<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 31, 1995.
( ) Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file no. 1-7088
------
AMERICAN BUSINESS PRODUCTS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-1030529
(State of Incorporation) (I.R.S. Employer Identification No.)
2100 RiverEdge Parkway, Suite 1200, Atlanta, Georgia 30328
(Address of principal executive offices, including zip code)
(770) 953-8300
(Registrant's telephone number, including area code)
---------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- ------------------- -------------------
Common Stock, $2 par value New York Stock Exchange
Common Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
-----------------
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
--- ---
The aggregate market value of the registrant's outstanding Common Stock, $2.00
par value per share, held by non-affiliates of the registrant on March 5, 1996
was $255,038,192.
There were 16,386,497 shares of Common Stock outstanding on March 5, 1996.
DOCUMENTS INCORPORATED HEREIN BY REFERENCE
Portions of the registrant's 1995 Annual Report for the fiscal year ended
December 31, 1995, are incorporated by reference in Parts I and II hereof.
Portions of the registrant's Proxy Statement for the 1996 Annual Meeting of
Shareholders to be held on April 24, 1996, are incorporated by reference in
Part III hereof.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
<PAGE> 2
PART I
------
ITEM 1 - BUSINESS
General
American Business Products was incorporated under the laws of Delaware in
December 1967 to acquire the stock of Curtis 1000 Inc., a producer of envelopes
and forms which has operated since 1882. Hereinafter, American Business
Products, Inc. and its subsidiaries are collectively referred to as the
"Company." In April 1986, the Company was reincorporated under the laws of
Georgia. The Company is one of the nation's leading producers of printed
business supplies, principally envelope products, custom business forms, and
custom labels. Additionally, the Company manufactures and distributes books
for the publishing industry and also is engaged in specialty extrusion coating
and laminating of papers, films, and nonwoven fabrics for packaging.
Business Segments
The Company's product line is composed of three business segments:
business supplies printing, book manufacturing, and specialty extrusion coating
and laminating.
Business supplies printing consists principally of the manufacture of a
wide variety of specialty mailers, envelopes, labels and lightweight packaging;
the printing and production of business forms; and other related products and
services including digital imaging or on-demand printing of various documents
and materials for businesses. The manufacture and distribution of customized
specialty labels is a rapidly growing part of this segment. The company
produces a complete line of standard and special types and sizes of commercial
mailing products including specialty mailers utilizing multi-part forms and
envelopes. Business forms products and services include customized continuous
forms for computers and word processors, custom cutsheet and roll laser paper
for laser printers, the imprinting of variable, customized data on forms,
electronic forms, and the management of forms inventories for customers.
Business supplies printing accounted for 75% of the Company's sales in 1995,
76% in 1994 and 74% in 1993.
Book manufacturing consists of the printing and binding of both hard cover
and soft cover books for the publishing industry. In addition, the Company
provides storage and order fulfillment services by shipping orders to
publishers' customers from two large distribution centers. This business
segment accounted for 9% of the Company's sales in 1995, 9% in 1994, and 9% in
1993.
Specialty extrusion coating and laminating consists of applying plastic
coatings in varying degrees of thickness to rolls of paper, film or fabric.
The Company also prints and metalizes certain of these products for customers.
The materials produced by this segment are used primarily for packaging
consumer products such as individual servings of sugar, salt and pepper, sugar
substitutes, and candy and ice cream bars, as well as medical and
pharmaceutical products. These materials also are used for composite can
liners and release liner papers for pressure sensitive products such as labels.
This business segment accounted for 16% of the Company's sales in 1995, 15% in
1994, and 17% in 1993.
Financial information regarding the Company's three business segments is
presented in the Notes to Consolidated Financial Statements under the heading
"Business Segment Information" of the Company's 1995 Annual Report, which
information is incorporated herein by reference. Portions of the 1995 Annual
Report are filed as Exhibit 13 to this Annual Report on Form 10-K.
Production
Substantially all of the Company's products are manufactured by wholly
owned subsidiaries of the Company in 36 manufacturing facilities located
throughout the United States. (See "Item 2 - Properties.") The principal raw
materials used by the Company in the manufacture of its products are paper,
carbon, ink and poly-resins. All purchases of such materials are made at
competitive prices negotiated with suppliers. The Company believes that there
are sufficient alternative sources of supply to provide its raw material
requirements if for any reason its present suppliers are unable to do so.
2
<PAGE> 3
Trademarks
The Company holds trademarks which management believes are sufficient for
the operation of its business without any substantial restrictions and adequate
for the operation of each business segment.
Backlog
As of February 29, 1996, the Company had backlogs believed to be firm of
approximately $48 million for business supplies printing, approximately $5.5
million for book manufacturing and approximately $11.8 million for extrusion
coating and laminating. Comparable backlogs as of February 28, 1995 were
approximately $46.3 million for business supplies printing, approximately $7.2
million for book manufacturing and approximately $10.7 million for extrusion
coating and laminating. All present backlogs are expected to be filled during
1996.
Distribution and Customers
The Company's products are sold throughout the United States, and less
than 1% of the Company's sales in any year have been outside of the United
States. The Company's products are sold principally through approximately 650
sales representatives. No customer or related group of customers in 1995
accounted for 10% or more of the sales of the Company. Demand for the
Company's business supplies printing, book manufacturing and extrusion coating
and laminating generally is not seasonal.
Competition
Business supplies printing, book manufacturing, and specialty extrusion
coating are highly competitive industries. Principal methods of competition
are pricing and service. The business supplies industry consists of thousands
of commercial printing enterprises, ranging from small family operations to
large corporations. In marketing many of its products, the Company competes
with some larger nationwide firms which have more resources than the Company as
well as numerous local and regional businesses, most of which are smaller than
the Company. The Company has generally maintained or increased its market
share against competitors by: (1) using to advantage its sales force, unusually
large for its industries; (2) utilizing its ability to process numerous small
orders efficiently; (3) creating new products and modifying existing products
to meet market needs; and (4) providing faster and/or more dependable
processing and delivery of customer orders. Based on annual revenues
attributable to the production of business supplies, the Company is a leading
U.S. producer of printed business supplies. No competitor is known to offer a
greater range of products than that offered by the Company, which believes it
is among a relatively few companies with the capital resources to acquire
automated equipment necessary to meet market demands and to maintain multiple
work shifts as necessary for timely completion and delivery of customer orders.
In the envelope industry, which had United States sales of approximately
$2.8 billion in 1995, according to the Department of Commerce, the Company's
largest subsidiary, Curtis 1000 Inc., is believed to be the leading
direct-to-user marketer of business envelopes in the United States based on
annual revenues, yet still has only a small share of the total market. Within
the industry, the Company also holds a strong competitive position in the sale
of specialty envelopes, including those manufactured from paper and a
synthetic, olefin, which offers superior quality, lighter weight and postage
savings to customers in comparison with kraft paper envelopes of the same size.
Specialty envelopes comprise the strongest sector of this industry and
continue to offer the most favorable growth outlook.
The business forms industry, a segment of commercial printing, is composed
of several hundred companies of varying sizes. On the basis of forms sales,
the Company believes it is the fifth largest of these companies. Sales of
manifold business forms in the United States in 1995 were estimated at
approximately $6.5 billion, based on Department of Commerce projections.
While this maturing industry has been characterized by strong pricing
competition in recent years and a decline in total industry sales, ABP has
increased its sales volume and market share by introducing new products and
improving its personalized forms inventory management services. In June, 1995,
ABP acquired a provider of electronic forms, automation software and electronic
distribution systems as a platform to expand the Company's presence in the
growing market for electronic forms and related technological products as a
means of capitalizing on current and future demand for these products.
Book printing, which had industry sales of approximately $5.8 billion in
1995, is also highly competitive, and the Company competes with numerous other
book manufacturers, many of which are larger and have substantially more
resources than the Company and therefore possible advantages in production and
marketing economies of scale and efficiencies. However, the Company has
achieved growth in sales and profits by providing complete order fulfillment
3
<PAGE> 4
services for customers or publishers and targeting certain segments of the
industry as more attractive sectors, including university presses and
publishers of religious books, while specializing in short to medium runs of
book printing and acquiring and utilizing advanced technology to provide high
quality service and broaden the product line.
Major competitors for the extrusion coating and laminating business
segment, which nationally had 1995 sales of approximately $3 billion, are
relatively few. They include Thilmany (division of International Paper),
several divisions of James River Corporation and Twin Pack (Canada).
Management believes none of these competitors is superior to the Company's
subsidiary, Jen-Coat in terms of quality and service, the factors which have
been advantageous to Jen-Coat. Competition on the basis of pricing which had
intensified beginning in 1993, abated in 1995 as the result of the pass-through
of higher raw material costs and by Jen-Coat's introducing new products,
entering new markets and further improving its technological capabilities.
Entry barriers to this industry include a capital investment which is
significant for small companies and highly individual market niches with
relatively low sales volume which generally deters larger companies.
Within the combined markets of the Company, the Company's total share
of sales is relatively small, providing the opportunity to increase market
share through innovative and creative products and effective marketing, which
are major elements of the Company's strategy for growth.
Environmental Matters
The Company knows of no significant environmental liabilities involving
its operations.
Employees
At December 31, 1995, the Company had approximately 4,452 full-time
employees. No significant number of employees is covered by any collective
bargaining agreement.
International Operations
The Company has a European joint venture, Curtis 1000 Europe GmbH ("Curtis
1000 Europe"), which is 50% owned by the Company and has plants in four
countries: Germany, England, Luxembourg and Poland. (See Part I - Item 2 -
Properties.") Curtis 1000 Europe manufactures and sells envelopes of all
kinds. The Company's share of net income of Curtis 1000 Europe, which is not
significant, is translated at average exchange rates prevailing during the
year, and is included in the Consolidated Financial Statements of the Company
and Notes to Consolidated Financial Statements which are incorporated herein by
reference. (See Part II, Item 8 - Financial Statements and Supplementary
Data.")
ITEM 2 - PROPERTIES
The Company's executive offices are located in approximately 15,200 square
feet of space at 2100 RiverEdge Parkway, Suite 1200, Atlanta, Georgia 30328.
The offices are leased from an unaffiliated party under a lease expiring on
January 26, 2003.
The principal properties of the Company include production facilities,
administrative/sales offices and warehouses. The Company operates 36
production facilities throughout the United States encompassing approximately
2,035,000 square feet. The Company owns 32 of these facilities while 4 are
leased facilities. The Company has announced a plan to close 13 facilities.
See the information set forth under the heading "Management's Discussion and
Analysis" in the Company's 1995 Annual Report. In addition, the Company and a
European joint venture/partner operate production facilities which are owned or
leased by the joint venture in Germany, Poland, England, and Luxembourg. The
facilities in Germany and Poland are owned by the joint venture, and the
facilities in England and Luxembourg are leased.
The Company leases 36 administrative/sales offices and 10 warehouses, all
of which are located in the United States. All of the Company's
administrative/sales offices and warehouses are used in the Company's business
supplies printing business except for three of such facilities which are used
in the Company's book manufacturing business.
Certain properties owned by the Company are held subject to mortgages.
See the information set forth under the heading "Long Term Debt" in the Notes
to Consolidated Financial Statements in the Company's 1995 Annual Report, which
information is incorporated herein by reference.
4
<PAGE> 5
The Company believes that all of its properties and equipment are in good
condition, adequately utilized and suitable for the purposes for which they are
being used.
ITEM 3 - LEGAL PROCEEDINGS
As of March 15, 1996, there were no material pending legal proceedings,
other than routine litigation incidental to the business, to which the Company
was a party or of which any of its properties were the subject, and none are
expected by management to materially effect the Company's financial position
and results of operations.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the shareholders of the Company
during the fourth quarter of 1995.
ITEM 4 (A) - EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below is information as of March 15, 1996 regarding the
executive officers of the Company:
THOMAS R. CARMODY, 62, has been Chairman of the Board of Directors of the
Company since April 1994 and Chief Executive Officer of the Company since 1988.
He previously served as President of the Company from 1985 until April 1994,
as Executive Vice President of the Company from 1982 until 1985 and as Chief
Operating Officer of the Company from 1982 until 1988. He has been a director
of the Company since 1983 and has served with the Company or Curtis 1000 Inc.,
a wholly-owned subsidiary of the Company, for over 40 years.
HENRY CURTIS VII, 47, has been Vice President of Administration of the Company
since April 1995. He served as Vice President of Administration and Sales
Support of Curtis 1000 Inc., a subsidiary of the Company from 1992 to March
1995. He served as Director of Employee Benefits of the Company from 1983 to
1990 and held various positions with the Company and its wholly-owned
subsidiaries, Curtis 1000 Inc. and Vanier Graphics Corporation since 1971. He
has been a director of the Company since 1989 and has served with the Company
or its subsidiaries for over 25 years.
MICHAEL C. DENIKEN, 48, was elected Treasurer and Chief Accounting Officer of
the Company effective October 1, 1995. He has served with the Company for over
17 years.
DAWN M. GRAY, 51, has served as Secretary of the Company since July 1989. She
served as Assistant Secretary from October 1976 to June 1989. She has served
with the Company or Curtis 1000 Inc., a wholly-owned subsidiary of the Company,
for over 29 years.
ROBERT W. GUNDECK, 53, has been President of the Company since April 1994 and
Chief Operating Officer of the Company since 1993. He previously served as
Executive Vice President of the Company from 1993 until April 1994 and as Vice
President - Corporate Development of the Company from 1990 until 1993. From
1988 until 1990 Mr. Gundeck was Director of Acquisitions and Corporate
Development of the Company. He has been a director of the Company since 1993,
and he has served with the Company for over 8 years.
RICHARD A. LEFEBER, 60, has served as Vice President-Administration of the
Company since January 1980. He served as Secretary of the Company from August
1982 to June 1989. He has served with the Company or Curtis 1000 Inc., a
wholly-owned subsidiary of the Company, for over 38 years.
RICHARD G. SMITH, 47, was elected Vice President - Finance and Chief Financial
Officer of the Company effective January 1, 1996. He joined the Company as
Vice President - Corporate Development in September 1995. From August 1994 to
August 1995, Mr. Smith was Senior Vice President of Brambles USA, Inc., the
major U. S. subsidiary of Brambles Industries Limited, an Australian based
specialized industrial services provider with annual revenues of approximately
$2 billion. From September 1992 to July 1994, he was Vice President and Chief
Financial Officer of Brambles Acquisition, Inc., the largest subsidiary of
Brambles USA, Inc. He was Vice President and Chief Financial Officer of
Environmental Systems Company, a New York Stock Exchange-listed hazardous waste
company from June 1991 to August 1992. Environmental Systems Company was
acquired by Brambles in March 1992. Prior to 1991 he served as Vice President
of Corporate Development for Laidlaw, Inc.
The Board of Directors elects officers annually in April for one year
terms or until their successors are elected and qualified. Officers are
subject to removal by the Board of Directors at any time.
5
<PAGE> 6
PART II
-------
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Information relating to the market for, holders of and dividends paid on
the Company's Common Stock is set forth under the captions "Quarterly Data
1995," "Quarterly Data 1994," "Stock Exchange Listing," and "Shareholders of
Record," in the Company's 1995 Annual Report, which information is incorporated
herein by reference.
ITEM 6 - SELECTED FINANCIAL DATA
Selected consolidated financial data for the Company for each year of the
eleven year period ended December 31, 1995 is set forth under the caption
"Eleven Year Financial Review" in the Company's 1995 Annual Report, which
information is incorporated herein by reference.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
A discussion of the Company's financial condition and results of
operations at and for the dates and periods covered by the consolidated
financial statements set forth in the Company's 1995 Annual Report is set forth
under the caption "Management's Discussion and Analysis" in the Company's 1995
Annual Report. Such discussion is incorporated herein by reference.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following Consolidated Financial Statements of the Company and its
subsidiaries, together with the Independent Auditors' Report, which are set
forth in the Company's 1995 Annual Report, are incorporated herein by
reference:
Consolidated Statements of Income for each of the three
years in the period ended December 31, 1995
Consolidated Balance Sheets as of December 31, 1995 and 1994
Consolidated Statements of Cash Flows for each of the
three years in the period ended December 31, 1995
Notes to Consolidated Financial Statements
The supplementary consolidated financial information regarding the Company
which is required by Item 302 of Regulation S-K is set forth under the caption
"Quarterly Data 1995" and "Quarterly Data 1994" in the Company's 1995 Annual
Report. Such information is incorporated herein by reference.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There has been no change of or disagreements with independent accountants
by the Company in the past two fiscal years or subsequently.
6
<PAGE> 7
PART III
--------
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information relating to the directors of the Company is set forth in
"Proposal 1 - Election of Directors" under the captions "Nominees,"
"Information Regarding Nominees and Directors" and "Meetings and Committees of
the Board of Directors" in the Company's definitive Proxy Statement for its
1996 Annual Meeting of Shareholders to be held on April 24, 1996 (the "Proxy
Statement"). Such information is incorporated herein by reference. Pursuant
to Instruction 3 of Item 401(b) of Regulation S-K and General Instruction G(3)
of Form 10-K, information relating to the executive officers of the Company is
set forth in Part I, Item 4(A) of this Report under the caption "Executive
Officers of the Registrant." Information regarding compliance by directors and
executive officers of the Company and owners of more than ten percent of the
Company's Common Stock with the reporting requirements of Section 16(a) of the
Securities Exchange Act of 1934, as amended, is set forth in the Proxy
Statement under the caption "Compliance with Section 16(a) of the Securities
Exchange Act of 1934." Such information is incorporated herein by reference.
ITEM 11 - EXECUTIVE COMPENSATION
Information relating to compensation of the executive officers and
directors of the Company is set forth in "Proposal 1 - Election of Directors"
under the caption "Director Compensation" and in "Executive Compensation" in
the Proxy Statement. Such information is incorporated herein by reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding ownership of the Company's $2.00 par value Common
Stock by certain persons is set forth in "Voting" under the caption "Principal
Shareholders" and in "Proposal 1 - Election of Directors" under the caption
"Information Regarding Nominees and Directors" and under the caption
"Executive Compensation" in the Proxy Statement. Such information is
incorporated herein by reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTION
Information regarding relationships or transactions between the Company
and affiliates of the Company is set forth under the caption "Executive
Compensation - Certain Transactions" in the Proxy Statement referred to in Item
10 above. Such information is incorporated herein by reference.
PART IV
-------
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of this Report:
1. Financial Statements
The Consolidated Financial Statements and the Independent
Auditors' Report thereon which are required to be filed as part of
this Report are included in the Company's 1995 Annual Report and are
set forth in and incorporated by reference in Part II, Item 8 hereof.
These Consolidated Financial Statements are as follows:
Consolidated Statements of Income for each of the three years
in the period ended December 31, 1995
Consolidated Balance Sheets as of December 31, 1995 and 1994
Consolidated Statements of Cash Flows for each of the three
years in the period ended December 31, 1995
Notes to Consolidated Financial Statements
7
<PAGE> 8
2. Financial Statement Schedule
The financial statement schedule filed as part of this Report
pursuant to Article 12 of Regulation S-X and the Independent Auditors'
Report in connection therewith are contained in the Index of Financial
Statement Schedule on page S-1 of this Report. All other schedules
for which provision is made in the applicable accounting regulations
of the Securities and Exchange Commission have been omitted because
such schedules are not required under the related instructions or are
inapplicable or because the information required is included in the
Consolidated Financial Statements or notes thereto.
3. Exhibits
The exhibits required to be filed as part of this Report are
set forth in the Index of Exhibits on page E-1 of this Report.
(b) Reports on Form 8-K:
No current reports on Form 8-K were filed by the Registrant during the
last quarter of the period covered by this report.
(c) The exhibits required to be filed as part of this Report are set forth
in the Index of Exhibits on page E-1 of this report
(d) The financial statement schedule required to be filed as part of this
Report is set forth in the Index of Financial Statement Schedule on page
S-1 of this Report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(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.
AMERICAN BUSINESS PRODUCTS, INC. (Registrant)
Date: March 15, 1996 BY: /S/ Robert W. Gundeck
----------------------------------
Robert W. Gundeck
Chief Executive Officer,
President and Director
Date: March 15, 1996 /S/ Richard G. Smith
----------------------------------
Richard G. Smith
Vice President-Finance
and Chief Financial Officer
Date: March 15, 1996 /S/ Michael C. Deniken
----------------------------------
Michael C. Deniken
Treasurer and
Chief Accounting Officer
8
<PAGE> 9
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Date: March 15, 1996 */S/ F. Duane Ackerman
----------------------------
F. Duane Ackerman, Director
Date: March 15, 1996 */S/ John E. Aderhold
----------------------------
John E. Aderhold, Director
Date: March 15, 1996 */S/ W. J. Biggers
----------------------------
W. J. Biggers, Director
Date: March 15, 1996 */S/ Thomas R. Carmody
----------------------------
Thomas R. Carmody, Director &
Chairman of the Board
Date: March 15, 1996 */S/ Henry Curtis VII
----------------------------
Henry Curtis VII, Director
Date: March 15, 1996 */S/ Herbert J. Dickson
----------------------------
Herbert J. Dickson, Director
Date: March 15, 1996 */S/ Hollis L. Harris
----------------------------
Hollis L. Harris, Director
Date: March 15, 1996 */S/ W. Stell Huie
----------------------------
W. Stell Huie, Director
Date: March 15, 1996 */S/ Thomas F. Keller,
----------------------------
Thomas F. Keller, Director
Date: March 15, 1996 */S/ G. Harold Northrop
-----------------------------
G. Harold Northrop, Director
Date: March 15, 1996 */S/ Rex A. McClelland
----------------------------
Rex A. McClelland, Director
* By:/S/ Dawn M. Gray
------------------
Dawn M. Gray,
Attorney-in-Fact
9
<PAGE> 10
AMERICAN BUSINESS PRODUCTS, INC.
INDEX OF FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report S-2
Schedule of the Company and Subsidiaries
II - Valuation Reserves S-3
</TABLE>
S-1
<PAGE> 11
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
American Business Products, Inc.:
We have audited the consolidated financial statements of American Business
Products, Inc. and subsidiaries as of December 31, 1995 and 1994, and for each
of the three years in the period ended December 31, 1995, and have issued our
report thereon dated February 23, 1996; such financial statements and report
are included in your 1995 Annual Report to Shareholders and are incorporated
herein by reference. Our audits also included the consolidated financial
statement schedule of American Business Products, Inc. and subsidiaries listed
in Item 14. This consolidated financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express
an opinion based on our audits. In our opinion, such consolidated financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
/S/ DELOITTE & TOUCHE LLP
- -------------------------
DELOITTE & TOUCHE LLP
Atlanta, Georgia
February 23, 1996
S-2
<PAGE> 12
SCHEDULE II
AMERICAN BUSINESS PRODUCTS, INC. AND SUBSIDIARIES
VALUATION RESERVES
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
CHARGED TO OTHER CHANGES
BEGINNING COSTS AND ADD (DEDUCT) ENDING
DESCRIPTION BALANCE EXPENSES DESCRIBE(1) DEDUCTIONS(2) BALANCE
- ----------- --------- ---------- ------------- ------------- -------
<S> <C> <C> <C> <C> <C>
For the Year Ended December 31, 1993:
Allowance for doubtful accounts 1,838 1,072 238 930 2,218
For the Year Ended December 31, 1994:
Allowance for doubtful accounts 2,218 1,162 1,001 2,379
For the Year Ended December 31, 1995:
Allowance for doubtful accounts 2,379 1,211 753 2,837
</TABLE>
(1) Reserve assumed from Discount Labels, Inc. on September 1, 1993.
(2) Deductions represent uncollectible accounts charged off, less recoveries.
<PAGE> 13
AMERICAN BUSINESS PRODUCTS, INC.
INDEX OF EXHIBITS
Where an exhibit is filed by incorporation by reference to a previously
filed registration statement or report, such registration statement or report
is identified in parentheses.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
3.1 Articles of Incorporation (Exhibit 3(a), Annual Report on Form 10-K for the fiscal year ended December 31, 1989).
3.2 Restated Bylaws, as amended (Exhibit 3(b), Annual Report on Form 10-K for the fiscal year ended December 31,
1990).
4.1 Note Agreement dated as of October 1, 1990 among the Company and the institutional investors listed on Schedule I
thereto, together with the form of 9.92% Senior Note to be used in connection therewith (Exhibit 4, Annual Report
on Form 10-K for the fiscal year ended December 31, 1990).
4.2 Note Agreement dated as of December 1, 1993 among the Company and the institutional investors listed on Schedule
I thereto, together with the form of 5.77% Senior Note to be used in connection therewith.
4.3 Form of Rights Agreement dated as of October 25, 1989 between the Company and Citizens and Southern Trust Company
(Georgia), N.A. (Exhibit 4, Current Report on Form 8-K dated October 25, 1989).
4.4 First Amendment to Rights Agreement dated as of August 10, 1992 between the Company and Wachovia Bank of North
Carolina, N.A., as successor Rights Agent (Exhibit 4(c), Annual Report on Form 10-K for the fiscal year ended
December 31, 1992).
10.1 Executive Compensation Plans and Arrangements:
(a) Supplemental Retirement Income Plan (Exhibit 10(a), Annual Report on Form 10-K for the fiscal year ended
December 31, 1989).
(b) Deferred Compensation Investment Plan (Directors) (Exhibit 10(b), Annual Report on Form 10-K for the fiscal
year ended December 31, 1989).
(c) Deferred Compensation Investment Plan (Executives) (Exhibit 10(c), Annual Report on Form 10-K for the fiscal
year ended December 31, 1989).
(d) 1981 Stock Option Plan (Exhibit 10(d), Annual Report on Form 10-K for the fiscal year ended December 31,
1989).
(e) Deferred Compensation Plan for Directors (Exhibit 10(e), Annual Report on Form 10-K for the fiscal year
ended December 31, 1989).
(f) American Business Products, Inc. Executive Retirement Plan dated September 14, 1992 (Exhibit 10(h), Annual
Report on Form 10-K for the fiscal year ended December 31, 1992).
(g) 1991 Stock Option Plan, and First Amendment thereto. (Exhibit 10(g), Annual Report on Form 10-K for the
fiscal year ended December 31, 1993).
</TABLE>
E-1
<PAGE> 14
<TABLE>
<S> <C>
(h) 1993 Directors Stock Incentive Plan (Exhibit 10(h), Annual Report on Form 10-K for the fiscal year ended
December 31, 1993.
(i) Special Nonqualified Deferred Compensation Plan and related Trust Agreement (Exhibit 10.1(a) Quarterly
Report on Form 10-Q for the quarter ended September 30, 1995.
(j) Second Amendment to the 1991 Stock Option Plan (Exhibit 10.1(a), Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995).
10.2 Agreement for the Purchase of Stock dated as of September 21, 1990 by and among the Company, Edward C. Leavy,
Edward C. Leavy, Executor under the will of Jean L. Leavy, and James B. Kauffman relating to the purchase of
Jen-Coat, Inc. (Exhibit 2, Current Report on Form 8-K, dated October 1, 1990).
10.3 (a) Stock Purchase Agreement dated September 1, 1993 among the Company, Home Safety Equipment Co., Inc., and
William Frederick Conway, Sr., Betty Conway, Allen C. Conway, Winifred Conway Arledge, William Frederick
Conway, Jr., Winifred B. Arledge, QSST Trust #1, Winifred B. Arledge, QSST Trust #2, Allen C. Conway, QSST
Trust #1, Allen C. Conway, QSST Trust #2, Allen C. Conway, QSST Trust #3, and William Frederick Conway, Jr.,
QSST Trust #1, William Frederick Conway, Jr., QSST Trust #2 (Exhibit 2, Current Report on Form 8-K dated
September 13, 1993).
(b) Non-Competition Agreement dated as of August 10, 1993 by and among William Frederick Conway, Sr., Betty
Conway, Allen C. Conway, Winifred Conway Arledge, Sol A. Arledge, and William Frederick Conway, Jr. and the
Company (Exhibit 99.1, Current Report on Form 8-K, dated September 13, 1993).
13 Pages 14 through 28 of the Company's 1995 Annual Report which are incorporated herein by reference.
21 Subsidiaries of the Registrant.
23 Independent Auditors' Consent.
24 Power of Attorney.
27 Financial Data Schedules (for SEC use only)
</TABLE>
E-2
<PAGE> 1
EXHIBIT 13
<PAGE> 2
(LOGO)
ELEVEN-YEAR
FINANCIAL
REVIEW
Per share figures have been adjusted to reflect a 5-for-4 stock split in 1989,
a 3-for-2 stock split in 1991 and a 3-for-2 stock split in 1995.
(A) Years from 1985 through 1987 have been restated to eliminate discontinued
operation.
(B) Before extraordinary loss (net of income taxes) of $2,223 or $.14 per
share.
(C) Before change in accounting principles of $12,449 or $.78 per share.
(D) Before change in accounting principles of $605 or $.04 per share.
YEAR ENDED DECEMBER 31
In thousands, except per share and employee data
<TABLE>
<CAPTION>
1995 1994 1993 1992
<S> <C> <C> <C> <C>
Net Sales....................... $633,955 $563,133 $486,139 $463,470
Cost of Goods Sold(A)........... 447,375 394,839 339,746 322,402
Earnings
Before Taxes(A)............... 41,502 33,007 26,643 30,487
After Taxes(A)................ 25,505 19,528(D) 16,683 19,582(C)
Per Common Share(A)........... 1.57 1.22(D) 1.04 1.22(C)
Dividends Paid
Common Stock.................. 9,085 8,550 8,013 7,487
Per Common Share.............. .560 .533 .500 .467
Interest Expense................ 8,243 8,711 6,604 6,270
Capital Expenditures -- Net..... 15,142 13,684 15,981 17,277
Depreciation and Amortization... 17,556 17,391 14,661 12,897
Salaries and Wages.............. 143,474 139,238 123,747 121,572
Current Assets.................. 168,819 152,712 141,768 121,938
Current Liabilities............. 75,218 63,419 55,330 44,509
Working Capital................. 93,601 89,293 86,438 77,429
Plant and Equipment............. 88,994 92,240 94,448 77,926
Total Assets.................... 336,431 312,101 302,192 237,238
Long-Term Debt.................. 61,761 75,144 85,580 40,005
Retained Earnings............... 124,459 118,095 107,728 99,117
Average Number of Common
Shares Outstanding............ 16,197 16,026 16,024 16,036
Stockholders' Equity............ 160,873 137,481 127,093 118,819
Book Value per Common Share..... 9.82 8.59 7.93 7.41
Return on Equity................ 17.1% 14.8% 13.6% 16.4%
Number of Employees............. 4,452 4,152 4,320 3,727
QUARTERLY DATA 1995 (Unaudited). 1st 2nd 3rd 4th
Net Sales....................... $157,384 $156,425 $157,169 $162,977
Gross Margin.................... 47,016 45,961 46,268 47,335
Net Income...................... 5,949 5,937 6,019 7,600
Earnings Per Share.............. .37 .37 .37 .46
Dividends Per Share............. .14 .14 .14 .14
Price Range of Common Stock
(High - Low).................. 17.63 - 13.56 20.50 - 16.83 21.00 - 18.25 28.50 - 20.63
</TABLE>
<PAGE> 3
(LOGO)
ELEVEN-YEAR
FINANCIAL
REVIEW
(cont.)
The long-term growth of ABP has been a priority since the formation of the
Company as reflected in this review of the financial performance from 1985
through 1995.
"We are committed to building value for our shareholders. However, we also hold
firmly to our conviction that our investors, our people, and our customers are
all best served by a policy of building value over the long term and not
sacrificing future growth to short term gain."
- Letter to Shareholders
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1991 1990 1989 1988 1987 1986 1985
$446,533 $398,794 $387,140 $358,242 $325,768 $311,620 $296,493
307,656 272,376 265,549 246,555 221,953 209,647 197,001
26,736 22,465 22,101 21,510 19,864 21,589 24,052
16,488 14,268 13,617 13,010 11,156 11,286(B) 12,426
1.03 .89 .85 .81 .69 .70(B) .77
6,692 6,295 5,608 5,027 4,566 4,333 3,644
.418 .391 .349 .313 .285 .270 .227
5,784 3,313 2,165 1,563 1,435 1,141 1,233
14,556 10,053 12,794 11,787 12,010 13,233 8,720
12,041 9,650 8,806 7,632 6,701 5,930 5,311
116,936 112,778 110,353 101,416 96,718 91,684 85,356
115,735 107,418 95,088 90,987 84,415 81,831 75,168
42,809 39,825 36,451 35,983 32,563 28,947 25,800
72,926 67,593 58,637 55,004 51,852 52,884 49,368
73,350 72,040 62,767 58,197 54,077 50,195 46,349
218,086 207,003 164,140 152,257 141,036 134,394 127,801
41,673 43,339 11,277 8,858 10,088 12,919 15,558
99,585 97,055 89,082 83,532 75,549 70,744 67,142
16,006 16,076 16,092 16,067 16,052 16,037 16,011
119,783 109,875 103,264 95,145 87,117 82,278 78,619
7.47 6.87 6.41 5.92 5.43 5.13 4.91
14.4% 13.4% 13.7% 14.3% 13.2% 14.0% 16.6%
3,894 3,986 4,034 4,007 3,867 3,785 3,795
QUARTERLY DATA 1994 (Unaudited) 1st 2nd 3rd 4th
Net Sales.................................... $140,715 $139,370 $138,186 $144,863
Gross Margin................................. 41,925 41,538 41,015 43,817
Net Income................................... 4,266(D) 4,400 4,463 6,400
Earnings Per Share........................... .27(D) .27 .28 .40
Dividends Per Share.......................... .1333 .1333 .1333 .1333
Price Range of Common Stock..................
(High - Low) 17.17 - 14.83 16.50 - 12.50 15.42 - 12.67 15.33 - 12.92
</TABLE>
<PAGE> 4
(LOGO)
MANAGEMENT'S
DISCUSSION
AND ANALYSIS
LINES OF BUSINESS
American Business Products, Inc. manufactures and markets envelope
products, business forms, labels, on-demand printing, and other supplies for
business and industry; manufactures and distributes hardcover and softcover
books for the publishing industry; and produces and markets extrusion coating
and laminating of papers, films, and nonwoven fabrics for use in medical,
industrial, and consumer packaging.
ACQUISITION
The acquisition of the assets of Electronic Form Systems, a provider
of electronic forms, automation software and electronic distribution systems,
in June, 1995, will enable the Company to expand from its traditional and
declining paper forms market estimated at $6.5 billion in 1995 to the growing
software, communications and workflow automation market estimated at $25
billion annually. Operating as a division of ABP subsidiary Vanier,
Electronic Form Systems provides the platform for such products as electronic
forms management and distribution of forms together with the ability to
integrate into customer application systems.
RESULTS OF OPERATIONS
The Company's 1995 revenues were a record $633,955,000, an increase of
$70,822,000 or 12.6% over 1994. The increase in revenues resulted from a
combination of growth of units sold and higher selling prices obtained by
passing through unusually high raw material costs. Although the ratio varied
by operating company, the Company believes that more than 50% of the increase
in revenues was due to higher prices and the balance was in growth of unit
sales.
Management believes the Company should continue to increase sales and
to improve profit margins (before the effect of the planned restructuring, see
below) due to the following factors: (1) continued increase in unit sales is
expected; (2) the Company has the ability to enter new markets and offer new
products; (3) the ongoing and announced re-engineering of the business process
should further reduce costs of operation; and (4) the Company's longstanding
relationships as a good customer of suppliers of raw materials are expected to
assure continuing adequate and uninterrupted supplies of raw materials.
Business supplies segment sales increased 11.0% for the year, again
with the pass-through of inflation in raw material costs accounting for more
than 50% of the increase and unit sales growth accounting for the balance.
This segment is expected to continue growth of sales and improve profit
margins, before the restructuring charge, due to the factors previously cited,
including anticipated growth of unit sales; the ability to enter new markets
and offer new products; the expected further reduction of operating costs; and
supplier relationships that should assure uninterrupted raw material supplies.
The book manufacturing segment increased sales 17.7% also due to a
combination of higher prices and unit growth with accompanying higher profits
and profit margins. The operation again added to capacity, broadened its
product line and expanded customer order fulfillment capabilities. This
business segment is expected to increase market share and profits while profit
margins may experience some pressure in 1996.
The extrusion coating segment increased sales 17.6% with strong unit
growth and improved profits and profit margins, benefiting from the ability to
pass through higher raw material costs, the moderation of competitive pricing
pressures, the introduction of new products and penetration of new markets.
This business segment is expected to continue increasing sales and to maintain
or improve profit margins in 1996.
The Company's expectations respecting future sales and profits are
forward looking forecasts which are subject to uncertainties. The forecasts
assume, among other things, reasonable continued growth in the general economy
which affects demand for the Company's products, and reasonable stability in
raw materials pricing, changes in which affect the Company's prices and
margins.
In 1994 ABP sales were a record $563,133,000, up 16% over 1993, with
the major portion of the sales increase resulting from acquisitions made in
1993 which expanded and strengthened the business supplies segment. This
segment achieved 20% sales growth, passing through higher raw material costs
and also increasing unit sales moderately. Book manufacturing gained 12.4% in
sales with a substantial increase in unit sales, although the combination of
higher raw material costs, price competition and start-up costs of a new
production line resulted in essentially flat net profits. In 1994, extrusion
coating sales advanced .2% with moderate unit
<PAGE> 5
(LOGO)
MANAGEMENT'S
DISCUSSION
AND ANALYSIS
(cont.)
growth and with profit margins constrained by higher raw material costs
combined with price competition and change in product mix.
In 1993 sales were a record $486,139,000, up 4.9% over 1992, led by the
extrusion coating segment which advanced 6.7% to a record. The business
supplies printing segment gained 4.9%, and the book manufacturing segment
increased 1.4% to a sales record. Core business lines felt the effects of a
slowly growing economy, strong price competition and over-capacity in the forms
industry. Unit sales of business supplies increased modestly as did book
manufacturing unit sales, while extrusion coating and laminating achieved
strong unit growth.
In 1995 the Company derived 75.2% of revenues from envelope products,
business forms, labels, and related business supplies printing operations; 9.2%
from book manufacturing and order fulfillment operations; and 15.6% from
extrusion coating and laminating operations. Sales by business segments in
1994 were: 76.2% from business supplies products; 8.8% from book manufacturing
and order fulfillment operations; and 15% from extrusion coating and laminating
operations. In 1993 the same segments had sales, respectively, of 73.6%, 9.1%,
and 17.3%.
The Company's gross profit margin (the difference between net sales and
cost of products sold, expressed as a percentage of net sales) was 29.4% in
1995 compared to 29.9% in 1994 and 30.1% in 1993. Selling, general and
administrative expenses (as a percentage of net sales) were 21.8% in 1995
compared to 22.7% in 1994 and 23.5% in 1993. The decrease for 1995 resulted
primarily from higher selling prices and plant consolidations.
The Company's income tax rate decreased in 1995, due to an increased
level of nontaxable income and a lower rate resulting from favorable settlement
of prior year liabilities. The 1995 rate was 38.5%, returning to a more normal
rate compared to 40.8% in 1994, which was unusual as the principal factor
affecting the rate was the non-deductibility of goodwill associated with
acquisitions made in 1993; also contributing in 1994 was a non-taxable loss
from the European joint venture which was affected by escalating raw material
costs, selling price pressures, and the costs of moving into new facilities.
The 1994 tax rate increased from 37.4% in 1993.
The effect of inflation on sales and operating income in 1995,
as previously indicated, was increased raw material costs and the Company's
ability to pass through these costs in prices to customers with resultant
improvement in profit margins. By comparison, in 1994 inflation of raw
material costs negatively affected profit margins for much of the year. In 1993
inflation was minimal as the result of the slow economy and generally stable
costs.
PLANT CONSOLIDATIONS
In February, 1996, the Company announced a restructuring plan to reduce
operating costs. The Company plans to close 13 plants in 1996 and reconfigure
business supplies production to a smaller number of larger and more efficient
facilities. The reconfiguration is expected to result in higher equipment
utilization, improved employee productivity and other scale economies. All
planned closings are expected to be completed in 1996.
As a result of the restructuring, the Company expects to record a
restructuring charge of approximately $8 million in 1996. Elements of the
restructuring charge are expected to be approximately as follows: Severance and
employee related costs, $6 million; fixed asset write-downs, $1 million; and
lease termination and other costs, $1 million. Management anticipates that the
plant consolidations will reduce costs an estimated $5.5 million annually
commencing in early 1997 and that a related redesign of order processing will
reduce annual costs by an additional estimated $3.5 million commencing later in
1997. Additionally, proceeds from the sale of real estate associated with the
plant closings are expected to be several million dollars higher than the
carrying value of such real estate. Expected gains on disposals of this real
estate will be recognized as each facility is sold.
The Company's expectations for the costs and benefits of the
restructuring plan and the related redesign of order processing are forward
looking estimates subject to uncertainty. Actual costs and benefits may vary
materially from the Company's expectations due to various factors such as:
higher or lower than anticipated rates of relocation or resignation of
employees who otherwise would receive termination payments; the extent of
management's ability to control duplication of costs, inefficiencies and
<PAGE> 6
(LOGO)
MANAGEMENT'S
DISCUSSION
AND ANALYSIS
(cont.)
overhead costs during the period of transferring production from closing to
continuing plants; sale prices realized upon future disposal of redundant
assets, particular real property which is subject to future supply and demand
conditions in various local real estate markets; and the difficulties inherent
in forecasting the operating results of an operating mode different from that
which exists at the time the forecast is made.
FINANCIAL POSITION
The Company's total cash and cash equivalents at December 31, 1995,
amounted to $29,023,000, an increase of $3,026,000 from a year earlier. The
primary sources of cash were funds provided by operating activities
($39,136,000) and the principal uses of cash were investing activities
($16,328,000) and financing activities ($19,782,000) which included
$11,368,000 for reduction of long term debt.
At December 31, 1994, cash and cash equivalents amounted to
$25,997,000, a decrease of $4,154,000 from a year earlier. The primary sources
of cash were funds provided by operating activities ($28,749,000) and the
principal uses of cash were investing activities ($13,418,000)and financing
activities ($19,485,000) which included $10,453,000 for reduction of long term
debt.
At December 31, 1993, cash and cash equivalents amounted to
$30,151,000, an increase of $126,000 over a year earlier. The primary sources
of cash were funds provided by operating activities ($20,179,000) and
financing activities ($41,915,000), and the primary use of cash was for
investing activities ($61,968,000).
The principal components of cash provided by operating activities in
1995 were net income ($25,505,000) and depreciation and amortization
($17,556,000). In 1994 the principal sources of cash from operating activities
were net income ($18,923,000) and depreciation and amortization ($17,391,000).
In 1993 the principal sources of cash from operating activities were net
income ($16,683,000) and depreciation and amortization ($14,661,000).
The principal investing activity in 1995 was capital expenditures for
upgrading and improving equipment and plants, including major expansions of
the label company plant and a book manufacturing facility; and the acquisition
of Electronic Form Systems. In 1994 the principal investment activity was
capital expenditures for upgrading and improving equipment and plants. The
principal investing activity in 1993 was the acquisition of Discount Labels,
Inc. and International Envelope Company, and in addition, capital expenditures
for upgrading and improving equipment and plants.
The Company's ratio of long term debt to total capitalization was
27.7% at December 31, 1995, compared with ratios of 35.3% at December 31,
1994, and 40.2% at December 31, 1993. The Company believes its internal cash
flows and, to the extent necessary, external financing arrangements will
provide sufficient funds to meet the Company's needs for the foreseeable
future.
Under the Company's plan to repurchase up to 1,687,500 shares of its
Common Stock in varying amounts over an indefinite period, there was no
activity in 1995. In 1994, the Company acquired 45,150 shares at prevailing
market prices at a total cost of $628,247. In 1993 the Company acquired 20,100
shares at the prevailing market prices at a total cost of approximately
$339,000.
ENVIRONMENTAL PROTECTION POLICY
American Business Products, Inc. is committed to the protection and
preservation of the environment and our natural resources within the Company's
over-all commitment to corporate responsibility and good citizenship. ABP
seeks not only to comply with all applicable laws and regulations but also to
monitor the effects of products and their manufacture upon the environment and
to increase awareness and concern for protecting and preserving the
environment and the world's natural resources. The Company knows of no
significant environmental liabilities involving its operations. The Company's
accounting policy relating to the environment is set forth in the Summary of
Significant Accounting Policies contained in Notes to Consolidated Financial
Statements.
<PAGE> 7
(LOGO)
CONSOLIDATED
STATEMENTS OF
INCOME
YEAR ENDED DECEMBER 31
In thousands, except per share amounts
<TABLE>
<CAPTION>
1994 1995 1993
<S> <C> <C> <C>
NET SALES................................ $633,955 $563,133 $486,139
-------- -------- --------
COST AND EXPENSES
Cost of goods sold.................... 447,375 394,839 339,746
Selling and administrative expenses... 138,474 127,566 114,263
-------- -------- -------
585,849 522,405 454,009
-------- -------- -------
OPERATING INCOME......................... 48,106 40,728 32,130
OTHER INCOME (EXPENSE)
Interest expense....................... (8,243) (8,711) (6,604)
Miscellaneous - net.................... 1,639 990 1,117
-------- ------- -------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLES 41,502 33,007 26,643
PROVISION FOR INCOME TAXES
Current
Federal............................. 14,347 11,902 8,992
State .............................. 3,202 3,700 2,677
Deferred .............................. (1,552) (2,123) (1,709)
-------- ------- -------
15,997 13,479 9,960
-------- ------- ------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLES........ 25,505 19,528 16,683
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLES............................. (605)
-------- -------- -------
NET INCOME............................... $ 25,505 $ 18,923 $16,683
======== ======== =======
PER COMMON SHARE
Income before cumulative effect of change
in accounting principles.............. $ 1.57 $ 1.22 $ 1.04
Net income $ 1.57 $ 1.18 $ 1.04
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 8
DECEMBER 31
Dollars in thousands
[LOGO]
CONSOLIDATED
BALANCE
SHEETS
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents.................................................. $ 29,023 $ 25,997
Accounts receivable, less allowances of $2,837 and $2,379.................. 85,978 72,536
Inventories................................................................ 52,715 51,929
Other...................................................................... 1,103 2,250
--------- ---------
Total Current Assets..................................................... 168,819 152,712
PLANT AND EQUIPMENT--AT COST
Land....................................................................... 5,573 5,983
Buildings and improvements................................................. 53,718 52,011
Machinery and equipment.................................................... 134,412 127,645
--------- ---------
193,703 185,639
Less accumulated depreciation.............................................. 104,709 93,199
--------- ---------
88,994 92,440
INTANGIBLE ASSETS FROM ACQUISITIONS
Goodwill, less amortization of $4,657 and $2,605........................... 36,936 31,528
Other, less amortization of $4,671 and $3,973.............................. 1,755 2,449
--------- ---------
38,691 33,977
DEFERRED INCOME TAXES....................................................... 12,048 10,495
OTHER ASSETS................................................................ 27,879 22,477
--------- ---------
$ 336,431 $ 312,101
========= =========
CURRENT LIABILITIES
Accounts payable........................................................... $ 45,686 $ 41,674
Salaries and wages......................................................... 12,839 9,771
Profit sharing contributions............................................... 5,924 4,397
Income taxes............................................................... 2,518 1,340
Current maturities of long-term debt....................................... 8,251 6,237
--------- ---------
Total Current Liabilities................................................ 75,218 63,419
LONG-TERM DEBT.............................................................. 61,761 75,144
SUPPLEMENTAL RETIREMENT BENEFITS............................................ 16,465 13,609
POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS.................................. 22,114 22,448
STOCKHOLDERS' EQUITY
Common stock -- $2 par value; authorized 50,000,000 shares,
issued 16,582,209 and 10,784,279 shares................................... 33,164 21,569
Addditional paid-in capital................................................ 5,701 118
Retained earnings.......................................................... 124,459 118,095
Foreign currency translation adjustment.................................... 365 64
--------- ---------
163,689 139,846
Less 204,232 and 121,478 shares of Common Stock in treasury -- at cost..... 2,816 2,365
--------- ---------
160,873 137,481
--------- ---------
$ 336,431 $ 312,101
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 9
YEAR ENDED DECEMBER 31
In thousands
[LOGO]
CONSOLIDATED
STATEMENTS OF
CASH FLOWS
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................... $ 25,505 $ 18,923 $ 16,683
Adjustments to reconcile net income to net cash provided by
operating activities, excluding acquisitions:
Depreciation and amortization............................... 17,556 17,391 14,661
(Increase) in accounts receivable........................... (13,443) (7,536) (7,482)
(Increase) in inventories................................... (734) (6,242) (4,244)
Decrease (increase) in other current assets................. 1,147 (1,320) 255
Loss (gain) on disposition of plant and equipment........... 627 (129) (48)
(Increase) in intangible and other assets................... (2,175) (803) (866)
Increase in accounts payable................................ 3,897 5,434 3,408
Increase (decrease) in other current liabilities............ 5,772 2,672 (2,007)
Increase in supplemental retirement benefits................ 2,871 1,752 1,793
(Decrease) increase in postretirement and postemployment
benefits................................................ (335) 1,139 (265)
(Increase) in deferred income taxes......................... (1,552) (2,532) (1,709)
-------- --------- --------
Total adjustments...................................... 13,631 9,826 3,496
-------- --------- --------
Net cash provided by operating activities.............. 39,136 28,749 20,179
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions, net of cash acquired............................ (3,419) (35,402)
(Increase) in annuity contracts............................... (7,467)
(Increase) in cash value of life insurance.................... (826) (19) (3,647)
Additions to plant and equipment.............................. (15,142) (13,684) (15,981)
Proceeds from dispositions of plant and equipment............. 3,059 285 529
-------- -------- --------
Net cash used in investing activities.................. (16,328) (13,418) (61,968)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in long-term debt.................................... 51,602
Reductions of long-term debt.................................. (11,368) (10,453) (1,442)
Repurchase of common stock.................................... (628) (340)
Sales and exchanges of common stock........................... 671 146 108
Dividends paid................................................ (9,085) (8,550) (8,013)
-------- -------- --------
Net cash (used) provided by financing activities....... (19,782) (19,485) 41,915
-------- -------- --------
Net increase (decrease) in cash and cash equivalents.......... 3,026 (4,154) 126
Cash and cash equivalents at beginning of year................ 25,997 30,151 30,025
-------- -------- --------
Cash and cash equivalents at end of year...................... $ 29,023 $ 25,997 $ 30,151
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
Cash paid during the year for:
Interest (net of amount capitalized)..................... $ 7,768 $ 9,039 $ 6,241
Income taxes............................................. 15,405 12,988 10,772
Liabilities assumed in acquisitions.......................... 115 849 6,471
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 10
NOTES TO
CONSOLIDATED
FINANCIAL
STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements
include the accounts of the Company and its subsidiaries. Intercompany
balances and transactions have been eliminated. These financial statements
have been prepared in accordance with generally accepted accounting principles
which in certain instances requires the use of management's estimates.
Actual results could differ from those estimates.
NATURE OF OPERATIONS: The Company manufactures and markets envelope
products, business forms, labels and other supplies for business and industry;
manufactures and distributes hardcover and softcover books for the publishing
industry; and manufactures and markets extrusion coating and laminating of
papers, films, and nonwoven fabrics for use in medical, industrial and
consumer packaging. The markets for these products are located principally
throughout the continental United States.
CASH AND CASH EQUIVALENTS: The Company invests cash in excess of daily
operating requirements in income producing investments. Such amounts, invested
in short-term instruments stated at cost which approximates market, were
$16,820,000 in 1995 and $16,175,000 in 1994. All such investments have an
original maturity of three months or less and for purposes of the statement of
cash flows are considered to be cash equivalents.
Amounts due banks upon the clearance of certain checks under the
Company's cash management program have been included in accounts payable. At
December 31, 1995 and 1994 such amounts were $9,381,000 and $6,904,000.
INVENTORIES: Inventories are valued at the lower of cost (first-in,
first-out) or market.
INTANGIBLE ASSETS: The excess of cost over amounts assigned
to tangible assets of purchased subsidiaries is amortized on the straight-line
basis over periods of 5 to 40 years. The Company evaluates the net carrying
value of such assets based on expectations of nondiscounted cash flows of each
subsidiary for which such assets are recorded. The Company believes no
material impairment of such assets exists.
PLANT AND EQUIPMENT: Plant and equipment is stated at cost.
Depreciation is computed using the straight-line method for financial
reporting purposes. Accelerated depreciation methods are used for income tax
purposes.
LONG-TERM DEBT: The fair value of the Company's long-term debt is
based on management's estimate of current market prices for the same issues.
Fair value is estimated to be $70,042,000 at December 31, 1995 and $76,400,000
at December 31, 1994.
ENVIRONMENTAL COSTS: Environmental expenditures that relate to current
operations are expensed or capitalized as appropriate. Remediation costs of
existing conditions caused by past operations are accrued when it is probable
that a liability has been incurred and the cost can be reasonably estimated.
REVENUE RECOGNITION: Sales and related costs are generally recorded
by the Company upon shipment of products to its customers. Under contractual
agreement with some customers, sales of certain custom products are recognized
upon completion of the order and invoicing under normal credit terms.
NET INCOME PER COMMON SHARE: Net income per common share is based upon
the weighted average number of shares outstanding, 16,197,044 in 1995,
16,025,695 in 1994, and 16,023,756 in 1993, which have been restated to
reflect a three-for-two stock split in June 1995. The dilutive effect of
outstanding stock options is not significant.
FOREIGN CURRENCY TRANSLATION: The Company's investment in a 50%-owned
foreign joint venture is translated at the rate in effect at the balance
sheet date. Resulting translation adjustments are reported separately as a
component of stockholders' equity. The Company's share of net income of the
joint venture is translated at average exchange rates prevailing during the
year.
IMPAIRMENT OF LONG-LIVED ASSETS: Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," establishes accounting standards for the
impairment of long-lived assets and certain intangibles and goodwill. The
standard is effective for years beginning after December 15, 1995 and will be
adopted by the Company in 1996. The impact on the Company's financial
statements has not yet been determined but is not expected to be material.
STOCK BASED COMPENSATION: Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation," establishes accounting
and reporting standards for stock-based employee compensation plans and for
certain nonemployee transactions. The standard is effective for years beginning
after December 15, 1995 and will be adopted by the Company in 1996. As
permitted by the standard, the Company expects to continue to account for
employee arrangements under APB No. 25. The Company does not expect that
adoption of the standard with regard to nonemployee arrangements will have a
material impact on its consolidated financial statements.
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLES: In 1994 the
Company adopted SFAS No. 112, "Employers' Accounting for Postemployment
Benefits" resulting in a cumulative net adjustment of $605,000.
<PAGE> 11
(LOGO)
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(cont.)
INVENTORIES
<TABLE>
<CAPTION>
1995 1994
INVENTORIES (000'S)
<S> <C> <C>
Products finished or in process $27,557 $25,685
Raw materials 24,438 25,560
Supplies 720 684
------- -------
$52,715 $51,929
======= =======
</TABLE>
LONG-TERM DEBT
<TABLE>
<CAPTION>
LONG-TERM DEBT (000'S) 1995 1994
<S> <C> <C>
Senior notes, 9.92%, due 1996 to 2000 $ 9,643 $17,229
Senior notes, 5.77%, due 1997 to 2003 48,000 48,000
Note payable to bank, variable at LIBOR
plus 1.15%, principal due to 2000 762 990
Mortgage note, variable at
56% of bank's base rate plus .25%
not to exceed 15%, principal
due to 1999 1,500 2,000
Mortgage note, variable at 75.8%
of prime rate not to exceed
11%, principal due to 2001 1,271 1,590
Mortgage note, variable at 79.4%
of prime rate not to exceed
11.75%, principal due to 1999 483 658
Other 102 102
Note payable to bank, 9.375% 2,700
Mortgage note, 6.75% 1,875
------- -------
$61,761 $75,144
======= =======
</TABLE>
The net carrying amount of plant, equipment and other assets assigned
as collateral to the above obligations was approximately $19,522,000 in 1995
and $24,955,000 in 1994. The Company has agreed to certain restrictive
covenants during the terms of some of these agreements. Under the most
restrictive of the covenants, the Company must maintain tangible net
worth not less than approximately $95,000,000 plus 25% of net income earned
after 1992 and must limit the amount of Senior Funded Debt to not more than
40% of total capitalization. The aggregate amounts of long-term debt maturing
during the next five years are approximately: 1996 -- $8,251,000; 1997 --
$12,467,000;1998 -- $12,365,000; 1999 -- $9,107,000; 2000 -- $7,251,000. Loans
from life insurance companies aggregating approximately $42,700,000 in 1995
and $41,900,000 in 1994 are secured by the cash values of the underlying life
insurance policies, $47,400,000 in 1995 and $45,300,000 in 1994. Such loans
have been netted against the cash values. Interest is payable annually at
rates ranging from 11.5% to 13%.
INCOME TAXES
Deferred income taxes have been established for the effects of
differences in the bases of assets and liabilities for financial reporting and
income tax purposes.
The provision for income taxes is reconciled with the Federal
statutory rate as follows (000's):
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Income tax at
Federal statutory rate $14,526 $11,552 $9,325
State income taxes net
of Federal income tax
benefit 2,010 2,093 1,702
Non-taxable life
insurance proceeds and
increase in cash value (1,285) (957) (1,054)
Other 746 791 (13)
------- ------- ------
$15,997 $13,479 $9,960
======= ======= ======
</TABLE>
<PAGE> 12
(LOGO)
NOTES TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(cont.)
Components of the net deferred income tax asset at December 31, 1995
and 1994 are as follows (000's):
<TABLE>
<CAPTION>
DEFERRED INCOME TAX ASSETS: 1995 1994
<S> <C> <C>
Postretirement and
postemployment benefits $15,394 $14,154
Other 3,722 3,482
------- -------
19,116 17,636
DEFERRED INCOME TAX LIABILITIES:
Property and equipment 7,068 7,141
------- -------
Net Deferred Income Tax Asset $12,048 $10,495
======= =======
</TABLE>
Management believes it is more likely than not that future taxable
income will be sufficient to realize fully the benefits of the deferred tax
assets.
STOCK OPTIONS
In 1991 the Company adopted a nonqualified Stock Option Plan to replace
the expiring 1981 Stock Option Plan. Under each plan, options could be granted
at fair market value to key employees. Twenty-five percent of each grant
becomes exercisable in each succeeding year. The Board of Directors may grant
options which include a stock appreciation feature under which employees may
elect to receive cash in lieu of Common Stock for up to 25% of the option
exercised.
The following table summarizes stock option activity for each of the
last three years.
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Outstanding at January 1 266,844 228,985 190,242
Issued 165,021 60,600 55,650
Exercised (54,329) (14,247) (15,024)
Canceled (4,200) (8,494) (1,883)
------- ------- -------
Outstanding at December 31 373,336 266,844 228,985
======= ======= =======
Exercisable 152,804 133,510 110,164
Price range of options:
Issued $17.50-$26.25 $13.17 $16.17-$18.50
Exercised $6.17-$18.25 $6.17-$11.20 $6.17-$11.20
Exercisable $6.17-$26.25 $6.17-$19.50 $6.17-$19.50
</TABLE>
The Company has reserved 1,438,920 shares of Common Stock for issuance
under the Plans.
In 1994 the Company's shareholders approved a Directors' Stock
Incentive Plan under which nonqualified stock options and restricted stock
awards may be issued and 221,700 shares of Common Stock have been reserved for
issuance under this plan.
Under the Plan, Directors may elect to forego all or a portion of the
director's retainer fee for the following year in exchange for an option to
purchase Common Stock. The number of options to be issued is determined by
dividing the foregone director's fee by one-half of the fair market value of
the Common Stock on the date of grant. The option price is equal to one-half
of the fair market value of the Common Stock on the date of grant. During 1995
and 1994 options for 10,092 and 11,454 shares were issued at prices of $8.92
and $7.33. At December 31, 1995 options for 21,546 shares were outstanding, of
which options for 11,454 shares were exercisable at $7.33 a share.
The Plan also provides for restricted stock awards. In general, each
director was issued 300 shares of Common Stock upon adoption of the Plan and
new directors will be issued 200 shares upon election. Additional awards will
be made to each director at the beginning of each successive three-year term,
but no director will receive more than 1,000 shares of Restricted Stock. At
December 31, 1995 the Company had issued 3,300 shares of Restricted Stock
under the Plan.
EMPLOYEE RETIREMENT PLANS
The Company and its principal subsidiaries have profit sharing and
other retirement plans covering their employees. The Company's contributions,
which are principally discretionary, were approximately $5,460,000 in 1995,
$4,530,000 in 1994, and $4,430,000 in 1993.
During 1978 the Company entered into agreements with key officers of
the Company and its subsidiaries which provide for nonvested supplemental
retirement benefits. In 1985 the Company entered into similar additional
agreements with directors and key officers. The Company has made current
provisions for future payments due under these agreements. The amounts charged
to operations in 1995, 1994, and 1993 were approximately $3,939,000, $3,457,000
and $3,340,000, respectively.
<PAGE> 13
(LOGO)
NOTES TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(cont.)
COMMITMENTS AND CONTINGENCIES
Rental expense under operating leases was approximately $5,053,000 in
1995, $4,889,000 in 1994 and $3,888,000 in 1993. Minimum rental commitments
under noncancelable leases other than capital leases are approximately: 1996 -
$4,940,000; 1997 - $3,850,000; 1998 - $3,453,000; 1999 - $2,804,000; 2000 -
$2,552,000 and $4,775,000 thereafter.
In the opinion of management, no litigation or claims are pending
against the Company which will have an adverse material effect on its
financial statements.
ACQUISITIONS
On September 1, 1993 the Company acquired all of the stock of Home
Safety Equipment Co., Inc., d/b/a Discount Labels (DL) for $26,745,000. DL is
located in New Albany, Indiana and is engaged in the manufacture and sale of
custom-printed labels. The excess of the purchase price over the estimated
fair market value of the assets acquired was approximately $17,550,000.
On October 28, 1993 the Company acquired certain assets of
International Envelope Company (IE) for $12,875,000. IE is located
principally in Exton, Pennsylvania and is engaged in the manufacture of
envelopes. The excess of the purchase price over the fair value of the assets
acquired was approximately $2,026,000.
On June 1, 1995 the Company acquired certain assets of Electronic Form
Systems, Inc. (EFS) for $9,650,000. EFS is located in Carrollton, Texas and is
engaged in the development and marketing of electronic forms software. The
excess of the purchase price over the fair value of the assets acquired was
approximately $6,765,000.
These acquisitions were recorded under the purchase method of
accounting and the results of operations have been included in the Company's
consolidated financial statements since acquisition.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides certain health care and life insurance benefits
for eligible retired employees. Substantially all of the Company's employees
may become eligible for these benefits if they reach normal retirement age
while working for the Company. The health care plan is contributory and is
adjusted periodically based on actual experience while the life insurance plan
is noncontributory. Neither plan is funded. The Company accounts for these
arrangements in accordance with Statement of Financial Accounting Standards
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions."
As of January 1, 1993 the Company made modifications to the above
plans which reduced its obligations for prior service costs by approximately
$13,900,00. Such amount is being amortized over the remaining active service
periods of its employees.
The following table presents a reconciliation of the plan's
funded status at December 31 (000's):
<TABLE>
<CAPTION>
1995 1994 1993
ACCUMULATED POSTRETIREMENT
BENEFIT OBLIGATION:
<S> <C> <C> <C>
Retired employees $ 4,572 $ 5,447 $ 5,172
Fully eligible active employees 458 608 453
Other active employees 3,776 4,604 4,998
-------- -------- --------
8,806 10,659 10,623
-------- -------- --------
Unrecognized prior service
cost reduction 11,394 12,231 13,068
Unrecognized net gain(loss) 503 (1,671) (2,382)
-------- -------- --------
Postretirement benefits $ 20,703 $ 21,219 $ 21,309
======== ======== ========
NET PERIODIC BENEFIT COST:
Service cost $ 194 $ 332 $ 244
Interest cost 647 800 791
Net amortization (859) (744) (819)
-------- -------- --------
$ (18) $ 388 $ 216
======== ======== ========
</TABLE>
The assumed health care cost trend rate for 1995 is 10.5% decreasing
annually by 1% to a rate of 5.5% in 2001 and beyond. The assumed discount rate
used in determining the accumulated postretirement benefit obligation was
7.25% at December 31, 1995, 8.5% at December 31, 1994 and 7.5% at December 31,
1993.
If the health care cost trend rate were increased by one percent
for all future years, the impact on the accumulated postretirement benefit
obligation as of December 31, 1995 and the aggregate of service and interest
costs for 1995 would have been insignificant.
<PAGE> 14
(LOGO)
NOTES TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(cont.)
STOCKHOLDERS' EQUITY
The Company has authorized 500,000 shares of Preferred Stock without
par value. No shares have been issued.
On October 25, 1989 the Board of Directors adopted a Share Rights Plan
and declared a dividend of one Right for each outstanding share of Common Stock
on November 6, 1989. Such Rights become exercisable, or transferable apart
from the Common Stock, twenty days after a person or group (Acquiring Person)
has acquired beneficial ownership of 20% of the Common Stock or after a person
or group has acquired beneficial ownership of 10% of the Common Stock and,
after reasonable inquiry and investigation, has been declared by the Board of
Directors to be an "Adverse Person." Each Right then may be exercised to
acquire a number of shares of Common Stock equal to one share of Common
Stock multiplied by a fraction, the numerator of which is the number of shares
of Common Stock outstanding on the date that an Acquiring Person or an Adverse
Person was first determined to be such (Stock Acquisition Date) and the
denominator of which is the number of Rights outstanding on the Stock
Acquisition Date that are not owned by the Acquiring Person or Adverse Person.
The price to be paid for each share of Common Stock acquired by exercise of
Rights is 20% of market value on the Stock Acquisition Date. In general, the
Rights may be redeemed by the Company at a price of $.01 at any time until
twenty days following the Stock Acquisition Date. The Rights will expire on
November 6, 1999.
Following is a summary of transactions in stockholders' equity for the
three years ended December 31, 1995. Amounts are in thousands of dollars,
except per share amounts.
STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
FOREIGN
ADDITIONAL CURRENCY
COMMON STOCK PAID-IN RETAINED TREASURY STOCK TRANSLATION
SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT ADJUSTMENTS
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE DECEMBER 31, 1992 10,774,484 $21,549 $ 19 $ 99,117 (89,010) $(1,598) $(268)
Net income 16,683
Dividends paid, $.50 per share (19) (8,013)
Exercise of stock options (59) 10,019 186
Repurchase of Common Stock (13,400) (339)
Foreign currency translation (165)
---------- ------- ------ -------- -------- ------- -----
BALANCE DECEMBER 31, 1993 10,774,484 21,549 0 107,728 (92,391) (1,751) (433)
Net income 18,923
Dividends paid, $.533 per share (8,550) 1,013 14
Exercise of stock options 7,995 16 82 (6) (30,100) (628)
Repurchase of Common Stock
Restricted stock awards 1,800 4 36
Foreign currency translation 497
---------- ------- ------ -------- -------- ------- -----
BALANCE DECEMBER 31, 1994 10,784,279 21,569 118 118,095 (121,478) (2,365) 64
Net income 25,505
Dividends paid, $.56 per share (9,085)
Shares issued in acquisition 323,304 647 5,353
Three-for-Two stock split 5,406,897 10,814 (758) (10,056) (63,177)
Exercise of stock options 48,579 96 514
Repurchase of Common Stock (19,577) (451)
Restricted stock awards 400 1 10
Performance award 18,750 37 464
Foreign currency translation 301
---------- ------- ------ -------- -------- ------- -----
BALANCE DECEMBER 31, 1995 16,582,209 $33,164 $5,701 $124,459 (204,232) $(2,816) $ 365
========== ======= ====== ======== ======== ======= =====
</TABLE>
SUBSEQUENT EVENT
In February 1996 the Company announced a restructuring plan to reduce
operating costs. The Company plans to close 13 plants in 1996 and will transfer
production to other larger facilities. As a result the Company expects to
record a restructuring charge to operations in 1996 of approximately $8
million, consisting of severance and other employee related costs of $6
million, fixed asset write-downs of $1 million and lease termination and other
miscellaneous costs of $1 million.
<PAGE> 15
(LOGO)
NOTES TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(cont.)
BUSINESS SEGMENT INFORMATION (000'S)
<TABLE>
<CAPTION>
DEPRECIATION & CAPITAL IDENTIFIABLE OPERATING
SALES AMORTIZATION EXPENDITURES ASSETS PROFIT
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995
Business supplies printing $476,604 $12,327 $ 9,854 $214,196 $37,432
Book manufacturing 58,207 2,113 3,727 26,715 6,781
Extrusion coating and laminating 99,144 2,814 1,413 47,828 11,639
Corporate 302 148 47,692 (7,746)
-------- ------- -------- -------- -------
$633,955 $17,556 $ 15,142 $336,431 $48,106
======== ======= ========= ======== =======
YEAR ENDED DECEMBER 31, 1994
Business supplies printing $429,342 $11,204 $ 7,242 $191,635 $32,290
Book manufacturing 49,464 1,860 2,187 25,539 5,653
Extrusion coating and laminating 84,327 2,760 1,376 46,609 8,778
Corporate 1,567 2,879 48,318 (5,993)
-------- ------- -------- ------- -------
$563,133 $17,391 $ 13,684 $312,101 $40,728
======== ======= ======== ======== =======
YEAR ENDED DECEMBER 31, 1993
Business supplies printing $357,910 $ 8,928 $ 9,849 $184,736 $21,856
Book manufacturing 44,031 1,803 1,493 19,607 5,935
Extrusion coating and laminating 84,198 2,628 3,171 45,354 10,003
Corporate 1,302 1,468 52,495 (5,664)
-------- -------- -------- -------- -------
$486,139 $14,661 $ 15,981 $302,192 $32,130
======== ======== ======== ======== =======
</TABLE>
The Company's three operating business segments are: business supplies
printing, consisting principally of business forms and envelope products, the
manufacture of books and the extrusion of polyethylene onto lightweight papers
and non-wovens.
Operating profit for each segment is sales less operating expenses. In
computing operating profit for each segment, the following items have not been
added or deducted: general corporate expenses, interest expense, income from
investments and income taxes.
Identifiable assets are those assets used in each segment's operation.
Corporate assets consist of cash and cash equivalents and other noncurrent
assets not used in the operation of a segment.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
American Business Products, Inc.:
We have audited the accompanying consolidated balance sheets of
American Business Products, Inc. and subsidiaries as of December 31, 1995 and
1994 and the related consolidated statements of income and cash flows for each
of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of American Business
Products, Inc. and subsidiaries at December 31, 1995 and 1994, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1995 in conformity with generally accepted accounting
principles.
As discussed in the Notes to the consolidated financial statements, in
1994 the Company changed its method of accounting for postemployment benefits.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
February 23, 1996
<PAGE> 16
(LOGO)
ABP ONLINE AND VIA FAX
News releases and financial results are accessible on the Internet at
http://www.prnewswire.com. Starting with the first quarter 1996 results, news
releases and quarterly reports are available by fax through "Company News On
Call". U.S. residents dial toll-free 800-758-5804, Extension 039693 to
receive faxed information about ABP in minutes, 24 hours a day, seven days a
week. If you wish to have information mailed to you, call Investor Relations,
800-227-3390, Monday-Friday, 8:00 a.m.-5:00 p.m.
STOCK EXCHANGE LISTING
(LOGO) American Business Products, Inc.'s Common Stock is listed on the New
York Stock Exchange. Ticker Symbol: ABP.
ANNUAL MEETING
The Annual Meeting of Shareholders will be held April 24, 1996, at
11:00 a.m. at the Cobb Galleria Centre, Two Galleria Parkway, Atlanta, Georgia
30339.
FORM 10-K ANNUAL REPORT
The Form 10-K filed with the Securities and Exchange Commission is
available to shareholders and may be obtained without charge upon written
request to the Secretary of the Company.
SHAREHOLDERS OF RECORD
On March 1, 1996, there were approximately 2,200 shareholders of record
of the Company's Common Stock.
AUDITORS
Deloitte & Touche LLP, Atlanta
GENERAL COUNSEL
Long, Aldridge & Norman, Atlanta
TRANSFER Agent AND REGISTRAR
Wachovia Bank of North Carolina, N. A.
Winston-Salem
1-800-633-4236 Shareholder Services
EQUAL OPPORTUNITY EMPLOYER
American Business Products, Inc., and its subsidiaries are equal
opportunity employers.
NAIC LOW COST INVESTMENT PLAN
(LOGO) ABP is a Corporate Member of the National Association of
Investors Corporation and a participant in the NAIC Low Cost Investment
program. For information, contact the NAIC, 1-810-583-6242, ext. 304.
DIVIDEND REINVESTMENT/STOCK PURCHASE PLAN
Registered shareholders of at least one share of ABP Common Stock may
participate in the Company's Dividend Reinvestment/Stock Purchase Plan to
acquire additional shares. The Company pays commission charges on purchases.
Even though your dividends are automatically reinvested, they continue
to be taxable to you for income tax purposes as having been received on the
dividend payment date.
Under the Dividend Reinvestment/Stock Purchase plan, you have the
option of investing any amount from $10 to $1,000 per month. When making an
optional cash investment, your check should be made payable and mailed to
Wachovia Bank of North Carolina, N.A., P. O. Box 3001, Winston-Salem, NC
27102-3001, and must be accompanied by a Stock Purchase Form. Funds are
invested on a monthly basis on or about the 15th and must arrive at Wachovia 5
business days prior to the 15th.
A booklet describing the Plan and enrollment procedures is available
upon request from Wachovia Bank of North Carolina, N.A. at the address above.
DIVIDENDS
Cash dividends on ABP Common Stock have been paid without interruption
for 38 years and have been increased for the last 38 years through 1995. Since
ABP's initial public offering in 1969, dividends per share have been increased
by more than 50 times. Dividends are generally declared on a quarterly basis,
with recordholders of date entitled to receive the cash dividend on the
payable date. Anticipated record and payable dates for the year 1996 are
listed below:
Record Date Payable Date
March 1, 1996 March 15, 1996
June 1, 1996 June 15, 1996
September 1, 1996 September 15, 1996
December 1, 1996 December 15, 1996
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
<PAGE> 2
EXHIBIT 21
SUBSIDIARIES OF AMERICAN BUSINESS PRODUCTS, INC.
The subsidiaries of the Company as of March 15, 1996, all of which are
wholly-owned, are set forth below:
<TABLE>
<CAPTION>
NAME STATE OF INCORPORATION
---- ----------------------
<S> <C>
BookCrafters USA, Inc. Michigan
Curtis 1000 Inc. Georgia
Discount Labels, Inc. Indiana
International Envelope Company Delaware
Jen-Coat, Inc. Massachusetts
Vanier Graphics Corporation California
d/b/a Vanier
</TABLE>
The results of operations of all subsidiaries described above are included
in the Consolidated Financial Statements incorporated by reference in this
Annual Report on Form 10-K.
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
<PAGE> 2
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference of our reports dated February 23,
1996, appearing in and incorporated by reference in this Annual Report on Form
10-K of American Business Products, Inc. for the year ended December 31, 1995
in the following Registration Statements of American Business Products, Inc.:
<TABLE>
<CAPTION>
FORM FILE NO.
<S> <C>
S-3 33-60567
S-8 33-53627
S-8 33-59271
S-8 33-61359
</TABLE>
/S/ DELOITTE & TOUCHE LLP
- -------------------------
DELOITTE & TOUCHE LLP
Atlanta, Georgia
March 18, 1996
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
<PAGE> 2
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints THOMAS R. CARMODY, W. C. DOWNER AND DAWN M.
GRAY, and each of them, his true and lawful attorneys-in-fact and agents, with
full power of substitution, for him and in his name, place and stead, in any
and all capacities, to sign the Annual Report on Form 10-K of American Business
Products, Inc., for the fiscal year ended December 31, 1995, and any and all
amendments to such Annual report on Form 10-K and to file the same, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission and the New York Stock Exchange, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitute or substitutes, lawfully may
do or cause to be done by virtue thereof.
This 7th day of February, 1996.
/S/ F. Duane Ackerman /S/ Robert W. Gundeck
------------------------------- -------------------------------
F. Duane Ackerman Robert W. Gundeck
/S/ John E. Aderhold /S/ Hollis L. Harris
------------------------------- -------------------------------
John E. Aderhold Hollis L. Harris
/S/ W. Joseph Biggers /S/ W. Stell Huie
------------------------------- -------------------------------
W. Joseph Biggers W. Stell Huie
/S/ Thomas R. Carmody /S/ Thomas F. Keller
------------------------------- -------------------------------
Thomas R. Carmody Thomas F. Keller
/S/ Henry Curtis, VII /S/ Rex A. McClelland
------------------------------- -------------------------------
Henry Curtis, VII Rex A. McClelland
/S/ Herbert J. Dickson /S/ G. Harold Northrop
------------------------------- -------------------------------
Herbert J. Dickson G. Harold Northrop
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF AMERICAN BUSINESS PRODUCTS, INC. FOR THE YEAR ENDED
DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 29,023
<SECURITIES> 0
<RECEIVABLES> 88,815
<ALLOWANCES> 2,837
<INVENTORY> 52,715
<CURRENT-ASSETS> 168,819
<PP&E> 193,703
<DEPRECIATION> 104,709
<TOTAL-ASSETS> 336,431
<CURRENT-LIABILITIES> 75,218
<BONDS> 0
0
0
<COMMON> 33,164
<OTHER-SE> 127,709
<TOTAL-LIABILITY-AND-EQUITY> 336,431
<SALES> 633,955
<TOTAL-REVENUES> 633,955
<CGS> 447,375
<TOTAL-COSTS> 585,849
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,243
<INCOME-PRETAX> 41,502
<INCOME-TAX> 15,997
<INCOME-CONTINUING> 25,505
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,505
<EPS-PRIMARY> 1.57
<EPS-DILUTED> 1.57
</TABLE>
