==============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2002
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.)
8310 S. Valley Highway, #400 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 10, 2002, the Registrant had 48,251,478 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
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................... 22
Item 3. Quantitative and Qualitative Disclosures About
Market Risk.................................................. 30
Part II - OTHER INFORMATION
Item 2. Change in Securities and Use of Proceeds........................ 31
Item 6. Exhibits and Reports on Form 8-K................................ 31
Signature Page........................................................................ 34
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MAIL-WELL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
MARCH 31, 2002 DECEMBER 31, 2001
(UNAUDITED)
-------------------- -----------------------
ASSETS
Current assets
Cash and cash equivalents $ 121,331 $ 809
Accounts receivable, net 203,308 207,750
Inventories, net 103,484 104,544
Net assets of discontinued operations 219,205 246,377
Net assets held for sale 61,022 54,073
Other current assets 57,195 67,001
---------- ----------
Total current assets 765,545 680,554
Property, plant and equipment, net 361,555 375,415
Goodwill and other intangible assets, net 348,010 347,061
Other assets, net 51,335 46,094
---------- ----------
Total assets $1,526,445 $1,449,124
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 147,474 $ 142,521
Accrued compensation and related liabilities 45,491 44,310
Other current liabilities 48,139 57,245
Current portion of long-term debt 310,372 302,822
---------- ----------
Total current liabilities 551,476 546,898
Long-term debt 658,881 550,177
Deferred income taxes 78,484 93,573
Other long-term liabilities 18,528 16,599
---------- ----------
Total liabilities 1,307,369 1,207,247
SHAREHOLDERS' EQUITY
Preferred stock, $0.01 par value; 25,000 shares authorized, no shares issued - -
Common stock, $0.01 par value; 100,000,000 shares authorized, 48,336,031
and 48,336,031 shares issued and outstanding in 2002 and 2001, respectively 483 483
Paid-in capital 214,138 214,138
Retained earnings 25,015 46,623
Deferred compensation (3,205) (3,359)
Accumulated other comprehensive loss (17,355) (16,008)
---------- ----------
Total shareholders' equity 219,076 241,877
---------- ----------
Total liabilities and shareholders' equity $1,526,445 $1,449,124
========== ==========
See notes to condensed consolidated financial statements.
3
MAIL-WELL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED
------------------
MARCH 31,
---------
2002 2001
---- ----
Net sales .......................................................... $391,729 $432,976
Cost of sales ...................................................... 317,695 345,142
-------- --------
Gross profit ....................................................... 74,034 87,834
Operating expenses:
Selling and administrative expenses ............................ 58,676 62,875
Amortization of intangibles .................................... 463 3,275
Restructuring and other charges ................................ 13,647 -
-------- --------
Operating income ................................................... 1,248 21,684
Other expense:
Interest expense .............................................. 12,008 14,751
Other expense ................................................. 254 526
-------- --------
Income (loss) from continuing operations before income taxes........ (11,014) 6,407
Income tax provision (benefit) ..................................... (2,749) 2,220
-------- --------
Income (loss) from continuing operations ........................... (8,265) 4,187
Income from discontinued operations:
Loss from discontinued operations, net of tax .................. - (564)
Loss on disposal, including tax expense......................... (8,580) -
-------- --------
Income (loss) before extraordinary item ............................ (16,845) 3,623
Extraordinary item, net of tax ..................................... (4,763) -
-------- --------
Net income (loss) .................................................. $(21,608) $ 3,623
======== ========
Earnings (loss) per share - basic
Continuing operations ......................................... $ (0.17) $ 0.09
Discontinued operations ....................................... (0.18) (0.01)
Extraordinary item ............................................ (0.10) -
-------- --------
Earnings (loss) per share - basic ............................. $ (0.45) $ 0.08
Earnings (loss) per share - diluted
Continuing operations ......................................... $ (0.17) $ 0.09
Discontinued operations ....................................... (0.18) (0.01)
Extraordinary item ............................................ (0.10) -
-------- --------
Earnings (loss) per share - diluted ........................... $ (0.45) $ 0.08
Weighted average shares - basic .................................... 47,658 47,457
Weighted average shares - diluted .................................. 47,658 47,752
See notes to condensed consolidated financial statements.
4
MAIL-WELL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
THREE MONTHS ENDED
------------------
MARCH 31,
---------
2002 2001
---- ----
Cash flows from operating activities:
Income (loss) from continuing operations $ (8,265) $ 4,187
Adjustments to reconcile income (loss) from continuing
operations to net cash provided by operating activities:
Depreciation 9,823 11,042
Amortization 1,928 4,776
Noncash portion of restructuring charges 6,723 -
Deferred income tax expense (benefit) (420) 1,421
Loss (gain) on disposal of assets 229 (158)
Other noncash charges (credits), net 96 (980)
Changes in operating assets and liabilities:
Accounts receivable 4,688 7,938
Inventories 745 (6,544)
Accounts payable and accrued compensation 1,637 34,355
Income tax payable (4,712) 7,658
Other working capital changes (9,252) (649)
Other, net 354 (4,988)
--------- ---------
Net cash provided by operating activities 3,574 58,058
Cash flows from investing activities:
Acquisitions (1,003) (3,904)
Capital expenditures (7,952) (4,932)
Proceeds from divestiture 31,622 -
Proceeds from sales of property and equipment 60 1,805
--------- ---------
Net cash provided by (used in) investing activities 22,727 (7,031)
Cash flows from financing activities:
Decrease in accounts receivable financing facility - (50,000)
Proceeds from exercise of stock options - 6
Proceeds from issuance of long-term debt 569,000 85,367
Repayments of long-term debt (459,360) (117,807)
Capitalized loan fees (12,037) (1,841)
--------- ---------
Net cash provided by (used in) financing activities 97,603 (84,275)
Effect of exchange rate changes on cash and cash equivalents (322) (24)
Cash flows from discontinued operations (3,060) 33,707
--------- ---------
Net increase in cash and cash equivalents 120,522 435
Cash and cash equivalents at beginning of year 809 94
--------- ---------
Cash and cash equivalents at end of year $ 121,331 $ 529
========= =========
See notes to condensed consolidated financial statements.
5
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements of Mail-Well,
Inc. and subsidiaries (collectively, the "Company") have been prepared in
accordance with generally accepted accounting principles for interim
financial statements and with the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three month
period ended March 31, 2002 are not necessarily indicative of the results
that may be expected for the year ended December 31, 2002.
The balance sheet at December 31, 2001 has been derived from the audited
financial statements at that date but does not include all of the
information and footnote disclosures required by generally accepted
accounting principles for complete financial statements. Certain amounts
included in the statement of operations for the three months ended March 31,
2001 have been reclassified to conform with the current year presentation
including the reclassification of discontinued operations previously
reported as part of the continuing operations.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for
the year ended December 31, 2001.
2. RECENT ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statements of Financial Accounting Standards ("SFAS") No. 141, Business
Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets.
Statement 141 requires that the purchase method of accounting be used for
all business combinations initiated after June 30, 2001. Statement 141 also
includes guidance on the initial recognition and measurement of goodwill and
other intangible assets arising from business combinations completed after
June 30, 2001. Statement 142 prohibits the amortization of goodwill and
intangible assets with indefinite useful lives. Statement 142 requires that
these assets be reviewed for impairment at least annually. Intangible assets
with finite lives will continue to be amortized over their estimated useful
lives. Additionally, Statement 142 requires that goodwill included in the
carrying value of equity method investments no longer be amortized.
Mail-Well began its application of Statement 142 beginning in the first
quarter of 2002. The Company has completed the first step of the two-step
process prescribed in Statement 142 to test goodwill for impairment and has
concluded that a portion of the $213.5 million of goodwill related to our
commercial printing business is impaired. The extent of this impairment will
not be known until we have completed step two of the process. The Company
will recognize the amount of the impairment as a cumulative effect of a
change in accounting principle as of January 1, 2002 when it is determined.
See Note 3.
In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations. Statement 143 addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. Mail-Well will adopt Statement 143 in
the first quarter of fiscal year 2003. The Company is evaluating the impact
of the adoption of Statement 143 on the consolidated financial statements.
In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets, which establishes one accounting model to
be used for long-lived assets to be disposed of by sale and broadens the
presentation of discontinued operations to include more disposal
transactions. Statement 144 supercedes SFAS No. 121,
6
Accounting for the Impairment of Long-Lived Assets to Be Disposed Of and the
accounting and reporting provisions of ABP Opinion No. 30, Reporting the
Results of Operations - Reporting the Effects Of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions. Mail-Well adopted Statement 144 as of January 1, 2002 and
there was no impact from the adoption of this statement.
3. GOODWILL AND OTHER INTANGIBLE ASSETS, NET
The changes in the carrying amount of goodwill for the three months ended
March 31, 2002 are as follows (in thousands):
COMMERCIAL
ENVELOPE PRINTING TOTAL
- ----------------------------------------------------------------------------------------------------
Balance as of January 1, 2002 $107,334 $213,492 $320,826
Reclassification from other intangibles (1) 11,240 - 11,240
- ----------------------------------------------------------------------------------------------------
Balance as of March 31, 2002 $118,574 $213,492 $332,066
====================================================================================================
<FN>
(1) This includes customer relationships and trained workforce that is required to be
included as part of goodwill under SFAS 142.
Due to the adoption of SFAS 142, the Company ceased amortizing goodwill. Had
SFAS 142 been in effect in the first quarter of 2001, the Company would not
have recorded goodwill amortization expense of $2.6 million. The following
summarizes net loss adjusted to exclude goodwill amortization expense, and
the related tax effect, that is no longer subject to amortization (in
thousands, except per share amounts):
THREE-MONTHS ENDED
MARCH 31, 2002 MARCH 31, 2001
- -------------------------------------------------------------------------------
Reported net income (loss) $(21,608) $3,623
Goodwill amortization, net of tax - 1,624
- -------------------------------------------------------------------------------
Adjusted net income (loss) $(21,608) $5,247
======== ======
- -------------------------------------------------------------------------------
Basic earnings (loss) per share - as reported $ (0.45) $ 0.08
Basic earnings (loss) per share - adjusted $ (0.45) $ 0.11
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Diluted earnings (loss) per share - as reported $ (0.45) $ 0.08
Diluted earnings (loss) per share - adjusted $ (0.45) $ 0.11
- -------------------------------------------------------------------------------
7
Other intangible assets are all amortizable and have original estimated
useful lives as follows: Non-compete agreements - 5 years; Patents - 12
years; Trademarks - 43 years; Other - Various. Based on the current amount
of intangibles subject to amortization, the estimated amortization expense
for each of the succeeding five years are as follows: $2.0 million,
$2.0 million, $1.3 million, $1.2 million and $1.2 million.
COMMERCIAL
ENVELOPE PRINTING TOTAL
- -------------------------------------------------------------------------------
Trademarks $ 8,314 $ - $ 8,314
Patent 2,054 - 2,054
Non-compete agreements 1,188 1,905 3,093
Other intangibles 1,731 752 2,483
- -------------------------------------------------------------------------------
Balance as of March 31, 2002 $13,287 $2,657 $15,944
===============================================================================
4. INVENTORIES
Inventories by major category were:
(in thousands) MARCH 31, 2002 DECEMBER 31, 2001
- ---------------------------------------------------------------------------------------
Raw materials $ 29,816 $ 29,964
Work in process 20,314 21,868
Finished goods 56,935 56,768
- ---------------------------------------------------------------------------------------
107,065 108,600
Reserves (3,581) (4,056)
- ---------------------------------------------------------------------------------------
$103,484 $104,544
======== ========
5. COMPREHENSIVE LOSS
A summary of comprehensive loss is as follows:
THREE MONTHS ENDED
(in thousands) MARCH 31, 2002 MARCH 31, 2001
- ------------------------------------------------------------------------------------------------
Net income (loss) $(21,608) $ 3,623
Currency translation adjustments, net (1,347) (6,528)
Unrealized loss on investments, net - (1,140)
Pension liability adjustment - 115
- ------------------------------------------------------------------------------------------------
Comprehensive loss $(22,955) $(3,930)
======== =======
8
6. EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share exclude dilution and are computed by dividing
net income (loss) by the weighted average number of common shares outstanding
for the period. Diluted earnings (loss) per share reflect the potential
dilution that could occur if securities or other contracts to issue common
stock were exercised or converted into common stock. A reconciliation of the
amounts included in the computation of basic earnings (loss) per share and
diluted earnings (loss) per share is as follows:
(IN THOUSANDS, EXCEPT PER SHARE AMOUNT) MARCH 31, MARCH 31,
2002 2001
- ---------------------------------------------------------------------------------------------
Numerator:
Numerator for basic and diluted earnings (loss) per share -
income (loss) from continuing operations $(8,265) $ 4,187
=============================================================================================
Denominator:
Denominator for basic earnings (loss) per share - weighted
average shares 47,658 47,457
Effects of dilutive securities:
Stock options - 295
- ---------------------------------------------------------------------------------------------
Denominator for diluted earnings (loss) per share - adjusted
weighted average shares and assumed conversions 47,658 47,752
=============================================================================================
Earnings (loss) per share:
Basic $ (0.17) $ 0.09
=============================================================================================
Diluted $ (0.17) $ 0.09
=============================================================================================
During the three-months ended March 31, 2002 and 2001, interest on the
Convertible Notes in the amount of $1,214,000 and shares of 7,319,000 issued
upon assumed conversion were excluded from the calculation of diluted
earnings (loss) per share due to their antidilutive effect on earnings (loss)
per share. In addition, outstanding options to purchase approximately
6,995,000 and 5,675,000 common shares were excluded from the calculation of
diluted earnings (loss) per share because the effect would be antidilutive
for the quarters ended March 31, 2002 and March 31, 2001, respectively.
7. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
MARCH 31, DECEMBER 31,
2002 2001
- --------------------------------------------------------------------------------------
Bank borrowings:
Secured Tranche A term loan, due 2006 $ 83,448 $ 194,918
Secured Tranche B term loan, due 2007 85,370 192,749
Revolving loan facility, due 2006 - 6,000
Senior Notes, due 2012 350,000 -
Senior Subordinated Notes, due 2008 300,000 300,000
Convertible Subordinated Notes, due 2002 139,063 139,063
Other 11,372 20,269
- --------------------------------------------------------------------------------------
969,253 852,999
Less current maturities (310,372) (302,822)
- --------------------------------------------------------------------------------------
Long-term debt $ 658,881 $ 550,177
======================================================================================
Current maturities include the anticipated retirement of the Convertible
Notes and also include the portion of bank borrowings that will be paid from
the proceeds from planned divestitures pursuant to the terms of the Secured
Senior Credit Facility, net of amounts that would become available as a
result of such repayments under the revolving credit facility due in 2006.
9
In March 2002, the Company issued $350,000,000 of 9 5/8% Senior Notes due
2012 ("Senior Notes"). Interest is payable semi-annually. The Company may
redeem the Senior Notes, in whole or in part, on or after March 15, 2007, at
a redemption prices from 100% to 104.813%, plus accrued and unpaid interest.
In addition, before March 2005, the Company can redeem up to 35% of the
Senior Notes at 109.625% of the principal amount thereof, plus accrued and
unpaid interest, with the net cash proceeds from certain common stock
offerings. The Company used the proceeds from the sale of the Senior Notes
to repay $197.0 million of its Tranche A and B term loans. In addition,
$20.5 million of the proceeds received from the sale of Curtis 1000, Inc.
were used to repay the bank Tranche A and B term loans.
Deferred financing costs of $8.2 million incurred in connection with the
Secured Senior Credit Facility were written off as of March 31, 2002. This
write-off represented the pro rata portion of the deferred financing fees
related to the Tranche A and B term loans repaid with the proceeds from the
sale of the Senior Notes and the sale of Curtis 1000, Inc. The write-off is
reported net of tax as an extraordinary item in the condensed consolidated
statements of operations.
As of March 31, 2002, the Company was in compliance with all of the covenants
of its various debt agreements.
8. RESTRUCTURING AND OTHER CHARGES
As announced in 2001, the Company is consolidating certain operations to
eliminate excess internal capacity in order to reduce costs and improve its
long-term competitive position. In addition, the Company is significantly
reducing the size of certain of its facilities in response to current market
conditions. The restructuring charge related to these plans totaled $11.7
million in first quarter of 2002. The following table and discussion present
the details of this restructuring charge, as well as other related charges
recorded during the quarter:
COMMERCIAL
(IN THOUSANDS) ENVELOPE PRINTING CORPORATE TOTAL
- -------------------------------------------------------------------------------------------------------------------
Employee separation and related
employee expenses $ - $ 233 $ - $ 233
Other exit costs 3,498 - - 3,498
Asset impairment charges 4,895 - - 4,895
Implementation expenses 3,040 - - 3,040
- -------------------------------------------------------------------------------------------------------------------
Total restructuring costs 11,433 233 - 11,666
Other charges 580 774 627 1,981
- -------------------------------------------------------------------------------------------------------------------
Total restructure and other charges $12,013 $1,007 $627 $13,647
===================================================================================================================
In addition to the three envelope manufacturing facilities consolidated in
2001, the envelope business consolidated four facilities in the first quarter
of 2002 and will consolidate four additional operations during the remainder
of 2002. When this consolidation plan is completed the Company will have
closed 11 envelope plants and substantially reduced excess internal capacity
and improved utilization of equipment and resources at the remaining 27
domestic plants and 12 plants in Canada. In 2001, the Company accrued the
separation and related employee expenses covering the 923 employees expected
to be terminated over the course of this project. As of March 31, 2002, 553
employees had been separated. Other exit costs of $3.5 million in the first
quarter of 2002 are primarily training costs for those employees at the
plants that are absorbing the sales of the plants being closed. Incremental
external implementation expenses were $3.0 million in the first quarter 2002.
Equipment taken out of service during the first quarter of 2002 as a result
of the consolidation program was written down $4.9 million to its fair market
value.
Commercial printing completed the consolidation of its operations in the
Philadelphia, Pennsylvania area in 2001. Commercial printing is also making
fundamental changes at certain of its commercial printing facilities in
response to changes in market conditions. As a result, it reduced headcount
in the first quarter of 2002 by 143 employees and incurred severance costs of
$233,000.
10
In 2001, the Company initiated several programs to significantly improve
operations and marketing effectiveness. Both the envelope and commercial
printing businesses have programs in place to institute best practices,
install pricing disciplines and align equipment and services to better serve
our customers and markets. We believe these initiatives will significantly
improve the performance of our businesses; accordingly, we have expedited the
implementation of these programs by investing in outside assistance. The
external incremental cost incurred on these initiatives totaled $2.0 million
during the first quarter of 2002.
A summary of the activity charged to the restructuring liability during the
three months ended March 31, 2002 was as follows (in thousands):
COMMERCIAL
ENVELOPE PRINTING TOTAL
----------------------------------------------
Balance, December 31, 2001 $10,126 $ 604 $10,730
Payments for severance (3,124) - (3,124)
Payments for lease termination costs (35) - (35)
Payments for other exit costs - (131) (131)
----------------------------------------------
Balance, March 31, 2002 $ 6,967 $ 473 $ 7,440
==============================================
9. DISCONTINUED OPERATIONS
In June 2001, the Company announced plans to sell its Label and Printed
Office Products segments. These segments have been segregated from continuing
operations and reported as discontinued operations for all periods presented
in the accompanying condensed consolidated financial statements.
On February 22, 2002, the Company sold the stock of Curtis 1000 Inc. for
$40 million, including the assumption of debt. Curtis 1000, Inc. was included
in the printed office products segment and had approximately $22.8 million
in revenue and $49,000 of operating income for the period ended February 22,
2002.
The reported loss on disposition of the Label and Printed Office Products
segments includes a write-down to net realizable value based on estimated
proceeds, costs associated with the planned dispositions, the estimated
earnings or losses from operations of the discontinued businesses through the
expected date of these dispositions and the related income tax expense.
Management has based its estimates of the sales proceeds expected from the
divestitures of Label and Printed Office Products on data provided by its
financial advisors and indications of value received from prospective buyers.
The loss will be adjusted if management has information indicating that the
actual sales proceeds will be different than the estimates.
Interest expense has been allocated to the operating results and the expected
earnings included in the calculation of the loss on disposal of discontinued
operations based upon the relative net assets of Label and Printed Office
Products. This allocation of interest totaled $6.5 million and $6.8 million
for the three months ended March 31, 2002 and 2001, respectively.
11
Operating results of the discontinued operations are summarized as follows
(in thousands):
2002 2001
---------------------------
Net sales:
Label $ 53,276 $ 55,508
Printed Office Products 74,540 100,739
---------------------------
$127,816 $156,247
===========================
Income (loss) from operations:
Label $ (365) $ (413)
Printed Office Products (7) 356
---------------------------
(372) (57)
Income tax expense 605 508
---------------------------
(977) (565)
===========================
Loss on disposal of discontinued operations:
Label (3,184) -
Printed Office Products (356) -
---------------------------
(3,540) -
Income tax expense 4,063 -
---------------------------
$ (8,580) $ (565)
===========================
The assets and liabilities of discontinued operations, which have been
reflected as net assets of discontinued operations in the condensed
consolidated balance sheets, are summarized as follows (in thousands):
MARCH 31, DECEMBER 31,
2002 2001
---------------------------------
Label segment:
Current assets $ 54,409 $ 46,285
Long-term assets 90,778 97,109
---------------------------------
Total assets 145,187 143,394
Current liabilities 38,395 40,085
Long-term liabilities 5,910 3,909
---------------------------------
Total liabilities 44,305 43,994
---------------------------------
Net assets of the Label segment 100,882 99,400
Printed Office Products segment:
Current assets 33,989 56,227
Long-term assets 123,320 158,875
---------------------------------
Total assets 157,309 215,102
Current liabilities 31,852 49,068
Long-term liabilities 7,134 19,057
---------------------------------
Total liabilities 38,986 68,125
---------------------------------
Net assets of the Printed Office Products segment 118,323 146,977
---------------------------------
Net assets of discontinued operations $219,205 $246,377
=================================
Assets primarily consist of accounts receivable, inventories, property and
equipment and deferred income taxes. Liabilities primarily consist of
accounts payable, accrued expenses, deferred income taxes and other long-term
liabilities. The net assets of discontinued operations presented in the
condensed consolidated balance sheets include the write-down of assets to
estimated net realizable value, the accrual of obligations associated with
the sale of the two segments and the accrual of estimated losses to the
expected date of disposal.
12
10. ASSETS HELD FOR SALE
The Company's divestiture plans also include the sale of certain operations
that are not strategic to its Envelope and Commercial Printing segments. The
Company expects to complete the dispositions of these operations by September
30, 2002. The following table presents the sales and operating income of
these operations for the three-months ended March 31, 2002 and 2001 (in
thousands):
2002 2001
-------------------------------
Sales $26,894 $29,504
Operating income 1,434 2,455
The assets of these operations at December 31, 2001 and March 31, 2002
totaled $72.4 million and $67.4 million, respectively, and are reported net
of $11.4 million and $13.3 million of related liabilities, respectively, as
"Net assets held for sale" in the accompanying condensed consolidated balance
sheets.
11. SEGMENT INFORMATION
The Company operates in two principal business segments. The Commercial
Printing segment specializes in printing annual reports, brand marketing
collateral, catalogs, brochures, maps and guidebooks, calendars, financial
communications and CD packaging. The Envelope segment manufactures customized
and stock envelopes for billing and remittance, direct mail advertising,
filing systems, photo processing, medical records and catalog orders. The
envelope segment is also a producer of specialty packaging products and a
manufacturer of stock products for the resale market.
The following tables present certain business segment information for the
three-months ended March 31, 2002 and 2001 as follows:
THREE MONTHS ENDED
MARCH 31
- --------------------------------------------------------------------------------------------------
(IN THOUSANDS) 2002 2001
- --------------------------------------------------------------------------------------------------
Net external sales:
Commercial Printing $190,754 $211,360
Envelope $200,975 221,616
- --------------------------------------------------------------------------------------------------
Total $391,729 $432,976
==================================================================================================
Operating income (a):
Commercial Printing $ (3,463) $ 6,361
Envelope 7,738 22,975
Corporate (3,027) (7,652)
- --------------------------------------------------------------------------------------------------
Total $ 1,248 $ 21,684
==================================================================================================
MARCH 31 DECEMBER 31
- --------------------------------------------------------------------------------------------------
(IN THOUSANDS) 2002 2001
- --------------------------------------------------------------------------------------------------
Identifiable assets (b):
Commercial Printing $ 615,538 $ 620,421
Envelope 518,842 537,747
Corporate 111,838 (9,494)
- --------------------------------------------------------------------------------------------------
Total $1,246,218 $1,148,674
Net assets of discontinued operations 219,205 246,377
Net assets held for sale 61,022 54,073
- --------------------------------------------------------------------------------------------------
Total $1,526,445 $1,449,124
========== ==========
<FN>
(a) Operating income is net of all costs and expenses directly related to
the segment involved. Corporate expenses include corporate general and
administrative expenses, lease expense, amortization expense of other
intangible assets and goodwill (in 2001), gains or losses on disposal of
assets and other miscellaneous expenses.
13
(b) Identifiable assets are accumulated by facility within each business
segment. Certain operating assets, which are under lease, are reported
as business segment assets for evaluation purposes. The net book value
of these assets has been eliminated by contra assets included with
corporate assets in order to reconcile identifiable assets with the
total assets of the Company. Corporate assets consist primarily of cash
and cash equivalents, other receivables, other assets and deferred tax
assets.
Intercompany sales for the three months ended March 31, 2002 were $1.9
million and $3.4 million and for the three months ended March 31, 2001 were
$2.5 million and $7.8 million for Commercial Printing and Envelope,
respectively. These amounts, which are eliminated in consolidation, are
excluded above in reported net sales.
14
12. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
In March 2002, Mail-Well I Corporation ("Issuer" or "MWI"), the Company's
wholly owned subsidiary, and the only direct subsidiary of the Company,
issued $350 million aggregate principal amount of 9 5/8% Senior Notes
("Senior Notes") due in 2012. The Senior Notes are guaranteed by all of the
U.S. subsidiaries (the "Guarantor Subsidiaries") of MWI, all of which are
wholly owned, and by Mail-Well, Inc. ("Parent Guarantor"). The guarantees are
joint and several, full, complete and unconditional. There are no material
restrictions on the ability of the Guarantor Subsidiaries to transfer funds
to MWI in the form of cash dividends, loans or advances, other than ordinary
legal restrictions under corporate law, fraudulent transfer and bankruptcy
laws.
In December 1998, MWI ("Issuer" or "MWI"), the Company's wholly-owned
subsidiary, and the only direct subsidiary of the Company, issued $300.0
million aggregate principal amount of 8 3/4% Senior Subordinated Notes
("Senior Subordinated Notes") due in 2008. The Senior Subordinated Notes are
guaranteed by the majority of the U.S. subsidiaries (the "Guarantor
Subsidiaries") of MWI, all of which are wholly owned, and by Mail-Well, Inc.
("Parent Guarantor"). The guarantees are joint and several, full, complete
and unconditional. There are no material restrictions on the ability of the
Guarantor Subsidiaries to transfer funds to MWI in the form of cash
dividends, loans or advances, other than ordinary legal restrictions under
corporate law, fraudulent transfer and bankruptcy laws.
The following condensed consolidating financial information illustrates the
composition of the Parent Guarantor, Issuer, Guarantor Subsidiaries and
non-guarantor subsidiaries. The Issuer, the Guarantor Subsidiaries and the
non-guarantor subsidiaries comprise all of the direct and indirect
subsidiaries of the Parent Guarantor. Management has determined that separate
complete financial statements would not provide additional material
information that would be useful in assessing the financial composition of
the Guarantor Subsidiaries.
Investments in subsidiaries are accounted for under the equity method,
wherein the investor company's share of earnings and income taxes applicable
to the assumed distribution of such earnings are included in net income. In
addition, investments increase in the amount of permanent contributions to
subsidiaries and decrease in the amount of distributions from subsidiaries.
The elimination entries remove the equity method investment in subsidiaries
and the equity in earnings of subsidiaries, intercompany payables and
receivables and other transactions between subsidiaries.
15
CONSOLIDATING CONDENSED STATEMENT OF FINANCIAL POSITION
March 31, 2002
(in thousands)
COMBINED COMBINED
PARENT GUARANTOR NONGUARANTOR
GUARANTOR ISSUER SUBSIDIARIES SUBSIDIARIES
--------- ------ ------------ ------------
Current assets:
Cash and cash equivalents $ - $ 119,948 $ 1,383 $ -
Accounts receivable, net - 52,375 127,829 23,104
Inventories, net - 50,043 40,877 12,564
Net assets of discontinued operations - - 159,193 60,012
Net assets held for sale - 33,575 27,447 -
Note receivable from Issuer 147,436 - - -
Other current assets 197 40,169 13,709 3,120
-------- ---------- --------- --------
Total current assets 147,633 296,110 370,438 98,800
Investment in subsidiaries 217,920 245,694 58,910 -
Property, plant and equipment, net - 135,465 173,560 52,530
Goodwill and other intangible assets, net - 85,645 216,751 45,614
Note receivable from subsidiaries - 722,400 - -
Other assets, net 783 44,034 21,297 2,992
-------- ---------- --------- --------
Total assets $366,336 $1,529,348 $ 840,956 $199,936
======== ========== ========= ========
Current liabilities:
Accounts payable $ - $ 66,482 $ 71,261 $ 9,731
Other current liabilities 6,029 67,032 12,125 8,444
Intercompany payable (receivable) 2,168 132,960 (184,348) 49,220
Note payable to Parent - 147,436 - -
Current portion of long-term debt 139,063 163,729 7,408 172
-------- ---------- --------- --------
Total current liabilities 147,260 577,639 (93,554) 67,567
Long-term debt - 658,881 - -
Note payable to Issuer - - 722,400 -
Deferred income taxes - 28,287 39,021 11,176
Other long-term liabilities - 14,582 21,171 546
-------- ---------- --------- --------
Total liabilities 147,260 1,279,389 689,038 79,289
Shareholders' equity 219,076 249,959 151,918 120,647
-------- ---------- --------- --------
Total liabilities and shareholders' equity $366,336 $1,529,348 $ 840,956 $199,936
======== ========== ========= ========
ELIM. CONSOLIDATED
----- ------------
Current assets:
Cash and cash equivalents $ - $ 121,331
Accounts receivable, net - 203,308
Inventories, net - 103,484
Net assets of discontinued operations - 219,205
Net assets held for sale - 61,022
Note receivable from Issuer (147,436) -
Other current assets - 57,195
----------- ----------
Total current assets (147,436) 765,545
Investment in subsidiaries (522,524) -
Property, plant and equipment, net - 361,555
Goodwill and other intangible assets, net - 348,010
Note receivable from subsidiaries (722,400) -
Other assets, net (17,771) 51,335
----------- ----------
Total assets $(1,410,131) $1,526,445
=========== ==========
Current liabilities:
Accounts payable $ - $ 147,474
Other current liabilities - 93,630
Intercompany payable (receivable) - -
Note payable to Parent (147,436) -
Current portion of long-term debt - 310,372
----------- ----------
Total current liabilities (147,436) 551,476
Long-term debt - 658,881
Note payable to Issuer (722,400) -
Deferred income taxes - 78,484
Other long-term liabilities (17,771) 18,528
----------- ----------
Total liabilities (887,607) 1,307,369
Shareholders' equity (522,524) 219,076
----------- ----------
Total liabilities and shareholders' equity $(1,410,131) $1,526,445
=========== ==========
16
CONSOLIDATING CONDENSED STATEMENT OF FINANCIAL POSITION
December 31, 2001
(in thousands)
COMBINED COMBINED
PARENT GUARANTOR NONGUARANTOR
GUARANTOR ISSUER SUBSIDIARIES SUBSIDIARIES
--------- ------ ------------ ------------
Current assets:
Cash and cash equivalents $ - $ (1,589) $ 1,613 $ 785
Accounts receivable, net - 60,039 123,333 24,378
Inventories, net - 51,032 41,319 12,193
Net assets of discontinued operations - - 176,879 69,498
Net assets held for sale - 25,852 28,221 -
Note receivable from Issuer 147,436 - - -
Other current assets 295 41,988 21,977 2,741
-------- ---------- --------- --------
Total current assets 147,731 177,322 393,342 109,595
Investment in subsidiaries 240,954 233,432 101,125 -
Property, plant and equipment, net - 151,735 170,112 53,568
Goodwill and other intangible assets, net - 96,585 204,742 45,734
Note receivable from subsidiaries - 749,400 - -
Other assets, net 1,023 29,925 31,034 2,992
-------- ---------- --------- --------
Total assets $389,708 $1,438,399 $ 900,355 $211,889
======== ========== ========= ========
Current liabilities:
Accounts payable $ - $ 63,491 $ 70,537 $ 8,493
Other current liabilities 4,291 71,611 11,749 13,904
Intercompany payable (receivable) 4,477 190,395 (167,446) (27,426)
Note payable to Parent - 147,436 - -
Current maturities of long-term debt 139,063 161,850 1,737 172
-------- ---------- --------- --------
Total current liabilities 147,831 634,783 (83,423) (4,857)
Long-term debt - 523,247 17,834 9,096
Note payable to Issuer - - 749,400 -
Deferred income taxes - 28,287 54,062 11,224
Other liabilities - 24,655 10,277 549
-------- ---------- --------- --------
Total liabilities 147,831 1,210,971 748,149 16,012
Shareholders' equity 241,877 227,427 152,207 195,877
-------- ---------- --------- --------
Total liabilities and shareholders' equity $389,708 $1,438,398 $ 900,356 $211,889
======== ========== ========= ========
ELIM. CONSOLIDATED
----- ------------
Current assets:
Cash and cash equivalents $ - $ 809
Accounts receivable, net - 207,750
Inventories, net - 104,544
Net assets of discontinued operations - 246,377
Net assets held for sale - 54,073
Note receivable from Issuer (147,436) -
Other current assets - 67,001
----------- ----------
Total current assets (147,436) 680,554
Investment in subsidiaries (575,511) -
Property, plant and equipment, net - 375,415
Goodwill and other intangible assets, net - 347,061
Note receivable from subsidiaries (749,400) -
Other assets, net (18,881) 46,094
----------- ----------
Total assets $(1,491,228) $1,449,124
=========== ==========
Current liabilities:
Accounts payable $ - $ 142,521
Other current liabilities - 101,555
Intercompany payable (receivable) - -
Note payable to Parent (147,436) -
Current maturities of long-term debt - 302,822
----------- ----------
Total current liabilities (147,436) 546,898
Long-term debt - 550,177
Note payable to Issuer (749,400) -
Deferred income taxes - 93,573
Other liabilities (18,881) 16,599
----------- ----------
Total liabilities (915,717) 1,207,247
Shareholders' equity (575,511) 241,877
----------- ----------
Total liabilities and shareholders' equity $(1,491,228) $1,449,124
=========== ==========
17
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
Quarter Ended March 31, 2002
(in thousands)
COMBINED COMBINED
PARENT GUARANTOR NONGUARANTOR
GUARANTOR ISSUER SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------ ------------ ------------ ------------ ------------
Net sales $ - $140,874 $209,403 $41,452 $ - $391,729
Cost of sales - 113,495 174,914 29,286 - 317,695
-------- -------- -------- ------- -------- --------
Gross profit - 27,379 34,489 12,166 - 74,034
Other operating costs 5 19,526 35,298 4,310 - 59,139
Restructuring and other charges - 13,414 233 - - 13,647
-------- -------- -------- ------- -------- --------
Operating income (loss) (5) (5,561) (1,042) 7,856 - 1,248
Other expense (income):
Interest expense 1,738 17,662 11,325 - (18,717) 12,008
Other expense (income) (1,977) (16,486) 48 (48) 18,717 254
-------- -------- -------- ------- -------- --------
Income (loss) before income taxes and
equity in undistributed earnings of
subsidiaries 234 (6,737) (12,415) 7,904 - (11,014)
Provision (benefit) for income taxes - (2,690) (3,335) 3,276 - (2,749)
-------- -------- -------- ------- -------- --------
Income (loss) before equity in
undistributed earnings of subsidiaries 234 (4,047) (9,080) 4,628 - (8,265)
Equity in undistributed earnings of
subsidiaries (21,842) (12,798) 6,419 - 28,221 -
-------- -------- -------- ------- -------- --------
Income (loss) before discontinued
operations and extraordinary items (21,608) (16,845) (2,661) 4,628 28,221 (8,265)
Loss on disposal, including income tax
expense - - (6,144) (2,436) - (8,580)
Extraordinary item, net of tax - (4,763) - - - (4,763)
-------- -------- -------- ------- -------- --------
Net income (loss) $(21,608) $(21,608) $ (8,805) $ 2,192 $ 28,221 $(21,608)
======== ======== ======== ======= ======== ========
18
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
Quarter Ended March 31, 2001
(in thousands)
COMBINED COMBINED
PARENT GUARANTOR NONGUARANTOR
GUARANTOR ISSUER SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------ ------------ ------------ ------------ ------------
Net sales $ - $112,823 $271,521 $48,632 $ - $432,976
Cost of sales - 90,161 219,106 35,875 - 345,142
------- -------- -------- ------- -------- --------
Gross profit - 22,662 52,415 12,757 - 87,834
Other operating costs 91 18,102 42,937 5,020 - 66,150
------- -------- -------- ------- -------- --------
Operating income (loss) (91) 4,560 9,478 7,737 - 21,684
Other expense (income):
Interest expense 1,738 18,768 13,174 1,051 (19,980) 14,751
Other expense (income) (1,976) (17,282) (187) (9) 19,980 526
------- -------- -------- ------- -------- --------
Income (loss) before income taxes and
equity in undistributed earnings of
subsidiaries 147 3,074 (3,509) 6,695 - 6,407
Provision (benefit) for income taxes - 1,346 (1,914) 2,788 - 2,220
------- -------- -------- ------- -------- --------
Income (loss) before equity in
undistributed earnings of subsidiaries 147 1,728 (1,595) 3,907 - 4,187
Equity in undistributed earnings of
subsidiaries 3,476 1,748 7,960 - (13,184) -
------- -------- -------- ------- -------- --------
Income before discontinued operations 3,623 3,476 6,365 3,907 (13,184) 4,187
Loss from discontinued operations, net of
tax - - (133) (431) - (564)
------- -------- -------- ------- -------- --------
Net income $ 3,623 $ 3,476 $ 6,232 $ 3,476 $(13,184) $ 3,623
======= ======== ======== ======= ======== ========
19
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
Three-months ended March 31, 2002
(in thousands)
COMBINED COMBINED
PARENT GUARANTOR NONGUARANTOR
GUARANTOR ISSUER SUBSIDIARIES SUBSIDIARIES ELIMINATION CONSOLIDATED
--------- ------ ------------ ------------ ----------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES $ 2,309 $ (4,658) $ 644 $ 438 $ 4,841 $ 3,574
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions - (1,003) - - - (1,003)
Capital expenditures - (391) (7,259) (302) - (7,952)
Proceeds from divestiture - 31,622 - - - 31,622
Proceeds from the sale of property
and equipment - 34 26 - 60
Investment in subsidiaries (2,309) - - - 2,309 -
------- --------- -------- -------- -------- ---------
Net cash provided by (used in)
investing activities (2,309) 30,262 (7,233) (302) 2,309 22,727
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of
long-term debt - 569,000 - - - 569,000
Repayments of long-term debt - (444,615) (5,745) (94,039) 85,039 (459,360)
Capitalized loan fees - (12,037) - - - (12,037)
Investment by parent - - - 92,189 (92,189) -
------- --------- -------- -------- -------- ---------
Net cash provided by (used in)
financing activities - 112,348 (5,745) (1,850) (7,150) 97,603
EFFECT OF EXCHANGE RATE CHANGES ON CASH - - 17 (339) - (322)
CASH FLOWS FROM DISCONTINUED OPERATIONS - - (3,240) 180 - (3,060)
------- --------- -------- -------- -------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS - 137,952 (15,557) (1,873) - 120,522
BALANCE AT BEGINNING OF YEAR - (18,004) 17,568 1,245 - 809
------- --------- -------- -------- -------- ---------
BALANCE AT END OF YEAR $ - $ 119,948 $ 2,011 $ (628) $ - $ 121,331
======= ========= ======== ======== ======== =========
20
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
Three-months ended March 31, 2001
(in thousands)
COMBINED COMBINED
PARENT GUARANTOR NONGUARANTOR
GUARANTOR ISSUER SUBSIDIARIES SUBSIDIARIES ELIMINATION CONSOLIDATED
--------- ------ ------------ ------------ ----------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES $ 5,194 $ (39,444) $ 44,667 $ 47,641 $ - $ 58,058
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions - (3,904) - - - (3,904)
Capital expenditures - (1,161) (3,300) (471) - (4,932)
Investment in subsidiaries (5) 10,416 - - (10,411) -
Other investing activities (5,195) (873) 54,548 3,325 (50,000) 1,805
------- --------- --------- -------- --------- ---------
Net cash provided by (used in)
investing activities (5,200) 4,478 51,248 2,854 (60,411) (7,031)
CASH FLOWS FROM FINANCING ACTIVITIES:
Changes due to accounts
receivable securitization, net - (3,487) (46,513) (50,000) 50,000 (50,000)
Proceeds from exercise of stock
options 6 - - - - 6
Proceeds from long-term debt - 82,006 - 3,361 - 85,367
Repayments of long-term debt - (114,609) (570) (2,628) - (117,807)
Capitalized loan fees - (1,841) - - - (1,841)
Proceeds from parent guarantor - 63,419 (63,419) - - -
Investment by parent - 5 (10,416) - 10,411 -
Other financing activities - - 1,047 (1,047) - -
------- --------- --------- -------- --------- ---------
Net cash provided by financing
activities 6 25,493 (119,871) (50,314) 60,411 (84,275)
EFFECT OF EXCHANGE RATE CHANGES ON CASH - - 13 (37) - (24)
CASH FLOWS FROM DISCONTINUED OPERATIONS - - 33,701 6 - 33,707
------- --------- --------- -------- --------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS - (9,473) 9,758 150 - 435
BALANCE AT BEGINNING OF YEAR - 9,596 (9,756) 254 - 94
------ --------- --------- -------- --------- ---------
BALANCE AT END OF YEAR $ - $ 123 $ 2 $ 404 $ - $ 529
======= ========= ========= ======== ========= =========
21
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
CORPORATE OVERVIEW
We are one of the largest printers in North America competing primarily in
the commercial printing and envelope market segments. We believe we are the
world's largest manufacturer of envelopes, the leading printer of envelopes
in the United States and Canada, the premier high impact color printer in the
United States, and a leading general commercial printer in several major U.S.
markets. We operate 73 facilities throughout North America in our commercial
printing and envelope businesses. The combination of our broad printing
facility network and our sales force, which is among the largest in the
industry, has enabled us to build our primary customer base to over 20,000
customers.
In May 2001, we completed a comprehensive review of our operations and
adopted a new strategy that focuses on our two primary businesses -
commercial printing and envelopes. In support of this strategy, we have
announced our intention and are in the process of seeking to divest of our
label and printed office products businesses and certain other non-strategic
assets. In February 2002, we sold Curtis 1000 Inc., a printed office products
company, for approximately $40 million. We intend to use the net proceeds
from the divestitures to reduce our senior secured debt. In connection with
our new strategic plan, we also announced plans to consolidate three of our
commercial printing plants into one facility, to close 11 of our envelope
plants and to redeploy the equipment and assets at other facilities. We have
completed the plant consolidations in commercial printing and seven of the
closures in envelope, and plan to complete the remaining consolidations by
the end of 2002. Our new strategy includes the launch of several initiatives
to significantly improve operations and marketing effectiveness. Both the
envelope and commercial printing businesses have programs in place to
institute best practices, install pricing disciplines and align equipment and
services to better serve our customers and markets. We believe these
initiatives will significantly improve the performance of our businesses.
CONSOLIDATED RESULTS OF OPERATIONS
The financial statements for all periods presented have been restated as
required by generally accepted accounting principles to report the results of
our label and printed office products businesses as discontinued operations.
The summary financial data set forth in the tables that follow present
reported amounts as well as comparable financial data for New Mail-Well. When
we refer to "New Mail-Well", we are referring to results of the operations
that will constitute Mail-Well subsequent to the planned divestitures of the
operations reported as discontinued operations and assets held for sale and
that exclude restructuring, asset impairment and other charges reported in
the consolidated statements of operations for the quarters ended March 31,
2002 and 2001.
The economic slowdown that began in 2001 continues to adversely affect the
sales and margins of both of our primary businesses, especially the portion
of our commercial printing business related to print advertising and the
direct mail and resale segments of our envelope business. We do not expect
significant increases in sales and margins until the markets we serve,
especially advertising and direct mail, recover. In the meantime, we have
continued to take steps through our strategic initiatives and otherwise to
reduce costs and improve operations.
SALES
QUARTER ENDED MARCH 31 % CHANGE
(dollars in thousands) 2002 2001 2001
- ----------------------------------------------------------------------------
Reported $391,729 $432,976 (9.5)%
New Mail-Well $364,836 $410,889 (11.2)%
- ----------------------------------------------------------------------------
New Mail-Well's sales in the first quarter of 2002 were $364.8 million, or
11.2% below sales during the first quarter of 2001. Despite reported
improvements in the general economy, we have yet to see improvements in the
22
key markets we serve. Demand for commercial printing continues to be weak,
and sales of envelopes into the resale and direct mail markets are below
levels of a year ago.
RESTRUCTURING AND OTHER CHARGES
As announced in 2001, we are consolidating certain operations to eliminate
excess internal capacity in order to reduce costs and improve our long-term
competitive position. In addition, we are significantly reducing the size of
certain of our facilities in response to current market conditions. The
restructuring charge related to these plans totaled $11.7 million in first
quarter of 2002. The following table and discussion present the details of
this restructuring charge, as well as other related charges recorded during
the quarter:
COMMERCIAL
(IN THOUSANDS) ENVELOPE PRINTING CORPORATE TOTAL
- ------------------------------------------------------------------------------------------------
Employee separation and related expenses $ - $ 233 $ - $ 233
Other exit costs 3,498 - - 3,498
Asset impairment charges 4,895 - - 4,895
Implementation expenses 3,040 - - 3,040
- ------------------------------------------------------------------------------------------------
Total restructuring costs 11,433 233 - 11,666
Other charges 580 774 627 1,981
- ------------------------------------------------------------------------------------------------
Total restructure and other charges $12,013 $1,007 $627 $13,647
================================================================================================
In addition to the three envelope manufacturing facilities consolidated in
2001, our envelope business consolidated four facilities in the first
quarter of 2002 and will consolidate four additional operations during the
remainder of 2002. When this consolidation plan is completed we will have
closed 11 envelope plants and substantially reduced excess internal capacity
and improved utilization of equipment and resources at the remaining 27
domestic plants and 12 plants in Canada. In 2001, we accrued the separation
and related employee costs covering the 923 employees expected to be
terminated over the course of this project. As of March 31, 2002, 553
employees had been separated. Other exit costs of $3.5 million are primarily
training costs for those employees at the plants that are absorbing the
sales of the plants being closed. Incremental external implementation
expenses were $3.0 million. Equipment taken out of service during the first
quarter of 2002 as a result of our consolidation program was written down
$4.9 million to its fair market value.
Our commercial printing business completed the consolidation of its
operations in the Philadelphia, Pennsylvania area in 2001. We are also
reducing fixed costs at certain of our commercial printing facilities in
response to changes in market conditions. As a result, we reduced headcount
in the first quarter of 2002 by 143 employees and incurred severance costs
of $233,000.
In 2001, we initiated several programs to significantly improve operations
and marketing effectiveness. Both the envelope and commercial printing
businesses have programs in place to institute best practices, install
pricing disciplines and align equipment and services to better serve our
customers and markets. We believe these initiatives will significantly
improve the performance of our businesses; accordingly, we have expedited
the implementation of these programs by investing in outside assistance. The
external incremental expenses incurred on these initiatives totaled
$2.0 million during the first quarter of 2002 and are reported in other
charges.
We expect to complete our strategic initiatives by the end of 2002 and
anticipate further charges of approximately $35.0 million.
23
OPERATING INCOME
QUARTER ENDED MARCH 31 % CHANGE
(dollars in thousands) 2002 2001
- -------------------------------------------------------------------------
Reported
Operating income $ 1,248 $21,684 (94)%
Operating margin 0.3% 5.0%
- -------------------------------------------------------------------------
New Mail-Well
Operating income $12,607 $19,230 (34)%
Operating margin 3.5% 4.7%
- -------------------------------------------------------------------------
New Mail-Well's operating income declined 34% in the first quarter of 2002 to
$12.6 million. The reduction in operating income was due primarily to the
contribution lost on the decline in sales, estimated to be approximately
$12.5 million. Increased competition resulting from the lower demand reduced
contribution margins by more than 6% and total contribution by approximately
another $8.7 million. Offsetting these declines were reductions in fixed
costs, which totaled approximately $12 million during the quarter.
The $13.6 million restructuring and other charges discussed above are the
primary difference between reported operating income and the operating income
of New Mail-Well.
INTEREST EXPENSE
QUARTER ENDED MARCH 31 % CHANGE
(dollars in thousands) 2002 2001
- --------------------------------------------------------------------------------------
Total interest expense $18,482 $21,533 (14)%
Less: Allocation to discontinued operations $(6,474) $(6,782)
- --------------------------------------------------------------------------------------
Reported interest expense $12,008 $14,751 (19)%
Less: Allocation to assets held for sale $ (968) $(1,621)
- --------------------------------------------------------------------------------------
New Mail-Well $11,040 $13,130 (16)%
======================================================================================
During the quarter ended March 31, 2002, interest before allocations to
discontinued operations and assets held for sale declined 14% due to lower
average debt balances and lower average interest rates. Our weighted average
interest rate will increase as a result of the issuance of $350 million of
9 5/8% senior notes on March 13, 2002.
Reported interest excludes an allocation of total interest expense to
discontinued operations based on the net assets of those operations. Interest
expense applicable to New Mail-Well excludes interest allocated to certain
operations of the envelope and commercial printing businesses that are held
for sale based on the net proceeds anticipated from the sales of these
assets.
INCOME TAXES
QUARTER ENDED MARCH 31
(dollars in thousands) 2002 2001
- ----------------------------------------------------------------------
Reported
Provision (benefit) for income taxes $(2,749) $2,220
Effective tax rate 25.0% 34.6%
- ----------------------------------------------------------------------
New Mail-Well
Provision for income taxes $ 524 $2,500
Effective tax rate 41.0% 45.5%
- ----------------------------------------------------------------------
24
New Mail-Well's effective tax rate for 2002 decreased by 4.5 percentage
points due to higher estimated pre-tax income in 2002, which decreased the
impact of nondeductible permanent differences on the effective rate.
The reported effective tax rate for 2002 reflects the tax impact of the
restructuring and other charges.
INCOME (LOSS) FROM CONTINUING OPERATIONS AND INCOME (LOSS) PER SHARE -
ASSUMING DILUTION
QUARTER ENDED MARCH 31 % CHANGE
(dollars in thousands) 2002 2001
- --------------------------------------------------------------------------------------------------
Income (loss) from continuing operations
Reported $(8,265) $4,187 (297)%
New Mail-Well $ 755 $2,779 (73)%
- --------------------------------------------------------------------------------------------------
Income (loss) from continuing operations per share
Reported $ (0.17) $ 0.09 (289)%
New Mail-Well $ 0.02 $ 0.06 (67)%
- --------------------------------------------------------------------------------------------------
New Mail-Well's income from continuing operations per share declined 67% in
the first quarter of 2002, reflecting a similar decrease in income from
continuing operations. The earnings decline was due to lower sales and lower
margins partially offset by lower fixed costs, lower amortization expense
and lower interest expense. Lower amortization expense was due to the
implementation of SFAS 142 whereby goodwill is no longer required to be
amortized.
Our reported loss from continuing operations of $8.3 million, or $.17 per
share, includes the restructuring and other charges of $13.6 million.
LOSS ON DISCONTINUED OPERATIONS
During the quarter ended March 31, 2002, we recorded a loss of $8.6 million
from discontinued operations, which included a loss from operations of
$1.0 million after the allocation of interest and taxes and $7.6 million of
additional loss estimated on the disposition of our label and printed office
products businesses. During the quarter, we competed the sale of Curtis 1000
for approximately $40.0 million, which includes the assumption of debt.
Curtis 1000 was reported as part of our printed office products business.
Our estimates of the sales proceeds expected from the divestitures are based
on data provided by our financial advisors and indications of value received
from prospective buyers. The loss is adjusted once the actual sales proceeds
are known or management has information indicating that the actual sales
proceeds are likely to be different than the estimates. We do not expect the
actual sales proceeds to be significantly different from those assumed, and
we expect to complete these dispositions during the second quarter or early
in the third quarter of 2002.
Sales of our label and printed office products businesses during the first
quarter of 2002 totaled $127.8 million. The operating income earned by these
businesses was $6.7 million.
EXTRAORDINARY ITEM
Results for the quarter ended March 31, 2002 include an extraordinary charge
of $4.8 million, net of tax, or $0.10 per share. We wrote-off the pro rata
portion of the deferred financing fees, $8.2 million, incurred in connection
with our bank credit facility which related to the portion of the term debt
repaid with the proceeds from the senior notes issued in March 2002 and from
the sale of Curtis 1000 in February 2002.
25
NET INCOME (LOSS) AND NET INCOME (LOSS) PER SHARE - ASSUMING DILUTION
YEAR ENDED DECEMBER 31 % CHANGE
(dollars in thousands) 2002 2001
- ---------------------------------------------------------------------------------------
Net income (loss)
Reported $(21,608) $3,623 (696)%
New Mail-Well $ 755 $2,779 (73)%
- ---------------------------------------------------------------------------------------
Net income (loss) per share - assuming dilution
Reported $ (0.45) $ 0.08 (663)%
New Mail-Well $ 0.02 $ 0.06 (67)%
- ---------------------------------------------------------------------------------------
Our reported net loss for the first quarter of 2002 was $21.6 million, or
$0.45 per share. This loss was due to lower income from continuing
operations, the charges taken in connection with our restructuring and other
strategic initiatives, the loss on discontinued operations and the
extraordinary charge.
BUSINESS SEGMENTS
ENVELOPE
The following table presents the reported sales and operating income of our
envelope business, as well as sales and operating income excluding the
results of operations that are held for sale and restructuring charges
recorded during the first quarter of 2002 ("New Envelope").
QUARTER ENDED MARCH 31 % CHANGE
(dollars in thousands) 2002 2001
- ---------------------------------------------------------------------
Net sales
Reported $200,975 $ 21,616 (9)%
New Envelope $185,099 $209,022 (11)%
- ---------------------------------------------------------------------
Operating income
Reported $ 7,738 $ 22,975 (66)%
New Envelope $ 18,318 $ 21,022 (13)%
- ---------------------------------------------------------------------
New Envelope's sales in the first quarter of 2002 were down 11.0% from the
first quarter of the prior year. We continue to experience lower sales in the
direct mail segment of our market. Sales to our direct mail customers were
down approximately $8.0 million in the quarter. Demand in the resale segment
of our market, which began to soften in the second half of 2001, continues
to be weak. Sales to our merchant and office products customers were down
$8.5 million.
Operating income of New Envelope declined 13%. Reductions of $8.1 in fixed
costs were not sufficient to offset the contribution lost due to lower sales
and lower margins. Margins are down from the prior year due to competitive
pressures and lower sales of higher value added products.
Reported results of our envelope business are significantly lower due to the
$12.0 million of restructuring and other charges recorded during the first
quarter of 2002.
26
COMMERCIAL PRINTING
The following table presents the reported sales and operating income of our
commercial printing business, as well as sales and operating income excluding
the results of its operations that are held for sale and restructuring and
impairment charges recorded during the first quarter of 2002 ("New Commercial
Printing").
QUARTER ENDED MARCH 31 % CHANGE
(dollars in thousands) 2002 2001
- -----------------------------------------------------------------------
Net sales
Reported $190,754 $211,360 (10)%
New Commercial Printing $184,588 $203,587 (9)%
- -----------------------------------------------------------------------
Operating income (loss)
Reported $ (3,463) $ 6,361 (154)%
New Commercial Printing $ (2,473) $ 5,585 (144)%
- -----------------------------------------------------------------------
Sales of New Commercial Printing in the first quarter of 2002 were down 9.0%
from the prior year. While total revenues from our annual report and car
brochure business were lower than in the first quarter of 2001, they were
higher than the first quarter of 2000. Demand for general commercial printing
continues to decline. Approximately 50% of the first quarter sales decline
was low margin work, which we chose not to retain due to competitive pricing
pressures in the market.
The decline in operating income of New Commercial Printing in the first
quarter of 2002 is due the contribution lost on lower sales and lower
margins, which were down 270 basis points from the first quarter of 2001.
Fixed costs are $2.8 million lower than the first quarter of 2001.
Reported results of our Commercial Printing business were lower due to the
$1.0 million of restructuring and other charges recorded during the first
quarter of 2002.
LIQUIDITY AND CAPITAL RESOURCES
In March 2002, we sold $350 million of 9 5/8% senior notes due 2012. We used
the proceeds from this offering to repay $197.0 million of our bank term
debt and $22.0 million of other debt. The remaining proceeds will be used to
fund working capital needs and provide the liquidity needed for the
repayment of our convertible debt due in November 2002. Also in March 2002,
we applied $20.5 million of the proceeds received from the sale of Curtis
1000 to the repayment of our bank term debt.
Since December 31, 2001, we have reduced the bank borrowings under our
secured senior credit facility from $393.7 million to $168.8 million at
March 31, 2002. Our senior secured credit facility contains certain cash
flow financial covenants which we could violate if some or all of our
divestitures are successfully completed in the near future. Even if the
divestitures do not occur as planned, these covenants could be violated if
our operating results continue to be disappointing. Rather than seek a
waiver from these restrictive covenants, as we have done successfully in the
past, we have determined to pursue an asset-based lending arrangement of the
kind which does not typically have similar restrictions. We believe we will
be able to refinance our senior secured credit facility in such a manner
prior to any possible violation of the existing covenants.
Cash flow from continuing operations was $3.6 million in the first quarter
of 2002 compared to $58.1 million in the first quarter of 2001. Capital
expenditures totaled $8.0 million in the first quarter of 2002 compared to
$4.9 million in the first quarter of 2001. In addition, we made a $1.0
million contractual payment on a small acquisition that was consummated in
the first quarter of 2001 for $3.9 million.
Our debt, net of cash, was 70.8% to total capital at March 31, 2002, up from
70.2% at December 31, 2001.
27
The following table summarizes our cash obligations as of March 31, 2002:
PAYMENTS DUE BY YEAR
--------------------
(in thousands) 2002 2003 AND 2004 2005 AND 2006 THEREAFTER TOTAL
- ----------------------------------------------------------------------------------------------
Long-term debt $310,372 $ 45,059 $ 95,951 $517,871 $ 969,253
Operating leases 33,844 56,913 42,545 32,066 165,368
- ----------------------------------------------------------------------------------------------
Total cash obligations $344,216 $101,972 $138,496 $549,937 $1,134,621
- ----------------------------------------------------------------------------------------------
Long-term debt due during 2002 includes the retirement of our convertible
notes, other current debt and the portion of our bank borrowings that will
be paid from the proceeds from our planned divestitures pursuant to the
terms of our senior credit facility, net of amounts that would become
available as a result of such repayments under our revolving credit
facility.
Our convertible notes mature in November 2002. We have provided for the
mandatory retirement of these notes as a result of our bond offering in
March 2002 and the amendment obtained on our secured senior credit facility.
At March 31, 2002, we had outstanding letters of credit of approximately
$6.2 million related to performance and payment guarantees. In addition, we
have issued letters of credit of $2.4 million as credit enhancements in
conjunction with other debt. Based on our experience with these
arrangements, we do not believe that any obligations that may arise will be
significant.
We expect to be able to fund our operations, capital expenditures and debt
and other contractual commitments within the next year from the proceeds
from the sales of our planned divestitures, which we expect to approximate
$300 million (of which $40 million has been received from the sale of Curtis
1000), internally generated cash flow and funds available under our
revolving credit facility. At March 31, 2002, we had $150 million of unused
credit available under our revolving credit facility.
CRITICAL ACCOUNTING POLICIES AND JUDGMENTS
In preparing our financial statements, we are required to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. We evaluate our estimates and judgments on an ongoing
basis, including those related to bad debts, inventory valuations, property,
plant and equipment, intangible assets, income taxes, restructuring costs,
and contingencies and litigation. We base our estimates and judgments on
historical experience and on various other factors that we believe to be
reasonable under the circumstances. Actual results may differ from these
estimates.
The most significant judgments made in our financial statements for quarter
ended March 31, 2002 involve the estimation of net sales proceeds to be
received form the sales of our discontinued operations and assets held for
sale. Our estimates are based on indications of value expressed by
prospective buyers and the advice of our financial advisors. We do not expect
the actual proceeds to be significantly different from our estimates;
however, until we have completed each of our planned divestitures, the
possibility exists that actual proceeds could be materially different from
our estimates.
We exercise judgment in evaluating our long-lived assets for impairment. We
believe our businesses serve markets that are strong and that the fair value
is in excess of the net book value to more than recover the investments we
have made in property, plant and equipment, as well as the goodwill and
other intangibles recorded as a result of
28
our acquisitions. In connection with the implementation of SFAS 142
discussed below, we are in the process of evaluating the impairment in our
commercial printing business.
We are self insured for the majority of our workers' compensation costs and
group health insurance costs. We rely on claims experience and the advice of
consulting actuaries and administrators in determining an adequate liability
for self-insurance claims.
The determination of our tax provision is complex due to operations in
several tax jurisdictions outside the United States. In addition,
realization of certain deferred tax assets is dependent upon our ability to
generate future taxable income.
NEW ACCOUNTING STANDARDS
In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statements of Financial Accounting Standards ("SFAS") No. 141, Business
Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets.
Statement 141 requires that the purchase method of accounting be used for
all business combinations initiated after June 30, 2001. Statement 141 also
includes guidance on the initial recognition and measurement of goodwill and
other intangible assets arising from business combinations completed after
June 30, 2001. Statement 142 prohibits the amortization of goodwill and
intangible assets with indefinite useful lives. Statement 142 requires that
these assets be reviewed for impairment at least annually. Intangible assets
with finite lives will continue to be amortized over their estimated useful
lives. Additionally, Statement 142 requires that goodwill included in the
carrying value of equity method investments no longer be amortized.
We began our application of Statement 142 beginning on January 1, 2002. We
have completed the first step of the two-step process prescribed in
Statement 142 to test goodwill for impairment and have concluded that a
portion of the $213.5 million of goodwill related to our commercial printing
business is impaired. We will not know the extent of this impairment until
we have completed step two of the process, which we expect to begin prior to
the end of the second quarter. We will recognize the amount of the
impairment as a cumulative effect of a change in accounting principle as
of January 1, 2002, when it is determined.
In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations. Statement 143 addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. Mail-Well will adopt Statement 143 on
January 1, 2003. We are evaluating the impact of the adoption of Statement
143 on the consolidated financial statements.
In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets, which establishes one accounting model to
be used for long-lived assets to be disposed of by sale and broadens the
presentation of discontinued operations to include more disposal
transactions. Statement 144 supercedes SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets to Be Disposed Of and the accounting and
reporting provisions of ABP Opinion No. 30, Reporting the Results of
Operations - Reporting the Effects Of Disposal of a Segment of a Business,
and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions. Mail-Well adopted Statement 144 as of January 1, 2002 and
there was no impact from the adoption of this statement.
29
FORWARD-LOOKING INFORMATION
This report, including "Management's Discussion and Analysis of Financial
Condition and Results of Operations," may contain various "forward-looking
statements," within the meaning of Section 21E of the Securities Exchange
Act of 1934, that are based on management's belief and assumptions, as well
as information currently available to management. Although we believe that
the expectations reflected in any such forward-looking statements are
reasonable, we can give no assurance that such expectations will prove to be
correct. Any such statements are subject to certain risks, uncertainties and
assumptions. Should one or more of these risks or uncertainties materialize,
or should underlying assumptions prove incorrect, our actual financial
results, performance or condition may vary materially from those expected.
Some of the key factors that may have a direct bearing on our actual
financial results, performance or condition are as follows:
o Paper and other raw material costs
o The degree and nature of competition
o The ability to execute restructuring plans and achieve productivity and
cost savings goals
o Postage rates and other changes in the direct-mail industry
o Interest rates and foreign currency exchange rates
o Ability to obtain additional or alternative financing
o General economic conditions
o General labor conditions
o Others as described in the Company's most recent annual report on
form 10-K under the heading "Risk Factors"
In view of such uncertainties, investors are cautioned not to place undue
reliance on these forward-looking statements. We do not assume any obligation
to update these forward-looking statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks such as changes in interest and foreign
currency exchange rates, which may adversely affect results of operations
and financial position. Risks from interest and foreign currency exchange
rate fluctuations are managed through normal operating and financing
activities. We do not utilize derivatives for speculative purposes, nor do
we hedge interest rate exposure through the use of swaps and options or
foreign exchange exposure through the use of forward contracts.
Exposure to market risk from changes in interest rates relates primarily to
our variable rate debt obligations. The interest on this debt is the London
Interbank Offered Rate ("LIBOR") plus a margin. At March 31, 2002, we had
outstanding variable rate debt outstanding of $171.0 million. A 1% increase
in LIBOR on the maximum amount available under our credit agreement, which
is $321.0 million, would increase our annual interest expense by
$3.2 million and reduce annual net income by approximately $2.0 million.
We have operations in Canada, the United Kingdom and Mexico, and thus are
exposed to market risk for changes in foreign currency exchange rates of the
Canadian dollar, the British pound and the Mexican peso.
30
PART II OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On March 13, 2002, the Company completed a private placement to qualified
institutional buyers under Rule 144A under the Securities Act of 1933 and
outside the United States in compliance with Regulation S under the
Securities Act of 1933 of $350,000,000 principal amount 9 5/8% Senior Notes
due 2012 (the "Notes"). The Notes were sold under a purchase agreement with
Credit Suisse First Boston Corporation, UBS Warburg LLC, Banc of America
Securities LLC, U.S. Bancorp Piper Jaffray Inc., First Union Securities,
Inc., and Scotia Capital (USA) Inc. The aggregate offering price of the
Notes was $350,000,000 and the aggregate underwriting fees and expenses were
approximately $11,500,000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------
3(i) Articles of Incorporation of the Company - incorporated by
reference from Exhibit 3(i) of the Company's Form 10-Q for the
quarter ended September 30, 1997.
3(ii) Bylaws of the Company - incorporated by reference from Exhibit 3.4
of the Company's Registration Statement on Form S-1 dated
September 21, 1995.
4.1.1 Form of Certificate representing the Common Stock, par value
$0.01 per share, of the Company - incorporated by reference from
Exhibit 4.1 of the Company's Amendment No. 1 to Form S-3 dated
October 29, 1997 (Reg. No. 333-35561).
4.1.2 Form of Indenture between the Company and The Bank of New York,
as Trustee, dated November 1997, relating to the Company's
$152,050,000 aggregate principal amount of 5% Convertible
Subordinated Notes due 2002--incorporated by reference from
Exhibit 4.2 to the Company's Amendment No. 2 to Form S-3 dated
November 10, 1997 (Reg. No. 333-36337).
4.1.3 Form of Supplemental Indenture between the Company and The Bank of
New York, as Trustee, dated November 1997, relating to the
Company's $152,050,000 aggregate principal amount of 5%
Convertible Subordinated Notes due 2002 and Form of Convertible
Note--incorporated by reference from Exhibit 4.5 to the Company's
Amendment No. 2 to Form S-3 dated November 10, 1997 (Reg. No.
333-36337).
4.2 Indenture dated as of December 16, 1998 between Mail-Well I
Corporation ("MWI") and State Street Bank and Trust Company, as
Trustee, relating to MWI's $300,000,000 aggregate principal amount
of 8 3/4% Senior Subordinated Notes due 2008 - incorporated by
reference from the Company's Annual Report on Form 10-K for the
year ended December 31, 1998.
4.5 Form of Senior Subordinated Note. Incorporated by reference from
the Company's Annual Report of Form 10-K for the year ended
December 31, 1998.
10.1 Form of Indemnity Agreement between the Company and each of its
officers and directors - incorporated by reference from Exhibit
10.17 of the Company's Registration Statement on Form S-1 dated
March 25, 1994.
10.2 Form of Indemnity Agreement between Mail-Well I Corporation and
each of its officers and directors - incorporated by reference
from Exhibit 10.18 of the Company's Registration Statement on
Form S-1 dated March 25, 1994.
10.3 Form of M-W Corp. Employee Stock Ownership Plan effective as of
February 23, 1994 and related Employee Stock Ownership Plan Trust
Agreement - incorporated by reference from Exhibit 10.19 of the
Company's Registration Statement on Form S-1 dated March 25, 1994.
10.4 Form of M-W Corp. 401(k) Savings Retirement Plan - incorporated
by reference from Exhibit 10.20 of the Company's Registration
Statement on Form S-1 dated March 25, 1994.
10.5 Mail-Well, Inc. 1994 Stock Option Plan, as amended on May 7,
1997 - incorporated by reference from Exhibit 10.56 of the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997.
31
10.6 Form of 1994 Incentive Stock Option Agreement - incorporated by
reference from Exhibit 10.22 of the Company's Registration
Statement on Form S-1 dated March 25, 1994.
10.7 Form of the Company Nonqualified Stock Option Agreement -
incorporated by reference from Exhibit 10.23 of the Company's
Registration Statement on Form S-1 dated March 25, 1994.
10.8 Mail-Well, Inc. 1997 Non-Qualified Stock Option Plan--incorporated
by reference from Exhibit 10.54 of the Company's Form 10-Q for
the quarter ended March 31, 1997.
10.9 1997 Non-Qualified Stock Option Agreement--incorporated by
reference from Exhibit 10.54 of the Company's Form 10-Q for the
quarter ended March 31, 1997.
10.10 Mail-Well, Inc. 1998 Incentive Stock Option Plan--incorporated by
reference from Exhibit 10.58 to the Company's Quarterly report on
Form 10-Q for the quarter ended March 31, 1998.
10.11 Form of 1998 Incentive Stock Option Agreement--incorporated by
reference from Exhibit 10.59 to the Company's Quarterly report on
Form 10-Q for the quarter ended March 31, 1998.
10.12 Credit Agreement dated as of March 16, 1998 among Supremex Inc.,
certain Guarantors, Bank of America National Trust and Savings
Association, as Agent and other financial institutions party
thereto--incorporated by reference from Exhibit 10.61 to the
Company's Quarterly report on Form 10-Q for the quarter ended
March 31, 1998.
10.13 Participation Agreement dated as of December 15, 1997 among
Mail-Well I Corporation, Keybank National Association, as Trustee
and other financial institutions party thereto--incorporated by
reference from Exhibit 10.62 to the Company's Quarterly report on
Form 10-Q for the quarter ended March 31, 1998.
10.14 Equipment Lease dated as of December 15, 1997 among Mail-Well I
Corporation, Keybank National Association, as Trustee and other
financial institutions party thereto--incorporated by reference
from Exhibit 10.63 to the Company's Quarterly report on Form 10-Q
for the quarter ended March 31, 1998.
10.15 Guaranty Agreement dated as of December 15, 1997 among Mail-Well,
Inc., Graphic Arts Center, Inc., Griffin Envelope Inc., Murray
Envelope Corporation, Shepard Poorman Communications Corporation,
Wisco Envelope Corp., Wisco II, LLC, Wisco III, LLC, Mail-Well I
Corporation, Keybank National Association, as Trustee and other
financial institutions party thereto--incorporated by reference
from Exhibit 10.64 to the Company's Quarterly report on Form 10-Q
for the quarter ended March 31, 1998.
10.16 Receivables Purchase Agreement dated as of July 1, 1999 among
Mail-Well Trade Receivables Corporation, as Seller, Quincy Capital
Corporation, as Issuer, The Alternative Purchasers from Time to
Time Party thereto, Mail-Well I Corporation, as Servicer and Bank
of America National Trust and Savings Association, as
Administrator; and First Amendment thereto--incorporated by
reference from the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999.
10.17 Purchase and Sales Agreement between Mail-Well I Corporation as
initial Servicer and as Guarantor, The Originators from Time to
Time Party thereto and Mail-Well Trade Receivable Corporation, as
Purchaser dated as of July 1, 1999; and First Amendment
thereto--incorporated by reference from the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1999.
10.18 Servicing Agreement dated as of July 1, 1999 by and among
Mail-Well I Corporation, as Servicer, Mail-Well Trade Receivables
Corporation, as Seller under the Receivables Purchase Agreement
and Bank of America National Trust and Saving Association, as
Administrator; and First Amendment thereto--incorporated by
reference from the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999.
10.19 Merger Agreement and Plan of Merger by and among American Business
Products, Inc., Mail-Well, Inc. and Sherman Acquisition
Corporation dated January 13, 2000--incorporated by reference from
Exhibit (c) (1) to the Registrant's Tender Offer Statement on
Schedule 14D-1 filed with the commission on January 21, 2000.
10.20 Change of Control Agreement dated November 15, 1999, between the
Company and Paul V. Reilly--incorporated by reference from the
Company's Annual Report on Form 10-K for the year ended December
31, 1999.
10.21 Change of Control Agreement dated November 15, 1999, between the
Company and Robert Meyer--incorporated by reference from the
Company's Annual Report on Form 10-K for the year ended December
31, 1999.
10.22 Change of Control Agreement dated November 15, 1999, between the
Company and Michael A. Zawalski--incorporated by reference from
the Company's Annual Report on Form 10-K for the year ended
December 31, 1999.
10.23 Credit Agreement dated as of February 18, 2000 among Mail-Well I
Corporation, Bank of America, N.A., as Administrative Agent and
Letter of Credit Issuing Bank, ABN AMRO Bank, N.V., as Syndication
Agents, the Bank of Nova Scotia, as Documentation Agent and certain
other financial institutions party thereto--incorporated by
reference from the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2000.
10.24 Security Agreement dated as of February 18, 2000, by and among
Mail-Well I Corporation, Mail-Well, Inc., certain other affiliates
of the Company and Bank of America, N.A., as agent--incorporated by
reference from the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2000.
32
10.25 Second Amendment to Credit Agreement dated as of March 28, 2001
among Mail-Well I Corporation, Mail-Well, Inc., certain
Mail-Well subsidiaries, Bank of America, N.A., as Administrative
Agent and Letter of Credit Issuing Bank, ABN AMRO Bank, N.V., as
Syndication Agents, the Bank of Nova Scotia, as Documentation
Agent and certain other financial institutions party
thereto--incorporated by reference from the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 2000.
10.26 Form of Restricted Stock Award Agreement under 2001 Long-Term
Equity Incentive Plan - incorporated by reference from the
Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2001.
10.27 First Amendment to Credit Agreement dated as of July 28, 2000
among Mail-Well I Corporation, Mail-Well, Inc., certain Mail-Well
subsidiaries, Bank of America, N.A., as Administrative Agent and
Letter of Credit Issuing Bank, ABN AMRO Bank, N.V., as Syndication
Agent, the Bank of Nova Scotia, as Documentation Agent and certain
other financial institutions party thereto - incorporated by
reference from the Company's First Amendment to Quarterly Report
on Form 10-Q for the quarter ended June 30, 2001.
10.28 Third Amendment to Credit Agreement dated as of June 29, 2001
among Mail-Well I Corporation, Mail-Well, Inc., certain Mail-Well
subsidiaries, Bank of America, N.A., as Administrative Agent and
Letter of Credit Issuing Bank, ABN AMRO Bank, N.V., as Syndication
Agent, the Bank of Nova Scotia, as Documentation Agent and certain
other financial institutions party thereto - incorporated by
reference from the Company's First Amendment to Quarterly Report
on Form 10-Q for the quarter ended June 30, 2001.
10.29 Fourth Amendment to Credit Agreement dated as of August 7, 2001
Mail-Well I Corporation, Mail-Well, Inc., certain Mail-Well
subsidiaries, Bank of America, N.A., as Administrative Agent and
Letter of Credit Issuing Bank, ABN AMRO Bank, N.V., as Syndication
Agent, the Bank of Nova Scotia, as Documentation Agent and certain
other financial institutions party thereto - incorporated by
reference from the Company's Current Report on Form 8-K filed
August 10, 2001.
10.30* Indenture dated as of March 13, 2002 between Mail-Well I
Corporation, the Guarantors named therein and State Street Bank and
Trust Company, as Trustee, relating to Mail-Well I Corporation's
$350,000,000 aggregate principal amount of 9 5/8% Senior Notes due
2012.
10.31* Form of Senior Note and Guarantee relating to Mail-Well I
Corporation's $350,000,000 aggregate principal amount of 9 5/8%
Senior Notes due 2012.
10.32* Registration Rights Agreement dated March 13, 2002 between Credit
Suisse First Boston Corporation et al and Mail-Well I Corporation
relating to the registration of Mail-Well I Corporation's
$350,000,000 aggregate principal amount of 9 5/8% Senior Notes due
2012.
10.33* Fifth Amendment to Credit Agreement dated as of February 26, 2002
among Mail-Well I Corporation, Mail-Well, Inc., certain Mail-Well
subsidiaries, Bank of America, N.A., as Administrative Agent and
Letter of Credit Issuing Bank, ABN AMRO Bank, N.V., as
Syndication Agent, the Bank of Nova Scotia, as Documentation
Agent and certain other financial institutions party thereto.
<FN>
- -------------
* Filed herewith.
(b) Reports on Form 8-K
1. Current Report on Form 8-K filed January 30, 2002,
reported under Item 5 to the Company's fourth quarter
earnings release and the transcript of the Company's public
conference call related to such earnings release.
2. Current Report on Form 8-K filed March 14, 2002, reported
under Item 5 of the Comnpany's press release with respect to
its private offering of senior notes due 2012.
33
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
-----------------------------
Date: May 14, 2002 Paul V. Reilly
Chief Executive Officer
By /s/ Michel P. Salbaing
-----------------------------
Date: May 14, 2002 Michel P. Salbaing
Chief Financial Officer
34