NORTHBROOK, Ill.--July 17, 2002--General Binding Corporation reported results today for the second quarter of 2002. While sales for the quarter were slightly lower relative to last year due to ongoing weakness in the economy, the Company continued to meet its profitability and debt reduction targets during the quarter through the ongoing successful implementation of its Operational Excellence Program. Quarterly Results Financial results for the second quarter included the following highlights: * Sales in the quarter totaled $174 million, down 3.5% from the second quarter of 2001, due primarily to continued weakness in the sale of binding and laminating products and commercial laminating films. * Gross profit margins, excluding $0.6 million of inventory rationalization and write-down charges in 2002, were flat or higher in each of the Company's four business groups, resulting in a 40.4% margin for the Company in the quarter, up from 38.4% last year. The bulk of the improvement in these margins 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 $58.3 million, slightly higher than the $57.3 million for the second quarter of 2001. * Interest expense for the quarter was $10.0 million, slightly higher than the $9.3 million reported last year due to a higher interest margin paid in 2002. * Restructuring and other special charges, including the $0.6 million inventory charge noted above, totaled $1.7 million ($0.06 per share) for the quarter and were primarily related to severance expenses. The prior year results included a special charge of approximately $4.4 million (or $0.27 per share) related to transition expenses for the Company's new Chairman and former CFO as well as restructuring expenses related to the closure of warehouse and administrative facilities in Germany. * Included in the results for the quarter was a benefit arising from the settlement of a U.S. Federal income tax refund claim of $0.9 million, or $0.06 per share. * Other income includes a net $0.8 million, or $0.03 per share, cash interest receipt arising from the settlement of the refund claim described above. * Net income reported for the quarter was $0.13 per share (basic), compared to a net loss of $(0.27) per share last year. Excluding special charges of $0.06 per share and the impact of the tax adjustments of $(0.09) per share, net income for the quarter was $0.10 per share. On a comparable basis, net income for last year's second quarter was $0.15 per share, excluding special charges of $0.27 per share and goodwill amortization of $0.15 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 $21.2 million (12.1% of sales), compared to adjusted EBITDA of $19.5 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 $341 million, an improvement of $17.8 million from the beginning of the year and $9.8 million from March 31, 2002. As a result of this debt reduction, the Company has reduced the size of its primary credit facility by $20 million since the beginning of the year. "We are pleased to see continued progress with our Operational Excellence Program across all of our business units," said Dennis Martin, Chairman of the Board, President and CEO. "As expected, this program is beginning to generate meaningful improvements in our gross margins as our pricing initiatives and cost reduction measures gain traction. Each of the business units has been implementing a comprehensive set of such initiatives, with improved gross margins as a result. The success in implementing this program has been the primary driver in attaining our corporate profitability targets to date, despite the weak sales environment we continue to face." "Overall, our sales were slightly down from last year," he continued, "and roughly flat to this year's first quarter. The weak economy continues to restrain sales in certain capital-related items such as our binding and laminating equipment, as well as in commercial laminating films sold through the sluggish publishing industry. However, the largest of our business units, the Office Products Group, is seeing some continuation of the promising improvement in day-to-day sales patterns that we noted last quarter, and their sales were up 4% over last year and 5.5% over this year's first quarter." "We continue to expect that our sales will be affected by a very uncertain economic environment over the second half of the year. Nonetheless, we remain confident that we can continue to improve the efficiency and profitability of our businesses as we move into next year through the aggressive implementation of our Operational Excellence Program." Six-Month Results For the first six months of 2002, sales were $347 million, compared to $372 million for the same period last year. Net income for the period was $0.10 per share, before special items and tax adjustments totaling $0.34 per share and the cumulative effect of the accounting change for SFAS No. 142 of $4.99 per share (described below). For the same period last year, net income, on a comparable basis, was $0.29 per share, excluding special items of $0.37 per share and goodwill amortization of $0.26 per share.