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: December 31, 1997
-----------------
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 December 31, 1997, 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
<TABLE>
<CAPTION>
Page Number
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PART I. FINANCIAL INFORMATION
Financial Statements
Consolidated Balance Sheets
As of December 31, 1997 (Unaudited) and June 28, 1997 1
Consolidated Statements of Operations (Unaudited) for the
Three Months Ended December 31, 1997 and 1996 and
Six Months Ended December 31, 1997 and 1996 2
Consolidated Statements of Cash Flows (Unaudited) for the 3
Six Months Ended December 31, 1997 and 1996
Notes to Consolidated Financial Statements (Unaudited) 4
Management's Discussion and Analysis of Interim Financial
Condition and Results of Operations 6
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
Signature 10
</TABLE>
<PAGE>
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except per share data)
<TABLE>
<CAPTION>
December 31, June 28,
1997 1997
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ - $ 110
Accounts receivable (Net of allowance for
doubtful accounts of $238 and $127, respectively) 7,712 8,840
Inventories (Note B) 9,314 9,006
Income taxes receivable 492 -
Deferred income taxes 412 412
Prepaid and other current assets 658 437
-------- -------
Total current assets 18,588 18,805
PROPERTY, PLANT AND EQUIPMENT - Net 33,917 34,544
EXCESS OF PURCHASE PRICE OVER NET
ASSETS ACQUIRED (Net of accumulated
amortization of $3,076 and $2,783, respectively) 20,231 20,524
OTHER ASSETS (Net of accumulated amortization
of $228 and $137, respectively) 1,137 1,185
--------- --------
TOTAL $ 73,873 $ 75,058
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Checks not yet presented $ 102 $ -
Current portion of long-term debt 4,200 3,313
Accounts payable 7,713 5,947
Accrued expenses 2,450 2,775
Income taxes payable - 692
---------- --------
Total current liabilities 14,465 12,727
LONG-TERM DEBT - Net of current portion 26,172 27,382
DEFERRED INCOME TAXES 2,964 3,028
OTHER LONG-TERM LIABILITIES 904 821
---------- --------
Total liabilities 44,505 43,958
---------- --------
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 1,156 3,019
Minimum pension liability in excess of unrecognized
prior service costs - (131)
------------- --------------
Total stockholders' equity 29,368 31,100
------------- --------------
TOTAL $ 73,873 $ 75,058
============= ==============
</TABLE>
See notes to unaudited consolidated financial statements.
<PAGE>
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
------------------------------ ---------------------------
1997 1996 1997 1996
------------ ------------- ----------- ----------
<S> <C> <C> <C> <C>
NET SALES $ 18,619 $ 17,829 $ 37,947 $ 36,301
COST OF GOODS SOLD 16,395 14,229 32,176 29,131
----------- ----------- ------------ ----------
GROSS PROFIT 2,224 3,600 5,771 7,170
----------- ----------- ------------ ----------
OPERATING EXPENSES:
Selling 1,154 968 2,231 1,959
General and administrative 2,981 1,651 4,523 3,201
Amortization of excess of purchase price
over net assets acquired 147 147 293 294
Restructuring charges 170 - 170 -
----------- ----------- ------------ ----------
Total operating expenses 4,452 2,766 7,217 5,454
----------- ----------- ------------ ----------
(LOSS) INCOME FROM OPERATIONS (2,228) 834 (1,446) 1,716
OTHER (INCOME) EXPENSE:
Interest expense 806 680 1,513 1,576
Other (income) expense - net (3) 1 (49) 4
----------- ----------- ------------ ----------
Other expense - net 803 681 1,464 1,580
----------- ----------- ------------ ----------
(LOSS) INCOME BEFORE INCOME TAXES (3,031) 153 (2,910) 136
(BENEFIT) PROVISION FOR INCOME TAXES (1,154) 114 (1,047) 163
----------- ----------- ------------ ----------
(LOSS) INCOME BEFORE EXTRAORDINARY ITEM (1,877) 39 (1,863) (27)
EXTRAORDINARY ITEM (net of tax effect of $66)
(Write-off of finance charges as a result of debt repayment) - - - (107)
----------- ----------- ------------ ----------
NET (LOSS) INCOME $ (1,877) $ 39 $ (1,863) $ (134)
=========== =========== ============ ==========
PER COMMON SHARE AMOUNTS:
(Loss) Income Before Extraordinary Item $ (0.37) $ 0.01 $ (0.37) $ (0.01)
=========== =========== ============ ==========
Net (Loss) Income $ (0.37) $ 0.01 $ (0.37) $ (0.03)
=========== =========== ============ ==========
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)
Six Months Ended
December 31,
1997 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ (1,863) $ (134)
Adjustments to reconcile net (loss) to
net cash provided by operating activities:
Extraordinary item - write-off of finance charges - 173
Depreciation and amortization 2,047 1,961
Gain on sale of property, plant and equipment (49) -
Changes in operating assets and liabilities:
Accounts receivable - net 1,128 (591)
Inventories (308) (655)
Income taxes (1,248) 7
Prepaid expenses and other assets (264) 164
Accounts payable 1,766 369
Accrued expenses and other liabilities (111) (13)
-------- ------
Net Cash Provided by Operating Activities 1,098 1,281
-------- ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property, plant and equipment 84 -
Purchases of property, plant and equipment (1,071) (1,296)
-------- ------
Net Cash Used in Investing Activities (987) (1,296)
-------- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving credit facility 1,650 206
Net principal repayments of long-term debt (1,898)(29,280)
Proceeds from refinancing - 31,050
Refinancing costs - (1,121)
Net repayment under capital leases (75) (83)
-------- ------
Net Cash (Used in) Provided by Financing Activities (323) 772
-------- ------
NET (DECREASE) INCREASE IN CASH (212) 757
CASH (CHECKS NOT YET PRESENTED)
AT BEGINNING OF PERIOD 110 (1,042)
-------- ------
CHECKS NOT YET PRESENTED
AT END OF PERIOD $ (102) $ (285)
======== ======
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 December
31, 1997, and the results of their operations and their cash flows for
the periods presented herein. Results for the six months ended December
31, 1997 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:
(In thousands) December 31, June 28,
1997 1997
-------------- --------------
(Unaudited)
Finished goods $ 5,037 $ 5,262
Work in process 1,717 1,160
Raw materials 2,084 2,160
Manufacturing supplies 476 424
--------------- --------------
$ 9,314 $ 9,006
=============== ==============
-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.
D. ADOPTION OF FAS 128
The Company adopted Statement of Financial Accounting Standards No.
128, "Earnings Per Share" (FAS 128) in the second quarter of fiscal
1998, as required. The new standard specifies the computation,
presentation and disclosure requirements for earnings per share.
E. RESTRUCTURING CHARGES
As previously announced, the Company has approved a plan to reduce
costs through a series of organizational and facility consolidations.
Included in the three months ended December 31, 1997 is a
restructuring charge of $0.2 million consisting of severance costs for
divisional personnel. Other costs of approximately $0.5 million
relating to the reorganization are included in general and
administrative expenses and consist of severance and relocation costs.
F. FINANCING AGREEMENTS
As of December 31, 1997, the Company's credit agreement was amended.
Under the terms of the new agreement, covenants relating to minimum
interest coverage, the debt ratio and fixed charge coverage have been
relaxed, the maturity of the Company's credit agreement has been
accelerated from September 25, 2001 to July 1, 1999, and capital
expenditures are limited to $2,000,000 per fiscal year. Effective
February 20, 1998, the interest rates will increase by a weighted
average of 1.3% per annum, with further increases of 0.5% per annum on
August 1, 1998 and on January 2, 1999.
-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 December 31,1997 Compared to
Three Months Ended December 31,1996
Net sales for the second quarter of fiscal 1998 were $18.6 million compared with
$17.8 million for the second quarter of fiscal 1997, an increase of $0.8
million, or 4.4%. Sales of spiral wound 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 second quarter increased $1.5 million over the corresponding
fiscal 1997 period.
Cost of goods sold increased $2.2 million, or 15.2% compared with the second
quarter of fiscal 1997. Cost of goods sold expressed as a percentage of net
sales increased in the second quarter of fiscal 1998 to 88.1% compared to 79.8%
in the corresponding period of fiscal 1997. Cost of goods sold was unusually
high in the second quarter because of a number of events. Great Plains sales
increased 24% from the corresponding quarter of 1997 which required it to
temporarily outsource some of its manufacturing at a much higher cost. Standard
Packaging had higher manufacturing costs associated with gearing up for a
substantial amount of new business which is expected to be shipped in calendar
1998, and Niemand 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 quarter.
Selling expenses increased $0.2 million or 19.2% in the second quarter of fiscal
1998, to $1.2 million from $1.0 million in the second quarter of fiscal 1997,
primarily as a result of an increase in sales and marketing efforts.
General and administrative expenses increased $1.3 million, or 80.6%. 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.
As previously announced, the Company has approved a plan to reduce costs through
a series of organizational and facility consolidations. Included in the three
months ended December 31, 1997 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 second quarter of fiscal 1998 increased $0.1 million to
$0.8 million from $0.7 million in the second quarter of fiscal 1997. This
increase is primarily the result of fees incurred in amending 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 December 31, 1997 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.
-6-
<PAGE>
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF INTERIM
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Six Months Ended December 31,1997 Compared to
Six Months Ended December 31,1996
Net sales increased $1.6 million, or 4.5%, to $37.9 million during the first six
months of fiscal 1998 from $36.3 million during the first six months of fiscal
1997. Sales of flexible packaging and pressure sensitive labels decreased
compared with prior year levels while sales of folding cartons in the first six
months of fiscal 1998 increased over the corresponding fiscal 1997 period.
Cost of goods sold increased $3.0 million, or 10.5% for the six months ended
December 31, 1997 compared with the corresponding period in fiscal 1997. Cost of
goods sold expressed as a percentage of net sales increased in the first six
months of fiscal 1998 to 84.8% compared to 80.3% in the corresponding period of
fiscal 1997. Cost of goods sold was unusually high for the period because of a
number of events. Great Plains sales increased 18.7% from the corresponding
period of 1997 which required it to temporarily outsource some of its
manufacturing at a much higher cost. Standard Packaging had higher manufacturing
costs associated with gearing up for a substantial amount of new business which
is expected to be shipped in calendar 1998, and Niemand 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 5.9% in the
first six months of fiscal 1998, compared with 5.4% in the first six months of
1997, primarily as a result of an increase in sales and marketing efforts.
General and administrative expenses increased $1.3 million, or 41.3%. 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 six months of fiscal 1998 decreased $0.1 million,
or 4.0% to $1.5 million from $1.6 million in the first six months of fiscal
1997. The decrease is a result of overall lower net borrowings as well as lower
interest rates in fiscal 1998 as compared to the first three months of the prior
year offset by the fees incurred in amending the Company's revolving credit
facility in the second quarter of fiscal 1998.
-7-
<PAGE>
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF INTERIM
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
The provision for income taxes as a percentage of pre-tax income for the six
months ended December 31, 1997 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.
Financial Condition:
Historically, the Company's liquidity requirements have been met by a
combination of funds provided by operations and its revolving credit agreements.
Outstanding bank borrowings net of existing cash balances decreased $0.1 million
since June 28, 1997, to $30.5 million at December 31, 1997.
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 $385,000 as of December 31, 1997. The Company had
available to it unused borrowing capacity of $2.0 million as of December 31,
1997.
As of December 31, 1997, the Company's credit agreement was amended. Under the
terms of the new agreement, covenants relating to minimum interest coverage, the
debt ratio and fixed charge coverage have been relaxed, the maturity of the
Company's credit agreement has been accelerated from September 25, 2001 to July
1, 1999, and capital expenditures are limited to $2,000,000 per fiscal year.
Effective February 20, 1998, the interest rates will increase by a weighted
average of 1.3% 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, capital expenditures, payment of
dividends and incurrence of subsidiary debt.
The Company was in compliance with the amended loan covenants at December 31,
1997.
During the first six months ended December 31, 1997, capital expenditures
totaled $1.1 million compared with $1.3 million in 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. 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.
-8-
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
At the Company's Annual Meeting of Stockholder's on November 6,
1997 a total of 4,691,832 shares, or 93.06%, of outstanding
shares were represented and entitled to vote.
(a) The following members were elected to the Board of Directors:
FOR WITHHOLD
David G. Chandler 4,415,422 276,410
Edgar D. Jannotta, Jr. 4,418,122 273,710
John W. Lloyd 4,320,476 371,356
Walter E. Rose 4,424,290 267,542
Robert G. Shaw 4,424,922 266,910
John D. Strautnieks 4,415,922 275,910
(b) The following proposal was approved:
Ratification of Deloitte & Touche LLP as the
independent auditors for the Company for the
1998 fiscal year.
Affirmative Votes: 4,543,741
Negative Votes: 141,977
Abstain: 6,114
Item 5. Other Information.
As previously announced, the Company has retained Bowles
Hollowell Conner & Co., a Charlotte, North Carolina based
investment bank, to work with management to develop other
strategic options to enhance shareholder value, including the
possible sale of the Company.
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 December 31, 1997.
-9-
<PAGE>
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: February 17, 1998 By: /s/ John W. Lloyd
----------------------- ------------------
John W. Lloyd, Chief Financial Officer
Signing on behalf of the registrant and
as principal financial officer
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-27-1998
<PERIOD-START> JUN-29-1997
<PERIOD-END> DEC-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 7,950
<ALLOWANCES> 238
<INVENTORY> 9,314
<CURRENT-ASSETS> 18,588
<PP&E> 50,215
<DEPRECIATION> 16,298
<TOTAL-ASSETS> 73,873
<CURRENT-LIABILITIES> 14,465
<BONDS> 0
0
0
<COMMON> 50
<OTHER-SE> 29,318
<TOTAL-LIABILITY-AND-EQUITY> 73,873
<SALES> 37,947
<TOTAL-REVENUES> 37,947
<CGS> 32,176
<TOTAL-COSTS> 32,176
<OTHER-EXPENSES> 7,168
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,513
<INCOME-PRETAX> (2,910)
<INCOME-TAX> (1,047)
<INCOME-CONTINUING> (1,863)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,863)
<EPS-PRIMARY> (0.37)
<EPS-DILUTED> (0.37)
</TABLE>
