PAGE
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(AMENDMENT NO. 2)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
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: 16,089,829 shares of common
stock, par value $.01, outstanding at June 12, 1995.
PAGE
<PAGE>
Part I., Item 1, Financial Statements
<TABLE>
GIBSON GREETINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except per share amounts)
(Unaudited)
<CAPTION>
Restated
-----------------------------------
March 31, December 31, March 31,
1994 1993 1993
--------- --------- ---------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 30,199 $ 9,477 $ 63,017
Trade receivables, net 60,457 192,163 48,900
Inventories 156,592 125,138 143,740
Prepaid expenses 5,578 4,207 4,632
Prepaid income taxes 3,009 - -
Deferred income taxes 34,949 36,796 31,533
--------- --------- ---------
Total current assets 290,784 367,781 291,822
PLANT AND EQUIPMENT, net 117,591 116,900 114,629
NOTES RECEIVABLE, net 1,126 - -
DEFERRED INCOME TAXES - 854 -
OTHER ASSETS, net 83,314 86,924 52,045
--------- --------- ---------
$ 492,815 $ 572,459 $ 458,496
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Debt due within one year $ 4,004 $ 66,187 $ 1,881
Accounts payable 18,454 18,835 16,442
Income taxes payable - 13,071 4,844
Other current liabilities 52,709 60,479 47,143
--------- --------- ---------
Total current liabilities 75,167 158,572 70,310
DEFERRED INCOME TAXES 486 - 176
LONG-TERM DEBT 72,936 74,365 68,833
OTHER LIABILITIES 43,182 26,425 16,760
--------- --------- ---------
Total liabilities 191,771 259,362 156,079
--------- --------- ---------
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,
16,561,530, 16,533,267 and
16,507,419 shares issued, respectively 166 165 165
Paid-in capital 45,703 45,209 44,522
Retained earnings 260,871 273,320 263,227
Foreign currency adjustment 200 291 391
--------- --------- ---------
306,940 318,985 308,305
Less treasury stock, at cost,
481,344, 473,344 and 473,344
shares, respectively 5,896 5,888 5,888
--------- --------- ---------
Total stockholders' equity 301,044 313,097 302,417
--------- --------- ---------
$ 492,815 $ 572,459 $ 458,496
========= ========= =========
</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
March 31,
----------------------
Restated
----------------------
1994 1993
--------- ---------
<S> <C> <C>
REVENUES $ 93,429 $ 84,907
COSTS AND EXPENSES:
Operating expenses:
Cost of products sold 36,028 30,996
Selling, distribution and
administrative expenses 57,852 49,661
--------- ---------
Total operating expenses 93,880 80,657
--------- ---------
Operating income (loss) before
financing and derivative transaction expenses (451) 4,250
Financing and derivative transaction expenses:
Interest expense, net of capitalized interest 1,974 1,656
Interest income (321) (429)
Loss on derivative transactions, net 8,974 1,441
--------- ---------
Total financing and derivative
transaction expenses, net 10,627 2,668
--------- ---------
Income (loss) before income taxes (11,078) 1,582
Income taxes (235) 1,221
--------- ---------
Net income (loss) $ (10,843) $ 361
========= =========
Net income (loss) per share $ (.67) $ .02
========= =========
Dividends per share $ .10 $ .10
========= =========
</TABLE>
[FN]
See accompanying notes to condensed consolidated financial statements.
<TABLE>
GIBSON GREETINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
----------------------
Restated
----------------------
1994 1993
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (10,843) $ 361
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and write-down of display fixtures 5,670 6,479
Loss on disposal of plant and equipment 514 418
Loss on derivative transactions, net 8,974 1,441
Deferred income taxes 3,187 (2,103)
Amortization and write-down of deferred
costs and other intangibles 5,249 3,703
Change in assets and liabilities:
Decrease in trade receivables, net 131,706 120,705
Increase in inventories (31,454) (24,982)
Increase in prepaid expenses (1,371) (331)
Increase in prepaid income taxes (3,009) -
Increase in notes receivable, net (1,126) -
Increase in other assets, net of amortization (1,639) (1,472)
Increase (decrease) in accounts payable (381) 1,704
Decrease in income taxes payable (13,071) (5,087)
Decrease in other current liabilities (7,770) (6,132)
Increase in other liabilities 7,783 279
All other, net 10 131
--------- ---------
Total adjustments 103,272 94,753
--------- ---------
Net cash provided by operating activities 92,429 95,114
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of plant and equipment (7,005) (8,820)
Proceeds from sale of plant and equipment 37 115
--------- ---------
Net cash used in investing activities (6,968) (8,705)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in short-term borrowings (62,270) (30,100)
Payments on long-term debt (1,350) (1,280)
Issuance of common stock 495 86
Acquisition of common stock for treasury (8) -
Dividends paid (1,606) (1,603)
--------- ---------
Net cash used in financing activities (64,739) (32,897)
--------- ---------
NET INCREASE IN CASH AND EQUIVALENTS 20,722 53,512
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 9,477 9,505
--------- ---------
CASH AND EQUIVALENTS AT END OF PERIOD $ 30,199 $ 63,017
========= =========
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest, net of amounts capitalized $ 929 $ 1,221
Income taxes 12,632 8,406
</TABLE>
[FN]
See accompanying notes to condensed consolidated financial statements.
PAGE
<PAGE>
GIBSON GREETINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended March 31, 1994 and 1993
(Amounts in thousands except per share data)
(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 March 31, 1994, December 31, 1993 and March 31, 1993, the
results of its operations for the three months ended March 31, 1994 and 1993
and its cash flows for the three months ended March 31, 1994 and 1993. The
accompanying financial statements should be read in conjunction with the
consolidated financial statements and notes included in the Company's Annual
Report on Form 10-K/A (Amendment No. 2) for the year ended December 31, 1993.
On July 1, 1994, the Company announced that it had determined that the
inventory of Cleo, Inc. (Cleo), a wholly-owned subsidiary, at December 31,
1993 had been overstated, resulting in an overstatement of the Company's 1993
condensed consolidated net income. The overstatement of inventory and income
before income taxes was $8,806 and the effect on net income was $5,345 at
December 31, 1993 and for the year then ended. The accompanying 1993
consolidated financial statements have been amended and restated to reflect
the correction of such overstatement.
At March 31, 1994, the Cleo inventories remained overstated by $8,806.
Accordingly, the accompanying condensed consolidated financial statements at
March 31, 1994 have been amended and restated to reflect the correction of
such overstatement. The correction had no impact on loss before income taxes,
net loss or net loss per share for the three months ended March 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 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 late March 1995, the
SEC advised the Company that it believed that the Company should restate its
1993 consolidated financial statements.
PAGE
<PAGE>
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 annual consolidated net income and a
corresponding decrease in 1994 annual consolidated net loss. This
restatement, which was reflected in the accompanying condensed consolidated
financial statements, reduced the previously reported net loss for the three
months ended March 31, 1994 by $7,477 or $.46 per share and reduced the
previously reported net income for the three months ended March 31, 1993 by
$1,441 or $.09 per share.
Interest rate swap and derivative transactions that do not qualify as hedges
are recorded at their fair market value, which is 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 1994 presentation.
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:
March 31, December 31, March 31,
1994 1993 1993
--------- --------- ---------
Trade receivables $ 105,480 $ 245,682 $ 100,007
Less reserve for returns,
allowances, cash discounts
and doubtful accounts 45,023 53,519 51,107
--------- --------- ---------
$ 60,457 $ 192,163 $ 48,900
========= ========= =========
Note 4 - Inventories
Inventories consist of the following:
March 31, December 31, March 31,
1994 1993 1993
--------- --------- ---------
Finished goods $ 95,227 $ 74,268 $ 82,570
Work-in-process 13,845 13,147 13,637
Raw materials and supplies 47,520 37,723 47,533
--------- --------- ---------
$ 156,592 $ 125,138 $ 143,740
========= ========= =========
PAGE
<PAGE>
Note 5 - Interest Expense
There was no capitalized interest for the three months ended March 31, 1994
and 1993.
Note 6 - Net Income (Loss) Per Share
The weighted average number of shares of common stock and equivalents
outstanding used in computing net (loss) income per share is as follows:
1994 1993
---------- ----------
Three months ended March 31, 16,198 16,074
========== ==========
Note 7 - Derivative Transactions
The Company periodically has entered into interest rate swap or derivative
transactions with the intent to manage the interest rate sensitivity of
portions of its debt. On March 4, 1994, the Company felt compelled to enter
into two interest rate derivative transactions to cap its exposure on two
prior interest interest rate derivative transactions that had a negative
market value, on that date, of $17,500. These two new transactions had caps
on the Company's total exposure and replaced the previous uncapped positions
that were entered into subsequent to December 31, 1993 in an attempt to limit
the Company's exposure against rising short-term interest rates.
The negative market values of these two positions at March 31, 1994 were as
follows:
Six-month LIBOR Band - 3.9% to 5.9% $13,274
Swap Spread 3,171
-------
$16,445
=======
Based on the stated maturity dates, the $16,445 accrual for loss is shown as
an Other Liability in the accompanying condensed consolidated balance sheet.
As required by SFAS No. 109, the Company has recorded the tax benefit from the
loss on these derivative transactions and an offsetting valuation allowance
for the full amount of the estimated tax benefit due to current uncertainties
surrounding the amount, timing and characteristics of the loss.
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.
Note 8 - 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 overstatment 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. 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 the 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,
Managment 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.
PAGE
<PAGE>
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.
As noted in Note 7, 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.
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 flows or operating
results.
In addition, the Company is a defendent 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
Introduction
As announced on July 1, 1994, the Company determined that the inventory of its
Cleo, Inc. gift wrap subsidiary (Cleo) had been overstated, resulting in an
overstatement of the Company's previously reported 1993 consolidated net
income. As a result of this overstatement, as well as the accrual of an
unrealized market value net loss on certain derivative transactions which did
not qualify as hedges, it was necessary for the Company to amend and restate
its consolidated financial statements for the third quarter ended September
30, 1993, the fourth quarter ended December 31, 1993, the twelve months ended
December 31, 1993 and for the first quarter ended March 31, 1994.
Additionally, the Company has complied with the Securities and Exchange
Commission (SEC) request that the Company restate its 1993 consolidated
financial statements due to the SEC's allegation that Bankers Trust caused the
Company to materially understate its unrealized losses related to certain
derivative transactions during 1993. The adjustments made are described in
Note 1 of the Notes to Condensed Consolidated Financial Statements included in
this report, and should be reviewed in conjunction with the discussion of
"Results of Operations" and "Liquidity and Capital Resources" presented below.
Results of Operations
Revenues increased 10.0% to $93.4 million in the first quarter of 1994 from
$84.9 million in the first quarter of 1993. This was principally due to sales
by The Paper Factory of Wisconsin, Inc. (The Paper Factory) which was acquired
June 1, 1993, as well as increases in sales of gift wrap and international
sales of greetings cards. These gains were partially offset by lower domestic
shipments of greeting cards during the quarter as a result of shipments in
late 1993 to ensure that customers received adequate replenishment of everyday
cards as well as supplies of Valentine products. Additionally, the severe
winter weather experienced in certain areas of the country adversely impacted
retail sales and, in turn, customer reordering of everyday products. Returns
and allowances were 21.3% of sales for the three months ended March 31, 1994
compared to 23.9% for the same period in 1993.
Operating expenses totaled $93.9 million in the first quarter of 1994
representing a 16.4% increase over the corresponding quarter in 1993. Cost of
products sold, as a percent of revenues, increased due to lower domestic
greeting card sales while selling, distribution and administrative expenses
increased due to expenses associated with The Paper Factory as well as higher
expenses to expand the Company's rapidly growing Mexican operations. At March
31, 1994, the Company anticipated that the change in product mix, pricing
pressures and customer discounts which adversely affected gross margins from
Cleo's sales of gift wrap and paper products in 1993 would continue in 1994
and that Cleo would incur a loss for 1994. In addition, the Company had
recently completed an extensive review of Cleo's inventory, and anticipated
that it would record, in the second quarter of 1994, obsolescence charges
against the book value of certain of Cleo's inventory.
PAGE
<PAGE>
Financing and derivative transaction expenses increased over 1993 primarily
due to net losses on certain interest rate derivative transactions of $9.0
million in the first quarter of 1994. The Company recorded a net loss on
derivative transactions for the three months ended March 31, 1994 of $9.0
million, consisting of an unrealized market value loss of $9.1 million on two
derivative transactions outstanding at March 31, 1994, which did not qualify
as hedges and the recognition of a $0.1 million gain. The market values of
derivative transactions outstanding at March 31, 1994 and 1993 were determined
by a financial institution based on the projected future value of the
transactions at maturity. These positions were reported at current fair
market value until they were closed out. (See "Financing and Derivative
Transactions Expenses" below).
Pretax loss of $11.1 million in the first quarter of 1994 compared with 1993
pretax income of $1.6 million, while the net loss of $10.8 million in the
first quarter of 1994 compared with 1993 net income of $0.4 million for the
same period.
Financing and Derivative Transaction Expenses
The company had two interest rate derivative transactions outstanding at March
31, 1994, which were recorded at fair market value. These two transactions
had caps on the Company's total exposure and replaced previous uncapped
positions that were entered into subsequent to December 31, 1993. At March
31, 1994, except for the two positions described below and two relatively
minor ($3.0 million notional value) interest rate swaps on industrial revenue
bonds, the Company had discontinued trading in any swap/derivative positions.
On March 4, 1994, the Company felt compelled to enter into the two outstanding
interest rate derivative transactions in order to replace and to cap its
exposure on two prior interest rate derivative transactions that had a
negative market value, on that date, of $17.5 million.
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 $6.2 million which included the reimbursement of approximately
$3.4 million 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.
The full amount of the $16.4 million loss, representing the termination value
at March 31, 1994 had no cash flow impact in the first quarter.
PAGE
<PAGE>
Certain of the derivative transactions executed during the first three months
of 1993 did not qualify as effective interest rate hedges and, accordingly,
the proceeds realized from such transactions (approximately $0.2 million) were
recognized as a component of the loss on derivative transactions, net in the
restated condensed consolidated statement of operations for the three months
ended March 31, 1993. Additionally, the estimated current market value of two
derivative transactions outstanding at March 31, 1993, which likewise did not
qualify as effective interest rate hedges, was a loss of $1.5 million which
was accrued in the restated condensed consolidated financial statements at
March 31, 1993.
Liquidity and Capital Resources
Cash flows from operating activities for the first three months of 1994
provided $92.4 million in cash compared to $95.1 million for the same period
in 1993. The decrease from 1993 reflected net loss as of March 31, 1994
offset by non-cash charges of $23.6 million, primarily reflecting the
unrealized net loss on derivative transactions, and higher inventory levels
combined with lower income taxes payable.
Cash used in investing activities for plant and equipment purchases in 1994
was $7.0 million compared to $8.8 million in 1993. Capital expenditures in
1993 included the purchase of a distribution center by the Company's U.K.
based subsidiary.
Cash used in financing activities in the first quarter of 1994 was $64.7
million compared to $32.9 million in 1993. The increase reflects the payoff
of higher short-term borrowing levels at December 31, 1993 compared to
December 31, 1992.
Covenants contained in the Company's debt agreement required the Company to
deliver to its lenders audited comparative 1994 and 1993 consolidated
financial statements by April 30, 1995. The Comapany obtained waivers dated
April 25 and 28, 1995 from the lenders extending the delivery of required
financial statements until June 8, 1995. These statements were delivered on
that date.
Management believes that its cash flows 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.)
PAGE
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
The information presented in Note 8 of Notes to Condensed Consolidated
Financial Statements (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
Not applicable.
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 Nelson J. Rohrbach, dated May 28, 1993
b) Reports on Form 8-K
The Company filed a Form 8-K with the Securities and
Exchange Commission on March 4, 1994 attaching the
Company's press release dated March 4, 1994. No
financial statements were required to be filed in
connection with the report.
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 June 19, 1995
By:/s/ William L. Flaherty
------------------------
William L. Flaherty
Vice President-Finance
Principal Financial
and Accounting Officer
<PAGE>
<PAGE>
Exhibit 10(a)
May 28, 1993
Mr. Nelson J. Rohrbach
Appleton, Wisconsin
Dear Jack:
This will confirm that you have agreed to serve as President of the
Paper Factory of Wisconsin, Inc. ("the Company"). As President, you will
report directly to the Board of Directors of the Company and to the Chief
Executive Officer of Gibson Greetings, Inc. and will be responsible for all of
the operations of the Company as Chief Executive Officer. The following terms
and conditions will govern your service to the Company.
1. You will serve the Company, whose home office shall be located in
Appleton, Wisconsin, for your term of employment hereunder, on a full-
time basis as Chief Executive Officer, and the Company will employ you
as such, for a period of four years commencing on the date of Closing of
that Stock Purchase Agreement to which you are a party and ending four
years from such date unless your employment terminates (or death occurs)
as hereinafter provided. Your annual salary will be your current salary
which amount will be reviewed every fifteen months from your last
salary adjustment and which may be adjusted from time to time by the
Company throughout the term of this Agreement in accordance with the
salary administration program at Gibson Greetings, Inc.
2. You will participate, subject to legal requirements and to mutually
agreeable changes, to the same extent and in the same manner as you
participated prior to execution of this agreement, in the Management
Incentive Plan attached hereto as Exhibit A (but with the individual
incentive measurements and various target levels determined by the Chief
Executive Officer of Gibson Greetings, Inc.) and in the fringe benefit
programs of the Company which, as examples, include the Company's 401(k)
plan, the Company's vacation plan, the Company's health benefit plan,
and, in your case, the provision of an automobile and Country Club dues.
In addition, you will participate in a Special Bonus Plan to the extent
set forth herein and in Exhibit B, which is attached to and made a part
hereof. You also will be an eligible employee for purposes of
consideration for participation in the Stock Option Plan of Gibson
Greetings, Inc. subject to determinations of participation by the
appropriate Gibson committee.
<PAGE>
<PAGE>
Mr. Nelson J. Rohrbach
Page Two
3. In the event you are unable to perform your duties hereunder due to
illness or other incapacity, which illness or incapacity continues for
more than six consecutive or nonconsecutive months in any twelve-month
period, the Company shall have the right, on not less than 30 days
written notice to you, to terminate your employment hereunder. In the
event of such termination of employment or in the case of your death:
(a) your participation in Phase I of the Special Bonus Plan shall
continue unabated for the period of such Phase I;
(b) your participation in Phase II of the Special Bonus Plan shall
terminate immediately and you shall not participate in such Phase
II Bonus Plan with respect to the fiscal year in which such
termination occurs or thereafter; and
(c) your salary and participation in other fringe benefit programs and
including the Company's Management Incentive Plan shall terminate
as of the end of the month of terminated employment or death,
provided you shall participate in the Management Incentive Plan on
a prorata basis with respect to the fiscal year in which such
termination or death occurs but not thereafter.
Termination of employment under this paragraph shall terminate
provisions of this Agreement with the exception of the provisions of
Paragraphs 5 and 6 of this Paragraph 3.
4. In the event you voluntarily terminate your employment during the term
of this Agreement (including retirement), of if the Company terminates
your employment for cause:
(a) your participation in Phase I of the Special Bonus Plan shall
continue unabated for the period of such Phase I;
(b) your participation in Phase II of the Special Bonus Plan shall
terminate immediately and you shall not participate in such Phase
II Bonus Plan with respect to the fiscal year in which such
termination occurs or thereafter; and
(c) your salary and participation in other fringe benefit programs and
including the Company's Management Incentive Plan shall terminate
as of the date of termination and you shall not participate in
such Plan with respect to the fiscal year in which such
termination occurs or thereafter.
<PAGE>
<PAGE>
Mr. Nelson J. Rohrbach
Page Three
As used herein, "cause" shall include, without limitation, inadequate
performance, a lack of commitment to the operations of the Company,
negligent performance, misconduct, a refusal to follow appropriate
directions or a material breach of this Agreement. Termination of
employment under this paragraph shall terminate provisions of this
Agreement with the exception of the provisions of Paragraphs 5 and 6 and
of this Paragraph 4.
5. In the event of termination of your employment hereunder for any reason,
you agree that (in addition to any other restrictions applicable to you
under the Stock Purchase Agreement described in Paragraph 1) for a
period of one year thereafter you will not directly or indirectly engage
or participate as a director, officer, employee, consultant, advisor,
shareholder, partner or joint venturer in any specialty retail store
engaged in the sale of paper party goods, greeting cards or gift wrap in
any of the markets served by Company on the date of termination. If any
of the provisions of this Paragraph 5 are held to be unenforceable
because of the scope, duration or area of its applicability, the court
making such determination shall have the power to modify such scope,
duration or area or all of them, and such provision shall then be
applicable in such modified form. Because the Company will be
irreparably damaged if the provisions of this paragraph are not
specifically enforced, Company shall be entitled to an injunction
restraining any violation of this paragraph by you (without any bond or
other security being required), or any other appropriate decree for
specific performance. Such remedies shall not be exclusive and shall be
in addition to any other remedy which Company may have.
6. In connection with this Agreement, you agree to continue to receive
Confidential Information in confidence, and not to disclose to others,
assist others in the application of, or use for your own gain, such
information, or any part thereof, unless and until it has become public
knowledge or has come into the possession of others by legal and
equitable means. You further agree that, upon termination of employment
with the Company, all documents, records, notebooks, and similar
writings, including copies thereof, then in your possession, whether
prepared by you or by others, will be left with or returned promptly to
the Company. For purposes of this Paragraph 6, "Confidential
Information" means information concerning Company's finances, plans,
sales, products, processes and services, and those of Company's parent,
<PAGE>
<PAGE>
Mr. Nelson J. Rohrbach
Page Four
subsidiaries, divisions, and affiliates, which is disclosed to you or
known by you as a consequence of or through your employment with the
Company, and which is not generally know in the industry in which the
Company or its subsidiaries, divisions or affiliates are or may become
engaged.
7. So long as you are a participant in the Special Bonus Plan, the Company
shall be maintained as a separate operating entity.
8. This Agreement shall inure to the benefit of and be binding upon you and
your legal representatives as well as the Company, its successors and
assigns including, without limitations, any person, partnership,
corporation or other entity which may acquire all, or substantially all,
of the Company's assets and business.
To indicate your acceptance of and willingness to be bound by this
Agreement, please sign and return one duplicate original of this letter.
Yours truly,
THE PAPER FACTORY OF WISCONSIN, INC.
By /s/ Tom Thompson
----------------
ACCEPTED AND AGREED TO:
/s/ Nelson J. Rohrbach
- -----------------------
Nelson J. Rohrbach
Dated: May 28, 1993
<PAGE>
<PAGE>
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