FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest
Event Reported): April 19, 1994
GIBSON GREETINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware 2-82990 52-1242761
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
2100 Section Road, Cincinnati, Ohio 45237
(Address of principal executive offices)
Registrant's telephone number, including area code:(513)841-6600
<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
Items 1, 2, 3, 4, 6 and 8 are not applicable and are omitted from
this report.
Item 5. Other Events
The press release of Gibson Greetings, Inc., dated
April 19, 1994, is filed as an exhibit to and incorporated by
reference in this Current Report on Form 8-K.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits
(a) Financial Statements of Business Acquired.
Not Applicable.
(b) Pro Forma Financial Information.
Not Applicable.
(c) Exhibits
Number Description
1 Press Release dated April 19, 1994
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
Date: April 19, 1994 GIBSON GREETINGS, INC.
By /s/ William L. Flaherty
William L. Flaherty
Vice President - Finance
<PAGE>
Exhibit 1
NEWS
Gibson RELEASE
Gibson Greetings, Inc. 2100 Section Road Cincinnati OH 45237
CONTACT: W. L. Flaherty RELEASE DATE:
Vice President - Finance April 19, 1994
Chief Financial Officer
(513) 841-6675
GIBSON GREETINGS, INC. ANNOUNCES EARNINGS CHARGE
DUE TO ACCOUNTING RECOGNITION OF UNREALIZED
LOSSES ON DERIVATIVE TRANSACTIONS
Gibson Greetings, Inc. announced today that it incurred an
additional charge against earnings of $16.7 million for the three
months ended March 31, 1994 due to the required accounting
recognition of unrealized losses on interest rate derivative
transactions with Bankers Trust which mature in June and August
1995. These transactions were announced on March 4, 1994 at
which time the Company felt compelled to enter into them in order
to cap its exposure on then outstanding uncapped derivatives
transactions also with Bankers Trust. At that time, Gibson
announced that it had incurred a realized loss of $3 million and
had capped its exposure at an additional $24.5 million in place
of the open exposure under prior swaps. The $16.7 million
unrealized loss is in addition to the $3 million realized loss
and represents a non-cash charge against income required to meet
accounting rules that such transactions be recorded at current
market value as of the end of each accounting period.
Accordingly, the total loss which the Company will recognize on
these transactions for the three months ended March 31, 1994 is
$19.7 million after tax, or $1.22 per share.
William L. Flaherty, Gibson's Chief Financial Officer,
emphasized that the additional $16.7 million loss has not been
realized, may in fact never be realized in this amount, and does
not require current cash outlays. "We are concerned that our
shareholders not be confused by this required accounting
treatment," Flaherty said. "The loss being recognized for
accounting purposes is the current market value of these
derivative transactions as determined by a Bankers Trust
valuation model based on the projected future value of the
transactions at maturity. The current market value can fluctuate
daily based on market conditions."
Gibson currently has two open transactions and cannot
realize a gain at maturity on either one. On one transaction,
Gibson's minimum loss will be the $3 million previously announced
and its maximum loss would be $17.5 million, depending on the 6
month LIBOR rate on June 7, 1995. Gibson is adversely impacted
at the rate of $72,500 for each basis point that the 6 month
LIBOR rate on that date exceeds 3.90%, up to a maximum of 5.90%.
On the other transaction, Gibson's maximum loss is capped at
$10.075 million, depending on the swap spread on August 15, 1995
for the 10.75% U.S. Treasury Note maturing August 15, 2005. The
Company is adversely impacted if swap spreads on that day are
less than 33.5 basis points, with the amount of its loss
calculated at the rate of $746,300 for each basis point, and with
its exposure capped if such spread is less than 20 basis points.
Gibson will realize no loss on this transaction if swap spreads
are at or above 33.5 basis points on August 15, 1995.
The combined effect of these two transactions is that
Gibson's losses will be between $3 million and $27.575 million.
The Company's losses would be minimized at $3 million if the 6
month LIBOR rate is at or below 3.90% on June 7, 1995 and the
swap spread is at or above 33.5 basis points on August 15, 1995,
while its losses would be maximized at $27.575 million if the 6
month LIBOR rate equals or exceeds 5.90% on June 7, 1995 and the
swap spread is 20 basis points or less on August 15, 1995.
Gibson may elect to liquidate the transactions at any time prior
to maturity based on market conditions prevailing at the time.
As of March 31, 1994, the 6 month LIBOR rate was 4.25% and the
swap spread was 33 basis points.
If held to maturity, and if market conditions at maturity
are the same as existed on March 31, 1994, the transactions would
result in a total realized loss of approximately $5.9 million.
The additional $13.8 million unrealized loss that is being
recognized currently results from future adverse movements
projected by the Bankers Trust valuation model. If those
projected adverse movements do not occur, or if favorable
movements occur, gains in an amount determined by then current
market conditions would be recognized in future periods to
reverse the prior recognition of unrealized losses, up to a net
loss of $3 million in the best case at maturity of the swaps.
Similarly, if there are further future adverse movements, Gibson
could be required to recognize up to an additional $7.875 million
of loss.
Flaherty observed that, "This will likely introduce an
element of volatility in Gibson's future reported earnings to
recognize market fluctuations in the current value of such
derivative transactions until they mature or are closed out. We
regret this situation, but are advised by our outside auditors
that such treatment is dictated by applicable accounting rules."
He reiterated that, "This is a one-time situation which is not
reflective of the Company's underlying operations."
Benjamin J. Sottile, Gibson's Chairman, President and Chief
Executive Officer said, "We are recognizing our obligation for
accounting purposes; however, it is clear that the Company should
never have been put in a position like this as we relied on
Bankers Trust to advise us on these transactions. We have taken
measures to ensure this will not happen again. We are satisfied
that the accounting matter has been addressed, and we are
presently evaluating legal alternatives."
"Gibson's financial position remains strong," Sottile
stated, "and there will be no adverse impact on our ability to
continue to provide the highest quality social expression
products and service to our customers, nor does it impact
Gibson's day-to-day operations or workforce."
END
