- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A AMENDMENT NO. 1 TO /X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1998 Commission file number 1-12551 MAIL-WELL, INC. (Exact name of Registrant as specified in its charter.) COLORADO 84-1250533 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 23 Inverness Way East, Englewood, CO 80112 (Address of principal executive offices) (Zip Code) 303-790-8023 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) INDICATE BY CHECKMARK 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 / / As of May 12, 1998, the Registrant had 43,051,001 shares of Common Stock, $0.01 par value, outstanding. 1 MAIL-WELL, INC. AND SUBSIDIARIES TABLE OF CONTENTS - -------------------------------------------------------------------------------- Page ---- Part I - Financial Information Item 1. Financial Statements.......................................... 3 2 PART I. FINANCIAL INFORMATION, ITEM 1. FINANCIAL STATEMENTS MAIL-WELL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS) (UNAUDITED) MARCH 31, DECEMBER 31, 1998 1997 CURRENT ASSETS Cash and cash equivalents . . . . . . . . . . . . . . . . . . $ 8,185 $ 37,587 Receivables, net. . . . . . . . . . . . . . . . . . . . . . . 59,288 38,436 Accounts receivable -- other. . . . . . . . . . . . . . . . . 8,257 7,874 Income tax receivable, net. . . . . . . . . . . . . . . . . . -- 1,777 Securitized interest in accounts receivable . . . . . . . . . 42,598 22,319 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . 96,732 78,143 Deferred income taxes . . . . . . . . . . . . . . . . . . . . 2,493 2,410 Other current assets. . . . . . . . . . . . . . . . . . . . . 7,504 5,093 --------- --------- Total current assets . . . . . . . . . . . . . . . . . . . . 225,057 193,639 PROPERTY, PLANT AND EQUIPMENT -- NET . . . . . . . . . . . . . . 279,766 223,390 DEFERRED FINANCING COSTS -- NET. . . . . . . . . . . . . . . . . 2,485 1,938 GOODWILL -- NET. . . . . . . . . . . . . . . . . . . . . . . . . 220,988 153,524 OTHER ASSETS -- NET. . . . . . . . . . . . . . . . . . . . . . . 15,038 13,710 --------- --------- TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 743,334 $ 586,201 --------- --------- --------- --------- CURRENT LIABILITIES Accounts payable. . . . . . . . . . . . . . . . . . . . . . . $ 64,180 $ 42,572 Accrued compensation and vacation . . . . . . . . . . . . . . 27,102 26,533 Accrued interest. . . . . . . . . . . . . . . . . . . . . . . 4,114 4,337 Income tax payable, net . . . . . . . . . . . . . . . . . . . 659 -- Other current liabilities . . . . . . . . . . . . . . . . . . 26,313 26,913 Current portion of long-term debt and capital leases. . . . . 464 562 --------- --------- Total current liabilities . . . . . . . . . . . . . . . . . 122,832 100,917 ACCRUED PENSION. . . . . . . . . . . . . . . . . . . . . . . . . 1,174 1,174 CAPITAL LEASES . . . . . . . . . . . . . . . . . . . . . . . . . 40 2,771 BANK BORROWINGS. . . . . . . . . . . . . . . . . . . . . . . . . 95,710 60,193 SENIOR SUBORDINATED NOTES. . . . . . . . . . . . . . . . . . . . 85,000 85,000 CONVERTIBLE SUBORDINATED NOTES . . . . . . . . . . . . . . . . . 152,050 152,050 DEFERRED INCOME TAXES. . . . . . . . . . . . . . . . . . . . . . 28,757 28,676 OTHER LONG TERM LIABILITIES. . . . . . . . . . . . . . . . . . . 5,439 5,519 --------- --------- Total liabilities. . . . . . . . . . . . . . . . . . . . . . 491,002 436,300 --------- --------- MINORITY INTEREST. . . . . . . . . . . . . . . . . . . . . . . . 3,500 3,500 --------- --------- STOCKHOLDERS' EQUITY Preferred stock, $0.01 par value; 25,000 shares authorized, none issued and outstanding . . . . . . . . . . . . . . . . -- -- Common stock, $0.01 par value; 100,000,000 shares authorized, 42,846,406 and 37,679,638 shares issued and outstanding, respectively (including 3,896,544 shares held by ESOP). . . 428 377 Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . 192,494 99,843 Retained earnings . . . . . . . . . . . . . . . . . . . . . . 59,317 49,807 Unearned ESOP compensation. . . . . . . . . . . . . . . . . . (2,357) (2,406) Cumulative foreign currency translation adjustment. . . . . . (730) (1,032) Pension liability adjustment. . . . . . . . . . . . . . . . . (73) (73) Unrealized loss, net of taxes, on securitized interest in accounts receivable . . . . . . . . . . . . . . . . . . . . (247) (115) --------- --------- Total stockholders' equity . . . . . . . . . . . . . . . . . 248,832 146,401 --------- --------- TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 743,334 $ 586,201 --------- --------- --------- --------- See notes to unaudited consolidated financial statements. 3 MAIL-WELL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (DOLLARS IN THOUSANDS) THREE MONTHS ENDED MARCH 31, ----------------------------- 1998 1997 ------ ------ NET SALES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $274,705 $212,032 COST OF SALES Materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116,205 89,958 Labor and other. . . . . . . . . . . . . . . . . . . . . . . . . . 80,454 59,017 Manufacturing. . . . . . . . . . . . . . . . . . . . . . . . . . . 18,137 15,541 Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,620 3,355 Waste recovery . . . . . . . . . . . . . . . . . . . . . . . . . . (3,222) (2,473) -------- -------- Total cost of sales. . . . . . . . . . . . . . . . . . . . . . 216,194 165,398 GROSS PROFIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,511 46,634 OTHER OPERATING COSTS Selling. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,867 15,421 Administrative . . . . . . . . . . . . . . . . . . . . . . . . . . 14,529 12,799 Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,733 1,117 (Gain) loss on disposal of assets. . . . . . . . . . . . . . . . . (467) 871 -------- -------- Total other operating costs. . . . . . . . . . . . . . . . . . 35,662 30,208 OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,849 16,426 OTHER EXPENSE Interest expense - debt. . . . . . . . . . . . . . . . . . . . . . 5,589 4,554 Interest expense - amortization of deferred financing costs. . . . 89 724 Discount on sale of accounts receivable. . . . . . . . . . . . . . 807 1,269 Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . (195) (530) -------- -------- INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . 16,559 10,409 PROVISION FOR INCOME TAXES Current. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,371 2,551 Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,678 1,877 -------- -------- NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,510 $ 5,981 -------- -------- -------- -------- EARNINGS PER BASIC SHARE . . . . . . . . . . . . . . . . . . . . . . . $ 0.25 $ 0.17 EARNINGS PER DILUTED SHARE . . . . . . . . . . . . . . . . . . . . . . $ 0.22 $ 0.16 WEIGHTED AVERAGE SHARES - BASIC. . . . . . . . . . . . . . . . . . . . 38,154,942 35,553,099 WEIGHTED AVERAGE SHARES - DILUTED. . . . . . . . . . . . . . . . . . . 48,357,308 36,413,862 See notes to unaudited consolidated financial statements. 4 MAIL-WELL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (DOLLARS IN THOUSANDS) THREE MONTHS ENDED MARCH 31, ---------------------------- 1998 1997 ------ ------ CASH FLOWS FROM OPERATING ACTIVITIES Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,510 $ 5,981 Adjustments to reconcile net income to cash provided by (used in) operations Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,620 3,355 Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,822 1,841 Deferred tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,678 1,877 (Gain), loss on disposal of assets . . . . . . . . . . . . . . . . . . . . . . (467) 871 ESOP compensation expense. . . . . . . . . . . . . . . . . . . . . . . . . . . 719 68 Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (132) 20 Change in operating assets and liabilities Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (32,982) 3,724 Current income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (302) 334 Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,559) (3,034) Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,527 (1,193) Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (223) (1,658) Other working capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,907 (1,128) Accrued pension, current and long term . . . . . . . . . . . . . . . . . . . . (219) (40) Other assets and other long-term liabilities . . . . . . . . . . . . . . . . . (375) 443 --------- --------- Net cash provided by (used in) operating activities . . . . . . . . . . . . . (2,476) 11,461 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Acquisition costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (140,927) (189) Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,871) (5,601) Proceeds from sale of property, plant and equipment. . . . . . . . . . . . . . 248 24 --------- --------- Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . (153,550) (5,766) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from common stock issuance. . . . . . . . . . . . . . . . . . . . . . 92,018 44 Cash overdrafts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 361 Proceeds from long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . 93,098 7,000 Repayments of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . (59,107) (11,333) Repayments of capital lease obligations. . . . . . . . . . . . . . . . . . . . (87) (258) --------- --------- Net cash provided by (used in) financing activities . . . . . . . . . . . . . 125,922 (4,186) --------- --------- EFFECT OF EXCHANGE RATE CHANGES ON CASH. . . . . . . . . . . . . . . . . . . . . 702 (314) --------- --------- INCREASE IN CASH AND CASH EQUIVALENTS. . . . . . . . . . . . . . . . . . . . . . (29,402) 1,195 BALANCE AT BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . 37,587 9,656 --------- --------- BALANCE AT END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,185 $ 10,851 --------- --------- --------- --------- SUPPLEMENTAL DISCLOSURES Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,812 $ 6,211 Cash paid for taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,178 2,803 See notes to unaudited consolidated financial statements. 5 MAIL-WELL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION NATURE OF OPERATIONS -- Mail-Well, Inc. and subsidiaries (the "Company") is one of the largest printers in North America, specializing in custom envelopes, high quality printed materials, labels, business communications documents and filing products. Within envelope printing and filing products, the Company competes primarily in the consumer direct segment in which envelopes are designed and manufactured to customer specifications. In addition, the Company manufactures stock envelopes sold in the office products and merchant/printer markets. The Company is also a leading high impact commercial printer specializing in printing advertising literature, high-end catalogs, annual reports, calendars and computer instruction books and is recognized as an innovative provider of quality printed products to leading companies in the United States. With acquisitions in early 1998, the Company is now a major printer of custom business communications documents for the distributor market and a major printer of glue-applied paper labels for the beverage, food and household products industries. The Company commenced operations on February 24, 1994 with the acquisition of the envelope businesses of Georgia-Pacific Corporation ("GP Envelope") and Pavey Envelope and Tag Corp. ("Pavey"). 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION -- The Company, headquartered in Englewood, Colorado, is organized under Colorado law and its common stock is traded on the New York Stock Exchange. These financial statements include the accounts of the Company and all significant intercompany accounts and transactions have been eliminated. INTERIM FINANCIAL INFORMATION -- The interim financial information contained herein is unaudited and includes all normal and recurring adjustments which, in the opinion of management, are necessary to present fairly the information set forth. The consolidated financial statements should be read in conjunction with the Notes to the Consolidated Financial Statements which are included in the Company's Form 10-K. The results for interim periods are not necessarily indicative of results to be expected for the Company's fiscal year ending December 31, 1998. The Company believes that the report filed on Form 10-Q is representative of its financial position, its results of operations and its cash flows for the three months ended March 31, 1998 and 1997. EMPLOYEE STOCK OWNERSHIP PLAN ("ESOP")-- Unearned ESOP compensation balance is presented in the accompanying financial statements as a reduction of equity. As the ESOP shares are allocated to participants, the unearned ESOP compensation balance will decrease and compensation expense will be recorded. AUTHORIZED CAPITAL STOCK -- At the Company's annual meeting on April 29, 1998, the shareholders approved an amendment to the Articles of Incorporation to increase the number of shares of common stock authorized for issuance to a total of 100,000,000 shares. COMPREHENSIVE INCOME-- Effective January 1, 1998, the Company adopted Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income. Accordingly, components of other comprehensive income (loss), net of tax, are as follows, Balance January 1 Current Period Change Balance March 31, ----------------- --------------------- ----------------- (in thousands) 1998 1997 1998 1997 1998 1997 ---- ---- ---- ---- ---- ---- Cumulative foreign currency translation adjustment . . $(1,032) $(115) $ 302 $ (140) $ (730) $(255) Pension liability adjustment . . . . . . . . . . . . . (73) (110) 0 0 (73) (110) Unrealized loss, net of taxes, on securitized interest in accounts receivable . . . . . . . . . . . ( 115) ( 49) (132) 0 (247) ( 49) -------- ------ ------ -------- -------- ------ Other comprehensive income (loss) . . . . . . . . . (1,220) (274) 170 (140) (1,050) (414) Net income . . . . . . . . . . . . . . . . . . . . . . 9,510 5,981 ------ -------- Comprehensive income. . . . . . . . . . . . . . . . $9,680 $ 5,841 ------ -------- ------ -------- 6 RECLASSIFICATION -- Certain amounts in the 1997 financial statements have been reclassified to conform to the 1998 presentation. EARNINGS PER SHARE -- In June 1997, the Company's common stock split 3:2 and in May 1998 the Company declared a 2:1 stock split effective June 1, 1998; all share and per share information have been retroactively restated to reflect these splits. In 1997, the Financial Accounting Standards Board issued "Statement of Financial Accounting Standards No. 128, Earnings Per Share" ("SFAS 128"). The Company has adopted SFAS 128 resulting in the restatement of earnings per share for all prior periods. Basic earnings per share excludes dilution and is computed by dividing earnings available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution of securities that could share in the earnings. Common shares outstanding excludes unallocated shares issued under the ESOP. INCOME SHARES PER-SHARE (in thousands, except share and per share amounts) (NUMERATOR) (DENOMINATOR) AMOUNT ----------- ------------- ------ FOR THE THREE MONTHS ENDED MARCH 31, 1998, EARNINGS PER BASIC SHARE Income available to common stockholders. . . . . . . . . . . . . . $ 9,510 38,154,942 $0.25 EFFECT OF DILUTIVE SECURITIES Stock options. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,954,260 Convertible subordinated notes . . . . . . . . . . . . . . . . . . 1,083 8,002,634 Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 245,472 EARNINGS PER DILUTED SHARE Income available to common stockholders including assumed conversions . . . . . . . . . . . . . . . . . . . . . . $10,593 48,357,308 $0.22 FOR THE THREE MONTHS ENDED MARCH 31, 1997, EARNINGS PER BASIC SHARE Income available to common stockholders. . . . . . . . . . . . . . $ 5,981 35,553,099 $0.17 EFFECT OF DILUTIVE SECURITIES Stock options. . . . . . . . . . . . . . . . . . . . . . . . . . . 812,613 Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,150 EARNINGS PER DILUTED SHARE Income available to common stockholders including assumed conversions . . . . . . . . . . . . . . . . . . . . . . $ 5,981 36,413,862 $0.16 3. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS (in thousands) INVENTORIES: MARCH 31, 1998 DECEMBER 31, 1997 -------------- ----------------- Raw materials. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 39,095 $ 30,308 Work in process. . . . . . . . . . . . . . . . . . . . . . . . . . 11,818 9,458 Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . 49,147 41,270 Reserve for obsolescence and loss. . . . . . . . . . . . . . . . . (3,328) (2,893) -------- -------- Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 96,732 $ 78,143 -------- -------- -------- -------- PROPERTY, PLANT AND EQUIPMENT: Land and land improvements . . . . . . . . . . . . . . . . . . . . $ 14,918 $ 12,459 Buildings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,542 52,817 Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . 6,564 4,914 Machinery and equipment. . . . . . . . . . . . . . . . . . . . . . 196,840 162,112 Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . 4,108 3,730 Automobiles and trucks . . . . . . . . . . . . . . . . . . . . . . 761 771 Computers and software . . . . . . . . . . . . . . . . . . . . . . 13,803 11,745 Construction in progress . . . . . . . . . . . . . . . . . . . . . 18,873 10,435 -------- -------- 319,409 258,983 Less accumulated depreciation. . . . . . . . . . . . . . . . . . . (39,643) (35,593) -------- -------- Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $279,766 $223,390 -------- -------- -------- -------- 7 4. LONG-TERM DEBT Long-term debt consists of the following (in thousands): INTEREST RATE AT MARCH 31, 1998 MARCH 31, 1998 DECEMBER 31, 1997 --------------- -------------- ----------------- Bank borrowings: Unsecured line of credit, due March 31, 2003 Mail-Well I Corporation. . . . . . . . . . . . . . . $ - $ - Supremex . . . . . . . . . . . . . . . . . . . . . . 5.375% 90,238 - Demand note Supremex . . . . . . . . . . . . . . . . . . . . . . - 55,393 Senior Subordinated Notes, due 2004 . . . . . . . . . . . 10.5% 85,000 85,000 Convertible Subordinated Notes, due 2002. . . . . . . . . 5.0% 152,050 152,050 Other . . . . . . . . . . . . . . . . . . . . . . . . . . 5,777 5,105 -------- -------- 333,065 297,548 Less current maturities . . . . . . . . . . . . . . . . (305) (305) -------- -------- Long-term debt. . . . . . . . . . . . . . . . . . . . . . $332,760 $297,243 -------- -------- -------- -------- On March 18,1998, the Company closed a new bank facility totaling $300 million with Bank of America, the lead agent for its syndicate of banks. The new bank facility consists of a five-year unsecured line of credit. Proceeds from the unsecured line of credit were used to repay the Demand Note outstanding at December 31, 1997. The indenture to the Senior Subordinated Notes contains restrictive covenants that, among other things and with certain exceptions, limit the ability of the Company to incur additional indebtedness, prepay subordinated debt, transfer assets outside the Company, pay dividends or repurchase shares of common stock. In addition the Company is required to satisfy financial covenants. The Convertible Subordinated Notes constitute unsecured subordinated obligations of the Company. They are convertible at the option of the holder into shares of the Company's common stock at a conversion price of $38.00 per share, or $19.00 per share after the 2:1 stock split effective June 1, 1998. In addition, the Company may be required to repurchase the Notes at a price of 101% of the principal amount, plus interest, upon occurrence of certain events constituting a change of control of the Company. 5. COMMON STOCK ISSUANCE On February 11, 1998, the Company completed the sale of 6,000,000 shares of its Common Stock, adjusted for the 2:1 stock split, at a price of $19.625 per share through a group of underwriters led by Prudential Securities Incorporated. Of these shares, 4,864,600 were sold by the Company and 1,135,400 were sold by a group of shareholders. Proceeds from the sale of common stock by the Company of $91.2 million, net of underwriting discounts and commissions, were used for general corporate purposes. An additional $0.8 million in proceeds was received on the exercise of options in the first quarter of 1998. 6. STOCK OPTIONS On February 4, 1998, the Company's Board of Directors adopted a non-qualified stock option plan (the "1998 Plan") for key employees and directors authorizing future grants of stock options to purchase up to 1,000,000 shares of the Company's common stock, adjusted for the 2:1 stock split. The 1998 Plan will be administered by the Compensation Committee of the Board, and key employees and directors of the Company and its affiliates may receive options as determined by the Committee in its discretion. The exercise price of options granted under the 1998 Plan shall not be less than 100% of the fair market value of the Company's common stock on the date of the grant. 8 7. ACQUISITIONS The statements of operations include the operations of acquisitions, all of which have been accounted for under the purchase method of accounting, from their acquisition date. On January 6, 1998, the Company acquired the stock of Poser Business Forms, Inc., ("Poser"). Poser is the second largest U.S. printer of custom business communications documents for the distributor market and has annual sales of $90 million. Poser, headquartered in Fairhope, Alabama, has a nation-wide network of 14 plants producing four-color process printing, labels, envelopes, loose-leaf products, laser cut-sheets and business forms. Poser also has two high-growth trademarked products, VersaSeal, a self-mailing system, and Security Guard, a line of documents with special security protection. This acquisition launches the Company in a new highly fragmented, growing operating segment On March 3, 1998, the Company acquired substantially all the assets of Rono Graphic Communications Co. and Hicks-Chatten Engraving Company ("Rono"). Rono is a printer specializing in high-quality posters, annual reports, advertising and point-of-purchase displays with $12 million in annual sales located in Portland, Oregon. On March 10, 1998, the Company acquired substantially all the assets of the Lawson Mardon Packaging USA, Inc. label division subsequently renamed Mail-Well Label ("MW Label"). MW Label is the second largest supplier of glue-applied labels in North America, providing premium and conventional labels, in-mold labels, postcards and graphic services to the food, beverage and consumer household products markets. Headquartered in Toronto, Ontario, with plants in Montreal, Quebec; Leamington, Ontario; Baltimore, Maryland; and Sparks, Nevada, MW Label has annual sales of $81 million. This acquisition also launches the Company in a new highly fragmented segment of the printing industry. On March 27, 1998, the Company acquired the stock of Denver Forms Company ("Denver Forms"). Denver Forms is a business communications documents and specialty printing manufacturer based in Denver, Colorado with annual sales of $12 million. On March 27, 1998, the Company acquired the stock of the National Graphics Company ("Natl Graphics"). Natl Graphics is a forms distributor based in Denver, Colorado with annual sales of $8 million. On March 27, 1998, the Company acquired substantially all the assets of EPX DENVER ("EPX"). EPX is a business communications documents and specialty printing manufacturer based in Denver, Colorado with annual sales of $4 million. On April 8, 1998, the Company acquired substantially all the assets of Blue Line Envelope ("Blue Line"). Blue Line, located in Montreal, Quebec, is an envelope manufacturer for office products outlets and stationers in Canada with annual sales of $6 million. On April 21, 1998, the Company acquired the stock of South Press, Inc. ("South Press"). South Press is a high quality printer located in Dallas, Texas with annual sales of $12 million. On May 5, 1998, the Company acquired the stock of Century Index Corporation ("Century"). Century is a manufacturer of filing products located in Anaheim, California, with annual sales of $8 million. On May 11, 1998, the Company acquired substantially all the assets of the International Paper label division ("IP Label"). IP Label located in Bowling Green, Kentucky, prints labels for consumer products and has annual sales of $30 million. 9 8. SEGMENT INFORMATION The Company's operating segments prepare separate financial information that is evaluated regularly by the Chief Operating Officer in assessing performance and deciding how to allocate resources. The Company does not allocate corporate overhead, interest (income) expense, amortization expense or income taxes by segment in assessing performance. Operating segments of the Company are defined primarily by product line and consist of Envelope Printing, High Impact Printing, Business Communication Printing and Label Printing. The latter two segments were added via acquisitions in the first quarter of 1998. The Company's segment information for the three months ending March 31 is as follows: Business Envelope Printing High Impact Communication Label United States Canada Printing Printing Printing Corporate Total ------------- ------ -------- -------- -------- --------- ----- (in thousands) (a) Net sales: 1998 $172,202 $28,197 $48,684 $21,597 $4,025 $ - $274,705 1997 139,700 31,616 40,716 - - - 212,032 - ------------------------------------------------------------------------------------------------------------------------- Operating income (loss): 1998 17,361 4,495 2,548 1,606 263 (3,424) 22,849 1997 14,644 4,269 1,849 - - (4,336) 16,426 - ------------------------------------------------------------------------------------------------------------------------- Depreciation and amortization: 1998 3,127 550 1,748 245 161 522 6,353 1997 2,381 579 1,524 - - (12) 4,472 - ------------------------------------------------------------------------------------------------------------------------- Identifiable assets: Mar 31, 1998 466,497 131,814 151,971 82,158 70,242 (159,348) 743,334 Dec 31, 1997 449,430 95,202 142,008 - - (100,439) 586,201 (a) Corporate identifiable assets include inter-company balances and adjustments for the accounts receivable securitization and certain operating leases. This is done to reflect the return on assets employed within each segment on a consistent basis. SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED. MAIL-WELL, INC. (Registrant) By /s/ PAUL V. REILLY ---------------------------- Paul V. Reilly President, Chief Operating Officer July 6, 1998 10