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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K/A
(X) Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 31, 1996.
( ) Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file no. 1-7088
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AMERICAN BUSINESS PRODUCTS, INC.
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(Exact name of registrant as specified in its charter)
Georgia 58-1030529
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(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)
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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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
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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 4, 1997
was $265,540,663.
There were 16,408,617 shares of Common Stock outstanding on March 4, 1997.
DOCUMENTS INCORPORATED HEREIN BY REFERENCE
Portions of the registrant's 1996 Annual Report for the fiscal year ended
December 31, 1996, are incorporated by reference in Parts I and II hereof.
Portions of the registrant's Proxy Statement for the 1997 Annual Meeting of
Shareholders to be held on April 23, 1997, 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_]
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(1) ITEM 1 - BUSINESS
General
American Business Products, Inc. ("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 and its
subsidiaries are collectively referred to as the "Company." In April
1986, American Business Products was reincorporated under the laws of
Georgia. The Company is in the business of manufacturing and
distributing specialty custom printed information products and
services. The Company is one of the nation's leading suppliers of
printed business supplies, principally envelope products, custom labels
and custom business forms. Additionally, the Company manufactures and
distributes books for the publishing industry and also engages in
specialty extrusion coating and laminating of papers, films, and
nonwoven fabrics for packaging and other products.
Sale of Subsidiary Assets
Effective on December 31, 1996, Vanier Graphics Corporation ("Vanier"),
a wholly owned subsidiary of American Business Products, sold
substantially all its assets to The Reynolds and Reynolds Company (the
"Vanier Sale"). Vanier was a manufacturer of business forms and a
provider of forms management and work-flow analysis.
Restructuring Program
During 1996 the Company reconfigured much of its business supplies
production by closing 13 generally smaller plants in various locations
and transferring their production to a smaller number of larger, more
efficient facilities. This action is expected to reduce operating costs
and result in higher equipment utilization, improved employee
productivity and other scale economies.
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, 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 specialized types and sizes of
envelopes. Prior to the Vanier Sale the Company also manufactured
business forms. Business supplies printing accounted for 74.1% of the
Company's sales in 1996, 75.2% in 1995 and 76.2% in 1994.
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 8.6% of the Company's sales in
1996, 9.2% in 1995 and 8.8% in 1994.
Specialty extrusion coating and laminating consist 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 and postage stamps. This
business segment accounted for 17.3% of the Company's sales in 1996,
15.6% in 1995 and 15.0% in 1994.
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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 1996 Annual
Report, which information is incorporated herein by reference. Portions
of the 1996 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 13 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.
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 January 31, 1997, the Company had backlogs believed to be firm of
approximately $30.4 million for business supplies printing,
approximately $5.2 million for book manufacturing and approximately
$16.4 million for extrusion coating and laminating. Comparable backlogs
as of January 31, 1996 were approximately $49.0 million for business
supplies printing, approximately $5.2 million for book manufacturing
and approximately $9.6 million for extrusion coating and laminating.
All present backlogs are expected to be filled during 1997.
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 493 sales representatives. No customer or related group
of customers in 1996 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
generally falls within the commercial printing industry, which had
estimated 1996 sales of $88 billion with a projected growth of 6% in
1997, according to an industry trade association. Printed business
supplies are produced by thousands of commercial printing enterprises,
estimated at 40,000 establishments, ranging from small family
operations to large multinational corporations. To improve its
competitive position, the Company's business supplies operations
reconfigured production facilities for greater efficiency and began
implementing a plan of business process reengineering and redesigned,
advanced technology order-processing and information systems. 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
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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.
In the envelope industry, which had United States sales of
approximately $2.9 billion in 1996, 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
compared to other envelope products.
In the business forms industry, strong pricing competition in recent
years has created essentially a commodity market for these products,
while competition from electronic communications has contributed to a
decline or flattening of total industry sales, estimated at less than
$7 billion in 1996 based on Department of Commerce projections.
Although theCompany sold its business forms business, Vanier Graphics,
in 1996, the Company's major business supplies subsidiary, Curtis 1000
Inc., continues to provide customized forms for its customers and this
is a substantial portion of Curtis 1000 sales. However, these products
are marketed as value-added products usually as part of a total
"business solutions" plan, including other products such as envelopes
and on-demand printing, and are not positioned as a low-priced
commodity, thus affording the Company competitive advantages through
its large direct sales force and relationship selling.
Book printing, which had industry sales exceeding $5 billion in 1996,
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 by providing
complete order fulfillment 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 1996 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,
which together with price form the basis of competition in this
business segment. An advantage is considered to be the entry barriers
to the industry, including a significant capital investment, which may
deter smaller companies, and highly individual market niches with
relatively low sales volume, which generally deters larger companies
from entering this industry.
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, 1996, the Company had approximately 3,520 full-time
employees. No significant number of employees is covered by any
collective bargaining agreement.
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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). 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.")
Federal, State or Local Regulations
Federal, state, and local regulations relating to protection of the
environment have not had and are not expected to have a material
adverse effect upon the Company's capital expenditures, liquidity,
earnings, or competitive position. The Company's various operating
units are subject to EPA, state, and local standards for air emissions,
industrial storm water discharges, generation of hazardous waste,
heating oil underground storage tanks, release response, hazardous
chemicals use reporting, sewer use, and the like, and the Company
believes that it is in substantial compliance with the applicable
standards. None of these environmental standards has had or is expected
to have a material adverse effect upon the Company.
Soil and groundwater contamination has been detected at a discontinued
manufacturing facility of one of the Company's subsidiaries. The
Company intends to address the contamination in conformity with the
requirements established by the North Carolina Department of
Environment, Health, and Natural Resources. The Company does not
believe that such costs will have a material adverse effect on the
Company.
(2) 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. The offices are leased from an unrelated party under a lease
expiring in 2003 which has a renewal option and annual cost of
$252,000.
In addition to the executive offices, the Company owns 12 production
facilities in the United States encompassing approximately 982,000
square feet. The Company leases a production facility of approximately
85,000 square feet in Houston, Texas with a lease expiration of 2000
and includes a renewal option and annual cost of $335,000. The Company
leases a production facility of approximately 140,000 square feet in
Exton, Pa. with a lease expiration of 2002 and includes a renewal
option and annual cost of $840,000. The Company leases a production
facility of approximately 65,000 square feet in Santa Fe Springs, Ca.
with a lease expiration of 1999 and includes a renewal option and
annual cost of $340,000. The company also leases a warehouse facility
of approximately 40,000 square feet in Fontana, Ca. with a lease
expiration of 2000 and annual cost of $137,000. Management believes
that a suitable replacement facility can be obtained on comparable
terms if a lease extension is not negotiated on the Fontana, Ca.
facility
The Company's business supplies printing business and book
manufacturing business have eleven other property leases, primarily
sales offices, with a total of approximately 32,000 square feet with
various maturities from 1997 to 2000. Management believes that suitable
replacement facilities can be obtained on comparable terms if lease
extensions are not negotiated.
The Company and a European partner have a joint venture, Curtis 1000
Europe GmbH, which operates five production facilities. Two of the
facilities in Germany and one in Poland are owned and one each in
England and Luxembourg are leased.
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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 1996 Annual
Report, which is incorporated herein by reference.
As of March 1, 1997 the Company owned ten properties which had been
rendered redundant to operating needs due to the Vanier Sale, the 1996
plant consolidation program and otherwise. The Company intends to sell
all of these properties. All operating properties and equipment are
believed to be in good condition, adequately utilized and suitable for
the purposes for which they are used.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
MANAGEMENT'S DISCUSSION AND ANALYSIS
(3)(4) PRO FORMA FINANCIAL INFORMATION
The accompanying unaudited pro forma condensed consolidated financial
statements give effect to the Vanier Sale as if the transaction occurred
on December 31, 1995. The pro forma condensed consolidated financial
statements of the Company are presented for informational purposes only
and their inclusion in this report is not intended to intimate that the
pro forma information is a more meaningful indicator of the results of
operations than the Company's reported financial results. Further, the
pro forma information may not reflect the Company's future results of
operations or what the results of operations of the Company would have
been had the Vanier Sale occurred at the date indicated.
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
(In thousands, except per share amounts)
Actual Pro Forma Pro Forma
December 31, Adjustment for December 31,
1996 Disposition 1996
<S> <C> <C> <C>
Net Sales $ 631,638 $ (130,293) $ 501,345
Cost and Expenses
Cost of goods sold 443,621 (93,818) 349,803
Selling and administrative 142,229 (31,136) 111,093
Restructuring expenses 8,334 (1,426) 6,908
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594,184 (126,380) 467,804
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Operating Income 37,454 (3,913) 33,541
Other Income (expense)
Interest expense (7,525) 276 (7,249)
Miscellaneous - net 4,110 2,116 (1)(2) 6,226
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Income Before Income Taxes 34,039 (1,521) 32,518
Provision for Income Taxes 12,985 (813) 12,172
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Net Income $ 21,054 $ (708) $ 20,346
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Earnings Per Share $ 1.28 $ (0.04) $ 1.24
============ ============ ==========
Weighted Average Number
of Common Shares Outstanding 16,395,851 16,395,851
============ ==========
</TABLE>
(1) Includes the loss on the Vanier Sale of $2.8 million.
(2) Does not include interest income of approximately $2.1 million which
the Company would have received had the net proceeds of the Vanier
Sale been invested in money market instruments throughout 1996.
Actual results for 1996 included a restructuring charge of $4.8 million
after tax, or $0.29 per share, related to the Company's plant consolidation
program, after tax gains of $1.8 million, or $0.11 per share, on the
disposal of realty rendered redundant to operating needs by the plant
consolidation program and a loss of $1.6 million after tax, or $0.10 per
share, on the Vanier Sale. Also, from Vanier's business forms manufacturing
business which the Company sold on December 31, 1996, the Company recorded
revenues of $130.3 million and after tax earnings (expressed net of the
loss on the Vanier Sale, that part of the restructuring charge that related
to Vanier and interest income that would have been earned had the Vanier
Sale proceeds been invested in money market instruments throughout 1996) of
$2.1 million, or $0.13 per share, for 1996. Without the restructuring
charge, the gains on related realty sales, the Vanier Sale loss and the
business' revenues and earnings contribution, 1996 would have shown
revenues of $501.3 million and net income of $23.5 million or $1.43 per
share.
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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: July 23, 1997 \s\ Richard G. Smith
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Richard G. Smith
Vice President-Finance
and Chief Financial Officer
[duly authorized officer
and principal financial officer]
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