GBC Reports Disappointing 2Q Results, Office Products, Film Sales Way Down
Press release from the issuing company
NORTHBROOK, Ill.- July 31, 2001--General Binding Corporation today reported sales of $198.4 million for its second quarter ending June 30, 2001, compared to sales of $223.9 million for the same period last year. Net income, before special charges, was $0.00 per share for the quarter, compared to $0.04 per share for the second quarter of 2000. Interest expense was down $2.2 million compared to last year, favorably impacting earnings for the quarter.
Included in 2001 operating results are charges totaling $2.0 million ($0.12 per share) primarily related to transition expenses for the Company's new Chairman and the Company's former CFO. In addition, GBC incurred $2.4 million ($0.15 per share) of restructuring expenses primarily related to the closure of warehouse and administrative facilities in Germany. The 2000 operating results included expenses of $0.6 million ($0.02 per share) related to supply chain initiatives in the Office Products Group.
Cash flow, as measured by EBITDA (earnings before interest, taxes, depreciation, amortization and certain special items) was $19.5 million, compared to $22.5 million for the same period last year. Total debt at the end of the quarter was $391 million, an improvementof $16 million from the $407 million balance at the beginning of the year.
The Company continues to be affected by the weak economic environment which has adversely impacted sales and gross margins, particularly in its Office Products and Films Groups. However, the Company's operating expense margin, excluding the restructuring and other charges discussed above, remained roughly flat to last year, reflecting close management of operating expenses.
* In the Office Products Group, sales were down 20%, primarily due to slower sales of visual communication products and the previously-announced exit from the sale of certain retail shredder products. Operating income fell 50% compared to last year due to lower sales, an unfavorable product mix, and the adverse effect of lower volumes on manufacturing efficiency.
* Sales in the Films Group decreased 10% from last year, and its operating income declined 22% due to continuing pricing pressures related primarily to softness in the publishing industry, as well as increases in raw material costs and lower manufacturing volumes.
* The Document Finishing Group maintained both sales and operating income levels similar to last year's levels.
* The Europe Group posted a 5% decline in sales, but operating income improved by $0.7 million primarily due to lower operating expenses. After adjusting for currency effects, sales in Europe increased slightly by approximately 2%.
"Our financial results continue to be affected primarily by lower sales, and we believe that this weaker demand results principally from a slower economy,'' said Dennis Martin, Chairman of the Board. "Most of the decline continues to be concentrated in the Office Products Group, which accounted for over 70% of that decline, principally in higher-end visual communication products. However, it is important to note that across the company, our strong leading market positions remain unchanged. In addition, we have done a good job of managing the more controllable areas of our business. We have maintained a fairly flat operating expense margin on a company-wide basis compared to last year by effectively mitigating the fixed components of our cost basis, such as the fixed component of program costs in the Office Products Group, by achieving lower costs in other businesses. And, we also continue to make solid progress in reducing our debt through aggressive management of working capital and a lower level of capital spending.''
"We have tempered our earlier optimism that the economy would begin to recover in the second half, as we have yet to see the inflection point.'' Mr. Martin continued. "As a result, until the economic rebound occurs, we are likely to see the current trends in our businesses continue. We are, however, continuing to build upon the successes of the cost reduction and restructuring programs completed last year. We are currently very focused on reviewing various longer-term initiatives aimed at enhancing the profitability of our product lines and streamlining our worldwide infrastructure. We are confident that these efforts, coupled with our leading worldwide market positions and strong customer relationships, will position us well to rebound quickly when the economy turns and help us deliver continuing improvements in performance and shareholder value throughout the coming years.''
For the first six months of 2001, sales were $409.1 million, compared to $464.3 million for the same period last year. Net income for the period, before special items, was $0.4 million or $0.03 per share, compared to net income last year of $1.4 million or $0.09 per share. Special items, before taxes, totaled $6.9 million and $2.1 million, or $0.37 per share and $0.07 per share after taxes, for the six month periods of 2001 and 2000, respectively.
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