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, 1999
Commission File Number: 00-19800
GIBRALTAR PACKAGING GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 47-0496290
(State of incorporation) (I.R.S. Employer
Identification Number)
2000 SUMMIT AVENUE
HASTINGS, NEBRASKA 68901-2148
(Address of principal executive offices) (Zip Code)
(402) 463-1366
(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, 1999, 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
Page Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
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Consolidated Balance Sheets 1
As of March 31, 1999 and June 27, 1998
Consolidated Statements of Operations for the 2
Three Months Ended March 31, 1999 and 1998 and
Nine Months Ended March 31, 1999 and 1998
Consolidated Statements of Cash Flows for the 3
Nine Months Ended March 31, 1999 and 1998
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial 6
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 14
Signature 14
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GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands except share and per share data)
March 31, June 27,
1999 1998
--------- --------
ASSETS
CURRENT ASSETS:
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Cash $ 82 $ 114
Accounts receivable (Net of allowance for
doubtful accounts of $208 and $162, respectively) 6,668 7,820
Inventories 9,816 10,667
Deferred income taxes 1,513 892
Prepaid and other current assets 611 483
------ ------
Total current assets 18,690 19,976
PROPERTY, PLANT AND EQUIPMENT - Net 21,492 25,362
EXCESS OF PURCHASE PRICE OVER NET
ASSETS ACQUIRED (Net of accumulated
amortization of $1,763 and $3,368, respectively) 4,577 13,775
OTHER ASSETS (Net of accumulated amortization
of $129 and $1,199, respectively) 910 258
------ ------
TOTAL $45,669 $59,371
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Checks not yet presented $ 498 $ 1,119
Current portion of long-term debt 2,415 2,034
Accounts payable 7,729 9,310
Accrued expenses 2,535 2,344
Income taxes payable - 200
------ ------
Total current liabilities 13,177 15,007
LONG-TERM DEBT - Net of current portion 29,176 27,872
DEFERRED INCOME TAXES 1,659 1,659
OTHER LONG-TERM LIABILITIES 687 815
------ ------
Total liabilities 44,699 45,353
------ ------
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
Accumulated deficit (27,242) (14,194)
------ ------
Total stockholders' equity 970 14,018
------ ------
TOTAL $45,669 $59,371
======= =======
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See notes to unaudited consolidated financial statements.
1
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GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands except share and per share data)
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Three Months Ended Nine Months Ended
March 31, March 31,
---------------------------- ----------------------------
1999 1998 1999 1998
---- ---- ---- ----
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NET SALES $ 19,015 $ 18,954 $ 58,180 $ 56,901
COST OF GOODS SOLD 17,098 15,790 50,084 47,966
--------- --------- --------- ---------
GROSS PROFIT 1,917 3,164 8,096 8,935
--------- --------- --------- ---------
OPERATING EXPENSES:
Selling 851 938 2,594 3,169
General and administrative 1,344 1,484 4,177 6,007
Amortization of excess of purchase price
over net assets acquired 103 145 309 438
Restructuring charges - - 235 170
Impairment of long-lived assets 11,861 - 11,861 -
--------- --------- --------- ---------
Total operating expenses 14,159 2,567 19,176 9,784
--------- --------- --------- ---------
INCOME (LOSS) FROM OPERATIONS (12,242) 597 (11,080) (849)
OTHER EXPENSE (INCOME):
Interest expense 790 733 2,495 2,246
Other income (4) (4) (11) (53)
--------- --------- --------- ---------
Other expense - net 786 729 2,484 2,193
--------- --------- --------- ---------
LOSS BEFORE INCOME TAXES (13,028) (132) (13,564) (3,042)
INCOME TAX (BENEFIT) PROVISION (394) 5 (516) (1,042)
--------- --------- --------- ---------
NET LOSS $(12,634) $(137) $(13,048) $(2,000)
========= ========= ========= =========
BASIC AND DILUTED PER COMMON SHARE AMOUNTS:
Net Loss $(2.51) $(0.03) $(2.59) $(0.40)
========= ========= ========= =========
WEIGHTED AVERAGE SHARES OUTSTANDING:
(basic and diluted) 5,041,544 5,041,544 5,041,544 5,041,544
========= ========= ========= =========
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See notes to unaudited consolidated financial statements.
2
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GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Nine Months Ended
March 31,
-----------------------------
1999 1998
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
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Net loss $(13,048) $(2,000)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Impairment write-down of long-lived assets 11,861 -
Depreciation and amortization 2,248 3,087
Gain on sale of property, plant and equipment (1) (53)
Write-off of long-lived assets 61 -
Changes in operating assets and liabilities:
Accounts receivable - net 1,152 1,449
Inventories 851 (1,276)
Income taxes (821) (1,958)
Prepaid expenses and other assets (76) (246)
Accounts payable (2,202) 3,016
Accrued expenses and other liabilities 63 364
-------- -------
Net Cash Provided by Operating Activities 88 2,383
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property, plant and equipment 5 96
Purchases of property, plant and equipment (987) (1,761)
-------- -------
Net Cash Used in Investing Activities (982) (1,665)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving credit facility 2,448 1,705
Net principal repayments of long-term debt (31,648) (2,224)
Proceeds from refinancing 30,830 -
Refinancing costs (823) -
Net activity under capital leases 55 (106)
-------- -------
Net Cash Provided by (Used In) Financing Activities 862 (625)
-------- -------
NET INCREASE (DECREASE) IN CASH (32) 93
CASH AT BEGINNING OF PERIOD 114 115
-------- -------
CASH AT END OF PERIOD $ 82 $ 208
======== =======
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See notes to unaudited consolidated financial statements.
3
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GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
A. GENERAL
The accompanying unaudited consolidated financial statements of
Gibraltar Packaging Group, Inc. ("Gibraltar" or the "Company") 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 the Company as of
March 31, 1999, and the results of its operations and cash flows for
the periods presented herein. Results for the nine months ended March
31, 1999 are not necessarily indicative of the results to be expected
for the full fiscal year. The financial statements should be read in
conjunction with the audited financial statements for the year ended
June 27, 1998 and the notes thereto contained in the Company's Annual
Report on Form 10-K.
B. INVENTORIES
Inventories consisted of the following (IN THOUSANDS):
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March 31, June 27,
1999 1998
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Finished goods $ 5,902 $ 6,506
Work in process 1,203 1,396
Raw materials 2,264 2,319
Manufacturing supplies 447 446
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$ 9,816 $ 10,667
============= ==============
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C. NET INCOME (LOSS) PER COMMON SHARE
Basic income per common share is based on the weighted average
outstanding common shares during the respective period. Diluted income
per share is based on the weighted average outstanding common shares
and the effect of all dilutive potential common shares, such as stock
options. Presently, there is no difference for the Company between
basic and diluted income per share.
D. ADOPTION OF SFAS 130
During the first quarter of fiscal 1999, the Company adopted SFAS No.
130, "Reporting Comprehensive Income," which requires disclosure of
comprehensive income to be included in the financial statements for
fiscal years beginning after December 15, 1997. Comprehensive income is
defined as the change in equity of a business enterprise during a
period from transactions and other events and circumstances from
non-owner sources. Presently, there are no components of comprehensive
income for the Company.
4
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GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
E. RESTRUCTURING CHARGES
In the second quarter of fiscal 1999, the Company recorded a
restructuring charge of $0.2 million consisting of severance costs for
corporate personnel, the write-off of leasehold improvements and moving
costs associated with relocating the corporate functions to its
Hastings, Nebraska facility.
F. STOCK APPRECIATION RIGHTS
On November 30, 1998, the Company established the 1998 Stock
Appreciation Rights Plan (the "Plan") to be administered by the
Compensation Committee of the Company's Board of Directors. The Plan
provides for the discretionary granting of Stock Appreciation Rights
("SAR") to key employees of the Company. SARs held by grantees under
the Plan entitle the holder to cash payments only.
Effective January 15, 1999, 150,000 SARs valued at $2.25 each and
150,000 SARs valued at $3.00 each were granted to officers of the
Company. The SARs vest at 20% per year through the maturity date of
June 30, 2003.
G. IMPAIRMENT OF LONG-LIVED ASSETS
Recoverability of long-lived assets not held for sale are evaluated by
measuring the carrying amount of the assets against the estimated
undiscounted future cash flows associated with them. On March 31, 1999,
the Company recorded a pre-tax non-cash charge of $11.9 million to
write-down the carrying amount of goodwill and fixed assets of its
subsidiary RidgePak Corporation dba ("Flashfold Carton") to estimated
fair value. Estimated fair value was determined by discounting future
cash flows.
The Flashfold Carton facility has been experiencing declining sales and
profitability for the past three years. In the first quarter of fiscal
1999, the facility was put under the operating control of the Gibraltar
Packaging Group, Inc. dba ("Great Plains") management team in an
attempt to improve operating results. Management's projections of
future operating cash flows during the first two quarters of fiscal
1999 continued to reflect planned operating improvements. During the
third quarter of fiscal 1999, it was determined that the planned
operating improvements could not be realized in the time period or to
the degree estimated. The impairment loss resulted in a complete
write-off of goodwill and reducing the carrying value of fixed assets
at Flashfold Carton.
H. RECLASSIFICATION
Certain amounts in the fiscal 1998 financial statements have been
reclassified to conform with the fiscal 1999 presentation.
5
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GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RECENT EVENTS:
On February 25, 1999, the Company announced that its common stock, par
value $0.01 per share ("Common Stock"), was de-listed from the Nasdaq
National Market ("National Market"). Nasdaq took this action because
the Company did not meet Nasdaq's National Market requirement that
listed companies maintain net tangible assets of at least $4.0 million.
In addition, the Company was not in compliance with the National
Market's requirement that the market value of the public float, which
excludes shares held by affiliates of the Company, be at least $5.0
million. The Common Stock of the Company is currently trading on the
OTC Bulletin Board.
On March 1, 1999, the Company announced a definitive agreement to sell
the machinery, equipment and inventory of the container business of its
Niemand Industries, Inc. ("Niemand") subsidiary based in Marion,
Alabama, to Robinson JDM Ltd. of Toronto, Canada. Niemand's container
business accounts for approximately half of Niemand's sales. There will
be no gain or loss recorded on the sale, which is expected to be
completed in the fourth quarter of fiscal 1999. The Company is in
discussion with other parties, including Niemand management, for the
sale of the remaining assets of Niemand. The Company anticipates that
the sale of all or part of the remaining assets of Niemand will be
completed by the end of the fiscal year.
RESULTS OF OPERATIONS:
Three Months Ended March 31, 1999 Compared to
Three Months Ended March 31, 1998
Net sales remained level at $19.0 million for both third quarters of
fiscal 1999 and 1998. Sales of folding cartons increased slightly, as
sales to major customers and new business in the third quarter of
fiscal 1999 increased over the corresponding period in the previous
year. Sales of tubular, spiral-wound paper packaging products and
pressure-sensitive labels decreased slightly compared with prior year
levels.
Cost of goods sold increased $1.3 million or 8.3% to $17.1 million in
the third quarter of fiscal 1999 compared to $15.8 million in the third
quarter of fiscal 1998. Expressed as a percentage of net sales, cost of
goods sold increased in the third quarter of fiscal 1999 to 89.9%
compared to 83.3% in the corresponding period of fiscal 1998. Raw
material costs continued to decline at the Standard Packaging &
Printing Corp. ("Standard Packaging") subsidiary as a result of
renegotiated prices with suppliers and the internalization of the die
making and ink mixing processes. As a result of writing down the
carrying amount of goodwill and fixed assets for Niemand to estimated
fair market value less cost to sell at the end of fiscal 1998,
depreciation expense has also been significantly reduced in fiscal
1999. Margins at Flashfold Carton were below plan and compared to the
prior year as a result of special inventory valuation adjustments.
Niemand suffered adverse product mix changes as sales of their higher
margin products declined. Repair and maintenance costs increased as a
result of the overall timing of specific repairs on equipment.
6
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GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
Selling expenses expressed as a percentage of net sales decreased to
4.5% in the third quarter of fiscal 1999, compared with 4.9% in the
corresponding fiscal 1998 period, primarily as a result of an overall
decrease in the size of the Company's sales force and its marketing
programs. These reductions are a direct result of cost savings
following the Company's organizational and facility consolidations
implemented in the second quarter of fiscal 1998.
General and administrative expenses expressed as a percentage of net
sales decreased to 7.1% in the third quarter of fiscal 1999, compared
with 7.8% in the corresponding fiscal 1998 period. The Company
continues to realize the cost savings benefits of the relocation of the
Company's corporate functions from Westport, Connecticut to its
Hastings, Nebraska facility in the second quarter of fiscal 1999.
On March 31, 1999, as a result of the Company's evaluation of the
recoverability of long-lived assets not held for sale, the Company
recorded a pre-tax non-cash charge of $11.9 million to write-down the
carrying amount of goodwill and fixed assets of Flashfold Carton to
estimated fair value. Estimated fair value was determined based on
discounting estimated future cash flows associated with Flashfold
Carton.
The Flashfold Carton facility has been experiencing declining sales and
profitability for the past three years. In the first quarter of fiscal
1999, the facility was put under the operating control of the Company's
Great Plains management team in an attempt to improve operating
results. Management's projections of future operating cash flows during
the first two quarters of fiscal 1999 continued to reflect planned
operating improvements. During the third quarter of fiscal 1999, it was
determined that the planned operating improvements could not be
realized in the time period or to the degree estimated. The impairment
loss resulted in a complete write-off of goodwill and reducing the
carrying value of fixed assets at Flashfold Carton.
Total interest expense for the third quarter of fiscal 1999 increased
to $0.8 million from $0.7 million in the third quarter of fiscal 1998,
an increase of 7.8%. This is a result of higher average borrowings of
approximately $2.6 million.
The income tax benefit as a percentage of pre-tax loss for the three
months ended March 31, 1999 was 3.6%, which differs from the statutory
rate primarily as a result of non-deductible amortization of the excess
of purchase price over net assets acquired and because a significant
portion of the impairment charge will provide no current or future tax
benefit. The equivalent tax rate was 3.8% for the corresponding period
in the prior year.
7
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GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
Nine Months Ended March 31, 1999 Compared to
Nine Months Ended March 31, 1998
------------------------------------------------------
Net sales increased $1.3 million, or 2.2%, to $58.2 million during the
first nine months of fiscal 1999 from $56.9 million during the first
nine months of fiscal 1998. Sales of folding cartons in the first nine
months of fiscal 1999 increased over the corresponding period in fiscal
1998, most notably at Great Plains and Standard Packaging. Sales of
pressure-sensitive labels decreased compared with prior year levels.
Cost of goods sold increased $2.1 million, or 4.4% for the nine months
ended March 31, 1999, compared with the corresponding period in fiscal
1998. Expressed as a percentage of net sales, cost of goods sold
increased in the first nine months of fiscal 1999 to 86.1% compared to
84.3% in the corresponding period of fiscal 1998. Raw material costs
continued to decline at Standard Packaging as a result of renegotiated
prices with suppliers and the internalization of the die making and ink
mixing processes. Product mix for Great Plains improved, allowing it to
schedule and run jobs more efficiently and cost effectively. Labor
costs at Flashfold Carton also decreased due to less overtime and more
emphasis placed on reducing labor costs. As a result of writing down
the carrying amount of goodwill and fixed assets for Niemand to
estimated fair market value less cost to sell at the end of fiscal
1998, depreciation expense has also been significantly reduced in
fiscal 1999. Margins at Flashfold Carton were below plan and compared
to the prior year as a result of special inventory valuation
adjustments. Niemand suffered adverse product mix changes as sales of
their higher margin products declined. Standard Packaging experienced
increased manufacturing costs primarily attributable to higher labor
costs associated with servicing customer demands and higher repair and
maintenance costs.
Selling expenses expressed as a percentage of net sales decreased to
4.5% in the first nine months of fiscal 1999, compared with 5.6% in the
first nine months of fiscal 1998, primarily as a result of an overall
decrease in the size of the Company's sales force and its marketing
programs. These reductions are a direct result of cost savings
following the Company's organizational and facility consolidations
implemented in the second quarter of fiscal 1998.
General and administrative expenses decreased $1.8 million, or 30.5%.
The Company continues to realize the cost savings benefits of the
second quarter fiscal 1998 restructuring program. In addition, general
and administrative expenses were lower as a result of the relocation of
the Company's corporate functions from Westport, Connecticut to its
Hastings, Nebraska facility in the second quarter of fiscal 1999.
Included in general and administrative expenses in the second quarter
of fiscal 1998 is an increase in receivable and other reserves of $0.6
million and a charge for severance and relocation costs of
approximately $0.5 million.
In the second quarter of fiscal 1999, the Company recorded a
restructuring charge of $0.2 million consisting of severance costs for
corporate personnel, the write-off of leasehold improvements and moving
costs associated with relocating the corporate functions to its
Hastings, Nebraska facility.
8
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GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
On March 31, 1999, as discussed in the three month analysis, the
Company recorded a pre-tax non-cash charge of $11.9 million to
write-down the carrying amount of goodwill and fixed assets of
Flashfold Carton to estimated fair value.
Total interest expense for the first nine months of fiscal 1999
increased $0.3 million, or 11.1%, to $2.5 million from $2.2 million in
the first nine months of fiscal 1998. In the second quarter of fiscal
1998, the Company incurred fees in amending the Company's revolving
credit facility. The lower amendment fees in the first nine months of
fiscal 1999 were offset by increased interest expense as a result of
higher average borrowings of approximately $2.5 million, coupled with
higher interest rates.
The income tax benefit as a percentage of pre-tax loss for the nine
months ended March 31, 1999 was 4.4%, which differs from the statutory
rate primarily as a result of non-deductible amortization of excess of
purchase price over net assets acquired and because a significant
portion of the impairment charge will provide no current or future tax
benefit. The equivalent tax rate was 34.3% for the corresponding period
in the prior year.
FINANCIAL CONDITION:
The Company's credit facility with First Source Financial LLP (First
Source) provides for a five year $25 million term loan and a five year
$15 million working capital revolving line of credit (Revolver). The
term loan requires quarterly principal payments of $562,500 in the
first year of the loan, beginning October 15, 1998. The balance of the
term loan is due in quarterly installments of $625,000 in fiscal year
2000, $687,500 per quarter through April 2003 and the balance of
$12,687,500 is due on July 31, 2003.
The proceeds from the credit facility were used to refinance the Harris
Bank credit facility, to repay the note payable related to the Alabama
facility, to pay the related transactions costs, and to fund the
working capital and capital expenditure needs of the Company. The
credit facility is secured by a first priority perfected security
interest in and lien on all assets (real and personal, tangible and
intangible) of the Company excluding the Burlington, North Carolina
property.
The Revolver provides for a revolving line of credit under a borrowing
base commitment subject to certain loan availability requirements. Loan
availability under the Revolver may not exceed the lesser of (1) the
Revolver Commitment or (2) the sum of (a) up to 85% of the Company's
eligible accounts receivable plus (b) up to 60% of the Company's
eligible inventory. At no time may the sum of aggregated loan advances
outstanding under the Revolver plus the aggregated amount of Letter of
Credit guarantees then extended exceed loan availability.
As of March 31, 1999, all outstanding Letters of Credit are guaranteed
by First Source. The Company pays a Letter of Credit fee of 2.75% to
guarantee availability under the Revolver. Outstanding Letters of
Credit at March 31, 1999 amounted to $222,000 and relate to workman's
compensation insurance policies.
9
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GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
The First Source credit facility contains certain restrictive covenants
including financial covenants related to Net Worth, Minimum Interest
Coverage Ratio, Capital Expenditures, Debt Ratio and Fixed Charge
Coverage. As of March 31, 1999, the Company was not in compliance with
certain financial covenants. First Source has amended the credit
agreement with the Company to waive covenants relating to Net Worth,
Minimum Interest Coverage Ratio, Debt Ratio and Fixed Charge Coverage
as of March 31, 1999.
The Revolver bears interest at First Source's prime rate plus 0.75% or
the London Interbank Offered Rate (LIBOR) plus 2.75%. The term loan
bears interest at First Source's prime rate plus 1.25% or LIBOR plus
3.25%. The Company also pays a commitment fee of 0.5% on the difference
between the average daily loan balance and the amount of the Revolver.
The interest rates at March 31, 1999 were at prime. First Source's
prime rate was 7.75% at March 31, 1999. Under the terms of the amended
credit agreement, the LIBOR option was suspended, effective January 25,
1999, until the Company achieves the covenant levels required by the
amended credit agreement. Additionally, the amendment increased
interest rates to First Source's prime rate plus 1.25% for the Revolver
and First Source's prime rate plus 1.75% for the term loan, effective
May 14, 1999.
At March 31, 1999, the Company had working capital of $5.5 million, as
compared to $5.0 million at June 27,1998. Historically, the Company's
liquidity requirements have been met by a combination of funds provided
by operations and its revolving credit agreements. The increase in
working capital was made possible by increased borrowing capacity as a
result of the debt refinancing described above. The Company had
available to it unused borrowing capacity of $2.8 million as of March
31, 1999.
During the nine months ended March 31, 1999, capital expenditures
totaled $1.0 million compared with $1.8 million in the corresponding
period in fiscal 1998, and consisted primarily of building expansion
and additions to machinery and equipment. The Company makes capital
improvements to improve efficiency and product quality and periodically
upgrades its equipment by purchasing or leasing new or previously used
equipment.
The Company's current strategy is to leverage the success of the
Company's Great Plains division to improve the performance of the
Company's other folding carton divisions. The Company has identified
opportunities for profit enhancement at Standard Packaging. After the
write-down at Flashfold Carton, the Company will continue to strive to
identify opportunities for profit enhancement at that facility.
Additionally, in the second quarter of fiscal 1999, the Company
relocated the corporate office and consolidated the Company's
administrative functions at the Great Plains' operation in Hastings,
Nebraska. As part of the strategy of focusing on folding cartons, the
Company has reached a definitive agreement with Robinson JDM Ltd. of
Toronto, Canada to sell the container portion of Niemand. The Company
is in discussions with other parties for the sale of the remaining
assets of Niemand.
Under the current strategy, management believes that future funds
generated by operations and borrowings available under its credit
facility with First Source will be sufficient to meet working capital
and capital expenditure requirements in the near term.
10
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GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
YEAR 2000 COMPLIANCE
The Year 2000 issue is the result of computer systems that use two
digits rather than four to define the applicable year, which may
prevent such systems from accurately processing dates ending in the
Year 2000 and after. This could result in system failures or in
miscalculations causing disruption of operations, including, but not
limited to, an inability to process transactions, to send and receive
electronic data or to engage in routine business activities and
operations.
The Company has completed its initial assessment of all currently used
computer systems and has developed a plan to correct those areas that
will be affected by the Year 2000 issue. The folding carton divisions
of the Company (Great Plains, Flashfold Carton and Standard Packaging)
have recently installed Amtech's Imaginera software for their
manufacturing and accounting IS systems. These information systems are
certified by the vendor to be Year 2000 Compliant. Niemand has done an
extensive review of all its current computer programs and files and has
completed its evaluation of vendors to upgrade all IS systems for Year
2000 compliance. The budget for these upgrades is $80,000, and Niemand
anticipates completion of these upgrades by June 1999.
In fiscal 1998 the Company began evaluating environmental and
manufacturing equipment, telephones, personal computer hardware and
software outside of the Company's IS systems. The Company's goal is to
complete any upgrade requirements by the end of fiscal 1999, but does
not expect that the cost for subsequent upgrades will be material to
the Company's consolidated financial statements.
In addition to reviewing its internal systems, the Company has sent out
surveys and questionnaires to its significant vendors to initiate
communications concerning Year 2000 compliance. All responses to date
indicate these significant vendors will be Year 2000 compliant prior to
calendar year 2000. There can be no assurance that the systems of other
companies that interact with the Company will be sufficiently Year 2000
compliant so as to avoid an adverse impact on the Company's operations,
financial condition and results of operations.
The Company presently anticipates that it will complete its Year 2000
assessment and remediation by the end of fiscal 1999. However, there
can be no assurance that the Company will be successful in implementing
its Year 2000 remediation plan according to the anticipated schedule.
If the Company does not complete implementation of its remediation plan
prior to January 1, 2000, the Company's operations and financial
condition will be negatively impacted, perhaps significantly, by the
failure of its information and or manufacturing systems. In addition,
the Company may be adversely affected by the inability of other
companies whose systems interact with the Company to become Year 2000
compliant and by potential interruptions of utility, communications or
transportation systems as result of Year 2000 issues.
Although the Company expects its internal systems to be Year 2000
compliant as described above, the Company is preparing a contingency
plan that will specify what it plans to do if it or significant
external companies are not Year 2000 compliant in a timely manner. The
Company expects to complete its contingency plan during calendar year
1999.
11
<PAGE>
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
FORWARD-LOOKING STATEMENTS
Statements that are not historical facts, including statements about
our confidence in the Company's prospects and strategies and our
expectations about the Company's sales expansion, are forward-looking
statements that involve risks and uncertainties. These risks and
uncertainties include, but are not limited to, (1) the Company's
ability to execute its business plan to leverage the success of the
Company's Great Plains division; (2) market acceptance risks, including
whether or not the Company will be able to successfully gain market
share against competitors many of which have greater financial and
other resources than the Company and the increasing trends of customers
to increase their buying power by consolidating the number of vendors
they maintain; (3) manufacturing capacity constraints, including
whether or not as the Company increases its sales it will be able to
successfully integrate its new customers into its existing
manufacturing and distribution system; (4) the Company's ability to
continue to comply with the restrictive covenants in its credit
facility or to obtain waivers if it is not in compliance in the future;
(5) whether the Company will be able to pass on to its customers price
increases for paper and paperboard products in fiscal 1999; (6) whether
the Company will be able to complete the sale of the remaining assets
of Niemand on terms that are satisfactory to the Company; (7) whether
or not management will be successful in sufficiently improving sales
and profitability at Flashfold Carton; (8) continued stability in other
raw material prices, including oil-based resin and plastic film; (9)
the impact of government regulation on the Company's manufacturing,
including whether or not additional capital expenditures will be needed
to comply with applicable environmental laws and regulations as the
Company's production increases; (10) pressure on prices from
competition or purchasers of the Company's products; (11) the
introduction of competing products by other firms, and (12) whether the
Company will be able to successfully complete its Year 2000 remediation
prior to January 1, 2000, and the risk that not all of the Company's
vendors and suppliers will be Year 2000 compliant. Investors and
potential investors are cautioned not to place undue reliance on these
forward-looking statements, which reflect the Company's analysis only
as of the date hereof. The Company undertakes no obligation to publicly
revise these forward-looking statements to reflect events or
circumstances that arise after the date hereof. These risks and others
that are detailed in this Form 10-Q and other documents that the
Company files from time to time with the Securities and Exchange
Commission, including its annual report on Form 10-K and any current
reports on Form 8-K must be considered by any investor or potential
investor in the Company.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary market risk is fluctuation in interest rates. All
of the Company's debt at March 31, 1999 is at variable interest rates,
and the Company has in the past utilized interest rate caps to reduce
the impact of changes in interest rates. A hypothetical 10% change in
interest rates would have had a $0.2 million impact on interest expense
for the nine months ended March 31, 1999.
12
<PAGE>
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, the Company is a party to certain lawsuits and
administrative proceedings that arise in the conduct of its business.
While the outcome of these lawsuits and proceedings cannot be predicted
with certainty, management believes that if adversely determined, the
lawsuits and proceedings, either singularly or in the aggregate, would
not have a material adverse effect on the financial condition, results
of operations or net cash flows of the Company.
In May 1998, two lawsuits, captioned Monroe B. Moorefield et al v.
Bernard H. Oakley, Sr., et al, File Number 98 CVS 990; and Harold L.
Fogleman et al v. Bernard H. Oakley, Sr., et al, File Number 98 CVS
989, were filed in Alamance County, State of North Carolina, alleging
property damage and personal injury arising from the groundwater
contamination at GB Labels, Inc. ("GB Labels"). The Company and GB
Labels, among others, were also named as defendants in the lawsuits.
The plaintiffs are all property owners, or their family members,
residing near the GB Labels facility.
In October 1998 the Fogleman plaintiffs dismissed without prejudice
their personal injury claims against the Company. The Foglemans'
property damage claims remain pending and the Company is pursuing
discovery on these claims. The Company and GB Labels have in their
responses to the complaints denied liability and intend to vigorously
defend themselves. Although at this time, the Company cannot predict
the outcome of this lawsuit, the Company does not believe that this
lawsuit will have a material adverse effect on the business or
financial condition of the Company.
In November 1998 the Moorefield plaintiffs dismissed their entire
complaint against the Company without prejudice. No Moorefield claims
are pending against the Company.
Although as described above, at this time certain claims have been
dismissed, there can be no assurance that the Fogleman and/or
Moorefield plaintiffs will not re-file their claims at a later date.
Effective at the close of business on February 23, 1999 the Company's
Common Stock was de-listed from the National Market. Nasdaq took this
action because the Company did not meet Nasdaq's requirement that
listed companies maintain net tangible assets of at least $4.0 million.
The Company also was not in compliance with the National Market's
requirement that the market value of the public float, which excludes
shares held by affiliates of the Company, be at least $5.0 million. The
Common Stock of the Company is currently being traded on the OTC
Bulletin Board.
.
13
<PAGE>
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
10.41 Fourth Amendment to Secured Credit Agreement, dated May 15,
1999, among Gibraltar Packaging Group, Inc., various financial
institutions and First Source Financial LLP, Individually and
as agent.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K:
The Company filed a Form 8-K on March 5, 1999, referencing its
de-listing from the Nasdaq National Market. The de-listing took
effect at close of business on February 23, 1999.
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 17, 1999 By: /s/ John W. Lloyd
-------------------------- ---------------------------------------
John W. Lloyd, Chief Financial Officer
Signing on behalf of the registrant and
as principal financial officer
14
EXHIBIT 10.41
FOURTH AMENDMENT TO SECURED CREDIT AGREEMENT
This Fourth Amendment to Secured Credit Agreement (this
"AGREEMENT") is dated as of May 14, 1999 by and among Gibraltar Packaging Group,
Inc., a Delaware corporation (the "BORROWER"), the financial institutions
parties to the Credit Agreement (as defined herein) (collectively, the "LENDERS"
and individually, a "LENDER") and First Source Financial LLP, as Agent for the
Lenders (the "AGENT").
RECITALS
WHEREAS, the Borrower, the Agent and the Lenders are parties
to that certain Secured Credit Agreement, dated as of July 31, 1998 (the
"ORIGINAL CREDIT AGREEMENT"), as amended by that certain First Amendment to
Secured Credit Agreement, dated as of September 1, 1998 (the "FIRST AMENDMENT"),
that certain Second Amendment to Secured Credit Agreement, dated as of November
13, 1998 (the "SECOND AMENDMENT") and that certain Third Amendment to Secured
Credit Agreement, dated as of February 12, 1999 (the "THIRD AMENDMENT"; the
Original Credit Agreement, as amended by the First Amendment, the Second
Amendment and the Third Amendment, is collectively referred to herein as the
"SECURED CREDIT AGREEMENT"), among the Borrower, the Agent and the Lenders;
WHEREAS, the Borrower wishes, and the Agent and the Lenders
are willing, to amend certain provisions of the Secured Credit Agreement and to
waive compliance with certain provisions of the Secured Credit Agreement, all on
the terms and conditions set forth in this Agreement.
WHEREAS, First Source Financial LLP and LaSalle Business
Credit, Inc. are the only Lenders which are parties to the Secured Credit
Agreement as of the date hereof; and
NOW, THEREFORE, in consideration of the mutual agreements
contained herein, the parties hereto agree as follows:
AGREEMENT
1. Definitions. Capitalized terms used but not otherwise defined herein
shall have the meanings as set forth in the Secured Credit Agreement.
2. Waiver. The Lenders hereby waive any Unmatured Event of Default or
Event of Default caused by the Borrower's failure to comply with the Net Worth,
Debt to EBITDA Ratio, Interest Coverage Ratio and Fixed Charge Coverage Ratio
covenants set forth in Sections 11.32(a), (b), (c) and (d) of the Secured Credit
Agreement through March 31, 1999; provided, however, that
1
<PAGE>
the Borrower may not incur or continue any LIBOR Rate Loans (or convert any
Prime Rate Loans into LIBOR Rate Loans) from the date hereof until the date on
which the Borrower demonstrates to the Agent and the Lenders, by the delivery of
a Compliance Certificate and the financial statements required under Section
11.1(b), its compliance with the financial covenant set forth in Sections
11.32(d).
3. Amendments to Secured Credit Agreement.
(a) Section 2.12.10 of the Secured Credit Agreement is hereby amended
by deleting it in its entirety and replacing it with the following:
SECTION 2.12.10 CASH COLLATERAL.
(a) DEPOSIT OF CASH COLLATERAL UPON AN EVENT OF
DEFAULT. Upon demand by Agent or the Required Lenders after the
occurrence of any Event of Default, Borrower shall deposit in an
account (the "LETTER OF CREDIT CASH COLLATERAL ACCOUNT") maintained
with FSFP in the name of Agent, for the ratable benefit of Agent and
the Lenders, with respect to each Letter of Credit then outstanding
(other than the RIC Letter of Credit, which does not constitute a
Letter of Credit hereunder), promptly upon such demand, cash or Cash
Equivalents in an amount equal to 110% of the greatest amount for which
such Letter of Credit may be drawn.
(b) TERMS OF LETTER OF CREDIT CASH COLLATERAL
ACCOUNT. Any funds held in the Letter of Credit Cash Collateral Account
shall be promptly applied by Agent to reimburse the Issuing Bank for
drafts drawn from time to time under the Letters of Credit. Such funds,
if any, remaining in the Letter of Credit Cash Collateral Account
following the termination of all Letters of Credit and the payment of
all Reimbursement Obligations in full shall, unless Agent is otherwise
directed by a court of competent jurisdiction, be promptly paid over to
Borrower. Upon the deposit of any amounts in the Letter of Credit Cash
Collateral Account and, in any event, on or before the Revolving Loan
Termination Date, Borrower shall enter into a security agreement in
form and substance satisfactory to Agent, pledging to Agent, for the
benefit of Agent and the Lenders, a security interest in all Cash
Equivalents delivered to Agent pursuant to the terms hereof. If no
Unmatured Event of Default or Event of Default has occurred and is
continuing, the Borrower may direct the investment of funds maintained
in the Letter of Credit Cash Collateral Account in Cash Equivalents.
Upon the occurrence and during the continuance of an Unmatured Event of
Default or Event of Default, Borrower shall have no control over funds
deposited in the Letter of Credit Cash Collateral Account, which funds
shall be invested by Agent from time to time in its discretion in Cash
Equivalents.
(b) Section 2 of the Secured Credit Agreement is hereby amended by
adding the following new Section 2.15 immediately following Section 2.14:
2
<PAGE>
SECTION 2.15 LASALLE LETTER OF CREDIT. Notwithstanding anything to the
contrary contained in this Agreement, Borrower may (a) cause LaSalle National
Bank (the "RIC ISSUING BANK") to issue a letter of credit (the "RIC LETTER OF
CREDIT") for the account of Borrower in the face amount not to exceed $150,000,
to support the obligations of Borrower to Royal Indemnity Company, and (b)
pledge to the RIC Issuing Bank as security for its reimbursement obligations to
the RIC Issuing Bank in respect of the RIC Letter of Credit, cash or Cash
Equivalents (the "RIC CASH COLLATERAL") in an amount not to exceed 100% of the
aggregate undrawn face amount of the outstanding RIC Letter of Credit and all
fees and other amounts due or which may become due with respect thereto. The RIC
Letter of Credit shall not be a Letter of Credit under this Agreement and,
therefore, no LC Guaranty shall be issued in respect thereof. Notwithstanding
anything to the contrary contained in Section 6.2 hereof, Borrower may maintain
a depositary account (the "RIC CASH COLLATERAL ACCOUNT") with the RIC Issuing
Bank; provided, that no funds other than RIC Cash Collateral shall be maintained
in such RIC Cash Collateral Account; provided, further, that (i) Borrower shall
have irrevocably instructed the RIC Issuing Bank, at the request of Agent, to
provide Agent with information concerning the RIC Cash Collateral Account, (ii)
the RIC Issuing Bank shall have acknowledged such instructions in writing for
the benefit of Agent, and (iii) at any time when an Event of Default or
unmatured Event of Default has occurred and is continuing Borrower shall, at
Agent's request, promptly cause the RIC Issuing Bank to provide Agent with daily
reports of the balance in the RIC Cash Collateral Account. Upon the
establishment of the RIC Cash Collateral Account, Borrower shall enter into a
security agreement in form and substance satisfactory to Agent, pledging to
Agent, for the benefit of Agent and the Lenders, a second priority security
interest (subject only to the security interest of the RIC Issuing Bank in the
RIC Cash Collateral) in the RIC Cash Collateral Account and all cash and Cash
Equivalents held therein.
(c) Section 4.1 of the Secured Credit Agreement is hereby amended by
deleting it in its entirety and replacing it with the following:
SECTION 4.1 INTEREST RATES. Subject to Section 4.3, Borrower
hereby promises to pay interest on the outstanding principal amount of each Loan
for the period commencing on the date thereof until such Loan is paid in full,
at a rate per annum determined by reference to the Prime Rate or the LIBOR Rate,
respectively. The applicable basis for determining the rate of interest shall be
selected by Borrower at the time a borrowing is requested pursuant to Section
2.3 or at the time a Notice of LIBOR Activity is given pursuant to Section 4.4,
as the case may be. If on any day any portion of any Loan is outstanding with
respect to which notice has not been given to Agent in accordance with the terms
of this Agreement specifying the basis for determining the rate of interest
thereon, then for that day, such portion of such Loan shall be a Prime Rate Loan
and shall bear interest at a rate determined by reference to the Prime Rate.
Subject to Section 4.3, (i) each Prime
3
<PAGE>
Rate Revolving Loan and LIBOR Rate Revolving Loan shall bear interest at a rate
per annum determined as follows: (a) if it is a Prime Rate Revolving Loan, then
at the sum of the Prime Rate in effect from time to time plus one and
one-quarter of one percent (1.25%); or (b) if it is a LIBOR Rate Revolving Loan,
then at the sum of the LIBOR Rate for the applicable Interest Period plus three
and one-quarter of one percent (3.25%) (the "LIBOR REVOLVING MARGIN"); and (ii)
each Prime Rate Term Loan and LIBOR Rate Term Loan shall bear interest at a rate
per annum determined as follows: (a) if it is a Prime Rate Term Loan, then at
the sum of the Prime Rate in effect from time to time plus one and
three-quarters of one percent (1.75%); or (b) if it is a LIBOR Rate Term Loan,
then at the sum of the LIBOR Rate for the applicable Interest Period plus three
and three-quarters of one percent (3.75%).
(d) Section 10.27 of the Secured Credit Agreement is hereby amended by
deleting it in its entirety and replacing it with the following:
SECTION 10.27 SOLVENCY. Borrower and its Subsidiaries are
Solvent, as determined on a consolidated basis, both before and after giving to
the execution and delivery of this Agreement and any of the other Related
Documents to which Borrower or any Subsidiary is a party and consummation of the
transactions contemplated hereunder or thereunder, including, without
limitation, the Related Transactions.
(e) Section 11 of the Secured Credit Agreement is hereby amended by
inserting the following new Section 11.34 immediately following Section 11.33:
SECTION 11.34 KEY MAN INSURANCE POLICY. On or before July 15,
1999, the Borrower shall deliver to the Agent a duly executed assignment of a
$5,000,000 life insurance policy on Richard Hinrichs in form and substance
satisfactory to the Agent.
4. Representations and Warranties. To induce the Agent and the Lenders
to enter into this Agreement and to make all future Loans under the Secured
Credit Agreement, the Borrower represents and warrants to the Agent and the
Lenders that:
(a) Due Authorization, etc. The execution, delivery and performance by
the Borrower of this Agreement executed as of the date hereof are within its
corporate powers, have been duly authorized by all necessary corporate action
(including without limitation, shareholder approval, if any shall be required),
have received all necessary governmental approval (if any shall be required),
and do not and will not contravene or conflict with any Requirement of Law or
Contractual Obligation binding upon such entity. This Agreement is the legal,
valid, and binding obligation of the Borrower enforceable against the Borrower
in accordance with its respective terms.
(b) Certain Agreements. To the best of the Borrower's knowledge, on the
date hereof all warranties of the Borrower thereto set forth in the Secured
Credit Agreement, as amended hereby,
4
<PAGE>
are true and correct in all material respects, without any waiver or
modification thereof and no default of any party exists under the Secured Credit
Agreement or any Related Document.
(c) Financial Information. All balance sheets, all statement of
operations, of shareholders' equity and of changes in financial position, and
other financial data which have been or shall hereafter be furnished to the
Agent for the purposes of or in connection with this Agreement have been and
will be prepared in accordance with GAAP consistently applied throughout the
periods involved and do and will, present fairly the financial condition of the
entities involved as of the dates thereof and the results of their operations
for the periods covered thereby.
(d) Litigation. No material litigation (including, without limitation,
derivative actions), arbitrations, governmental investigation or proceeding or
inquiry shall, on the date hereof, be pending which was not previously disclosed
in writing to the Agent and no material adverse development shall have occurred
in any litigation (including, without limitation, derivative actions),
arbitration, government investigations, or proceeding or inquiry previously
disclosed to the Agent in writing.
5. Conditions to Effectiveness. This Agreement shall be effective as of
March 31, 1999 upon the satisfaction of the conditions set forth in this Section
5 and delivery of the following documents to the Agent on or prior to the date
hereof (unless another date is specified), in form and substance satisfactory to
the Agent and the Lenders:
(a) Agreement. The Borrower shall have delivered to the Agent executed
originals of this Agreement.
(b) Consents and Acknowledgments. The Borrower shall have obtained all
consents, approvals and acknowledgments which may be required with respect to
the execution, delivery and performance of this Agreement.
(c) No Default. As of the date hereof after giving effect to this
Agreement and the waiver set forth in Section 2 hereof, no Unmatured Event of
Default or Event of Default under any Related Document shall have occurred and
be continuing.
(d) Amendment Fee. The Borrower shall have delivered to the Agent for
the benefit of the Lenders, on or before May 14, 1999, an amendment fee of
$40,000.
6. Affirmation of Guaranties.
Each Guarantor (i) consents to and approves the execution and delivery
of this Agreement by the Borrower, the Agent and the Lenders, (ii) agrees that
this Agreement does not and shall not limit or diminish in any manner its
obligations under its Guaranty or under any of the other Related Documents to
which it is a party, (iii) agrees that this Agreement shall not be construed as
requiring the consent of any Guarantor in any other circumstance, (iv) reaffirms
its obligations under its Guaranty and all of the other Related Documents to
which it is a party, and (v) agrees that its
5
<PAGE>
Guaranty and such other Related Documents remain in full force and effect and
are each hereby ratified and confirmed.
7. Miscellaneous.
(a) Captions. Section captions used in this Agreement are for
convenience only, and shall not affect the construction of this Agreement.
(b) Governing Law. This Agreement shall be a contract made under and
governed by the laws of the State of Illinois, without regard to conflict of
laws principles. Wherever possible each provision of this Agreement shall be
interpreted in such manner to be effective and valid under applicable law, but
if any provision of this Agreement shall be prohibited by or invalid under such
law, such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provisions or the
remaining provision of this Agreement.
(c) Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties on separate counterparts, and each
such counterpart shall be deemed to be an original, but all such counterparts
shall together constitute one and the same Agreement. Delivery of an executed
counterpart of a signature page to this Agreement by telecopy shall be effective
as delivery of a manually executed counterpart of this Agreement.
(d) Successors and Assignees. This Agreement shall be binding upon the
Borrower, the Agent, the Lenders and their respective successors and assignees,
and shall inure to the sole benefit of the Borrower, the Agent, the Lenders and
their successors and assignees.
(e) References. Any reference to the Secured Credit Agreement contained
in any notice, request, certificate, or other document executed concurrently
with or after the execution and delivery of this Agreement shall be deemed to
include this Agreement unless the context shall otherwise require.
(f) Continued Effectiveness. Notwithstanding anything contained herein,
the terms of this Agreement are not intended to and do not serve to effect a
novation as to the Secured Credit Agreement, any Note or any of the Collateral
Documents provided to furnish security therefor. The parties hereto expressly do
not intend to extinguish the Secured Credit Agreement, any Note or the
Collateral Documents. Instead, it is the express intention of the parties hereto
to reaffirm the existence of the indebtedness created under the Secured Credit
Agreement which is evidenced by Notes and secured by the various Collateral
Documents. The Secured Credit Agreement and each of the Related Documents as
amended hereby remain in full force and effect. The execution, delivery and
effectiveness of this Agreement shall not operate as a waiver of any right,
power or remedy of the Lenders or the Agent under the Secured Credit Agreement
or any Related Document to which the Lenders and the Agent are a party nor,
except as set forth in Section 2 hereof, constitute a waiver of any provision in
or Event of Default or Unmatured Event of Default (now or hereafter existing)
under the terms of the Secured Credit Agreement or any Related Document.
6
<PAGE>
(g) Fees and Expenses. In accordance with Section 14.4 of the Secured
Credit Agreement, the Borrower agrees to pay on demand all fees, costs and
expenses incurred by the Agent and the Lenders in connection with the
preparation, execution and delivery of this Agreement.
* * * * *
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
GIBRALTAR PACKAGING GROUP, INC., as
Borrower
By: /s/ John W. Lloyd
Name Printed: John W. Lloyd
Title: Executive VP & CFO
FIRST SOURCE FINANCIAL LLP,
as Agent and a Lender
By: First Source Financial, Inc.
Its: Manager
By: /s/ John Thacker
Name Printed: John Thacker
Title: Senior Vice President
LASALLE BUSINESS CREDIT, INC.,
as a Lender
By: /s/ Ellen Cook
Name Printed: Ellen Cook
Title: Vice President
RIDGEPAK CORPORATION, as a Guarantor
By: /s/ John W. Lloyd
Name Printed: John W. Lloyd
Title: Secretary
S-1
[TO FOURTH AMENDMENT TO SECURED CREDIT AGREEMENT]
<PAGE>
NIEMAND HOLDINGS, INC., as a Guarantor
By: /s/ John W. Lloyd
Name Printed: John W. Lloyd
Title: Secretary
NIEMAND INDUSTRIES, INC., as a Guarantor
By: /s/ John W. Lloyd
Name Printed: John W. Lloyd
Title: Secretary
GB LABELS, INC., as a Guarantor
By: /s/ John W. Lloyd
Name Printed: John W. Lloyd
Title: Secretary
STANDARD PACKAGING AND PRINTING
CORP., as a Guarantor
By: /s/ John W. Lloyd
Name Printed: John W. Lloyd
Title: Secretary
S-2
[TO FOURTH AMENDMENT TO SECURED CREDIT AGREEMENT]
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000882830
<NAME> GIBRALTAR PACKAGING GROUP
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-03-1999
<PERIOD-START> JUN-28-1998
<PERIOD-END> MAR-31-1999
<CASH> 82
<SECURITIES> 0
<RECEIVABLES> 6,876
<ALLOWANCES> 208
<INVENTORY> 9,816
<CURRENT-ASSETS> 18,690
<PP&E> 41,065
<DEPRECIATION> 19,573
<TOTAL-ASSETS> 45,669
<CURRENT-LIABILITIES> 13,177
<BONDS> 0
0
0
<COMMON> 50
<OTHER-SE> 920
<TOTAL-LIABILITY-AND-EQUITY> 45,669
<SALES> 58,180
<TOTAL-REVENUES> 58,180
<CGS> 50,084
<TOTAL-COSTS> 50,084
<OTHER-EXPENSES> 19,165
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,495
<INCOME-PRETAX> (13,564)
<INCOME-TAX> (516)
<INCOME-CONTINUING> (13,048)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,048)
<EPS-PRIMARY> (2.59)
<EPS-DILUTED> (2.59)
</TABLE>
