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: September 30, 1999
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Commission File Number: 00-19800
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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 September 30, 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
<TABLE>
<CAPTION>
Page Number
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PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets 1
As of September 30, 1999 and July 3, 1999
Consolidated Statements of Operations for the 2
Three Months Ended September 30, 1999 and 1998
Consolidated Statements of Cash Flows for the 3
Three Months Ended September 30, 1999 and 1998
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial 5
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk 10
PART II. OTHER INFORMATION
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Item 1. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 12
Signature 12
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GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
September 30, July 3,
1999 1999
--------- ---------
ASSETS
CURRENT ASSETS:
Cash $ 144 $ 198
Accounts receivable (Net of allowance for
doubtful accounts of $211 and $194, respectively) 7,204 7,287
Inventories 8,046 8,027
Deferred income taxes 972 972
Prepaid and other current assets 439 350
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Total current assets 16,805 16,834
PROPERTY, PLANT AND EQUIPMENT - NET 20,169 21,182
EXCESS OF PURCHASE PRICE OVER NET
ASSETS ACQUIRED (Net of accumulated
amortization of $1,831 and $1,794, respectively) 4,506 4,543
OTHER ASSETS (Net of accumulated amortization
of $230 and $191, respectively) 794 779
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TOTAL $ 42,274 $ 43,338
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Checks not yet presented $ 610 $ 976
Current portion of long-term debt 2,995 2,891
Accounts payable 7,365 6,502
Accrued expenses 2,644 3,001
Income taxes payable 264 107
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Total current liabilities 13,878 13,477
LONG-TERM DEBT - Net of current portion 26,318 27,943
DEFERRED INCOME TAXES 834 834
OTHER LONG-TERM LIABILITIES 596 638
======== ========
Total liabilities 41,626 42,892
======== ========
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 (27,564) (27,766)
======== ========
Total stockholders' equity 648 446
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TOTAL $ 42,274 $ 43,338
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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)
Three Months Ended
September 30,
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1999 1998
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NET SALES $ 17,573 $ 20,185
COST OF GOODS SOLD 14,296 16,964
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GROSS PROFIT 3,277 3,221
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OPERATING EXPENSES:
Selling 773 887
General and administrative 1,294 1,549
Amortization of excess of purchase price
over net assets acquired 36 102
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Total operating expenses 2,103 2,538
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INCOME FROM OPERATIONS 1,174 683
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OTHER (INCOME) EXPENSE:
Interest expense 814 906
Other income - net -- (2)
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Other expense - net 814 904
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INCOME (LOSS) BEFORE INCOME TAXES 360 (221)
INCOME TAX PROVISION (BENEFIT) 158 (44)
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NET INCOME (LOSS) $ 202 $ (177)
=========== ===========
BASIC AND DILUTED PER COMMON SHARE AMOUNTS:
Net Income (Loss) $ 0.04 $ (0.04)
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING
(basic and diluted) 5,041,544 5,041,544
=========== ===========
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)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
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1999 1998
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 202 $ (177)
Adjustments to reconcile net income (loss) to
net cash flows from operating activities:
Depreciation and amortization 600 742
Gain on sale of property, plant and equipment -- (1)
Changes in operating assets and liabilities:
Accounts receivable - net 83 (122)
Inventories (19) (447)
Prepaid expenses and other assets (142) (110)
Accounts payable 497 (2,292)
Income taxes payable 157 (91)
Accrued expenses and other liabilities (399) (78)
======= =======
Net Cash Flows from Operating Activities 979 (2,576)
======= =======
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property, plant and equipment 623 1
Changes in restricted funds -- (229)
Purchases of property, plant and equipment (135) (290)
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Net Cash Flows from Investing Activities 488 (518)
======= =======
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) under revolving credit facility (324) 3,799
Net principal repayments of long-term debt (1,188) (30,523)
Proceeds from issuance of long-term debt -- 30,830
Refinancing costs -- (830)
Net activity under capital leases (9) 6
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from Financing Activities (1,521) 3,282
======= =======
NET (DECREASE) INCREASE IN CASH (54) 188
CASH AT BEGINNING OF PERIOD 198 114
======= =======
CASH AT END OF PERIOD $ 144 $ 302
======= =======
</TABLE>
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
September 30, 1999, and the results of its operations and cash flows
for the periods presented herein. Results of operations for the three
months ended September 30, 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 July 3, 1999 and the notes thereto
contained in the Company's Annual Report on Form 10-K.
B. INVENTORIES
Inventories consisted of the following (IN THOUSANDS):
September 30, July 3,
1999 1999
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Finished goods $ 5,443 $ 5,060
Work in process 937 913
Raw materials 1,149 1,699
Manufacturing supplies 517 355
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$ 8,046 $ 8,027
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C. SALE OF GB LABELS
In connection with the Company's strategic plan, the Company sold the
operating assets of its GB Labels, Inc. ("GB Labels") subsidiary,
effective August 30, 1999. The Company recorded a pre-tax non-cash
charge of $82,000 in the fourth quarter of fiscal 1999 to write-down
the carrying amount of GB Labels' fixed assets sold to fair value less
cost to sell. No gain or loss was recorded on the sale in fiscal 2000.
D. RECLASSIFICATION
Certain amounts in the fiscal 1999 financial statements have been
reclassified to conform with the fiscal 2000 presentation.
4
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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
In connection with the Company's strategic plan to refocus on its core
capabilities in folding cartons, the Company sold the operating assets
of GB Labels to JIT Manufacturing, Inc., effective August 30, 1999. The
Company also announced the signing of an agreement to sell the
remaining business of its Niemand Industries, Inc. ("Niemand") division
to TEKPAK, Inc. ("TEKPAK"), a company formed by Niemand's president.
The consummation of the sale is subject to TEKPAK obtaining financing
for the transaction. The closing is expected before December 31, 1999.
The completed sale of the container portion of Niemand is discussed
below, in Results of Operations.
RESULTS OF OPERATIONS
Three Months Ended September 30, 1999 Compared to
Three Months Ended September 30, 1998
-------------------------------------------------
In the first quarter of fiscal 2000, the Company had net sales of $17.6
million compared with $20.2 million in the corresponding period of
fiscal 1999, a decrease of $2.6 million or 12.9%. The sale of the
operating assets of GB Labels in August 1999 and the container portion
of the Company's Niemand subsidiary in June 1999 accounted for $2.1
million of the decrease. Sales of folding cartons declined slightly, as
the Company's Standard Packaging & Printing Corp. ("Standard
Packaging") subsidiary experienced some reduced business, primarily as
a result of product changes made by existing customers.
Cost of goods sold decreased $2.7 million or 15.7% to $14.3 million in
the first quarter of fiscal 2000 compared to $17.0 million in the first
quarter of fiscal 1999. Expressed as a percentage of net sales, cost of
goods sold decreased in the first quarter of fiscal 2000 to 81.3%
compared to 84.0% in the corresponding period of fiscal 1999. As a
result of the Company's continuing cost control efforts, cost of goods
sold in actual dollars and as a percentage of net sales continues to
decline at each division. The product mix of the remaining portion of
Niemand's business is more advantageous, resulting in higher margins.
Standard Packaging continues to benefit from reductions in raw material
costs as a result of renegotiated prices with suppliers and the
internalization of the die making and ink mixing processes. Labor costs
in general also decreased as productivity improved and overtime was
reduced, most notably at Standard Packaging. In addition, depreciation
expense has been reduced at the Company's subsidiary RidgePak
Corporation (dba "Flashfold Carton"), as a result of the long-lived
asset impairment write-down at the end of the third quarter of fiscal
1999. These cost improvements were partially offset by certain cost
increases. Flashfold Carton suffered lower margins due to product mix.
Repair and maintenance costs at Standard Packaging increased as a
result of the overall timing of necessary equipment repairs.
5
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GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
Selling expenses decreased $0.1 million or 12.9% to $0.8 million in the
first quarter of fiscal 2000 from $0.9 million in the corresponding
period of fiscal 1999. Expressed as a percentage of net sales, selling
expense remained level at 4.4%. Selling expenses decreased primarily as
a result of reorganizing the Company's sales force and internalizing
previously out-sourced functions within its marketing programs.
General and administrative expenses decreased $0.3 million or 16.5% to
$1.3 million in the first quarter of fiscal 2000 from $1.5 million in
the corresponding period of fiscal 1999. General and administrative
expenses expressed as a percentage of net sales decreased slightly to
7.4% in the first quarter of fiscal 2000, compared with 7.7% in the
corresponding fiscal 1999 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.
In connection with the Company's strategic plan, the Company sold the
operating assets of GB Labels, effective August 30, 1999. The Company
recorded a pre-tax non-cash charge of $82,000 in the fourth quarter of
fiscal 1999 to write-down the carrying amount of GB Labels' fixed
assets sold to fair value less cost to sell. No gain or loss was
recorded on the sale in fiscal 2000.
Total interest expense decreased $0.1 million or 10.2% to $0.8 million
in the first quarter of fiscal 2000 from $0.9 million in the
corresponding period of fiscal 1999. The decrease is the result of
lower average borrowings.
The income tax provision as a percentage of pre-tax income for the
three months ended September 30, 1999 was 43.9%, which differs from the
statutory rate primarily as a result of non-deductible amortization of
the excess of purchase price over net assets acquired. The equivalent
tax rate was an income tax benefit of 19.9% 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). As
amended on September 29, 1999, the remaining balance of the term loan
is due in quarterly installments of $625,000 through October 1999,
monthly installments of $208,333 through July 2000 and $229,167 through
April 2003, with the balance of $11,328,935 due on July 31, 2003.
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 its Burlington, North Carolina
property.
6
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GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
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) $15
million 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 September 30, 1999, all outstanding letters of credit were
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 September 30, 1999 amounted to $222,000 and relate to
workman's compensation insurance policies.
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 September 30, 1999, the Company was in compliance with
all financial covenants.
The Revolver currently bears interest at First Source's prime rate plus
1.25%, while the term loan currently bears interest at First Source's
prime rate plus 1.75%. The Company also pays a commitment fee of 0.5%
on the unused portion of the Revolver. First Sources prime rate was
8.25% at September 30, 1999.
At September 30, 1999, the Company had working capital of $2.9 million,
as compared to $3.4 million at July 3, 1999. Historically, the
Company's liquidity requirements have been met by a combination of
funds provided by operations and its revolving credit agreements. Funds
provided by operations during the three months ended September 30, 1999
were $1.0 million compared with funds used of $2.6 million in the
corresponding period in fiscal 1999. The cash outflow from operations
in the first quarter of fiscal 1999 was largely due to the significant
amount of payables paid during that time period, as a result of the
refinancing. The decrease in working capital is primarily the result of
the increase in income taxes payable and the current portion of
long-term debt. The Company had available to it unused borrowing
capacity of $1.7 million as of September 30, 1999.
During the three months ended September 30, 1999, capital expenditures
totaled $0.1 million compared with $0.3 million in the corresponding
period in fiscal 1999, and consisted primarily of additions to
machinery and equipment and capital improvements. 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.
7
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GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
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
and is pursuing opportunities for profit enhancement at Standard
Packaging and will continue to strive to identify such opportunities at
Flashfold Carton. As part of the strategy of focusing on folding
cartons, the Company sold the operating assets of GB Labels in August
1999 and the container portion of Niemand in June 1999. The Company
anticipates completing the divestiture of Niemand in the second quarter
of fiscal 2000.
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.
YEAR 2000
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's goal is to be Year 2000 compliant, meaning critical
systems, devices, applications or business relationships have been
evaluated and are expected to be suitable for continued use into and
beyond the Year 2000. The folding carton divisions of the Company
(Great Plains, Flashfold Carton and Standard Packaging) have 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.
The Company began in fiscal 1998 evaluating personal computer hardware
and software outside of the Company's IS systems. The Company's
expectations are to complete any upgrade requirements or modifications
by the end of calendar 1999.
Year 2000 Costs: Niemand Industries is currently upgrading all of its
manufacturing and financial software and hardware systems to be Year
2000 Compliant. The upgrades will be completed by the end of November
1999. Budgeted costs for these upgrades were set at $90,000, and
currently Niemand anticipates that it will stay within budget. All
other costs incurred as a result of ensuring Year 2000 compliance, to
date, have been expensed or capitalized as software purchases in the
normal course of operations of the Company. Any remaining costs for the
Year 2000 project will be reflected as general and administrative costs
incurred in the normal course of operations, due to the Company's
internal IS department managing the project.
Risk Assessment: At this time, the Company believes its most reasonably
likely worst case scenarios are: (1) that principal suppliers are not
Year 2000 ready and cannot timely deliver their products; (2) that the
Company could experience an extended interruption in any one of its
utility, communication or transportation systems. Although the Company
does not believe that any of these scenarios will occur, it has
assessed the effects of such events and does not expect that they would
have a material adverse effect on the Company's financial condition and
results of operations.
8
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GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
In addition to reviewing its internal systems, the Company has
contacted all of its significant vendors and customers to verify their
Year 2000 compliance. The Company currently has many suppliers, and
believes this will help mitigate any adverse impact. Although all
outside company responses have indicated Year 2000 compliance, 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. In the event that a temporary
disruption does occur, the Company does not expect that it would have a
material adverse effect on its financial condition and results of
operations.
Contingency Plans: Although the Company expects its internal systems to
be Year 2000 compliant as described above, contingency plans are being
prepared so that the Company's critical business processes can be
expected to continue to function on January 1, 2000 and beyond. The
Company's contingency plans will be structured to address both
remediation of systems and their components and overall business
operating risk. These plans are intended to mitigate both internal
risks and potential risks in the supply chain of the Company's
suppliers. These plans will also address the potential risks of power
outages, communication interruptions and transportation delays. The
Company expects to complete its contingency plan during the calendar
year.
FORWARD-LOOKING STATEMENTS
Statements that are not historical facts, including statements about
our confidence in the Company's prospects and strategies, 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 introduction of
competing products by other firms; (5) pressure on prices from
competition or purchasers of the Company's products; (6) continued
stability in other raw material prices, including oil-based resin and
plastic film; (7) whether the Company will be able to pass on to its
customers price increases for paper and paperboard products in fiscal
2000; (8) whether or not management will be successful in sufficiently
improving sales and profitability at Flashfold Carton and Standard
Packaging; (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) 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; (11) whether TEKPAK will be successful in obtaining adequate
financing to purchase the remaining business of Niemand; (12) if the
TEKPAK transaction is not completed successfully, whether the Company
will be able to sell the remaining business of Niemand on terms that
are satisfactory to the Company; (13) whether Anthem will file a
counterclaim against the Company and (14) whether the Company will be
adversely affected by its inability or the inability of other companies
whose systems interact with the Company to be fully Year 2000 compliant
in a timely manner. Investors and potential investors are cautioned not
9
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GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
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 and 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 September 30, 1999 was at variable interest
rates. A hypothetical 10% change in interest rates would have had a
$0.1 million impact on interest expense for the three months ended
September 30, 1999.
10
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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 98CVS 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. 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 September 1999, the Fogleman plaintiffs entered into a
settlement agreement with the Company and dismissed their entire
complaint with prejudice. In October 1999, the Moorefield plaintiffs
entered into a settlement agreement with the Company and dismissed
their entire complaint with prejudice.
On April 28, 1999, the Company filed a lawsuit captioned Gibraltar
Packaging Group, Inc. v. Anthem Health Plans, d.b.a. Anthem Blue Cross
and Blue Shield of Connecticut ("Anthem"), Case No. 3:99DV00785, in the
United States District Court for the District of Connecticut. The
Company is seeking damages for Anthem's alleged breach of a contract
for health insurance for employees of the Company. While the Company
initiated this action, it anticipates that Anthem will file a
counterclaim for unpaid premiums. The amount of the anticipated
counterclaim is presently unknown, and there can be no assurances that
the outcome of a potential counterclaim would not have an adverse
impact on the Company. The case is scheduled for a settlement mediation
in December 1999.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of Gibraltar's stockholders in the
quarter ended September 30, 1999.
11
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GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
10.50 Sixth Amendment to Secured Credit Agreement, dated October 26,
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:
None
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: November 12, 1999 By: /s/John W. Lloyd
----------------- -------------------------------
John W. Lloyd, Chief Financial
Officer
Signing on behalf of the
registrant and as principal
financial officer
12
EXHIBIT 10.50
SIXTH AMENDMENT TO SECURED CREDIT AGREEMENT
-------------------------------------------
This Sixth Amendment to Secured Credit Agreement (this
"AGREEMENT") is dated as of October 26, 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"), that certain Third Amendment to Secured
Credit Agreement, dated as of February 12, 1999 (the "THIRD AMENDMENT"), that
certain Fourth Amendment to Secured Credit Agreement, dated as of May 14, 1999
(the "FOURTH AMENDMENT") and that certain Fifth Amendment to Secured Credit
Agreement, dated as of September 29, 1999 (the "FIFTH AMENDMENT"); the Original
Credit Agreement, as amended by the First Amendment, the Second Amendment, the
Third Amendment, the Fourth Amendment and the Fifth 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:
<PAGE>
AGREEMENT
---------
1. Definitions. Capitalized terms used but not otherwise
defined herein shall have the meanings as set forth in the Secured Credit
Agreement.
2. Amendments to Secured Credit Agreement.
---------------------------------------
(a) Section 1.1 of the Secured Credit Agreement is hereby
amended by inserting the following new definitions in alphabetical
order:
"NIEMAND" shall mean Niemand Industries, Inc., a
Delaware corporation.
"NIEMAND LEASE" shall mean that certain Lease, dated
______________, 1999, between Niemand, as landlord, and Tekpak, Inc.,
as tenant.
"RENTAL PAYMENTS" shall mean all Annual Rent received
by Niemand pursuant to the terms of the Niemand Lease.
(b) Section 2.5(c) of the Secured Credit Agreement is hereby
amended by deleting it in its entirety and replacing it with the
following:
(c) Additionally, upon receipt by Borrower of any
Unapplied Insurance or Condemnation Proceeds except as to Inventory,
Asset Sale Proceeds, Equity Sale Proceeds, Rental Payments or proceeds
of any refinancing of the Liabilities or other source of funds (other
than revenue derived in the ordinary course of business) of the
Borrower and its Subsidiaries, Borrower shall make a mandatory
prepayment of the Term Loans in the amount thereof, subject to Agent's
right to otherwise apply such payments after the occurrence and during
the continuance of an Event of Default. Each such payment shall be
accompanied by: (I) accrued interest on such principal amount; provided
however, that accrued interest on Rental Payments shall be paid as set
forth in Section 4.5); (ii) amounts payable under Section 4.4(f), if
any; and, (iii) with respect to reductions as a result of any
prepayment described in Section 2.8, the Prepayment Premium required
under such Section. Each such payment shall be applied to reduce the
remaining regularly scheduled principal installments of the Term Loans
in inverse order of their maturities.
(c) Section 11.17 of the Secured Credit Agreement is hereby
amended by adding the following sentence at the end thereof:
Borrower shall not permit Niemand to enter into or permit to exist any
amendment or modification of the Niemand Lease.
-2-
<PAGE>
3. 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, 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.
4. Conditions to Effectiveness. This Agreement shall be effective as of
October 26, 1999 upon the satisfaction of the conditions set forth in this
Section 4 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.
-3-
<PAGE>
(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, no Unmatured Event of Default or Event of Default under
any Related Document shall have occurred and be continuing.
5. 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 Guaranty and such other Related
Documents remain in full force and effect and are each hereby ratified and
confirmed.
-4-
<PAGE>
6. 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 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.
(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
-5-
<PAGE>
by the Agent and the Lenders in connection with the preparation,
execution and delivery of this Agreement.
* * * * *
-6-
<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 Vice President
FIRST SOURCE FINANCIAL LLP,
as Agent and a Lender
By: First Source Financial, Inc.
Its: Manager
By: /s/ Kathi J. Inorio
Name Printed: Kathi J. Inorio
Title: Vice President
LASALLE BUSINESS CREDIT, INC.,
as a Lender
By: /s/ Ellen T. Cook
Name Printed: Ellen T. Cook
Title: Vice President
RIDGEPAK CORPORATION, as a Guarantor
By: /s/ John W. Lloyd
Name Printed: John W. Lloyd
Title: Secretary
NIEMAND HOLDINGS, INC., as a Guarantor
By: /s/ John W. Lloyd
Name Printed: John W. Lloyd
Title: Secretary
S-1
[TO SIXTH AMENDMENT]
<PAGE>
NIEMAND INDUSTRIES, INC., as a Guarantor
By: /s/ John W. Lloyd
Name Printed: John W. Lloyd
Title: Secretary
BURLINGTON HOLDINGS, INC. (f/k/a 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 SIXTH AMENDMENT]
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-01-2000
<PERIOD-START> JUL-04-1999
<PERIOD-END> SEP-09-1999
<CASH> 144
<SECURITIES> 0
<RECEIVABLES> 7,415
<ALLOWANCES> 211
<INVENTORY> 8,046
<CURRENT-ASSETS> 16,805
<PP&E> 39,027
<DEPRECIATION> 18,858
<TOTAL-ASSETS> 42,274
<CURRENT-LIABILITIES> 13,878
<BONDS> 0
0
0
<COMMON> 50
<OTHER-SE> 598
<TOTAL-LIABILITY-AND-EQUITY> 42,274
<SALES> 17,573
<TOTAL-REVENUES> 17,573
<CGS> 14,296
<TOTAL-COSTS> 14,296
<OTHER-EXPENSES> 2,103
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 814
<INCOME-PRETAX> 360
<INCOME-TAX> 158
<INCOME-CONTINUING> 202
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 202
<EPS-BASIC> 0.04
<EPS-DILUTED> 0.04
</TABLE>
