GBC Reports Q3 Results: Office Products Group Outperforming Other Units
Press release from the issuing company
NORTHBROOK, Ill.--Oct. 29, 2002--General Binding Corporation reported results today for the third quarter of 2002 reflecting slightly lower sales relative to last year's third quarter due to the continuing weak economy. Despite the challenging sales environment, GBC reported that sales in its Office Products Group, its largest business group, continued to improve, with the Group posting a 2.8% increase in sales over the prior year. In addition, the Company reported an overall gross profit margin above last year and continued progress in reducing its net debt.
Financial results for the quarter included the following highlights:
* Sales in the quarter totaled $176 million, down 1.7% from the third quarter of 2001, The decline was attributable to weaker sales of binding and laminating products and commercial laminating films in the Company's Document Finishing, Films and Europe Groups, partially offset by a 2.8% increase in sales in the Office Products Group.
* The gross profit margin increased over last year by 0.5 points to 39.4%, primarily due to improvement in the Office Products and Europe Groups, which more than offset a decrease in the Document Finishing Group's margin. The bulk of the margin improvement was attributable to continuing progress in certain pricing and cost reduction initiatives related to the Company's Operational Excellence Program.
* Selling, service and administrative expenses totaled $56.1 million, down slightly from the $57.5 million total for the third quarter of 2001.
* Interest expense for the quarter was $10.1 million, higher than the $8.9 million reported last year due to a higher interest margin paid in 2002, which was partially offset by a lower average debt level in 2002.
* Restructuring and other special charges totaled $1.4 million ($0.06 per share) for the quarter and were primarily related to severance expenses. The prior year results included restructuring charges of approximately $1.1 million ($0.06 per share) related to the shutdown of operations in Poland and certain workforce reductions.
* Other income included a non-cash charge of $1.1 million ($0.07 per share) related to the expected disposal of the Company's interest in an international joint venture.
* A net loss was reported for the quarter of $(0.03) per share (basic), compared to a loss of $(0.01) per share last year. Excluding $0.13 per share of restructuring and other charges and the loss on the business disposal noted above, net income for the quarter was $0.10 per share. On a comparable basis, net income for last year's third quarter was $0.18 per share, excluding restructuring charges of $0.06 per share and goodwill amortization of $0.13 per share.
* Cash flow, as measured by adjusted EBITDA (earnings before interest, taxes, depreciation, amortization and certain special items, all as specifically defined in the Company's primary credit facility), was $19.6 million (11.2% of sales), compared to adjusted EBITDA of $19.4 million (10.8% of sales) for the same period last year.
* Total debt, net of cash and investments, at the end of the quarter was $334 million, an improvement of $25 million from the beginning of the year and $7 million from June 30, 2002.
"While the weak economy and the capital spending constraints at many of our customers continue to adversely affect sales in our Document Finishing and Films Groups, we are pleased to see another quarter of improvement in the Office Products Group, the largest of our business units," said Dennis Martin, Chairman of the Board, President and CEO. "Their sales were up 2.8% over last year and 4.5% over this year's second quarter. In addition, ongoing progress with the pricing initiatives, cost reduction measures and rationalization efforts of our Operational Excellence Program allowed us to increase our gross margin and maintain our operating expense margin, despite the lower sales level. The Operational Excellence Program, and continued moderation in our capital expenditures, also helped generate another successful quarter of free cash flow which was used to pay our net debt down by $7 million. Thus far this year, our major focus on generating free cash flow has allowed us to pay debt down by $25 million."
"During the quarter, we also announced the combination of our Document Finishing and Office Products businesses into a new group called the Commercial and Consumer Group," Mr. Martin continued. "Although there will likely be certain cost savings associated with this combination, the driving force behind the move is to pursue growth opportunities through improved alignment of our sales and marketing activities. We believe that this growth platform will help us better exploit synergies in product development, manufacturing, distribution and customer service, while leveraging our powerful brand names, proven market strength, leadership in innovation, and our valuable customer and consumer experience. The creation of this new group will build on the success of our Operational Excellence Program, and it continues the transformation of GBC by intensifying our consumer-focused brand management approach."
For the first nine months of 2002, sales were $523 million, compared to $551 million for the same period last year. Net income for the period was $0.20 per share, before special items and tax adjustments totaling $0.46 per share and the cumulative effect of the accounting change for SFAS No.142, "Goodwill and Other Intangible Assets," of $4.98 per share. For the same period last year, net income, on a comparable basis, was $0.47 per share, excluding special items of $0.43 per share and goodwill amortization of $0.40 per share.
WhatTheyThink is the global printing industry's go-to information source with both print and digital offerings, including WhatTheyThink.com, WhatTheyThink Email Newsletters, and the WhatTheyThink magazine. Our mission is to inform, educate, and inspire the industry. We provide cogent news and analysis about trends, technologies, operations, and events in all the markets that comprise today's printing and sign industries including commercial, in-plant, mailing, finishing, sign, display, textile, industrial, finishing, labels, packaging, marketing technology, software and workflow.