Log In | Become a Member | Contact Us


Leading printing executives into the future

Connect on Twitter | Facebook | LinkedIn

Featured:     European Coverage     Production Inkjet Analysis

GBC Reports 2001 Results, Sales Down $126 Million for the Year

Thursday, February 07, 2002

Press release from the issuing company

NORTHBROOK, Ill.--Feb. 6, 2002-- General Binding Corporation today reported results for 2001 reflecting slower sales resulting from the weak economy. Despite the weak sales environment, the Company's focus on working capital has resulted in further reductions in the Company's debt levels. In addition, GBC reported that its new Operational Excellence Program is expected to significantly increase the Company's cash flows when completed in 2003. Annual Results For the full year 2001, the Company reported the following summary results: * Sales totaled $784.3 million, down $126.5 million from the prior year. Approximately $26 million of the decrease was due to the Company's planned exit from the sale of retail shredders and certain writing board products. The remainder was due to lower capital spending by customers on writing boards and binding and laminating equipment, and on continued weakness in the publishing industry. * The Company's gross profit margin, before special charges, was relatively unchanged from the prior year as a result of the Company's ongoing supply chain management programs. * Selling, service and administrative expenses were down approximately $35 million in 2001, due primarily to lower variable sales expenses. * Interest expense was lower in 2001 by $8.4 million as a result of lower average debt levels and interest rates. * The results for the year included special charges of $25.0 million ($1.27 per share), which are reflected in sales, cost of sales, restructuring expenses and other operating expenses. The prior year's results included special charges of $4.5 million ($0.10 per share). * A net loss of $(1.24) per share was recorded in 2001, compared to net income of $0.15 per share in 2000. Excluding special charges, net income was $0.03 per share in 2001, compared to $0.25 per share in the prior year. * Cash flow, as measured by adjusted EBITDA (earnings before interest, taxes, depreciation, amortization and certain special items), was $76.2 million (9.7% of sales), compared to adjusted EBITDA of $95.3 million (10.5% of sales) for the prior year. * Total net debt at the end of the year, adjusted for cash and equivalents, was $359 million, reflecting a reduction of $39 million from the prior year-end. Fourth Quarter Results Financial results for the fourth quarter of 2001 included the following highlights: * Sales in the quarter totaled $178.2 million, down $40 million from the fourth quarter of 2000, due primarily to continued weakness in the sale of certain writing board products, binding and laminating equipment, and commercial laminating films. In addition, all of the Company's business units reported weaker-than-expected demand in the month of December, particularly in the last two weeks of the month. Through January, the Company had not seen a continuation of the weak sales trend which occurred at the end of December. * The Company's gross profit margin for the quarter, before special charges, declined slightly from the fourth quarter of the prior year. * Selling, service and administrative expenses were lower in the quarter from the prior period by $7.4 million reflecting lower variable selling expenses. * Interest expense was lower in the quarter by $2.6 million as a result of lower average debt levels and interest rates. * Special charges included in the quarter totaled $16.7 million ($0.83 per share), which are reflected in sales, cost of sales, restructuring expenses and other operating expenses. The prior year's results included special charges of $0.8 million ($0.02 per share). * A net loss of $(0.88) per share was reported in the quarter, compared to net income of $0.10 per share last year. Excluding special charges, the net loss for the quarter was $(0.05) per share, compared to net income of $0.12 per share reported in the fourth quarter of 2000. * Cash flow, as measured by adjusted EBITDA (earnings before interest, taxes, depreciation, amortization and certain special items), was $16.3 million (9.1% of sales), compared to adjusted EBITDA of $25.7 million (11.8% of sales) for the prior period. * Total net debt at the end of the quarter, adjusted for cash and equivalents, was $359 million, reflecting a reduction of $11 million from the net balance at the beginning of the quarter. Building on Solid Foundation for Future Growth "Throughout the year, we have effectively managed the controllable areas of our businesses, while continuing to maintain all of our leading market positions and solid customer relationships,'' said Dennis Martin, Chairman of the Board, President and CEO. "These strong market positions and our focus on working capital improvements have helped us to substantially maintain our gross margins and EBITDA margins during the year, as well as lower our net debt position. In addition, our recurring supplies businesses were only modestly affected by the weak economy. Two areas, however, were adversely affected throughout the year, and these include capital-related products, such as visual communication products and binding and lamination equipment, as well as commercial lamination films, which have been affected by a weak publishing industry.'' "Although we had a difficult sales year due to the economy, we continued to make progress during the year with our goal of building long-term shareholder value for GBC,'' he added. "In 2001, we continued to strengthen GBC's management team and its Board of Directors. We completed a comprehensive operational review of all of our businesses to both simplify business processes and eliminate the remaining excess facilities and unprofitable SKUs related to the Company's late-1990s acquisitions and to identify new revenue enhancement projects. We began to roll out several of the initiatives of this new Operational Excellence Program in the fourth quarter, and we are now aggressively implementing the remaining initiatives. In addition, we finalized the extension of our primary credit facility for an additional two-year period to provide us with the time to realize the cash flow benefits of these initiatives and the flexibility to execute a refinancing under more favorable market conditions.'' New Operational Excellence Program The Company's new Operational Excellence Program uses the "80/20 principles'' of simplification, segmentation, and intense focus, and includes a combination of revenue and operational improvement initiatives spread across all of the Company's business units. The Program is expected to generate operating income improvements in 2002 of about $7-$9 million before taxes. When the Program is fully implemented by late-2003, operating income is expected to increase by approximately $20-$25 million on an annual pretax basis thereafter. Of the $25.0 million of restructuring and special charges incurred in the year 2001, $16.7 million ($0.83 per share) related to the fourth quarter implementation of the new Program. Further, the Company estimates that it will incur up to $23 million of additional charges related to the Program, and most of these charges are expected to occur in 2002. These charges primarily consist of severance costs, inventory rationalizations and other expenses related to facility closures. The total cash portion of these charges is estimated to aggregate up to $13 million, of which about $3 million was recognized in 2001. The Company said that its Operational Excellence Program is focused both on improving operational effectiveness and on new revenue initiatives primarily in the following areas: * A workforce rationalization which affects approximately 400 positions, or about 9% of GBC's worldwide workforce. The rationalization effort is principally related to the Company's previously-announced closure of a manufacturing facility in Ashland, Mississippi from which production will be transferred to Company facilities in Booneville, Mississippi and Nuevo Laredo, Mexico; * The closing and rationalization of at least ten manufacturing, distribution and other facilities around the world; * A continuation of the Company's successful SKU rationalization and supply chain management programs which are expected to result in a further reduction in existing SKUs by approximately one-third and in decreases in the costs of raw materials and sourced products; * New sales, marketing and branding strategies focusing on key products, markets and customers, including a reallocateddirect sales force and an expanded dealer network with new branded products; * New product introductions and selective price increases; and * Increasing research and development opportunities and capitalizing on strategic alliances with other manufacturers for new products. Outlook for 2002 "In 2002,'' Mr. Martin continued, "we do not yet see any significant improvement in the economy, and our revenue growth islikely to be modest and will result from several pricing initiatives and new product introductions. EBITDA, after adjusting for special items, is expected to grow by about 10-12%, primarily due to the positive effects of the new Operational Excellence Program. Net debt is expected to decline moderately as a result of our continued emphasis on working capital and the generation of free cash flows, but interest expense should increase due to the higher interest rate on our recently-amended primary credit facility. Should the economy improve faster than expected, we would expect greater growth in sales and profitability due to the significant leverage we have in our infrastructure.'' "In summary, we will undoubtedly face a challenging economic environment as we move forward. However, we are intensely focused on continuing to ensure that best practices are implemented in aligning our organization and product portfolio to grow revenues, increase operating efficiencies, strengthen our brands and, ultimately, drive shareholder value. We remain optimistic that these efforts, coupled with our leading worldwide market positions and strong customer relationships, will allow us to quickly rebound and exploit opportunities when the economy improves.''

 

 

SHARE

Email Icon Email

Print Icon Print

Become a Member

Join the thousands of printing executives who are already part of the WhatTheyThink Community.

Copyright © 2016 WhatTheyThink. All Rights Reserved