FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
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 0-4855
THE C. R. GIBSON COMPANY
INCORPORATED IN THE STATE OF DELAWARE 06-0361615
32 Knight Street, Norwalk, Connecticut 06856
Telephone number - (203) 847-4543
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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Common stock, $.10 par value: 7,289,451 shares as of July 31, 1995
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
The C. R. Gibson Company Condensed Consolidated Statement of Income
(unaudited)
(in thousands of dollars except per share data)
QUARTER ENDED SIX MONTHS
JUNE 30, ENDED JUNE 30,
------------- --------------
1995 1994 1995 1994
------ -------- -------- -------
Net sales $ 16,590 $ 16,265 $ 35, 565 $ 33,076
Cost of goods sold 9,942 9,542 21,445 19,630
------ -------- -------- -------
Gross profit 6,648 6,723 14,120 13,446
Selling, general and
administrative 5,038 5,067 10,432 10,273
Interest expense, net 365 222 675 416
------ -------- -------- -------
Income from continuing operations
before income taxes 1,245 1,434 3,013 2,757
Provision for income taxes 477 537 1,154 1,029
------ -------- -------- -------
Income from continuing operations 768 897 1,859 1,728
------ -------- -------- -------
Discontinued operations
Loss from operations of The
Rytex Company (net of income
tax benefits of $282 for the quarter
ended June 30, 1994, and $240 and
$671 for the six months ended June
30, 1995 and 1994, respectively) -- (535) (468) (1,260)
Loss on disposal of The Rytex
Company, including provision
of $542 for operating losses
during phase-out period (net of
income tax benefits of $134 and
$661 for the quarter and six
months ended June 30, 1995) (259) -- (1,281) --
------ -------- -------- -------
Loss from discontinued operations (259) (535) (1,749) (1,260)
------ -------- -------- -------
Net income $ 509 $ 362 $ 110 $ 468
===== ===== ===== =====
Net income (loss) per common share:
Continuing operations $ 0.11 $ 0.12 $ 0.26 $ 0.23
Discontinued operations $(0.04) $(0.07) $(0.24) $(0.17)
--------- --------- --------- ----------
Net income per common share $ 0.07 $ 0.05 $ 0.02 $ 0.06
========= ========= ========= ==========
Weighted average shares
outstanding 7,287,799 7,437,971 7,288,572 7,472,085
========= ========= ========= =========
See accompanying Notes to Unaudited Condensed Consolidated Financial
Statements.
(2)
The C. R. Gibson Company
Condensed Consolidated Balance Sheet
(thousands of dollars)
June 30, Dec. 31,
1995 1994
--------- --------
(Unaudited) (*Note)
ASSETS
Current assets:
Cash and cash equivalents $ 736 $ 1,000
Accounts receivable, less allowance for doubtful
accounts ($323 and $288) 12,879 11,026
Inventories 19,683 18,988
Prepaid expenses and other current assets 2,250 3,269
-------- --------
Total current assets 35,548 34,283
-------- --------
Property, plant, and equipment - net 16,498 18,331
Other assets 3,495 6,469
-------- --------
Total assets $ 55,541 $ 59,083
======== ========
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 6,550 $ 4,630
Accounts payable 2,499 5,307
Other liabilities 2,535 3,761
-------- --------
Total current liabilities 11,584 13,698
Long-term debt 13,018 13,302
Other long-term liabilities 1,327 1,360
-------- --------
Total liabilities 25,929 28,360
-------- --------
Shareholders' Equity:
Common Stock, $.10 par value:
Authorized - 15,000,000 shares
Issued - 7,760,113 shares (7,775,216 - 1994) 776 776
Capital contributed in excess of par value 10,924 10,900
Retained earnings 22,044 22,232
Cumulative translation adjustment (583) (596)
ESOP unearned compensation (1,150) (243)
Treasury stock, at cost - 320,662 shares
of Common Stock (313,023 shares in 1994) (2,399) (2,346)
-------- --------
Total shareholders' equity 29,612 30,723
-------- --------
Total liabilities and shareholders' equity $ 55,541 $ 59,083
======== ========
*NOTE:
The balance sheet at December 31, 1994 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
See accompanying Notes to Unaudited Condensed Consolidated Financial
Statements.
(3)
The C. R. Gibson Company
Condensed Consolidated Statement of Cash Flows (unaudited)
(thousands of dollars)
Six Months Ended June 30,
1995 1994
---- ----
Operating Activities:
Net income $ 110 $ 468
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation 1,600 1,620
Amortization 562 1,046
(Increase) decrease in cash surrender value
of life insurance (2) 534
Change in operating assets and liabilities:
Accounts receivable (1,853) (2,708)
Inventories (1,664) (1,431)
Prepaid and other current assets 2,069 (270)
Deferred promotion costs, net of charges
of $513 and $3,223 (164) (516)
Accounts payable and accrued expenses (3,825) 142
Other 13 (117)
------ ------
Net cash used in operating activities (3,154) (1,232)
------ ------
Investing Activities:
Purchases of property, plant and equipment (1,067) (2,054)
Other investing activities 1,405 (1,023)
Loan to ESOP (1,050) --
------ ------
Net cash used in investing activities (712) (3,077)
------ ------
Financing Activities:
Repurchase of treasury stock (53) (813)
Proceeds from the sale of The Rytex Company 2,055 --
Proceeds from lines of credit 1,920 1,000
Net proceeds from debt issuance -- 4,987
Proceeds from repayment of ESOP Loan 143 142
Principal payments on line of credit, long-term debt,
and capital lease obligations (197) (271)
Dividends paid (595) (597)
Other 329 9
------ ------
Net cash provided by financing activities 3,602 4,457
------ ------
(Decrease) increase in cash and cash equivalents (264) 148
Cash and cash equivalents at beginning of period 1,000 794
------ ------
Cash and cash equivalents at end of period $ 736 $ 942
===== ======
See accompanying Notes to Unaudited Condensed Consolidated Financial
Statements.
(4)
The C. R. Gibson Company
Notes to Unaudited Condensed Consolidated Financial Statements
June 30, 1995
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
Operating results for the three and six month periods ended June 30,
1995 are not necessarily indicative of the results that may be expected
for the year ending December 31, 1995. For further information, refer
to the financial statements and footnotes thereto incorporated into the
Company's Annual Report on Form 10-K for the year ended December
31,1994.
NOTE B -- INVENTORIES
The components of inventory are as follows (in thousands):
June 30, December 31,
1995 1994
-------- ------------
Raw materials $ 5,513 $ 5,914
Work in process 3,530 3,657
Finished goods 10,640 9,417
-------- --------
$ 19,683 $ 18,988
======== ========
NOTE C -- NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share is computed by dividing net income
(loss) by the weighted average number of common shares outstanding
during each period. There were 150,000 shares purchased by the Employee
Stock Ownership Plan in January 1995, currently held in suspense, which
are not considered outstanding and therefore not included in the
computation of net income (loss) per common share in 1995.
NOTE D -- SALE OF THE RYTEX COMPANY
On May 15, 1995, The C. R. Gibson Company sold substantially all of the
assets and business of its subsidiary, The Rytex Company ("Rytex"). The
sale to a wholly-owned subsidiary of The American Stationery Company,
Inc. was for a purchase price of approximately $3,100,000 in cash and
notes.
(5)
The sale of Rytex resulted in a net loss of $739,000. The remaining
assets of Rytex at June 30, 1995 consist of cash and accounts
receivable, net of a reserve, and the remaining liabilities consist of a
note payable, pension accrual and a reserve for remaining expenses
associated with the sale.
The consolidated statements of income of the Company have been restated
for all prior periods to report the net results of Rytex as a loss from
discontinued operations. For the six months ended June 30, 1995, Rytex
reported net sales of $3,092,000 compared to prior year's level of
$4,539,000. Net sales for the quarter ended June 30, 1995 decreased to
$574,000 from $1,777,000 for the same quarter last year. The following
previously reported and unaudited restated 1994 operating results of the
Company are as follows (dollars in thousands, except per share data):
Previously
Reported Restated
---------- --------
Net sales $78,208 $67,331
====== ======
Gross profit $31,259 $26,579
====== ======
Net loss $ (382) $ --
====== ======
Net loss per common share $ (0.05) $ --
====== ======
Income from continuing
operations $ -- $ 3,204
====== ======
Income from continuing
operations per share $ -- $ 0.43
====== ======
(6)
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
On May 15, 1995, the Company sold substantially all of the assets and
business of its Rytex subsidiary. The sale was for a purchase price of
approximately $3,100,000 in cash and notes. The consolidated statements
of income have been restated for all prior periods to report the net
results of Rytex as a loss from discontinued operations.
Net sales from continuing operations for the quarter ended June 30, 1995
increased by 2.0% to $16,590,000 from $16,265,000 for the same quarter
last year. For the six-month period ended June 30, 1995, sales
increased 7.5% to $35,565,000 compared to the prior year's level of
$33,076,000. Sales of the Company's Christmas Gift Wrap and Paper
Tableware products are significantly ahead of last year and the Mass
Market Infant Gift product sales remain strong. Income from continuing
operations for the six months ended June 30, 1995 was $1,859,000
compared to $1,728,000 for the same period last year, an increase of
7.6%. Income from continuing operations for the second quarter totaled
$768,000, a decrease from the 1994 amount of $897,000 for the same
period. This decrease is principally due to higher interest expense
associated with increased borrowing levels and higher rates as well as
increased paper costs.
Net income for the six months ended June 30, 1995 was $110,000 compared
to $468,000 for the same period last year. For the quarter ended June
30, 1995, net income was $509,000 compared to $362,000 for the quarter
ended June 30, 1994. The decrease in year to date earnings is due to
the loss from discontinued operations of $1,749,000 in 1995 versus
$1,260,000 in 1994 while the increase in the quarterly earnings in 1995
versus 1994 is also due to the loss from discontinued operations,
$259,000 in 1995 versus $535,000 in 1994.
Gross profit as a percent of sales for the quarter and six months ended
June 30, 1995 has declined from 1994 levels. This is principally due to
higher costs associated with raw material purchases as well as lower
margins in 1995 associated with the Company's Canadian subsidiary.
Selling, general and administrative expenses year to date amounted to
$10,432,000 as compared with $10,273,000 for the corresponding period in
1994. The increase is generally associated with the increased sales
volume. For the quarter ended June 30, 1995, selling, general and
administrative expenses decreased slightly to $5,038,000 from $5,067,000
for the comparable quarter of 1994.
(7)
Interest expense, net for the six-month period increased to $675,000 in
1995 from $416,00 in 1994. Interest for the second quarter of 1995
amounted to $365,000 as compared with $222,000 for the comparable
quarter of 1994. This increase is principally due to higher borrowing
levels as well as increased interest rates.
The effective tax rate from continuing operations was 38.3% for the six
months ended June 30, 1995 compared to 37.3% for the prior year period.
For the quarter ended June 30, 1995, the effective tax rate from
continuing operations was 38.3% compared to 37.4% for the second quarter
of 1994.
The ratio of current assets to current liabilities was 3.1 to 1 at the
end of the second quarter of 1995, compared to 2.5 to 1 at December 31,
1994. Working capital amounted to $25,014,000 at June 30, 1995,
compared to $20,585,000 at December 31, 1994. This increase is
principally due to the effect that the sale of Rytex had on current
assets and current liabilities at June 30, 1995.
The decrease in accounts payable and other liabilities from December 31,
1994 to June 30, 1995 is principally due to Rytex. Rytex had $2,085,000
in accounts payable and $792,000 in other liabilities at December 31,
1994 versus $0 at June 30, 1995. The decrease in other assets is
principally due to the amortization of $1,965,000 of other assets at
Rytex in 1995 during both the operating and phase-out periods and the
sale of $700,000 of other assets on May 15, 1995.
In January 1995, the Employee Stock Ownership Plan purchased 150,000
shares of the Company's common stock at a cost of $1,050,000.
Other than the sale of Rytex, there were no other significant changes in
capitalization of the Company during the quarter ended June 30, 1995,
nor has the Company entered into any significant financial arrangement
not reflected in the financial statements. The Company expects that
available cash and existing lines of credit will be sufficient to meet
its normal operating requirements.
(8)
PART II
Item 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The 1995 Annual Meeting of Shareholders was held on May 9, 1995.
(b) No response required in accordance with Instruction 3 to Item 4.
(c) The following matters were voted upon at the meeting and the
numbers of votes cast for, against, abstained or withheld, and
broker non-votes are as follows:
Election of the following individuals to the Board of Directors:
FOR WITHHELD BROKER NONVOTES
--- -------- ---------------
Robert G. Bowman 7,065,284 31,706 280,059
Joanna Bradshaw 7,049,588 47,402 280,059
Richard E. Cheney 7,063,094 33,896 280,059
Rudolph Eberstadt, Jr. 7,063,094 33,896 280,059
Robert Garrett 7,065,488 31,502 280,059
James M. Harrison 7,055,777 41,213 280,059
Barbara M. Henagan 7,034,253 62,737 280,059
Willard J. Overlock 7,062,267 34,723 280,059
Frank A. Rosenberry 5,767,097 1,329,893 280,059
John G. Russell 7,053,177 43,813 280,059
Robert J. Simon 6,967,250 129,740 280,059
Appointment of Ernst & Young LLP as independent auditors for the year 1995:
7,003,225 for, 53,745 against, 40,020 abstained, and 280,059 broker non-
votes.
(d) Not applicable.
(9)
PART II
Item 6.
(a) EXHIBITS
EXHIBIT NO. DESCRIPTION
10 Form of Indemnification Agreement dated
as of July 14, 1995 entered into between
The C. R. Gibson Company and each of its
directors
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
The registrant filed no reports of Form 8-K during the second
quarter of 1995.
SIGNATURES
Pursuant to the requirements 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.
THE C. R. GIBSON COMPANY
(registrant)
By: /S/ FRANK A. ROSENBERRY
Frank A. Rosenberry
President and Chief Executive Officer
By: /S/ JOHN S. CONLON
John S. Conlon
Controller (Chief Accounting Officer)
August 11, 1995
(10)
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
10 Form of Indemnification Agreement dated
as of July 14, 1995 entered into between
The C. R. Gibson Company and each of its
directors
27 Financial Data Schedule