[TEXT]
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-11902
GIBSON GREETINGS, INC.
Incorporated under the laws IRS Employer
of the State of Delaware Identification No. 52-1242761
2100 Section Road, Cincinnati, Ohio 45237
Telephone Number: Area Code 513-841-6600
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value; Preferred Stock Purchase Rights
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
The aggregate market value of the Common Stock, $.01 par value,
of the registrant held by non-affiliates of the registrant as of
March 11, 1994 was approximately $365,872,000.
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest
practicable date: 16,085,953 shares of Common Stock, $.01 par
value, at March 11 , 1994.
Documents incorporated by reference:
Portions of Gibson Greetings, Inc.'s Proxy Statement for the
1994 Annual Meeting of Stockholders are incorporated by
reference in Part III.
PAGE
PART I
Item 1. Business
Gibson Greetings, Inc. and its wholly-owned and majority-owned
subsidiaries (the "Company") operate in a single industry
segment -- the design, manufacture and sale of everyday and seasonal
greeting cards, gift wrap and accessories, paper partywares and
related specialty products.
Products
The Company's major products are extensive lines of greeting
cards (both everyday and seasonal) and gift wrap. Everyday
cards are categorized as conventional greeting cards and
alternative market cards. Seasonal cards are devoted to holiday
seasons, which include, in declining order of net sales,
Christmas, Valentine's Day, Mother's Day, Easter, Father's Day,
Graduation and Thanksgiving. In 1993, approximately 58% of net
sales of cards were derived from everyday cards and
approximately 42% from seasonal cards. The Company produces
gift wrap and gift wrap accessories (including tissue and kraft
paper, tags, ribbons, bows and gift trims) predominately for the
Christmas season. The Company's products also include paper
partywares, candles, calendars, gift items and holiday
decorations. The following table sets forth, in thousands of
dollars for the years indicated, the Company's net sales
attributable to each of the principal classes of the Company's
products:
Years Ended December 31,
----------------------------------
1993 1992 1991
-------- -------- --------
Greeting cards $268,952 $243,647 $270,579
Gift wrap 192,862 187,965 196,352
Other products 84,351 52,506 55,235
-------- -------- --------
Total net sales $546,165 $484,118 $522,166
======== ======== ========
Many of the Company's products incorporate well-known
proprietary characters. Net sales associated with licensed
properties accounted for approximately 14% of overall 1993 net
sales. The Company believes it benefits from the publication of
cartoon strips, television programming, advertising and other
promotional activities by the creators of such licensed
characters. The Company has also developed proprietary
properties of its own. See "Trademarks, Copyrights and
Licenses."
PAGE
Approximately 2% of the Company's revenues in 1993 were
attributable to export sales and royalty income from foreign
sources. During 1993, the Company acquired The Paper Factory of
Wisconsin, Inc. ("The Paper Factory"), a Wisconsin corporation, to
strengthen the Company's position in the rapidly-growing party segment
of the industry. During 1992, the Company formed Gibson de Mexico,
S.A. de C.V., a Mexican corporation, which purchased the net
assets of a Mexican manufacturer and marketer of greeting cards,
to market the Company's products primarily in Mexico. During
1991, the Company formed Gibson Greetings International Limited,
a Delaware corporation, to market the Company's products in the
United Kingdom and other European countries.
Sales and Marketing
The Company's products are sold in more than 50,000 retail
outlets worldwide. Because of the value consumers place on
convenience, the Company continues to concentrate its
distribution through one-stop-shopping outlets. To market
effectively through these outlets, the Company has developed
specific product programs and new product lines and introduced
new in-store displays. The Company's products are primarily
sold under the Gibson and Cleo brand names and are primarily
distributed to supermarkets, deep discounters, mass
merchandisers, variety stores and drug stores. During 1993, the
Company's five largest customers accounted for approximately 35%
of the Company's net sales and only one customer, Wal-Mart
Stores Inc., accounted for more than 10% of the Company's net
sales
The Company's products under the Gibson brand name are usually
stocked in a department where only these products are displayed.
Product displays are expressly designed for the presentation of
greeting cards, gift wrap, paper partywares, candles and other
products. The Company also supplies corrugated displays for
seasonal specialties. The Company's method of selling greeting
cards requires frequent and attentive merchandising service and
fast delivery of reorders. The Company employs a direct field
sales force that regularly visits most of the Company's
customers, supported by a larger, nationwide merchandising
service force.
PAGE
In order to properly display and service these products, a
sizable initial investment is made in store display fixtures,
sometimes totaling 300 linear feet, and in the hiring and
training of service associates. To minimize costs and
disruption, in the short-term, caused by the loss of a customer,
the Company has entered into longer term contracts with certain
retailers, consistent with general industry practice. These
contracts generally have terms of from three to six years, and
sometimes specify a minimum sales volume commitment. Some of
the advantages to the Company include: less disruption to its
distribution channels; the ability to plan product offerings
into the future; and establishment of a reliable service network
to ensure the best product display and salability. In certain
of these contracts, cash payments or credits are negotiated
constituting advance discounts against future sales. These
payments are capitalized and amortized over the initial term of
the contract. In the event of contract default by a retailer,
such as bankruptcy or liquidation, a contract may be deemed
impaired and unamortized amounts may be charged against
operations immediately following the default. Use of these
contracts has expanded in recent years within the industry and
the Company currently has contracts with a number of customers
including two of its top five customers.
Most of the Company's gift wrap is Christmas-related and is
sold under the Cleo brand name. These products are usually
shipped in corrugated cartons which may be used as temporary
free-standing displays. Separate free-standing product
displayers and display planning services are also made available
for the purpose of enhancing the presentation of Cleo products.
The Company's Cleo brand gift wrap is typically sold at lower
unit retail price levels than the Company's other brands of gift
wrap. In general, the Company does not provide in-store
merchandising services with respect to Cleo products but rather
ships these products directly to the retailers' stores or their
warehouses for subsequent distribution to individual stores.
It is characteristic of the Company's business and of the
industry that accounts receivable for seasonal merchandise are
carried for relatively long periods, typically as long as six
months. Consistent with general industry practice, the Company
allows customers to return for credit certain seasonal greeting
cards.
Design and Production
Most of the Company's greeting cards are designed, printed and
finished at its Cincinnati, Ohio facility and then sent to its
facilities in Berea or Covington, Kentucky for shipment directly
to retail stores. Most of the Company's gift wrap is designed,
printed and finished at the Company's facilities in Memphis,
Tennessee and distributed from the Company's facilities in
Memphis, Tennessee and Cerritos, California. The Company also
purchases for resale certain finished and semi-finished
products, such as gift items, from both domestic and foreign
sources.
The Company maintains a full-time staff of artists, writers,
art directors and creative planners who design a majority of the
Company's products. Design of everyday products begins
approximately 12 months in advance of shipment. The Company's
seasonal greeting cards and other items are designed and printed
over longer periods than the everyday cards. Designing seasonal
products begins approximately 18 months before the holiday date.
Seasonal designs go into production about 12 months before the
holiday date.
Production of the Company's products increases throughout the
year until late September. Because a substantial portion of the
Company's shipments are typically concentrated in the latter
half of the year, the Company normally is required to carry
large inventories.
The Company believes that adequate quantities of raw materials
used in its business are and will continue to be available from
many suppliers. Paper costs are the most significant component
of the Company's product cost structure.
Competition
The greeting card and gift wrap industry is highly competitive.
Based upon its general knowledge of the industry and the
limited public information available about its competitors, the
Company believes it is the third largest producer of greeting
cards and gift wrap in the United States. The Company's
principal competitors are Hallmark Cards, Inc. and American
Greetings Corporation, which are predominant in the industry,
and CPS/Artfaire, Inc. Certain of the Company's competitors
have greater financial and other resources than the Company.
The Company believes that the principal areas of competition
with respect to its products are quality, design, service to the
retail outlet, price and terms, which may include payments and
other concessions to retail customers under long-term
agreements, and that it is competitive in all of these areas.
See "Sales and Marketing".
Trademarks, Copyrights and Licenses
The Company has approximately 40 registrations of trademarks in
the United States and foreign countries. Although the Company does not
generally register its creative artwork and editorial text with the
U.S. Copyright Office, it does obtain certain copyright protection
by printing notice of a claim of copyright on its products.
The Company has rights under various license agreements to incorporate
well-known proprietary characters into its products. These
licenses, most of which are exclusive, are generally for terms of
one to four years and are subject to certain renewal options.
There can be no assurance that the Company will be able to
renew license agreements as to any particular proprietary
character. The Company believes that its business is not
dependent upon any individual trademark, copyright or license.
Employees
As of December 31, 1993, the Company employed approximately
4,600 persons on a full-time basis. In addition, as of December
31, 1993, the Company employed approximately 4,800 persons on a
part-time basis. Because of the seasonality of the Company's
sales, the number of the Company's production and warehousing
employees varies during the year, normally reaching a peak level
in September. Approximately 800 hourly employees in the
Company's Memphis, Tennessee facilities are represented by a
local union affiliated with the United Paper Workers
International Union and are employed under a contract which
expires in 1996. Approximately 300 hourly employees currently
on the payroll at the Company's Berea, Kentucky facility are
represented by a local union affiliated with the International
Brotherhood of Firemen and Oilers Union. Unfair labor practice
charges have been filed against the Company as an outgrowth of a
strike at the Berea facility in 1989. See "Legal Proceedings."
Environmental Issues
The Company, over the past ten years, has taken a proactive
approach to environmental concerns. In 1986,
Cleo, Inc. ("Cleo") converted its printing operations to water-based inks.
Likewise, since early 1990, the Company's subsidiary, the Gibson Card Division
("Gibson") has converted its card and related products production to
water-based inks. Previously, Gibson had its Cincinnati-produced waste
solvents incinerated. All but one underground storage tank on Company owned
and leased premises were removed in or before 1988. In 1990, the last
underground storage tank, which had contained isopropyl alcohol, was also
removed in accordance with governmental closure regulations.
For the past seven years, the Company has consulted with
professional firms for environmental audits before entering into
potential long-term real estate transactions. Historically,
expenditures associated with managing and limiting pollution or
hazardous substances, as well as expenditures to remediate
previously contaminated sites, have not been material to the
Company's financial statements. At December 31, 1993, the
Company was aware of two environmental liabilities as discussed
below:
DIAZ REFINERY - JACKSON COUNTY, ARKANSAS
In 1989, the Company was identified by the Arkansas Department
of Pollution Control and Ecology ("ADPC&E") as a potentially
responsible party ("PRP") in connection with the Diaz Refinery
Site in Jackson County, Arkansas. The Company is participating
with approximately 700 other PRPs in a settlement with ADPC&E
for remediation of the Site. To date, the Company's share of
total Site costs has been approximately $46,000. The nature and
extent of the contamination, if any, is still being
investigated. Thus, it is not possible at this time to provide
an estimate of total clean-up costs for the Site or the Company's
share of such costs.
PAGE
KIRK LANDFILL - DYER COUNTY, TENNESSEE
In December 1993, the Company was advised by the Tennessee
Department of Environment and Conservation ("TDEC") that Cleo had
been identified by the State as a potentially liable party for
reimbursement of Superfund Expenditures made by the State of
Tennessee for site identification, investigation, containment
and clean-up, including monitoring and maintenance activities.
The Company has ascertained that Cleo's alleged responsibility
involves the alleged disposal of certain waste solvents at the
Site during the period 1972-1975. At this time, insufficient
information is available to determine the Company's potential
liability, if any; however, the TDEC has requested payment of
approximately $13,000, representing full reimbursement of costs
incurred to date. The Company is investigating whether
insurance provisions under policies in existence during the time
period will be applicable.
PAGE
Item 2. Properties
The following is a summary of the Company's principal
manufacturing, distribution and administrative facilities:
Approximate
Floor Space
Location Principal Use (Sq Ft)
- -------------------- ------------------------------------- -----------
Cincinnati, Ohio Corporate headquarters, manufacturing
and administration 593,700
Memphis, Tennessee Manufacturing, distribution and
administration 1,002,800
Berea, Kentucky Manufacturing and distribution 597,100
Mexico City, Mexico Manufacturing and distribution 26,900
Telford, England Manufacturing, distribution and
administration 58,800
Memphis, Tennessee Manufacturing and distribution 1,153,200
Covington, Kentucky Manufacturing and distribution 293,000
Florence, Kentucky Manufacturing and distribution 80,000
Reynosa, Tamaulipas,
Mexico Manufacturing 86,700
Bloomington, Indiana Distribution 167,700
Memphis, Tennessee Distribution (3 facilities) 796,600
Cerritos, California Distribution 214,600
Neenah, Wisconsin Distribution 31,000
---------
Total 5,102,100
=========
The first three facilities listed above are all currently
leased for an initial term expiring in 2002. The Company has
the right to renew the lease for two additional terms of five
years each. The Company also has an option to purchase these
facilities in 2002 at the higher of $35,400,000 or the fair
market value of the properties at that time. For accounting
purposes, this lease has been treated as an operating lease.
See Note 11 of Notes to Consolidated Financial Statements
set forth in Item 8 below.
PAGE
The Company's 1.1 million square foot manufacturing and
distribution facility in Memphis, Tennessee has been financed
primarily through the issuance, by the Industrial Development
Board of the City of Memphis and County of Shelby, Tennessee
(the "Board"), of both taxable and tax-exempt economic
development revenue bonds for the benefit of the Company's
subsidiary, Cleo. Title to the facility will be held until
2004 by the Board. See Note 6 of Notes to Consolidated Financial
Statements set forth in Item 8 below.
The Telford, England, Covington, Kentucky and Bloomington,
Indiana manufacturing and distribution facilities are owned by
the Company. The Covington, Kentucky facility has been financed
principally through tax-exempt debt and is pledged to secure the
repayment of such debt. See Note 6 of Notes to Consolidated
Financial Statements set forth in Item 8 below.
The Florence, Kentucky facility, the Mexico City, Mexico
facility, the Reynosa, Tamaulipas, Mexico facility and the distribution
facilities at Memphis, Tennessee, Cerritos, California and Neenah,
Wisconsin are leased. The Company also leases sales offices, other
manufacturing, distribution and administrative facilities and, on
a temporary basis, uses public warehouse space in various locations
throughout the United States. The Paper Factory leases approximately
140 stores averaging approximately 3,000 to 4,000 square feet per store.
Certain of these leases contain contingent payments based upon individual
store sales. Leases for such facilities expire at various dates
through 2003.
The Company believes that its facilities are adequate for its
present needs and that its properties, including machinery and
equipment, are generally in good condition, well maintained and
suitable for their intended uses.
Item 3. Legal Proceedings
In 1989, unfair labor practice charges were filed against the
Company as an outgrowth of a strike at its Berea, Kentucky
facility. Remedies sought include back pay from August 8, 1989
and reinstatement of employment for approximately 200 employees.
In February 1990, the General Counsel of the National Labor
Relations Board ("NLRB") issued a complaint based on certain of
the allegations of these charges (In the Matter of Gibson
Greetings, Inc. and International Brotherhood of Fireman and
Oilers, AFL-CIO, Cases 9-CA-26706, 27660, 26875.) On December
18, 1991, an Administrative Law Judge of the NLRB issued a
recommended order, which included reinstatements and back pay
affecting approximately 160 strikers, based on findings that the
Company had violated certain provisions of the National Labor
Relations Act. On May 7, 1993, the NLRB upheld the
Administrative Law Judge's decision in some respects, and
enlarged the number of strikers entitled to back pay to
approximately 240. A prompt notice of appeal was filed in the
PAGE
United States Court of Appeals for the District of Columbia
Circuit. The Company believes it has substantial defenses to
the charges, and these defenses will be presented in briefs in
the Company's appeal. The appeal is scheduled to be heard on
September 14, 1994. In addition, the Company is a defendant in
certain other litigation. Management does not believe that an
adverse outcome as to any or all of these matters would have a
material adverse effect on the Company's net worth or total cash
flows; however, the impact on the statement of operations in a
given year could be material.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Executive Officers of the Registrant
See Item 10. Directors and Executive Officers of the
Registrant.
PAGE
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters
The Company's debt agreements contain certain covenants
including limitations on dividends based on a formula related to
net income, stock sales and certain restricted investments. At
December 31, 1993, the amount of unrestricted retained earnings
available for dividends (in thousands of dollars) was $50,760.
The Company's business is seasonal with a significant amount of
its net sales and net income historically occurring in the last
two quarters of the year. The following table presents certain
consolidated quarterly financial data (unaudited) for 1993 and
1992:
(Dollars in
thousands except First Second Third Fourth
per share amounts) Quarter Quarter Quarter Quarter Year
-------- -------- -------- -------- --------
1993
- -------------------
Net sales $ 84,896 $ 83,796 $142,137 $235,336 $546,165
Total revenues 84,907 83,964 142,296 235,759 546,926
Cost of products
sold 30,996 30,813 76,119 130,375 268,303
Net income 1,802 1,215 4,145 18,690 25,852
Net income per share 0.11 0.08 0.26 1.16 1.61
Dividends per share 0.10 0.10 0.10 0.10 0.40
Market price of
common stock (1):
Low 17 7/8 18 17 7/8 18 3/4 17 7/8
High 20 3/8 20 3/4 22 5/8 21 1/4 22 5/8
1992
- -------------------
Net sales $ 79,097 $ 78,219 $115,238 $211,564 $484,118
Total revenues 79,428 78,736 115,556 212,103 485,823
Cost of products
sold 27,257 28,344 70,643 121,096 247,340
Income (loss)
before cumulative
effect of accounting
changes 2,427 1,202 (12,329) 16,685 7,985
Cumulative effect of
accounting changes,
net of income taxes
of $1,609 (1,449) - - - (1,449)
Net income (loss) 978 1,202 (12,329) 16,685 6,536
Income (loss) per
share before
cumulative effect
of accounting
changes 0.15 0.07 (0.75) 1.03 0.50
Cumulative effect of
accounting changes (0.09) - - - (0.09)
Net income
(loss) per share 0.06 0.07 (0.75) 1.03 0.41
Dividends per share 0.09 0.10 0.10 0.10 0.39
Market price of
common stock (1):
Low 25 1/8 22 16 1/4 16 1/4 16 1/4
High 31 27 5/8 24 1/4 20 31
[FN]
(1) Per share prices are based on the closing price as quoted
in the Nasdaq National Market.
(2) Quarterly results for 1992 have been restated to reflect
the adoption of Statement of Financial
Accounting Standards (SFAS) No. 106 and SFAS No. 109 in the
first quarter. The impact of the
adoption of these standards was to reduce income before
cumulative effect of accounting changes
by $73 and $74 in the first and second quarters, respectively,
and reduce earnings per share in the
second quarter by $.01.
PAGE
Item 6. Selected Financial Data
The following summaries set forth selected financial data for
the Company for each of the five years in the period ended
December 31, 1993. Selected financial data should be read in
conjunction with the Consolidated Financial Statements set forth
in Item 8 below.
Income Statement Data
(Dollars and shares in thousands except per share amounts)
Years Ended December 31,
--------------------------------------------------------
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
Revenues:
Net sales $546,165 $484,118 $522,166 $511,211 $463,290
Royalty income 761 1,705 2,148 1,985 1,980
-------- -------- -------- -------- --------
Total revenues 546,926 485,823 524,314 513,196 465,270
-------- -------- -------- -------- --------
Cost of products
sold 268,303 247,340 252,217 254,182 231,664
Selling,
distribution and
administrative
expenses 227,863 218,642 194,872 187,282 166,415
Interest expense 7,737 7,803 9,380 8,667 3,842
Interest income (949) (1,023) (342) (819) (2,319)
-------- -------- -------- -------- --------
Income before
income taxes and
cumulative effect
of accounting
changes 43,972 13,061 68,187 63,884 65,668
Income taxes 18,120 5,076 26,303 24,084 23,299
-------- -------- -------- -------- --------
Income before
cumulative effect
of accounting
changes 25,852 7,985 41,884 39,800 42,369
Cumulative effect
of accounting
changes - (1,449) - - -
-------- -------- -------- -------- --------
Net income $ 25,852 $ 6,536 $ 41,884 $ 39,800 $ 42,369
======== ======== ======== ======== ========
Income per share
before cumulative
effect of
accounting
changes $ 1.61 $ 0.50 $ 2.61 $ 2.51 $ 2.68
======== ======== ======== ======== ========
Net income
per share $ 1.61 $ 0.41 $ 2.61 $ 2.51 $ 2.68
======== ======== ======== ======== ========
Dividends
per share $ 0.40 $ 0.39 $ 0.36 $ 0.34 $ 0.33
======== ======== ======== ======== ========
Average common
shares and
equivalents 16,103 16,104 16,039 15,848 15,784
======== ======== ======== ======== ========
Other Financial Data
(Dollars in thousands except per share amounts)
December 31,
--------------------------------------------------------
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
Working capital $213,856 $224,261 $215,011 $128,489 $146,676
Plant and
equipment, net 116,900 112,712 110,769 101,996 75,067
Total assets 580,411 501,104 544,261 553,499 438,888
Debt due within
one year (1) 66,187 31,911 71,208 148,302 89,197
Long-term debt 74,365 70,175 71,079 21,755 30,425
Excess of fair
value of companies
acquired over
cost, net - - - 1,430 2,880
Stockholders'
equity 323,681 303,341 300,743 261,402 226,043
Equity per share 20.15 18.92 18.86 16.58 14.41
Capital
expenditures 31,049 30,970 31,736 42,706 31,959
[FN]
(1) Includes the current portion of long-term debt which
consisted of $3,917 in 1993, $1,811 in 1992, $708 in 1991,
$6,702 in 1990 and $2,697 in 1989.
PAGE
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Unless specifically stated otherwise, dollars in thousands except
per share amounts.
Results of Operations
The Company's 1993 results reflected a recovery from the prior
year which was adversely impacted by the Chapter 11 bankruptcy
filing by Phar-Mor, Inc. (Phar-Mor) during 1992. Total revenues
in 1993 increased 12.6% to $546.9 million compared to a decrease
of 7.3% in 1992 and an increase of 2.2% in 1991. The revenue
gains in 1993 were attributable to The Paper Factory of
Wisconsin, Inc. (The Paper Factory) which was acquired in June
1993, as well as increased domestic and international sales of
greeting cards, partially offset by a modest decline in sales of
gift wrap and related products. Consistent with general industry
practice, the Company allows customers to return for credit
certain seasonal greeting cards. Also, consistent with general
industry practice, and where deemed prudent to secure
substantial long-term volume commitments, the Company enters
into long-term sales contracts with certain retailers, some of
which include advance payments. Returns and allowances were
13.3% in 1993 compared to 15.9% in 1992 and 17.2% in 1991. The
decline in 1993 returns and allowances was due to lower returns
of certain seasonal products and lower allowances for certain
everyday products. The Company does not believe that its 1993
results were materially affected by recessionary pressures.
Royalty income of $.8 million for 1993 declined by $.9 million
from 1992 primarily due to the expiration of certain
international licensing agreements.
The Company's 1992 results reflected lower revenues from
Phar-Mor of $28.1 million, including the write-off of long-term
contracts totaling $16.4 million. In addition, lower unit sales
for everyday and seasonal greeting cards, partially offset by
higher unit sales of gift wrap and lower returns of certain
seasonal products contributed to the decline. The 1991 increase
in total revenues resulted from higher selling prices and unit
sales for everyday and seasonal greeting cards partially offset
by unit decreases in gift wrap and increased returns and
allowances.
PAGE
Total costs and expenses were $503.0 million or 92.0% of total
revenues in 1993 compared to 97.3% in 1992 and 87.0% in 1991.
Cost of products sold was 49.1% of total revenues in 1993
compared to 50.9% and 48.1% in 1992 and 1991, respectively. The
decline in 1993 compared to 1992 was due to higher revenues and
product sales mix, reflecting the acquisition of The Paper
Factory. The increase in 1992 compared to 1991 was due to lower
revenues and product sales mix. Selling, distribution and
administrative expenses were 41.7% of total revenues in 1993
compared to 45.0% in 1992 and 37.2% in 1991. The decline in
these expenses, as a percentage, reflected higher revenues,
partially offset by acquisition costs associated with The Paper
Factory and start-up costs for international operations.
Additionally, 1992 expenses included Phar-Mor related items
including write-offs of accounts receivable of $5.9 million and
card display fixtures of $5.1 million. Expenses associated with
international operations as well as domestic restructuring
charges also adversely impacted 1992.
Interest expense, net of interest income, decreased to 1.2% of
total revenues in 1993 compared to 1.4% and 1.7% in 1992 and
1991, respectively. Lower interest rates were partially offset
by higher average borrowings, largely resulting from the
acquisition of The Paper Factory as well as higher working
capital levels. The decrease in the 1992 percentage versus 1991
was attributable to lower average borrowing levels combined with
lower interest rates. Also included in 1991 were a $.5 million
prepayment penalty on the Company's 13.625% senior notes which
were retired and increased interest expense associated with debt
incurred to finance a new manufacturing and distribution center.
Income before income taxes and cumulative effect of accounting
changes was $44.0 million, an increase of $30.9 million over
1992 compared to a decrease in 1992 of $55.1 million from 1991
and an increase of $4.3 million in 1991 over 1990. This
represented 8.0% of total revenues in 1993 compared to 2.7% and
13.0% in 1992 and 1991, respectively.
The effective income tax rate for 1993 was 41.2% compared to
38.9% in 1992 and 38.6% in 1991. See Notes 1 and 7 of Notes to
Consolidated Financial Statements set forth in Item 8 below.
Income before cumulative effect of accounting changes was $25.9
million in 1993 compared to $8.0 million in 1992 and $41.9
million in 1991, and represented 4.7% of total revenues compared
to 1.6% and 8.0% in 1992 and 1991, respectively.
PAGE
During 1992, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 106 - "Employer's Accounting for
Postretirement Benefits Other Than Pensions" retroactive to
January 1, 1992. Upon adoption, the Company incurred a
one-time charge of $2.5 million, net of income taxes of $1.6
million, attributable to the cumulative effect of the adoption
of this accounting change. The impact on net income per share
was $.15. In addition, the Company adopted SFAS No. 109 -
"Accounting for Income Taxes" which resulted in a credit of $1.1
million or $.06 per share for the cumulative effect of this
change.
Net income of $25.9 million in 1993 increased $19.3 million
compared to a decrease in 1992 of $35.3 million and an increase
of $2.1 million in 1991, and represented 4.7% of total revenues
compared to 1.3% and 8.0% in 1992 and 1991, respectively.
The Company attempts to minimize the impact of inflation by
controlling its cost of raw materials, labor and other expenses,
and pricing its products in light of general economic conditions.
Liquidity and Capital Resources
Cash flows from operating activities for 1993 provided $31.6
million in cash compared to $74.8 million in 1992 and $47.0
million in 1991. The decline in 1993 of $43.2 million was
primarily the result of decreased amortization of deferred costs
and other intangibles of $14.5 million combined with higher
working capital requirements. Trade receivables increased 13.3%
largely reflecting increased revenues. Inventories increased
12.8% resulting from the acquisition of The Paper Factory
combined with higher gift wrap and related products inventories.
The increase in other assets, excluding amortization, primarily
reflected additional commitments made for long-term customer
agreements combined with goodwill associated with the
acquisition of The Paper Factory.
Cash used in investing activities for plant and equipment
purchases totaled $31.0 million in both 1993 and 1992 compared
to $31.7 million in 1991. The Company anticipates that the 1994
expenditure levels will be in line with historical trends based
upon existing business conditions.
Cash provided by financing activities in 1993 was $23.7 million
compared to cash used in financing activities in 1992 and 1991
of $44.3 million and $30.4 million, respectively. The 1993
increase in short-term borrowings reflected higher working
capital levels combined with funds used to acquire The Paper
Factory. Long-term debt increased in 1993 due to the issuance
of unsecured notes to the former shareholders of The Paper
Factory, payable over the next four years. During 1991, the
Company prepaid $6.0 million of its 13.625% senior notes and
privately placed $50.0 million of 9.33% senior notes. Proceeds
from the private placements were used to reduce short-term debt.
PAGE
In April 1993, the Company consummated a new $210 million,
three-year revolving credit facility, replacing a similar
existing facility. The facility will provide funds for general
corporate purposes and future growth. On March 4, 1994, the
Company announced that, based on trading of swap/derivative
positions subsequent to year-end, the Company entered into two
new contracts which will result in a minimum loss of $3.0 million and
a maximum potential loss of $27.5 million. The new contracts, which
mature in June and August 1995, may be liquidated at any time
prior to maturity and have an estimated cost of termination of
approximately $17.5 million at March 4, 1994.
Management believes that its cash flows from operations and
credit sources will provide adequate funds, both on a short-term
and on a long-term basis, for currently foreseeable debt
payments, lease commitments and payments under existing customer
agreements, all of which total approximately $19 million to $29
million per year for the next five years, as well as for
financing existing operations, currently projected capital
expenditures, anticipated long-term sales agreements consistent
with industry trends and other contingencies.
Management does not believe that there are any trends, events,
commitments or uncertainties, except for previously disclosed
items, and aside from normal seasonal fluctuations and general
industry competitive conditions, that should be expected to have
a material effect on the results of operations, financial
condition, liquidity, or capital resources of the Company.
For additional financial information see Consolidated Financial
Statements and Notes to Consolidated Financial Statements set
forth in Item 8 below.
PAGE
Item 8. Financial Statements and Supplementary Data
Gibson Greetings, Inc.
Consolidated Statements of Income
Years Ended December 31, 1993, 1992 and 1991
(Dollars in thousands except per share amounts)
1993 1992 1991
--------- --------- ---------
Revenues:
Net sales $ 546,165 $ 484,118 $ 522,166
Royalty income 761 1,705 2,148
--------- --------- ---------
Total revenues 546,926 485,823 524,314
--------- --------- ---------
Costs and expenses:
Cost of products sold 268,303 247,340 252,217
Selling, distribution and
administrative expenses 227,863 218,642 194,872
Interest expense, net of
capitalized interest 7,737 7,803 9,380
Interest income (949) (1,023) (342)
--------- --------- ---------
Total costs and expenses 502,954 472,762 456,127
--------- --------- ---------
Income before income taxes and
cumulative effect of
accounting changes 43,972 13,061 68,187
Income taxes 18,120 5,076 26,303
--------- --------- ---------
Income before cumulative effect
of accounting changes 25,852 7,985 41,884
--------- --------- ---------
Cumulative effect of change in
accounting for postretirement
benefits other than pensions,
net of income taxes of $1,609 - (2,487) -
Cumulative effect of change in
accounting for income taxes - 1,038 -
--------- --------- ---------
Net income $ 25,852 $ 6,536 $ 41,884
========= ========= =========
Income per share before
cumulative effect of
accounting changes $ 1.61 $ 0.50 $ 2.61
Cumulative effect per share
of change in accounting for
postretirement benefits
other than pensions, net of
income taxes - (0.15) -
Cumulative effect per share of
change in accounting for
income taxes - 0.06 -
--------- --------- ---------
Net income per share $ 1.61 $ 0.41 $ 2.61
========= ========= =========
[FN]
See accompanying notes to consolidated financial statements.
PAGE
Gibson Greetings, Inc.
Consolidated Balance Sheets
December 31, 1993 and 1992
(Dollars in thousands except per share amounts)
1993 1992
--------- ---------
Assets
Current assets:
Cash and equivalents $ 9,477 $ 9,505
Trade receivables, net 192,163 169,605
Inventories 133,944 118,758
Prepaid expenses 4,207 4,301
Deferred income taxes 36,796 31,947
--------- ---------
Total current assets 376,587 334,116
Plant and equipment, net 116,900 112,712
Other assets, net 86,924 54,276
--------- ---------
$ 580,411 $ 501,104
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Debt due within one year $ 66,187 $ 31,911
Accounts payable 18,835 14,738
Income taxes payable 17,230 9,931
Other current liabilities 60,479 53,275
--------- ---------
Total current liabilities 162,731 109,855
Deferred income taxes (1,102) 2,693
Long-term debt 74,365 70,175
Other liabilities 20,736 15,040
--------- ---------
Total liabilities 256,730 197,763
--------- ---------
Stockholders' Equity:
Preferred stock, par value $1.00;
5,000,000 shares authorized,
none issued - -
Preferred stock, Series A, par
value $1.00; 300,000 shares
authorized, none issued - -
Common stock, par value $.01;
50,000,000 shares authorized,
16,533,267 and 16,506,919
shares issued, respectively 165 165
Paid-in capital 45,209 44,436
Retained earnings 283,904 264,469
Foreign currency adjustment 291 159
--------- ---------
329,569 309,229
--------- ---------
Less treasury stock, at cost,
473,344 and 473,344 shares,
respectively 5,888 5,888
--------- ---------
Total stockholders' equity 323,681 303,341
--------- ---------
Commitments and contingencies
(Notes 11 and 12)
$ 580,411 $ 501,104
========= =========
[FN]
See accompanying notes to consolidated financial statements.
PAGE
Gibson Greetings, Inc.
Consolidated Statements of Cash Flows
Years Ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
1993 1992 1991
--------- --------- ---------
Cash flows from operating activities:
Net income $ 25,852 $ 6,536 $ 41,884
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and write-down of
display fixtures 22,688 24,870 18,495
Loss on disposal of plant
and equipment 5,817 3,816 4,441
Deferred income taxes (9,157) (6,708) (3,246)
Amortization of excess of fair value
of companies acquired over cost - - (1,430)
Amortization and write-down of
deferred costs and
other intangibles 19,547 34,087 15,822
Change in assets and liabilities:
(Increase) decrease in trade
receivables, net (22,529) 36,422 (5,466)
Increase in inventories (6,963) (4,119) (29)
(Increase) decrease in
prepaid expenses 286 (182) 3,898
Increase in other assets,
net of amortization (25,999) (23,356) (8,085)
Increase (decrease) in
accounts payable 2,579 (524) 386
Increase (decrease) in
income taxes payable 7,173 (9,967) 4,456
Increase (decrease) in other
current liabilities 6,603 6,169 (24,544)
Increase in other liabilities 5,696 7,511 457
All other, net (22) 272 (89)
--------- --------- ---------
Total adjustments 5,719 68,291 5,066
--------- --------- ---------
Net cash provided by
operating activities 31,571 74,827 46,950
--------- --------- ---------
Cash flows from investing activities:
Purchase of plant and equipment (31,049) (30,970) (31,736)
Proceeds from sale of
plant and equipment 550 63 27
Acquisition of The Paper Factory
of Wisconsin, Inc.,
net of cash acquired (24,782) - -
--------- --------- ---------
Net cash used in investing
activities (55,281) (30,907) (31,709)
--------- --------- ---------
Cash flows from financing activities:
Net increase (decrease) in
short-term borrowings 23,062 (40,400) (71,100)
Issuance of long-term debt, net 8,075 875 50,000
Payments on long-term debt (1,811) (708) (6,702)
Issuance of common stock 773 2,277 3,243
Acquisition of common stock
for treasury - (49) (222)
Dividends paid (6,417) (6,251) (5,638)
--------- --------- ---------
Net cash provided by (used in)
financing activities 23,682 (44,256) (30,419)
--------- --------- ---------
Net decrease in cash and equivalents (28) (336) (15,178)
Cash and equivalents at beginning of year 9,505 9,841 25,019
--------- --------- ---------
Cash and equivalents at end of year $ 9,477 $ 9,505 $ 9,841
========= ========= =========
Supplemental disclosure of
cash flow information
Cash paid during the year for:
Interest, net of amounts capitalized $ 7,544 $ 8,201 $ 9,264
Income taxes 20,243 19,015 24,851
[FN]
See accompanying notes to consolidated financial statements.
PAGE
Gibson Greetings, Inc.
Consolidated Statements of Changes in Stockholder's Equity
Years Ended December 31, 1993, 1992 and 1991
(Dollars in thousands except per share amounts)
1993 1992 1991
--------- --------- ---------
Common stock, par value $.01:
Balance at beginning of year $ 165 $ 164 $ 162
Exercise of stock options - 1 2
--------- --------- ---------
165 165 164
--------- --------- ---------
Paid-in capital:
Balance at beginning of year 44,436 42,160 38,919
Exercise of stock options 773 2,276 3,241
--------- --------- ---------
45,209 44,436 42,160
--------- --------- ---------
Retained earnings:
Balance at beginning of year 264,469 264,184 227,938
Net income 25,852 6,536 41,884
Cash dividends paid ($.40, $.39,
and $.36 per share in 1993,
1992 and 1991, respectively) (6,417) (6,251) (5,638)
--------- --------- ---------
283,904 264,469 264,184
--------- --------- ---------
Foreign currency translation adjustment:
Balance at beginning of year 159 74 -
Aggregate adjustments resulting
from translation of financial
statements into U.S. dollars 132 85 74
--------- --------- ---------
291 159 74
--------- --------- ---------
Less treasury stock, at cost:
Balance at beginning of year 5,888 5,839 5,617
Common stock acquired - 49 222
--------- --------- ---------
5,888 5,888 5,839
--------- --------- ---------
Total stockholders' equity $ 323,681 $ 303,341 $ 300,743
========= ========= =========
[FN]
See accompanying notes to consolidated financial statements.
PAGE
Gibson Greetings, Inc.
Notes to Consolidated Financial Statements
Years Ended December 31, 1993, 1992 and 1991
(Dollars in thousands except per share amounts)
Note 1--Nature of Business and Statement of Accounting Policies
Principles of consolidation
The consolidated financial statements include the accounts of
Gibson Greetings, Inc. and its wholly-owned and majority-owned
subsidiaries (the Company). All intercompany transactions have
been eliminated.
Nature of business
The Company operates in a single industry segment: the design,
manufacture and sale of greeting cards, gift wrap and related
products. The Company sells to customers in several channels of
the retail trade principally located in the United States. The
Company recognizes sales at the time of shipment from its
facilities. Provisions for sales returns are recorded at the
time of the sale, based upon current conditions and the
Company's historic experience. The Company conducts business
based upon periodic credit evaluations of its customers'
financial condition and generally does not require collateral.
The Company does not believe a concentration of risk exists due
to the diversity of channels of distribution and geographic
location of its retail customers. During the year ended
December 31, 1993, the Company's largest customer accounted for
approximately 12% of total revenues and during the year ended
December 31, 1992, the same customer accounted for approximately
11% of total revenues. During the year ended December 31, 1991,
a different customer accounted for approximately 13% of total
revenues.
International Operations
During 1992, the Company formed Gibson de Mexico, S.A. de C.V.
(Gibson de Mexico) to purchase certain assets and assume certain
liabilities of Pagina Once, S.A. de C.V. (Pagina Once). Pagina
Once was primarily engaged in the manufacturing and marketing of
greeting cards. Minority stockholders of Gibson de Mexico are
principal officers of Gibson de Mexico. The total cost of the
acquisition exceeded the fair value of the net assets by $583.
During 1991, the Company formed Gibson Greetings International
Limited (Gibson International) to market the Company's products
primarily in the United Kingdom and other European countries.
The minority stockholders of Gibson International are principal
officers of Gibson International.
The activities of these subsidiaries were not material to
consolidated operations in either 1993 or 1992.
PAGE
Retail Operations
On June 1, 1993, the Company acquired The Paper Factory of
Wisconsin, Inc. (The Paper Factory) for $25.1 million in a
business combination accounted for as a purchase. The Paper
Factory operates retail stores located primarily in
manufacturers' outlet shopping centers. The results of The
Paper Factory are not material and are included in the
consolidated financial statements since the date of acquisition.
The total cost of the acquisition exceeded the fair value of
the net assets of The Paper Factory by $26.2 million. In
connection with the acquisition, the Company assumed liabilities
of approximately $11.6 million. Accumulated goodwill
amortization at December 31, 1993 was $792.
Cash and equivalents
Cash and equivalents are stated at cost. Cash equivalents
include time deposits, money market instruments and short-term
debt obligations with original maturities of three months or
less. The carrying amount approximates fair value because of
the short maturity of these instruments.
Inventories
Inventories are stated at the lower of cost (first-in,
first-out) or market.
Plant and equipment
Plant and equipment are stated at cost. Plant and equipment,
except for leasehold improvements, are depreciated over their
related estimated useful lives, using the straight-line method.
Leasehold improvements are amortized over the terms of the
respective leases, using the straight-line method. Expenditures
for maintenance and repairs are charged to operations currently;
renewals and betterments are capitalized.
Other assets
Other assets include deferred and prepaid costs, goodwill and
other intangibles. Deferred and prepaid costs represent costs
incurred relating to long-term customer sales agreements.
Deferred and prepaid costs are amortized ratably over the terms
of the agreements, generally three to six years. Goodwill and
other intangibles are amortized over periods ranging from three
to twenty years, using the straight-line method.
PAGE
Income taxes
Effective January 1, 1992, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 109 - "Accounting for
Income Taxes." This Statement utilizes the liability method of
accounting for income taxes. Deferred taxes are determined
based on the estimated future tax effects of differences between
the financial statement and tax bases of assets and liabilities
given the provisions of currently enacted tax laws. Prior to
1992, the Company accounted for income taxes using Accounting
Principles Board Opinion No. 11. Investment tax credits are
amortized to income over the lives of the related assets.
Excess of fair value of companies acquired over cost
The excess of fair value of companies acquired over cost was
amortized to income over ten years, using the straight-line
method. Amortization was complete in 1991. Accumulated
amortization at December 31, 1993 and 1992 was $14,480.
Interest rate swap agreements
The difference between the amount of interest to be paid and
the amount of interest to be received under interest rate swap
agreements due to changing interest rates is charged or credited
to interest expense over the life of the agreements. The fair
value of interest rate swaps (used for hedging purposes) is the
estimated amount that the Company would receive or pay to
terminate the swap agreements at the reporting date, taking into
account current interest rates and the current creditworthiness
of the swap counterparties.
Other Postretirement Benefits
Effective January 1, 1992, the Company adopted SFAS No. 106 -
"Employers' Accounting for Postretirement Benefits Other Than
Pensions" (OPEB). This Statement requires that the cost of these
benefits be recognized in the financial statements during the
employee's active working career.
Computation of net income per share
The computation of net income per share is based upon the
weighted average number of shares of common stock and
equivalents outstanding during the year: 16,102,709 shares for
1993, 16,103,897 shares for 1992, and 16,039,259 shares for 1991.
PAGE
Reclassifications
Certain prior year amounts in the consolidated financial
statements have been reclassified to conform to the 1993
presentation.
Note 2--Trade Receivables
Trade receivables at December 31, 1993 and 1992, consist of the
following:
1993 1992
--------- ---------
Trade receivables $ 245,682 $ 223,022
Less reserve for returns,
allowances, cash discounts
and doubtful accounts 53,519 53,417
--------- ---------
$ 192,163 $ 169,605
========= =========
Note 3--Inventories
Inventories at December 31, 1993 and 1992, consist of the
following:
1993 1992
--------- ---------
Finished goods $ 83,074 $ 67,736
Work-in-process 13,147 12,867
Raw materials and supplies 37,723 38,155
--------- ---------
$ 133,944 $ 118,758
========= =========
PAGE
Note 4--Plant and Equipment
Plant and equipment at December 31, 1993 and 1992, consist of
the following:
1993 1992
--------- ---------
Land and buildings $ 35,936 $ 32,807
Machinery and equipment 60,842 54,010
Display fixtures 84,117 84,334
Leasehold improvements 10,001 9,164
Construction in progress 4,233 3,761
--------- ---------
195,129 184,076
Less accumulated depreciation 78,229 71,364
--------- ---------
$ 116,900 $ 112,712
========= =========
Note 5--Other Assets
Other assets at December 31, 1993 and 1992, consist of the
following:
1993 1992
--------- ---------
Deferred and prepaid costs $ 112,157 $ 87,895
Goodwill and other intangibles 31,601 5,384
--------- ---------
143,758 93,279
Less accumulated amortization 56,834 39,003
--------- ---------
$ 86,924 $ 54,276
========= =========
PAGE
Note 6--Debt
Debt at December 31, 1993 and 1992, consists of the following:
1993 1992
--------- ---------
Debt due within one year:
Commercial paper bearing
interest at a weighted
average rate of 3.60% $ 13,020 $ -
Loans payable to banks
under a revolving credit
agreement bearing interest
at a weighted average rate
of 3.70% 10,000 -
Loans payable to banks under
uncommitted borrowing
facilities bearing interest
at weighted average rates of
3.55% and 3.58%, respectively 39,250 30,100
Current portion of long-term debt 3,917 1,811
--------- ---------
$ 66,187 $ 31,911
========= =========
Long-term debt:
Senior notes bearing interest
at 9.33%, with annual serial
maturities from 1995 through
2001 $ 50,000 $ 50,000
Economic development revenue
bonds (tax-exempt) bearing
interest at a weighted average
rate of 7.17%, with annual
serial maturities from 1993
through 1999 and a term maturity
in 2004, less unamortized
discount of $163 and $179 in
1993 and 1992, respectively, to
yield an effective rate of 7.29% 9,277 9,821
Economic development revenue
bonds (taxable) bearing interest
at 9.10%, with annual sinking
fund payments required in 1993
through 2004, less unamortized
discount of $159 and $175 in
1993 and 1992, respectively, to
yield an effective rate of 9.35% 6,431 6,760
Notes payable to former
shareholders of The Paper
Factory of Wisconsin, Inc.
bearing interest at 5.01%,
payable in annual installments
of $2,019 8,075 -
Industrial revenue bonds bearing
interest at 9.25%, payable in
semi-annual installments of $300,
secured by plant and equipment
with a carrying value of $6,275
and $6,792 at December 31, 1993
and 1992, respectively 3,000 3,600
Urban development action grant
bearing interest at 8.00%,
payable in quarterly
installments, secured by land,
building and equipment with a
carrying value of $16,183 and
$16,262 at December 31, 1993 and
1992, respectively 682 875
Other notes bearing interest at a
weighted average rate of 5.20%,
payable in quarterly
installments, secured by the same
assets securing the industrial
revenue bonds 817 930
--------- ---------
78,282 71,986
Less portion due within one year 3,917 1,811
--------- ---------
$ 74,365 $ 70,175
========= =========
PAGE
In 1991, the Company privately placed $50,000 in long-term
senior notes with proceeds being used for general corporate
purposes.
In 1993, the Company entered into a new three-year revolving
credit agreement, replacing a similar existing facility, which
expires April 26, 1996. The amount which can be borrowed under
this agreement is $210,000.
The fair value of the Corporation's long-term debt is estimated
based on the quoted market prices for the same or similar issues
or on the current rates offered to the Corporation for debt of
the same remaining maturities. The estimated fair value of the
Company's gross long-term debt at December 31, 1993 was $83,992.
The Company periodically enters into interest rate swap or
derivative transactions with the intent to manage the interest
rate sensitivity of portions of its debt. At December 31, 1993,
the Company had four outstanding interest rate swap/derivative
positions with a total notional amount of $96,000. Two
agreements, with terms similar to the related bonds, are
constituted as hedges and effectively change the Company's
interest rate on $3,000 of industrial revenue bonds to 6.67%
through February 1998. One of the other two agreements attempts
to limit the Company's exposure against rising short-term rates
on a notional amount of $60,000 through 1995. The last position
provides the Company with a maximum 1.0% annuity on $30,000
through August 1994 predicated on short-term rates remaining in
a specified range. Based on the estimated cost of terminating
these two positions, the Company has an unrealized net loss at
December 31, 1993 of approximately $1,000.
On March 4, 1994, the Company announced that, based on trading
of swap/derivative positions subsequent to year-end, the Company
entered into two new contracts which will result in a minimum
loss of $3,000 and a maximum potential loss of $27,500. The new
contracts, which mature in June and August 1995, may be
liquidated at any time prior to maturity and have an estimated
cost of termination of approximately $17,500 at March 4, 1994.
The annual principal payments due on long-term debt for each of
the years in the five-year period ended December 31, 1998, are
$3,917, $11,164, $11,269, $11,116 and $9,205, respectively.
Capitalized interest for the years ended December 31, 1993,
1992 and 1991 were $0, $74 and $322, respectively.
PAGE
The Company's debt agreements contain certain covenants
including limitations on dividends based on a formula related to
net income, stock sales and certain restricted investments. At
December 31, 1993, the amount of unrestricted retained earnings
available for dividends was $50,760.
Note 7--Income Taxes
The Company adopted the provisions of SFAS No. 109 effective
January 1, 1992, and recorded a credit of $1,038 and increased
earnings per share by $.06 for the cumulative effect of this
change in accounting principle. There was no effect on income
before income taxes for the year ended December 31, 1992,
resulting from the adoption of SFAS No. 109.
The provision for income taxes for the years ended December 31,
1993, 1992 and 1991, consists of the following:
1993 1992 1991
--------- --------- ---------
Federal:
Current $ 21,355 $ 7,257 $ 23,915
Deferred (7,052) (4,594) (2,617)
Deferred investment
tax credits, net (122) (124) (195)
--------- --------- ---------
14,181 2,539 21,103
--------- --------- ---------
State and local:
Current 5,240 2,093 5,829
Deferred (1,390) (1,076) (629)
--------- --------- ---------
3,850 1,017 5,200
--------- --------- ---------
Foreign:
Current - - -
Deferred 89 (89) -
--------- --------- ---------
89 (89) -
--------- --------- ---------
$ 18,120 $ 3,467 $ 26,303
========= ========= =========
PAGE
For the year ended December 31, 1992, provision for income
taxes was included in the financial statements as follows:
1992
---------
Continuing operations $ 5,076
Transition effect of change in
accounting for postretirement
benefits other than pensions (1,609)
---------
$ 3,467
=========
Recently enacted tax laws raised the statutory tax rate for
corporations from 34% to 35%, retroactive to January 1, 1993.
Partially offsetting the adverse impact of the 1% increase in
effective tax rates in 1993 and future periods is the favorable
adjustment of $.7 million recorded in 1993 due to the
revaluation of certain deferred tax assets.
The effective income tax rate for the years ended December 31,
1993, 1992 and 1991, varied from the statutory federal income
tax rate as follows:
1993 1992 1991
--------- --------- ---------
Statutory federal
income tax rate 35.0% 34.0% 34.0%
State and local income taxes,
net of federal income tax
benefit 5.7 6.8 5.0
Other 0.5 (1.9) (0.4)
--------- --------- ---------
41.2% 38.9% 38.6%
========= ========= =========
PAGE
The tax effect of significant temporary differences
representing deferred tax assets and liabilities is as follows
for the year ended December 31, 1991:
1991
---------
Reserve for returns, allowances, cash
discounts and doubtful accounts $ (2,780)
Reserve for inventories and related items 616
Depreciation of plant and equipment 617
Reserve for display fixtures (500)
Accrued compensation and benefits (1,479)
Other 280
---------
$ (3,246)
=========
Deferred taxes are determined based on the estimated future tax
effects of differences between the financial statement and tax
bases of assets and liabilities given the provisions of
currently enacted tax laws.
The net deferred taxes are comprised of the following:
1993 1992
--------- ---------
Current deferred taxes:
Gross assets $ 37,573 $ 32,646
Gross liabilities (777) (699)
--------- ---------
36,796 31,947
--------- ---------
Noncurrent deferred taxes:
Gross assets 12,745 8,180
Gross liabilities (11,241) (10,350)
Deferred investment
tax credits (402) (523)
--------- ---------
1,102 (2,693)
--------- ---------
$ 37,898 $ 29,254
========= =========
The Company did not record any valuation allowances against
deferred tax assets at January 1, 1992, December 31, 1992 or
December 31, 1993, due to the substantial amounts of taxable
income generated over the last three to five years.
PAGE
The tax balances of significant temporary differences
representing deferred tax assets and liabilities for the years
ended December 31, 1993 and 1992 were as follows:
1993 1992
--------- ---------
Reserve for returns, allowances,
cash discounts and doubtful
accounts $ 22,279 $ 21,828
Reserve for inventories
and related items 7,655 4,959
Postretirement benefits 1,885 1,851
Depreciation of plant
and equipment (11,078) (10,294)
Reserve for display fixtures 1,644 1,476
Accrued compensation and benefits 10,854 7,700
Other accruals and reserves 5,061 2,257
Deferred investment tax credits
benefits other than pensions (402) (523)
--------- ---------
$ 37,898 $ 29,254
========= =========
Note 8--Other Current Liabilities
Other current liabilities at December 31, 1993 and 1992,
consist of the following:
1993 1992
--------- ---------
Compensation, payroll taxes and
related withholdings $ 14,110 $ 10,626
Sales, service and
advertising costs 22,915 23,157
Other 23,454 19,492
--------- ---------
$ 60,479 $ 53,275
========= =========
PAGE
Note 9--Postretirement Benefits
The Company sponsors a defined benefit pension plan (the
Retirement Plan) covering substantially all employees who meet
certain eligibility requirements. Benefits are based upon years
of service and average compensation levels. The Company's
general funding policy is to contribute amounts deductible for
federal income tax purposes. Contributions are intended to
provide not only for benefits earned to date, but also for
benefits expected to be earned in the future.
The following table sets forth the Retirement Plan's funded
status on the measurement dates, September 30, 1993 and 1992,
and a reconciliation of the funded status to the amounts
recognized in the Company's consolidated balance sheets at
December 31, 1993 and 1992:
1993 1992
--------- ---------
Actuarial present value of
benefit obligations:
Vested benefit obligation $ 49,995 $ 42,871
========= =========
Accumulated benefit
obligation $ 54,203 $ 46,296
========= =========
Projected benefit
obligation for services
rendered to date $ 66,183 $ 59,329
Plan assets at fair market value 62,106 56,457
--------- ---------
Plan assets less than projected
benefit obligation (4,077) (2,872)
Unrecognized net asset at
January 1, 1986, being
recognized over 9.9 years (873) (1,332)
Unrecognized prior service cost 1,852 2,553
Unrecognized net gain resulting
from experience different from
assumed and effects of changes
in assumptions (4,565) (3,639)
--------- ---------
Accrued pension expense included
in other liabilities $ (7,663) $ (5,290)
========= =========
The fair market value of the Retirement Plan's assets at
December 31, 1993 and 1992, was $61,559 and $58,474,
respectively. The changes in asset values relative to the
measurement dates are primarily due to fluctuations in the
market value of the plan's equity investments.
PAGE
In 1990, the Company established a nonqualified defined benefit
plan for employees whose benefits under the Retirement Plan are
limited by provisions of the Internal Revenue Code.
Additionally in 1990, the Company established a nonqualified
defined benefit plan to provide supplemental retirement benefits
for selected executives in addition to benefits provided under
other Company plans. A nonqualified plan was also established
to provide retirement benefits for members of the Company's
Board of Directors who are not covered under any of the
Company's other plans. All plans established in 1990 were
unfunded at December 31, 1993 and 1992, although assets for
those plans are held in certain grantor tax trusts known as
"Rabbi" trusts. These assets are subject to claims of the
Company's creditors but otherwise must be used only for purposes
of providing benefits under the plans.
The following table sets forth the nonqualified defined benefit
plans' benefit obligations on the measurement dates, September
30, 1993 and 1992, and a reconciliation of those obligations to
the amounts recognized in the Company's consolidated balance
sheets at December 31, 1993 and 1992:
1993 1992
--------- ---------
Actuarial present value of
benefit obligations:
Vested benefit obligation $ 3,431 $ 2,402
========= =========
Accumulated benefit
obligation $ 4,396 $ 3,206
========= =========
Projected benefit
obligation for services
rendered to date $ 5,321 $ 3,870
Plan assets at fair market value - -
--------- ---------
Unfunded projected
benefit obligation (5,321) (3,870)
Unrecognized prior service cost 2,254 2,163
Unrecognized net loss resulting
from experience different from
assumed and effects of changes
in assumptions 834 169
--------- ---------
Accrued pension expense included
in other liabilities $ (2,233) $ (1,538)
========= =========
PAGE
The assumed weighted average discount rate and rate of increase
in future compensation levels used in determining the actuarial
present value of the projected benefit obligation for the plans
was 7.0% and 5.0% in 1993 and 8.0% and 6.0% in 1992,
respectively. The assumed long-term rate of return on plan
assets used for valuation purposes was 9.0% for 1993 and 1992.
A summary of the components of net pension expense for all of
the Company's defined benefit plans for the years ended December
31, 1993, 1992 and 1991, is as follows:
1993 1992 1991
--------- --------- ---------
Service cost-benefits earned
during the period $ 2,917 $ 2,834 $ 2,529
Interest cost on projected
benefit obligation 5,092 4,758 4,323
Net amortization and deferral
income tax benefit 128 159 6,923
Expected return on plan assets (4,941) (4,610) (11,064)
-------- --------- ---------
$ 3,196 $ 3,141 $ 2,711
======== ========= =========
The Company has a defined contribution pension plan for
employees who are members of a collective bargaining unit.
Benefits under this plan are determined based upon years of
service and an hourly contribution rate. Pension expense for
this plan for the years ended December 31, 1993, 1992 and 1991,
was $451, $479 and $410, respectively.
The Company has two defined contribution plans pursuant to
Section 401(k) of the Internal Revenue Code. The plans provide
that employees meeting certain eligibility requirements may
defer a portion of their salary subject to certain limitations.
The Company pays certain administrative costs of the plans and
contributes to the plans based upon a percentage of the
employee's salary deferral and an annual additional contribution
at the discretion of the Board of Directors. The total expense
for these plans for the years ended December 31, 1993, 1992 and
1991, was $501, $481 and $511, respectively.
In addition to providing pension benefits, the Company provides
medical and life insurance benefits for certain eligible
employees upon retirement from the Company. Substantially all
employees may become eligible for such benefits upon retiring
from active employment of the Company. Medical and life
insurance benefits for employees and retirees are paid by a
combination of company and employee or retiree contributions.
Retiree insurance benefits are provided by insurance companies
whose premiums are based on claims paid during the year. The
PAGE
Company adopted the provisions of SFAS No. 106 effective January
1, 1992. This standard requires companies to accrue an
actuarially determined charge for postretirement benefits during
the period in which active employees become eligible, under
existing plan agreements, for such future benefits. The
cumulative effect of this change resulted in a charge to net
income of $2,487 or $.15 per share, after taxes of $1,609. Prior
to January 1, 1992, the Company recognized these costs, which
were not significant to operations, on a cash basis.
Net periodic cost of these benefits for the years ended
December 31, 1993 and 1992 is as follows:
1993 1992
--------- ---------
Service cost-benefits earned
during the period $ 148 $ 139
Interest cost on
accumulated benefits 470 343
Net amortization 61 -
--------- ---------
$ 679 $ 482
========= =========
A reconciliation of the accumulated postretirement benefit
obligation (APBO) measured as of September 30, 1993 and 1992 to
the Company's consolidated balance sheets at December 31, 1993
and 1992 was as follows:
1993 1992
--------- ---------
Retirees $ 3,514 $ 2,681
Fully eligible active employees 1,228 1,257
Other active employees 1,084 479
--------- ---------
Accumulated benefit obligation 5,826 4,417
Unrecognized prior service cost (771) -
Unrecognized net loss (383) -
--------- ---------
Accrued APBO included in
other liabilities $ 4,672 $ 4,417
========= =========
PAGE
The accumulated benefit obligation for 1993 and 1992 was
determined using the following assumptions:
1993 1992
----------------------- -----------------------
Discount rate 7% 8%
Health care cost
trend rate 11% for 1994 graded down 16% for 1993 and 1994,
1% per year to 5% in the gradually declining to
year 2000, 5% thereafter a rate of 6% by 2003
The health care cost trend rate assumption does not have a
significant effect on the amounts reported. For example, a 1%
increase in the health care cost trend rate would increase the
accumulated postretirement benefit obligation as of December 31,
1993, and the net periodic cost for the year then ended by
approximately 5% and 4%, respectively.
Note 10--Stockholders' Equity
Employee stock plans
Under various stock option and incentive plans, the Company may
grant incentive and nonqualified stock options to purchase its
common stock. All incentive options are granted at the fair
market value on the date of grant. Incentive stock options
generally become exercisable one year after the date granted and
expire ten years after the date granted, if not earlier expired
due to termination of employment. Nonqualified stock options
become exercisable according to a vesting schedule determined at
the date granted and expire on the date set forth in the option
agreement, if not earlier expired due to termination of
employment.
A summary of stock option activity during the years ended
December 31, 1993, 1992 and 1991, is as follows:
1993 1992 1991
--------- --------- ---------
Number of options to purchase
common stock:
Outstanding at
beginning of year 1,073,470 646,958 782,529
Granted 47,500 534,900 37,000
Exercised (26,348) (93,021) (151,338)
Expired (31,580) (15,367) (21,233)
--------- --------- --------
Outstanding at end of year 1,063,042 1,073,470 646,958
========= ========= ========
Exercisable at end of year 666,594 439,641 408,294
========= ========= ========
The exercise prices of options granted in 1993 ranged from
$18.88 to $21.25. The exercise prices of options granted in
1992 ranged from $18.38 to $28.63 and the exercise price of
options granted in 1991 ranged from $24.75 to $28.00. Options
exercised were at prices of $2.38 to $23.50, in 1993, 1992 and
1991. Options outstanding at December 31, 1993, are at prices
ranging from $11.38 to $28.63.
Under certain stock incentive plans, the Company may grant the
right to purchase restricted shares of its common stock. Such
shares are subject to restriction on transfer and to repurchase
by the Company. The purchase price of restricted shares is
determined by the Company and may be nominal. In 1993, 1992 and
1991, 0, 5,000 and 38,500 restricted shares, respectively, were
purchased at a price of $1.00 per share.
At December 31, 1993, 621,192 shares were available under the
stock option and incentive plans, of which 563,166 shares could
be issued as restricted shares.
Stock rights
On December 4, 1987, the Company's Board of Directors declared
a dividend distribution of one right for each outstanding share
of the Company's common stock to stockholders of record on
December 21, 1987. Each right entitles the holder to purchase,
for the exercise price of $40 per share, 1/100th of a share of
Series A Preferred Stock. Until exercisable, the rights are
attached to all shares of the Company's common stock outstanding.
The rights are exercisable only in the event that a person or
group of persons (i) acquires 20% or more of the Company's
common stock and there is a public announcement to that effect,
(ii) announces an intention to commence or commences a tender or
exchange offer which would result in that person or group owning
30% or more of the Company's common stock, or (iii) beneficially
owns a substantial amount (at least 15%) of the Company's common
stock and is declared to be an Adverse Person (as defined in the
Rights Agreement) by the Company's Board of Directors. Upon a
merger or other business combination transaction, each right may
entitle the holder to purchase common stock of the acquiring
company worth two times the exercise price of the right. Under
certain other circumstances (defined in the Rights Agreement)
each right may entitle the holder (with certain exceptions) to
purchase common stock, or in certain circumstances, cash,
property or other securities of the Company, having a value
worth two times the exercise price of the right.
The rights are redeemable at one cent per right at anytime
prior to 20 days after the public announcement that a person or
group has acquired 20% of the Company's common stock. Unless
exercised or redeemed earlier by the Company, the rights expire
on December 28, 1997.
PAGE
Note 11--Commitments
Lease commitments
The Company has a long-term lease agreement for certain of its
principal facilities. The initial lease term runs through
January 31, 2002, with two five-year renewal options available.
The basic rent under the lease is subject to adjustment based on
changes in the Consumer Price Index for the preceding five
years, effective March 1, 1987, and every five years thereafter
including renewal periods. The lease provides a purchase option
exercisable in 2002. The option price is the higher of $35,400
or the fair market value on the date of exercise. As a
condition of the lease, all property taxes, insurance costs and
operating expenses are to be paid by the Company.
The Company also leases additional manufacturing, distribution
and administrative facilities, sales offices and personal
property under noncancellable leases which expire on various
dates through 2003. Certain of these leases contain renewal
and escalating rental payment provisions.
Rental expense for the years ended December 31, 1993, 1992 and
1991, on all real and personal property, was $20,297, $15,846
and $13,777, respectively. Minimum future annual rentals under
noncancellable leases for each of the years in the five-year
period ended December 31, 1998 are $17,444, $16,242, $14,190,
$12,759 and $9,842, respectively. After 1998, these commitments
aggregate $25,364.
Contract commitments
The Company has several long-term customer sales agreements
which require payments and credits for each of the years in the
five-year period ended December 31, 1998, of $3,959, $1,347,
$707, $443 and $242, respectively. After December 31, 1998,
these commitments aggregate $100. All of these amounts have
been recorded as other current liabilities or other liabilities
in the accompanying balance sheet as of December 31, 1993.
Employment agreements
The Company has employment agreements with certain executives
which provide for, among other things, minimum annual salaries
adjusted for cost-of-living changes, continued payment of
salaries in certain circumstances and incentive bonuses.
Certain agreements further provide for signing bonuses, deferred
compensation payable upon expiration of the agreements and
employment termination payments, including payments contingent
upon any person becoming the beneficial owner of 50% or greater
of the Company's outstanding stock.
PAGE
Note 12--Legal Proceedings
In 1990, a complaint was issued against the Company alleging
certain unfair labor practices in connection with a strike at
one of its facilities. On December 18, 1991, an Administrative
Law Judge of the National Labor Relations Board ("NLRB") issued
a recommended order, which included reinstatement and back pay
affecting approximately 160 strikers, based on findings that the
Company had violated certain provisions of the National Labor
Relations Act. On May 7, 1993, the NLRB upheld the
Administrative Law Judge's decision in some respects, and
enlarged the number of strikers entitled to back pay to
approximately 240. A prompt notice of appeal was filed in the
United States Court of Appeals for the District of Columbia
Circuit. Management believes it has substantial defenses to
these charges and these defenses will be presented in briefs in
the Company's appeal. In addition, the Company is a defendant
in certain other litigation. Management does not believe that
an adverse outcome as to any or all of these matters would have
a material adverse effect on the Company's net worth or total
cash flows; however, the impact on the statement of operations
in a given year could be material.
PAGE
Report of Independent Public Accountants
To Gibson Greetings, Inc.:
We have audited the accompanying consolidated balance sheets of
Gibson Greetings, Inc. (a Delaware corporation) and its
subsidiaries as of December 31, 1993 and 1992, and the related
consolidated statements of income, cash flows and changes in
stockholders' equity for each of the three years in the period
ended December 31, 1993. These financial statements and the
schedules referred to below are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements and schedules based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Gibson Greetings, Inc. and its subsidiaries as of December
31, 1993 and 1992, and the results of their operations and their
cash flows for each of the three years in the period ended
December 31, 1993 in conformity with generally accepted
accounting principles.
As discussed in notes to consolidated financial statements,
effective January 1, 1992, the Company changed its methods of
accounting for postretirement benefits other than pensions and
income taxes.
Our audits were made for the purpose of forming an opinion on
the basic financial statements taken as a whole. The schedules
listed in the index of financial statements are presented for
purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial
statements. These schedules have been subjected to the auditing
procedures applied in the audits of the basic financial
statements and, in our opinion, fairly state in all material
respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN & CO.
Cincinnati, Ohio,
March 4, 1994.
PAGE
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Not applicable.
PART III
Except as set forth below, the information required by this Part
is included in the Company's definitive Proxy Statement, filed
with the Securities and Exchange Commission in connection with
the Company's 1994 Annual Meeting of Stockholders, and is
incorporated by reference herein.
Item 10. Directors and Executive Officers of the Registrant
The Executive Officers of the Company (at March 18, 1994) are
as follows:
Name Age Title
------------------- --- ----------------------------
Benjamin J. Sottile 56 Chairman of the Board,
President and
Chief Executive Officer
Ralph J. Olson 49 Vice President and Director
William L. Flaherty 46 Vice President, Finance and
Chief Financial Officer
James H. Johnsen 52 Vice President, Controller
and Treasurer
Stephen M. Sweeney 57 Vice President, Human
Resources
Information about Mr. Sottile is incorporated by reference from
the Company's definitive Proxy Statement for the 1994 Annual
Meeting of Stockholders.
RALPH J. OLSON. Mr. Olson is a Vice President of the Company
and is President and Chief Operating Officer of the Company's
Gibson Card Division, positions he has held since 1991. From
1989 until 1991, he was President of the E-Z Go Division of
Textron, Inc., a manufacturer of golf and utility vehicles.
During the period from 1984 until 1989, he was President of the
Material Handling Division of Interlake Corp., specializing in
material handling, automation and storage systems.
WILLIAM L. FLAHERTY. Mr. Flaherty has been Vice President,
Finance and Chief Financial Officer of the Company since
November 1993. Prior to that time, he served as Vice President
and Corporate Treasurer of FMR Corp., the parent company of
Fidelity Investments Group, a mutual fund management and
discount stock brokerage firm (1989 - 1992) and as Vice President
and Treasurer of James River Corporation , an integrated
manufacturer of pulp, paper and converted paper and plastic
products (1987 - 1989).
JAMES H. JOHNSEN. Mr. Johnsen is the Company's Vice President,
Controller and Treasurer and Assistant Secretary. He joined the
Accounting Department of the Company in 1964 and served as the
Company's Corporate Controller from 1978 until 1986 and as its
Treasurer from 1980 until 1986, at which time he was elected
Vice President, Control and Treasurer.
STEPHEN M. SWEENEY. Mr. Sweeney joined the Company as Vice
President, Human Resources in 1987. He held similar positions
with Coca Cola Enterprises, Inc. from 1985 until 1987, the
Tribune Company from 1983 until 1985 and Contel, Inc. from 1976
to 1983.
Officers serve with the approval of the Board of Directors.
PAGE
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
a) The following documents are filed as part of this report:
1. Financial Statements:
Page
Herein Financial Statement
------ -----------------------------------------------------
11 Consolidated Statements of Income for the years ended
December 31, 1993, 1992 and 1991
12 Consolidated Balance Sheets as of December 31, 1993
and 1992
13 Consolidated Statements of Cash Flows for the years
ended December 31, 1993, 1992 and 1991
14 Consolidated Statements of Changes in Stockholders'
Equity for the years ended December 31, 1993, 1992
and 1991
15 Notes to Consolidated Financial Statements
26 Report of Independent Public Accountants
2. Financial Statement Schedules required to be filed by Item 8
of this Form 10-K:
Schedules Filed:
Page
Herein Schedule
------ -----------------------------------------------------
30 II Amounts Receivable from Related Parties
31 VIII Valuation and Qualifying Accounts
32 IX Short-term Borrowings
33 X Supplementary Income Statement Information
All other schedules are omitted because of the absence of
conditions under which they are required or because the information
is shown in the financial statements or notes thereto.
3. Exhibits: See Index of Exhibits (page 34) for a listing of
all exhibits filed with this annual report on Form 10-K
b) Reports on Form 8-K: None.
PAGE
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized as
of the 18th day of March 1994.
Gibson Greetings, Inc.
By /s/ Benjamin J. Sottile
-----------------------
Benjamin J. Sottile
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons on behalf of
the registrant and in the capacities indicated as of the 18th day of
March 1994.
Signature Title
---------- -----
Chairman of the Board,
/s/ Benjamin J. Sottile President and Chief Executive Officer
-------------------------
Benjamin J. Sottile (principal executive officer)
Vice President, Finance
/s/ William L. Flaherty Chief Financial Officer
-------------------------
William L. Flaherty (principal financial officer)
Vice President, Controller
/s/ James H. Johnsen and Treasurer
-------------------------
James H. Johnsen (principal accounting officer)
/s/ Thomas M. Cooney
-------------------------
Thomas M. Cooney Director
/s/ Julius Koppelman
-------------------------
Julius Koppelman Director
/s/ Charles D. Lindberg
-------------------------
Charles D. Lindberg Director
/s/ Ralph J. Olson
-------------------------
Ralph J. Olson Director
/s/ Albert R. Pezzillo
-------------------------
Albert R. Pezzillo Director
/s/ Thomas J. Smith
-------------------------
Thomas J. Smith Director
/s/ Burton B. Staniar
-------------------------
Burton B. Staniar Director
/s/ Frank Stanton
-------------------------
Frank Stanton Director
/s/ Charlotte St. Martin
-------------------------
Charlotte St. Martin Director
/s/ Roger T. Staubach
-------------------------
Roger T. Staubach Director
/s/ C. Anthony Wainwright
-------------------------
C. Anthony Wainwright Director
-------------------------
Harry N. Walters Director
PAGE
GIBSON GREETINGS, INC.
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES
(Thousands of dollars)
Column A Column B Column C Column D Column E
- ----------------------- ---------- --------- ------------------------- -----------------------
Deductions Balance at End of Period
Balance at ------------------------- ------------------------
Beginning Amounts Amounts
Name of Debtor of Period Additions Collected Written Off Current Noncurrent
- ----------------------- ---------- --------- --------- ----------- --------- ----------
M. Sillence,
Operations Director,
Gibson Greetings
International Limited:
Twelve months
ended 12/31/93 $ 249 $ - $ 249 $ - $ - $ -
Twelve months
ended 12/31/92 322 (72) (A) - - 249 -
Twelve months
ended 12/31/91 - 322 (B) - - 322 -
P.M. Osman,
Managing Director,
Gibson Greetings
International Limited:
Twelve months
ended 12/31/93 - - - - - -
Twelve months
ended 12/31/92 99 45 (A) 144 - - -
Twelve months
ended 12/31/91 - 99 (C) - - 99 -
S. Kosmalski,
Senior Vice President
Sales:
Twelve months
ended 12/31/93 - - - - - -
Twelve months
ended 12/31/92 - 120 (D) 120 - - -
Twelve months
ended 12/31/91 - - - - - -
[FN]
- -----------------------
(A) Includes foreign currency translation adjustments.
(B) Real estate assistance loan, secured, bearing interest at 12%
if note not repaid by May 12, 1993 or upon sale of principal
residence, whichever occurs first.
(C) Real estate assistance loan, secured, bearing interest at 12%
if note not repaid by November 14, 1992 or upon sale of
principal residence, whichever occurs first.
(D) Real estate assistance loan, secured, bearing interest at 12%
if note not repaid by September 15, 1992 or upon sale of
principal residence, whichever occurs first.
PAGE
GIBSON GREETINGS, INC.
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
(Thousands of dollars)
Column A Column B Column C Column D Column E
- -------------------- ---------- ------------------------- ---------- ----------
Additions
-------------------------
Balance at Charged to Charged to Balance at
Beginnng Costs and Other End of
Description of Period Expenses Accounts Deductions Period
- -------------------- ---------- ---------- ---------- ---------- ----------
Deducted from
trade receivables
Allowance for
doubtful accounts:
Twelve months
ended 12/31/93 $ 7,515 $ 4,188 $ - $ 1,102 (A) $ 10,601
Twelve months
ended 12/31/92 8,950 11,549 - 12,984 (A) 7,515
Twelve months
ended 12/31/91 6,850 4,094 - 1,994 (A) 8,950
Allowance for sales
returns, allowances
and cash discounts:
Twelve months
ended 12/31/93 45,902 89,987 - 92,971 (B) 42,918
Twelve months
ended 12/31/92 45,490 100,813 - 100,401 (B) 45,902
Twelve months
ended 12/31/91 41,020 116,414 - 111,944 (B) 45,490
[FN]
- --------------------
(A) Accounts that were judged to be uncollectible and charged to the
reserve, net of recoveries.
(B) Includes actual cash discounts taken by customers and sales returns
and allowances that were granted to customers, all of which were
charged to the reserve.
PAGE
GIBSON GREETINGS, INC.
SCHEDULE IX - SHORT-TERM BORROWINGS
(Thousands of dollars)
Column A Column B Column C Column D Column E
- ---------------------- ---------- -------------------------- ----------- ----------
Weighted
Maximum Average Average
Weighted Amount Amount Interest
Balance at Average Outstanding Outstanding Rate
Category of Aggregrate End of Interest During the During the During the
Short-Term Borrowings Period Rate Period Period Period
- ---------------------- ---------- ---------- ----------- ----------- ----------
Bank Debt (D):
Twelve months
ended 12/31/93 $ 49,250 3.58 % $ 59,250 $ 17,133 3.55 %
Twelve months
ended 12/31/92 30,100 3.58 51,000 16,129 4.21
Twelve months
ended 12/31/91 70,500 6.10 99,200 60,603 6.59
Commercial Paper (D):
Twelve months
ended 12/31/93 13,020 3.60 20,000 1,609 3.36
Twelve months
ended 12/31/92 - - 49,000 4,589 3.63
Twelve months
ended 12/31/91 - - 7,000 2,333 7.14
[FN]
- ----------------------
(A) The maximum amount outstanding during the period was
determined as of month-end.
(B) The average amount outstanding during the period was
computed based on the average daily outstanding balance.
(C) The weighted average interest rate during the period
was computed by dividing actual short-term interest expense
by the average amount outstanding during the period.
(D) See Note 6 of Notes to fiscal year 1993 and 1992
Consolidated Financial Statements and Note 8 of
Notes to fiscal year 1991 Consolidated Financial
Statements, each Note contained in or incorporated by
reference into the Company's annual report on Form 10-K
for that year, for information on short-term borrowing
facilities.
PAGE
GIBSON GREETINGS, INC.
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
(Thousands of dollars)
Column A Column B
- ---------------------- ----------------------------------------
Twelve Months Ended December 31,
----------------------------------------
Item 1993 1992 1991
- ---------------------- ---------- ---------- ----------
Royalty expense $ 7,086 $ 6,191 $ 6,419
PAGE
Index of Exhibits
Exhibit
Number Description
------- -----------------------------------------------------------------
3(a) Restated Certificate of Incorporation as amended (*1)
3(b) Bylaws
4(a) Article 4.01 of Restated Certificate of Incorporation
(included in Exhibit 3(a))
4(b) Rights Agreement dated as of December 4, 1987, between
Gibson Greetings, Inc. and The First National Bank of Boston,
Rights Agent, including Certificate of Designation, Preferences
and Rights of Series A Preferred Stock (*2)
10(a) Lease Agreement dated January 25, 1982 between
Corporate Property Associates 2 and Corporate Property
Associates 3 and Gibson Greeting Cards, Inc. (*3)
10(b) Sublease Agreement dated January 1, 1977 between B.F.
Goodrich and Cleo Wrap Division of Gibson Greetings Card, Inc.
(*3)
10(c) Amendment and Extension of Term of Sublease dated June
26, 1983, between B.F. Goodrich Company and Gibson Greeting
Cards, Inc. (*4)
10(d) Amendment dated June 25, 1985, to Lease Agreement,
dated January 25, 1982, by and between Corporate Property
Associates 2 and Corporate Property Associates 3 and Gibson
Greeting Cards, Inc. (*5)
10(e) Lease and Agreement dated March 7, 1986 between
Associated Warehouses, Inc. and Cleo Wrap Division of Gibson
Greetings, Inc. (*5)
10(f) Commercial Paper Issuing Agent Agreement dated as of
July 11, 1986, between Gibson Greetings, Inc. and Irving Trust
Corporation (*6)
10(g) Commercial Paper Dealer Agreement dated July 16, 1986,
between Gibson Greetings, Inc. and The First Boston Corporation
(*6)
10(h) Credit Agreement, dated as of April 26, 1993, by and
among Gibson Greetings, Inc.; Bankers Trust Company; The Bank of
New York; Mellon Bank, N.A.; The Fifth Third Bank; Harris Trust
and Savings Bank; NBD Bank, N.A.; Royal Bank of Canada; The
Sanwa Bank, Ltd.; Society National Bank; Union Bank of
Switzerland; Wachovia Bank of Georgia, N.A.; and Bankers Trust
Company, as agent (*7)
10(i) Form of Note Agreement between Gibson Greetings, Inc.
and Connecticut Mutual Life, The Minnesota Mutual Life Insurance
Company, The Reliable Life Insurance Company, Federated Life
Insurance Company, The Variable Annuity Life Insurance Company
and Nationwide Life Insurance Company, dated May 15, 1991 (*8)
10(j) Executive Compensation Plans and Arrangements
(i) 1982 Stock Option Plan
(ii) 1983 Stock Option Plan
(iii) 1985 Stock Option Plan
(iv) 1987 Stock Option Plan
(v) 1989 Stock Option Plan
(vi) 1989 Stock Option Plan for Nonemployee Directors
(vii) 1991 Stock Option Plan
(viii) Employment Agreement with Mr. Cooney (*9)
(ix) Form of Second Amendment to Employment Agreement with
Mr. Cooney (*1)
PAGE
Exhibit
Number Description
------- -----------------------------------------------------------------
(x) Employment Agreement between Gibson Greetings, Inc.
and Benjamin J. Sottile, dated April 1, 1993 (*7)
(xi) Compensatory agreements (*10)
(xii) ERISA Makeup Plan (*11)
(xiii) Supplemental Executive Retirement Plan (*11)
(xiv) Agreements dated January 2, 1991 and December 10, 1993
between Gibson Greetings, Inc. and Stephen M. Sweeney
(xv) Agreement dated November 18, 1993 between Gibson
Greetings, Inc. and William L. Flaherty
(xvi) Agreement dated February 22, 1994 between Gibson
Greetings, Inc. and Michael A. Pietrangelo
11 Computation of Income per Share
21 Subsidiaries of the Registrant
23 Consent of Independent Public Accountants
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* Filed as an Exhibit to the document indicated and
incorporated herein by reference:
(1) The Company's Report on Form 10-K for the year ended
December 31, 1988.
(2) The Company's Report on Form 8-K dated December 28, 1987,
filed January 4, 1988.
(3) The Company's Registration Statement on Form S-8 (No.
2-82990).
(4) The Company's Registration Statement on Form S-8 (No.
2-96396).
(5) The Company's Report on Form 10-K for the year ended
December 31, 1985.
(6) The Company's Report on Form 10-Q for the quarter ended
September 30, 1986.
(7) The Company's Report on Form 10-Q for the quarter ended
June 30, 1993.
(8) The Company's Report on Form 10-Q for the quarter ended
June 30, 1991.
(9) The Company's Report on Form 10-K for the year ended
December 31, 1986.
(10) The Company's Report on Form 10-K for the year ended
December 31, 1991.
(11) The Company's Report on Form 10-K for the year ended
December 31, 1992.
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The Company will furnish to the Commission upon request its
long-term debt instruments not listed above.