 1-7088
----------------- ------
AMERICAN BUSINESS PRODUCTS, INC.
- - -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-1030529
- - -------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No)
2100 RiverEdge Parkway, Suite 1200, Atlanta, Georgia 30328
- - -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (404) 953-8300
--------------------------
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 No X
--- ---
Common Stock, $2.00 par value 10,686,406 shares
----------------------------- ---------------------------------
(Class) (Outstanding at June 30, 1994)
Exhibit Index on Page 7
1
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PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
The Consolidated Balance Sheets of the Company as of June 30, 1994, and
December 31, 1993 and the Consolidated Income Statements of the Company for the
three months and six months ended June 30, 1994, and 1993, are incorporated
herein by reference to the Company's Quarterly Report to Shareholders for the
six months ended June 30, 1994, attached hereto as Exhibit 19. Set forth below
are the Consolidated Statements of Cash Flows of the Company for the six months
ended June 30, 1994, and 1993.
AMERICAN BUSINESS PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1994, AND 1993 (UNAUDITED)
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Income from operations $ 8,061,000 $ 8,308,000
Adjustments to reconcile net income to net cash
provided by operating activities 1,876,000 -3,619,000
----------- -----------
Net cash(used) provided by operating activities 9,937,000 4,689,000
CASH FLOWS USED IN INVESTING ACTIVITIES
(Increase) in annuity contracts -6,234,000
Decrease (increase)in cash value of life insurance 1,261,000 -2,459,000
Additions to plant and equipment -6,152,000 -10,291,000
Other 52,000 149,000
----------- -----------
Net cash used in investing activities -4,839,000 -18,835,000
CASH FLOWS USED BY FINANCING ACTIVITIES
Dividends paid -4,273,000 -4,008,000
Other -693,000 3,202,000
----------- -----------
Net cash used by financing activities 4,966,000 -806,000
Net (decrease) in cash and cash equivalents 132,000 -14,952,000
Cash and cash equivalents at beginning year 30,151,000 30,025,000
----------- -----------
Cash and cash equivalents at end of period $30,283,000 $15,073,000
=========== ===========
</TABLE>
2
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AMERICAN BUSINESS PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Unaudited Consolidated Financial Statements
The information contained in these consolidated financial statements and
notes is unaudited, but in the opinion of management, all adjustments
necessary for a fair presentation of such information have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to applicable rules and regulations
of the Securities and Exchange Commission. The consolidated financial
statements included herein should be read in conjunction with the audited
financial statements and notes thereto contained in the Company's Annual
Report on Form 10-K for the year ended December 31, 1993.
2. Consolidation Policy
The consolidated financial statements include the accounts of the
Company and its subsidiaries, all of which are wholly-owned. Intercompany
balances and transactions have been eliminated.
3. Net Income Per Share
Net income per common share is based upon the weighted average number of
shares outstanding during each period: 10,683,155 and 10,684,514 for the
six month periods and 10,683,901 and 10,682,969 for the second quarter
ended June 30, 1994, and June 30, 1993, respectively.
4. Inventories
Inventories consisted of the following at the dates indicated:
June 30, 1994 December 31,1993
------------- ----------------
Products finished or in process $24,076,000 $24,510,000
Raw materials 22,149,000 20,771,000
Supplies 625,000 406,000
----------- -----------
Total $46,850,000 $45,687,000
=========== ===========
5. The Company adopted Statement of Financial Accounting Standards
No. 112, "Employers' Accounting for Post-employment Benefits", on
January 1, 1994, and recorded the cumulative effect of this
change on that date.
3
<PAGE> 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
1. Liquidity and Capital Resources
The current ratio increased to 2.8 to 1 at June 30, 1994, from 2.6 to 1
at December 31, 1993.
The Company does not anticipate incurring significant additional debt
and internal cash flows should be sufficient to generate funds for normal
operations.
2. Results of Operations
Sales during the second quarter and first six months of 1994 increased
by 20.8% and 20.2% over sales for the same period of 1993. Without sales
generated by operations acquired in late 1993, the Company's revenues would
have increased by approximately 3% over the same periods in 1993, resulting
principally from an increase in unit sales.
Cost of goods sold, selling and administrative expenses expressed as a
percentage of sales for the second quarter of 1994 were 70.2%, 23.0% and
1.6% respectively compared to 70.7%, 23.5% and 1.3% for the second quarter
of 1993. The decrease in the percentage for cost of goods sold is
attributable principally to better profit margins from operations acquired
in late 1993. The decrease in the percentage for selling and
administrative expenses reflects the Company's continuing efforts to
control expenses. The increase in the percentage for interest expense is
attributable to additional debt incurred in 1993 to finance the
acquisitions mentioned above.
Cost of goods sold, selling and administrative expenses and interest
expense expressed as a percentage of sales for the first six months of 1994
were 70.2%, 23.1% and 1.7%, respectively compared to 70.0%, 23.7% and 1.2%
for the first six months of 1993. The increase in cost of goods sold as a
percentage of sales results from a combination of increased pricing
pressures and a higher profit margin from operations acquired in late
1993. The decrease in the percentage for selling and administrative
expenses and the increase in the percentage for interest expense result
from the same reasons explained above for the second quarter.
The effective income tax rate for the first quarter of 1994 were 43.2%
and 41.3% compared to 35.4% and 34.8% in 1993. These increases were
attributable principally to decreased levels of nontaxable income, an
increase in the federal statutory rate, increased provisions for state
income taxes and to income tax assessments.
4
<PAGE> 5
PART II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The 1994 Annual Meeting of Shareholders of the Company was held on April 27,
1994, and proxies were solicited under Regulation 14A of the Securities
Exchange Act of 1934.
The following nominees for director were elected to serve as director until the
1997 Annual Meeting of Shareholders:
<TABLE>
<CAPTION>
BROKER
FOR WITHHELD NON-VOTES
--------- -------- ---------
<S> <C> <C> <C>
F. Duane Ackerman 9,636,450 42,394 0
John E. Aderhold 9,637,441 41,403 0
Thomas F. Keller 9,636,766 42,078 0
Marvin E. Schmalzried 9,637,747 41,097 0
</TABLE>
The following directors continued in office as directors after the 1994 Annual
Meeting for the following terms:
DIRECTOR TERM EXPIRES
-------- ------------
Thomas R. Carmody 1995
Robert W. Gundeck 1995
Hollis L. Harris 1995
W. Stell Huie 1995
W. Joseph Biggers 1996
Henry Curtis VII 1996
Herbert J. Dickson 1996
G. Harold Northrop 1996
A proposal to amend the 1991 Stock Option Plan was approved as follows:
BROKER
FOR AGAINST ABSTAIN NON-VOTE
- - --- ------- ------- --------
8,451,011 1,150,477 76,694 662
A proposal to adopt the 1993 Directors Stock Incentive approved as follows:
BROKER
FOR AGAINST ABSTAIN NON-VOTE
- - --- ------- ------- --------
9,147,017 460,964 70,202 661
The other matter which was voted upon and approved during the 1994 Annual
Meeting was a proposal to ratify the appointment of Deloitte & Touche as
independent accountants of the Company for the 1994 fiscal year.
5
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BROKER
AFFIRMATIVE NEGATIVE ABSTENTIONS NON-VOTES
- - ----------- -------- ----------- ---------
9,605,881 40,882 32,081 0
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits attached hereto:
Number Description
------ -----------
19 Quarterly Report to Shareholders
for the three months ended June 30, 1994.
b. Reports on Form 8-K.
None
SIGNATURES
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.
AMERICAN BUSINESS PRODUCTS, INC.
--------------------------------
(Registrant)
DATE: August 9, 1994 /S/ W. C. Downer
------------------------------------
W. C. Downer, Vice President-Finance
(Chief Financial and Accounting
Officer and Duly Authorized Officer)
6
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AMERICAN BUSINESS PRODUCTS, INC.
INDEX OF EXHIBITS
Number Description Page Number
- - ------ ----------- -----------
19 Quarterly Report to Shareholders Page 1 - 6
for the three months ended June 30, 1994
7
<PAGE> 1
EXHIBIT 19
(LOGO)
AMERICAN
BUSINESS
PRODUCTS
INC.
QUARTERLY REPORT TO SHAREHOLDERS
6 MONTHS ENDED JUNE 30, 1994
1
<PAGE> 2
AMERICAN BUSINESS PRODUCTS, INC.
- - --------------------------------------------------------------------------------
[LOGO]
TO OUR SHAREHOLDERS:
Record second quarter sales and earnings were achieved as American Business
Products, Inc. gained new momentum for growth. Second quarter sales and net
income both increased more than 20%, while first half results reflected similar
advances.
Sales reached $139.4 million, a second quarter record, up 20.8% over the second
quarter last year. Net income for the quarter increased 20.9% to a second
quarter record of $4.4 million or $.41 per share compared with $3.6 million or
$.34 per share for the second quarter of 1993.
First half sales set a record at $280.1 million, up 20.2%. Income for the period
before the effect of mandated accounting charges (FASB 112) was $8.7 million or
$.81 per share compared with $8.3 million or $.78 per share for the first half
last year. After giving effect to the non-cash charges, net income was $8.1
million or $.75 per share. The one-time accounting charge must be taken in 1994
by all companies providing post-employment benefits to employees.
In the second quarter we had strong performances by our two 1993 acquisitions,
Discount Labels, Inc. and International Envelope Company, as well as our book
manufacturing subsidiary and improving results for our business forms
operations. The performance of our European joint venture was affected by the
slow economy in Europe and the expenses of moving to a new manufacturing
facility in Neuwied, Germany.
We expect to continue the positive trends of the second quarter for the balance
of 1994.
The Board of Directors approved a regular quarterly dividend of $.20 per share
payable September 15 to shareholders of record September 1.
<TABLE>
<S> <C>
Thomas R. Carmody Robert W. Gundeck
Chairman and President and
Chief Executive Officer Chief Operating Officer
</TABLE>
July 27, 1994
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS SECOND QUARTER SIX MONTHS
PERIOD ENDED JUNE 30 1994 1993 1994 1993
<S> <C> <C> <C> <C>
Net sales $139,370,000 $115,338,000 $280,084,000 $233,086,000
Income before cumulative effect of
changes in accounting principles 4,400,000 3,638,000 8,665,000 8,308,000
Income per common share before cumulative
effect of changes in accounting
principles .41 .34 .81 .78
Net income 4,400,000 3,638,000 8,060,000 8,308,000
Net income per common share .41 .34 .75 .78
Dividends per common share .20 .1875 .40 .375
- - -----------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 3
<TABLE>
<CAPTION>
CONSOLIDATED INCOME STATEMENTS
- - ------------------------------------------------------------------------------------------
1994 1993
------------ ------------
<S> <C> <C>
QUARTER ENDED JUNE 30
Net Sales.................................................. $139,370,000 $115,338,000
------------ ------------
Cost of Goods Sold......................................... 97,832,000 81,514,000
Selling and Administrative Expenses........................ 32,021,000 27,116,000
------------ ------------
129,853,000 108,630,000
------------ ------------
Operating Income........................................... 9,517,000 6,708,000
Other Income (Expense):
Interest expense......................................... (2,268,000) (1,484,000)
Miscellaneous -- net..................................... 498,000 405,000
------------ ------------
Income Before Income Taxes................................. 7,747,000 5,629,000
Provision for Income Taxes................................. 3,347,000 1,991,000
------------ ------------
Net Income................................................. $ 4,400,000 $ 3,638,000
============ ============
Earnings per Common Share.................................. $ .41 $ .34
Dividends per Common Share................................. .20 .1875
Average Number of Common Shares Outstanding................ 10,683,901 10,682,969
SIX MONTHS ENDED JUNE 30
Net Sales.................................................. $280,084,000 $233,086,000
------------ ------------
Cost of Goods Sold......................................... 196,622,000 163,267,000
Selling and Administrative Expenses........................ 64,794,000 55,208,000
------------ ------------
261,416,000 218,475,000
------------ ------------
Operating Income........................................... 18,668,000 14,611,000
Other Income (Expense)
Interest expense......................................... (4,634,000) (2,748,000)
Miscellaneous -- net..................................... 735,000 871,000
------------ ------------
Income Before Income Taxes and Cumulative Effect of Changes
in Accounting Principles................................. 14,769,000 12,734,000
Provision for Income Taxes................................. 6,104,000 4,426,000
------------ ------------
Income Before Cumulative Effect of Changes in Accounting
Principles............................................... 8,665,000 8,308,000
Cumulative Effect of Changes in Accounting Principles...... (605,000)
------------ ------------
Net Income (Loss).......................................... $ 8,060,000 $ 8,308,000
============ ============
Per Common Share:
Income Before Cumulative Effect of Changes in Accounting
Principles............................................ $ .81 $ .78
Net Income............................................... .75 .78
Dividends Per Common Share................................. .40 .375
Average Number of Common Shares Outstanding................ 10,683,155 10,684,514
(Unaudited)
- - ------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 4
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
- - -----------------------------------------------------------------------------------------
JUNE 30, DECEMBER 31,
1994 1993
------------ ------------
<S> <C> <C>
Current Assets
Cash and cash equivalents............................... $ 30,283,000 $ 30,151,000
Accounts receivable, less allowances of $2,261,000 and
$2,218,000........................................... 66,014,000 65,000,000
Inventories............................................. 46,850,000 45,687,000
Other................................................... 3,401,000 930,000
------------ ------------
Total Current Assets............................ 146,548,000 141,768,000
Plant And Equipment -- At Cost
Land.................................................... 5,940,000 5,940,000
Buildings and improvements.............................. 49,112,000 48,475,000
Machinery and equipment................................. 126,120,000 121,805,000
------------ ------------
181,172,000 176,220,000
Less accumulated depreciation........................... 88,399,000 81,772,000
------------ ------------
92,773,000 94,448,000
Intangible Assets From Acquisitions
Goodwill, less amortization of $2,133,000 and
$1,651,000........................................... 32,001,000 31,634,000
Other, less amortization of $3,573,000 and $3,173,000... 2,849,000 3,274,000
------------ ------------
34,850,000 34,908,000
Deferred Income Taxes..................................... 8,563,000 7,963,000
Other Assets.............................................. 21,328,000 23,105,000
------------ ------------
$304,062,000 $302,192,000
============ ============
Current Liabilities
Accounts payable........................................ $ 34,762,000 $ 36,241,000
Salaries and wages...................................... 9,552,000 8,530,000
Profit sharing contributions............................ 2,599,000 4,106,000
Income taxes............................................ 200,000
Current maturities of long-term debt.................... 6,183,000 6,253,000
------------ ------------
Total Current Liabilities....................... 53,096,000 55,330,000
Long-Term Debt And Capital Leases......................... 84,860,000 85,580,000
Supplemental Retirement Benefits.......................... 12,839,000 12,880,000
Postretirement Benefits................................... 22,290,000 21,309,000
Stockholders' Equity
Common stock -- $2 par value; authorized 50,000,000
shares, issued 10,777,784 and 10,774,484 shares...... 21,559,000 21,549,000
Additional paid-in capital.............................. 79,000
Retained earnings....................................... 111,509,000 107,728,000
Foreign currency translation adjustment................. (433,000) (433,000)
------------ ------------
132,714,000 128,844,000
Less 91,378 and 92,391 shares of Common Stock in
treasury -- at cost.................................. 1,737,000 1,751,000
------------ ------------
130,977,000 127,093,000
------------ ------------
$304,062,000 $302,192,000
============ ============
(Unaudited)
- - ----------------------------------------------------------------------------------------
</TABLE>
4
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ABP SHAREHOLDER INFORMATION
ABP has a Dividend Reinvestment Plan which is open to all shareholders of ABP
common stock. This Plan allows the reinvestment of dividends on a regular
quarterly basis and accepts optional cash investments from $10 to $1,000 per
month. If you would like more information on this program, you can write to
Diana Coursey, Investor Relations, American Business Products, Inc., P.O. Box
105684, Atlanta, Georgia 30348.
If you have a change of address, need to transfer shares or have other questions
regarding your current ABP holdings you can contact Wachovia Bank of North
Carolina, P.O. Box 3001, Winston-Salem, NC 27102-3001 or call 1 (800) 633-4236.
5
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(LOGO) AMERICAN BUSINESS PRODUCTS, INC.
2100 RIVEREDGE PARKWAY
SUITE 1200
ATLANTA, GA. 30328
404-953-8300
MAILING ADDRESS:
P.O. BOX 105684
ATLANTA, GA. 30348
6
