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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2002
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Commission File Number: 00-19800
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GIBRALTAR PACKAGING GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 47-0496290
(State of incorporation) (I.R.S. Employer Identification Number)
2000 SUMMIT AVENUE
HASTINGS, NEBRASKA 68901
(Address of principal (Zip Code)
executive offices)
(402) 463-1366 WWW.GIBRALTARPACKAGINGGROUP.COM
(Registrant's telephone (Registrant's website)
number, including area code)
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. |X| Yes |_| No
As of September 30, 2002, there were 5,041,544 shares of the Company's
common stock, par value $0.01 per share, issued and outstanding.
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
INDEX
Page Number
-----------
PART I. FINANCIAL INFORMATION
- ------- ---------------------
Item 1. Financial Statements
Consolidated Balance Sheets 1
As of September 30, 2002 (Unaudited) and June 29, 2002
Consolidated Statements of Operations (Unaudited) for the 2
Three Months Ended September 30, 2002 and 2001
Consolidated Statements of Cash Flows (Unaudited) for the 3
Three Months Ended September 30, 2002 and 2001
Notes to Consolidated Financial Statements (Unaudited) 4
Item 2. Management's Discussion and Analysis of Financial 6
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk 13
Item 4. Controls and Procedures 13
PART II. OTHER INFORMATION
- -------- -----------------
Item 1. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 14
Signature 15
Certifications Pursuant to 17 CFR Section 240.13a-14 16
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
September 30, June 29,
2002 2002
-------- --------
ASSETS (Unaudited)
CURRENT ASSETS:
Cash $ 64 $ 45
Accounts receivable (NET OF ALLOWANCE FOR
DOUBTFUL ACCOUNTS OF $553 AND $521, RESPECTIVELY) 5,689 5,432
Inventories 7,474 7,317
Deferred income taxes 703 703
Prepaid and other current assets 474 423
-------- --------
Total current assets 14,404 13,920
PROPERTY, PLANT AND EQUIPMENT - NET 15,130 15,687
GOODWILL 4,112 4,112
OTHER ASSETS (NET OF ACCUMULATED AMORTIZATION
OF $115 AND $83, RESPECTIVELY) 792 825
-------- --------
TOTAL $ 34,438 $ 34,544
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Checks not yet presented $ 998 $ 718
Current portion of long-term debt 3,346 3,349
Accounts payable 3,533 4,036
Accrued expenses 2,597 3,254
-------- --------
Total current liabilities 10,474 11,357
LONG-TERM DEBT - Net of current portion 14,614 14,917
DEFERRED INCOME TAXES 1,321 932
OTHER LONG-TERM LIABILITIES 430 430
-------- --------
Total liabilities 26,839 27,636
-------- --------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 1,000,000 shares
authorized; none issued -- --
Common stock, $.01 par value; 10,000,000 shares
authorized; 5,041,544 issued and outstanding 50 50
Additional paid-in capital 28,162 28,162
Accumulated deficit (20,613) (21,304)
-------- --------
Total stockholders' equity 7,599 6,908
-------- --------
TOTAL $ 34,438 $ 34,544
======== ========
See notes to unaudited consolidated financial statements.
1
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(IN THOUSANDS EXCEPT SHARE DATA)
Three Months Ended
September 30,
-----------------------
2002 2001
---------- ----------
NET SALES $ 17,288 $ 15,356
COST OF GOODS SOLD 13,863 12,357
---------- ----------
GROSS PROFIT 3,425 2,999
---------- ----------
OPERATING EXPENSES:
Selling, general and administrative 1,983 1,896
Amortization of goodwill -- 34
---------- ----------
Total operating expenses 1,983 1,930
---------- ----------
INCOME FROM OPERATIONS 1,442 1,069
---------- ----------
OTHER EXPENSE:
Interest expense 272 432
Other expense - net 18 16
---------- ----------
Total other expense 290 448
---------- ----------
INCOME BEFORE INCOME TAXES 1,152 621
INCOME TAX PROVISION 461 262
---------- ----------
NET INCOME $ 691 $ 359
========== ==========
BASIC AND DILUTED PER COMMON SHARE AMOUNTS:
Net Income $ 0.14 $ 0.07
========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING
(basic and diluted) 5,041,544 5,041,544
========== ==========
See notes to unaudited consolidated financial statements.
2
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(IN THOUSANDS)
Three Months Ended
September 30,
------------------
2002 2001
------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 691 $ 359
Adjustments to reconcile net income to
net cash flows from operating activities:
Depreciation and amortization 535 559
Provision for losses on accounts receivable 32 38
Loss on sale of property, plant and equipment 84 3
Deferred income taxes 389 216
Changes in operating assets and liabilities:
Accounts receivable - net (289) 465
Inventories (157) (243)
Prepaid expenses and other assets (51) 373
Accounts payable (223) 12
Accrued expenses and other liabilities (657) 138
------- -------
Net Cash Flows from Operating Activities 354 1,920
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property, plant and equipment 30 6
Purchases of property, plant and equipment (59) (250)
------- -------
Net Cash Flows from Investing Activities (29) (244)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds (payments) under revolving credit facility 264 (1,037)
Net principal repayments of long-term debt (555) (687)
Net repayments under capital leases (15) (5)
------- -------
Net Cash Flows from Financing Activities (306) (1,729)
------- -------
NET INCREASE (DECREASE) IN CASH 19 (53)
CASH AT BEGINNING OF PERIOD 45 144
------- -------
CASH AT END OF PERIOD $ 64 $ 91
======= =======
See notes to unaudited consolidated financial statements.
3
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
A. GENERAL
The accompanying unaudited consolidated financial statements of
Gibraltar Packaging Group, Inc. ("Gibraltar" or the "Company") have
been prepared in accordance with Rule 10-01 of Regulation S-X for
interim financial statements required to be filed with the Securities
and Exchange Commission and do not include all information and
footnotes required by accounting principals generally accepted in the
United States of America for complete financial statements. However, in
the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the financial
position of the Company as of September 30, 2002, and the results of
its operations and cash flows for the periods presented herein. Results
of operations for the three months ended September 30, 2002 are not
necessarily indicative of the results to be expected for the full
fiscal year. The financial statements should be read in conjunction
with the audited financial statements for the year ended June 29, 2002
and the notes thereto contained in the Company's Annual Report on Form
10-K.
B. INVENTORIES
Inventories consisted of the following (IN THOUSANDS):
September 30, June 29,
2002 2002
------------- --------------
Finished goods $ 5,241 $ 4,665
Work in process 917 935
Raw materials 1,027 1,414
Manufacturing supplies 289 303
------------- --------------
$ 7,474 $ 7,317
============= ==============
4
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
C. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
On June 30, 2002, the Company adopted SFAS No. 142, GOODWILL AND OTHER
INTANGIBLE ASSETS, which establishes the accounting for acquired
goodwill and other intangible assets, and provides that goodwill and
indefinite-lived intangible assets will not be amortized, but will be
tested for impairment on an annual basis. The Company's related
amortization consists solely of goodwill amortization, which has no
income tax effect. Following is a reconciliation of net income as
originally reported for the three month periods ended September 30,
2002 and 2001, to adjusted net income (IN THOUSANDS):
Three Months
Ended September 30,
2002 2001
------- --------
Reported net income $ 691 $ 359
Goodwill amortization - 34
------- --------
Adjusted net income $ 691 $ 393
======= ========
In accordance with SFAS No. 142, the Company has completed its
transitional goodwill impairment test using a discounted cash flow
valuation as of June 30, 2002. No impairment charges resulted from the
transitional impairment test.
During the first quarter of fiscal 2003, the Company adopted SFAS No.
143, ACCOUNTING FOR ASSET RETIREMENT OBLIGATIONS. This standard
addresses financial accounting and reporting for obligations related to
the retirement of tangible long-lived assets and the related asset
retirement costs. The adoption of this standard did not have a material
impact on the Company's financial position or results of operations.
During the first quarter of fiscal 2003, the Company adopted SFAS No.
144, ACCOUNTING FOR IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS. The
standard addresses financial accounting and reporting for the
impairment or disposal of long-lived assets. The adoption of this
standard did not have a material impact on the Company's financial
position or results of operations.
During the first quarter of fiscal 2003, the Company adopted SFAS No.
145, RESCISSION OF FASB STATEMENTS NO. 4, 44, AND 64, AMENDMENT OF FASB
STATEMENT NO. 13, AND TECHNICAL CORRECTIONS. This standard concludes
that debt extinguishments used as part of a company's risk management
strategy should not be classified as an extraordinary item. SFAS No.
145 also requires sale-leaseback accounting for certain lease
modifications that have economic effects that are similar to
sale-leaseback transactions.
In June 2002, the FASB issued SFAS No. 146, ACCOUNTING FOR COSTS
ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES. SFAS No. 146 requires that
a liability for a cost associated with an exit or disposal activity is
recognized at fair value when the liability is incurred and is
effective for exit or disposal activities that are initiated after
December 31, 2002. The Company does not expect its adoption of this
standard in fiscal 2003 to have a significant impact on its financial
statements.
5
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
D. LONG-TERM DEBT
The credit facility provides for an excess cash flow payment to be
applied against the Special Advance Loan after each fiscal year-end
until it is repaid. The $1.1 million excess cash flow payment for
fiscal 2002 was paid out of unused borrowing capacity in October 2002.
At September 30, 2002, the Company had available to it unused borrowing
capacity of $5.0 million.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CRITICAL ACCOUNTING POLICIES
The preparation of the consolidated financial statements in conformity
with accounting principles generally accepted in the United States of
America ("GAAP") requires the Company to select and apply accounting
policies that best provide the framework to report the Company's
results of operations and financial position. The selection and
application of those policies require management to make difficult
subjective or complex judgments concerning reported amounts of revenue
and expenses during the reporting period and the reported amounts of
assets and liabilities at the date of the financial statements. The
judgments and uncertainties inherent in this process affect the
application of those policies. As a result, there exists the likelihood
that materially different amounts would be reported under different
conditions or using different assumptions. Management has identified
the following accounting policies that it deems critical to the
portrayal of the Company's financial condition and results of
operations and that involve significant subjectivity. Management
believes that its selection and application of these policies best
represent the operating results and financial position of the Company.
The following discussion provides information on the processes utilized
by management in making judgments and assumptions as they apply to its
critical accounting policies.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The allowance for doubtful accounts is based on management's assessment
of the collectibility of specific customer accounts and the aging of
the accounts receivable. If there is a deterioration of a customer's
credit worthiness or actual defaults are higher than historical
experience, estimates of the recoverability of amounts due the Company
could be adversely affected.
INCOME TAXES
The Company records deferred tax assets and liabilities using enacted
tax rates for the effect of temporary differences between the book and
tax basis of assets and liabilities. If enacted tax rates changed, the
Company would adjust the deferred tax assets and liabilities, through
the provision for income taxes in the period of change, to reflect the
enacted tax rate expected to be in effect when the deferred tax items
reverse. The Company records a valuation allowance on deferred tax
assets to reflect the expected future tax benefits to be realized. In
determining the appropriate valuation allowance, the Company takes into
account the level of expected future taxable income and available tax
planning strategies. If future taxable income is lower than expected or
if expected tax planning strategies are not
6
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
available as anticipated, the Company may record additional valuation
allowance through income tax expense in the period such determination
was made.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company's long-lived assets consist primarily of property, plant,
and equipment. Management believes the useful lives assigned to these
assets, which range from 2 to 40 years, are reasonable. Management
evaluates the long-lived assets for impairment when events or changes
in circumstances indicate, in management's judgment, that the carrying
value of such assets may not be recoverable. If management's
assumptions about these assets change as a result of events or
circumstances, and management believes the assets may have declined in
value, then the Company may record impairment charges, resulting in
lower profits.
GOODWILL AND INTANGIBLE ASSETS
The Company is required to make certain assumptions and estimates
regarding the fair value of intangible assets, namely goodwill, when
assessing such assets for impairment. Changes in the fact patterns
underlying such assumptions and estimates could ultimately result in
the recognition of impairment losses on intangible assets.
CONTINGENT LIABILITIES
There are various claims and lawsuits pending against the Company. The
Company has recorded a liability where the effect of litigation can be
estimated and where an outcome is considered probable. Management's
estimates are based on its knowledge of the relevant facts at the time
of the issuance of the Company's Consolidated Financial Statements.
Subsequent developments could materially alter management's assessment
of a matter's probable outcome and the estimate of the Company's
liability.
ENVIRONMENTAL ISSUES
The Company records its environmental liabilities when site assessments
or remedial actions are probable and a range of reasonably likely
cleanup costs can be estimated. The Company reviews its sites and
assesses the liability quarterly, by assessing a range of reasonably
likely costs for each identified site using currently available
information, including existing technology, current laws and
regulations and the probable level of involvement and financial
condition of other potentially responsible parties. These estimates
include costs for site investigations, remediation, operations and
maintenance, monitoring and site closure.
7
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS
Three Months Ended September 30, 2002 Compared to
Three Months Ended September 30, 2001
-------------------------------------
In the first quarter of fiscal 2003, the Company had net sales of $17.3
million compared with $15.4 million in the corresponding period of
fiscal 2002, an increase of $1.9 million or 12.6%. This increase is
primarily attributable to gains from a group of existing and new
customers.
Gross profit for the first quarter of fiscal 2003 increased to 19.8% of
net sales from 19.5% in the corresponding period of fiscal 2002. This
increase can be attributed to the fact that the Company was able to
leverage its existing cost structure while increasing sales volume.
This benefit was partially offset by lower margins from some customers,
due to a change in the customer mix.
Income from operations for the first quarter of fiscal 2003 was $1.4
million compared with $1.1 million in the corresponding period of
fiscal 2002, an increase of $0.4 million or 34.9%. This increase was
primarily a result of the increase in sales, as well as continuing cost
containment efforts. Selling, general, and administrative costs
increased primarily as a result of a $0.1 million loss on disposal of
fixed assets. Also, with the adoption of SFAS No. 142, GOODWILL AND
OTHER INTANGIBLE ASSETS, the Company stopped amortizing goodwill in the
first quarter of fiscal 2003.
Total interest expense decreased $0.2 million or 37.0% to $0.3 million
in the first quarter of fiscal 2003 from $0.4 million in the
corresponding period of fiscal 2002. This decrease is due to $3.2
million in lower average borrowings and a reduction in the average
interest rate to 5.4% from 7.6%.
The income tax provision as a percentage of pre-tax income for the
first quarter of fiscal 2003 was 40.0%, compared with an income tax
provision of 42.2% for the corresponding period in fiscal 2002. Prior
to the adoption of SFAS No. 142 in the first quarter of fiscal 2003,
the effective tax rate typically differed from the statutory rate
primarily as a result of non-deductible amortization of goodwill.
Net income for the first quarter of fiscal 2003 was $0.7 million or
$0.14 per share, compared to $0.4 million or $0.07 per share in the
first quarter of fiscal 2002.
FINANCIAL CONDITION
On December 20, 2001, the Company entered into a three-year renewable
credit facility with LaSalle Business Credit, Inc ("LaSalle"). This
facility provides for an $11.6 million Term Loan, a $4.0 million
Special Advance Loan, and a $12.0 million working capital revolving
line-of-credit ("Revolver"). The Term Loan and Special Advance Loan
combined are to be repaid over seven years, but are callable after
three years. The Special Advance Loan, which is to be repaid first,
requires monthly principal payments of $185,155 plus interest.
Additionally, the credit facility provides for an excess cash flow
payment to be applied against the Special Advance Loan after each
fiscal year-end until it is repaid. The $1.1 million excess cash flow
payment for fiscal 2002 was paid
8
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
out of unused borrowing capacity in October 2002. Until the Special
Advance Loan is repaid, only monthly interest payments will be applied
against the Term Loan. Upon repayment of the Special Advance Loan,
monthly principal payments based on the remaining amortization period
plus interest will be applied against the Term Loan. The credit
facility is secured by a first priority perfected security interest in
and lien on all assets (real and personal, tangible and intangible) of
the Company, excluding its Burlington, North Carolina property. The
initial proceeds of the new facility were used to repay the outstanding
indebtedness under the Company's previous credit facility with First
Source Financial LLP.
The Revolver provides for a revolving line of credit under a borrowing
base commitment subject to certain loan availability requirements. Loan
availability under the Revolver may not exceed the lesser of: (1) $12.0
million; or (2) the sum of (a) 85% of the Company's eligible accounts
receivable plus (b) a percentage of the Company's eligible inventory
which ranges from 35% to 70%. At no time may the sum of aggregated loan
advances outstanding under the Revolver plus the aggregate amount of
extended letter of credit guarantees exceed loan availability. The
Company had available to it unused borrowing capacity of $5.0 million,
as of September 30, 2002.
The Revolver bears interest at LaSalle's prime rate plus 0.50% or the
London Interbank Offered Rate ("LIBOR") plus 2.75%. The Term Loan bears
interest at LaSalle's prime rate plus 0.75% or LIBOR plus 3.00%. The
Special Advance Loan bears interest at LaSalle's prime rate plus 1.00%
or LIBOR plus 3.25%. The Company also pays a commitment fee of 0.50% on
the unused portion of the Revolver. The interest rates at September 30,
2002 were a combination of prime and LIBOR. LaSalle's prime and LIBOR
rates for the Revolver and Special Advance Loan were 4.75% and 1.81%,
respectively, at September 30, 2002. LaSalle's prime and LIBOR rates
for the Term Loan were 4.75% and 2.20%, respectively, at September 30,
2002.
As of September 30, 2002, all outstanding letters of credit were
guaranteed by LaSalle. The Company pays an annual letter of credit fee
of 2.00% on the outstanding balance to guarantee availability under the
Revolver. Outstanding letters of credit at September 30, 2002 amounted
to $147,500 and related to workman's compensation insurance policies.
The LaSalle credit facility contains certain restrictive covenants
including financial covenants related to net worth, debt service
coverage, interest coverage and capital expenditures. As of September
30, 2002, the Company was in compliance with all financial covenants.
In addition, the Company's credit facility restricts the ability of the
Company to pay dividends.
At September 30, 2002, the Company had working capital of $3.9 million,
as compared to $2.6 million at June 29, 2002. Historically, the
Company's liquidity requirements have been met by a combination of
funds provided by operations and its revolving credit agreements. Funds
provided by operations during the three months ended September 30, 2002
were $0.4 million compared with funds provided of $1.9 million in the
corresponding period of fiscal 2002. Although net income was higher in
the first quarter of fiscal 2003, fluctuations in accounts receivable
and accrued liabilities had a significant impact on working capital and
cash flows from operating activities, as compared to the previous year.
Operating cash flow was also affected by the settlement of the Anthem
Health
9
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
Plans litigation. In addition, fluctuation in accounts receivable, due
to timing, resulted in a significant increase to operating cash flows
during the first quarter of fiscal 2002.
During the three months ended September 30, 2002, capital expenditures
totaled $59,000 compared with $250,000 in the corresponding period of
fiscal 2002. The Company makes capital improvements to increase
efficiency and product quality, and periodically upgrades its equipment
by purchasing or leasing new or previously used equipment.
The Company's current strategy is to continue to focus its efforts on
its core business of folding cartons, as well as the supporting product
lines of flexible, litho-laminated, and corrugated products. The
Company intends to expand these product lines by utilizing the maximum
capacity at each facility, while continually identifying, researching,
and, when applicable, implementing new technologies and equipment that
will enable the Company to continue to improve performance,
productivity, and profitability.
Under the current strategy, management believes that future funds
generated by operations and borrowings available under its credit
facility with LaSalle will be sufficient to meet working capital and
capital expenditure requirements in the near term.
10
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
The Company has contractual obligations and commercial commitments that
may affect its financial condition. Based on management's assessment of
the underlying provisions and circumstances of the material contractual
obligations and commercial commitments of the Company, including
material off-balance sheet and structured finance arrangements, there
is no known trend, demand, commitment, event or uncertainty that is
reasonably likely to occur which would have a material effect on the
Company's financial condition or results of operations. The following
tables identify material obligations and commitments as of September
30, 2002:
------------------------------------------------------------------------------------------------------------------
PAYMENTS DUE BY PERIOD
-----------------------------------------------------------------
CONTRACTUAL CASH OBLIGATIONS AFTER 5
(THOUSANDS OF DOLLARS) TOTAL 1 YEAR 2 YEARS 3 YEARS 4 YEARS 5 YEARS YEARS
------------------------------------------------------------------------------------------------------------------
Term Loan $ 11,553 $ 959 $ 2,222 $ 8,372 $ - $ - $ -
Special Advance Loan 2,334 2,334 - - - - -
Revolving Line-of-Credit (a) 3,846 - - 3,846 - - -
Capital lease obligations 227 53 46 48 52 28 -
Operating leases 3,247 1,249 989 579 185 135 110
------------------------------------------------------------------------------------------------------------------
Total contractual cash obligations $ 21,207 $4,595 $ 3,257 $12,845 $ 237 $ 163 $ 110
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
AMOUNT OF COMMITMENT EXPIRATION
PER PERIOD
-----------------------------------------------------------------
OTHER COMMERCIAL COMMITMENTS TOTAL
AMOUNTS AFTER 5
(THOUSANDS OF DOLLARS) COMMITTED 1 YEAR 2 YEARS 3 YEARS 4 YEARS 5 YEARS YEARS
------------------------------------------------------------------------------------------------------------------
Revolving Line-of-Credit (b) $ 4,962 $ - $ - $ 4,962 $ - $ - $ -
Standby letters of credit 148 148 - - - - -
------------------------------------------------------------------------------------------------------------------
Total commercial commitment $ 5,110 $ 148 $ - $ 4,962 $ - $ - $ -
------------------------------------------------------------------------------------------------------------------
(a) The revolving line-of-credit represents the actual outstanding
balance, as of September 30, 2002.
(b) The revolving line-of-credit represents the unused borrowing
capacity available to the Company, as of September 30, 2002.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
During the first quarter of fiscal 2003, the Company adopted SFAS No.
143, ACCOUNTING FOR ASSET RETIREMENT OBLIGATIONS. This standard
addresses financial accounting and reporting for obligations related to
the retirement of tangible long-lived assets and the related asset
retirement costs. The adoption of this standard did not have a material
impact on the Company's financial position or results of operations.
During the first quarter of fiscal 2003, the Company adopted SFAS No.
144, ACCOUNTING FOR IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS. The
standard addresses financial accounting and reporting for the
impairment or disposal of long-lived assets. The adoption of this
standard did not have a material impact
11
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
on the Company's financial position or results of operations.
During the first quarter of fiscal 2003, the Company adopted SFAS No.
145, RESCISSION OF FASB STATEMENTS NO. 4, 44, AND 64, AMENDMENT OF FASB
STATEMENT NO. 13, AND TECHNICAL CORRECTIONS. This standard concludes
that debt extinguishments used as part of a company's risk management
strategy should not be classified as an extraordinary item. SFAS No.
145 also requires sale-leaseback accounting for certain lease
modifications that have economic effects that are similar to
sale-leaseback transactions.
In June 2002, the FASB issued SFAS No. 146, ACCOUNTING FOR COSTS
ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES. SFAS No. 146 requires that
a liability for a cost associated with an exit or disposal activity is
recognized at fair value when the liability is incurred and is
effective for exit or disposal activities that are initiated after
December 31, 2002. The Company does not expect its adoption of this
standard in fiscal 2003 to have a significant impact on its financial
statements.
FORWARD-LOOKING STATEMENTS
Statements that are not historical facts, including statements about
our confidence in the Company's prospects and strategies and our
expectations about the Company's sales expansion, are forward-looking
statements that involve risks and uncertainties. These risks and
uncertainties include, but are not limited to: (1) softened demand for
the Company's products due to overall economic conditions; (2) the
Company's ability to execute its business plan; (3) market acceptance
risks, including whether or not the Company will be able to
successfully gain market share against competitors, many of which have
greater financial and other resources than the Company, and the
continuing trend of customers to increase their buying power by
consolidating the number of vendors they maintain; (4) manufacturing
capacity constraints, including whether or not, as the Company
increases its sales, it will be able to successfully integrate its new
customers into its existing manufacturing and distribution system; (5)
the introduction of competing products by other firms; (6) pressure on
pricing from competition or purchasers of the Company's products; (7)
whether the Company will be able to pass on to its customers price
increases for paper and paperboard products; (8) continued stability in
other raw material prices, including oil-based resin and plastic film;
(9) the impact of government regulation on the Company's manufacturing
processes, including whether or not additional capital expenditures
will be needed to comply with applicable environmental laws and
regulations as the Company's production increases; and (10) the
Company's ability to continue to comply with the restrictive covenants
in its credit facility or to obtain waivers if it is not in compliance
in the future. Investors and potential investors are cautioned not to
place undue reliance on these forward-looking statements, which reflect
the Company's analysis only as of the date of this report. The Company
undertakes no obligation to publicly revise these forward-looking
statements to reflect events or circumstances that arise after the date
of this report. These risks and others that are detailed in this Form
10-Q and other documents that the Company files from time to time with
the Securities and Exchange Commission, including its annual report on
Form 10-K, quarterly reports on Form 10-Q, and any current reports on
Form 8-K, must be considered by any investor or potential investor in
the Company.
12
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary market risk is fluctuation in interest rates. All
of the Company's debt at September 30, 2002 was at variable interest
rates. A hypothetical 10% change in interest rates would have had a
$24,000 impact on interest expense and cash flows for the three months
ended September 30, 2002.
ITEM 4. CONTROLS AND PROCEDURES
The Company's Chief Executive Officer, Walter E. Rose, and Vice
President Finance, Brett E. Moller, have reviewed the Company's
disclosure controls and procedures within 90 days prior to the filing
of this report. Based upon this review, these officers believe that the
Company's disclosure controls and procedures are effective in ensuring
that material information related to the Company is made known to them
by others responsible for reporting such material information within
the Company.
There were no significant changes in the Company's internal controls or
in other factors that could significantly affect these controls
subsequent to the date that the Company carried out its evaluation.
13
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, the Company is a party to certain lawsuits and
administrative proceedings that arise in the conduct of its business.
While the outcome of these lawsuits and proceedings cannot be predicted
with certainty, management believes that, if adversely determined, the
lawsuits and proceedings, either singularly or in the aggregate, would
not have a material adverse effect on the financial condition, results
of operations or net cash flows of the Company.
On April 28, 1999, the Company filed a lawsuit captioned Gibraltar
Packaging Group, Inc. v. Anthem Health Plans, d.b.a. Anthem Blue Cross
and Blue Shield of Connecticut ("Anthem"), in the United States
District Court for the District of Connecticut. The Company was seeking
damages for Anthem's alleged breach of a contract for health insurance
for employees of the Company. In October 2000, Anthem filed a
counterclaim for unpaid premiums. Discovery revealed that a third party
may be liable to indemnify the Company for all or part of the
counterclaim, and the Company brought a third party claim against this
party in the litigation. The lawsuit was settled in September 2002, and
did not have a material adverse effect of the financial condition,
results of operations, or net cash flows of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of Gibraltar's stockholders in the
quarter ended September 30, 2002.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
None
(b) Reports on Form 8-K:
None
14
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
SIGNATURE
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.
GIBRALTAR PACKAGING GROUP, INC.
By: /s/ Brett E. Moller
-----------------------------
Brett E. Moller
Vice President Finance
(Principal Financial and Accounting Officer)
Date: November 12, 2002
15
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
CERTIFICATIONS
CERTIFICATIONS PURSUANT TO 17 CFR SECTION 240.13a-14
- ----------------------------------------------------
I, Walter E. Rose, Chairman of the Board and Chief Executive Officer of
Gibraltar Packaging Group, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Gibraltar
Packaging Group, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
16
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: November 12, 2002
/s/ Walter E. Rose
- --------------------------------------------
WALTER E. ROSE
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
(Principal Executive Officer)
I, Brett E. Moller, Vice President Finance of Gibraltar Packaging Group, Inc.,
certify that:
1. I have reviewed this quarterly report on Form 10-Q of Gibraltar
Packaging Group, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
17
GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: November 12, 2002
/s/ Brett E. Moller
- --------------------------------------------
BRETT E. MOLLER
VICE PRESIDENT FINANCE
(Principal Financial Officer)
CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350
- -------------------------------------------------
Simultaneously with the filing of this quarterly report on Form 10-Q, the
Company submitted to the Securities and Exchange Commission the certification of
this report by its chief executive and chief financial officer required by 18
U.S.C. ss. 1350 as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of
2002.
18