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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 September 30, 1997
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: 16,459,705 shares of common
stock, par value $.01, outstanding at November 10, 1997.
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Part I. Item 1. Financial Statements
<TABLE>
GIBSON GREETINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except per share amounts)
(Unaudited)
<CAPTION>
September 30, December 31, September 30,
1997 1996 1996
------------- ------------ -------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 94,942 $ 98,155 $ 60,713
Trade receivables, net 26,818 42,423 26,406
Inventories 75,078 65,069 74,188
Income taxes receivable - - 11,273
Prepaid expenses 3,714 2,958 3,499
Deferred income taxes 35,557 44,598 42,143
--------- --------- ---------
Total current assets 236,109 253,203 218,222
PLANT AND EQUIPMENT, net 89,456 92,649 94,413
DEFERRED INCOME TAXES 18,991 16,592 13,529
OTHER ASSETS, net 90,352 89,115 92,833
--------- --------- ---------
$ 434,908 $ 451,559 $ 418,997
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Debt due within one year $ 7,888 $ 7,901 $ 7,899
Accounts payable 13,335 13,420 11,014
Income taxes payable 6,250 15,816 -
Other current liabilities 73,581 81,438 74,244
--------- --------- ---------
Total current liabilities 101,054 118,575 93,157
LONG-TERM DEBT 24,117 40,898 40,867
SALES AGREEMENT PAYMENTS DUE
AFTER ONE YEAR 12,939 14,274 15,390
OTHER LIABILITIES 22,477 21,496 21,003
--------- --------- ---------
Total liabilities 160,587 195,243 170,417
--------- --------- ---------
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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,
17,008,306 shares issued at
September 30, 1997, 16,708,059
shares issued at December 31, 1996
and 16,638,380 shares issued at
September 30, 1996 170 167 166
Paid-in capital 51,660 47,474 46,628
Retained earnings 227,850 213,755 207,308
Foreign currency adjustment 592 871 429
--------- --------- ---------
280,272 262,267 254,531
Less treasury stock, at cost,
494,601 shares 5,951 5,951 5,951
--------- --------- ---------
Total stockholders' equity 274,321 256,316 248,580
--------- --------- ---------
$ 434,908 $ 451,559 $ 418,997
========= ========= =========
</TABLE>
[FN]
See accompanying notes to condensed consolidated financial statements.
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<TABLE>
GIBSON GREETINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands except per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $ 92,145 $ 92,551 $ 284,421 $ 278,915
--------- --------- --------- ---------
Costs and expenses
Operating expenses:
Cost of products sold 38,645 38,721 105,931 104,165
Selling, distribution
and administrative
expenses 48,890 50,710 152,425 148,999
--------- --------- --------- ---------
Total operating
expenses 87,535 89,431 258,356 253,164
--------- --------- --------- ---------
Operating income 4,610 3,120 26,065 25,751
--------- --------- --------- ---------
Financing expenses:
Interest expense 1,398 1,812 6,034 5,794
Interest income (1,433) (910) (4,403) (2,313)
--------- --------- --------- ---------
Total financing
expenses, net (35) 902 1,631 3,481
--------- --------- --------- ---------
Income before
income taxes 4,645 2,218 24,434 22,270
Income taxes 1,974 (1,836) 10,339 6,751
--------- --------- --------- ---------
Net income $ 2,671 $ 4,054 $ 14,095 $ 15,519
========= ========= ========= =========
Net income per share $ 0.15 $ 0.25 $ 0.83 $ 0.95
========= ========= ========= =========
Dividends per share $ - $ - $ - $ -
========= ========= ========= =========
</TABLE>
[FN]
See accompanying notes to condensed consolidated financial statements.
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<TABLE>
GIBSON GREETINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
----------------------
1997 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 14,095 $ 15,519
--------- ---------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation including write-down of display
fixtures 16,784 16,067
Loss on disposal of plant and equipment 12 433
Deferred income taxes 6,642 4,084
Amortization of deferred costs and intangibles
and write-down of deferred costs 17,037 17,863
Change in assets and liabilities:
Decrease in trade receivables, net 15,605 20,214
Increase in inventories (10,009) (5,885)
Decrease in income taxes receivable - (575)
(Increase) decrease in prepaid expenses (756) 555
Increase in other assets, net of amortization (18,274) (5,242)
Increase (decrease) in accounts payable (85) 3,019
Decrease in income taxes payable (9,566) -
Increase (decrease) in other current liabilities (7,857) 2,602
Decrease in other liabilities (354) (4,132)
All other, net (3) 2,198
--------- ---------
Total adjustments 9,176 51,201
--------- ---------
Net cash provided by operating activities 23,271 66,720
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of plant and equipment (14,153) (20,302)
Proceeds from sale of plant and equipment 274 240
Collection of note receivable from sale of
Cleo, Inc. - 24,574
--------- ---------
Net cash provided by (used in)
investing activities (13,879) 4,512
--------- ---------
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in short-term borrowings - (19,000)
Payments on long-term debt, net (16,794) (7,661)
Issuance of common stock 4,189 587
--------- ---------
Net cash used in financing
activities (12,605) (26,074)
--------- ---------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (3,213) 45,158
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 98,155 15,555
--------- ---------
CASH AND EQUIVALENTS AT END OF PERIOD $ 94,942 $ 60,713
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 1,613 $ 2,155
Income taxes 13,261 3,241
</TABLE>
[FN]
See accompanying notes to condensed consolidated financial statements.
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GIBSON GREETINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 1997 and 1996
(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 September 30, 1997, December 31, 1996 and September 30, 1996,
the results of its operations for the three and nine months ended September
30, 1997 and 1996 and its cash flows for the nine months ended September 30,
1997 and 1996. 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 for the year ended
December 31, 1996.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 128 - "Earnings Per Share," which is effective for
financial statements for both interim and annual periods ending after December
15, 1997. Early adoption of the statement is not permitted. The Company has
applied this statement on a pro forma basis to the 1996 third quarter, nine
months and annual results and to the 1997 third quarter and nine months
results and determined that the adoption of this statement would not have had
a material impact on the earnings per share calculations for these periods.
The Financial Accounting Standards Board has issued Statements of Financial
Accounting Standards (SFAS) No. 129 - "Disclosure of Information about Capital
Structure," No. 130 - "Reporting Comprehensive Income" and No. 131 -
"Disclosures about Segments of an Enterprise and Related Information." SFAS
No. 129, which must be adopted in the fourth quarter of 1997, and SFAS No.
131, which must be adopted in the fourth quarter of 1998, will have no effect
on the Company's financial position or results of operations. SFAS No. 130,
which must be adopted in the first quarter of 1998, will also have no effect
on the Company's financial position. However, SFAS No. 130 will require the
Company to report comprehensive income, a measure of performance that includes
all non-owner sources of changes in equity. In addition to net income
reported in these financial statements, comprehensive income would include
foreign currency translation adjustments. Management does not expect SFAS No.
131 to require the Company to change the reportable business segments included
in its 1996 Annual Report on Form 10-K or to present additional information,
including presenting certain business segment information in its quarterly
financial statements.
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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:
September 30, December 31, September 30,
1997 1996 1996
------------- ------------ -------------
Trade receivables $ 65,979 $ 101,712 $ 75,176
Less reserve for returns,
allowances, cash discounts
and doubtful accounts 39,161 59,289 48,770
------------- ------------ -------------
$ 26,818 $ 42,423 $ 26,406
============= ============ =============
Note 4 - Inventories
Inventories consist of the following:
September 30, December 31, September 30,
1997 1996 1996
------------- ------------ -------------
Finished goods $ 56,864 $ 47,666 $ 56,159
Work-in-process 10,769 11,710 11,884
Raw materials and supplies 7,445 5,693 6,145
------------- ------------ -------------
$ 75,078 $ 65,069 $ 74,188
============= ============ =============
Note 5 - Net Income Per Share
The weighted average number of shares of common stock and equivalents
outstanding used in computing net income per share is as follows:
1997 1996
---------- ----------
Three months ended September 30, 17,182 16,293
========== ==========
Nine months ended September 30, 17,082 16,266
========== ==========
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Note 6 - Legal Matters
In July 1994, immediately following the Company's announcement of an inventory
misstatement at Cleo,Inc. (Cleo), a then subsidiary of the Company, 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 then Chairman,
President and Chief Executive Officer, its then 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 August 1996, the Court certified the
case as a class action. On October 7, 1997, the Court modified its class
order and narrowed the scope of the class. The latest 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
motions to dismiss and for summary judgement on the latest complaint and a
Third Party Complaint against its former auditor for contribution against any
judgment adverse to the Company. The Court has vacated a previously scheduled
trial date, and no new date has been set.
The Company presently is unable to predict the effect of the ultimate
resolution of the matter described above upon the Company's results of
operations and cash flows; as of this date, however, Management does not
expect that such resolution 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.
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.
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<PAGE>
Part I. Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition
Results of Operations
Effective August 31, 1996, the Company liquidated its Mexican subsidiary,
Gibson de Mexico, S.A. de C.V. (Gibson de Mexico). As a result of the
liquidation, the Company recorded a pretax charge of $2.1 million, an income
tax benefit of $3.7 million and an increase in net income of $1.6 million or
$.10 per share during the third quarter of 1996. The operating results for
Gibson de Mexico are included in the three and nine months ended September 30,
1996, and were not material to the consolidated results of operations.
Results of Operations - Three Months Ended September 30, 1997 Compared with
Three Months Ended September 30, 1996
Revenues in the third quarter of 1997 decreased .4% to $92.1 million from
revenues of $92.6 million in the third quarter of 1996 reflecting decreased
domestic greeting card shipments primarily due to the loss of certain
customers, partially offset by improvements in returns and allowances at
Gibson's Card Division, growth at The Paper Factory of Wisconsin, Inc. (The
Paper Factory) and increased international greeting card net sales. Overall,
returns and allowances were 14.9% of sales for the three months ended
September 30, 1997 compared to returns and allowances of 16.7% for the
comparable period in 1996 reflecting decreased seasonal and everyday return
provisions for domestic greeting card sales as well as lower customer
allowances. The Company continues to face strong competitive pressures with
regard to both price and terms of sale.
Total operating expenses were $87.5 million in the third quarter of 1997
representing a 2.1% decrease from total operating expenses of $89.4 million in
the third quarter of 1996. Cost of products sold as a percent of revenues was
41.9% for the third quarter of 1997 versus 41.8% for the third quarter of
1996. The slight increase was primarily due to the sales mix between
operating units. Selling, distribution and administrative expenses as a
percent of revenues were 53.1% for the third quarter of 1997 versus 54.8% for
the third quarter of 1996. Excluding the impact of the 1996 pretax charge of
$2.1 million for the loss on the liquidation of Gibson de Mexico, selling,
distribution and administrative expenses as a percent of revenues were 52.5%
for the third quarter of 1996. The increase is due to increased selling and
marketing expenses related to new product programs and retail environment
activities at the Card Division, and growth at The Paper Factory and
international operations, partially offset by a decrease in administrative
expenses and reduced bad debt expense at the Card Division.
Interest expense, net reflected increased interest income on invested balances
and reduced long-term debt in the third quarter of 1997 compared to the third
quarter of 1996.
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Pretax income for the third quarter of 1997 was $4.6 million compared to
pretax income for the third quarter of 1996 of $2.2 million which included the
loss on the liquidation of Gibson de Mexico of $2.1 million. The effective
income tax rate was 42.5% for the third quarter of 1997 compared to an
effective income tax rate excluding the pretax charge of $2.1 million and
related income tax benefit of $3.7 million resulting from the liquidation of
Gibson de Mexico, of 42.5% for the third quarter of 1996.
Net income for the third quarter of 1997 was $2.7 million compared with net
income of $4.1 million for the comparable period in 1996. The net effect of
the liquidation of Gibson de Mexico was to increase 1996 net income by $1.6
million or $.10 per share.
Results of Operations - Nine Months Ended September 30, 1997 Compared with
Nine Months Ended September 30, 1996
Revenues for the nine months ended September 30, 1997 increased 2.0% to $284.4
million from revenues of $278.9 million for the nine months ended September
30, 1996 reflecting growth at The Paper Factory and increased international
greeting card net sales. Revenues for Gibson's Card Division for the nine
months ended September 30, 1997 decreased from the comparable period in 1996
due to lower shipments partially offset by lower returns and allowances.
Overall, returns and allowances were 16.7% of sales for the nine months ended
September 30, 1997 compared to returns and allowances of 18.8% for the
comparable period in 1996 reflecting decreased seasonal and everyday return
provisions for domestic greeting card sales and lower customer allowances.
Total operating expenses were $258.4 million for the nine months ended
September 30, 1997 representing a 2.1% increase from total operating expenses
of $253.2 million for the nine months ended September 30, 1996. Cost of
products sold as a percent of revenues was 37.2% for the nine months ended
September 30, 1997 versus 37.3% for the nine months ended September 30, 1996.
The slight decrease was primarily due to the sales mix. Selling, distribution
and administrative expenses as a percent of revenues were 53.6% for the nine
months ended September 30, 1997 versus 53.4% for the nine months ended
September 30, 1996. Excluding the impact of the 1996 pretax charge of $2.1
million for the loss on the liquidation of Gibson de Mexico, selling,
distribution and administrative expenses as a percent of revenues were 52.7%
for the nine months ended September 30, 1996. The increase was primarily due
to increased selling and marketing expenses related to new product programs,
retail environment activities and new business initiatives for both domestic
and international operations, growth at The Paper Factory and a $1.4 million
pretax charge for workforce reduction costs at the Card Division. These were
offset by lower administrative expenses and reduced bad debt expense.
Interest expense, net reflected increased interest income on invested balances
for the nine months ended September 30, 1997 compared to the nine months ended
September 30, 1996.
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Pretax income for the nine months ended September 30, 1997 was $24.4 million
compared to pretax income for the nine months ended September 30, 1996 of
$22.3 million. The effective income tax rate was 42.3% for the nine months
ended September 30, 1997 compared to an effective income tax rate, excluding
the pretax charge of $2.1 million and related income tax benefit of $3.7
million resulting from the liquidation of Gibson de Mexico, of 42.8% for the
nine months ended September 30, 1996.
Net income for the nine months ended September 30, 1997 was $14.1 million
compared with net income of $15.5 million for the comparable period in 1996.
The net effect in 1996 of the liquidation of Gibson de Mexico was to increase
net income by $1.6 million or $.10 per share.
Liquidity and Capital Resources
Cash provided by operating activities for the nine months ended September 30,
1997 was $23.3 million compared to $66.7 million for the comparable period in
1996. The decrease from 1996 primarily results from increased up-front
payments on customer sales agreements, payment of income taxes as opposed to
the receipt of income tax refunds in the prior year, increased inventory
levels and other working capital changes.
Cash used in investing activities in the first nine months of 1997 was $13.9
million compared to cash provided by investing activities of $4.5 million in
the first nine months of 1996. Cash used in investing activities represents
capital expenditures for the first nine months of 1997. The reduction in
capital expenditures for the first nine months of 1997 compared to the first
nine months of 1996 represents the timing of certain capital projects and
lower capital expenditure activities. Cash provided by investing activities
for the first nine months of 1996 included the collection of a note receivable
of $24.6 million from the sale of Cleo, Inc., a former subsidiary of the
Company, which was sold in mid-November 1995.
Cash used in financing activities for the nine months ended September 30, 1997
was $12.6 million compared to cash used in financing activities of $26.1
million in the comparable period of 1996. The change reflects no short-term
borrowings at December 31, 1996 or September 30, 1997 compared to the
repayment of short-term borrowings outstanding at December 31, 1995 during the
nine months ended September 30, 1996. On June 2, 1997, the Company prepaid
$7.1 million in principal, without premium, on its Senior Notes. This payment
was in addition to the $7.1 million principal amount the Company was scheduled
to pay under the Note Agreement. As a result of these payments and prior
retirements of the Senior Notes, all Senior Notes will be repaid no later than
June 1999.
The Company continues to pursue the sale of The Paper Factory chain of retail
outlets. The decision to pursue the sale of The Paper Factory is a strategic
one and is based on the determination that the Company should focus on its
core business of greeting cards and related products. One desired condition
of a sale is that the Company receive a long-term contract to supply The Paper
Factory stores with product. A final decision to proceed with any sale will
depend on whether a suitable price and terms of sale can be agreed upon with
any potential buyer.
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The Management of the Company has analyzed its computer hardware and software
in connection with potential dating problems that may arise with the year
2000. Management's determination is that many potential problems can be
corrected by the year 2000, and the related costs are not expected to
materially impact the Company.
The Company is carrying significant cash balances. On July 30, 1997, the
Company announced a stock repurchase program of up to one million shares of
its common stock over the next twelve months. The repurchases will be made on
the open market or in privately negotiated transactions, at prevailing market
prices. The times and amounts of the repurchases will be determined by market
conditions. The stock acquired will be held as treasury stock and used in the
future in the Company's stock option plans and for general corporate purposes.
As of November 10, 1997, the Company has repurchased 60,000 shares of stock.
Other than the scheduled debt payments and the stock repurchase program
discussed above, there currently are no commitments for the use of this cash;
however, Management is evaluating various alternatives, including strategic
acquisitions.
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 sales 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
Note 6 of Notes to Condensed Consolidated Financial Statements).
Except for the historical information contained herein, the matters discussed
in this report are forward-looking statements which involve risks and
uncertainties, including but not limited to economic, competitive,
governmental and technological factors affecting the Company's operations,
markets, products, services and prices.
-14-
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Part II. Other Information
Item 1. Legal Proceedings
The information presented in Note 6 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 J. T. Wilson, dated September 29, 1997.
a) Exhibit 27 Financial Data Schedule (contained in EDGAR filing
only).
b) Reports on Form 8-K None.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Gibson
Greetings, Inc. has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GIBSON GREETINGS, INC.
Date: November 14, 1997 By:/s/ Paul W. Farley
-----------------------
Paul W. Farley
Vice President - Controller and
Assistant Treasurer
Principal Accounting Officer
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<PAGE>
Exhibit 10(a)
September 29, 1997
Mr. James T. Wilson
6302 Windcrest Drive #1016
Plano, TX 75024
Dear Jim:
Gibson Greetings, Inc. and I are very pleased that you have agreed to serve as
Executive Vice President - Finance & Operations and Chief Financial Officer of
Gibson Greetings, Inc. ("the Company"). As Executive Vice President -
Finance & Operations and Chief Financial Officer, you will report directly to
me. The following terms and conditions will govern your service to the
Company.
1. You will serve the Company on a full-time basis as a senior executive
employee, and the Company will employ you as such, commencing September
29, 1997. This Agreement will extend indefinitely until terminated by
the Company, or by you upon thirty days' advance written notice to the
Company. In the event the terms of this Agreement are materially
breached by the Company or that this Agreement and your employment are
terminated by the Company other than for cause, you will be entitled to
receive a lump sum from the Company in lieu of all other monies or
benefits provided under this Agreement (except that compensation and
benefits which at the time of termination have accrued or vested under
any applicable plan or policy of the Company, or are intended to survive
your employment, shall continue to the extent so provided by the plan,
policy or applicable law including, but not limited to, retirement
benefits [which include the Retirement Income Plan, SERP, and the
Company's ERISA Makeup Plan], stock options, medical insurance COBRA
benefits, Voluntary Deferred Compensation Plan, 401(k) Plan and accrued
vacation pay), and in lieu of severance pay pursuant to Company policy.
This lump sum shall equal twice your annual salary at the time of breach
or termination. This Lump sum shall be reduced by one twenty-fourth of
such sum for each month of employment you have completed under this
agreement, provided, however, that the lump sum payment shall not be
reduced by more than one half.
2. Your annual salary will be $250,000, which amount will be reviewed every
fifteen months and which may be adjusted from time to time by the
Company in accordance with the Company's salary administration program.
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Mr. James T. Wilson
September 29, 1997
Page 2
3. A signing bonus in the amount of $50,000 will be paid to you soon after
you begin employment, with an additional bonus of $50,000 payable upon
closing on a home in the Cincinnati, Ohio area.
4. Every three years, you will be provided a new automobile of such class
as may be set forth in the Company's then current automobile program,
which automobile will be owned or leased by the Company.
5. You will participate in the Company's Management Bonus Plan and, as
such, you will be eligible for an annual bonus for 1997 and for each
calendar year during the term of this Agreement up to a maximum of
112.5% of your base salary, subject to the terms and conditions of the
Management Bonus Plan in effect for each such year.
6. As additional consideration for this Agreement, and contingent upon
approval by the Compensation Committee, you will be granted a stock
option for 125,000 shares of the common stock of the Company at the
closing market price of the stock on the official grant date. One third
of such options shall become vested on each of the first three
anniversaries of the grant. Such vesting shall be conditioned upon your
continuing to be employed by the Company on each such date. Such grant
shall be in accordance with the provisions of the Company's standard
"Stock Option Agreement for Officers Subject to Section 16," a copy of
which is attached hereto. The stock options granted under this
paragraph are in addition to any that may be granted to you in the
Company's discretion during the term or your employment under any
existing or future plan(s).
7. The Company will reimburse you in accordance with the terms of the
Company's Executive Relocation and Moving Expense policy for your
reasonable expenses of moving from Plano, Texas to Cincinnati, Ohio,
including, but not limited to: household moving costs; you and your
family's travel expenses for house-hunting trips as approved in advance
by the Company; and closing costs related to your purchase of a home in
the Cincinnati area.
8. You will be covered by the Company's special benefit programs for
executives which include: executive physical examinations, life
insurance, tax preparation and estate planning assistance. The amount
of your life insurance shall be three (3) times your annual salary, not
to exceed $600,000.
9. Upon approval of the Compensation Committee, you will be named a
participant in the Company's ERISA Makeup Plan and its Supplemental
Executive Retirement Plan (SERP).
10.You will be eligible for participation in all other benefit plans
available to the employees of the Company, in accordance with the terms
of those plans, including participation in the Voluntary Deferred
Compensation Plan, the 401(k) Plan, the Retirement Income Plan and
health insurance.
-18-
PAGE
<PAGE>
Mr. James T. Wilson
September 29, 1997
Page 3
11.You will be eligible for four weeks of paid vacation during each year
this Agreement remains in effect.
12.Your employment and this agreement shall terminate automatically upon
your disability, other than temporary disability for a period of less
than six consecutive months or partial disability not materially
affecting your ability to work or which can not be reasonably
accommodated by the Company, or death. All other benefits due you
following termination of your employment and this agreement for
disability or death shall be determined in accordance with the plans,
policies and practices of the Company.
13.In the event you voluntarily terminate your employment during the term
of this Agreement (except in direct response to a material breach of
this Agreement by the Company) or if the Company terminates this
Agreement and your employment for cause, your right to all compensation
(other than accrued but unpaid) hereunder shall cease as of the date of
termination (except that compensation and benefits which at the time of
termination have accrued or vested under any applicable plan or policy
of the Company, or are intended to survive your employment, shall
continue to the extent so provided by the plan, policy or applicable law
including, but not limited to, retirement benefits [which include the
Retirement Income Plan, SERP, and the Company's ERISA Makeup Plan],
stock options, medical insurance COBRA benefits, Voluntary Deferred
Compensation Plan, 401(k) Plan and accrued vacation pay). As used in
this Agreement, "cause" shall mean fraud, gross negligence, or willful
misconduct in the performance of your duties or a willful and material
breach of this Agreement. Except for the provisions of Paragraphs 14,
15 and 16, and, except for the provisions for termination pay contained
in Paragraph 1 in the event of a voluntary termination by you in direct
response to a material breach of the Agreement by the Company, voluntary
termination of employment by you shall terminate this Agreement.
-19-
PAGE
<PAGE>
Mr. James T. Wilson
September 29, 1997
Page 4
14.Also in the event you voluntarily terminate your employment hereunder
(except in direct response to a material breach of this Agreement by the
Company) or retire, or if the Company terminates this Agreement and your
employment for cause, you agree that for a period of one year after such
termination, you will not compete, directly or indirectly, with the
Company or with any division, subsidiary or affiliate of the Company or
participate as a director, officer, employee, consultant, advisor,
partner or joint venturer in any business engaged in the development,
advertising, promotion, manufacture and/or sale at wholesale of greeting
cards, gift wrap or other products the same as or competitive to those
produced or sold by the Company, or by any division, subsidiary or
affiliate of the Company, without the Company's prior written consent.
If the Company chooses to terminate this Agreement and you continue to
be employed by the Company as an employee, agent, consultant or
otherwise, you agree that this paragraph shall continue to bind you for
a period of one (1) year after your separation from the Company as an
employee, agent, consultant or otherwise.
15.In the event that your employment with the Company is terminated for any
reason, by you or the Company, you agree that, for a period of one year
following such termination of employment, you shall not in any way
solicit or recruit any employee of the Company, its affiliates or
subsidiaries, for any employment, consulting or other arrangement for
your benefit or that of any third party.
16.In connection with this Agreement, you may receive confidential
information of the Company. You agree, both during the term of this
Agreement and after termination, 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, "confidential information"
means information concerning Company's finances, plans, sales, products,
processes and services, or those of Company's subsidiaries, divisions or
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 known in the industry in which the Company or its
subsidiaries, divisions or affiliates are or may become engaged. You
agree that this paragraph will continue to bind you notwithstanding the
termination of this Agreement or your employment for any reason
whatsoever. If the Company chooses to terminate this Agreement and you
continue to be employed by the Company as an employee, agent, consultant
or otherwise, you agree that this paragraph will continue to bind you
after your separation from the Company as an employee, agent or
consultant.
-20-
PAGE
<PAGE>
Mr. James T. Wilson
September 29, 1997
Page 5
17.To the extent that the terms of this agreement are inconsistent with the
terms of any Company policy or benefit plan, the terms of this agreement
shall govern and be in place of, not in addition to, the terms of such
policy or benefit plan.
18.This Agreement will 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 limitation, any person, partnership,
corporation or other entity which may acquire all, or substantially all,
of the Company's assets and business.
19.If any provision of this Agreement is later judicially determined to be
void, that provision may be stricken and the remaining portions of this
Agreement enforced as if the provision so stricken had never been
included herein.
To indicate your acceptance of and willingness to be bound by this Agreement,
please sign and return one duplicate original of this letter.
Sincerely,
GIBSON GREETINGS, INC.
/s/ Frank J. O'Connell
Frank J. O'Connell
Chairman of the Board,
Chief Executive Officer
and President
FJO/JET/dk
ACCEPTED AND AGREED TO:
/s/ James T. Wilson
James T. Wilson
Date: September 29, 1997
-21-
PAGE
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Gibson
Greeting, Inc.'s Quarterly Report on Form 10-Q for the nine months ended
September 30, 1997, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 94942
<SECURITIES> 0
<RECEIVABLES> 65979
<ALLOWANCES> 39161
<INVENTORY> 75078
<CURRENT-ASSETS> 236109
<PP&E> 187070
<DEPRECIATION> 97614
<TOTAL-ASSETS> 434908
<CURRENT-LIABILITIES> 101054
<BONDS> 0
<COMMON> 170
0
0
<OTHER-SE> 274151
<TOTAL-LIABILITY-AND-EQUITY> 434908
<SALES> 284421
<TOTAL-REVENUES> 284421
<CGS> 105931
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<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6034
<INCOME-PRETAX> 24434
<INCOME-TAX> 10339
<INCOME-CONTINUING> 14095
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</TABLE>
