TABLE OF CONTENTS




|                                                     |                                                                                               |  |  |  |  |  |  | 
|---------------------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|Financial Information                               
|Financial statements (unaudited)                    
|CONDENSED CONSOLIDATED BALANCE SHEETS               
|CONDENSED CONSOLIDATED STATEMENTS OF INCOME         
|CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS     
|NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|                                                     | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                                     | PART II. OTHER INFORMATION                                                                   
|                                                     | Item 5.Board of Directors Changes                                                            
|                                                     | Item 6. Exhibits and Reports on Form-8K                                                      
|                                                     | SIGNATURE                                                                                    
|Restated By-Laws dated as of June 28, 2000          
|Chairman of the Board Service Agreement             
|Financial Data Schedule                             



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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2000

Commission File Number 0-2604

GENERAL BINDING CORPORATION
(Exact name of registrant as specified in its charter)

36-0887470
(I.R.S. employer identification No.)

Delaware
(State or other jurisdiction of incorporation or organization)

One GBC Plaza,
Northbrook, Illinois 60062
(Address of principal executive offices, including zip code)

(847) 272-3700
(Registrants telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.



|Yes |  | X |  | No |  | 
|--- |  | - |  | -- |  | 

Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the close of the latest practicable date.

|                                      |  |                             
|------------------------------------- |  | ----------------------------
|Class                                 |  | Outstanding at
July 31, 2000
|Common Stock, $.125 par value         |  | 13,338,898                  
|Class B Common Stock, $.125 par value |  | 2,398,275                   



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##### Table of Contents



GENERAL BINDING CORPORATION AND SUBSIDIARIES
FORM 10-QFor the Quarter Ended June 30, 2000
Table of Contents



|PART I. |  | Financial Information                                       |  | Page
|------- |  | ----------------------------------------------------------- |  | ----
|        |  |                                                             |  |     
|        |  |                                                             |  |     
|Item 1. |  | Financial statements (unaudited)                            |  |     
|        |  |                                                             |  |     
|        |  | Condensed Consolidated Balance Sheets as of                 |  |     
|        |  | June 30, 2000 and December 31, 1999                         |  | 2   
|        |  |                                                             |  |     
|        |  | Condensed Consolidated Statements of Income for the three   |  |     
|        |  | and six months ended June 30, 2000 and 1999                 |  | 3   
|        |  |                                                             |  |     
|        |  | Condensed Consolidated  Statements of Cash Flows for the    |  |     
|        |  | six months ended June 30, 2000 and 1999                     |  | 4   
|        |  |                                                             |  |     
|        |  | Notes to Condensed Consolidated Financial Statements        |  | 5   
|        |  |                                                             |  |     
|Item 2. |  | Management's Discussion and Analysis of Financial Condition |  |     
|        |  | and Results of Operations                                   |  | 16  
|        |  |                                                             |  |     
|PART II |  | Other Information                                           |  |     
|        |  |                                                             |  |     
|Item 5. |  | Other Information                                           |  | 25  
|        |  |                                                             |  |     
|Item 6. |  | Exhibits and Reports on Form 8-K                            |  | 25  
|        |  |                                                             |  |     
|        |  | Signatures                                                  |  | 26  

1



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##### Table of Contents















GENERAL BINDING CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS
(000s omitted)









|                                           |                                                    |                                                   |                            |                           |        |             |          |              |        |         |         | 
|------------------------------------------ | -------------------------------------------------- | ------------------------------------------------- | -------------------------- | ------------------------- | ------ | ----------- | -------- | ------------ | ------ | ------- | ------- | 
|                                           |                                                    |                                                   |                            |                           |        | June 30,    |          | December 31,
|                                           |                                                    |                                                   |                            |                           |        | 2000        |          | 1999        
|                                           |                                                    |                                                   |                            |                           |        | (unaudited) |          |             
|                                           |                                                    |                                                   |                            |                           |        |             |          |             
|ASSETS                                    
|                                          
|                                          
|                                          
|                                          
|Current assets:                           
|                                          
|                                          
|                                          
|                                          
|                                           | Cash and cash equivalents                          |                                                   | $                          | 6,767                     |        |             | $        | 11,068       |       
|                                          
|                                          
|                                          
|                                          
|                                           | Receivables, less allowances for doubtful accounts |                                                   |                            |                           |        |             |          |              |       
|                                          
|                                          
|                                          
|                                          
|                                           |                                                    | and sales returns: 2000 - $15,252, 1999 - $15,164 |                            | 155,809                   |        |             |          | 163,216      |       
|                                          
|                                          
|                                          
|                                          
|                                           | Inventories:                                      
|                                          
|                                          
|                                          
|                                          
|                                           |                                                    | Raw materials                                     |                            |                           | 38,449 |             |          |              | 36,123 |        
|                                          
|                                          
|                                          
|                                          
|                                           |                                                    | Work in process                                   |                            |                           | 4,217  |             |          |              | 6,192  |        
|                                          
|                                          
|                                          
|                                          
|                                           |                                                    | Finished goods                                    |                            |                           | 83,997 |             |          |              | 84,032 |        
|                                           |                                                    |                                                   |                            |                           |        |             |          |              |       
|                                           |                                                    |                                                   | Total inventories          |                           |        | 126,663     |          |              |        | 126,347 |        
|                                          
|                                          
|                                          
|                                          
|                                           | Deferred tax assets                                |                                                   |                            | 21,004                    |        |             |          | 30,816       |       
|                                          
|                                          
|                                          
|                                          
|                                           | Other                                              |                                                   |                            | 23,042                    |        |             |          | 27,586       |       
|                                           |                                                    |                                                   |                            |                           |        |             |          |              |       
|                                           |                                                    |                                                   | Total current assets       |                           |        | 333,285     |          |              |        | 359,033 |        
|                                          
|                                          
|                                          
|                                          
|Total capital assets at cost               |                                                    |                                                   | 257,100                    |                           |        |             | 254,326  |             
|                                          
|                                          
|                                          
|                                          
|Less  accumulated depreciation            |                                                    |                                                   | (120,285                   | )                         |        |             | (112,735 | )           
|                                           |                                                    |                                                   |                            |                           |        |             |          |              |       
|                                           | Net capital assets                                 |                                                   |                            | 136,815                   |        |             |          | 141,591      |       
|                                          
|                                          
|                                          
|                                          
|Goodwill, net of amortization              |                                                    |                                                   | 277,845                    |                           |        |             | 283,059  |             
|                                          
|                                          
|                                          
|                                          
|Other                                      |                                                    |                                                   | 36,244                     |                           |        |             | 38,809   |             
|                                           |                                                    |                                                   |                            |                           |        |             |          |              |       
|                                           | Total assets                                       |                                                   | $                          | 784,189                   |        |             | $        | 822,492      |       
|                                           |                                                    |                                                   |                            |                           |        |             |          |              |       
|LIABILITIES AND
STOCKHOLDERS EQUITY      
|                                          
|                                          
|                                          
|                                          
|Current liabilities:                      
|                                          
|                                          
|                                          
|                                          
|                                           | Accounts payable                                   |                                                   | $                          | 56,427                    |        |             | $        | 64,487       |       
|                                          
|                                          
|                                          
|                                          
|                                           | Accrued liabilities                                |                                                   |                            | 85,502                    |        |             |          | 88,702       |       
|                                          
|                                          
|                                          
|                                          
|                                           | Notes payable                                      |                                                   |                            | 11,150                    |        |             |          | 13,407       |       
|                                          
|                                          
|                                          
|                                          
|                                           | Current maturities of long-term debt               |                                                   |                            | 558                       |        |             |          | 2,131        |       
|                                           |                                                    |                                                   |                            |                           |        |             |          |              |       
|                                           |                                                    |                                                   |                            | Total current liabilities |        |             | 153,637  |              |        |         | 168,727 | 
|                                          
|                                          
|                                          
|                                          
|Long-term debt, less current maturities    |                                                    |                                                   | 434,781                    |                           |        |             | 454,459  |             
|                                          
|                                          
|                                          
|                                          
|Other long-term liabilities                |                                                    |                                                   | 19,836                     |                           |        |             | 20,296   |             
|                                          
|                                          
|                                          
|                                          
|Deferred tax liabilities                   |                                                    |                                                   | 29,197                     |                           |        |             | 29,399   |             
|                                          
|                                          
|                                          
|                                          
|Stockholders equity:                     
|                                          
|                                          
|                                          
|                                          
|                                           | Common stock                                       |                                                   |                            | 1,962                     |        |             |          | 1,962        |       
|                                          
|                                          
|                                          
|                                          
|                                           | Class B common stock                               |                                                   |                            | 300                       |        |             |          | 300          |       
|                                          
|                                          
|                                          
|                                          
|                                           | Additional paid-in capital                         |                                                   |                            | 22,010                    |        |             |          | 22,010       |       
|                                          
|                                          
|                                          
|                                          
|                                           | Retained earnings                                  |                                                   |                            | 164,030                   |        |             |          | 163,719      |       
|                                          
|                                          
|                                          
|                                          
|                                           | Treasury stock                                     |                                                   |                            | (27,096                   | )      |             |          | (27,096      | )     
|                                          
|                                          
|                                          
|                                          
|                                           | Accumulated other comprehensive income             |                                                   |                            | (14,468                   | )      |             |          | (11,284      | )     
|                                           |                                                    |                                                   |                            |                           |        |             |          |              |       
|                                           |                                                    |                                                   | Total stockholders equity |                           |        | 146,738     |          |              |        | 149,611 |        
|                                           |                                                    |                                                   |                            |                           |        |             |          |              |       
|Total liabilities and stockholders equity |                                                    | $                                                 | 784,189                    |                           |        | $           | 822,492  |             
|                                           |                                                    |                                                   |                            |                           |        |             |          |              |       

The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.

2



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##### Table of Contents



GENERAL BINDING CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF INCOME
(000s omitted, except per share data)









|                                                          |                                                              |   |                    |         |                  |   |         |         |      |   |         |         |   |   |         |         |  
|--------------------------------------------------------- | ------------------------------------------------------------ | - | ------------------ | ------- | ---------------- | - | ------- | ------- | ---- | - | ------- | ------- | - | - | ------- | ------- | -
|                                                          |                                                              |   | Three months ended |         | Six months ended
|                                                          |                                                              |   | June 30,           |         | June 30,        
|                                                          |                                                              |   |                    |         |                 
|                                                          |                                                              |   | 2000               |         | 1999             |   | 2000    |         | 1999
|                                                          |                                                              |   |                    |         |                  |   |         |         |     
|Net sales                                                 |                                                              | $ | 221,529            |         |                  | $ | 227,032 |         |      | $ | 459,536 |         |   | $ | 448,114 |        
|                                                         
|                                                         
|                                                         
|                                                         
|Costs and expenses:                                      
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Product cost of sales, including development and
engineering |   |                    | 120,734 |                  |   |         | 130,540 |      |   |         | 258,496 |   |   |         | 257,609 |  
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Selling, service and administrative                          |   |                    | 85,247  |                  |   |         | 79,540  |      |   |         | 169,427 |   |   |         | 158,480 |  
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Amortization of goodwill and related intangibles             |   |                    | 2,734   |                  |   |         | 2,786   |      |   |         | 5,470   |   |   |         | 5,450   |  
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Interest expense                                             |   |                    | 11,457  |                  |   |         | 10,396  |      |   |         | 23,090  |   |   |         | 20,784  |  
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Restructuring and other expenses                             |   |                    |        |                  |   |         | 11,555  |      |   |         | 1,498   |   |   |         | 11,555  |  
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Other expense (income), net                                  |   |                    | 586     |                  |   |         | (474    | )    |   |         | 932     |   |   |         | (666    | )
|                                                          |                                                              |   |                    |         |                  |   |         |         |      |   |         |         |   |   |         |        
|                                                          | Income (loss) before taxes                                   |   |                    | 771     |                  |   |         | (7,311  | )    |   |         | 623     |   |   |         | (5,098  | )
|                                                         
|                                                         
|                                                         
|                                                         
|Income tax expense (benefit)                              |                                                              |   | 385                |         |                  |   | (2,961  | )       |      |   | 311     |         |   |   | (2,064  | )      
|                                                          |                                                              |   |                    |         |                  |   |         |         |      |   |         |         |   |   |         |        
|                                                          | Net income (loss)                                            |   | $                  | 386     |                  |   | $       | (4,350  | )    |   | $       | 312     |   |   | $       | (3,034  | )
|                                                          |                                                              |   |                    |         |                  |   |         |         |      |   |         |         |   |   |         |        
|Other comprehensive income (loss), net of taxes:         
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Foreign currency translation adjustments                     |   |                    | (538    | )                |   |         | (884    | )    |   |         | (3,184  | ) |   |         | (2,881  | )
|                                                          |                                                              |   |                    |         |                  |   |         |         |      |   |         |         |   |   |         |        
|Comprehensive (loss)                                      |                                                              | $ | (152               | )       |                  | $ | (5,234  | )       |      | $ | (2,872  | )       |   | $ | (5,915  | )      
|                                                          |                                                              |   |                    |         |                  |   |         |         |      |   |         |         |   |   |         |        
|Net income (loss) per common share: (1)                  
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Basic                                                        |   | $                  | 0.02    |                  |   | $       | (0.27   | )    |   | $       | 0.02    |   |   | $       | (0.19   | )
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Diluted                                                      |   |                    | 0.02    |                  |   |         | (0.27   | )    |   |         | 0.02    |   |   |         | (0.19   | )
|                                                         
|                                                         
|                                                         
|                                                         
|Weighted average number of common shares outstanding: (2)
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Basic                                                        |   |                    | 15,734  |                  |   |         | 15,734  |      |   |         | 15,734  |   |   |         | 15,731  |  
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Diluted                                                      |   |                    | 15,857  |                  |   |         | 15,734  |      |   |         | 15,796  |   |   |         | 15,731  |  



---

|(1) |  | Amounts represent per share amounts for both Common Stock and Class B Common
Stock.
|--- |  | -----------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Weighted average shares includes both Common Stock and Class B Common
Stock.       

The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.

3



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##### Table of Contents









GENERAL BINDING CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(000s omitted)









|                                                                                         |                                                              |                                                      |        |                  |         |             |        |        |         |  
|---------------------------------------------------------------------------------------- | ------------------------------------------------------------ | ---------------------------------------------------- | ------ | ---------------- | ------- | ----------- | ------ | ------ | ------- | -
|                                                                                         |                                                              |                                                      |        | Six Months Ended
|                                                                                         |                                                              |                                                      |        | June 30,        
|                                                                                         |                                                              |                                                      |        |                 
|                                                                                         |                                                              |                                                      |        | 2000             |         | 1999       
|                                                                                         |                                                              |                                                      |        | (unaudited)      |         | (unaudited)
|                                                                                         |                                                              |                                                      |        |                  |         |            
|Operating activities:                                                                   
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Net income (loss)                                                                        |                                                              | $                                                    | 312    |                  |         | $           | (3,034 | )     
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Depreciation                                                 |                                                      |        | 11,354           |         |             |        | 10,796 |        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Amortization                                                 |                                                      |        | 8,055            |         |             |        | 7,842  |        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Restructuring and other expenses                             |                                                      |        | 1,498            |         |             |        | 11,555 |        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Provision for doubtful accounts and sales returns            |                                                      |        | 2,638            |         |             |        | 1,595  |        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Provision for inventory reserves                             |                                                      |        | 3,083            |         |             |        | 2,895  |        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | (Decrease) in non-current deferred taxes                     |                                                      |        | (26              | )       |             |        | (479   | )      
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | (Increase) in other long-term assets                         |                                                      |        | (855             | )       |             |        | (2,733 | )      
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Other                                                        |                                                      |        | (232             | )       |             |        | (540   | )      
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Changes in current assets and liabilities:                                              
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Decrease in receivables                                      |                                                      |        | 1,788            |         |             |        | 5,909  |        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | (Increase) in inventories                                    |                                                      |        | (5,833           | )       |             |        | (5,982 | )      
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Decrease in other current assets                             |                                                      |        | 3,970            |         |             |        | 1,611  |        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Decrease (increase) in deferred tax assets                   |                                                      |        | 9,712            |         |             |        | (1,516 | )      
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | (Decrease) in accounts payable and accrued liabilities       |                                                      |        | (8,656           | )       |             |        | (6,437 | )      
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | (Decrease) in income taxes payable                           |                                                      |        | (1,797           | )       |             |        | (1,853 | )      
|                                                                                         |                                                              |                                                      |        |                  |         |             |        |       
|                                                                                         |                                                              | Net cash provided by operating activities            |        |                  | 25,011  |             |        |        | 19,629  |  
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Investing activities:                                                                   
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Capital expenditures                                         |                                                      |        | (9,006           | )       |             |        | (9,254 | )      
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Proceeds from sale of plant and equipment                    |                                                      |        | 450              |         |             |        | 1,675  |        
|                                                                                         |                                                              |                                                      |        |                  |         |             |        |       
|                                                                                         |                                                              | Net cash (used in) investing activities              |        |                  | (8,556  | )           |        |        | (7,579  | )
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Financing activities:                                                                   
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Repayments of long-term debt-maturities greater than 90 days |                                                      |        | (18,000          | )       |             |        |       |        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Net change in borrowings-maturities of 90 days or less       |                                                      |        | (2,983           | )       |             |        | (5,924 | )      
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | (Reduction) in current portion of long-term debt             |                                                      |        | (1,484           | )       |             |        | (169   | )      
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Payments of debt issuance costs                              |                                                      |        | (116             | )       |             |        | (659   | )      
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Dividends paid                                               |                                                      |        |                 |         |             |        | (3,774 | )      
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Purchases of treasury stock                                  |                                                      |        |                 |         |             |        | (536   | )      
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Proceeds from the exercise of stock options                  |                                                      |        |                 |         |             |        | 636    |        
|                                                                                         |                                                              |                                                      |        |                  |         |             |        |       
|                                                                                         |                                                              | Net cash (used in) financing activities              |        |                  | (22,583 | )           |        |        | (10,426 | )
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Effect of exchange rates on cash                                                         |                                                              |                                                      | 1,827  |                  |         |             | 1,861  |       
|                                                                                         |                                                              |                                                      |        |                  |         |             |        |       
|                                                                                         |                                                              | Net (decrease) increase in cash and cash equivalents |        |                  | (4,301  | )           |        |        | 3,485   |  
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Cash and cash equivalents at the beginning of the year                                   |                                                              |                                                      | 11,068 |                  |         |             | 6,095  |       
|                                                                                         |                                                              |                                                      |        |                  |         |             |        |       
|Cash and cash equivalents at the end of the period                                       |                                                              | $                                                    | 6,767  |                  |         | $           | 9,580  |       
|                                                                                         |                                                              |                                                      |        |                  |         |             |        |       
|Supplemental disclosure:                                                                
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Interest paid                                                |                                                      | $      | 22,743           |         |             | $      | 18,780 |        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Income taxes (refunded) paid                                 |                                                      |        | (16,978          | )       |             |        | 3,781  |        

The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.

4



---



##### Table of Contents






GENERAL BINDING CORPORATION AND SUBSIDIARIES







NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)




(1) Basis of Presentation



| |  |  | The condensed consolidated financial statements include the accounts of
General Binding Corporation and its subsidiaries (GBC or the Company).
These financial statements have been prepared by GBC, pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have
been condensed or omitted pursuant to such rules and regulations. GBC
believes that the disclosures included in these condensed consolidated
financial statements are adequate to make the information presented not
misleading. It is suggested that these condensed consolidated financial
statements be read in conjunction with the financial statements and the
notes thereto included in GBCs 1999 Annual Report on Form 10-K. In the
opinion of management, all adjustments necessary to present fairly the
financial position of GBC as of June 30, 2000 and December 31, 1999 and
the results of their operations for the three and six months ended June
30, 2000 and 1999 have been included. Operating results for any interim
period are not necessarily indicative of results that may be expected for
the full year.
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of certain estimates by
management in determining the entitys assets, liabilities, revenues and
expenses. Actual results could differ from those estimates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  |  | Certain amounts for prior periods have been reclassified to conform to the
2000 presentation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

(2) Long-term Debt



| |  |  | Long-term debt consists of the following at June 30, 2000 and December 31,
1999  outstanding borrowings denominated in foreign currencies have been
converted to U.S. dollars (000s omitted):
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                  |  |   |          |       |              |   |         |       | 
|--------------------------------------------------------------------------------- |  | - | -------- | ----- | ------------ | - | ------- | ----- | 
|                                                                                  |  |   | June 30, |       | December 31,
|                                                                                  |  |   | 2000     |       | 1999        
|                                                                                  |  |   |          |       |             
|Revolving Credit Facility                                                        
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|U.S. Dollar borrowings  (weighted average floating interest rate of
9.18% at     |  |   |          |       |              |   |         |      
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|June 30, 2000 and 8.58% at December 31, 1999)                                     |  | $ | 245,800  |       |              | $ | 266,700 |      
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|British Pound borrowings  (floating interest rate of 8.62% at June 30,
2000 and  |  |   |          |       |              |   |         |      
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|8.48% at December 31, 1999)                                                       |  |   | 4,248    |       |              |   | 5,654   |      
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Swiss Franc borrowings  (floating interest rate of 5.85% at June 30,
2000 and    |  |   |          |       |              |   |         |      
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|4.76% at December 31, 1999)                                                       |  |   | 9,740    |       |              |   | 9,987   |      
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Dutch Guilder borrowings  (floating interest rate of 6.98% at June 30,
2000 and  |  |   |          |       |              |   |         |      
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|6.1% at December 31, 1999)                                                        |  |   | 3,466    |       |              |   | 2,741   |      
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Australian Dollar borrowings  (floating interest rate of 8.66% at June
30, 2000  |  |   |          |       |              |   |         |      
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|and 7.78% at December 31, 1999)                                                   |  |   | 5,193    |       |              |   | 4,658   |      
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|New Zealand Dollar borrowings  (floating interest rate of 9.31% at
June 30, 2000 |  |   |          |       |              |   |         |      
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|and 8.42% at December 31, 1999)                                                   |  |   | 1,314    |       |              |   | 1,464   |      
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Euro borrowings  (floating interest rate of 6.92% at June 30, 2000)              |  |   | 2,196    |       |              |   |        |      
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Industrial Revenue Bonds                                                         
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Industrial Revenue Bond  due March 2026 (floating interest rate of
4.8% at       |  |   |          |       |              |   |         |      
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|June 30, 2000 and 5.5% at December 31, 1999)                                      |  |   | 7,522    |       |              |   | 7,511   |      
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Industrial Revenue Bond  due annually from July 1994 to July 2008               
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|(floating interest rate of 5.15% at June 30, 2000 and 6.5% at
December 31, 1999)  |  |   |          | 1,600 |              |   |         | 1,600 | 

5



---



##### Table of Contents



|                                                                                            |  |  |         |         |  |  |         |         | 
|------------------------------------------------------------------------------------------- |  |  | ------- | ------- |  |  | ------- | ------- | 
|Industrial Revenue Bond  due annually from June 2002 to June 2007                         
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|(floating interest rate of 4.95% at June 30, 2000 and 5.6% at
December 31, 1999)            |  |  |         | 1,050   |  |  |         | 1,050   | 
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Notes Payable                                                                              
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Senior Subordinated Notes, U.S. Dollar borrowing  due 2008 (fixed
interest rate of 9.375%) |  |  | 150,000 |         |  |  | 150,000 |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Note payable, Dutch Guilder borrowing  due monthly from November
1994 to October 2004      |  |  |         |         |  |  |         |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|(fixed interest rate of 8.85%)                                                              |  |  | 1,079   |         |  |  | 1,007   |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Note payable, Dutch Guilder borrowing  due June 2000 (fixed
interest rate of 7.05%)        |  |  |        |         |  |  | 1,748   |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Other borrowings                                                                            |  |  | 2,131   |         |  |  | 2,470   |        
|                                                                                            |  |  |         |         |  |  |         |        
|Total debt                                                                                  |  |  |         | 435,339 |  |  |         | 456,590 | 
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Less  current maturities                                                                   |  |  | (558    | )       |  |  | (2,131  | )      
|                                                                                            |  |  |         |         |  |  |         |        
|Total long-term debt                                                                        |  |  | $       | 434,781 |  |  | $       | 454,459 | 
|                                                                                            |  |  |         |         |  |  |         |        



| |  |  | See Item 2.  Managements Discussion and Analysis of Financial Condition
and Results of Operations  Liquidity and Capital Resources for a further
discussion of GBCs credit facilities.
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(3) Earnings Per Share



| |  |  | In accordance with SFAS No. 128, net income per common share was computed
as follows (000s omitted, except per share amounts):
| |  |  | -------------------------------------------------------------------------------------------------------------------------------

|                                                 |                                           |   |                    |     |                  |   |        |   |      |   |        |    |  |   |        |   | 
|------------------------------------------------ | ----------------------------------------- | - | ------------------ | --- | ---------------- | - | ------ | - | ---- | - | ------ | -- |  | - | ------ | - | 
|                                                 |                                           |   | Three months ended |     | Six months ended
|                                                 |                                           |   |                    |     |                 
|                                                 |                                           |   | June 30,           |     | June 30,        
|                                                 |                                           |   |                    |     |                 
|                                                 |                                           |   | 2000               |     | 1999             |   | 2000   |   | 1999
|                                                 |                                           |   |                    |     |                  |   |        |   |     
|(A) Net income (loss) available to
common        |                                           |   |                    |     |                  |   |        |   |      |   |        |    |  |   |        |  
|Shareholders                                     |                                           | $ | 386                |     |                  | $ | (4,350 | ) |      | $ | 312    |    |  | $ | (3,034 | )
|                                                 |                                           |   |                    |     |                  |   |        |   |      |   |        |    |  |   |        |  
|(B) Weighted average number of common
shares     |                                           |   |                    |     |                  |   |        |   |      |   |        |    |  |   |        |  
|                                                
|                                                
|                                                
|                                                
|outstanding (1)                                  |                                           |   | 15,734             |     |                  |   | 15,734 |   |      |   | 15,734 |    |  |   | 15,731 |  
|                                                
|                                                
|                                                
|                                                
|                                                 | Additional common shares
issuable under   |   |                    |     |                  |   |        |   |      |   |        |    |  |   |        |   | 
|                                                 | employee stock
options using the treasury |   |                    |     |                  |   |        |   |      |   |        |    |  |   |        |   | 
|                                                 | stock method                              |   |                    | 123 |                  |   |        |  |      |   |        | 62 |  |   |        |  | 
|                                                 |                                           |   |                    |     |                  |   |        |   |      |   |        |    |  |   |        |  
|(C) Weighted average number of
common shares     |                                           |   |                    |     |                  |   |        |   |      |   |        |    |  |   |        |  
|outstanding assuming
the exercise of stock       |                                           |   |                    |     |                  |   |        |   |      |   |        |    |  |   |        |  
|options (1)                                      |                                           |   | 15,857             |     |                  |   | 15,734 |   |      |   | 15,796 |    |  |   | 15,731 |  
|                                                 |                                           |   |                    |     |                  |   |        |   |      |   |        |    |  |   |        |  
|Net income (loss) per common share (2) 
basic   |                                           |   |                    |     |                  |   |        |   |      |   |        |    |  |   |        |  
|(A) / (B)                                        |                                           | $ | 0.02               |     |                  | $ | (0.27  | ) |      | $ | 0.02   |    |  | $ | (0.19  | )
|                                                 |                                           |   |                    |     |                  |   |        |   |      |   |        |    |  |   |        |  
|Net income (loss) per common share (2) 
diluted |                                           |   |                    |     |                  |   |        |   |      |   |        |    |  |   |        |  
|(A) / (C)                                        |                                           | $ | 0.02               |     |                  | $ | (0.27  | ) |      | $ | 0.02   |    |  | $ | (0.19  | )
|                                                 |                                           |   |                    |     |                  |   |        |   |      |   |        |    |  |   |        |  



---

|(1) |  | Weighted average shares includes both Common Stock and Class B
Common Stock.       
|--- |  | -----------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Amounts represent per share amounts for both Common Stock and
Class B Common Stock.

6



---



##### Table of Contents



(4) Restructuring and Other Expenses



| |  |  | During the first six months of 2000, GBC recorded restructuring and other
expenses of $1.5 million. The restructuring charge primarily consists of
severance costs, early retirement benefits, and other expenses. Other
expenses consist of consulting fees associated with projects to
rationalize GBCs product line offerings and to reorganize its supply
chain management process.
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The components of the restructuring and other expenses are as follows
(000s omitted):                                                                                                                                                                                                                                                                                                  

|                                        |  |                    |   |                  |  |   |       | 
|--------------------------------------- |  | ------------------ | - | ---------------- |  | - | ----- | 
|                                        |  | Three months ended |   | Six months ended
|                                        |  | June 30, 2000      |   | June 30, 2000   
|                                        |  |                    |   |                 
|Severance and early retirement benefits |  | $                  |  |                  |  | $ | 421   | 
|                                       
|                                       
|                                       
|                                       
|All other restructuring expenses        |  |                    |  |                  |  |   | 427   | 
|                                       
|                                       
|                                       
|                                       
|Consulting expenses                     |  |                    |  |                  |  |   | 650   | 
|                                        |  |                    |   |                  |  |   |       | 
|                                        |  | $                  |  |                  |  | $ | 1,498 | 
|                                        |  |                    |   |                  |  |   |       | 



| |  |  | GBC has completed substantially all of its restructuring activities which
were initiated during 1999. As of June 30, 2000, approximately 625
employees have been terminated, compared to an original plan of 620.
Management believes that the restructuring provisions recorded will be
adequate to cover estimated restructuring costs that will be paid in
future periods. The balance in the restructuring reserve at June 30, 2000
primarily represents severance, early retirement, and other benefit
expenses to be paid in the future periods.
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Changes in the restructuring reserve for the six months ended June 30,
2000 and 1999 were as follows (000s omitted):                                                                                                                                                                                                                                                                                                                                                                                                                                 

|                                 |  |                  |        |                  |  |   |        |  
|-------------------------------- |  | ---------------- | ------ | ---------------- |  | - | ------ | -
|                                 |  | Six months ended |        | Six months ended
|                                 |  | June 30, 2000    |        | June 30, 1999   
|                                 |  |                  |        |                 
|Balance  beginning of period    |  | $                | 9,884  |                  |  | $ |       |  
|                                
|                                
|                                
|                                
|Provisions                       |  |                  | 848    |                  |  |   | 11,555 |  
|                                
|                                
|                                
|                                
|Involuntary termination costs    |  |                  | (1,576 | )                |  |   | (1,042 | )
|                                
|                                
|                                
|                                
|Other cash restructuring charges |  |                  | (1,823 | )                |  |   | (309   | )
|                                
|                                
|                                
|                                
|Non-cash restructuring charges   |  |                  | (1,783 | )                |  |   | (1     | )
|                                
|                                
|                                
|                                
|Other (1)                        |  |                  | (206   | )                |  |   | (117   | )
|                                 |  |                  |        |                  |  |   |        |  
|Balance  end of period          |  | $                | 5,344  |                  |  | $ | 10,086 |  
|                                 |  |                  |        |                  |  |   |        |  



---

|(1) |  | Amounts primarily relate to the effects of foreign exchange rate changes.
|--- |  | -------------------------------------------------------------------------

(5) Business Segments



| |  |  | In accordance with SFAS No. 131, GBC has identified four reportable
operating segments based on the amount of revenues and operating income of
these segments. GBCs operating segments are based on the organization of
GBC into business groups comprised of similar products and services. The
Document Finishing Groups revenues are primarily derived from sales of
binding and punching equipment and related supplies, custom binders and
folders, and maintenance and repair services. The Films Groups revenues
are primarily derived through sales of thermal films, mid-range and
commercial high-speed laminators and large-format digital print laminators
and maintenance/repair
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

7



---



##### Table of Contents





| |  |  | services. The Document Finishing Group and the
Films Groups products and services are sold
through direct channels to the general office markets, commercial
reprographic centers, educational and training markets, commercial
printers, and to government agencies. The Office Products Groups
revenues are primarily derived from the sale of binding and laminating
equipment and supplies, document shredders, visual communications products
and desktop accessories through indirect channels including office product
superstores, contract/commercial stationers, wholesalers, mail order
companies and retail dealers. The European Group sells products similar
to those sold by the Office Products and Document Finishing Groups.
Expenses incurred by the four reportable segments described above relate
to costs incurred to manufacture or purchase products and selling, general
and administrative costs. The All Others category presented below
primarily represents expenses of a corporate nature and revenues and
expenses for certain entities not assigned to one of the other four
reportable segments. For internal management purposes, and the
presentation below, operating income is determined as income before taxes
excluding interest expense, other income and expense, and restructuring
and other expenses.
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                         |  |                             |         |                           |  |                         |         |      |  |      |         |      |  |   |         |   |  |   |         |   |  |   |        |  
|------------------------ |  | --------------------------- | ------- | ------------------------- |  | ----------------------- | ------- | ---- |  | ---- | ------- | ---- |  | - | ------- | - |  | - | ------- | - |  | - | ------ | -
|                         |  | Unaffiliated Customer Sales |         | Affiliated Customer Sales |  | Operating Income (Loss)
|                         |  | Three months ended          |         | Three months ended        |  | Three months ended     
|(000's omitted)          |  | June 30,                    |         | June 30,                  |  | June 30,               
|                         |  |                             |         |                           |  |                        
|                         |  | 2000                        |         | 1999                      |  | 2000                    |         | 1999 |  | 2000 |         | 1999
|                         |  |                             |         |                           |  |                         |         |      |  |      |         |     
|Document Finishing Group |  | $                           | 49,364  |                           |  | $                       | 52,012  |      |  | $    | 10,299  |      |  | $ | 8,670   |   |  | $ | 7,147   |   |  | $ | 7,610  |  
|                        
|                        
|                        
|                        
|Films Group              |  |                             | 41,293  |                           |  |                         | 40,725  |      |  |      | 3,963   |      |  |   | 4,190   |   |  |   | 9,195   |   |  |   | 8,761  |  
|                        
|                        
|                        
|                        
|Office Products Group    |  |                             | 90,307  |                           |  |                         | 83,710  |      |  |      | 4,060   |      |  |   | 7,889   |   |  |   | 8,704   |   |  |   | 8,072  |  
|                        
|                        
|                        
|                        
|Europe Group             |  |                             | 26,828  |                           |  |                         | 36,619  |      |  |      | 2,624   |      |  |   | 5,625   |   |  |   | (1,074  | ) |  |   | (1,459 | )
|                        
|                        
|                        
|                        
|All Others               |  |                             | 13,737  |                           |  |                         | 13,966  |      |  |      | 23      |      |  |   | (47     | ) |  |   | (11,158 | ) |  |   | (8,818 | )
|                        
|                        
|                        
|                        
|Eliminations             |  |                             |        |                           |  |                         |        |      |  |      | (20,969 | )    |  |   | (26,327 | ) |  |   |        |   |  |   |       |  
|                        
|                        
|                        
|                        
|                         |  |                             |         |                           |  |                         |         |      |  |      |         |      |  |   |         |   |  |   |         |   |  |   |        |  
|                        
|                        
|                        
|                        
|Total                    |  | $                           | 221,529 |                           |  | $                       | 227,032 |      |  | $    |        |      |  | $ |        |   |  | $ | 12,814  |   |  | $ | 14,166 |  
|                        
|                        
|                        
|                        
|                         |  |                             |         |                           |  |                         |         |      |  |      |         |      |  |   |         |   |  |   |         |   |  |   |        |  

|                         |  |                             |         |                           |  |                         |         |      |  |      |         |      |  |   |         |   |  |   |         |   |  |   |         |  
|------------------------ |  | --------------------------- | ------- | ------------------------- |  | ----------------------- | ------- | ---- |  | ---- | ------- | ---- |  | - | ------- | - |  | - | ------- | - |  | - | ------- | -
|                         |  | Unaffiliated Customer Sales |         | Affiliated Customer Sales |  | Operating Income (Loss)
|                         |  | Six months ended            |         | Six months ended          |  | Six months ended       
|(000's omitted)          |  | June 30,                    |         | June 30,                  |  | June 30,               
|                         |  |                             |         |                           |  |                        
|                         |  | 2000                        |         | 1999                      |  | 2000                    |         | 1999 |  | 2000 |         | 1999
|                         |  |                             |         |                           |  |                         |         |      |  |      |         |     
|Document Finishing Group |  | $                           | 102,207 |                           |  | $                       | 101,897 |      |  | $    | 19,683  |      |  | $ | 21,335  |   |  | $ | 14,643  |   |  | $ | 14,405  |  
|                        
|                        
|                        
|                        
|Films Group              |  |                             | 81,786  |                           |  |                         | 76,888  |      |  |      | 8,687   |      |  |   | 9,622   |   |  |   | 17,390  |   |  |   | 15,933  |  
|                        
|                        
|                        
|                        
|Office Products Group    |  |                             | 188,748 |                           |  |                         | 171,429 |      |  |      | 8,358   |      |  |   | 15,498  |   |  |   | 17,392  |   |  |   | 18,365  |  
|                        
|                        
|                        
|                        
|Europe Group             |  |                             | 59,702  |                           |  |                         | 72,480  |      |  |      | 5,710   |      |  |   | 22,397  |   |  |   | (1,184  | ) |  |   | (1,916  | )
|                        
|                        
|                        
|                        
|All Others               |  |                             | 27,093  |                           |  |                         | 25,420  |      |  |      | 28      |      |  |   | 20      |   |  |   | (22,098 | ) |  |   | (20,212 | )
|                        
|                        
|                        
|                        
|Eliminations             |  |                             |        |                           |  |                         |        |      |  |      | (42,466 | )    |  |   | (68,872 | ) |  |   |        |   |  |   |        |  
|                        
|                        
|                        
|                        
|                         |  |                             |         |                           |  |                         |         |      |  |      |         |      |  |   |         |   |  |   |         |   |  |   |         |  
|                        
|                        
|                        
|                        
|Total                    |  | $                           | 459,536 |                           |  | $                       | 448,114 |      |  | $    |        |      |  | $ |        |   |  | $ | 26,143  |   |  | $ | 26,575  |  
|                        
|                        
|                        
|                        
|                         |  |                             |         |                           |  |                         |         |      |  |      |         |      |  |   |         |   |  |   |         |   |  |   |         |  



| |  |  | Sales information for the three and six months ended June 30, 2000 and
1999 by geographical area is summarized below (000s omitted).
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------

|                    |  |                             |         |                           |  |      |         |      |  |   |         |  |  |   |         | 
|------------------- |  | --------------------------- | ------- | ------------------------- |  | ---- | ------- | ---- |  | - | ------- |  |  | - | ------- | 
|                    |  | Unaffiliated Customer Sales
|                    |  |                            
|                    |  | Three months ended June 30, |         | Six months ended June 30,
|                    |  |                             |         |                          
|                    |  | 2000                        |         | 1999                      |  | 2000 |         | 1999
|                    |  |                             |         |                           |  |      |         |     
|United States       |  | $                           | 156,174 |                           |  | $    | 150,178 |      |  | $ | 322,163 |  |  | $ | 300,021 | 
|                   
|                   
|                   
|                   
|Europe              |  |                             | 33,495  |                           |  |      | 45,501  |      |  |   | 73,299  |  |  |   | 89,115  | 
|                   
|                   
|                   
|                   
|Other International |  |                             | 31,860  |                           |  |      | 31,353  |      |  |   | 64,074  |  |  |   | 58,978  | 
|                    |  |                             |         |                           |  |      |         |      |  |   |         |  |  |   |         | 
|Total               |  | $                           | 221,529 |                           |  | $    | 227,032 |      |  | $ | 459,536 |  |  | $ | 448,114 | 
|                    |  |                             |         |                           |  |      |         |      |  |   |         |  |  |   |         | 

8



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##### Table of Contents



(6) New Accounting Standards



| |  |  | In July 2000, the Emerging Issues Task Force (EITF) reached a final
consensus on Issue No. 00-10 Accounting for Shipping and Handling
Fees and Costs. This consensus will require companies to record
shipping and handling fees billed to its customers as revenue.
Currently GBC records shipping and handling revenues as a selling
expense, which is netted against shipping and handling costs. The
impact of this change in accounting will result in an insignificant
increase in GBCs revenues, and will have no impact on operating
earnings. GBC will be required to implement EITF 00-10 during the
fourth quarter of 2000. Implementation of the consensus will require
a restatement of prior periods, or a disclosure as to why restatement
was not made and the impact on the current reporting period.                                                                                                                                                                                                      
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | In July 2000, the Emerging Issues Task Force (EITF) reached a final
consensus on Issue No. 00-14 Accounting for Certain Sales
Incentives. This consensus specifies when companies are required to
record the cost of certain sales incentives, and how the costs should
be classified in the income statement. Currently GBC records the
costs of certain sales incentives as selling expenses in its income
statement. The impact of this change in accounting will result in a
reduction in GBCs revenues and selling expenses, and an increase to
cost of sales. The amount of the reclassifications has not been
quantified. The implementation of EITF 00-14 will have no impact on
GBCs operating earnings, however, operating margins will increase.
GBC will be required to implement EITF 00-10 during the fourth quarter
of 2000. Implementation of the consensus will require a restatement
of prior periods, or a disclosure as to why restatement was not made
and the impact on the current reporting period.

(7) Subsidiary Guarantor Information



| |  |  | During 1998, GBC issued $150 million of 9.375% Senior Subordinated Notes
due 2008 to finance the acquisition of Ibico AG. Each of GBCs domestic
restricted subsidiaries has jointly and severally, fully and
unconditionally guaranteed the Senior Subordinated Notes. Rather than
filing separate financial statements for each guarantor subsidiary with
the Securities and Exchange Commission, GBC has elected to present the
following condensed consolidating results of operations, financial
position and cash flows of the Parent, Guarantors and Non-Guarantors (in
each case carrying investments under the equity method) and the
eliminations necessary to arrive at the information for GBC on a
consolidated basis:
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

9



---



##### Table of Contents



Condensed Consolidating Balance Sheets (000s omitted):

|                                                          |                                        |                            |                           |         |               |         |            |         |                |       |              |         |              |        |          |          |          |         |         |         |         |         | 
|--------------------------------------------------------- | -------------------------------------- | -------------------------- | ------------------------- | ------- | ------------- | ------- | ---------- | ------- | -------------- | ----- | ------------ | ------- | ------------ | ------ | -------- | -------- | -------- | ------- | ------- | ------- | ------- | ------- | 
|                                                          |                                        |                            |                           |         | June 30, 2000
|                                                          |                                        |                            |                           |         |              
|                                                          |                                        |                            |                           |         | Parent        |         | Guarantors |         | Non-Guarantors |       | Eliminations |         | Consolidated
|                                                          |                                        |                            |                           |         |               |         |            |         |                |       |              |         |             
|Assets
Current assets:                                   
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Cash and cash equivalents              |                            | $                         | 4,661   |               |         | $          | (1,067  | )              |       | $            | 3,173   |              |        | $        |         |          |         | $       | 6,767   |        
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Receivables, net                       |                            |                           | 95,104  |               |         |            | 888     |                |       |              | 59,817  |              |        |          |         |          |         |         | 155,809 |        
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Inventories, net                       |                            |                           | 68,078  |               |         |            | 385     |                |       |              | 58,200  |              |        |          |         |          |         |         | 126,663 |        
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Deferred tax assets                    |                            |                           | 19,048  |               |         |            | 403     |                |       |              | 1,553   |              |        |          |         |          |         |         | 21,004  |        
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Other                                  |                            |                           | 8,403   |               |         |            | 1,416   |                |       |              | 13,223  |              |        |          |         |          |         |         | 23,042  |        
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Due from affiliates                    |                            |                           | 46,611  |               |         |            | 18,547  |                |       |              | 2,649   |              |        |          | (67,807  | )        |         |         |        |        
|                                                          |                                        |                            |                           |         |               |         |            |         |                |       |              |         |              |        |          |          |          |         |         |         |        
|                                                          |                                        | Total current assets       |                           |         | 241,905       |         |            |         | 20,572         |       |              |         | 138,615      |        |          |          | (67,807  | )       |         |         | 333,285 |        
|                                                         
|                                                         
|                                                         
|                                                         
|Net capital assets                                        |                                        |                            | 101,634                   |         |               |         | 8,361      |         |                |       | 26,820       |         |              |        |         |          |          |         | 136,815 |        
|                                                         
|                                                         
|                                                         
|                                                         
|Goodwill, net of amortization                             |                                        |                            | 179,256                   |         |               |         | 25,825     |         |                |       | 72,764       |         |              |        |         |          |          |         | 277,845 |        
|                                                         
|                                                         
|                                                         
|                                                         
|Other                                                     |                                        |                            | 28,462                    |         |               |         | 1,108      |         |                |       | 6,674        |         |              |        |         |          |          |         | 36,244  |        
|                                                         
|                                                         
|                                                         
|                                                         
|Investment in subsidiaries                                |                                        |                            | 182,699                   |         |               |         | 136,154    |         |                |       |             |         |              |        | (318,853 | )        |          |         |        |        
|                                                          |                                        |                            |                           |         |               |         |            |         |                |       |              |         |              |        |          |          |          |         |         |         |        
|                                                          | Total assets                           |                            | $                         | 733,956 |               |         | $          | 192,020 |                |       | $            | 244,873 |              |        | $        | (386,660 | )        |         | $       | 784,189 |        
|                                                          |                                        |                            |                           |         |               |         |            |         |                |       |              |         |              |        |          |          |          |         |         |         |        
|Liabilities and
Stockholders Equity
Current liabilities:
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Accounts payable                       |                            | $                         | 37,531  |               |         | $          | 741     |                |       | $            | 18,155  |              |        | $        |         |          |         | $       | 56,427  |        
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Accrued liabilities                    |                            |                           | 61,061  |               |         |            | 2,880   |                |       |              | 23,701  |              |        |          | (2,140   | )        |         |         | 85,502  |        
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Notes payable                          |                            |                           | (1      | )             |         |            |        |                |       |              | 11,151  |              |        |          |         |          |         |         | 11,150  |        
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Current maturities of long-term debt   |                            |                           | 234     |               |         |            |        |                |       |              | 324     |              |        |          |         |          |         |         | 558     |        
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Due to affiliates                      |                            |                           | 23,991  |               |         |            |        |                |       |              | 28,962  |              |        |          | (52,953  | )        |         |         |        |        
|                                                          |                                        |                            |                           |         |               |         |            |         |                |       |              |         |              |        |          |          |          |         |         |         |        
|                                                          |                                        |                            | Total current liabilities |         |               | 122,816 |            |         |                | 3,621 |              |         |              | 82,293 |          |          |          | (55,093 | )       |         |         | 153,637 | 
|                                                         
|                                                         
|                                                         
|                                                         
|Long-term debt  affiliated                               |                                        |                            |                          |         |               |         |           |         |                |       | 14,855       |         |              |        | (14,855  | )        |          |         |        |        
|                                                         
|                                                         
|                                                         
|                                                         
|Long-term debt, less current maturities                   |                                        |                            | 429,933                   |         |               |         |           |         |                |       | 4,848        |         |              |        |         |          |          |         | 434,781 |        
|                                                         
|                                                         
|                                                         
|                                                         
|Other long-term liabilities                               |                                        |                            | 14,464                    |         |               |         | 332        |         |                |       | 5,040        |         |              |        |         |          |          |         | 19,836  |        
|                                                         
|                                                         
|                                                         
|                                                         
|Deferred tax liabilities                                  |                                        |                            | 20,005                    |         |               |         | 5,299      |         |                |       | 3,893        |         |              |        |         |          |          |         | 29,197  |        
|                                                         
|                                                         
|                                                         
|                                                         
|Stockholders equity:                                     |                                        |                            |                           |         |               |         |            |         |                |       |              |         |              |        |          |          |          |         |         |        
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Common stock                           |                            |                           | 1,962   |               |         |            | 5       |                |       |              | 3,518   |              |        |          | (3,523   | )        |         |         | 1,962   |        
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Class B common stock                   |                            |                           | 300     |               |         |            |        |                |       |              |        |              |        |          |         |          |         |         | 300     |        
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Additional paid-in capital             |                            |                           | 22,010  |               |         |            | 95,717  |                |       |              | 155,028 |              |        |          | (250,745 | )        |         |         | 22,010  |        
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Retained earnings                      |                            |                           | 164,030 |               |         |            | 92,584  |                |       |              | (11,775 | )            |        |          | (80,809  | )        |         |         | 164,030 |        
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Treasury stock                         |                            |                           | (27,096 | )             |         |            |        |                |       |              |         |              |        |          |          |          |         |         | (27,096 | )      
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Accumulated other comprehensive income |                            |                           | (14,468 | )             |         |            | (5,538  | )              |       |              | (12,827 | )            |        |          | 18,365   |          |         |         | (14,468 | )      
|                                                          |                                        |                            |                           |         |               |         |            |         |                |       |              |         |              |        |          |          |          |         |         |         |        
|                                                          |                                        | Total stockholders equity |                           |         | 146,738       |         |            |         | 182,768        |       |              |         | 133,944      |        |          |          | (316,712 | )       |         |         | 146,738 |        
|                                                          |                                        |                            |                           |         |               |         |            |         |                |       |              |         |              |        |          |          |          |         |         |         |        
|Total liabilities and stockholders equity                |                                        | $                          | 733,956                   |         |               | $       | 192,020    |         |                | $     | 244,873      |         |              | $      | (386,660 | )        |          | $       | 784,189 |        
|                                                          |                                        |                            |                           |         |               |         |            |         |                |       |              |         |              |        |          |          |          |         |         |         |        

10



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##### Table of Contents



|                                           |                                        |                            |                           |         |                   |         |            |        |                |       |              |         |              |        |          |          |          |         |         |         |         |         | 
|------------------------------------------ | -------------------------------------- | -------------------------- | ------------------------- | ------- | ----------------- | ------- | ---------- | ------ | -------------- | ----- | ------------ | ------- | ------------ | ------ | -------- | -------- | -------- | ------- | ------- | ------- | ------- | ------- | 
|                                           |                                        |                            |                           |         | December 31, 1999
|                                           |                                        |                            |                           |         |                  
|                                           |                                        |                            |                           |         | Parent            |         | Guarantors |        | Non-Guarantors |       | Eliminations |         | Consolidated
|                                           |                                        |                            |                           |         |                   |         |            |        |                |       |              |         |             
|Assets                                     |                                       
|Current assets:                           
|                                          
|                                          
|                                          
|                                          
|                                           | Cash and cash equivalents              |                            | $                         | 4,469   |                   |         | $          | (596   | )              |       | $            | 7,195   |              |        | $        |         |          |         | $       | 11,068  |        
|                                          
|                                          
|                                          
|                                          
|                                           | Receivables, net                       |                            |                           | 97,699  |                   |         |            | 888    |                |       |              | 64,629  |              |        |          |         |          |         |         | 163,216 |        
|                                          
|                                          
|                                          
|                                          
|                                           | Inventories, net                       |                            |                           | 68,469  |                   |         |            | 308    |                |       |              | 57,570  |              |        |          |         |          |         |         | 126,347 |        
|                                          
|                                          
|                                          
|                                          
|                                           | Deferred tax assets                    |                            |                           | 28,835  |                   |         |            | 403    |                |       |              | 1,578   |              |        |          |         |          |         |         | 30,816  |        
|                                          
|                                          
|                                          
|                                          
|                                           | Other                                  |                            |                           | 15,480  |                   |         |            | 1,759  |                |       |              | 10,347  |              |        |          |         |          |         |         | 27,586  |        
|                                          
|                                          
|                                          
|                                          
|                                           | Due from affiliates                    |                            |                           | 49,762  |                   |         |            | 13,934 |                |       |              | (5,926  | )            |        |          | (57,770  | )        |         |         |        |        
|                                           |                                        |                            |                           |         |                   |         |            |        |                |       |              |         |              |        |          |          |          |         |         |         |        
|                                           |                                        | Total current assets       |                           |         | 264,714           |         |            |        | 16,696         |       |              |         | 135,393      |        |          |          | (57,770  | )       |         |         | 359,033 |        
|                                          
|                                          
|                                          
|                                          
|Net capital assets                         |                                        |                            | 103,514                   |         |                   |         | 8,450      |        |                |       | 29,627       |         |              |        |         |          |          |         | 141,591 |        
|                                          
|                                          
|                                          
|                                          
|Goodwill, net of amortization              |                                        |                            | 182,702                   |         |                   |         | 25,573     |        |                |       | 74,784       |         |              |        |         |          |          |         | 283,059 |        
|                                          
|                                          
|                                          
|                                          
|Other                                      |                                        |                            | 31,130                    |         |                   |         | 954        |        |                |       | 7,052        |         |              |        | (327     | )        |          |         | 38,809  |        
|                                          
|                                          
|                                          
|                                          
|Investment in subsidiaries                 |                                        |                            | 180,867                   |         |                   |         | 151,755    |        |                |       |             |         |              |        | (332,622 | )        |          |         |        |        
|                                           |                                        |                            |                           |         |                   |         |            |        |                |       |              |         |              |        |          |          |          |         |         |         |        
|Total assets                               |                                        | $                          | 762,927                   |         |                   | $       | 203,428    |        |                | $     | 246,856      |         |              | $      | (390,719 | )        |          | $       | 822,492 |        
|                                           |                                        |                            |                           |         |                   |         |            |        |                |       |              |         |              |        |          |          |          |         |         |         |        
|Liabilities and
Stockholders Equity       |                                       
|Current liabilities:                      
|                                          
|                                          
|                                          
|                                          
|                                           | Accounts payable                       |                            | $                         | 42,864  |                   |         | $          | 1,090  |                |       | $            | 20,533  |              |        | $        |         |          |         | $       | 64,487  |        
|                                          
|                                          
|                                          
|                                          
|                                           | Accrued liabilities                    |                            |                           | 61,632  |                   |         |            | 2,791  |                |       |              | 26,420  |              |        |          | (2,141   | )        |         |         | 88,702  |        
|                                          
|                                          
|                                          
|                                          
|                                           | Notes payable                          |                            |                           | (1      | )                 |         |            |       |                |       |              | 13,408  |              |        |          |         |          |         |         | 13,407  |        
|                                          
|                                          
|                                          
|                                          
|                                           | Current maturities of long-term debt   |                            |                           | 245     |                   |         |            |       |                |       |              | 1,886   |              |        |          |         |          |         |         | 2,131   |        
|                                          
|                                          
|                                          
|                                          
|                                           | Due to affiliates                      |                            |                           | 24,593  |                   |         |            |       |                |       |              | 11,204  |              |        |          | (35,797  | )        |         |         |        |        
|                                           |                                        |                            |                           |         |                   |         |            |        |                |       |              |         |              |        |          |          |          |         |         |         |        
|                                           |                                        |                            | Total current liabilities |         |                   | 129,333 |            |        |                | 3,881 |              |         |              | 73,451 |          |          |          | (37,938 | )       |         |         | 168,727 | 
|                                          
|                                          
|                                          
|                                          
|Long-term debt  affiliated                |                                        |                            |                          |         |                   |         |           |        |                |       | 22,300       |         |              |        | (22,300  | )        |          |         |        |        
|                                          
|                                          
|                                          
|                                          
|Long-term debt, less current maturities    |                                        |                            | 449,070                   |         |                   |         |           |        |                |       | 5,389        |         |              |        |         |          |          |         | 454,459 |        
|                                          
|                                          
|                                          
|                                          
|Other long-term liabilities                |                                        |                            | 14,908                    |         |                   |         | 332        |        |                |       | 5,056        |         |              |        |         |          |          |         | 20,296  |        
|                                          
|                                          
|                                          
|                                          
|Deferred tax liabilities                   |                                        |                            | 20,005                    |         |                   |         | 5,299      |        |                |       | 4,095        |         |              |        |         |          |          |         | 29,399  |        
|                                          
|                                          
|                                          
|                                          
|Stockholders equity:                     
|                                          
|                                          
|                                          
|                                          
|                                           | Common stock                           |                            |                           | 1,962   |                   |         |            | 5      |                |       |              | 3,426   |              |        |          | (3,431   | )        |         |         | 1,962   |        
|                                          
|                                          
|                                          
|                                          
|                                           | Class B common stock                   |                            |                           | 300     |                   |         |            |       |                |       |              |        |              |        |          |         |          |         |         | 300     |        
|                                          
|                                          
|                                          
|                                          
|                                           | Additional paid-in capital             |                            |                           | 22,010  |                   |         |            | 95,717 |                |       |              | 154,695 |              |        |          | (250,412 | )        |         |         | 22,010  |        
|                                          
|                                          
|                                          
|                                          
|                                           | Retained earnings                      |                            |                           | 163,719 |                   |         |            | 95,609 |                |       |              | (12,339 | )            |        |          | (83,270  | )        |         |         | 163,719 |        
|                                          
|                                          
|                                          
|                                          
|                                           | Treasury stock                         |                            |                           | (27,096 | )                 |         |            |       |                |       |              |        |              |        |          |         |          |         |         | (27,096 | )      
|                                          
|                                          
|                                          
|                                          
|                                           | Accumulated other comprehensive income |                            |                           | (11,284 | )                 |         |            | 2,585  |                |       |              | (9,217  | )            |        |          | 6,632    |          |         |         | (11,284 | )      
|                                           |                                        |                            |                           |         |                   |         |            |        |                |       |              |         |              |        |          |          |          |         |         |         |        
|                                           |                                        | Total stockholders equity |                           |         | 149,611           |         |            |        | 193,916        |       |              |         | 136,565      |        |          |          | (330,481 | )       |         |         | 149,611 |        
|                                           |                                        |                            |                           |         |                   |         |            |        |                |       |              |         |              |        |          |          |          |         |         |         |        
|Total liabilities and stockholders equity |                                        | $                          | 762,927                   |         |                   | $       | 203,428    |        |                | $     | 246,856      |         |              | $      | (390,719 | )        |          | $       | 822,492 |        
|                                           |                                        |                            |                           |         |                   |         |            |        |                |       |              |         |              |        |          |          |          |         |         |         |        

11



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##### Table of Contents



Condensed Consolidating Statements of Income (000s omitted):

|                                   |  |                                                              |         |                                  |         |            |     |                |      |              |        |              |        |   |         |   |         |   |         |  |         | 
|---------------------------------- |  | ------------------------------------------------------------ | ------- | -------------------------------- | ------- | ---------- | --- | -------------- | ---- | ------------ | ------ | ------------ | ------ | - | ------- | - | ------- | - | ------- |  | ------- | 
|                                   |  |                                                              |         | Three months ended June 30, 2000
|                                   |  |                                                              |         |                                 
|                                   |  |                                                              |         | Parent                           |         | Guarantors |     | Non-Guarantors |      | Eliminations |        | Consolidated
|                                   |  |                                                              |         |                                  |         |            |     |                |      |              |        |             
|Unaffiliated sales                 |  | $                                                            | 156,174 |                                  |         | $          |    |                |      | $            | 65,355 |              |        | $ |        |   |         | $ | 221,529 | 
|                                  
|                                  
|                                  
|                                  
|Affiliated sales                   |  |                                                              | 12,626  |                                  |         |            |    |                |      |              | 3,582  |              |        |   | (16,208 | ) |         |   |        | 
|                                   |  |                                                              |         |                                  |         |            |     |                |      |              |        |              |        |   |         |   |         |   |         | 
|                                   |  | Net sales                                                    |         |                                  | 168,800 |            |     |                |     |              |        |              | 68,937 |   |         |   | (16,208 | ) |         |  | 221,529 | 
|                                  
|                                  
|                                  
|                                  
|Costs and expenses:               
|                                  
|                                  
|                                  
|                                  
|                                   |  | Product cost of sales, including development and
engineering |         |                                  | 93,480  |            |     |                | 84   |              |        |              | 43,229 |   |         |   | (16,059 | ) |         |  | 120,734 | 
|                                  
|                                  
|                                  
|                                  
|                                   |  | Selling, service and administrative                          |         |                                  | 61,465  |            |     |                | 12   |              |        |              | 23,770 |   |         |   |        |   |         |  | 85,247  | 
|                                  
|                                  
|                                  
|                                  
|                                   |  | Amortization of goodwill and related intangibles             |         |                                  | 2,031   |            |     |                | 189  |              |        |              | 514    |   |         |   |        |   |         |  | 2,734   | 
|                                  
|                                  
|                                  
|                                  
|                                   |  | Interest expense                                             |         |                                  | 11,034  |            |     |                | 220  |              |        |              | 1,206  |   |         |   | (1,003  | ) |         |  | 11,457  | 
|                                  
|                                  
|                                  
|                                  
|                                   |  | Other expense (income)                                       |         |                                  | 83      |            |     |                | (787 | )            |        |              | 371    |   |         |   | 919     |   |         |  | 586     | 
|                                   |  |                                                              |         |                                  |         |            |     |                |      |              |        |              |        |   |         |   |         |   |         | 
|                                   |  | Income (loss) before taxes and                               |         |                                  |         |            |     |                |      |              |        |              |        |   |         |   |         |   |         |  |         | 
|                                  
|                                  
|                                  
|                                  
|                                   |  | undistributed
earnings of                                    |         |                                  |         |            |     |                |      |              |        |              |        |   |         |   |         |   |         |  |         | 
|                                  
|                                  
|                                  
|                                  
|                                   |  | wholly owned subsidiaries                                    |         |                                  | 707     |            |     |                | 282  |              |        |              | (153   | ) |         |   | (65     | ) |         |  | 771     | 
|                                  
|                                  
|                                  
|                                  
|Income taxes (benefits)            |  |                                                              | 319     |                                  |         |            | 142 |                |      |              | (76    | )            |        |   |        |   |         |   | 385     | 
|                                   |  |                                                              |         |                                  |         |            |     |                |      |              |        |              |        |   |         |   |         |   |         | 
|                                   |  | Income (loss) before                                         |         |                                  |         |            |     |                |      |              |        |              |        |   |         |   |         |   |         |  |         | 
|                                   |  | undistributed earnings of                                    |         |                                  |         |            |     |                |      |              |        |              |        |   |         |   |         |   |         |  |         | 
|                                   |  | wholly owned subsidiaries                                    |         |                                  | 388     |            |     |                | 140  |              |        |              | (77    | ) |         |   | (65     | ) |         |  | 386     | 
|                                  
|                                  
|                                  
|                                  
|Undistributed (losses) earnings of |  |                                                              |         |                                  |         |            |     |                |      |              |        |              |        |   |         |   |         |   |         | 
|                                   |  | wholly-owned subsidiaries                                    |         |                                  | (2      | )          |     |                | (191 | )            |        |              |       |   |         |   | 193     |   |         |  |        | 
|                                   |  |                                                              |         |                                  |         |            |     |                |      |              |        |              |        |   |         |   |         |   |         | 
|Net income (loss)                  |  | $                                                            | 386     |                                  |         | $          | (51 | )              |      | $            | (77    | )            |        | $ | 128     |   |         | $ | 386     | 
|                                   |  |                                                              |         |                                  |         |            |     |                |      |              |        |              |        |   |         |   |         |   |         | 

|                                |  |                                                              |         |                                  |         |            |        |                |        |              |        |              |        |   |         |   |         |   |         |   |         |  
|------------------------------- |  | ------------------------------------------------------------ | ------- | -------------------------------- | ------- | ---------- | ------ | -------------- | ------ | ------------ | ------ | ------------ | ------ | - | ------- | - | ------- | - | ------- | - | ------- | -
|                                |  |                                                              |         | Three months ended June 30, 1999
|                                |  |                                                              |         |                                 
|                                |  |                                                              |         | Parent                           |         | Guarantors |        | Non-Guarantors |        | Eliminations |        | Consolidated
|                                |  |                                                              |         |                                  |         |            |        |                |        |              |        |             
|Unaffiliated sales              |  | $                                                            | 150,178 |                                  |         | $          |       |                |        | $            | 76,854 |              |        | $ |        |   |         | $ | 227,032 |  
|                               
|                               
|                               
|                               
|Affiliated sales                |  |                                                              | 11,767  |                                  |         |            |       |                |        |              | 11,639 |              |        |   | (23,406 | ) |         |   |        |  
|                                |  |                                                              |         |                                  |         |            |        |                |        |              |        |              |        |   |         |   |         |   |         |  
|                                |  | Net sales                                                    |         |                                  | 161,945 |            |        |                |       |              |        |              | 88,493 |   |         |   | (23,406 | ) |         |   | 227,032 |  
|                               
|                               
|                               
|                               
|Costs and expenses:            
|                               
|                               
|                               
|                               
|                                |  | Product cost of sales, including development and
engineering |         |                                  | 95,739  |            |        |                | 194    |              |        |              | 57,979 |   |         |   | (23,372 | ) |         |   | 130,540 |  
|                               
|                               
|                               
|                               
|                                |  | Selling, service and administrative                          |         |                                  | 51,807  |            |        |                | 18     |              |        |              | 27,715 |   |         |   |        |   |         |   | 79,540  |  
|                               
|                               
|                               
|                               
|                                |  | Amortization of goodwill and related intangibles             |         |                                  | 2,067   |            |        |                | 44     |              |        |              | 675    |   |         |   |        |   |         |   | 2,786   |  
|                               
|                               
|                               
|                               
|                                |  | Restructuring and other expenses                             |         |                                  | 8,860   |            |        |                |       |              |        |              | 2,695  |   |         |   |        |   |         |   | 11,555  |  
|                               
|                               
|                               
|                               
|                                |  | Interest expense                                             |         |                                  | 9,719   |            |        |                | 371    |              |        |              | 1,072  |   |         |   | (766    | ) |         |   | 10,396  |  
|                               
|                               
|                               
|                               
|                                |  | Other (income) expense                                       |         |                                  | (1,178  | )          |        |                | (773   | )            |        |              | 1,299  |   |         |   | 178     |   |         |   | (474    | )
|                                |  |                                                              |         |                                  |         |            |        |                |        |              |        |              |        |   |         |   |         |   |         |  
|                                |  | (Loss) income before taxes                                   |         |                                  |         |            |        |                |        |              |        |              |        |   |         |   |         |   |         |   |         |  
|                               
|                               
|                               
|                               
|                                |  | and undistributed
earnings                                   |         |                                  |         |            |        |                |        |              |        |              |        |   |         |   |         |   |         |   |         |  
|                               
|                               
|                               
|                               
|                                |  | of wholly owned                                              |         |                                  |         |            |        |                |        |              |        |              |        |   |         |   |         |   |         |   |         |  
|                               
|                               
|                               
|                               
|                                |  | subsidiaries                                                 |         |                                  | (5,069  | )          |        |                | 146    |              |        |              | (2,942 | ) |         |   | 554     |   |         |   | (7,311  | )
|                               
|                               
|                               
|                               
|Income (benefits) taxes         |  |                                                              | (1,815  | )                                |         |            | 60     |                |        |              | (1,192 | )            |        |   | (14     | ) |         |   | (2,961  | )
|                                |  |                                                              |         |                                  |         |            |        |                |        |              |        |              |        |   |         |   |         |   |         |  
|                                |  | (Loss) income before                                         |         |                                  |         |            |        |                |        |              |        |              |        |   |         |   |         |   |         |   |         |  
|                               
|                               
|                               
|                               
|                                |  | undistributed earnings of                                    |         |                                  |         |            |        |                |        |              |        |              |        |   |         |   |         |   |         |   |         |  
|                               
|                               
|                               
|                               
|                                |  | wholly owned subsidiaries                                    |         |                                  | (3,254  | )          |        |                | 86     |              |        |              | (1,750 | ) |         |   | 568     |   |         |   | (4,350  | )
|                               
|                               
|                               
|                               
|Undistributed (losses) earnings |  |                                                              |         |                                  |         |            |        |                |        |              |        |              |        |   |         |   |         |   |         |  
|                                |  | of wholly-owned subsidiaries                                 |         |                                  | (3,905  | )          |        |                | (1,170 | )            |        |              |       |   |         |   | 5,075   |   |         |   |        |  
|                                |  |                                                              |         |                                  |         |            |        |                |        |              |        |              |        |   |         |   |         |   |         |  
|Net (loss) income               |  | $                                                            | (7,159  | )                                |         | $          | (1,084 | )              |        | $            | (1,750 | )            |        | $ | 5,643   |   |         | $ | (4,350  | )
|                                |  |                                                              |         |                                  |         |            |        |                |        |              |        |              |        |   |         |   |         |   |         |  

12



---



##### Table of Contents



|                        |  |                                                                          |                                |   |            |   |                |  |              |   |              |  |         |   |         |   |         |   |         |  |         | 
|----------------------- |  | ------------------------------------------------------------------------ | ------------------------------ | - | ---------- | - | -------------- |  | ------------ | - | ------------ |  | ------- | - | ------- | - | ------- | - | ------- |  | ------- | 
|                        |  |                                                                          | Six months ended June 30, 2000
|                        |  |                                                                          |                               
|                        |  |                                                                          | Parent                         |   | Guarantors |   | Non-Guarantors |  | Eliminations |   | Consolidated
|                        |  |                                                                          |                                |   |            |   |                |  |              |   |             
|Unaffiliated sales      |  | $                                                                        | 322,163                        |   |            | $ |               |  |              | $ | 137,373      |  |         | $ |        |   |         | $ | 459,536 | 
|                       
|                       
|                       
|                       
|Affiliated sales        |  |                                                                          | 26,304                         |   |            |   |               |  |              |   | 7,809        |  |         |   | (34,113 | ) |         |   |        | 
|                        |  |                                                                          |                                |   |            |   |                |  |              |   |              |  |         |   |         |   |         |   |         | 
|                        |  | Net sales                                                                |                                |   | 348,467    |   |                |  |             |   |              |  | 145,182 |   |         |   | (34,113 | ) |         |  | 459,536 | 
|                       
|                       
|                       
|                       
|Costs and expenses:    
|                       
|                       
|                       
|                       
|                        |  | Product cost of sales, including development and
engineering             |                                |   | 201,120    |   |                |  | (18          | ) |              |  | 91,304  |   |         |   | (33,910 | ) |         |  | 258,496 | 
|                       
|                       
|                       
|                       
|                        |  | Selling, service and administrative                                      |                                |   | 121,593    |   |                |  | 23           |   |              |  | 47,811  |   |         |   |        |   |         |  | 169,427 | 
|                       
|                       
|                       
|                       
|                        |  | Amortization of goodwill and related intangibles                         |                                |   | 4,061      |   |                |  | 377          |   |              |  | 1,032   |   |         |   |        |   |         |  | 5,470   | 
|                       
|                       
|                       
|                       
|                        |  | Interest expense                                                         |                                |   | 22,211     |   |                |  | 429          |   |              |  | 1,896   |   |         |   | (1,446  | ) |         |  | 23,090  | 
|                       
|                       
|                       
|                       
|                        |  | Restructuring and other expenses                                         |                                |   | 717        |   |                |  |             |   |              |  | 781     |   |         |   |        |   |         |  | 1,498   | 
|                       
|                       
|                       
|                       
|                        |  | Other (income) expense                                                   |                                |   | (203       | ) |                |  | (1,498       | ) |              |  | 1,421   |   |         |   | 1,212   |   |         |  | 932     | 
|                        |  |                                                                          |                                |   |            |   |                |  |              |   |              |  |         |   |         |   |         |   |         | 
|                        |  | (Loss) income before taxes                                               |                                |   |            |   |                |  |              |   |              |  |         |   |         |   |         |   |         |  |         | 
|                       
|                       
|                       
|                       
|                        |  | and undistributed
earnings of wholly owned subsidiaries                  |                                |   | (1,032     | ) |                |  | 687          |   |              |  | 937     |   |         |   | 31      |   |         |  | 623     | 
|                       
|                       
|                       
|                       
|Income (benefits) taxes |  |                                                                          | (502                           | ) |            |   | 344            |  |              |   | 469          |  |         |   |        |   |         |   | 311     | 
|                        |  |                                                                          |                                |   |            |   |                |  |              |   |              |  |         |   |         |   |         |   |         | 
|                        |  | (Loss) income before undistributed earnings of
wholly owned subsidiaries |                                |   | (530       | ) |                |  | 343          |   |              |  | 468     |   |         |   | 31      |   |         |  | 312     | 
|                       
|                       
|                       
|                       
|Undistributed earnings  |  |                                                                          |                                |   |            |   |                |  |              |   |              |  |         |   |         |   |         |   |         | 
|                        |  | (losses) of wholly-owned
subsidiaries                                    |                                |   | 842        |   |                |  | 310          |   |              |  |        |   |         |   | (1,152  | ) |         |  |        | 
|                        |  |                                                                          |                                |   |            |   |                |  |              |   |              |  |         |   |         |   |         |   |         | 
|Net income (loss)       |  | $                                                                        | 312                            |   |            | $ | 653            |  |              | $ | 468          |  |         | $ | (1,121  | ) |         | $ | 312     | 
|                        |  |                                                                          |                                |   |            |   |                |  |              |   |              |  |         |   |         |   |         |   |         | 

|                                |  |                                                                                    |         |                                |         |            |      |                |      |              |         |              |         |   |         |   |         |   |         |   |         |  
|------------------------------- |  | ---------------------------------------------------------------------------------- | ------- | ------------------------------ | ------- | ---------- | ---- | -------------- | ---- | ------------ | ------- | ------------ | ------- | - | ------- | - | ------- | - | ------- | - | ------- | -
|                                |  |                                                                                    |         | Six months ended June 30, 1999
|                                |  |                                                                                    |         |                               
|                                |  |                                                                                    |         | Parent                         |         | Guarantors |      | Non-Guarantors |      | Eliminations |         | Consolidated
|                                |  |                                                                                    |         |                                |         |            |      |                |      |              |         |             
|Unaffiliated sales              |  | $                                                                                  | 300,021 |                                |         | $          |     |                |      | $            | 148,093 |              |         | $ |        |   |         | $ | 448,114 |  
|                               
|                               
|                               
|                               
|Affiliated sales                |  |                                                                                    | 28,341  |                                |         |            |     |                |      |              | 31,953  |              |         |   | (60,294 | ) |         |   |        |  
|                                |  |                                                                                    |         |                                |         |            |      |                |      |              |         |              |         |   |         |   |         |   |         |  
|                                |  | Net sales                                                                          |         |                                | 328,362 |            |      |                |     |              |         |              | 180,046 |   |         |   | (60,294 | ) |         |   | 448,114 |  
|                               
|                               
|                               
|                               
|Costs and expenses:            
|                               
|                               
|                               
|                               
|                                |  | Product cost of sales, including development and engineering                       |         |                                | 195,422 |            |      |                | 379  |              |         |              | 122,102 |   |         |   | (60,294 | ) |         |   | 257,609 |  
|                               
|                               
|                               
|                               
|                                |  | Selling, service and administrative                                                |         |                                | 105,607 |            |      |                | 45   |              |         |              | 52,828  |   |         |   |        |   |         |   | 158,480 |  
|                               
|                               
|                               
|                               
|                                |  | Amortization of goodwill and related intangibles                                   |         |                                | 3,852   |            |      |                | 375  |              |         |              | 1,223   |   |         |   |        |   |         |   | 5,450   |  
|                               
|                               
|                               
|                               
|                                |  | Restructuring and other expenses                                                   |         |                                | 8,860   |            |      |                |     |              |         |              | 2,695   |   |         |   |        |   |         |   | 11,555  |  
|                               
|                               
|                               
|                               
|                                |  | Interest expense                                                                   |         |                                | 19,427  |            |      |                | 698  |              |         |              | 2,087   |   |         |   | (1,428  | ) |         |   | 20,784  |  
|                               
|                               
|                               
|                               
|                                |  | Other (income) expense                                                             |         |                                | (2,030  | )          |      |                | (829 | )            |         |              | 1,353   |   |         |   | 840     |   |         |   | (666    | )
|                                |  |                                                                                    |         |                                |         |            |      |                |      |              |         |              |         |   |         |   |         |   |         |  
|                                |  | (Loss) income before taxes and undistributed
earnings of wholly owned subsidiaries |         |                                | (2,776  | )          |      |                | (668 | )            |         |              | (2,242  | ) |         |   | 588     |   |         |   | (5,098  | )
|                               
|                               
|                               
|                               
|Income (benefits) taxes         |  |                                                                                    | (886    | )                              |         |            | (270 | )              |      |              | (908    | )            |         |   |        |   |         |   | (2,064  | )
|                                |  |                                                                                    |         |                                |         |            |      |                |      |              |         |              |         |   |         |   |         |   |         |  
|                                |  | (Loss) income before undistributed earnings of
wholly owned subsidiaries           |         |                                | (1,890  | )          |      |                | (398 | )            |         |              | (1,334  | ) |         |   | 588     |   |         |   | (3,034  | )
|                               
|                               
|                               
|                               
|Undistributed (losses) earnings |  |                                                                                    |         |                                |         |            |      |                |      |              |         |              |         |   |         |   |         |   |         |  
|                                |  | of wholly-owned subsidiaries                                                       |         |                                | (3,953  | )          |      |                | (576 | )            |         |              |        |   |         |   | 4,529   |   |         |   |        |  
|                                |  |                                                                                    |         |                                |         |            |      |                |      |              |         |              |         |   |         |   |         |   |         |  
|Net (loss) income               |  | $                                                                                  | (5,843  | )                              |         | $          | (974 | )              |      | $            | (1,334  | )            |         | $ | 5,117   |   |         | $ | (3,034  | )
|                                |  |                                                                                    |         |                                |         |            |      |                |      |              |         |              |         |   |         |   |         |   |         |  

13



---



##### Table of Contents



Condensed Consolidating Statements of Cash Flows (000s omitted):

|                                                    |                                         |                                         |        |                                |         |            |        |                |      |              |        |              |        |   |   |   |   |   |        |        |         |  
|--------------------------------------------------- | --------------------------------------- | --------------------------------------- | ------ | ------------------------------ | ------- | ---------- | ------ | -------------- | ---- | ------------ | ------ | ------------ | ------ | - | - | - | - | - | ------ | ------ | ------- | -
|                                                    |                                         |                                         |        | Six months ended June 30, 2000
|                                                    |                                         |                                         |        |                               
|                                                    |                                         |                                         |        | Parent                         |         | Guarantors |        | Non-Guarantors |      | Eliminations |        | Consolidated
|                                                    |                                         |                                         |        |                                |         |            |        |                |      |              |        |             
|Net cash provided by (used
in) operating activities |                                         | $                                       | 28,948 |                                |         | $          | (75    | )              |      | $            | (3,862 | )            |        | $ |  |   |   | $ | 25,011 |       
|                                                   
|                                                   
|                                                   
|                                                   
|Investing activities:                              
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Capital expenditures                    |                                         |        | (6,835                         | )       |            |        | (396           | )    |              |        | (1,775       | )      |   |   |  |   |   |        | (9,006 | )      
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Proceeds from sale of plant and         |                                         |        |                                |         |            |        |                |      |              |        |              |        |   |   |   |   |   |        |        |        
|                                                    |                                         | equipment                               |        |                                | 145     |            |        |                |     |              |        |              | 305    |   |   |   |  |   |        |        | 450     |  
|                                                    |                                         |                                         |        |                                |         |            |        |                |      |              |        |              |        |   |   |   |   |   |        |       
|                                                    | Net cash (used in) investing activities |                                         |        | (6,690                         | )       |            |        | (396           | )    |              |        | (1,470       | )      |   |   |  |   |   |        | (8,556 | )      
|                                                   
|                                                   
|                                                   
|                                                   
|Financing activities:                              
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | (Reduction) increase in intercompany    |                                         |        |                                |         |            |        |                |      |              |        |              |        |   |   |   |   |   |        |        |        
|                                                    |                                         | borrowings                              |        |                                | (2,910  | )          |        |                |     |              |        |              | 2,910  |   |   |   |  |   |        |        |        |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Repayments of long-term
debt           |                                         |        |                                |         |            |        |                |      |              |        |              |        |   |   |   |   |   |        |        |        
|                                                    |                                         | maturities greater than 90 days         |        |                                | (18,000 | )          |        |                |     |              |        |              |       |   |   |   |  |   |        |        | (18,000 | )
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Net change in
borrowings               |                                         |        |                                |         |            |        |                |      |              |        |              |        |   |   |   |   |   |        |        |        
|                                                    |                                         | maturities
of 90 days or less           |        |                                | (1,028  | )          |        |                |     |              |        |              | (1,955 | ) |   |   |  |   |        |        | (2,983  | )
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | (Reduction) in current portion of       |                                         |        |                                |         |            |        |                |      |              |        |              |        |   |   |   |   |   |        |        |        
|                                                    |                                         | long-term debt                          |        |                                | (12     | )          |        |                |     |              |        |              | (1,472 | ) |   |   |  |   |        |        | (1,484  | )
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Payments for debt issuance costs        |                                         |        | (116                           | )       |            |        |               |      |              |        |             |        |   |   |  |   |   |        | (116   | )      
|                                                    |                                         |                                         |        |                                |         |            |        |                |      |              |        |              |        |   |   |   |   |   |        |       
|                                                    |                                         | Net cash (used in) financing activities |        |                                | (22,066 | )          |        |                |     |              |        |              | (517   | ) |   |   |  |   |        |        | (22,583 | )
|                                                   
|                                                   
|                                                   
|                                                   
|Effect of exchange rates on cash                    |                                         |                                         |       |                                |         |            |       |                |      |              | 1,827  |              |        |   |  |   |   |   | 1,827  |       
|                                                    |                                         |                                         |        |                                |         |            |        |                |      |              |        |              |        |   |   |   |   |   |        |       
|Net increase
(decrease) in cash & cash equivalents  |                                         |                                         | 192    |                                |         |            | (471   | )              |      |              | (4,022 | )            |        |   |  |   |   |   | (4,301 | )     
|                                                   
|                                                   
|                                                   
|                                                   
|Cash and cash equivalents at the                    |                                         |                                         |        |                                |         |            |        |                |      |              |        |              |        |   |   |   |   |   |        |       
|                                                    |                                         | beginning of
the year                   |        |                                | 4,469   |            |        |                | (596 | )            |        |              | 7,195  |   |   |   |  |   |        |        | 11,068  |  
|                                                    |                                         |                                         |        |                                |         |            |        |                |      |              |        |              |        |   |   |   |   |   |        |       
|Cash and cash equivalents
at the end of the period  |                                         | $                                       | 4,661  |                                |         | $          | (1,067 | )              |      | $            | 3,173  |              |        | $ |  |   |   | $ | 6,767  |       
|                                                    |                                         |                                         |        |                                |         |            |        |                |      |              |        |              |        |   |   |   |   |   |        |       

14



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##### Table of Contents



|                                                    |  |   |        |                                |   |            |       |                |   |              |         |              |   |   |     |   |  |   |        |         |   | 
|--------------------------------------------------- |  | - | ------ | ------------------------------ | - | ---------- | ----- | -------------- | - | ------------ | ------- | ------------ | - | - | --- | - |  | - | ------ | ------- | - | 
|                                                    |  |   |        | Six months ended June 30, 1999
|                                                    |  |   |        |                               
|                                                    |  |   |        | Parent                         |   | Guarantors |       | Non-Guarantors |   | Eliminations |         | Consolidated
|                                                    |  |   |        |                                |   |            |       |                |   |              |         |             
|Net cash provided by (used
in) operating activities |  | $ | 23,668 |                                |   | $          | 5,767 |                |   | $            | (10,067 | )            |   | $ | 261 |   |  | $ | 19,629 |        
|                                                   
|                                                   
|                                                   
|                                                   
|Investing activities:                              
|                                                   
|                                                   
|                                                   
|                                                   
|Capital expenditures                                |  |   |        | (5,445                         | ) |            |       | (192           | ) |              |         | (3,617       | ) |   |     |  |  |   |        | (9,254  | )
|                                                   
|                                                   
|                                                   
|                                                   
|Proceeds from sale of plant and equipment           |  |   |        | 1,675                          |   |            |       |               |   |              |         |             |   |   |     |  |  |   |        | 1,675   |  
|                                                    |  |   |        |                                |   |            |       |                |   |              |         |              |   |   |     |   |  |   |        |        
|Net cash (used in) investing activities             |  |   |        | (3,770                         | ) |            |       | (192           | ) |              |         | (3,617       | ) |   |     |  |  |   |        | (7,579  | )
|                                                   
|                                                   
|                                                   
|                                                   
|Financing activities:                              
|                                                   
|                                                   
|                                                   
|                                                   
|(Reduction) increase in intercompany                |  |   |        |                                |   |            |       |                |   |              |         |              |   |   |     |   |  |   |        |         |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                   
|                                                   
|                                                   
|                                                   
|borrowings                                          |  |   |        | (13,150                        | ) |            |       |               |   |              |         | 13,150       |   |   |     |  |  |   |        |        |  
|                                                   
|                                                   
|                                                   
|                                                   
|Net change in
borrowingsmaturities
of              |  |   |        |                                |   |            |       |                |   |              |         |              |   |   |     |   |  |   |        |         |  
|                                                   
|                                                   
|                                                   
|                                                   
|90 days or less                                     |  |   |        | (5,152                         | ) |            |       |               |   |              |         | (772         | ) |   |     |  |  |   |        | (5,924  | )
|                                                   
|                                                   
|                                                   
|                                                   
|(Reduction) in current portion of long-term         |  |   |        |                                |   |            |       |                |   |              |         |              |   |   |     |   |  |   |        |         |  
|                                                   
|                                                   
|                                                   
|                                                   
|debt                                                |  |   |        | (169                           | ) |            |       |               |   |              |         |             |   |   |     |  |  |   |        | (169    | )
|                                                   
|                                                   
|                                                   
|                                                   
|Payments for debt issuance costs                    |  |   |        | (659                           | ) |            |       |               |   |              |         |             |   |   |     |  |  |   |        | (659    | )
|                                                   
|                                                   
|                                                   
|                                                   
|Dividends paid                                      |  |   |        | (3,774                         | ) |            |       |               |   |              |         |             |   |   |     |  |  |   |        | (3,774  | )
|                                                   
|                                                   
|                                                   
|                                                   
|Purchase of treasury stock                          |  |   |        | (536                           | ) |            |       |               |   |              |         |             |   |   |     |  |  |   |        | (536    | )
|                                                   
|                                                   
|                                                   
|                                                   
|Proceeds from the exercise of stock options         |  |   |        | 636                            |   |            |       |               |   |              |         |             |   |   |     |  |  |   |        | 636     |  
|                                                    |  |   |        |                                |   |            |       |                |   |              |         |              |   |   |     |   |  |   |        |        
|Net cash (used in)
provided by                      |  |   |        |                                |   |            |       |                |   |              |         |              |   |   |     |   |  |   |        |         |  
|                                                   
|                                                   
|                                                   
|                                                   
|financing activities                                |  |   |        | (22,804                        | ) |            |       |               |   |              |         | 12,378       |   |   |     |  |  |   |        | (10,426 | )
|                                                   
|                                                   
|                                                   
|                                                   
|Effect of exchange rates on cash                    |  |   |       |                                |   |            |      |                |   |              | 1,861   |              |   |   |    |   |  |   | 1,861  |        
|                                                    |  |   |        |                                |   |            |       |                |   |              |         |              |   |   |     |   |  |   |        |        
|Net
(decrease) increase in cash & cash              |  |   |        |                                |   |            |       |                |   |              |         |              |   |   |     |   |  |   |        |        
|                                                   
|                                                   
|                                                   
|                                                   
|equivalents                                         |  |   | (2,906 | )                              |   |            | 5,575 |                |   |              | 555     |              |   |   | 261 |   |  |   | 3,485  |        
|                                                   
|                                                   
|                                                   
|                                                   
|Cash and cash equivalents at the beginning of
the   |  |   |        |                                |   |            |       |                |   |              |         |              |   |   |     |   |  |   |        |        
|year                                                |  |   | 4,049  |                                |   |            | (650  | )              |   |              | 2,696   |              |   |   |    |   |  |   | 6,095  |        
|                                                    |  |   |        |                                |   |            |       |                |   |              |         |              |   |   |     |   |  |   |        |        
|Cash and cash equivalents
at the end of the         |  |   |        |                                |   |            |       |                |   |              |         |              |   |   |     |   |  |   |        |        
|period                                              |  | $ | 1,143  |                                |   | $          | 4,925 |                |   | $            | 3,251   |              |   | $ | 261 |   |  | $ | 9,580  |        
|                                                    |  |   |        |                                |   |            |       |                |   |              |         |              |   |   |     |   |  |   |        |        

15



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##### Table of Contents









Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations



| |  |  | The following narrative discusses the results of operations,
liquidity and capital resources for GBC on a consolidated basis.
This section should be read in conjunction with GBCs Annual
Report on Form 10-K for the fiscal year ended December 31, 1999.
See Managements Discussion and Analysis of Financial Condition
and Results of Operations contained therein.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Forward Looking Statements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  |  | Certain statements under the caption Managements Discussion and
Analysis of Financial Condition and Results of Operations and
elsewhere in this Report constitute forward looking statements
within the meaning of Section 21E(I) (1) of the Exchange Act.
Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause actual results
and performance of GBC to be materially different than
anticipated future results and performance expressed or implied
by such forward-looking statements. Such factors include, among
other things, the following: competition within the office
products and lamination film products markets, the effects of
economic conditions, the issues associated with the restructuring
of certain of GBCs operations, the ability of GBCs distributors
to successfully market and sell the Companys products, the
ability of GBC to obtain capital to finance anticipated operating
and capital requirements, the availability and price of raw
materials, dependence on certain suppliers of manufactured
products, the effect of consolidation in the office products
industry and other factors indicated in GBCs registration
statements and reports filed with the SEC. These important
factors may also cause the forward-looking statements made by GBC
in this Report, including but not limited to those contained
under the caption Managements Discussion and Analysis of
Financial Condition and Results of Operations, to be materially
different from the actual results achieved by the Company. In
light of these and other uncertainties, the inclusion of any
forward-looking statements herein should not be regarded as a
representation by GBC that the Companys plans and objectives
will be achieved.
|
| |  |  | Results of Operations Quarter Ended June 30, 2000 compared to
Quarter Ended June 30, 1999                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  |  | Sales                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  |  | Net sales for second quarter of 2000 decreased 2.4% to $221.5
million, compared to the second quarter of 1999. The decrease was
primarily due to the exiting of the visual communications business in
the U.K. and the weakening of the European currencies. Net sales by
business segment are summarized below (000s omitted):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

16



---



##### Table of Contents



|                         |           |   |                        |         |      |   |        |         | 
|------------------------ | --------- | - | ---------------------- | ------- | ---- | - | ------ | ------- | 
|                         |           |   | Net Sales             
|                         |           |   | Quarter ended June 30,
|                         |           |   |                       
|                         |           |   | 2000                   |         | 1999
|                         |           |   |                        |         |     
|Document Finishing Group |           | $ | 49,364                 |         |      | $ | 52,012 |        
|                        
|                        
|                        
|                        
|Films Group              |           |   | 41,293                 |         |      |   | 40,725 |        
|                        
|                        
|                        
|                        
|Office Products Group    |           |   | 90,307                 |         |      |   | 83,710 |        
|                        
|                        
|                        
|                        
|Europe Group             |           |   | 26,828                 |         |      |   | 36,619 |        
|                        
|                        
|                        
|                        
|Other                    |           |   | 13,737                 |         |      |   | 13,966 |        
|                         |           |   |                        |         |      |   |        |        
|                         | Net sales |   | $                      | 221,529 |      |   | $      | 227,032 | 
|                         |           |   |                        |         |      |   |        |        



| |  |  | Sales for the Document Finishing Group decreased by $2.6 million or
5.1% in the second quarter of 2000, compared to the second quarter of
1999. The decrease occurred primarily in the US Binding business as
a result of lower than planned headcount in the direct sales force.
This decrease was partially offset by higher service revenues and
stronger sales in Mexico. The Films Groups sales increased by $0.6
million or 1.4% in the second quarter of 2000 when compared to the
second quarter of 1999. However, excluding the impact of weaker
European exchange rates and higher sales recorded in the second
quarter of 1999 due to a change in the fiscal year end of the films
business in Europe, sales increased approximately 9.0% during the
second quarter of 2000. The sales increases were primarily due to
higher volumes of laminating films in both the Commercial Films and
Digital Print Finishing businesses. The Office Products Groups
sales increased by $6.6 million or 7.9% in the second quarter of 2000
when compared to the second quarter of 1999 primarily due to a lower
level of customer returns, and higher sales of visual communications
products and shredders. Net sales in Europe decreased by $9.8
million or 26.7% in the second quarter of 2000 when compared to the
second quarter of 1999. A significant amount of this decrease was
anticipated as a result of the decision to exit the manufacturing of
unprofitable visual communications products in the United Kingdom;
comparisons for the remainder of the year will be impacted by the
exit from this business in the first quarter of 2000. Sales were
also significantly impacted by weaker exchange rates in the European
currencies.
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Gross Margins, Costs and Expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  |  | The gross profit margin in the second quarter of 2000 was 45.5%, a
3.0 percentage point increase compared to the 42.5% gross profit
margin for the second quarter of 1999. The increased gross margin
was due to improved manufacturing efficiencies, a favorable product
mix, efficiencies resulting from the closure of manufacturing
facilities in Peterborough, U.K. and Auburn Hills, MI, and a lower
level of customer returns in the Office Products Group.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  |  | Selling, service and administrative expenses increased 7.2% in the
second quarter of 2000 compared to 1999. As a percentage of sales,
selling, service and administrative expenses increased by 3.5
percentage points to 38.5% in 2000 as compared to 35.0% in 1999.
Within the Office Products Group, selling expenses were negatively
impacted by significantly higher customer rebate and allowance
programs during the second quarter of 2000 compared to 1999.
Expenses related to fiscal year 2000 program costs are comparable to
the full year 1999 costs (as a percentage of sales), but are higher
in the second quarter of 2000 compared to 1999 due to many of the
1999 customer programs not being finalized until mid-1999.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

17



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##### Table of Contents





| |  |  | Selling,
service and administrative expenses for the Document Finishing Group
were relatively flat, while the
Films Group experienced a decrease of approximately 8.7% due to cost
saving measures. Selling, service and administrative expenses in
Europe also declined approximately 28.7% in the second quarter of
2000 when compared to the second quarter of 1999 as a result of the
cost saving and restructuring programs, and the decline in the
European currencies.
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Operating Income                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  |  | Operating income for GBCs business segments is summarized below
(000s omitted). This presentation of operating income excludes
restructuring and other expenses, interest expense, and other income
and expense.                                                                                                                                                                                                                                                           

|                         |                  |   |                        |        |      |   |        |        | 
|------------------------ | ---------------- | - | ---------------------- | ------ | ---- | - | ------ | ------ | 
|                         |                  |   | Operating Income      
|                         |                  |   | Quarter ended June 30,
|                         |                  |   |                       
|                         |                  |   | 2000                   |        | 1999
|                         |                  |   |                        |        |     
|Document Finishing Group |                  | $ | 7,147                  |        |      | $ | 7,610  |       
|                        
|                        
|                        
|                        
|Films Group              |                  |   | 9,195                  |        |      |   | 8,761  |       
|                        
|                        
|                        
|                        
|Office Products Group    |                  |   | 8,704                  |        |      |   | 8,072  |       
|                        
|                        
|                        
|                        
|Europe Group             |                  |   | (1,074                 | )      |      |   | (1,459 | )     
|                        
|                        
|                        
|                        
|Other                    |                  |   | (11,158                | )      |      |   | (8,818 | )     
|                         |                  |   |                        |        |      |   |        |       
|                         | Operating income |   | $                      | 12,814 |      |   | $      | 14,166 | 
|                         |                  |   |                        |        |      |   |        |       



| |  |  | Operating income for the second quarter of 2000 decreased 9.5% or
$1.4 million compared to the second quarter of 1999. Operating
income in the Document Finishing Group was unfavorably impacted by
the lower sales level. Operating income for the Films Group was
favorably impacted by lower selling, service and administrative
costs. Operating income in the Office Products Group increased $0.6
million as a result of the higher sales level and higher gross profit
resulting from lower levels of customer returns, which were partially
offset by higher program costs during the second quarter of 2000.
Europes operating loss was reduced by $0.4 million to $1.1 during
the second quarter of 2000. This loss is primarily attributable to
the weakness in the European currencies, as approximately half of the
Europe Groups products are currently sourced in U.S. dollars. The
significant decrease in operating expenses were offset by the lower
sales levels discussed above. Operating income for the Other
category was unfavorably impacted in the second quarter of 2000 by
higher unallocated manufacturing variances, and expenses related to
information systems and compensation programs.
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Interest expense increased by $1.1 million to $11.5 million in the
second quarter of 2000 compared to $10.4 million in the second
quarter of 1999. Average outstanding borrowings during the second
quarter of 2000 were approximately $60.7 million lower than in the
second quarter of 1999 as a result of repayments made throughout 1999
and 2000, and a $17.0 million income tax refund received during the
second quarter of 2000, which is described in the Liquidity and
Capital Resources section following. Lower interest expense
resulting from the lower outstanding balances was offset by higher
average interest rates during the second quarter of 2000, as well as
higher interest rate spreads resulting from the amendment of GBCs
revolving credit facility in the fourth quarter of 1999.                                                                                                                                                                                                                                                                                                                                                                                                           

18



---



##### Table of Contents





| |  |  | Other expense was $0.6 million in the second quarter of 2000,
compared to income of $0.5 million in 1999. The most significant
factor affecting this decrease was currency gains experienced in the
second quarter of 1999, compared to losses experienced in 2000.                                                                                                                                                                                                                                                                                                        
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Restructuring and Other Expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |  |  | During the second quarter of 1999, GBC recorded an after-tax
restructuring charge of $6.9 million ($11.6 million pre-tax), or
approximately $0.44 per diluted share. See Note 4 to the Condensed
Consolidated Financial Statements.                                                                                                                                                                                                                                                                                                                                        
|
| |  |  | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  |  | GBCs worldwide effective tax rate was 50.0% for the second quarter
of 2000, compared to a benefit of 40.5% in the second quarter of
1999. The high effective tax rate in 2000 is due to the low level of
earnings, which is significantly impacted by the mix of earnings and
losses among GBCs foreign subsidiaries and the low level of pre-tax
earnings in the U.S., which has a lower statutory rate than many
foreign countries in which GBC operates. The 1999 tax benefit was a
result of the restructuring charges and anticipated loss for the 1999
fiscal year.
|
| |  |  | Net Income (Loss)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  |  | GBC had net income of $0.4 million for the second quarter of 2000
($0.02 per diluted share) compared to a net loss of $(4.4) million
($(0.27) per diluted share) reported in the second quarter of 1999.
The loss experienced during the second quarter of 1999 was primarily
a result of restructuring and related expenses.                                                                                                                                                                                                                                              
|
| |  |  | Six Months Ended June 30, 2000 compared to Six Months June 30,
1999                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  |  | Sales                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  |  | Net sales for first half of 2000 increased 2.5% to $459.5 million,
compared to the first half of 1999 as a result of offsetting
fluctuations between the different business units. Net sales by
business segment are summarized below (000s omitted):                                                                                                                                                                                                                                                                                                                     

|                         |           |   |                           |         |      |   |         |         | 
|------------------------ | --------- | - | ------------------------- | ------- | ---- | - | ------- | ------- | 
|                         |           |   | Net Sales                
|                         |           |   | Six months ended June 30,
|                         |           |   |                          
|                         |           |   | 2000                      |         | 1999
|                         |           |   |                           |         |     
|Document Finishing Group |           | $ | 102,207                   |         |      | $ | 101,897 |        
|                        
|                        
|                        
|                        
|Films Group              |           |   | 81,786                    |         |      |   | 76,888  |        
|                        
|                        
|                        
|                        
|Office Products Group    |           |   | 188,748                   |         |      |   | 171,429 |        
|                        
|                        
|                        
|                        
|Europe Group             |           |   | 59,702                    |         |      |   | 72,480  |        
|                        
|                        
|                        
|                        
|Other                    |           |   | 27,093                    |         |      |   | 25,420  |        
|                         |           |   |                           |         |      |   |         |        
|                         | Net sales |   | $                         | 459,536 |      |   | $       | 448,114 | 
|                         |           |   |                           |         |      |   |         |        



| |  |  | The Films Groups sales increased by $4.9 million or 6.4% in the
first half of 2000 when compared to the first half of 1999. However,
excluding the impact in 1999 of changing the fiscal year end for the
European
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

19



---



##### Table of Contents





| |  |  | films business and the impact of the weaker
European currencies, Films sales increased 14.0% due to significant
increases in the Groups Digital Print Finishing business and
moderate increases in Commercial Films sales resulting from higher
volumes. The Office Products Groups sales increased by $17.3
million or 10.1% in the first half of 2000 when compared to the first
half of 1999. Excluding the impact of the lower
level of customer returns, sales increased 5.7%. The level of
customer returns experienced during 1999 were above historical levels
primarily as a result of the plan-o-gram changes which were occurring
during this period. In addition, Office Products sales were
favorably impacted during the first six months of 2000 by
significantly higher sales of writing boards and strong shredder
sales. Net sales in Europe decreased by $12.8 million or 17.6% in
the first half of 2000 when compared to the first half of 1999. The
majority of this decrease was anticipated as a result of the decision
to exit the manufacturing of unprofitable visual communications
products in the United Kingdom in the third quarter of 1999. In
addition, European sales were unfavorably impacted by a decrease in
exchange rates during 2000, in comparison to 1999. Excluding the
impact of the exchange rates and the discontinuance of visual
communications product sales in the U.K., European sales for 2000
were flat compared to 1999.
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Gross Margins, Costs and Expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  |  | The gross profit margin in the first half of 2000 was 43.7%, a 1.2
percentage point increase compared to the 42.5% gross profit margin
for the first half of 1999. The increased gross margin was a result
of cost savings from the restructuring initiatives undertaken during
1999, and lower customer returns in the Office Products Group.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  |  | Selling, service and administrative expenses increased 6.9% in the
first half of 2000 compared to 1999. As a percentage of sales,
selling, service and administrative expenses increased by 1.5
percentage points to 36.9% in 2000 as compared to 35.4% in 1999.
Within the Office Products Group, selling expenses were negatively
impacted by significantly higher customer rebate and allowance
programs during the first half of 2000 compared to 1999. Expenses
related to fiscal year 2000 program costs are comparable to the full
year 1999 costs (as a percentage of sales), but are higher in the
first half of 2000 compared to 1999 due to many of the 1999 customer
programs not being finalized until mid-1999. Selling, service and
administrative expenses for the Document Finishing Group were
relatively flat in 2000 compared to 1999, while expenses decreased
significantly in the Films Group due to cost saving programs.
Selling, service and administrative expenses in Europe also declined
significantly in the first half of 2000 when compared to the first
half of 1999 as a result of the restructuring and cost saving
programs implemented during 1999.                                                                                                                                                                                                                                                                                           
|
| |  |  | Operating Income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  |  | Operating income for GBCs business segments is summarized below
(000s omitted). This presentation of operating income excludes
restructuring and other expenses, interest expense, and other income
and expense.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | 

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|                         |                  |   |                           |        |      |   |         |        | 
|------------------------ | ---------------- | - | ------------------------- | ------ | ---- | - | ------- | ------ | 
|                         |                  |   | Operating Income         
|                         |                  |   | Six months ended June 30,
|                         |                  |   |                          
|                         |                  |   | 2000                      |        | 1999
|                         |                  |   |                           |        |     
|Document Finishing Group |                  | $ | 14,643                    |        |      | $ | 14,405  |       
|                        
|                        
|                        
|                        
|Films Group              |                  |   | 17,390                    |        |      |   | 15,933  |       
|                        
|                        
|                        
|                        
|Office Products Group    |                  |   | 17,392                    |        |      |   | 18,365  |       
|                        
|                        
|                        
|                        
|Europe Group             |                  |   | (1,184                    | )      |      |   | (1,916  | )     
|                        
|                        
|                        
|                        
|Other                    |                  |   | (22,098                   | )      |      |   | (20,212 | )     
|                         |                  |   |                           |        |      |   |         |       
|                         | Operating income |   | $                         | 26,143 |      |   | $       | 26,575 | 
|                         |                  |   |                           |        |      |   |         |       



| |  |  | Operating income for the first half of 2000 decreased 1.6% or $0.4
million compared to the first half of 1999. Operating income in the
Films Group was favorably impacted by the higher sales levels and
decreases in operating expenses in 2000, compared to 1999. The
Office Products Groups decrease in operating income was due to the
higher program costs discussed above. Europes operating loss was
reduced by $0.7 million to $1.2 million during the first six months
of 2000. Lower sales and gross profit were more than offset by lower
operating expenses as a result of managements cost saving and
restructuring programs, and the impact from weaker European
currencies.                   
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Interest expense increased by $2.3 million to $23.1 million in the
first half of 2000, compared to $20.8 million in the first half of
1999. Average outstanding borrowings during the first half of 2000
were approximately $59.5 million lower than in the first half of 1999
as a result of repayments made throughout 1999 and 2000, and a $17.0
million income tax refund received during the second quarter of 2000.
Lower interest expense resulting from the lower outstanding balances
was offset by higher average interest rates during the first half of
2000, as well as higher interest rate spreads resulting from the
amendment of GBCs revolving credit facility in the fourth quarter of
1999.
|
| |  |  | Other expense was $0.9 million in the first half of 2000, compared to
income of $0.7 million in 1999. The most significant factor
affecting this decrease was currency gains experienced in the first
half of 1999, compared to losses experienced in 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  |  | Restructuring and Other Expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  |  | During the first half of 2000, GBC recorded an after-tax
restructuring charge of $0.8 ($1.5 million pre-tax), or $0.05 per
share for restructuring and related expenses. Included in this
charge was approximately $0.85 million for the restructuring of
certain distribution operations in Europe (primarily employee
severance costs), and $0.65 million related to the supply chain
management program. Restructuring charges for the first six months
of 1999 were $11.6 million. See Note 4 to the Condensed Consolidated
Financial Statements.                                                                                                                                                           
|
| |  |  | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  |  | GBCs worldwide effective tax rate was 50.0% for the first half of
2000, compared to a benefit of 40.5% in 1999. The high effective tax
rate in 2000 is due to the low level of pre-tax earnings, and is
significantly                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

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| |  |  | impacted by the mix of earnings and losses
among GBCs foreign subsidiaries and the low level of pre-tax earnings in the
U.S., which has a lower statutory rate
than many foreign countries in which GBC operates. The 1999 tax
benefit was a result of the restructuring charges and an anticipated
loss for the 1999 fiscal year.                                                                                                                                                                                                                                                                                                                                                                         
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Net Income (Loss)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |  |  | GBC reported net income of $0.3 million for the first half of 2000
($0.02 per diluted share) compared to a net loss of $(3.0) million
($(0.19) per diluted share) reported in the first half of 1999. The
2000 results were primarily a result of the restructuring programs
implemented during 1999, and the higher sales and gross profit
achieved by certain business units. The loss experienced during the
first half of 1999 was primarily a result of the restructuring and
related expenses.                                                                                                                                                                                                        
|
| |  |  | Liquidity and Capital Resources                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  |  | Management assesses the Companys liquidity in terms of its overall
debt capacity and ability to generate cash from operations to fund
its operating and investing activities. Significant factors affecting
the management of liquidity are cash flows generated from operating
activities, capital expenditures, customer financing requirements,
adequate bank lines of credit and financial flexibility to attract
long-term capital with satisfactory terms. GBCs primary sources of
liquidity and capital resources were internally-generated cash flows,
borrowings under GBCs revolving credit facilities and short-term
borrowings from banks.                                                   
|
| |  |  | GBCs cash and cash equivalents decreased by $4.3 million as of June
30, 2000 as compared to December 31, 1999 primarily due to cash used
to repay borrowings under GBCs revolving credit facility.
Management believes that GBCs SKU rationalization and supply chain
management program may yield significant benefits in future periods,
and may favorably impact cash flows from operating activities.                                                                                                                                                                                                                                                                                                
|
| |  |  | Cash provided by operating activities was $25.0 million for the
six months ended June 30, 2000, compared to $19.6 million for the
six months ended June 30, 1999. Approximately $17.0 million of
cash was received from a federal income tax refund during the
second quarter of 2000. The primary uses of cash during the
first six months of 2000 were to fund reductions in accounts
payable and accrued liabilities, which primarily related to the
payment of restructuring costs, and to fund higher inventory
levels. Operating cash flows for the first six months of 1999
were favorably impacted by significant reductions in accounts
receivable from a historically high level at December 1998.
|
| |  |  | Net cash used in investing activities was $8.6 million for the
first six months of 2000, as compared to $7.6 million in the
first six months of 1999, primarily due to capital expenditures
of $9.0 and $9.3 million, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  |  | Net cash used in financing activities was $22.6 million for the
first six months of 2000, compared to $10.4 million during the
first six months of 1999. During 2000, cash generated from
operating activities was used to repay borrowings under GBCs
revolving credit facility. During the first six months of 1999,                                                                                                                                                                                                                                                                                                                                                                                     

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| |  |  | GBC paid $3.8 million of dividends (or $0.24 per share).
Currently, GBC is restricted from paying dividends under the
terms of its Revolving Credit Facility.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | GBC has access to various U.S. and international credit
facilities, including a multicurrency revolving credit facility
established on January 13, 1997 (the Revolving Credit Facility)
with a group of international banks which provide for up to $410
million of revolving credit borrowings through January 2002. The
Revolving Credit Facility was amended and restated on November
12, 1999 to provide GBC with additional financial flexibility.
Management believes that the amended facility will provide GBC
with the liquidity necessary to meet currently-anticipated
operating and capital requirements. Outstanding borrowings under
the Revolving Credit Facility totaled $272.0 million at June 30,
2000.                                                                                                                                                                                                                                                                             
|
| |  |  | Under the most restrictive of the covenants of the Revolving
Credit Facility applicable at June 30, 2000, GBC must meet a
specified EBITDA target set for each quarter through the first
fiscal quarter of 2001. The amendment and restatement also
provides for more flexible covenants regarding net worth levels,
future-starting leverage and interest coverage hurdles, the
pledging of substantially all of the assets of General Binding
Corporation and its domestic subsidiaries as collateral, and
increases in interest rate spreads payable under the facility,
which vary depending upon the financial performance of the
Company. In addition, there are certain restrictions on dividend
payments, additional indebtedness, investments and capital
expenditures. GBC was in compliance with these covenants as of
June 30, 2000.                                                                                                                                                        
|
| |  |  | New Accounting Standards                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  |  | In June 1998, the FASB issued SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, and in June 2000
issued SFAS No. 138 Accounting for Certain Derivative
Instruments and Certain Hedging Activities. These statements
establish accounting and reporting standards for certain
derivative financial instruments and hedging activities
(including certain derivative instruments imbedded in other
contracts) and require GBC to recognize all derivatives as either
assets or liabilities on the balance sheet and measure them at
fair market value. Gains and losses resulting from changes in
fair value would be accounted for depending on the use of the
derivative and whether it is designated as a hedge and qualifies
for hedge accounting. GBC will be required to implement both
SFAS No.s 133 and 138 for its fiscal year 2001. GBC does not
believe that the adoption of SFAS No.s 133 and 138 will have a
significant impact on its results of operations.
|
| |  |  | In July 2000, the Emerging Issues Task Force (EITF) reached a
final consensus on Issue No. 00-10 Accounting for Shipping and
Handling Fees and Costs. This consensus will require companies
to record shipping and handling fees billed to its customers as
revenue. Currently GBC records shipping and handling revenues as
a selling expense, which is netted against shipping and handling
costs. The impact of this change in accounting will result in an
insignificant increase in GBCs revenues, and will have no impact
on operating earnings. GBC will be required to implement EITF
00-10 during the fourth quarter of 2000.                                                                                                                                                                                                                                                                                                                                                             

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| |  |  | In July 2000, the Emerging Issues Task Force (EITF) reached a
final consensus on Issue No. 00-14 Accounting for Certain Sales
Incentives. This consensus specifies when companies are
required to record the cost of certain sales incentives, and how
the costs should be classified in the income statement.
Currently GBC records the costs of certain
sales incentives as selling expenses in its income statement.
The impact of this change in accounting will result in a
reduction in GBCs revenues and selling expenses, and an increase
to cost of sales. The amount of the reclassifications has not
been quantified. The implementation of EITF 00-14 will have no
impact on GBCs operating earnings, however, operating margins
will increase. GBC will be required to implement EITF 00-10
during the fourth quarter of 2000.
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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##### Table of Contents









PART II. OTHER INFORMATION







Item 5. Board of Directors Changes



| |  |  | During the second quarter of 2000, and subsequent to June 30, 2000,
but prior to the filing of this report, there were several changes to
GBCs board of directors. Three members of the board of directors,
including the chairman of the board, resigned their positions. These
directors have been replaced by three new directors, two of which are
significant shareholders of Lane Industries, Inc., GBCs majority
shareholder.
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







Item 6. Exhibits and Reports on Form-8K



| |  |  | (a) |  | Exhibit 3 (ii):                                                                                                                              
| |  |  | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  |     |  | Restated By-Laws dated as of June 28, 2000.                                                                                                  
|
| |  |  |     |  | Exhibit 10 (iii) (a) Material Contracts:                                                                                                     
|
| |  |  |     |  | Chairman of the Board Service Agreement dated as of June 28, 2000
and Chairman of the Board Stock Option Agreement dated
as of June 12, 2000.
|
| |  |  |     |  | Exhibit 27:                                                                                                                                  
|
| |  |  |     |  | Financial Data Schedule for the six months ended June 30, 2000.                                                                              
|
| |  |  | (b) |  | Reports on Form 8-K: None.                                                                                                                   

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SIGNATURE

Pursuant to the requirements of Section 13 or 19(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.



| |                             |                                
| | --------------------------- | -------------------------------
| | GENERAL BINDING CORPORATION
|
|
|
|
| | By:                         | /s/ Terry G. Westbrook         
|
|
|
|
| |                             | Terry G. Westbrook             
|
|
|
|
| |                             | Senior Vice President and Chief
|
|
|
|
| |                             | Financial Officer              
| |                            
| |                             | August 14, 2000                

26