<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1996
Commission File Number: 00-19800
GIBRALTAR PACKAGING GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 47-0496290
(State of incorporation) (IRS Employer
Identification Number)
2115 REXFORD ROAD, SUITE 215
CHARLOTTE, NORTH CAROLINA 28211
(Address of principal executive offices) (Zip Code)
(704) 366-2929
(Registrant's telephone number, including area code)
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. |X| Yes |_| No
As of March 31, 1996, there were 5,041,544 shares of the Company's
common stock, par value $0.01 per share, issued and outstanding.
<PAGE>
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page Number
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets 1
As of March 31, 1996 (unaudited) and July 1, 1995
Consolidated Statements of Income (unaudited) 2
Three months ended March 31, 1996 and 1995 and
Nine months ended March 31, 1996 and 1995
Consolidated Statements of Cash Flows (unaudited) 3
Nine months ended March 31, 1996 and 1995
Notes to Consolidated Financial Statements (unaudited) 4
Item 2. Management's Discussion and Analysis of Financial 5
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 8
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except per share data)
<TABLE>
<CAPTION>
March 31 July 1
1996 1995
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Accounts receivable (net of allowance for $ 7,979 $ 7,684
doubtful accounts of $237 and $211)
Inventories 9,120 10,487
Deferred income taxes 755 717
Refundable income taxes 274
Prepaid and other assets 374 403
------- ------
Total current assets 18,228 19,565
PROPERTY AND EQUIPMENT - Net 35,484 36,941
EXCESS OF PURCHASE PRICE OVER NET 21,252 21,691
ASSETS ACQUIRED (Net of accumulated
amortization of $2,037 and $1,598)
OTHER ASSETS (Net of accumulated amortization 736 839
of $369 and $212) ------- -------
TOTAL $75,700 $79,036
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Checks not yet presented $ 1,134 $ 744
Current portion of long-term debt 4,060 4,389
Accounts payable 5,350 5,621
Accrued expenses and other liabilities 2,694 2,871
Income taxes payable 308
------- ------
Total current liabilities 13,546 13,625
LONG-TERM DEBT - Net of current portion 27,634 31,527
DEFERRED INCOME TAXES 2,892 2,829
OTHER LONG-TERM LIABILITIES 834 750
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; 4,000,000 shares
authorized; none issued
Common stock, $.01 par value; 10,000,000 shares
authorized; 5,041,544 issued and
outstanding, respectively 50 50
Additional paid-in capital 28,162 28,162
Retained earnings 2,582 2,093
------- -------
Total stockholders' equity 30,794 30,305
------- -------
TOTAL $75,700 $79,036
======= =======
</TABLE>
See notes to consolidated financial statements.
1
<PAGE>
PART I. FINANCIAL INFORMATION (CONTINUED)
ITEM 1. FINANCIAL STATEMENTS (CONTINUED).
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
NET SALES $ 19,135 $ 19,892 $ 56,111 $ 57,264
COST OF GOODS SOLD 14,853 15,674 44,022 48,033
---------- ----------- ---------- ----------
GROSS PROFIT 4,282 4,218 12,089 9,231
---------- ---------- ----------- -----------
OPERATING EXPENSES:
Selling 1,071 1,103 3,091 3,279
Administrative 1,511 1,696 4,107 4,460
Severance, office moving and restructuring charges 745 - 998 1,386
Amortization of excess of purchase
price over net assets acquired 145 146 439 441
---------- ----------- ---------- --------
Total operating expenses 3,472 2,945 8,635 9,566
---------- ---------- ---------- ----------
INCOME (LOSS) FROM OPERATIONS 810 1,273 3,454 (335)
OTHER (INCOME) EXPENSE:
Interest and deferred finance costs 791 760 2,428 2,134
Other (income) expense 6 1 (1) (48)
----------- --------- --------- -----------
Other expense - net 797 761 2,427 2,086
---------- ------------ ---------- -----------
INCOME (LOSS)
BEFORE INCOME TAXES 13 512 1,027 (2,421)
PROVISION (BENEFIT)
FOR INCOME TAXES 79 241 538 (626)
---------- ---------- ---------- ------------
NET INCOME (LOSS) $ (66) $ 271 $ 489 $ (1,795)
========== ========== ========== ==========
NET INCOME (LOSS) PER SHARE $ (0.01) $ 0.05 $ 0.10 $ (0.36)
========== ========== ========== ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING 5,041,544 5,041,007 5,041,544 5,039,441
========== ========== ========== =========
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
PART I. FINANCIAL INFORMATION (CONTINUED)
ITEM 1. FINANCIAL STATEMENTS (CONTINUED).
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
(In thousands) Nine Months Ended
March 31,
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 489 $(1,795)
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 2,930 2,786
Write-down of property and equipment 27 1,202
Changes in operating assets and liabilities:
Accounts receivable (295) 463
Inventories 1,367 136
Prepaid expenses and other assets (23) (830)
Accounts payable (271) 1,676
Accrued income taxes and other expenses 514 (1,379)
-------- -------
Net Cash Provided by Operating Activities 4,738 2,259
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment 99 170
Purchases of property and equipment (1,005) (1,702)
Acquisition costs - (76)
---------- ---------
Net Cash Used in Investing Activities (906) (1,608)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings (payments) under revolving credit agreement (1,478) 1,548
Borrowings under capital leases 79 102
Principal payments under long-term debt agreements (2,823) (2,830)
Principal payments under finance lease arrangements - (10)
Net proceeds from issuance of common stock - 22
--------- --------
Net Cash Used in Financing Activities (4,222) (1,168)
NET (DECREASE) IN CASH (390) (517)
CASH (CHECKS NOT YET PRESENTED) AT BEGINNING OF PERIOD (744) 59
--------- ---------
CASH (CHECKS NOT YET PRESENTED) AT END OF PERIOD $ (1,134) $ (458)
========== ==========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
PART I. FINANCIAL INFORMATION (CONTINUED)
ITEM 1. FINANCIAL STATEMENTS (CONTINUED).
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
A. GENERAL
The consolidated balance sheet of Gibraltar Packaging Group, Inc.
("Company") and Subsidiaries (collectively, "Gibraltar") at July 1,
1995 has been taken from Gibraltar's audited financial statements at
that date. All other consolidated financial statements contained herein
have been prepared by Gibraltar and are unaudited. The financial
statements should be read in conjunction with the financial statements
for the year ended July 1, 1995 and the notes thereto contained in
Gibraltar's Annual Report on Form 10-K for the year then ended.
The accompanying consolidated financial statements have been prepared
in accordance with Rule 10-01 of Regulation S-X for interim financial
statements required to be filed with the Securities and Exchange
Commission and do not include all information and footnotes required by
generally accepted accounting principles for complete financial
statements. However, in the opinion of management, the accompanying
consolidated financial statements contain all adjustments, consisting
only of normal recurring adjustments, necessary to present fairly the
financial position of Gibraltar as of March 31, 1996 and July 1, 1995,
and the results of its operations and its cash flows for the periods
presented herein. Results for the nine months ended March 31, 1996 are
not necessarily indicative of the results to be expected for the full
fiscal year.
B. INVENTORIES
A summary of inventories by components is as follows:
<TABLE>
<CAPTION>
(In thousands) March 31, 1996 July 1, 1995
-------------- ------------
(Unaudited)
<S> <C> <C>
Finished goods $ 5,268 $ 5,879
Work-in-process 1,201 1,273
Raw materials 2,406 3,063
Manufacturing supplies 245 272
-------- -------
Total inventory $ 9,120 $10,487
======== =======
</TABLE>
C. NET INCOME PER SHARE
Earnings per share is based on the weighted average number of shares of
common stock and common stock equivalents outstanding for the periods
indicated.
D. RECLASSIFICATIONS
Certain 1995 amounts have been reclassified to conform with the
classifications used in the 1996 financial statements.
4
<PAGE>
E. SEVERANCE, OFFICE MOVING AND RESTRUCTURING CHARGES
Included in the nine months ended March 31, 1996 is a pre-tax charge of
$998,000 for severance of eight senior employees ($901,000) and the
move of the corporate office ($97,000) from Charlotte, North Carolina
to Westport, Connecticut. The third quarter of 1996 includes $745,000
of these costs; $648,000 for severance and $97,000 for the office move.
At March 31, 1996 the remaining severance liability is approximately
$735,000.
The costs related to the corporate office move include amounts for
lease terminations, the write-off of leasehold improvements and moving
of furniture and personnel. The move is anticipated to be completed by
June 30, 1996 and these costs will generally have been incurred by that
date.
All funds related to the second quarter 1995 restructuring charge have
been spent.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
o RESULTS OF OPERATIONS:
Three Months Ended March 31, 1996 Compared to
Three Months Ended March 31, 1995
Net sales for the third quarter of fiscal 1996 were $19.1 million
compared with $19.9 million for the third quarter of fiscal 1995, a
decrease of 4.0%. Sales of pressure-sensitive labels, flexible
packaging and laminated products were lower while sales of spiral-wound
packaging increased.
Cost of goods sold decreased $0.8 million, or 5.1%, compared with the
third quarter of fiscal 1995. As a percentage of net sales, cost of
goods sold was 78.0% for the third quarter of fiscal 1996 compared with
78.9% for the third quarter of fiscal 1995. The decrease in cost of
goods sold reflects a more profitable product mix and reduced headcount
and manufacturing costs at the Niemand Industries spiral-wound
division.
Selling expenses decreased $32,000, or 2.9%, in the third quarter of
fiscal 1996 as compared to the third quarter of fiscal 1995, due to a
decrease in the number of sales personnel.
Administrative expenses decreased $185,000, or 10.9%. This decrease
reflects significantly lower corporate office expense due to
decentralization.
A charge of $745,000 has been recorded in the current year third
quarter consisting primarily of severance costs for divisional
personnel and expenses related to the move of the corporate office from
Charlotte, North Carolina to Westport, Connecticut. See footnote E for
further discussion of this item.
Interest and deferred finance costs for the third quarter of fiscal
1996 increased to $791,000 from $760,000 in the third quarter of fiscal
1995. While borrowings under the revolving credit facility decreased in
the current year quarter compared with the prior year quarter, interest
rates were higher in the current year resulting in a slight increase in
interest expense. Amortization of finance costs was also higher in the
third quarter of 1996 due to fees incurred in March, 1995
5
<PAGE>
amending the credit agreement. These fees are being amortized
straight-line over the original life of the credit agreement.
The provision for income taxes for the three months ended March 31,
1996 and 1995 exceeds the amount that would be determined based on
federal and state income tax rates primarily due to the
non-deductibility of the amortization of the excess of purchase price
over net assets acquired.
Nine Months Ended March 31, 1996 Compared to
Nine Months Ended March 31, 1995
Net sales for the nine months ended March 31, 1996 were $56.1 million
compared with $57.3 million for the nine months ended March 31, 1995, a
decrease of 2.1%. Increased sales of folding cartons were offset by
lower sales of pressure sensitive labels, flexible packaging,
spiral-wound packaging and laminated products.
Cost of goods sold decreased $4.0 million, or 8.3% for the nine months
ended March 31, 1996 compared with the similar period of the prior
year.
Included in cost of goods sold for the second quarter of fiscal 1995
were adjustments to the inventory balances of Niemand Industries
totaling approximately $1.3 million reflecting a physical inventory
shortage as well as reserves for obsolescence. Similarly, GB Labels
recorded a charge of $341,000 for physical inventory shortage and
inventory obsolescence during that quarter. No similar amounts were
recorded in the current year.
Excluding the charge of $1.6 million recorded in the second quarter of
the prior year, the cost of sales percentage improved to 78.4% in the
current year from 81.0% in the prior year. The percentage was favorably
impacted by product mix as well as reduced headcount and manufacturing
costs at the Niemand facility.
Operating expenses for the nine months ended March 31, 1996 decreased
to $8.6 million from $9.6 million for the nine months ended March 31,
1995, a decrease of $1.0 million. The lower current year expenses
reflect decreased corporate office expenditures and a smaller charge
for restructuring in the current year compared with the prior year.
In the second quarter of fiscal 1995, a $1.4 million restructuring
charge was recorded to write-down property, plant and equipment and to
provide severance for personnel related to the Niemand consolidation.
As discussed in footnote E, a pre-tax charge of $998,000 for severance
and the corporate office relocation was recorded in the nine months
ended March 31, 1996. $253,000 of such costs occurred in the first and
second quarters. See footnote E for further discussion.
Interest and deferred finance costs for the first nine months of fiscal
1996 increased to $2.4 million from $2.1 million in the first nine
months of fiscal 1995. This increase reflects higher borrowings under
the revolving credit line during the current year period, increased
interest rates and an increase in the amortization of deferred finance
costs as discussed under the quarterly comparison.
The provision for income taxes for the nine months ended March 31, 1996
exceeds, and the benefit for income taxes related to the nine months
ended March 31, 1995 is less than, the amounts that would be determined
based on federal and state income tax rates primarily due to the
6
<PAGE>
non-deductibility of the amortization of the excess of purchase
price over net assets acquired.
o LIQUIDITY AND CAPITAL RESOURCES:
The Company amended its bank credit agreement on March 31, 1996 to
extend the expiration of the revolving credit facility to April 1, 1997
from January 2, 1997 and to re-negotiate the repayment terms of the
credit facility.
As a result of this amendment, the Company has an available line of
credit of $18 million through May 31, 1996, $17.5 million through July
2, 1996 and $16 million up until the expiration date of the facility.
At March 31, 1996 there was an outstanding balance of $16.0 million
under the Line of Credit Agreement.
At March 31, 1996, the Company was in violation of certain of its
covenants under the bank credit agreement. The bank has issued waivers
of these covenants.
During the nine months ended March 31, 1996, capital expenditures
totaled $1,005,000. In order to accommodate continued growth, Gibraltar
makes capital improvements to improve efficiency and product quality.
Gibraltar frequently upgrades its equipment by purchasing or leasing
used equipment thereby reducing capital expenditures.
Management believes that existing cash balances, funds generated by
operations, and borrowings available under its current or future credit
facilities will be sufficient to meet working capital, and capital
expenditure requirements in fiscal 1996 and for the foreseeable future.
Nevertheless, Gibraltar may require or choose to obtain additional
capital through public or private debt or equity offerings or
additional bank borrowings to fund future developments. There is no
assurance that Gibraltar will be able to obtain such additional
capital.
7
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
None.
(b) Reports on Form 8-K:
Gibraltar did not file any reports on Form 8-K during the
quarter ended March 31, 1996.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GIBRALTAR PACKAGING GROUP, INC.
Date: May 15, 1996 By: /s/ John W. Lloyd
----------------------- --------------------------------------
John W. Lloyd, Chief Financial Officer
Signing on behalf of the registrant and
as principal financial officer
8
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-29-1996
<PERIOD-START> JUL-2-1995
<PERIOD-END> MAR-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 8,216
<ALLOWANCES> 237
<INVENTORY> 9,120
<CURRENT-ASSETS> 18,228
<PP&E> 46,226
<DEPRECIATION> 10,742
<TOTAL-ASSETS> 75,700
<CURRENT-LIABILITIES> 13,546
<BONDS> 0
0
0
<COMMON> 50
<OTHER-SE> 30,744
<TOTAL-LIABILITY-AND-EQUITY> 75,700
<SALES> 56,111
<TOTAL-REVENUES> 56,111
<CGS> 44,022
<TOTAL-COSTS> 44,022
<OTHER-EXPENSES> 8,634
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,428
<INCOME-PRETAX> 1,027
<INCOME-TAX> 538
<INCOME-CONTINUING> 1,027
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 489
<EPS-PRIMARY> 0.10
<EPS-DILUTED> 0.10
</TABLE>
