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GBC Reports Q1 Results: Sales Off Slightly, Profit Margin Up

Press release from the issuing company

Northbrook, IL, April 22, 2003 -- General Binding Corporation today announced results for the first quarter of 2003. Sales were 1.6% below the level of sales in the first quarter of 2002, reflecting the weak economy. The gross profit margin increased significantly by 1.5 percentage points, principally resulting from ongoing success in the implementation of the Company’s Operational Excellence Program. Net income for the quarter was $0.01 per share, compared to a loss last year of $(0.37) per share, before the cumulative effect of accounting changes. “The wide-ranging Operational Excellence initiatives we undertook throughout the organization last year to generate cost savings and increases in our productivity levels account for much of the significant improvement we continue to see in our gross profit margin,” said Dennis Martin, Chairman of the Board, President and CEO. Although we did not get any lift in sales during the quarter due to the difficult economic climate, we continue to expect further cost savings from Operational Excellence during the year, and we believe that we are well-positioned to leverage this improved profitability as the economy improves. In addition, the recent strategic realignment of the Commercial and Consumer and the Industrial and Print Finishing Groups will help us improve our focus and penetration into existing markets. And, we continue to fund investments related to new sales, marketing and product development initiatives which will provide a solid foundation for revenue growth in years ahead, particularly in some of the new markets that we are focusing on, such as the home and school markets.” 1st Quarter Results Financial results for the quarter included the following highlights: • Sales in the quarter totaled $169.4 million, down $2.8 million or 1.6% from the first quarter of 2002. International sales within the Groups were positively affected by exchange rate movements. The Document Finishing Group reported a sales increase of 3.9% in the quarter over the prior year, and sales in the Films and Europe Groups were flat. Sales in the Office Products Group were down 7.4%, due to lower demand in most of its channels. • The Company’s gross profit for the quarter increased by $1.5 million, or 1.5 points over the prior year, related primarily to pricing initiatives and savings resulting from the Company’s Operational Excellence Program. • Selling, service and administrative expenses were up $2.1 million in the quarter compared to prior year, primarily due to the adverse effect of exchange rate movements on international expenses as well as planned spending on certain new initiatives. • Operating income for the quarter was down slightly by $0.5 million. Income in the Films Group was stable, and lower sales in the Office Products Group and a lower gross profit margin in the Document Finishing Group were partially offset by income improvement in the Europe Group and lower corporate expenses. • Interest expense in the quarter totaled $9.3 million, down $1.0 million due primarily to a lower average debt level. • Restructuring expense in the quarter totaled $1.4 million. This expense was incurred as a result of subleasing a manufacturing facility as part of a previously-announced rationalization. In 2002, restructuring and other expenses totaled $4.8 million. • Total net debt at the end of the quarter, adjusted for cash and equivalents, was $324 million, roughly flat to the amount outstanding at the beginning of the quarter.