PAGE
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number 0-11902
GIBSON GREETINGS, INC.
Incorporated under the laws IRS Employer
of the State of Delaware Identification No. 52-1242761
2100 Section Road, Cincinnati, Ohio 45237
Telephone Number: Area Code 513-841-6600
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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 16,579,930 shares of common
stock, par value $.01, outstanding at August 7, 1995.
PAGE
<PAGE>
<TABLE>
Part I. Item 1. Financial Statements
GIBSON GREETINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except per share amounts)
(Unaudited)
<CAPTION>
Restated
---------
June 30, December 31, June 30,
1995 1994 1994
--------- --------- ---------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 8,100 $ 2,000 $ 5,957
Trade receivables, net 38,321 197,799 50,584
Inventories 190,111 127,460 192,427
Prepaid expenses 5,873 5,719 5,814
Prepaid income taxes - - 8,702
Deferred income taxes 42,355 48,775 36,333
--------- --------- ---------
Total current assets 284,760 381,753 299,817
--------- --------- ---------
Plant and equipment, net 116,275 119,491 122,087
Deferred income taxes 9,905 8,080 -
Other assets, net 94,730 102,871 86,628
--------- --------- ---------
$ 505,670 $ 612,195 $ 508,532
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Debt due within one year $ 49,252 $ 117,114 $ 33,102
Accounts payable 17,859 21,779 22,512
Income taxes payable 222 4,742 -
Other current liabilities 67,707 86,990 70,682
--------- --------- ---------
Total current liabilities 135,040 230,625 126,296
--------- --------- ---------
Deferred income taxes - - 423
Long-term debt 52,474 63,233 63,695
Sales agreement payments due
after one year 19,333 21,107 9,379
Other liabilities 20,873 19,730 25,973
--------- --------- ---------
Total liabilities 227,720 334,695 225,766
--------- --------- ---------
Stockholders' Equity:
Preferred stock, par value $1.00;
5,000,000 shares authorized,
none issued - - -
Preferred stock, Series A, par
value $1.00; 300,000 shares
authorized, none issued - - -
Common stock, par value $.01;
50,000,000 shares authorized,
16,579,930 shares issued at June 30,
1995 and 16,579,530 shares issued at
December 31, 1994 and June 30, 1994 166 166 166
Paid-in capital 46,033 45,992 46,019
Retained earnings 239,194 238,282 242,328
Foreign currency adjustment (1,497) (1,000) 193
--------- --------- ---------
283,896 283,440 288,706
Less treasury stock, at cost,
489,701 shares at June 30, 1995
and 483,701 shares at December 31,
1994 and June 30, 1994 5,946 5,940 5,940
--------- --------- ---------
Total stockholders' equity 277,950 277,500 282,766
--------- --------- ---------
$ 505,670 $ 612,195 $ 508,532
========= ========= =========
</TABLE>
[FN]
See accompanying notes to condensed consolidated financial statements.
PAGE
<PAGE>
<TABLE>
GIBSON GREETINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands except per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
Restated Restated
--------- ---------
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $ 97,470 $ 90,648 $ 197,757 $ 184,077
Costs and expenses
Operating expenses:
Cost of products sold 37,520 43,538 76,688 79,566
Selling, distribution
and administrative
expenses 55,264 61,237 112,038 119,089
--------- --------- --------- ---------
Total operating
expenses 92,784 104,775 188,726 198,655
--------- --------- --------- ---------
Operating income (loss) 4,686 (14,127) 9,031 (14,578)
Financing and derivative
transaction expenses:
Interest expense 3,012 2,055 6,143 4,029
Interest income (139) (188) (225) (509)
Loss on derivative
transactions - 6,550 - 15,524
--------- --------- --------- ---------
Total financing and
derivative transaction
expenses, net 2,873 8,417 5,918 19,044
--------- --------- --------- ---------
Income (loss) before
income taxes 1,813 (22,544) 3,113 (33,622)
Income taxes 1,172 (5,611) 2,201 (5,846)
--------- --------- --------- ---------
Net income (loss) $ 641 $ (16,933) $ 912 $ (27,776)
========= ========= ========= =========
Net income (loss) per share $ .04 $ (1.05) $ 0.06 $ (1.72)
========= ========= ========= =========
Dividends per share $ - $ .10 $ - $ .20
========= ========= ========= =========
</TABLE>
[FN]
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<PAGE>
<TABLE>
GIBSON GREETINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<CAPTION>
Six Months Ended
June 30,
------------------------
Restated
----------
1995 1994
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 912 $ (27,776)
---------- ----------
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and write-down of display fixtures 11,512 11,449
Loss on disposal of plant and equipment 2,932 2,818
Loss on derivative transactions - 15,524
Deferred income taxes 4,595 1,740
Amortization of deferred costs and other
intangibles 10,621 10,546
Change in assets and liabilities:
Decrease in trade receivables, net 159,478 141,579
Increase in inventories (62,651) (67,289)
Increase in prepaid expenses (154) (1,607)
Increase in prepaid income taxes - (8,702)
Increase in other assets, net of amortization (2,480) (10,250)
Increase (decrease) in accounts payable (3,920) 3,677
Decrease in income taxes payable (4,520) (13,071)
Increase (decrease) in other current
liabilities (19,283) 10,203
Increase in other liabilities (631) (6,597)
All other, net (345) (125)
---------- ----------
Total adjustments 95,154 89,895
---------- ----------
Net cash provided by operating activities 96,066 62,119
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of plant and equipment (11,583) (19,467)
Proceeds from sale of plant and equipment 219 56
---------- ----------
Net cash used in investing activities (11,364) (19,411)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in short-term borrowings (67,950) (40,320)
Payments on long-term debt (10,687) (3,451)
Issuance of common stock 41 811
Acquisition of common stock for treasury (6) (52)
Dividends paid - (3,216)
---------- ----------
Net cash used in
financing activities (78,602) (46,228)
---------- ----------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 6,100 (3,520)
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 2,000 9,477
---------- ----------
CASH AND EQUIVALENTS, END OF PERIOD $ 8,100 $ 5,957
========== ==========
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest $ 4,797 $ 3,975
Income taxes 2,124 14,039
</TABLE>
[FN]
See accompanying notes to condensed consolidated financial statements.
PAGE
<PAGE>
GIBSON GREETINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 1995 and 1994
(Dollars in thousands except per share amounts)
(Unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include
the accounts of Gibson Greetings, Inc. and its subsidiaries (the Company).
Intercompany transactions and balances have been eliminated in consolidation.
The unaudited condensed consolidated financial statements have been prepared
in accordance with Article 10-01 of Regulation S-X of the Securities and
Exchange Commission and, as such, do not include all information required by
generally accepted accounting principles. However, in the opinion of the
Company, these financial statements contain all adjustments, consisting of
only normal recurring adjustments, necessary to present fairly the financial
position as of June 30, 1995, December 31, 1994 and June 30, 1994, the results
of its operations for the three and six months ended June 30, 1995 and 1994
and its cash flows for the six months ended June 30, 1995 and 1994. The
accompanying financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K/A (Amendment No. 1) for the year ended December 31,
1994.
In an institution and settlement of administrative proceedings dated December
22, 1994 against Bankers Trust (the Bankers Trust Order), the Securities and
Exchange Commission (SEC) alleged that Bankers Trust misled the Company about
the value of the Company's derivative positions by providing the Company with
fair values that were significantly different from the values determined by
Bankers Trust's computer model and recorded on Bankers Trust's financial
records, which difference resulted in a significant understatement of the
magnitude of the Company's fiscal year 1993 losses. In March 1995, the SEC
advised the Company that it believed that the Company should restate its 1993
consolidated financial statements.
The Company has restated the 1993 year-end consolidated financial statements
to reflect derivative values based on Bankers Trust's computer model as set
forth in the Bankers Trust Order. Such restatement resulted in a $4,571
reduction in previously reported 1993 consolidated net income and a
corresponding decrease in 1994 consolidated net loss. This restatement, which
was reflected in the accompanying condensed consolidated financial statements,
increased the previously reported net loss for the three months ended June 30,
1994 by $3,255 or $.20 per share and reduced the previously reported net loss
for the six months ended June 30, 1994 by $4,222 or $.26 per share.
Interest rate swap and derivative transactions that did not qualify as hedges
were recorded at their fair market value, which was the estimated amount that
the Company would receive or pay to terminate the transactions at the
reporting date as determined by a financial institution's valuation model
based on the projected value of the transactions at maturity.
Certain prior year amounts in the consolidated financial statements have been
reclassified to conform with the 1995 presentation.
PAGE
<PAGE>
Note 2 - Seasonal Nature of Business
Because of the seasonal nature of the Company's business, results of
operations for interim periods are not necessarily indicative of results for
the full year.
Note 3 - Trade Receivables
Trade receivables consist of the following:
June 30, December 31, June 30,
1995 1994 1994
--------- --------- ---------
Trade receivables $ 81,436 $ 265,194 $ 88,060
Less reserve for returns,
allowances, cash discounts
and doubtful accounts 43,115 67,395 37,476
--------- --------- ---------
$ 38,321 $ 197,799 $ 50,584
========= ========= =========
Note 4 - Inventories
Inventories consist of the following:
June 30, December 31, June 30,
1995 1994 1994
--------- --------- ---------
Finished goods $ 126,295 $ 73,881 $ 125,076
Work-in-process 19,281 15,623 19,907
Raw materials and supplies 44,535 37,956 47,444
--------- --------- ---------
$ 190,111 $ 127,460 $ 192,427
========= ========= =========
Note 5 - Interest Expense
There was no capitalized interest for the three and six month periods ended
June 30, 1995 and 1994.
Note 6 - Net Income (Loss) Per Share
The weighted average number of shares of common stock and equivalents
outstanding used in computing net income (loss) per share is as follows:
1995 1994
---------- ----------
Three months ended June 30, 16,200 16,111
========== ==========
Six months ended June 30, 16,149 16,154
========== ==========
PAGE
<PAGE>
Note 7 - Legal Matters
In July 1994, immediately following the Company's announcement of an inventory
misstatement at the Company's subsidiary Cleo, Inc. (Cleo), which resulted in
an overstatement of the Company's previously reported 1993 consolidated net
income, five purported class actions were commenced by certain stockholders.
These suits were consolidated and a Consolidated Amended Class Action
Complaint against the Company, its Chairman, President and Chief Executive
Officer, its Chief Financial Officer and the former President and Chief
Executive Officer of Cleo was filed in October 1994 in the United States
District Court for the Southern District of Ohio (In Re Gibson Securities
Litigation). In December 1994 the Court ruled that neither of the two named
plaintiffs qualified as a class representative. Plaintiffs have filed an
Amended Complaint naming a proposed substitute class representative. Like its
predecessors in this litigation, the most recent complaint alleges violations
of the federal securities laws and seeks unspecified damages for an asserted
public disclosure of false information regarding the Company's earnings.
During December 1994, the Company filed a motion to dismiss one count of the
complaint which set forth a common law theory of respondeat superior
liability. On June 9, 1995, this motion was denied by the Court. The Company
intends to defend the suit vigorously and has filed an Answer denying any
wrongdoing and a Third Party Complaint against its former auditor for
contribution against any judgment adverse to the Company.
On April 10, 1995, two purported class action lawsuits were commenced against
the Company, its Chairman, President and Chief Executive Officer and its Chief
Financial Officer in the United States District Court for the Southern
District of Ohio (Kurtz v. Gibson Greetings, Inc., et al. and Romine v. Gibson
Greetings, Inc., et al.). The Complaints allege violations of the federal
securities law for an asserted failure to disclose allegedly material
information regarding the Company's financial performance. The Company
intends to defend the suits vigorously.
The litigation described in the two preceding paragraphs is in early stages of
proceedings. Accordingly, the Company presently is unable to predict the
effect of the ultimate resolutions of these matters upon the Company's results
of operations and cash flows; as of this date, however, Management does not
expect that such resolutions would result in a material adverse effect upon
the Company's total net worth, although a substantially unfavorable outcome
could be material to such net worth.
The SEC is conducting a private investigation to determine whether the Company
or certain former officers engaged in conduct in violation of certain
provisions of the Securities Exchange Act of 1934 and the rules and
regulations thereunder. The investigation is focused on the Company's
derivative transactions and the Company's reporting and accounting with
respect thereto. The Company is cooperating in such investigation.
PAGE
<PAGE>
On September 12, 1994 the Company filed suit against Bankers Trust Company and
its affiliate BT Securities in the United States District Court for the
Southern District of Ohio (Gibson Greetings, Inc. v. Bankers Trust Company and
BT Securities Corporation) alleging that in connection with the sale of
derivatives to the Company they had breached fiduciary duties, made fraudulent
misrepresentations, and failed to make adequate disclosures, in violation of
common law and statutory obligations to the Company. The suit sought damages
and asked that the court declare the Company's existing derivative
transactions with Bankers Trust to be unenforceable. Bankers Trust filed an
Answer denying the allegations and a counterclaim seeking enforcement of the
existing derivative transactions. On November 23, 1994 the Company settled
its claims against Bankers Trust. As part of the settlement, the Company paid
Bankers Trust $6,180, which included the reimbursement of approximately $3,344
of cash payments previously made to the Company by Bankers Trust and recorded
as income in 1993. In return, the remaining transactions were terminated with
no further liability to the Company.
In 1989, unfair labor practice charges were filed against the Company as an
outgrowth of a strike at its Berea, Kentucky facility. Remedies sought
include back pay from August 8, 1989 and reinstatement of employment for
approximately 200 employees. In February 1990, the General Counsel of the
National Labor Relations Board (NLRB) issued a complaint based on certain of
the allegations of these charges (In the Matter of Gibson Greetings, Inc. and
International Brotherhood of Firemen and Oilers, AFL-CIO Cases 9-CA-26706,
27660, 26875). On December 18, 1991, an Administrative Law Judge of the NLRB
issued a recommended order, which included reinstatements and back pay
affecting approximately 160 strikers, based on findings that the Company had
violated certain provisions of the National Labor Relations Act. On May 7,
1993, the NLRB upheld the Administrative Law Judge's decision in some
respects, and enlarged the number of strikers entitled to back pay to
approximately 240. An appeal was filed in the United States Court of Appeals
for the District of Columbia Circuit and, on May 19, 1995, a unanimous panel
of that Court reversed the NLRB's finding. The Court found that the strike
was not an unfair labor practice strike and that a significant number of
strikers had been permanently replaced and thus were not entitled to
reinstatement or back pay. The Court remanded the case to the NLRB for a
factual determination on the issue of permanency with respect to approximately
52 replacements hired after June 29, 1989. The Company did not contest the
reinstatement of six employees terminated for alleged striker violence and the
Court ordered reinstatement of four others in the same category. Management
does not believe that the outcome of this matter will result in a material
adverse effect on the Company's total net worth, cash flow or operating
results.
In addition, the Company is a defendant in certain other routine litigation
which is not expected to result in a material adverse effect on the Company's
net worth, total cash flows or operating results.
PAGE
<PAGE>
Part I., Item 2., Management's Discussion and Analysis of Results of
Operations and Financial Condition
Results of Operations
Revenues in the second quarter of 1995 increased 7.5% to $97.5 million from
the second quarter in 1994. Increased sales by The Paper Factory of
Wisconsin, Inc. (The Paper Factory) and Cleo, Inc. (Cleo) as well as higher
international demand were partially offset by lower domestic sales of greeting
cards. Returns and allowances were 14.0% of sales for the three months ended
June 30, 1995 compared to 17.5% for the same period in 1994. For the six
months ended June 30, 1995, revenues increased 7.4% to $197.8 million from the
same period in 1994 reflecting an increase in retail sales at The Paper
Factory combined with increases in both domestic and international greeting
card sales and gift wrap and related products. Returns and allowances were
18.0% of sales for the six months ended June 30, 1995 compared to 19.5% for
the comparable period in 1994.
Operating expenses totaled $92.8 million in the second quarter of 1995
representing a 11.4% decrease from the corresponding quarter in 1994. Cost of
products sold, as a percent of revenues, was 38.5% versus 48.0% for the second
quarter of 1994. The decrease was primarily due to the impact of the second
quarter 1994 obsolescence charge at Cleo resulting from an extensive review of
Cleo's inventory as well as additional charges in the 1994 period for sales
returns and allowances for customer discounts at Cleo. Selling, distribution
and administrative expenses, as a percent of revenues, decreased to 56.7% from
67.6% primarily due to cost reduction programs implemented in late 1994 and
early 1995 at the Card Division and Cleo.
Operating expenses totaled $188.7 million for the six months ended June 30,
1995 representing a 5.0% decrease from 1994. Cost of products sold, as a
percent of revenues, was 38.8% versus 43.2% in 1994 which included the
obsolescence charges at Cleo. Selling, distribution and administrative
expenses, as a percent of revenues, decreased to 56.7% from 64.7% reflecting
lower selling and marketing expenses associated with domestic operations.
For the three months ended June 30, 1994, the Company recorded an unrealized
market value loss of $6.6 million on two derivative transactions outstanding
at June 30, 1994, which did not qualify as hedges. For the six months ended
June 30, 1994, the Company recorded a net loss on derivative transactions of
$15.5 million consisting of an unrealized market value loss of $15.6 million
and the recognition of a $0.1 million gain, all from derivative transactions
which did not qualify as hedges. The market value of derivative transactions
outstanding at June 30, 1994 was determined by a financial institution model
based on the projected future value of the transactions at maturity.
Second quarter pretax income of $1.8 million compared with pretax loss for
1994 of $22.5 million. Pretax income for the six months ended June 30, 1995
was $3.1 million compared with 1994 pretax loss of $33.6 million.
Net income for the second quarter of 1995 was $0.6 million compared with 1994
net loss of $16.9 million. For the six months ended June 30, 1995, net income
was $0.9 million compared with 1994 net loss of $27.8 million.
Despite the positive impact on the three and six months ended June 30, 1995 of
previously implemented cost cutting and other initiatives, the Company
continues to face strong competitive pressures with regard to pricing and
other terms of sale.
PAGE
<PAGE>
Liquidity and Capital Resources
Cash flows from operating activities for the first six months of 1995 provided
$96.1 million in cash compared to $62.1 million for the same period in 1994.
The increase from 1994 reflected increased collection of trade receivable
balances outstanding at year end combined with lower inventory levels.
Included in 1994 was a non-cash charge of $15.5 million related to unrealized
losses on derivative transactions.
Cash used in investing activities for plant and equipment purchases in 1995
was $11.6 million compared to $19.5 million in 1994. Capital expenditures for
1995 are expected to be lower than those for 1994.
Cash used in financing activities in the first half of 1995 was $78.6 million
compared to $46.2 million in 1994. The increase reflects the repayment of
higher short-term borrowing levels at December 31, 1994 compared to December
31, 1993. The Company's current Revolving Credit Facility expires April,
1996. Management is confident that the Company will be able to negotiate a
new revolving credit facility.
Management believes that its cash flow from operations and credit sources will
provide adequate funds, both on a short-term and on a long-term basis, for
currently foreseeable debt payments, lease commitments and payments under
existing customer agreements, as well as for financing existing operations,
currently projected capital expenditures, anticipated long-term sales
agreements consistent with industry trends and other contingencies. (See Part
II. Item 1.)
As previously announced, the Company's Board of Directors has determined to
explore possible expressions of interest in the acquisition of the Company.
The Company has engaged two investment banking firms to work with it in this
regard. In addition, one of these firms has been engaged to identify
prospective buyers for Cleo, either as an alternative to, or in conjunction
with, the possible acquisition of the Company. The implementation of a
strategy with regard to Cleo could result in a substantial charge to 1995
results.
PAGE
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
The information presented in Note 7 of Notes to Condensed Consolidated
Financial Statement (Part I, Item 1) is incorporated by reference in response
to this Item.
Item 2. Changes In Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of the Company was held May 23,1995 for
the following purpose:
To elect three directors.
The results of the matters voted on are as follows:
Against
or Broker
For Withheld Abstentions Non-Votes
---------- -------- ----------- ---------
Election of Directors:
Thomas M. Cooney 14,362,341 663,720 8,981 -
Benjamin J. Sottile 14,363,111 663,720 8,211 -
Charlotte A. St. Martin 11,937,432 663,720 2,433,890 -
As previously reported, Mr. Cooney resigned as a director of the Company
effective June 29, 1995.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibit 10(A) Employment Agreement between Gibson
Greetings, Inc. and N. J. Rohrbach,
dated June 16, 1995.
Exhibit 27 Financial Data Schedule.
b) Reports on Form 8-K None.
PAGE
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Gibson
Greetings, Inc. has duly caused this amended report to be signed on its behalf
by the undersigned thereunto duly authorized.
GIBSON GREETINGS, INC.
Date: August 14, 1995 By:/s/ William L. Flaherty
------------------------
William L. Flaherty
Vice President-Finance
Principal Financial
and Accounting Officer
PAGE
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 8100
<SECURITIES> 0
<RECEIVABLES> 38321
<ALLOWANCES> 43115
<INVENTORY> 190111
<CURRENT-ASSETS> 284760
<PP&E> 116275
<DEPRECIATION> 11512
<TOTAL-ASSETS> 505670
<CURRENT-LIABILITIES> 135040
<BONDS> 52474
<COMMON> 166
0
0
<OTHER-SE> 277784
<TOTAL-LIABILITY-AND-EQUITY> 505670
<SALES> 197757
<TOTAL-REVENUES> 197757
<CGS> 76688
<TOTAL-COSTS> 188726
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2431
<INTEREST-EXPENSE> 6143
<INCOME-PRETAX> 3113
<INCOME-TAX> 2201
<INCOME-CONTINUING> 912
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 912
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
PAGE
<PAGE>
EXHIBIT 10(A)
June 16, 1995
Mr. Nelson J. Rohrbach
President and Chief Executive Officer
Cleo, Inc.
4025 Viscount
Memphis, TN 38118
Dear Jack:
This will serve as an amendment to the employment agreement between the
parties dated November 21, 1994 ("Agreement") and shall become effective only
upon the occurrence of a change in controlling ownership of the Company, or a
sale of all or substantially all of the assets of the Company ("Qualifying
Transaction").
Upon the closing date of any Qualifying Transaction occurring during the term
of the Agreement, the Agreement shall be amended as follows:
1. Upon the closing of any Qualifying Transaction, you will be
entitled to receive, in addition to any and all other
compensation under the Agreement, a lump sum payment in an
amount equal to your then current annual base salary. Such
payment shall be in addition to all other payments otherwise
owed to you and shall not constitute a termination of the
Agreement.
2. Upon the occurrence of a Qualifying Transaction, the term of
the Agreement is hereby extended for a period of two (2)
years from the closing date of such Qualifying Transaction.
Unless you receive at least six (6) months' prior written
notice from the Company that the Agreement will terminate
upon the expiration of said two (2) year period, the
Agreement will automatically be extended and will continue
in effect until terminated by the Company for any reason and
at any time upon giving you six (6) months' written notice
or by you upon thirty (30) days' written notice to the
Company. This agreement shall remain at all times subject
to earlier termination for cause.
<PAGE>
Mr. Nelson J. Rohrbach
June 16, 1995
Page 2
3. A change in your title or duties as set forth in the
Agreement shall not constitute a breach of the Agreement by
the Company, provided that you shall remain a senior-level
executive of the Company with an appropriate title, position
and responsibilities.
All other terms and conditions of the Agreement not amended hereby remain in
full force and effect.
Sincerely,
CLEO INC
Benjamin J. Sottile
Chairman of the Board
BJS/JET/dk
ACCEPTED AND AGREED TO:
/s/ Nelson J. Rohrbach
-----------------------
Nelson J. Rohrbach
Date:
<PAGE>
