<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1994 Commission file number 1-7088
------------------ ------
AMERICAN BUSINESS PRODUCTS, INC.
- - ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-1030529
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No)
2100 RiverEdge Parkway, Suite 1200, Atlanta, Georgia 30328
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(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 10,691,669 shares
----------------------------- ----------------------------------
(Class) (Outstanding at September 30,1994)
Exhibit Index on Page 6
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PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
The Consolidated Balance Sheets of the Company as of September 30, 1994, and
December 31, 1993, and the Consolidated Income Statements of the Company for
the three months and nine months ended September 30, 1994, and 1993, are
incorporated herein by reference to the Company's Quarterly Report to
Shareholders for the nine months ended September 30, 1994, attached hereto as
Exhibit 19. Set forth below are the Consolidated Statements of Cash Flows of
the Company for the nine months ended September 30, 1994, and 1993, along with
certain notes to the financial statements.
AMERICAN BUSINESS PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993 (UNAUDITED)
<TABLE>
<CAPTION>
1994 1993
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
- - ------------------------------------
Income from operations $ 12,523,000 $11,894,000
Adjustments to reconcile net income to net
cash provided by operating activities 7,015,000 1,559,000
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Net cash provided by operating activities 19,538,000 13,453,000
CASH FLOWS USED IN INVESTING ACTIVITIES
- - ---------------------------------------
Acquisition, net of cash acquired -25,914,000
(Increase) in annuity contracts -6,229,000
Decrease (increase) in cash value of
life insurance 864,000 -2,937,000
Additions to plant and equipment -10,297,000 -12,590,000
Other 197,000 327,000
----------- -----------
Net cash used in investing activities -9,236,000 -47,343,000
CASH FLOWS USED BY FINANCING ACTIVITIES
- - ---------------------------------------
(Decease) Increase in long-term debt -9,654,000 31,047,000
Dividends paid -6,411,000 -6,010,000
Other 129,000 -236,000
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Net cash (used) provided by financing -15,936,000 24,801,000
activities
Net (decrease) in cash and
cash equivalents -5,634,000 -9,089,000
Cash and cash equivalents at beginning
of year 30,151,000 30,025,000
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Cash and cash equivalents at end of period $24,517,000 $20,936,000
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</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. All
such adjustments are of a normal recurring nature. 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: 10,685,434 and 10,682,712 for the
nine month periods and 10,689,916 and 10,679,167 for the third quarter
ended September 30, 1994, and September 30, 1993, respectively.
4. Inventories
Inventories consisted of the following at the dates indicated:
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
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<S> <C> <C>
Products finished or in process $25,184,000 $24,510,000
Raw materials 20,744,000 20,771,000
Supplies 651,000 406,000
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Total $46,579,000 $45,687,000
=========== ===========
</TABLE>
5. Change in Accounting Principle
In January, 1994, the Company adopted Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Postemployment Benefits,"
the cumulative effect of which was accounted for as a change in accounting
principle. This change reduced net income for the first quarter and first
nine months of 1994 by $605,000.
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 2.7 to 1 at September 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 third quarter and first nine months of 1994 increased by
15.6% and 18.6% 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 and interest
expense expressed as a percentage of sales for the third quarter of 1994
were 70.3%, 23.0% and 1.7%, respectively, compared to 70.7%, 23.3% and
1.6% for the third 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 nine months of
1994 were 70.2%, 23.1% and 1.7%, respectively, compared to 70.3%, 23.6%
and 1.3% for the first nine months of 1993. The changes in these
percentages resulted from the same reasons explained above for the third
quarter.
The effective income tax rates for the third quarter and first nine months
of 1994 were 40.5% and 41.0% compared to 36.8% and 35.4% 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 6. Exhibits and Reports on Form 8-K.
a. Exhibits attached hereto and incorporated herein by reference:
Number Description
- - ------ -----------
19 Quarterly Report to Stockholders for the nine months ended September
30, 1994.
27 Financial Data Schedules for Third Quarter 1994 10-Q (for the SEC use
only)
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: November 4, 1994 /S/ W. C. Downer
--------------------------------
W. C. Downer,
Vice President - Finance
(Chief Financial and Accounting
Officer and Duly Authorized Officer)
5
<PAGE> 6
AMERICAN BUSINESS PRODUCTS, INC.
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Number Description Page Number
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<S> <C> <C>
19 Quarterly Report to Stockholders 7
for the nine months ended September 30, 1994
27 Financial Data Schedules for Third Quarter 1994 10-Q (for the SEC use only) 11
</TABLE>
6
<PAGE> 1
EXHIBIT 19
AMERICAN BUSINESS PRODUCTS, INC.
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[LOGO]
TO OUR SHAREHOLDERS:
American Business Products, Inc. achieved record sales and earnings for both the
third quarter and the first nine months of 1994. Sales for the quarter increased
almost 16% and net income advanced more than 24%.
For the three months ended September 30, sales rose 15.6% to $138.2 million
compared with $119.5 million for the third quarter of 1993. This year's third
quarter net income was up 24.4% to $4.5 million or $.42 per share compared with
$3.6 million or $.34 per share for the third quarter last year.
Sales for the first nine months of 1994 increased 18.6% to $418.3 million versus
$352.6 million last year. Income for the nine months was $13.1 million or $1.23
per share before the first quarter non-cash charge for the FASB 112 accounting
changes. Net income after the FASB 112 charge of $604,520 was $12.5 million or
$1.17 per share. For the comparable period last year net income was $11.9
million or $1.11 per share.
This encouraging performance by our people was supported by the improving
economy, and we expect this trend to continue for the balance of the year.
Although paper costs have increased for our industries since April and could
increase further, we have maintained our profit margins, and with continuing
economic growth we believe such cost increases should be recovered.
Your Board of Directors has approved a regular quarterly dividend of $.20 per
share payable December 15 to shareholders of record on December 1.
We anticipate continuing growth for another record year.
<TABLE>
<S> <C>
Thomas R. Carmody Robert W. Gundeck
Chairman and President and
Chief Executive Officer Chief Operating Officer
</TABLE>
October 26, 1994
<TABLE>
<CAPTION>
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FINANCIAL HIGHLIGHTS THIRD QUARTER NINE MONTHS
PERIOD ENDED SEPTEMBER 30 1994 1993 1994 1993
<S> <C> <C> <C> <C>
Net sales $138,186,000 $119,516,000 $418,270,000 $352,602,000
Income before cumulative effect of
changes in accounting principles 4,463,000 3,586,000 13,128,000 11,894,000
Income per common share before cumulative
effect of changes in accounting
principles .42 .34 1.23 1.11
Net income 4,463,000 3,586,000 12,523,000 11,894,000
Net income per common share .42 .34 1.17 1.11
Dividends per common share .20 .1875 .60 .5625
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</TABLE>
<PAGE> 2
CONSOLIDATED INCOME STATEMENTS
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<TABLE>
<CAPTION>
1994 1993
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<S> <C> <C>
QUARTER ENDED SEPTEMBER 30
Net Sales.................................................. $138,186,000 $119,516,000
------------ ------------
Cost of Goods Sold......................................... 97,171,000 84,461,000
Selling and Administrative Expenses........................ 31,825,000 27,824,000
------------ ------------
128,996,000 112,285,000
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Operating Income........................................... 9,190,000 7,231,000
Other Income (Expense):
Interest expense......................................... (2,366,000) (1,923,000)
Miscellaneous -- net..................................... 672,000 366,000
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Income Before Income Taxes................................. 7,496,000 5,674,000
Provision for Income Taxes................................. 3,033,000 2,088,000
------------ ------------
Net Income................................................. $ 4,463,000 $ 3,586,000
============ ============
Earnings per Common Share.................................. $ .42 $ .34
Dividends per Common Share................................. .20 .1875
Average Number of Common Shares Outstanding................ 10,689,916 10,679,167
NINE MONTHS ENDED SEPTEMBER 30
Net Sales.................................................. $418,270,000 $352,602,000
------------ ------------
Cost of Goods Sold......................................... 293,793,000 247,728,000
Selling and Administrative Expenses........................ 96,619,000 83,032,000
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390,412,000 330,760,000
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Operating Income........................................... 27,858,000 21,842,000
Other Income (Expense)
Interest expense......................................... (7,000,000) (4,671,000)
Miscellaneous -- net..................................... 1,407,000 1,237,000
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Income Before Income Taxes and Cumulative Effect of Changes
in Accounting Principles................................. 22,265,000 18,408,000
Provision for Income Taxes................................. 9,137,000 6,514,000
------------ ------------
Income Before Cumulative Effect of Changes in Accounting
Principles............................................... 13,128,000 11,894,000
Cumulative Effect of Changes in Accounting Principles...... (605,000)
------------ ------------
Net Income (Loss).......................................... $ 12,523,000 $ 11,894,000
============ ============
Per Common Share:
Income before cumulative effect of changes in accounting
principles............................................ $ 1.23 $ 1.11
Net income............................................... 1.17 1.11
Dividends Per Common Share................................. .60 .5625
Average Number of Common Shares Outstanding................ 10,685,434 10,682,712
</TABLE>
(Unaudited)
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<PAGE> 3
CONSOLIDATED BALANCE SHEETS
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<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1994 1993
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<S> <C> <C>
Current Assets
Cash and cash equivalents.............................. $ 24,517,000 $30,151,000
Accounts receivable, less allowances of $2,307,000 and
$2,218,000.......................................... 69,770,000 65,000,000
Inventories............................................ 46,579,000 45,687,000
Other.................................................. 2,831,000 930,000
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Total Current Assets........................... 143,697,000 141,768,000
Plant And Equipment -- At Cost
Land................................................... 5,940,000 5,940,000
Buildings and improvements............................. 50,536,000 48,475,000
Machinery and equipment................................ 128,054,000 121,805,000
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184,530,000 176,220,000
Less accumulated depreciation.......................... 91,522,000 81,772,000
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93,008,000 94,448,000
Intangible Assets From Acquisitions
Goodwill, less amortization of $2,369,000 and
$1,651,000.......................................... 31,765,000 31,634,000
Other, less amortization of $3,773,000 and
$3,173,000.......................................... 2,649,000 3,274,000
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34,414,000 34,908,000
Deferred Income Taxes.................................... 8,862,000 7,963,000
Other Assets............................................. 21,295,000 23,105,000
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$301,276,000 $302,192,000
============ ============
Current Liabilities
Accounts payable....................................... $ 36,877,000 $36,241,000
Salaries and wages..................................... 9,622,000 8,530,000
Profit sharing contributions........................... 4,238,000 4,106,000
Income taxes........................................... 200,000
Current maturities of long-term debt................... 1,949,000 6,253,000
------------ -----------
Total Current Liabilities...................... 52,686,000 55,330,000
Long-Term Debt And Capital Leases........................ 80,231,000 85,580,000
Supplemental Retirement Benefits......................... 12,776,000 12,880,000
Postretirement Benefits.................................. 22,251,000 21,309,000
Stockholders' Equity
Common stock -- $2 par value; authorized 50,000,000
shares, issued 10,783,047 and 10,774,484 shares..... 21,566,000 21,549,000
Additional paid-in capital............................. 104,000
Retained earnings...................................... 113,832,000 107,728,000
Foreign currency translation adjustment................ (433,000) (433,000)
------------ -----------
135,069,000 128,844,000
Less 91,378 and 92,391 shares of Common Stock in
treasury -- at cost................................. 1,737,000 1,751,000
------------ -----------
133,332,000 127,093,000
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$301,276,000 $302,192,000
============ ============
</TABLE>
(Unaudited)
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<PAGE> 4
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.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENT OF AMERICAN BUSINESS PRODUCTS, INC. FOR THE THIRD
QUARTER ENDED SEPTEMBER 30, 1994, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<CASH> 24,517,000
<SECURITIES> 0
<RECEIVABLES> 72,077,000
<ALLOWANCES> 2,307,000
<INVENTORY> 46,579,000
<CURRENT-ASSETS> 143,697,000
<PP&E> 184,530,000
<DEPRECIATION> 91,522,000
<TOTAL-ASSETS> 301,276,000
<CURRENT-LIABILITIES> 52,686,000
<BONDS> 80,231,000
<COMMON> 21,566,000
0
0
<OTHER-SE> 111,766,000
<TOTAL-LIABILITY-AND-EQUITY> 301,276,000
<SALES> 418,270,000
<TOTAL-REVENUES> 418,270,000
<CGS> 293,793,000
<TOTAL-COSTS> 390,412,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,000,000
<INCOME-PRETAX> 22,265,000
<INCOME-TAX> 9,137,000
<INCOME-CONTINUING> 13,128,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 605,000
<NET-INCOME> 12,523,000
<EPS-PRIMARY> 1.17
<EPS-DILUTED> 1.17
</TABLE>
