0001021408-01-507175.txt : 20011009 0001021408-01-507175.hdr.sgml : 20011009 ACCESSION NUMBER: 0001021408-01-507175 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010924 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GIBRALTAR PACKAGING GROUP INC CENTRAL INDEX KEY: 0000882830 STANDARD INDUSTRIAL CLASSIFICATION: PAPERBOARD CONTAINERS & BOXES [2650] IRS NUMBER: 470496290 STATE OF INCORPORATION: DE FISCAL YEAR END: 0629 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-19800 FILM NUMBER: 1743440 BUSINESS ADDRESS: STREET 1: 2000 SUMMIT AVENUE CITY: HASTINGS STATE: NV ZIP: 68902-2148 BUSINESS PHONE: 4024631366 MAIL ADDRESS: STREET 1: 2000 SUMMIT AVENUE CITY: HASTINGS STATE: NV ZIP: 68902-2148 10-K 1 d10k.txt GIBRALTAR PACKAGING GROUP, INC. ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 __________________ FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 2001 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file No. 00-19800 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 executive offices) (Zip Code) (402) 463-1366 www.gibraltarpackaginggroup.com (Registrant's telephone number, (Registrant's website) including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.01 per share (Title of class) 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 the Form 10-K. [X] The aggregate market value of the voting and non-voting common equity stock held by nonaffiliates of the registrant on September 10, 2001 was $3,590,633 (based upon the September 10, 2001 closing sale price of the common stock as reported on the NASDAQ Over-The-Counter Bulletin Board). The number of shares of common stock of the registrant outstanding as of September 10, 2001 was 5,041,544 shares. DOCUMENTS INCORPORATED BY REFERENCE Items 10, 11, 12 and 13 of Part III are incorporated by reference to the definitive proxy statement relating to the registrant's Annual Meeting of Stockholders for fiscal 2001, which definitive proxy statement will be filed within 120 days of the end of the registrant's fiscal year. ================================================================================ Table of Contents PART I
Page ---- Item 1 Business..................................................... 1 Item 2. Properties................................................... 7 Item 3. Legal Proceedings............................................ 8 Item 4. Submission of Matters to a Vote of Security Holders.......... 8 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters.............................. 9 Item 6. Selected Financial Data...................................... 10 Item 7. Management's Discussion and Analysis of Financial Conditions and Results of Operations............... 11 Item 7A. Quantitative and Qualitative Disclosure About Market Risk.... 15 Item 8. Financial Statements and Supplementary Data.................. 15 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure....................... 15 PART III Item 10. Directors and Executive Officers of the Registrant........... 16 Item 11. Executive Compensation....................................... 16 Item 12. Security Ownership of Certain Beneficial Owners and Management............................. 16 Item 13. Certain Relationships and Related Transactions............... 16 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K........................... 17
PART I Item 1. Business -------- General Gibraltar Packaging Group, Inc. ("Gibraltar" or the "Company") designs, manufactures, and markets packaging products nationwide, for numerous industries. The Company produces four types of packaging products through the use of three manufacturing facilities. These facilities are: Gibraltar Packaging Group, Inc. (dba "Great Plains Packaging", or "Great Plains") in Hastings, Nebraska; RidgePak Corporation (dba "Flashfold Carton") in Fort Wayne, Indiana; and Standard Packaging & Printing Corp. ("Standard Packaging") in Mount Gilead, North Carolina. Folding cartons is the primary product line for the Company; however, Standard Packaging also manufactures flexible packaging, and Great Plains Packaging also manufactures litho-laminated cartons and corrugated containers. In August 1998, the Company announced its strategy to refocus on its core capabilities of folding cartons and to leverage the success of the Company's Great Plains division to improve the performance of the Company's other folding carton divisions. As a result, the Company initiated a plan to divest its facilities that manufactured non-folding carton related products. This included the sale of two of the Company's subsidiaries: Niemand Industries, Inc. ("Niemand") in Marion, Alabama; and GB Labels, Inc. ("GB Labels"), in Burlington, North Carolina. Niemand, a manufacturer of tubular paper packaging as well as contract packaging and filling, was sold in two stages. The sale of the operating assets of its container business was finalized in June 1999 and the remaining operating assets were sold in February 2000. The operating assets of GB Labels, a manufacturer of pressure-sensitive labels, were sold in August 1999. Through the implementation of this strategy, the Company has improved operations and developed a stronger foundation for future growth. The Company has better positioned itself to take advantage of opportunities as they arise. Over the past fiscal year the Company has evaluated capacity levels at its three facilities and has implemented new technologies and equipment that will position the Company to increase its performance, productivity, and profitability. These advancements include the installation of blanking die-cutting equipment at its Hastings, Nebraska and Mount Gilead, North Carolina facilities, as well as the recent installation of a narrow web flexo press at the Hastings, Nebraska facility. Gibraltar will 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 continue 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. The Company markets its products to customers located throughout the United States, with the majority of its sales located within the central, southern and eastern regions of the nation. The Company's sales are derived from a variety of industries including the following markets: food products, paper and allied products, pharmaceuticals and medical instruments, textiles, automotive, household, tobacco, and industrial products. The Company believes its three folding carton facilities are strategically located to enhance its competitive position by providing broad geographic coverage to serve larger, nationwide customers. Gibraltar's predecessor was incorporated under the name GPC Co. in Hastings, Nebraska in 1967, and subsequently changed its name to Great Plains Packaging Co. in 1986. In 1991 Great Plains Packaging Co. was reincorporated in Delaware, and its name was changed to Gibraltar Packaging Group, Inc. -1- The Company's principal executive offices are located at 2000 Summit Avenue, Hastings, Nebraska 68901, its phone number is 402-463-1366, and its website is www.gibraltarpackaginggroup.com. Unless otherwise stated in this Annual Report, references to fiscal 2001, 2000, and 1999 relate to the fiscal years ended June 30, 2001, July 1, 2000, and July 3, 1999, respectively. Manufacturing Products and Processes Gibraltar offers four types of packaging products, which are described in the following sections. The Company no longer offers the three product lines which were produced by GB Labels and Niemand due to the sale of these divisions, as mentioned above. Fluctuations in the percent of net sales for each product line can be attributed, in part, to the sale of these divisions. Folding Cartons The Company designs, manufactures, and markets a variety of printed folding cartons, which are purchased by customers in a variety of consumer and industrial markets. The Company's customers use folding cartons for both product packaging and retail display of products. Sales of folding cartons represented approximately 79%, 73%, and 63% of the Company's net sales for fiscal 2001, 2000, and 1999, respectively. The Company believes that recent trends in the folding carton market favor manufacturers that can produce creative graphics to enhance visual presentation, point-of-sale appeal, and product differentiation. Specialty packaging designed to address these needs often includes graphics with high-resolution print, multiple colors, and innovative structural designs. The Company's internal structural design teams have won numerous industry awards, due in part, to the Company's emphasis on product design. The Company believes that its design resources enhance its competitiveness in the folding carton market, and result in increased profitability. Folding cartons are produced at each of the Company's three production facilities in Hastings, Nebraska; Fort Wayne, Indiana; and Mount Gilead, North Carolina. For offset printing, once a customer's order is received, paperboard rolls are purchased from outside suppliers and converted into sheets with sheeting equipment, in sizes determined for each order. Customers supply graphic disks, artwork, or film to the Company, and then specialized printing plates are created to use in the printing of paperboard sheets on multicolor offset printing presses. The printed board is then cut, creased, embossed, folded, and glued into individual cartons per the carton specifications, and then packaged for shipment to customers. For the newly installed flexographic printing press, the process differs slightly. Once a customer's order is received, paperboard rolls are purchased from outside suppliers. Folding cartons are then produced directly from the roll stock by printing and die cutting in line to output blanks for gluing or flat packing. This printing process utilizes UV inks and coatings, which is an additional feature the Company can now offer to its customers. In June 1996, the Company's Hastings, Nebraska facility became the sixth folding carton plant in the United States to achieve ISO 9001 certification, the rigorous international quality standard. This facility renewed their certification in June 1999 for another three-year term. In January 1998, the Company's Fort Wayne, Indiana facility also achieved ISO 9001 certification, and then renewed their certification in January 2001. The facility in Mount Gilead, North Carolina recently received ISO 9001 certification on June 20, 2001. ISO (International Organization for Standardization) has steadily become a worldwide standard for quality management. It requires a company to codify its quality program by defining and documenting its quality system. -2- Flexible Poly-Film Packaging Flexible packaging sales represented approximately 11%, 11%, and 9% of the Company's net sales for fiscal 2001, 2000, and 1999, respectively. The flexible packaging industry has experienced significant historical growth due to advances in plastic technology and the popularity of convenient packaging. Flexible packaging offers light-weight, low-bulk, resource-conserving packaging that also protects perishable products, by creating a barrier against air and moisture. For consumer marketing purposes, flexible packaging combines high-quality, multicolor graphics, with a see-through feature that enables the consumer to see the product within the package, along with the package graphics. Although the Company sells most of its flexible packaging for use in the food, textile, and household products markets, flexible packaging is also used by many other industries. Flexible packaging is produced at the Standard Packaging facility in Mount Gilead, North Carolina. The Company purchases its plastic films including polyethylene, polypropylene, and similar materials, from film manufacturers rather than producing its own plastic films. The film is printed at the Company's facilities using multicolor printing presses. The printed rolls are then slit into smaller rolls, or shipped in roll form, to customers who then convert it into its final package form (for example, bags, pouches or overwrap). The Company also converts the printed film rolls into bags or pouches, and then ships the final package forms to its customers. The Company has additional capabilities which can be incorporated into poly-film packaging, which include affixing pressure-sensitive labels, attaching hanging display hooks, grommets, zip-lock closures, and tape seals. Specialty Laminated Cartons At the Hastings, Nebraska facility, the Company manufactures specialty laminated cartons, which it markets to customers throughout the United States, primarily in the food, automotive, household, and industrial markets. Laminated cartons are used for the retail sale of products and offer customers a number of visual marketing benefits. Specialty laminated carton sales represented approximately 6% of the Company's net sales for fiscal years 2001, 2000, and 1999. During the manufacturing process, laminated sheets, which are composed of a printed paperboard sheet glued onto single face corrugate, are die cut, glued, and folded into cartons per the carton specifications. Laminated packaging offers a structurally stronger package suitable for packaging heavier contents, protecting products during shipping, or meeting other package performance needs, while at the same time providing high-resolution graphics. The Company believes that the resolution of the print and graphics enhances the product's appeal, and that the lamination provides increased product visibility without sacrificing the protection of the product. Corrugated Containers The Company's Hastings, Nebraska facility also designs and manufactures printed corrugated containers, which it markets to customers located in the mid- western United States. The primary markets for this product line are the automotive, industrial, and agricultural markets. Corrugated container sales represented approximately 4% of the Company's net sales for fiscal years 2001 and 2000, respectively, and 3% for fiscal 1999. -3- The Company purchases corrugated sheets from outside suppliers, then prints, cuts, creases, folds, and glues the sheets into individual containers per the carton specifications. The Company also manufactures corrugated inserts, which require specialty die-cutting and gluing, and are used to provide additional strength and protection of packaged products. Corrugated containers offer a structurally strong package, suitable for protecting products during shipping, or meeting other packaging performance needs. Discontinued Products Contract Packaging and Filling Contract packaging and filling services were provided by the Niemand facility located in Marion, Alabama. Sales for this product line represented approximately 3% and 6% of the Company's net sales for fiscal 2000 and 1999, respectively. In February 2000, in connection with the Company's strategy to refocus on its core business of folding cartons, the Company sold the operating assets of Niemand's contract packaging and filling business, and no longer manufactures these products. Tubular, Spiral-Wound Paper Packaging The Niemand facility in Marion, Alabama manufactured tubular paper packaging products. Net sales of tubular, spiral-wound packaging represented approximately 2% and 11% of the Company's net sales for fiscal 2000 and 1999, respectively. In June 1999, in connection with the Company's strategy to refocus on its core business of folding cartons, the Company finalized the sale of the operating assets of Niemand's tubular, spiral-wound paper packaging business, and no longer manufactures these products. Pressure-Sensitive Labels The GB Labels facility in Burlington, North Carolina, manufactured pressure- sensitive labels. Net sales for this product line accounted for approximately 1% of the Company's net sales for fiscal 2000 and 2% of the Company's net sales for fiscal 1999. These labels are backed with adhesive, mounted on paper backing and typically shipped in rolls to customers. Customers use these labels for a variety of applications, including product promotions, packaging modifications, clothing packaging and labeling, as well as other applications. In August 1999, in connection with the Company's strategy to refocus on its core business of folding cartons, the Company sold all of the operating assets of its GB Labels division, and no longer manufactures pressure-sensitive labels. Competition The packaging markets in which the Company competes are highly fragmented and increasingly competitive. The Company competes with numerous small, non- integrated companies that produce one or more packaging products and, to a lesser extent, with divisions or subsidiaries of large integrated packaging producers, as well as in-house packaging operations. The vertically integrated paperboard, oil, and chemical companies that the Company competes with may have multiple lines of business and produce their own raw materials. In general, the integrated companies focus primarily on producing large quantities of basic, commodity packaging and often provide their products to large companies nationwide. The non-integrated manufacturers generally operate only one or two production facilities and emphasize higher-margin, value-added packaging, often with specialized or customized graphics. Unlike the integrated manufacturers, these manufacturers produce smaller orders of packaging with quick turnaround, and in many cases also work with the customer in designing the packaging. -4- Competition among the non-integrated packaging manufacturers, against which the Company primarily competes, is based on product quality, service, timeliness of delivery, manufacturing capabilities and, to a lesser extent than with commodity packaging, price. The Company believes that its expertise and reputation within the packaging industry for providing timely, personalized service and high-quality packaging enables it to compete effectively with other non-integrated packaging companies. The Company has also been impacted by the increasing trends of customers to improve their buying power through vendor consolidation. The Company has been successful in several of these initiatives, however, the Company cannot guarantee success in future vendor consolidation efforts. Many of the Company's competitors have greater resources, financial and otherwise, than the Company. In addition, to the extent that packaging methods are developed and successfully marketed as alternatives to the Company's products, the Company may compete with producers of such alternative packaging methods. Raw Materials Raw materials used in the Company's production process include paperboard, inks, flexible films, resin, and adhesives, all of which the Company purchases from more than one supplier. In fiscal 2001, prices for these materials remained relatively steady, with some decreases experienced for certain materials. The Company anticipates that prices will continue to remain comparatively stable through the first and second quarters of fiscal 2002. Although the Company has historically been able to pass material increases on to its customers, any future price increases could have an adverse impact on the Company's results of operations, if the Company is unable to continue to pass these increases on to its customers. The supply of materials such as polyethylene, polypropylene, and other plastic films and resins used in the manufacture of flexible packaging, is subject to the disruptions generally associated with the petroleum and petroleum product markets. The supply of plastic materials depends upon factors beyond the control of the Company, including, directly or indirectly, changes in the economy, price levels and seasons, the level of domestic oil production, the availability of imports, and the actions of OPEC. In addition, if the supply of oil-based resins or plastic films should tighten in the future, vertically integrated producers may have an advantage over the Company, as such competitors could allocate scarce resin resources to their own flexible packaging units, or transfer them at advantageous prices to their own flexible packaging units. Although the Company's supply of raw materials is presently sufficient, a prolonged shortage of raw materials, the resulting higher costs, or diminished availability of such materials could adversely affect its business. Production Backlog and Inventory Control The majority of demand for the Company's products does not fluctuate significantly throughout the fiscal year. However, the Company occasionally experiences a slight increase in production backlog due to the seasonal business of some of its customers. Because the Company produces according to firm purchase orders, as do the majority of manufacturers within the industry, fluctuations in production, shipments, and inventory levels are not significant. -5- Customers The Company derives its sales from a diverse market base. In fiscal 2001, the Company sold its products throughout the United States to over 475 different customers for use in a variety of industries. The table below sets forth the Company's approximate percent of net sales by market for each of the years indicated. In fiscal 2001, the company reviewed its industry classifications to better represent the customer base it currently serves. These changes are reflected in each of the fiscal years listed below. Fluctuations in the percentage of net sales for certain industries can be attributed, in part, to the sale of the GB Labels and Niemand Industries divisions. ------------------------------------------------------------------------- June 30, July 1, July 3, 2001 2000 1999 ---- ---- ---- Food products 19% 17% 17% Paper and allied products 18% 17% 13% Pharmaceutical and medical instruments 15% 15% 16% Textiles 14% 18% 17% Automotive products 10% 11% 9% Household products 9% 11% 13% Tobacco products 8% 3% 2% Industrial products 2% 2% 2% Other 5% 6% 11% ---- ---- ---- Total net sales 100% 100% 100% ==== ==== ==== ------------------------------------------------------------------------- Sales to the Company's top three customers accounted for approximately 36% of the Company's net sales for fiscal 2001. Sales to Smead Manufacturing represented approximately 17%, and sales to Anchor Food Products represented approximately 11% of net sales in fiscal 2001. The Company believes that developing long-term relationships with customers is critical to its success in the packaging industry. Customers generally purchase products and services under firm purchase orders rather than long-term contracts, although the Company does have several customers with contracts ranging from one to three years. Employees As of June 30, 2001, the Company employed approximately 452 full-time employees--96 salaried, and 356 hourly. The Company primarily markets its products and services through 13 employee sales representatives, as well as several commissioned brokers or agents. The Graphics Communication Union, No. 19-M, represents approximately 81 hourly employees at the Fort Wayne, Indiana facility. The current three-year union contract remains in effect through November 7, 2002. The Company considers its relationship with its employees and the union to be generally satisfactory. Although there are no difficulties anticipated, the Company is unable to forecast the outcome of future negotiations between the Company and the Graphics Communication Union No 19-M, or the potential impact any dispute could have on the Company's financial position or results of operations. -6- Regulation The Company's activities are subject to various environmental, health and worker safety laws. The Company has expended resources, both financial and managerial, to comply with applicable environmental, health and worker safety laws in its operations and at its facilities, and anticipates that it will continue to do so in the future. Compliance with environmental laws has not generally had a material effect on the Company's capital expenditures, earnings or competitive position. However, as part of the environmental due diligence carried out in fiscal 1995 in connection with a proposed merger, the Company became aware of groundwater contamination at its GB Labels facility in Burlington, North Carolina. Groundwater testing performed in 1995 revealed the presence of tetrachlorethelene ("PCE") and related compounds in the groundwater at the site, and in three of the neighboring properties' wells. The Company notified the North Carolina Division of Environmental Management and the County Health Department, provided bottled water to affected residents, and offered to connect, at its cost, any resident wishing to be connected to the municipal water supply. In February 1997 the North Carolina Division of Water Quality ("DWQ") asked Gibraltar to conduct a follow-up assessment of the GB Labels facility. The Company arranged with its environmental consultants to install additional groundwater monitoring wells, conduct additional investigative work at the GB Labels site and prepare an updated report. The Comprehensive Assessment Report was filed with the DWQ in June 1998. To date, the DWQ has requested no further updates. Following the August 1995 preliminary site assessment, the Company had its environmental consultants prepare an estimate of likely remediation costs based on all of the information known at that time. These estimated costs ranged from $750,000 to $1.1 million over a period of seven to ten years. Accordingly, the Company recorded a liability for such remediation costs of $750,000 in fiscal year 1995. This estimate may be affected by new information learned, any modifications to any remediation plan that may be proposed by the DWQ and the actual costs incurred as part of evaluation and remediation. The reduction in the accrual for such remediation costs to $431,000 from $432,000 at June 30, 2001 and July 1, 2000, respectively, reflects legal and environmental consulting expenses incurred in fiscal 2001. Incurred expenses as of June 30, 2001 related to remediation totaled $319,000. Management believes that the ultimate resolution of this and other environmental matters will not materially affect the financial position or results of future operations and cash flows of the Company. Item 2. Properties ---------- The Company owns offices and manufacturing facilities in Hastings, Nebraska; Fort Wayne, Indiana; and Mount Gilead, North Carolina. The Company's facilities consist of a total of more than 425,000 square feet. The Company also leases 71,000 square feet of office, production, and warehouse space in Hastings, Nebraska. Additional warehouse facilities are leased in Fort Wayne, Indiana, and Mebane, North Carolina. -7- The Niemand facility, which is owned by the Company and was previously used in a manufacturing capacity, is currently being leased to the company that acquired Niemand's operating assets. The Company's facilities and equipment are generally in good operating condition, and are suitable for their respective uses and adequate for current needs. The Company maintains business property and other insurance coverage for its facilities and operations, in amounts and for risks generally consistent with industry practice for companies of similar size. Item 3. 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 is 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. The amount of the counterclaim is unknown. Discovery has revealed that a third party may be liable to indemnify the Company for all or part of the counterclaim, and the Company has brought a third party claim against this party in the litigation. There can be no assurances that the outcome of the litigation would not have an adverse impact on the Company. The parties participated in a settlement mediation in December 1999. The parties determined to gather additional information through depositions, which are ongoing. The Company anticipates another settlement mediation will be scheduled before the end of 2001. Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- No matters were submitted to a vote of the stockholders of Gibraltar during the fourth quarter of Gibraltar's fiscal year ended June 30, 2001. -8- PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder ----------------------------------------------------------------- Matters ------- Price Range of Common Stock The Company's common stock is currently traded on the NASDAQ Over-The-Counter Bulletin Board. The trading symbol for the Company's common stock is "PACK." The following table sets forth, for the periods indicated, the high and low sale prices for the Company's common stock as reported by NASDAQ: HIGH LOW FISCAL 2001 Fourth Quarter $ 1.56 $ 1.25 Third Quarter 1.75 1.25 Second Quarter 1.56 0.88 First Quarter 1.06 0.63 FISCAL 2000 Fourth Quarter $ 1.06 $ 0.75 Third Quarter 1.00 0.50 Second Quarter 1.00 0.38 First Quarter 1.03 0.69 There were approximately 166 shareholders of record of the Company's common stock as of September 10, 2001. The Company believes that the number of beneficial owners of its common stock is approximately 700. Dividend Policy Historically, the Company has not paid cash dividends on its common stock. Any payment of cash dividends in the future will depend upon the terms of the Company's debt instruments, the financial condition, capital requirements and earnings of the Company, as well as other factors the Board of Directors may deem relevant. In addition, the Company's credit facility with First Source Financial LLP restricts the ability of the Company to pay dividends. Recent Sales of Unregistered Securities None. -9- Item 6. Selected Financial Data ----------------------- The following selected historical financial information has been derived from the Company's audited consolidated financial statements. This information should be read in connection with the Company's Consolidated Financial Statements and the Notes thereto, as well as "Management's Discussion and Analysis of Financial Condition and Results of Operations," included elsewhere in this Annual Report. Gibraltar Packaging Group, Inc. and Subsidiaries Selected Consolidated Financial Data (in thousands, except per share data)
Years Ended ------------------------------------------------------------- June 30, July 1, July 3, June 27, June 28, 2001/(1)/ 2000/(2)/ 1999/(3)/ 1998/(4)/ 1997/(5)/ --------- --------- --------- --------- --------- Statement of Operations Data: Net Sales $64,084 $67,543 $ 76,514 $ 75,890 $74,710 Cost of Goods Sold 50,908 54,998 65,711 64,138 59,396 Gross Profit 13,176 12,545 10,803 11,752 15,314 Operating Expenses 7,961 7,862 21,802 26,411 11,362 Income (Loss) From Operations 5,215 4,683 (10,999) (14,659) 3,952 Other Expense - Net 2,499 3,130 3,324 3,989 3,061 Provision (Benefit) for Income Taxes (923) 483 (751) (1,435) 559 Income (Loss) before Extraordinary Item 3,639 1,070 (13,572) (17,213) 332 Net Income (Loss) 3,639 1,070 (13,572) (17,213) 225 Basic and Diluted Per Common Share Amounts: Income (Loss) before Extraordinary Item 0.72 0.21 (2.69) (3.41) 0.07 Net Income (Loss) 0.72 0.21 (2.69) (3.41) 0.05 Weighted Average Shares Outstanding 5,042 5,042 5,042 5,042 5,042 Balance Sheet Data: Working Capital 2,403 2,333 3,357 4,969 6,078 Total Assets 36,374 37,654 43,338 59,371 75,058 Long-Term Debt (net of current portion) 18,578 22,498 27,943 27,872 27,382 Stockholders' Equity 5,155 1,516 446 14,018 31,100
(1) Includes a $2.0 million reduction to the tax provision. As a result of earnings improvements, the Company reduced its deferred income tax asset valuation allowance by $2.0 million in fiscal 2001 to reflect a change in estimate related to the realizability of its deferred income tax assets. (2) Includes the effect of the sale of the operating assets of Niemand in June 1999 and February 2000 and the sale of the operating assets of GB Labels in August 1999. (3) Includes impairment write-downs of long-lived assets related to Flashfold Carton and GB Labels of $11,861 and $352, respectively, and restructuring charges of $235 related to the relocation of the Company's corporate offices. (4) Includes a charge for severance and relocation costs of approximately $500 and a restructuring charge of $170 consisting of severance costs for divisional personnel. Results also include an impairment write-down of long-lived assets related to Niemand of approximately $14,083 and a write-off of unamortized finance costs related to the Harris Bank refinancing of approximately $854. (5) Includes an extraordinary after-tax loss of $107 reflecting the write-off of unamortized finance costs of a previous refinancing. -10- Item 7. Management's Discussion and Analysis of Financial Condition and Results ----------------------------------------------------------------------- of Operations ------------- Results of Operations The following table presents, for the periods indicated, the percentage relationship that certain items in the Company's Consolidated Statement of Operations bear to net sales. This information should be read in conjunction with the Company's Consolidated Financial Statements and the Notes thereto included elsewhere in this Annual Report. Years Ended --------------------------- June 30, July 1, July 3, 2001 2000 1999 ---- ---- ---- Net Sales 100.0% 100.0% 100.0% Cost of Goods Sold 79.4 81.4 85.9 Gross Profit 20.6 18.6 14.1 Operating Expenses 12.4 11.6 28.5 Income (Loss) from Operations 8.1 6.9 (14.4) Other Expense - Net 3.9 4.6 4.3 Provision (Benefit) for Income Taxes (1.4) 0.7 (1.0) Net Income (Loss) 5.7% 1.6% (17.7)% Fiscal Year 2001 vs. 2000 In fiscal 2001, the Company had net sales of $64.1 million compared with $67.5 million in fiscal 2000, a decrease of $3.5 million or 5.1%. An increase in sales from retained operations of $0.4 million was offset by a reduction in sales of $3.9 million following the sale of the operating assets of GB Labels in August 1999 and Niemand in February 2000. See "Item 1. Business-General." Sales from retained operations were strong in the first half of the fiscal year, but were negatively impacted by the overall slow-down in economic conditions in the second half. Gross profit for fiscal 2001 increased to 20.6% of net sales from 18.6% in fiscal 2000. This increase was due primarily to an influx of new business with higher margins, reduced payroll costs, and the divestiture of low margin business from the sale of the operating assets of Niemand and GB Labels. Additionally, the Company still benefits from continuing cost control efforts and productivity gains carried over from the previous year. Cost of goods sold decreased $4.1 million, or 7.4%, to $50.9 million in fiscal 2001 compared to $55.0 million in fiscal 2000. The sale of the operating assets of GB Labels and Niemand accounted for $3.9 million of the decrease. Operating income for fiscal 2001 was $5.2 million compared with $4.7 million in fiscal 2000, an increase of $0.5 million or 11.4%. This increase was the result of the operating improvements from the retained operations and the sale of the operating assets of GB Labels and Niemand. Selling, general and administrative expenses increased $0.1 million or 1.6% to $7.8 million in fiscal 2001 from $7.7 million in fiscal 2000. Expressed as a percentage of net sales, selling, general and administrative expenses increased to 12.2% in fiscal 2001, compared with 11.4% in fiscal 2000. This is the result of an increase in third party brokers commissions and bad debt expense, partially offset by decreases due to the sale of the operating assets of Niemand and GB Labels. -11- Total interest expense decreased $0.5 million, or 17.9%, to $2.5 million in fiscal 2001 from $3.0 million in fiscal 2000. The decrease is primarily the result of $5.8 million in lower average borrowings and lower average interest rates. The income tax benefit as a percentage of pre-tax income for fiscal 2001 was 34.0% compared with an income tax provision of 31.1% for fiscal 2000. The effective tax rate typically differs from the statutory rate primarily as a result of non-deductible amortization of goodwill. However, as a result of earnings improvements, the Company reduced its deferred income tax asset valuation allowance by $2.0 million in fiscal 2001 to reflect a change in estimate related to the realizability of its deferred income tax assets. See Note 5 of the Notes to Consolidated Financial Statements for a detailed description of the adjustment to the deferred income tax asset valuation. Net income in fiscal 2001 was $3.6 million, or $0.72 per share, compared to $1.1 million or $0.21 per share in fiscal 2000. Net income in fiscal 2001 includes the effect of reducing the deferred income tax asset valuation allowance by $2.0 million, as a result of earnings improvements. Excluding the impact of the change in the deferred income tax asset valuation allowance, net income would have been $1.7 million (or $0.33 per share). The following table illustrates the effect of the income tax asset valuation allowance (in thousands, except per share data):
Excluding Impact of Change in Tax As Reported Valuation Allowance ----------------- ------------------- Income Before Income Taxes $2,716 $2,716 Provision (Benefit) for Income Taxes (923) 1,046 ----------------- ------------------- Net Income $3,639 $1,670 ================= =================== Net Income Per Share $ 0.72 $ 0.33 ================= ===================
Fiscal Year 2000 vs. 1999 In fiscal 2000, the Company's net sales were $67.5 million compared with $76.5 million in fiscal 1999, a decrease of $9.0 million or 11.7%. An increase in sales from retained operations of $1.8 million was offset by a reduction in sales of $10.8 million following the sale of the operating assets of GB Labels in August 1999 and Niemand in June 1999 and February 2000. See "Item 1. Business - General." Gross profit for fiscal 2000 increased to 18.6% of net sales from 14.1% in fiscal 1999. Increased productivity, better pricing, and cost control efforts played a large role in this improvement. Gross margins at Flashfold Carton were further improved when compared to the prior year as a result of lower depreciation following the impairment write-down of long-lived assets in fiscal 1999, and as a result of inventory valuation adjustments in the third quarter of fiscal 1999. These improvements were partially offset by lower margins from Niemand and GB Labels and higher self-funded medical plan claims. Cost of goods sold decreased $10.7 million, or 16.3%, to $55.0 million in fiscal 2000 compared to $65.7 million in fiscal 1999. The sale of the operating assets of GB Labels and Niemand accounted for $10.0 million of the decrease, partially offset by increases related to higher sales from retained operations. -12- Selling, general and administrative expenses decreased $1.3 million or 14.5% to $7.7 million in fiscal 2000 from $9.0 million in fiscal 1999. Expressed as a percentage of net sales, selling, general and administrative expenses decreased slightly to 11.4% in fiscal 2000, compared with 11.8% in fiscal 1999. Selling expenses decreased primarily as a result of the sale of the operating assets of GB Labels and Niemand. Additional cost savings resulted from reorganizing the Company's sales force and continued cost reduction efforts, which included the relocation of the corporate headquarters in the second quarter of fiscal 1999. In connection with the Company's strategic plan, the Company sold the operating assets of GB Labels, effective August 30, 1999. The Company recorded a pre-tax non-cash charge of $82,000 in the fourth quarter of fiscal 1999 to write-down the carrying amount of GB Labels' fixed assets sold to fair value less cost to sell. No gain or loss was recorded on the sale in fiscal 2000. Effective February 1, 2000, the Company completed the sale of the remaining operating assets of Niemand. The sale of the container business of Niemand was finalized in the fourth quarter of fiscal 1999. In the fourth quarter of fiscal 1998, the Company recorded a pre-tax non-cash charge of $14.1 million to write- down the carrying amount of goodwill and fixed assets of Niemand to estimated fair value less cost to sell. No material gain or loss was recorded on either sale. Interest expense decreased $0.3 million or 8.8% to $3.0 million in fiscal 2000 from $3.3 million in fiscal 1999. This decrease is primarily the result of $4.3 million in lower average borrowings coupled with slightly higher average interest rates. The income tax provision as a percentage of pre-tax income for fiscal 2000 was 31.1%, which differs from the statutory rate primarily as a result of a change in the Company's valuation allowance, offset by non-deductible amortization of goodwill. The equivalent tax rate for fiscal 1999 was an income tax benefit of 5.2%. Financial Condition The Company's credit facility with First Source Financial LLP ("First Source"), as amended, provides for a five-year $25 million term loan and a five- year $12 million working capital revolving line of credit ("Revolver"). The loan requires monthly principal payments of $229,167 through April 2003, with the balance of $9,692,435 due on July 31, 2003. 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 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 million or (2) the sum of (a) up to 85% of the Company's eligible accounts receivable plus (b) up to 60% of the Company's eligible inventory. 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 $1.9 million as of June 30, 2001. -13- The Revolver currently bears interest at First Source's prime rate plus 1.25% or the London Interbank Offered Rate ("LIBOR") plus 3.25%. The term loan currently bears interest at First Source's prime rate plus 1.75% or LIBOR plus 3.75%. The Company also pays a commitment fee of 0.5% on the unused portion of the Revolver. The interest rates at June 30, 2001 were a combination of prime and LIBOR. First Source's prime and LIBOR rates were 6.75% and 3.76%, respectively, at June 30, 2001. As of June 30, 2001, all outstanding letters of credit were guaranteed by First Source. The Company pays a letter of credit fee of 2.75% to guarantee availability under the Revolver. Outstanding letters of credit at June 30, 2001 amounted to $160,000 and relate to workman's compensation insurance policies. The First Source credit facility contains certain restrictive covenants including financial covenants related to net worth, minimum interest coverage ratio, capital expenditures, debt ratio and fixed charge coverage. As of June 30, 2001, 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 June 30, 2001, the Company had working capital of $2.4 million, as compared to $2.3 million at July 1, 2000. 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 totaled $4.3 million in fiscal 2001 and $2.9 million in fiscal 2000. This increase is primarily attributable to higher profitability during fiscal 2001 when compared to fiscal 2000. During fiscal 2001, capital expenditures totaled $0.8 million compared with $0.3 million in fiscal 2000, and consisted primarily of additions to machinery and equipment as well as improvements to existing facilities. 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. Under the current strategy, management believes that future funds generated by operations and borrowings available under its credit facility with First Source will be sufficient to meet working capital and capital expenditure requirements in the near term. Inflation Inflation has not had a significant impact on the Company's cost structure. Impact of New Accounting Pronouncements During the first quarter of fiscal 2001, the Company adopted SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. The adoption of this statement did not have a material impact on the Company's financial position or results of operations. During the first quarter of fiscal 2001, the Company also implemented SEC Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition. The implementation of this SAB did not have a material impact on the Company's financial position or results of operations. In June 2001, the Financial Accounting Standards Board ("FASB") approved the issuance of SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. These standards establish accounting and reporting for business combinations, goodwill and other intangibles. SFAS No. 141 requires all business combinations entered into subsequent to June 30, 2001 to be accounted for using the purchase method of accounting. SFAS No. 142 provides that -14- goodwill and other intangible assets with indefinite lives will not be amortized, but will be tested for impairment on an annual basis. SFAS No. 142 is effective for the Company beginning July 1, 2002. The Company has not quantified the impact resulting from the adoption of these standards including the impact, if any, of completion of the annual impairment test. However, the historical impact of not amortizing goodwill would have been to increase net income for the years ended June 30, 2001, July 1, 2000, and July 3, 1999 by $135,000, $161,000, and $345,000 respectively. Item 7A. Quantitative and Qualitative Disclosure About Market Risk --------------------------------------------------------- The Company's primary market risk is fluctuation in interest rates. All of the Company's debt at June 30, 2001 is at variable interest rates. A hypothetical 10% change in interest rates would have had a $0.2 million impact on interest expense for the fiscal year ended June 30, 2001. 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, including whether or not additional capital expenditures will be needed to comply with applicable environmental laws and regulations as the Company's production increases; (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; and (11) the outcome of the Anthem Health Plans litigation. 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-K and other documents that the Company files from time to time with the Securities and Exchange Commission, including quarterly reports of Form 10-Q and any current reports on Form 8-K, must be considered by any investor or potential investor in the Company. Item 8. Financial Statements and Supplementary Data ------------------------------------------- Reference is made to the financial statements, the report thereon, the notes thereto, and supplementary data commencing at page F-1 of this Annual Report on Form 10-K which financial statements, report, notes, and data are incorporated herein by reference. Item 9. Change in and Disagreements With Accountants on Accounting and -------------------------------------------------------------- Financial Disclosure -------------------- None. -15- PART III Item 10. Directors and Executive Officers of the Registrant -------------------------------------------------- The information relating to the identification, business experience and directorships of each director and nominee for director of Gibraltar and the information relating to the identification and business experience of Gibraltar's executive officers, required by Items 401 and 405 of Regulation S-K, will be presented in the sections entitled "Election of Directors - Nominees for Director" and "Executive Compensation and Other Information - Executive Officers" of Gibraltar's definitive proxy statement for the Annual Meeting of Stockholders for fiscal 2001, and is hereby incorporated by reference. If the definitive proxy statement for the 2001 annual meeting is not filed with the Securities and Exchange Commission within 120 days of the end of Gibraltar's 2001 fiscal year, Gibraltar will amend this Annual Report and include such information in the amendment. Item 11. Executive Compensation ---------------------- The information relating to the compensation of directors and officers required by Item 402 of Regulation S-K will be presented in the sections entitled "Election of Directors - Director Compensation" and "Executive Compensation and Other Information" of Gibraltar's definitive proxy statement for the Annual Meeting of Stockholders for fiscal 2001 and is hereby incorporated by reference. If the definitive proxy statement for the 2001 annual meeting is not filed with the Securities and Exchange Commission within 120 days of the end of Gibraltar's 2001 fiscal year, Gibraltar will amend this Annual Report and include such information in the amendment. Item 12. Security Ownership of Certain Beneficial Owners and Management -------------------------------------------------------------- The information relating to security ownership required by Item 403 of Regulation S-K will be presented in the section entitled "Voting Securities and Principal Stockholders" of Gibraltar's definitive proxy statement for the Annual Meeting of Stockholders for fiscal 2001 and is hereby incorporated by reference. If the definitive proxy statement for the 2001 annual meeting is not filed with the Securities and Exchange Commission within 120 days of the end of Gibraltar's 2001 fiscal year, Gibraltar will amend this Annual Report and include such information in the amendment. Item 13. Certain Relationships and Related Transactions ---------------------------------------------- The information relating to certain relationships and transactions required by Item 404 of Regulation S-K will be presented in the section "Executive Compensation and Other Information - Certain Transactions" of Gibraltar's definitive proxy statement for the Annual Meeting of Stockholders for fiscal 2001 and is hereby incorporated by reference. If the definitive proxy statement for the 2001 annual meeting is not filed with the Securities and Exchange Commission within 120 days of the end of Gibraltar's 2001 fiscal year, Gibraltar will amend this Annual Report and include such information in the amendment. -16- PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K ---------------------------------------------------------------- (a) (1) Financial Statements Page Independent Auditors' Report F-1 Consolidated Balance Sheets, June 30, 2001 and July 1, 2000 F-2 Consolidated Statements of Operations, Years Ended June 30, 2001, July 1, 2000, and July 3, 1999 F-3 Consolidated Statements of Stockholders' Equity, Years Ended June 30, 2001, July 1, 2000, and July 3, 1999 F-4 Consolidated Statements of Cash Flows, Years Ended June 30, 2001, July 1, 2000, and July 3, 1999 F-5 Notes to Consolidated Financial Statements F-6 (2) All schedules of the Registrant for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions, are inapplicable, or have been disclosed in the Notes to Consolidated Financial Statements and, therefore, have been omitted. (3) Exhibits Exhibits -------- 3.1 Certificate of Incorporation, as amended, of Gibraltar Packaging Group, Inc. (incorporated by reference to Exhibit 3.1 to Gibraltar's Registration Statement on Form S-1 (File No. 33-44965), as amended, filed January 9, 1992). 3.2 By-Laws of Gibraltar Packaging Group, Inc. (incorporated by reference to Exhibit 3.2 to Gibraltar's Registration Statement on Form S-1 (File No. 33-44965), as amended, filed January 9, 1992). 4.1 Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to Gibraltar's Registration Statement on Form S-1 (File No. 33-44965), as amended, filed January 9, 1992). 10.1 Agreement and Plan of Reorganization, dated as of January 7, 1992, among Gibraltar Packaging Group, Inc., RidgePak Acquisition Corporation, RidgePak Corporation, and the Shareholders of RidgePak Corporation (incorporated by reference to Exhibit 10.1 to Gibraltar's Registration Statement on Form S-1 (File No. 33-44965), as amended, filed January 9, 1992). 10.2 Registration Rights Agreement, dated March 4, 1992, by and among Gibraltar Packaging Group, Inc. and certain stockholders of Gibraltar Packaging Group, Inc. (incorporated by reference to Exhibit 4.2 to Gibraltar's Annual Report on Form 10-K for the year ended June 30, 1992 (File No. 00-19800)). -17- ** 10.3 Employment Agreement, dated February 10, 1992, between Gibraltar Packaging Group, Inc. and Deke C. Abbott, Jr. (incorporated by reference to Exhibit 10.6 to Gibraltar's Registration Statement on Form S-1 (File No. 33-44965), as amended, filed January 9, 1992). ** 10.4 Gibraltar Packaging Group, Inc. 1992 Incentive Stock Option Plan, dated March 5, 1992 and amended as of April 28, 1994 (incorporated by reference to Exhibit 10.5 to Gibraltar's Annual Report on Form 10-K for the year ended July 2, 1994 (File No. 00- 19800)). ** 10.5 Gibraltar Packaging Group, Inc. Director Stock Option Plan dated July 13, 1992 and amended as of April 28, 1994 (incorporated by reference to Exhibit 10.6 to Gibraltar's Annual Report on Form 10-K for the year ended July 2, 1994 (File No. 00-19800)). ** 10.6 Employment Agreement, dated December 1, 1992, between Gibraltar Packaging Group, Inc. and Richard Hinrichs (incorporated by reference to Exhibit 28.1 to Gibraltar's Quarterly Report on Form 10-Q for the period ended December 31, 1992 (File No. 00-19800)). 10.7 Stock Purchase Agreement, dated January 28, 1993, by and among Gibraltar Packaging Group, Inc., Standard Packaging and Printing Corp. and each of the shareholders of Standard Packaging and Printing Corp. (incorporated by reference to Exhibit 2.1 to Gibraltar's Current Report on Form 8-K dated January 28, 1993 (File No. 00-19800)). 10.8 Registration Rights Agreement, dated as of January 28, 1993, between Gibraltar Packaging Group, Inc. and Brady W. Dickson and Joan H. Dickson (incorporated by reference to Exhibit 28.1 to Gibraltar's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1993 (File No. 00-19800)). 10.9 Agreement and Plan of Reorganization, dated April 28, 1993, by and among Gibraltar Packaging Group, Inc., Niemand Acquisition Corporation, Niemand Holdings, Inc., Niemand Industries, Inc., and each of the stockholders of Niemand Holdings, Inc. (incorporated by reference to Exhibit 2.1 to Gibraltar's Current Report on Form 8-K dated April 28, 1993 (File No. 00-19800)). 10.10 Registration Rights Agreement, dated April 28, 1993, by and among Gibraltar Packaging Group, Inc. and the former stockholders of Niemand Holdings, Inc. listed on Schedule I thereto (incorporated by reference to Exhibit 28.1 to Gibraltar's Current Report on Form 8-K dated April 28, 1993 (File No. 00-19800)). 10.11 Stock Sale Agreement, dated November 8, 1993, between Gibraltar Packaging Group, Inc. and Golden Belt Manufacturing Company (incorporated by reference to Exhibit 10.35 to Gibraltar's Annual Report on Form 10-K for the year ended July 2, 1994 (File No. 00- 19800)). 10.12 Agreement and Plan of Merger, dated as of March 17, 1995, as extended by letter agreement dated June 15, 1995 and as terminated by letter agreement dated August 3, 1995, among Caraustar Industries, Inc., GibPac Acquisition Company and Gibraltar Packaging Group, Inc. (incorporated by reference to Exhibit 10.37 to Gibraltar's Annual Report on Form 10-K for the year ended July 1, 1995 (File No. 00-19800)). -18- ** 10.16 Letter Agreement, dated December 18, 1997 between Gibraltar Packaging Group, Inc. and Richard D. Hinrichs regarding employment (incorporated by reference to Exhibit 10.16 to Gibraltar's Annual Report on Form 10-K for the year ended June 27, 1998 (File No. 00-19800)). 10.17 Secured Credit Agreement, dated July 31, 1998, among Gibraltar Packaging Group, Inc., various financial institutions and First Source Financial LLP, Individually and as Agent ("The Credit Agreement") (incorporated by reference to Exhibit 10.17 to Gibraltar's Annual Report on Form 10-K for the year ended June 27, 1998 (File No. 00-19800)). 10.18 Term Note, dated July 31, 1998, in favor of First Source Financial LLP, executed by Gibraltar Packaging Group, Inc. In the principal amount of $25,000,000 (incorporated by reference to Exhibit 10.18 to Gibraltar's Annual Report on Form 10-K for the year ended June 27, 1998 (File No. 00-19800)). 10.19 Revolving Note, dated July 31, 1998, in favor of First Source Financial LLP, executed by Gibraltar Packaging Group, Inc. In the principal amount of $15,000,000 (incorporated by reference to Exhibit 10.19 to Gibraltar's Annual Report on Form 10-K for the year ended June 27, 1998 (File No. 00-19800)). 10.20 Security Agreement executed by GB Labels, Inc., dated July 31, 1998, in favor of First Source Financial LLP (incorporated by reference to Exhibit 10.20 to Gibraltar's Annual Report on Form 10-K for the year ended June 27, 1998 (File No. 00-19800)). 10.21 Security Agreement executed by RidgePak Corporation, dated July 31, 1998, in favor of First Source Financial LLP (incorporated by reference to Exhibit 10.21 to Gibraltar's Annual Report on Form 10-K for the year ended June 27, 1998 (File No. 00-19800)). 10.22 Security Agreement executed by Standard Packaging and Printing Corp., dated July 31, 1998, in favor of First Source Financial LLP (incorporated by reference to Exhibit 10.22 to Gibraltar's Annual Report on Form 10-K for the year ended June 27, 1998 (File No. 00-19800)). 10.23 Security Agreement executed by Niemand Holdings, Inc., dated July 31, 1998, in favor of First Source Financial LLP (incorporated by reference to Exhibit 10.23 to Gibraltar's Annual Report on Form 10-K for the year ended June 27, 1998 (File No. 00-19800)). 10.24 Security Agreement executed by Niemand Industries, Inc., dated July 31, 1998, in favor of First Source Financial LLP (incorporated by reference to Exhibit 10.24 to Gibraltar's Annual Report on Form 10-K for the year ended June 27, 1998 (File No. 00-19800)). 10.25 Pledge Agreement executed by Niemand Holdings, Inc., dated July 31, 1998, in favor of First Source Financial LLP (incorporated by reference to Exhibit 10.25 to Gibraltar's Annual Report on Form 10-K for the year ended June 27, 1998 (File No. 00-19800)). -19- 10.26 Deed of Trust Security Agreement, executed by Gibraltar Packaging Group, Inc., dated July 31, 1998, in favor of First Source Financial LLP (incorporated by reference to Exhibit 10.26 to Gibraltar's Annual Report on Form 10-K for the year ended June 27, 1998 (File No. 00-19800)). 10.27 Deed of Trust Security Agreement, executed by Standard Packaging and Printing Corp., dated July 31, 1998, in favor of First Source Financial LLP (incorporated by reference to Exhibit 10.27 to Gibraltar's Annual Report on Form 10-K for the year ended June 27, 1998 (File No. 00-19800)). 10.28 Security Agreement executed by Gibraltar Packaging Group, Inc., dated July 31, 1998, in favor of First Source Financial LLP (incorporated by reference to Exhibit 10.28 to Gibraltar's Annual Report on Form 10-K for the year ended June 27, 1998 (File No. 00-19800)). 10.29 Pledge Agreement executed by Gibraltar Packaging Group, Inc., dated July 31, 1998, in favor of First Source Financial LLP (incorporated by reference to Exhibit 10.29 to Gibraltar's Annual Report on Form 10-K for the year ended June 27, 1998 (File No. 00-19800)). 10.30 Guaranty, dated July 31, 1998 among Gibraltar Packaging Group, Inc., RidgePak Corporation, Standard Packaging and Printing Corp., Niemand Holdings, Inc., Niemand Industries Inc., GB Labels, Inc. And First Source Financial LLP (incorporated by reference to Exhibit 10.30 to Gibraltar's Annual Report on Form 10-K for the year ended June 27, 1998 (File No. 00-19800)). 10.31 Mortgage Security Agreement executed by RidgePak Corporation, dated July 31, 1998 in favor of First Source Financial LLP (incorporated by reference to Exhibit 10.31 to Gibraltar's Annual Report on Form 10-K for the year ended June 27, 1998 (File No. 00-19800)). 10.32 Mortgage Security Agreement executed by Niemand Industries, Inc., dated July 31, 1998 in favor of First Source Financial LLP (incorporated by reference to Exhibit 10.32 to Gibraltar's Annual Report on Form 10-K for the year ended June 27, 1998 (File No. 00-19800)). **10.33 Gibraltar Packaging Group, Inc.1998 Stock Appreciation Rights Plan, dated November 30, 1998 (incorporated by reference to Exhibit 10.33 to Gibraltar's Quarterly Report on Form 10-Q for the period ended December 31, 1998 (File No. 00-19800)). **10.34 Employment Agreement, dated January 15, 1999, between Gibraltar Packaging Group, Inc. and John W. Lloyd (incorporated by reference to Exhibit 10.34 to Gibraltar's Quarterly Report on Form 10-Q for the period ended December 31, 1998 (File No. 00- 19800)). **10.35 Employment Agreement, dated January 15, 1999, between Gibraltar Packaging Group, Inc. and Richard D. Hinrichs (incorporated by reference to Exhibit 10.35 to Gibraltar's Quarterly Report on Form 10-Q for the period ended December 31, 1998 (File No. 00- 19800)). -20- **10.36 Stock Appreciation Rights Agreement, dated January 15, 1999, between Gibraltar Packaging Group, Inc. and John W. Lloyd (incorporated by reference to Exhibit 10.36 to Gibraltar's Quarterly Report on Form 10-Q for the period ended December 31, 1998 (File No. 00-19800)). **10.37 Stock Appreciation Rights Agreement, dated January 15, 1999, between Gibraltar Packaging Group, Inc. and Richard D. Hinrichs (incorporated by reference to Exhibit 10.37 to Gibraltar's Quarterly Report on Form 10-Q for the period ended December 31, 1998 (File No. 00-19800)). 10.38 First Amendment to Secured Credit Agreement, dated September 1, 1998, among Gibraltar Packaging Group, Inc., various financial institutions and First Source Financial LLP, Individually and as agent (incorporated by reference to Exhibit 10.38 to Gibraltar's Quarterly Report on Form 10-Q for the period ended December 31, 1998 (File No. 00-19800)). 10.39 Second Amendment to Secured Credit Agreement, dated November 15, 1998, among Gibraltar Packaging Group, Inc., various financial institutions and First Source Financial LLP, Individually and as agent (incorporated by reference to Exhibit 10.39 to Gibraltar's Quarterly Report on Form 10-Q for the period ended December 31, 1998 (File No. 00-19800)). 10.40 Third Amendment to Secured Credit Agreement, dated February 11, 1999, among Gibraltar Packaging Group, Inc., various financial institutions and First Source Financial LLP, Individually and as agent (incorporated by reference to Exhibit 10.40 to Gibraltar's Quarterly Report on Form 10-Q for the period ended December 31, 1998 (File No. 00-19800)). 10.41 Fourth Amendment to Secured Credit Agreement, dated May 15, 1999, among Gibraltar Packaging Group, Inc., various financial institutions and First Source Financial LLP, Individually and as agent (incorporated by reference to Exhibit 10.41 to Gibraltar's Quarterly Report on Form 10-Q for the period ended March 31, 1999 (File No. 00-19800)). 10.42 Asset Purchase Agreement, dated February 25, 1999, between Robinson JDM Ltd. (Buyer) and Niemand Industries, Inc. (Seller) (incorporated by reference to Exhibit 10.42 to Gibraltar's Annual Report on Form 10-K for the year ended July 3, 1999 (File No. 00- 19800)). 10.43 Escrow Agreement, dated March 29, 1999, among Robinson JDM Ltd. (Buyer), Niemand Industries, Inc. (Seller) and Chicago Title Insurance Company (incorporated by reference to Exhibit 10.43 to Gibraltar's Annual Report on Form 10-K for the year ended July 3, 1999 (File No. 00-19800)). 10.44 First Amendment to Asset Purchase Agreement, dated April 20, 1999, between Robinson JDM Ltd. (Buyer) and Niemand Industries, Inc. (Seller) (incorporated by reference to Exhibit 10.44 to Gibraltar's Annual Report on Form 10-K for the year ended July 3, 1999 (File No. 00-19800)). 10.45 Non-Competition and Non-Solicitation Agreement, dated May 28, 1999, among Robinson JDM Ltd., Gibraltar Packaging Group, Inc. and Niemand Industries, Inc. (incorporated by reference to Exhibit 10.45 to Gibraltar's Annual Report on Form 10-K for the year ended July 3, 1999 (File No. 00-19800)). -21- 10.46 Asset Purchase Agreement, dated September 1, 1999, between JIT Manufacturing, Inc. (Buyer) and GB Labels, Inc. (Seller) (incorporated by reference to Exhibit 10.46 to Gibraltar's Annual Report on Form 10-K for the year ended July 3, 1999 (File No. 00- 19800)). 10.47 Non-Competition Agreement, dated September 1, 1999, between JIT Manufacturing, Inc. and Gibraltar Packaging Group, Inc. (incorporated by reference to Exhibit 10.47 to Gibraltar's Annual Report on Form 10-K for the year ended July 3, 1999 (File No. 00- 19800)). 10.48 Guaranty Agreement, dated September 1, 1999, between JIT Manufacturing, Inc. and Gibraltar Packaging Group, Inc. (incorporated by reference to Exhibit 10.48 to Gibraltar's Annual Report on Form 10-K for the year ended July 3, 1999 (File No. 00- 19800)). 10.49 Fifth Amendment to Secured Credit Agreement, dated September 29, 1999, among Gibraltar Packaging Group, Inc., various financial institutions and First Source Financial LLP, Individually and as agent (incorporated by reference to Exhibit 10.49 to Gibraltar's Annual Report on Form 10-K for the year ended July 3, 1999 (File No. 00-19800)). 10.50 Sixth Amendment to Secured Credit Agreement, dated October 26, 1999, among Gibraltar Packaging Group, Inc., various financial institutions and First Source Financial LLP, individually and as agent (incorporated by reference to Exhibit 10.50 to Gibraltar's Quarterly Report on Form 10-Q for the period ended September 30, 1999 (File No. 00-19800)). 10.51 Seventh Amendment to Secured Credit Agreement, dated November 19, 1999, among Gibraltar Packaging Group, Inc., various financial institutions and First Source Financial LLP, individually and as agent (incorporated by reference to Exhibit 10.51 to Gibraltar's Quarterly Report on Form 10-Q for the period ended December 31, 1999 (File No. 00-19800)). **10.52 Further Agreement Concerning Employment, dated January 23, 2000, between Gibraltar Packaging Group, Inc. and John W. Lloyd (incorporated by reference to Exhibit 10.52 to Gibraltar's Quarterly Report on Form 10-Q for the period ended December 31, 1999 (File No. 00-19800)). 10.53 Asset Purchase Agreement, dated November 3, 1999, among TEKPAK, Inc., Niemand Industries, Inc. and Gibraltar Packaging Group, Inc. (incorporated by reference to Exhibit 10.53 to Gibraltar's Quarterly Report on Form 10-Q for the period ended December 31, 1999 (File No. 00-19800)). **10.54 Memorandum of Understanding, dated July 3, 2000, between Gibraltar Packaging Group, Inc. and John W. Lloyd (incorporated by reference to Exhibit 10.54 to Gibraltar's Annual Report on Form 10-K for the period ended July 1, 2000 (File No. 00-19800)). **10.55 Letter of Resignation, dated September 1, 2000, between Gibraltar Packaging Group, Inc. and John W. Lloyd (incorporated by reference to Exhibit 10.55 to Gibraltar's Annual Report on Form 10-K for the period ended July 1, 2000 (File No. 00-19800)). -22- 10.56 Eighth Amendment to Secured Credit Agreement, dated September 30, 2000, among Gibraltar Packaging Group, Inc., various financial institutions and First Source Financial LLP, Individually and as agent (incorporated by reference to Exhibit 10.56 to Gibraltar's Quarterly Report on Form 10-Q for the period ended December 31, 2000 (File No. 00-19800)). * 10.57 Amendment to Asset Purchase Agreement, dated April 6, 2001, among TEKPAK, Inc., Niemand Industries, Inc. and Gibraltar Packaging Group, Inc. 21.1 Subsidiaries of Gibraltar Packaging Group, Inc. (incorporated by reference to Exhibit 21.1 to Gibraltar's Annual Report on Form 10-K for the year ended July 3, 1999 (File No. 00-19800)). * 23.1 Consent of Deloitte & Touche LLP. ________________ *Filed herewith. **Indicates management contract or compensatory plan. (b) Reports on Form 8-K. None -23- 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. GIBRALTAR PACKAGING GROUP, INC. By: /s/ Lyle O. Halstead /s/ Brett E. Moller ------------------------------- ------------------------------ Lyle O. Halstead Brett E. Moller V. P. Finance - Operations V. P. Finance - Corporate (Principal Accounting Officer) (Principal Financial Officer) Date: September 21, 2001 September 21, 2001 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/ Walter E. Rose /s/ Richard D. Hinrichs ------------------ --------------------------------- Walter E. Rose Richard D. Hinrichs Chief Executive Officer and Chief Operating Officer and Director Chairman of the Board September 21, 2001 (Principal Executive Officer) September 21, 2001 /s/ David G. Chandler /s/ Robert G. Shaw --------------------- ---------------------------- David G. Chandler Robert G. Shaw Director Director September 21, 2001 September 21, 2001 /s/ John D. Strautnieks /s/ John W. Lloyd ------------------------ ------------------------- John D. Strautnieks John W. Lloyd Director Director September 21, 2001 September 21, 2001 -24- INDEPENDENT AUDITORS' REPORT Board of Directors Gibraltar Packaging Group, Inc. Hastings, Nebraska We have audited the accompanying consolidated balance sheets of Gibraltar Packaging Group, Inc. and its subsidiaries as of June 30, 2001 and July 1, 2000, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended June 30, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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, such consolidated financial statements present fairly, in all material respects, the financial position of Gibraltar Packaging Group, Inc. and subsidiaries at June 30, 2001 and July 1, 2000, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2001 in conformity with accounting principles generally accepted in the United States of America. /s/ Deloitte & Touche LLP DELOITTE & TOUCHE LLP Omaha, Nebraska August 8, 2001 F-1 GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands except share data)
June 30, July 1, 2001 2000 ASSETS CURRENT ASSETS: Cash $ 144 $ 160 Accounts receivable (Net of allowance for doubtful accounts of $508 and $185, respectively) 6,285 6,442 Inventories 6,693 6,810 Deferred income taxes 725 582 Prepaid and other current assets 766 578 -------- -------- Total current assets 14,613 14,572 PROPERTY, PLANT AND EQUIPMENT - Net 16,590 18,031 GOODWILL (Net of accumulated amortization of $2,090 and $1,955, respectively) 4,247 4,382 DEFERRED INCOME TAXES 105 - OTHER ASSETS (Net of accumulated amortization of $487 and $306, respectively) 819 669 -------- -------- TOTAL $ 36,374 $ 37,654 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Checks not yet presented $ 1,115 $ 797 Current portion of long-term debt 2,769 2,751 Accounts payable 4,925 5,208 Accrued expenses 3,401 3,483 -------- -------- Total current liabilities 12,210 12,239 LONG-TERM DEBT - Net of current portion 18,578 22,498 DEFERRED INCOME TAXES - 894 OTHER LONG-TERM LIABILITIES 431 507 -------- -------- Total liabilities 31,219 36,138 -------- -------- COMMITMENTS AND CONTINGENCIES (Notes 8 and 9) 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 (23,057) (26,696) -------- -------- Total stockholders' equity 5,155 1,516 -------- -------- TOTAL $ 36,374 $ 37,654 ======== ========
See notes to consolidated financial statements. F-2 GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED JUNE 30, 2001, JULY 1, 2000, AND JULY 3, 1999 (In thousands except share data)
2001 2000 1999 NET SALES $ 64,084 $ 67,543 $ 76,514 COST OF GOODS SOLD 50,908 54,998 65,711 ---------- ---------- ---------- GROSS PROFIT 13,176 12,545 10,803 ---------- ---------- ---------- OPERATING EXPENSES: Selling, general, and administrative 7,826 7,701 9,009 Amortization of goodwill 135 161 345 Restructuring charges - - 235 Impairment of long-lived assets - - 12,213 ---------- ---------- ---------- Total operating expenses 7,961 7,862 21,802 ---------- ---------- ---------- INCOME (LOSS) FROM OPERATIONS 5,215 4,683 (10,999) ---------- ---------- ---------- OTHER (INCOME) EXPENSE: Interest expense 2,499 3,043 3,336 Other (income) expense - net - 87 (12) ---------- ---------- ---------- Other expense - net 2,499 3,130 3,324 ---------- ---------- ---------- INCOME (LOSS) BEFORE INCOME TAXES 2,716 1,553 (14,323) PROVISION (BENEFIT) FOR INCOME TAXES (923) 483 (751) ---------- ---------- ---------- NET INCOME (LOSS) $ 3,639 $ 1,070 $ (13,572) ========== ========== ========== BASIC AND DILUTED PER COMMON SHARE AMOUNTS: Net Income (Loss) $0.72 $0.21 $(2.69) ========== ========== ========== WEIGHTED AVERAGE SHARES OUTSTANDING 5,041,544 5,041,544 5,041,544 ========== ========== ========== (basic and diluted)
See notes to consolidated financial statements. F-3 GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY YEARS ENDED JUNE 30, 2001, JULY 1, 2000, AND JULY 3, 1999 (In thousands except share data)
Common Stock Additional ----------------- Number of Paid-in Accumulated Shares Amount Capital Deficit Total BALANCE, June 27, 1998 5,041,544 $50 $28,162 $(14,194) $ 14,018 Net loss - - - (13,572) (13,572) --------- ------ ---------- -------- -------- BALANCE, July 3, 1999 5,041,544 50 28,162 (27,766) 446 Net income - - - 1,070 1,070 --------- ------ ---------- -------- -------- BALANCE, July 1, 2000 5,041,544 50 28,162 (26,696) 1,516 Net income - - - 3,639 3,639 --------- ------ ---------- -------- -------- BALANCE, June 30, 2001 5,041,544 $50 $28,162 $(23,057) $ 5,155 ========= ====== ========== ======== ========
See notes to consolidated financial statements. F-4 GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED JUNE 30, 2001, JULY 1, 2000, AND JULY 3, 1999 (In thousands)
2001 2000 1999 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 3,639 $ 1,070 $(13,572) Adjustments to reconcile net income (loss) to net cash flows from operating activities: Impairment write-down of long-lived assets - - 12,213 Depreciation and amortization 2,212 2,359 3,062 Gain on sale of property, plant and equipment (55) (13) (12) Deferred income taxes (1,142) 450 (905) Changes in operating assets and liabilities: Accounts receivable - net 157 101 422 Inventories 117 69 1,927 Prepaid expenses and other assets (519) (289) 7 Accounts payable 35 (815) (2,951) Accrued expenses and other liabilities (158) (11) 319 ------- ------- -------- Net Cash Flows from Operating Activities 4,286 2,921 510 ------- ------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of property, plant and equipment 403 38 16 Proceeds from sale of Niemand and GB Labels - 2,907 677 Purchases of property, plant and equipment (803) (331) (1,245) ------- ------- -------- Net Cash Flows from Investing Activities (400) 2,614 (552) ------- ------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings (payments) under revolving credit facility (798) (777) 2,998 Net principal repayments of long-term debt (3,081) (4,764) (32,943) Net repayments under capital leases (23) (32) (39) Proceeds from issuance of long-term debt - - 30,830 Refinancing costs - - (720) ------- ------- -------- Net Cash Flows from Financing Activities (3,902) (5,573) 126 ------- ------- -------- NET INCREASE (DECREASE) IN CASH (16) (38) 84 CASH AT BEGINNING OF YEAR 160 198 114 ------- ------- -------- CASH AT END OF YEAR $ 144 $ 160 $ 198 ======= ======= ======== SUPPLEMENTAL DISCLOSURE: Income taxes paid $ 191 $ 8 $ 247 ======= ======= ======== Interest paid $ 2,365 $ 2,969 $ 3,116 ======= ======= ======== SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Capital lease obligations $ - $ - $ 82 ======= ======= ========
See notes to consolidated financial statements. F-5 GIBRALTAR PACKAGING GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THREE YEARS ENDED JUNE 30, 2001, JULY 1 2000, AND JULY 3, 1999 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation - The accompanying consolidated financial statements include the accounts of Gibraltar Packaging Group, Inc. (the "Company") and its wholly owned subsidiaries; RidgePak Corporation (dba "Flashfold Carton") and Standard Packaging & Printing Corporation ("Standard Packaging"). The activity of Niemand Industries, Inc. ("Niemand") and GB Labels, Inc. ("GB Labels") have been included in the consolidated financial statements through the date of disposition. All significant intercompany accounts and transactions have been eliminated. Description of Business - The Company designs and manufactures high quality specialty packaging products in facilities located in Nebraska, Indiana, and North Carolina, and markets these products primarily to customers throughout the United States. The Company's products include folding cartons, specialty laminated containers, and flexible packaging for a wide range of businesses. Based on the nature of the product, the production processes, types of customers, and methods used to distribute products, the Company operates in one reportable segment. Fiscal Year - The Company ends its fiscal year on the Saturday closest to June 30. Cash and Cash Equivalents - The Company considers all highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents. The Company utilizes a cash management system that includes zero balance accounts. Negative cash balances for such accounts, resulting from outstanding checks, are reclassified to checks not yet presented in the consolidated financial statements. Accounts Receivable - The changes in the allowance for doubtful accounts receivable consist of the following (in thousands): Years Ended ------------------------------ June 30, July 1, July 3, 2001 2000 1999 Allowance, Beginning of Year $ 185 $ 194 $ 162 Provision for Uncollectible Accounts 342 28 122 Write-off of Uncollectible Accounts (19) (37) (90) ----- ----- ----- Allowance, End of Year $ 508 $ 185 $ 194 ===== ===== ===== Inventories - Inventories are stated at the lower of cost (first-in, first-out method) or market. Property, Plant and Equipment - Depreciation is provided using the straight-line method over the following estimated useful lives: Buildings 30 years Machinery and equipment 2-20 years Vehicles 3-8 years Furniture and fixtures 3-10 years F-6 Goodwill - The excess of the purchase price over the net assets acquired is being amortized over a forty-year period on a straight-line basis. The carrying value of goodwill is evaluated in relation to the operating performance and future undiscounted net cash flows of the related acquired businesses. Impairment of Long-Lived Assets - Recoverability of long-lived assets not held for sale are evaluated by measuring the carrying amount of the assets against the estimated undiscounted future cash flows associated with them. The evaluation of the recoverability of long-lived assets that are held for sale are based on comparing the assets' carrying amount with its fair value less cost to sell. Based on these evaluations, there were no adjustments to the carrying value of long-lived assets in fiscal years 2001 and 2000. In conjunction with the sale of GB Labels in August 1999, the Company recorded a pre-tax non-cash charge of $82,000 in the fourth quarter of fiscal 1999 to write-down the carrying amount of GB Labels' fixed assets sold to fair value less cost to sell. Additionally, the Company recorded a pre-tax non-cash charge of $0.3 million to write-down the carrying amount of the retained real property of GB Labels to estimated fair value. At the end of the third quarter of fiscal 1999, the Company recorded a charge of $11.8 million to write-down the carrying amount of goodwill and fixed assets of Flashfold Carton to estimated fair value. Estimated fair value was determined by discounting future cash flows. The Flashfold Carton facility had been experiencing declining sales and profitability for the three years prior to fiscal 2000. In the first quarter of fiscal 1999, the facility was put under the operating control of the Gibraltar Packaging Group, Inc. (dba "Great Plains Packaging", or "Great Plains") management team in an attempt to improve operating results. Management's projections of future operating cash flows during the first two quarters of fiscal 1999 continued to reflect planned operating improvements. During the third quarter of fiscal 1999, it was determined that the planned operating improvements could not be realized in the time period or to the degree estimated. The impairment loss resulted in a complete write-off of goodwill and a reduction in the carrying value of fixed assets at Flashfold Carton. Disposal of Assets - In connection with a modification of the Company's strategic plan, the Company has divested itself of the operating assets of two of its subsidiaries, GB Labels and Niemand. In the fourth quarter of fiscal 1999, the sale of the container business of Niemand was finalized. The remainder of the operating assets were sold effective February 1, 2000. No gain or loss was recorded on the sales in either fiscal 2000 or fiscal 1999. The sale of the operating assets of GB Labels was effective August 30, 1999. No gain or loss was recorded on the sale in fiscal 2000. Individually and in total the assets disposed of were not material to the Company's financial statements. Accordingly, pro forma financial statements are not presented. Other Assets - Costs associated with obtaining financing arrangements are included in other assets. In July 1998, the Company capitalized approximately $0.8 million, representing the cost of refinancing its debt under a new credit facility as described in Note 4. Revenue Recognition - Sales and related cost of sales are recognized upon the earlier of shipment of products or acceptance by the customer. Shipping and Handling Costs - Shipping and handling costs are included in cost of goods sold in the consolidated statements of operations. F-7 Earnings per share - Basic earnings per share data are based on the weighted average outstanding common shares during the period. Diluted earnings per share data are based on the weighted average outstanding common shares and the effect of all dilutive potential common shares, including stock options. New Accounting Pronouncements - During the first quarter of fiscal 2001, the Company adopted SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. The adoption of this statement did not have a material impact on the Company's financial position or results of operations. During the first quarter of fiscal 2001, the Company also implemented SEC Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition. The implementation of this SAB did not have a material impact on the Company's financial position or results of operations. In June 2001, the Financial Accounting Standards Board ("FASB") approved the issuance of SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. These standards establish accounting and reporting for business combinations, goodwill and other intangibles. SFAS No. 141 requires all business combinations entered into subsequent to June 30, 2001 to be accounted for using the purchase method of accounting. SFAS No. 142 provides that goodwill and other intangible assets with indefinite lives will not be amortized, but will be tested for impairment on an annual basis. SFAS No. 142 is effective for the Company beginning July 1, 2002. The Company has not quantified the impact resulting from the adoption of these standards including the impact, if any, of completion of the annual impairment test. However, the historical impact of not amortizing goodwill would have been to increase net income for the years ended June 30, 2001, July 1, 2000, and July 3, 1999 by $135,000, $161,000, and $345,000, respectively. Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Reclassification - Certain amounts in the fiscal 2000 financial statements have been reclassified to conform with the fiscal 2001 presentation. 2. INVENTORIES Inventories consisted of the following (in thousands): June 30, July 1, 2001 2000 Finished goods $4,846 $4,995 Work in process 797 676 Raw materials 764 848 Manufacturing supplies 286 291 ------ ------ $6,693 $6,810 ====== ====== F-8 3. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment (at cost) consisted of the following (in thousands): June 30, July 1, 2001 2000 Land $ 632 $ 707 Buildings 11,852 12,066 Machinery, equipment and vehicles 20,711 20,264 Furniture and fixtures 1,516 1,473 Construction-in-progress 19 90 ------- ------- 34,730 34,600 Less accumulated depreciation 18,140 16,569 ------- ------- $16,590 $18,031 ======= ======= 4. FINANCING AGREEMENTS Long-term debt consisted of (columnar amounts in thousands): June 30, July 1, 2001 2000 First Source term loan $14,734 $17,815 Revolving credit facility 6,575 7,373 Capital lease obligations 38 61 ------- ------- Total 21,347 25,249 Less current portion 2,769 2,751 ------- ------- Long-term debt $18,578 $22,498 ======= ======= The Company's credit facility with First Source Financial LLP ("First Source"), as amended, provides for a five-year $25 million term loan and a five-year $12 million working capital revolving line of credit ("Revolver"). The loan requires monthly principal payments of $229,167 through April 2003, with the balance of $9,692,435 due on July 31, 2003. 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 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 million or (2) the sum of (a) up to 85% of the Company's eligible accounts receivable plus (b) up to 60% of the Company's eligible inventory. 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 $1.9 million as of June 30, 2001. The Revolver currently bears interest at First Source's prime rate plus 1.25% or the London Interbank Offered Rate ("LIBOR") plus 3.25%. The term loan currently bears interest at First Source's prime rate plus 1.75% or LIBOR plus 3.75%. The Company also pays a commitment fee of 0.5% on the unused portion of the Revolver. The interest rates at June 30, 2001 were a combination of prime and LIBOR. First Source's prime and LIBOR rates were 6.75% and 3.76%, respectively, at June 30, 2001. F-9 As of June 30, 2001, all outstanding letters of credit were guaranteed by First Source. The Company pays a letter of credit fee of 2.75% to guarantee availability under the Revolver. Outstanding letters of credit at June 30, 2001 amounted to $160,000 and relate to workman's compensation insurance policies. The First Source credit facility contains certain restrictive covenants including financial covenants related to net worth, minimum interest coverage ratio, capital expenditures, debt ratio and fixed charge coverage. As of June 30, 2001, 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. Anticipated maturities of long-term debt subsequent to June 30, 2001, pursuant to the credit facility and future minimum payments under finance leases, are as follows (in thousands): Amounts 2002 $ 2,769 2003 2,310 2004 16,268 ------- Total $21,347 ======= 5. INCOME TAXES The provision (benefit) for income taxes consists of the following (in thousands): June 30, July 1, July 3, 2001 2000 1999 Current: Federal $ 62 $ - $ 71 State 157 33 83 Deferred (1,142) 450 (905) -------- ------ ------- $ (923) $ 483 $ (751) ======== ====== ======= The following represents a reconciliation between the actual income tax expense and income taxes computed by applying the statutory federal income tax rate to income (loss) before income taxes: June 30, July 1, July 3, 2001 2000 1999 Statutory rate $ 923 $ 528 $(4,870) State income tax effect 95 45 (215) Change in valuation allowance (1,969) (127) 1,176 Disallowed losses with respect to impaired asset write-down - - 3,023 Amortization of goodwill 46 55 117 Other - net (18) (18) 18 -------- ------ ------- Total $ (923) $ 483 $ (751) -------- ------ ------- F-10 Deferred income tax (liabilities) assets result from reporting income and expenses in different periods for tax and financial reporting purposes. The deferred tax liabilities and assets are comprised of the following (in thousands): June 30, July 1, 2001 2000 Deferred income tax assets: Difference in basis of amortizable assets $ 210 $ 816 Non-deductible accrued liabilities 939 989 State net operating loss carryforwards 1,502 1,559 State tax credits carryforward 875 875 Federal net operating loss carryforward 2,223 3,098 AMT credit carryforward 454 385 Differences in the basis of inventory for tax purposes 178 123 Other - net 12 40 -------- ------- Total 6,393 7,885 Deferred tax asset valuation allowance (2,313) (4,282) -------- ------- Net 4,080 3,603 -------- ------- Deferred tax liabilities: Difference in basis of property, plant and equipment (3,061) (3,463) Other (189) (452) -------- ------- Total (3,250) (3,915) -------- ------- Net deferred income tax asset (liability) $ 830 $ (312) ======== ======= At June 30, 2001, the Company had the following tax net operating loss carryforwards for federal income tax purposes (in thousands): Expiration Amounts 2012 $ 180 2013 3,271 2019 3,017 2020 71 ------- Total $ 6,539 ======= At June 30, 2001, the Company had a state investment tax credit carryforward of approximately $0.9 million which expires if unutilized by the year 2006. These credits are available to offset both Nebraska state income tax and Nebraska sales tax on qualifying purchases. F-11 6. EMPLOYEE BENEFIT PLANS The Company maintains a noncontributory defined benefit pension plan (the "benefit plan") covering substantially all of the RidgePak Corporation hourly union employees fulfilling participation requirements. Benefits are based on the employee's years of credited service. The Company's funding policy is to contribute annually the minimum amount required under ERISA. Plan assets are held by an independent trustee and consist of U.S. Government securities, time deposits, common stocks, corporate bonds and collective investment funds. The change in benefit obligation and plan assets and the reconciliation of funded status for the years presented included the following components (dollars in thousands): June 30, July 1, 2001 2000 Change in benefit obligations: Benefit obligation at beginning of year $ 555 $ 529 Service cost 43 45 Interest cost 43 39 Actuarial gain 54 (23) Benefits paid (97) (35) ----- ----- Benefit obligation at end of year 598 555 ----- ----- Change in plan assets: Fair value of plan assets at beginning of year 685 602 Actual return on plan assets 13 64 Employer contribution 65 54 Benefits paid (97) (35) ----- ----- Fair value of plan assets at end of year 666 685 ----- ----- Reconciliation of funded status: Plan assets in excess of projected benefit obligation 68 130 Unrecognized loss 115 16 Contributions made after the measurement date 40 - ----- ----- Prepaid pension cost recognized on balance sheet $ 223 $ 146 ===== ===== Discount rate used to calculate the above liability 7.25% 8.00% The net periodic pension cost and assumptions used for the years presented included the following components (dollars in thousands): June 30, July 1, July 3, 2001 2000 1999 Service cost-benefits earned during the period $ 43 $ 45 $ 58 Interest cost on projected benefit obligation 43 39 32 Expected return on plan assets (58) (52) (44) Amortization of loss - - 5 ----- ----- ----- Net periodic pension cost $ 28 $ 32 $ 51 ===== ===== ===== Discount rate used to calculate expense 8.00% 7.50% 6.50% Expected long-term rate of return on plan assets 8.00% 8.00% 8.00% The Company also sponsors a defined contribution 401(k) plan (the "Gibraltar Plan"). Employees are eligible to participate in the Gibraltar Plan upon completion of six months of credited service. Participants fully vest in Company contributions after five years with partial vesting after one year. An employee may contribute up to 15% of his or her earnings on a pre-tax basis subject to IRS limitations. The Company matches 25% of an employee's contribution up to a maximum of 4% of eligible compensation. F-12 The Company's contributions to the Gibraltar Plan for the years ended June 30, 2001, July 1, 2000, and July 3, 1999 were approximately $83,000, $86,000 and $115,000 respectively. 7. STOCK OPTION PLANS The 1992 Incentive Stock Option Plan (the "1992 Plan") provides for grants to key employees of the Company of options to purchase in the aggregate up to 300,000 shares of the Company's common stock with exercise prices equal to or greater than the market price at the date of grant. Options granted under the 1992 Plan are exercisable no earlier than six months and no later than ten years from the grant date. The Director Stock Option Plan (the "Directors Plan") provides for each independent director to receive a grant of an option to purchase 3,000 shares of the Company's common stock at an exercise price equal to the market price at the date such person is elected to the board. Options granted under the Directors Plan are exercisable no earlier than six months and no later than ten years from the grant date. Effective November 30, 1998, the Company's 1996 Non-Qualified Stock Option Plan was terminated. There were 225,000 shares granted under that plan in fiscal 1997, with vesting based on meeting certain financial criteria. This termination was the direct result of the adoption of the 1998 Stock Appreciation Rights Plan (referenced below). On November 30, 1998, the Company established the 1998 Stock Appreciation Rights Plan (the "Plan") to be administered by the Compensation Committee of the Company's Board of Directors. The Plan provides for the discretionary granting of stock appreciation rights ("SAR") to key employees of the Company. SARs held by grantees under the Plan entitle the holder to cash payments only. Effective January 15, 1999, 150,000 SARs valued at $2.25 each and 150,000 SARs valued at $3.00 each were granted to officers of the Company. The SARs vest at 20% per year through the maturity date of June 30, 2003. No compensation expense has been recorded related to this plan, since the value of the SARs exceed the current trading price of the stock. A summary of stock option transactions under the Company's employee option plans and the Director's stock plan for each of the three years in the period ended June 30, 2001 is as follows: Weighted Average Shares Exercise Price ------ -------------- Outstanding at June 27, 1998 280,834 $ 4.73 Granted - - Exercised - - Canceled or Lapsed (228,000) 4.07 -------- ---------- Outstanding at July 3, 1999 52,834 7.59 Granted - - Exercised - - Canceled or Lapsed (1,500) 9.00 -------- ---------- Outstanding at July 1, 2000 51,334 $ 7.55 Granted - - Exercised - - Canceled or Lapsed - - -------- ---------- Outstanding at June 30, 2001 51,334 $ 7.55 ======== ========== F-13 Shares exercisable at July 3, 1999 52,834 $ 7.59 Shares exercisable at July 1, 2000 51,334 $ 7.55 Shares exercisable at June 30, 2001 51,334 $ 7.55
The following table summarizes information about stock options outstanding at June 30, 2001:
Weighted Range of Avg. Remaining Weighted Weighted Exercise Number Contractual Average Number Average Prices Outstanding Life Exercise Price Exercisable Exercisable ------ ----------- ---- -------------- ------------ ----------- $6.00 - $6.50 22,334 1.0 years $ 6.02 22,334 $ 6.02 $8.00 - $9.00 29,000 2.7 years 8.72 29,000 8.72 ---------- --------- -------------- ----------- ----------- 51,334 2.0 Years $ 7.55 51,334 $ 7.55
The Company accounts for its stock-based compensation under the provisions of APB Opinion 25, "Accounting for Stock Issued to Employees," which utilizes the intrinsic value method. No compensation cost has been recognized related to the Company's stock option plans. Had compensation cost been determined based on the fair value of the options at the date of grant consistent with the requirements of Statement of Financial Accounting Standards No. 123, "Accounting for Stock- Based Compensation," the Company's net income (loss) and earnings per share would have been changed to the pro forma amounts indicated below:
June 30, July 1, July 3, 2001 2000 1999 Net income (loss) applicable to common shareholders As reported $3,639 $1,070 $(13,572) Pro forma $3,639 $1,070 $(13,572) Net income (loss) per basic and diluted common share As reported $ 0.72 $ 0.21 $ (2.69) Pro forma $ 0.72 $ 0.21 $ (2.69)
At June 30, 2001, the stock option exercise prices for the two existing plans exceeded the market value of the Company's common stock and therefore the options are excluded from the Company's earnings per share calculation. 8. LEASES Operating Leases (as lessee) - The Company leases office and manufacturing space, manufacturing equipment, computer equipment, vehicles and warehouse space under non-cancelable operating leases. Rent expense for the fiscal years ended June 30, 2001, July 1, 2000, and July 3, 1999 under such lease agreements was approximately $1,406,000, $1,346,000 and $1,584,000, respectively. As of June 30, 2001, approximate minimum future lease commitments were as follows (in thousands): Amounts 2002 $1,327 2003 1,123 2004 943 2005 597 2006 98 Thereafter 8 ------- Total $ 4,096 ======= F-14 Operating Leases (as lessor) - The Company leases the Niemand facility to the company that acquired the operating assets of Niemand's container packaging and filling business. The noncancelable lease term is for five years and contains a five-year renewal option. The lessee also has the option to purchase the facility during this period for $1.1 million. The carrying value of the facility at June 30, 2001 is $1.9 million. As of June 30, 2001, approximate future minimum lease payments were as follows (in thousands): Amounts 2002 $ 160 2003 160 2004 160 2005 93 ----- Total $ 573 ===== 9. COMMITMENTS AND CONTINGENCIES 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. Environmental Matters - In May 1995, the Company discovered groundwater contamination at its Burlington, North Carolina facility. Based on work performed by its environmental consultants, the Company established a reserve of $750,000 for such remediation costs in fiscal 1995. The Company's accrual for such remediation costs included in other long-term liabilities on the Consolidated Balance Sheet approximates $431,000 and $432,000 as of June 30, 2001 and July 1, 2000, respectively. Incurred expenses as of June 30, 2001 related to remediation totaled $319,000. In June of 1998, the Company completed a follow-up assessment of the facility which was then filed with the Division of Water Quality ("DWQ"). The Company is awaiting a reply from the DWQ. Management believes that the ultimate resolution of this and other environmental matters will not materially affect the financial position or results of future operations and cash flows of the Company. 10. RELATED PARTY TRANSACTIONS Certain officers of the Company hold an equity interest in Rostra Technologies, Inc. ("Rostra"), a related party. During fiscal 1999, the Company paid $158,000, to Rostra in management fees for services provided by the Company's CFO. Effective January 1999, the Company ceased paying management fees to Rostra for the Company's CFO. At June 30, 2001 and July 1, 2000, the Company had no outstanding amounts owed to Rostra for unpaid fees. 11. SEVERANCE, OFFICE MOVING AND RESTRUCTURING CHARGES In recent years, the Company has restructured its corporate headquarters and certain aspects of its business in an effort to reduce its cost structure and remain competitive in its markets. Restructuring charges primarily involve the separation of employees, moving costs and similar actions. Costs for restructuring activities are limited to incremental costs that directly result from the restructuring activities and provide no future benefit to the Company. In fiscal 1996, the Company recorded a pre-tax charge of $1,038,000 for severance of nine members of senior management ($937,000) and other costs with no future benefits resulting from the move of the corporate office ($101,000) from Charlotte, North Carolina to Westport, F-15 Connecticut. The move was completed by June 29, 1996. In the second quarter of fiscal 1998, the Company approved a plan to reduce costs through a series of organizational and facility consolidations. A restructuring charge of $170,000 was recorded relating to severance costs for divisional personnel. Other costs of approximately $500,000 relating to the reorganization are included in general and administrative expenses and consist of severance and relocation costs. In the second quarter of fiscal 1999, the Company approved a plan to further reduce costs by closing the Company's corporate office and moving the Company's corporate functions to its Hastings, Nebraska facility. The move was completed on November 2, 1998. A restructuring charge of $235,000 was recorded consisting of severance costs for two corporate personnel ($74,000), the write-off of leasehold improvements ($61,000) and moving costs ($100,000) associated with relocating the corporate functions to its Hastings, Nebraska facility. At June 30, 2001, July 1, 2000, and July 3, 1999, accrued liabilities and other long-term liabilities included approximately $53,000, $116,000 and $169,000, respectively, in restructuring charges, primarily relating to severance costs. The change in these reserves is the result of direct cash outflows related to the restructuring. 12. MAJOR CUSTOMERS Sales to three customers represented approximately 36% of net sales in fiscal year 2001. Sales to two customers represented approximately 17% and 11% of net sales in fiscal 2001, respectively. Sales to one customer represented approximately 16% and 12% of net sales in fiscal years 2000 and 1999. 13. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amount of cash, accounts receivable and accounts payable approximates fair value because of the short-term maturity of these instruments. The carrying value of the Company's borrowings under its long-term revolving credit agreement and other long-term borrowings approximates fair value based on quoted market prices for the same or similar instruments. The fair value of the Company's letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate or settle the obligations. As of June 30, 2001, the fair value of the letters of credit was $160,000. F-16 14. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) The following is a summary of the quarterly results of operations for the years ended June 30, 2001 and July 1, 2000 (in thousands, except per share data):
Quarter Ended -------------------------------------------------------------------- 2001 September 30/(1)/ December 31/(1)/ March 31/(1)/ June 30/(1)/ Year Net Sales $16,396 $16,416 $16,275 $14,997 $64,084 Gross Profit 3,530 3,392 3,318 2,936 13,176 Net Income 562 515 494 2,068 3,639 Per Common Share Amounts: (basic and diluted) Net Income $ 0.11 $ 0.10 $ 0.10 $ 0.41 $ 0.72 Quarter Ended ---------------------------------------------------------------- 2000 September 30/(2)/ December 31 March 31/(3)/ July 1 Year Net Sales $17,573 $16,678 $17,414 $15,878 $67,543 Gross Profit 3,277 3,078 3,356 2,834 12,545 Net Income 202 221 310 337 1,070 Per Common Share Amounts: (basic and diluted) Net Income $ 0.04 $ 0.04 $ 0.06 $ 0.07 $ 0.21
/(1)/ As a result of earnings improvements, the Company reduced its deferred tax asset valuation allowance by $2.0 million in fiscal 2001 to reflect a change in estimate related to the realizability of its deferred income tax assets. Of this change, $109,000, $113,000, $103,000, and $1,644,000 was made in the first, second, third, and fourth quarters of fiscal 2001, respectively. /(2)/ The operating assets of GB Labels were sold in August 1999. /(3)/ The remaining operating assets of Niemand were sold in February 2000. F-17 EX-10.57 3 dex1057.txt AMENDMENT TO ASSET PURCHASE AGREEMENT Exhibit 10.57 NIEMAND INDUSTRIES, INC. c/o Gibraltar Packaging Group, Inc. 2000 Summit Avenue P. O. Box 2148 Hastings, NE 68901 April 6, 2001 Merrell Ketchum, President TEKPAK, Inc. 1410 South Washington Street Marion, Alabama 36756 Re: Lease Between Niemand Industries, Inc. and TEKPAK, Inc. Dear Merrell: We are sending this letter to you pursuant to the Lease dated February 1, 2000 (the "Lease") between Niemand Industries, Inc. ("Landlord") and TEKPAK, Inc. ("Tenant"). As you know, TEKPAK has an option to purchase the Premises, pursuant to the terms set forth in Exhibit B of the Lease. Paragraph 1 of that Exhibit B defines the Purchase Price as $1,400,000, to be reduced by the value of the approximately 136 acres at the rear of the Premises (the "Rear Parcel") in the manner defined therein. This letter will confirm our agreement that, notwithstanding anything to the contrary in that Section 1 of Exhibit B, (i) Niemand shall be entitled to sell approximately 7.73 acres more than the approximately 136 acres described above, and such additional 7.73 acres shall be included in the definition of the "Rear Parcel", (ii) so long as the presently contemplated sale of the Rear Parcel closes, the value of the Rear Parcel will be deemed to be $269,457, and that, as a result, the Purchase Price for the Premises, in the event of your election to exercise the option set forth in Exhibit B to the Lease, will be $1,130,543, and (ii) Section 24.01 of the Lease is hereby amended to provide as follows: Section 24.01 Option To Purchase. Tenant shall have the option to ------------------ purchase the Premises on the terms set forth in Exhibit B attached hereto and made a part hereof. Tenant shall exercise said option by written notice to Landlord no later than ninety (90) days prior to the expiration of the Term. In addition, we have agreed that, notwithstanding anything contained in Section 6.01 of the Lease to the contrary, Tenant shall not be required to maintain "all risk" insurance on the buildings and improvements on the Premises any longer. This change relates only to the replacement cost of the buildings and improvements and to the possible loss of rents to Landlord. Landlord will obtain such coverage and will provide Tenant with a certificate of such insurance. If Tenant desires any other coverage on the Premises, it should maintain such coverage on its own. I trust that the foregoing sets forth our understandings. If so, please confirm by signing a copy of this letter and returning it to me. Very truly yours, NIEMAND INDUSTRIES, INC. /s/ Brett Moller Brett Moller, Vice President Agreed this __ day of April, 2001. TEKPAK, Inc. By: /s/ Merrell A. Ketchum Merrell A. Ketchum, President 2 EX-23.1 4 dex231.txt CONSENT OF DELOITTE & TOUCHE LLP Exhibit 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement No. 33- 66790 and 33-66844 of Gibraltar Packaging Group, Inc. on Form S-8 of our report dated August 8, 2001 appearing in this Annual Report on Form 10-K of Gibraltar Packaging Group, Inc. for the year ended June 30, 2001. /s/ Deloitte & Touche LLP DELOITTE & TOUCHE LLP Omaha, Nebraska September 24, 2001