<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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, 1998
--------------
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)
274 RIVERSIDE AVENUE
WESTPORT, CT 06880
(Address of principal executive offices) (Zip Code)
(203) 227-0400
(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, 1998, there were 5,041,544 shares of the Company's
common stock, par value $ 0.01 per share, issued and outstanding.
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GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
------------------------------------------------
INDEX
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<TABLE>
<CAPTION>
Page Number
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<S> <C>
PART I. FINANCIAL INFORMATION
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Financial Statements
Consolidated Balance Sheets 1
As of March 31, 1998 (Unaudited) and June 28, 1997
Consolidated Statements of Operations (Unaudited) for the 2
Three Months Ended March 31, 1998 and 1997 and
Nine Months Ended March 31, 1998 and 1997
Consolidated Statements of Cash Flows (Unaudited) for the 3
Nine Months Ended March 31, 1998 and 1997
Notes to Consolidated Financial Statements (Unaudited) 4
Management's Discussion and Analysis of Interim Financial 6
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk 8
PART II. OTHER INFORMATION
- -------- -----------------
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
Signature 9
</TABLE>
<PAGE>
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
March 31, June 28,
1998 1997
(Unaudited)
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<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ - $ 110
Accounts receivable (NET OF ALLOWANCE FOR
DOUBTFUL ACCOUNTS OF $288 AND $127, RESPECTIVELY) 7,391 8,840
Inventories (Note B) 10,282 9,006
Income taxes receivable 1,202 -
Deferred income taxes 412 412
Prepaid and other current assets 608 437
--------------- --------------
Total current assets 19,895 18,805
PROPERTY, PLANT AND EQUIPMENT - Net 33,760 34,544
EXCESS OF PURCHASE PRICE OVER NET
ASSETS ACQUIRED (NET OF ACCUMULATED
AMORTIZATION OF $3,221 AND $2,783, RESPECTIVELY) 20,086 20,524
OTHER ASSETS (NET OF ACCUMULATED AMORTIZATION
OF $284 AND $137, RESPECTIVELY) 1,113 1,185
--------------- --------------
TOTAL $ 74,854 $ 75,058
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Checks not yet presented $ 997 $ -
Current portion of long-term debt 3,863 3,313
Accounts payable 7,763 5,947
Accrued expenses 2,935 2,775
Income taxes payable - 692
--------------- --------------
Total current liabilities 15,558 12,727
LONG-TERM DEBT - Net of current portion 26,207 27,382
DEFERRED INCOME TAXES 2,964 3,028
OTHER LONG-TERM LIABILITIES 894 821
--------------- --------------
Total liabilities 45,623 43,958
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STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 1,000,000 shares
authorized; none issued
Common stock, $.01 par value; 10,000,000 shares
authorized; 5,041,544 issued and outstanding 50 50
Additional paid-in capital 28,162 28,162
Retained earnings 1,019 3,019
Minimum pension liability in excess of unrecognized
prior service costs - (131)
--------------- ---------------
Total stockholders' equity 29,231 31,100
--------------- --------------
TOTAL $ 74,854 $ 75,058
=============== ==============
</TABLE>
See notes to unaudited consolidated financial statements.
-1-
<PAGE>
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
--------------------------- --------------------------
1998 1997 1998 1997
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET SALES $ 18,954 $ 18,817 $ 56,901 $ 55,118
COST OF GOODS SOLD 15,790 14,725 47,966 43,856
----------- ----------- ----------- -----------
GROSS PROFIT 3,164 4,092 8,935 11,262
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Selling 938 1,097 3,169 3,056
General and administrative 1,484 1,675 6,007 4,876
Amortization of excess of purchase price
over net assets acquired 145 147 438 441
Restructuring charges -- -- 170 --
----------- ----------- ----------- -----------
Total operating expenses 2,567 2,919 9,784 8,373
----------- ----------- ----------- -----------
INCOME (LOSS) FROM OPERATIONS 597 1,173 (849) 2,889
OTHER (INCOME) EXPENSE:
Interest expense 733 699 2,246 2,275
Other (income) expense - net (4) 8 (53) 12
----------- ----------- ----------- -----------
Other expense - net 729 707 2,193 2,287
----------- ----------- ----------- -----------
(LOSS) INCOME BEFORE INCOME TAXES (132) 466 (3,042) 602
PROVISION (BENEFIT) FOR INCOME TAXES 5 231 (1,042) 394
----------- ----------- ----------- -----------
(LOSS) INCOME BEFORE EXTRAORDINARY ITEM (137) 235 (2,000) 208
EXTRAORDINARY ITEM (net of tax effect of $66)
(WRITE-OFF OF FINANCE CHARGES AS A RESULT OF DEBT REPAYMENT) -- -- -- (107)
----------- ----------- ----------- -----------
NET (LOSS) INCOME $ (137) $ 235 $ (2,000) $ 101
=========== =========== =========== ===========
PER COMMON SHARE AMOUNTS:
(Loss) Income Before Extraordinary Item $ (0.03) $ 0.05 $ (0.40) $ 0.04
=========== =========== =========== ===========
Net (Loss) Income $ (0.03) $ 0.05 $ (0.40) $ 0.02
=========== =========== =========== ===========
WEIGHTED AVERAGE SHARES
OUTSTANDING (basic and diluted) 5,041,544 5,041,544 5,041,544 5,041,544
=========== =========== =========== ===========
</TABLE>
See notes to unaudited consolidated financial statements.
-2-
<PAGE>
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
--------------------
1998 1997
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (2,000) $ 101
Adjustments to reconcile net (loss) income to
net cash provided by operating activities:
Extraordinary item - write-off of finance charges -- 173
Depreciation and amortization 3,087 2,928
Gain on sale of property, plant and equipment (53) --
Changes in operating assets and liabilities:
Accounts receivable - net 1,449 (433)
Inventories (1,276) (421)
Income Taxes (1,958) 236
Prepaid expenses and other assets (246) 9
Accounts payable 1,816 45
Accrued expenses and other liabilities 364 (119)
-------- --------
Net Cash Provided by Operating Activities 1,183 2,519
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property, plant and equipment 96 --
Purchases of property, plant and equipment (1,761) (1,802)
-------- --------
Net Cash Used in Investing Activities (1,665) (1,802)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving credit facility 1,705 1,756
Net principal repayments of long-term debt (2,224) (30,545)
Proceeds from refinancing -- 31,050
Refinancing costs -- (1,173)
Net repayment under capital leases (106) (100)
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Net Cash (Used in) Provided by Financing Activities (625) 988
-------- --------
NET (DECREASE) INCREASE IN CASH (1,107) 1,705
CASH (CHECKS NOT YET PRESENTED)
AT BEGINNING OF PERIOD 110 (1,042)
-------- --------
(CHECKS NOT YET PRESENTED) CASH
AT END OF PERIOD $ (997) $ 663
========= ========
</TABLE>
See notes to unaudited consolidated financial statements.
-3-
<PAGE>
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
A. GENERAL
The consolidated balance sheet of Gibraltar Packaging Group, Inc. (the
"Company") and Subsidiaries (collectively, "Gibraltar") at June 28,
1997 has been derived from Gibraltar's Annual Report on Form 10-K for
the year then ended. 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 June 28, 1997 and the notes thereto
contained in Gibraltar's Annual Report on Form 10-K for the year then
ended.
The accompanying unaudited 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 unaudited 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,
1998, and the results of their operations and their cash flows for the
periods presented herein. Results for the nine months ended March 31,
1998 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, June 28,
1998 1997
(Unaudited)
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<S> <C> <C>
Finished goods $ 6,215 $ 5,262
Work in process 1,591 1,160
Raw materials 2,096 2,160
Manufacturing supplies 380 424
--------------- --------------
$ 10,282 $ 9,006
=============== ==============
</TABLE>
-4-
<PAGE>
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
C. NET INCOME (LOSS) PER SHARE
Net income (loss) per common share is based on the weighted average
number of shares of common stock and common stock equivalents
outstanding during the period as calculated under the treasury stock
method. Common stock equivalents, which have an antidilutive effect on
the computation for any period, are not included as outstanding for
the period.
-5-
<PAGE>
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF INTERIM
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
Three Months Ended March 31, 1998 Compared to
Three Months Ended March 31, 1997
---------------------------------
Net sales for the third quarter of fiscal 1998 were $19.0 million compared with
$18.8 million for the third quarter of fiscal 1997, an increase of $0.2 million
or 0.7%. Sales of spiral-wound paper packaging and pressure sensitive labels
decreased compared with prior year levels, while volume increases attributable
to sales of folding cartons continued to remain strong as sales to major
customers in the third quarter increased $0.9 million over the corresponding
fiscal 1997 period.
Cost of goods sold increased $1.1 million, or 7.2% compared with the third
quarter of fiscal 1997. Cost of goods sold expressed as a percentage of net
sales increased in the third quarter of fiscal 1998 to 83.3% compared to 78.3%
in the corresponding period of fiscal 1997. The increase in the cost of products
sold over the comparable period in fiscal 1997 is primarily attributable to the
following events. Flashfold incurred unusually high costs related to
preventative maintenance and modifications made to its presses, in order to add
capacity. Standard Packaging had higher labor costs associated with gearing up
for new business both realized and anticipated in the second half of fiscal
1998, and both Standard Packaging and Niemand Industries suffered some adverse
mix changes as sales of its higher margin products declined.
Selling, general and administrative expenses expressed as a percentage of net
sales decreased to 12.8% in the third quarter of fiscal 1998 compared to 14.7%
in the corresponding period in fiscal 1997. Expressed in total dollars selling,
general and administrative expenses decreased $0.4 million, or 12.6%. The
Company began to realize the major cost saving benefits from a series of
organizational and facility consolidations program in the form of reduced
selling, general and administrative expenses in the third quarter of fiscal
1998. The Company continues its commitment to evaluate and implement, as
necessary, cost saving opportunities.
Interest expense for the third quarter of fiscal 1998 increased slightly to
$0.73 million from $0.7 million in the third quarter of fiscal 1997, an increase
of $0.03 million, or 4.9%. This increase is primarily attributed to higher
interest rates incurred in the third quarter of fiscal 1998 in accordance with
the amendment of the Company's revolving credit facility as of December 31,
1997.
The provision for income taxes as a percentage of pre-tax income for the three
months ended March 31, 1998 is 40%, which differs from the statutory rate
primarily as a result of non-deductible amortization in excess of purchase price
over net assets acquired. This compares with an effective rate of 37.8% in the
prior year.
Nine Months Ended March 31, 1998 Compared to
Nine Months Ended March 31, 1997
- --------------------------------
Net sales increased $1.8 million, or 3.2%, to $56.9 million during the first
nine months of fiscal 1998, from $55.1 million during the first nine months of
fiscal 1997. Sales of spiral-wound paper packaging and pressure sensitive
-6-
<PAGE>
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF INTERIM
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
labels decreased compared with prior year levels while sales of folding cartons
in the first nine months of fiscal 1998 increased $3.3 million over the
corresponding fiscal 1997 period.
Cost of goods sold increased $4.1 million, or 9.4% for the nine months ended
March 31, 1998 compared with the corresponding period in fiscal 1997. Cost of
goods sold expressed as a percentage of net sales increased in the first nine
months of fiscal 1998 to 84.3% compared to 79.6% in the corresponding period in
fiscal 1997. The increase in the cost of products sold over the comparable
period in fiscal 1997 is primarily attributable to the following events.
Standard Packaging had higher manufacturing costs associated with gearing up for
a substantial amount of new business in the second half of fiscal 1998, and both
Standard Packaging and Niemand Industries suffered some adverse mix changes as
sales of its higher margin products declined. In addition, during the second
quarter of fiscal 1998, the Company changed from a self-insured medical plan to
a new fully insured plan, and experienced a number of large claims under the old
plan, which significantly increased medical costs for the period.
Selling expenses expressed as a percentage of net sales increased to 5.6% in the
first nine months of fiscal 1998, compared with 5.5% in the first nine months of
fiscal 1997, primarily as a result of an increase in sales and marketing efforts
during the first half of fiscal 1998.
General and administrative expenses increased $1.1 million, or 23.2%. Included
in the second quarter of fiscal 1998 is an increase in receivable, inventory and
other reserves of $0.6 million and a charge for severance and relocation costs
of approximately $0.5 million.
Included in the second quarter of fiscal 1998 is a restructuring charge of $0.2
million consisting of severance costs for divisional personnel. Other costs
relating to the reorganization are included in general and administrative
expenses and consist of severance and relocation costs.
Interest expense for the first nine months of fiscal 1998 decreased $0.1
million, or 1.3% to $2.2 million compared to $2.3 million in the first nine
months of fiscal 1997. The decrease is primarily a result of overall lower net
borrowings as well as lower interest rates in fiscal 1998 as compared to the
first three months of fiscal 1997 offset by the fees incurred in amending the
Company's revolving credit facility in fiscal 1998.
The provision for income taxes as a percentage of pre-tax income for the nine
months ended March 31, 1998 is 40%, which differs from the statutory rate
primarily as a result of non-deductible amortization in excess of purchase price
over net assets acquired. This compares with an effective rate of 37.8% in the
prior year.
During the first quarter of fiscal 1997, the Company recorded an extraordinary
after-tax loss of $0.1 million or $0.02 per common share reflecting the
write-off of unamortized finance costs of a previous refinancing.
LIQUIDITY AND CAPITAL RESOURCES:
Historically, the Company's liquidity requirements have been met by a
combination of funds provided by
-7-
<PAGE>
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF INTERIM
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
operations and its revolving credit agreements. Outstanding bank borrowings net
of existing cash balances increased $0.5 million since June 28, 1997, to $31.1
million at March 31, 1998. The increase in net borrowings is primarily
attributable to the repayment of long term obligations and the acquisition of
certain capital assets as discussed below in the additions in capital
expenditures.
The Company's existing borrowing capacity consists of a $25 million term loan
and a $10 million revolving credit facility. The amount available under the
revolving credit facility is reduced by the amount of outstanding standby
letters of credit, which was $422,000 as of March 31, 1998. The Company had
available to it unused borrowing capacity of $1.9 million as of March 31, 1998.
As of December 31, 1997, the Company's credit agreement was amended. Under the
terms of the amended agreement, covenants related to minimum interest coverage,
the debt ratio and fixed charge coverage were relaxed, the maturity of the
Company's credit agreement was accelerated from September 25, 2001 to July 1,
1999, and capital expenditures were limited to $2,000,000 per fiscal year.
Effective February 16, 1998, the interest rates increased by a weighted average
of 1.3% per annum. Additionally, upon maturity at March 31, 1998 all borrowings
previously bearing interest based on the London Interbank Offered Rate (LIBOR)
were converted to prime plus 1.0% per annum, with further increases of 0.5% per
annum on August 1, 1998 and on January 2, 1999. The credit facility also
provides for certain restrictions including sales of assets, payment of
dividends and incurrence of subsidiary debt.
The Company was in compliance with all loan covenants at March 31, 1998.
During the nine months ended March 31, 1998, capital expenditures totaled $1.8
million, a rate constant with the corresponding period in fiscal 1997, and
consisted primarily of additions to machinery and equipment and building
improvements. Gibraltar makes capital improvements to improve efficiency and
product quality and upgrades its equipment by purchasing or leasing new or
previously used equipment.
Management believes that funds generated by operations, and borrowings available
under its current credit facility will be sufficient to meet working capital,
and capital expenditure requirements in fiscal 1998. Thereafter management
believes Gibraltar may require additional capital, which it may seek to obtain
through public or private debt or equity offerings, or additional bank
borrowings to fund future developments. There is no assurance Gibraltar will be
able to obtain such capital on terms that are acceptable to Gibraltar.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
-8-
<PAGE>
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
The Company has reduced operating costs through a series of
organizational and facility consolidations. Effective January
1998, the Company's Flashfold Carton operation was consolidated
under the direction of the Great Plains' Packaging management
team. Dick Hinrichs, President of the Great Plains Packaging
Division, will be responsible for both operations. Concurrently,
Jim Stajkowski, formerly President of the Flashfold Carton
division, was appointed President of the Standard Packaging
division. Mr. Stajkowski replaced Jon Crane, the former President
of Standard Packaging, who retired at the end of January.
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, 1998.
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, 1998 By: /s/ John W. Lloyd
--------------- ---------------------
John W. Lloyd, Chief Financial Officer
Signing on behalf of the registrant and
as principal financial officer
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-27-1998
<PERIOD-START> JUN-29-1997
<PERIOD-END> MAR-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 7,679
<ALLOWANCES> 288
<INVENTORY> 10,282
<CURRENT-ASSETS> 19,895
<PP&E> 50,891
<DEPRECIATION> 17,131
<TOTAL-ASSETS> 74,854
<CURRENT-LIABILITIES> 15,558
<BONDS> 0
0
0
<COMMON> 50
<OTHER-SE> 29,181
<TOTAL-LIABILITY-AND-EQUITY> 74,854
<SALES> 56,901
<TOTAL-REVENUES> 56,901
<CGS> 47,966
<TOTAL-COSTS> 47,966
<OTHER-EXPENSES> 9,731
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,246
<INCOME-PRETAX> (3,042)
<INCOME-TAX> (1,042)
<INCOME-CONTINUING> (2,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,000)
<EPS-PRIMARY> (0.40)
<EPS-DILUTED> (0.40)
</TABLE>
