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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 September 30, 1999
Commission file number 1-12551
MAIL-WELL, INC.
ADDITIONAL AFFILIATE ISSUERS AND/OR GUARANTORS LISTED ON SCHEDULE
ATTACHED HERETO
(Exact name of Registrant as specified in its charter.)
COLORADO 84-1250533
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
23 Inverness Way East, Suite 160, 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 November 8, 1999, the Registrant had 49,194,236 shares
of Common Stock, $0.01 par value, outstanding.
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1
SCHEDULE OF ADDITIONAL AFFILIATE ISSUERS AND/OR GUARANTORS
Exact Name of Guarantor Primary Standard I.R.S. Employer
Registrants as Specified in State of Industrial Identification
Their Respective Charters Formation Classification Number Number
------------------------- --------- --------------------- ------
Mail-Well I Corporation Delaware 2677 84-1250534
Graphics Arts Center, Inc. Delaware 2752 93-1008554
Mail-Well Commercial Printing, Inc. Delaware 2752 84-1461875
Mail-Well Canada Holdings, Inc. Delaware 6719 84-1313090
Mail-Well Label Holdings, Inc. Colorado 6719 84-1449291
Mail-Well Label USA, Inc. Colorado 2752 84-1449292
Mail-Well West, Inc. Delaware 2677 84-1313079
Mail-Well I Corporation Colorado 2677 84-1250533
Murray Envelope Holdings, Inc. Colorado 6719 84-1421627
Murray Envelope Corporation Mississippi 2677 64-0271038
N-M Envelope, Inc. Mississippi 2677 64-0840384
National Graphics Company Colorado 2761 84-0692676
Poser Business Forms, Inc. Delaware 2761 75-2195786
Wisco II, L.L.C. Delaware 2677 84-1313080
2
MAIL-WELL, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
- ------------------------------------------------------------------------------------
PAGE
----
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 23
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 29
Part II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 29
Signature Page 32
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MAIL-WELL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------ -----------------
CURRENT ASSETS (UNAUDITED)
Cash and cash equivalents $ 5,147 $ 1,375
Receivables, net 91,328 130,523
Investment in accounts receivable securitization 92,891 47,069
Accounts receivable -- other 15,442 12,686
Income tax receivable - 10,715
Inventories, net 139,771 114,131
Other current assets 23,120 19,351
---------- ----------
Total current assets 367,699 335,850
PROPERTY, PLANT AND EQUIPMENT, NET 522,448 437,732
GOODWILL, NET 443,978 322,149
OTHER ASSETS, NET 26,137 32,225
---------- ----------
TOTAL $1,360,262 $1,127,956
========== ==========
CURRENT LIABILITIES
Accounts payable $ 134,486 $ 87,023
Accrued compensation and vacation 53,151 41,401
Other current liabilities 61,852 47,192
Current portion of long-term debt and capital leases 9,954 8,036
---------- ----------
Total current liabilities 259,443 183,652
LONG-TERM DEBT AND CAPITAL LEASES 672,558 583,427
DEFERRED INCOME TAXES 58,688 47,534
OTHER LONG-TERM LIABILITIES 11,491 10,468
---------- ----------
Total liabilities 1,002,180 825,081
MINORITY INTEREST IN NON VOTING STOCK OF SUBSIDIARY 3,500 3,500
SHAREHOLDERS' EQUITY
Preferred stock, $0.01 par value; 25,000 shares authorized,
none issued and outstanding - -
Common stock, $0.01 par value; 100,000,000 shares authorized,
48,978,543 and 48,846,904 shares issued and outstanding,
respectively 490 488
Paid-in capital 217,851 217,218
Retained earnings 137,997 90,740
Accumulated other comprehensive income (loss) (1,756) (9,071)
---------- ----------
Total shareholders' equity 354,582 299,375
---------- ----------
TOTAL $1,360,262 $1,127,956
========== ==========
See notes to unaudited consolidated financial statements.
4
MAIL-WELL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE AMOUNTS)
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
SEPTEMBER 30, SEPTEMBER 30,
------------- -------------
1999 1998 1999 1998
---- ---- ---- ----
NET SALES $ 492,787 $ 404,143 $ 1,372,250 $ 1,072,936
COST OF SALES 379,773 318,521 1,052,229 847,840
---------- ---------- ----------- -----------
GROSS PROFIT 113,014 85,622 320,021 225,096
OTHER OPERATING COSTS
Selling, administrative and other 68,557 53,175 199,019 141,234
Merger costs - 284 - 3,286
---------- ---------- ----------- -----------
Total other operating costs 68,557 53,459 199,019 144,520
---------- ---------- ----------- -----------
OPERATING INCOME 44,457 32,163 121,002 80,576
OTHER (INCOME) EXPENSE
Interest expense 14,729 10,979 41,545 26,132
Other (income) expense 64 (49) (640) (1,134)
---------- ---------- ----------- -----------
INCOME BEFORE INCOME TAXES 29,664 21,233 80,097 55,578
PROVISION FOR INCOME TAXES 12,163 8,510 32,840 22,023
---------- ---------- ----------- -----------
NET INCOME $ 17,501 $ 12,723 $ 47,257 $ 33,555
========== ========== =========== ===========
EARNINGS PER SHARE - BASIC $ 0.36 $ 0.27 $ 0.97 $ 0.73
EARNINGS PER SHARE - DILUTED $ 0.32 $ 0.25 $ 0.88 $ 0.67
WEIGHTED AVERAGE SHARES - BASIC 48,972 47,004 48,923 45,722
WEIGHTED AVERAGE SHARES - DILUTED 58,401 56,804 58,323 55,797
See notes to unaudited consolidated financial statements.
5
MAIL-WELL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
NINE MONTHS ENDED
-----------------
SEPTEMBER 30,
--------------
1999 1998
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 47,257 $ 33,555
Adjustments to reconcile net income to cash provided by operations
Depreciation and amortization 42,769 29,279
Deferred income taxes 9,195 8,882
Other (967) 138
Changes in operating assets and liabilities, net of effects
of acquired businesses:
Receivables (42,028) (24,395)
Inventories (11,417) 2,202
Accounts payable 17,392 3,835
All other assets and other liabilities 25,703 (6,787)
--------- ---------
Net cash provided by operating activities 87,904 46,709
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition costs, net of cash acquired (193,372) (313,431)
Capital expenditures (62,850) (49,421)
Other investing activities 2,854 586
--------- ---------
Net cash used in investing activities (253,368) (362,266)
CASH FLOWS FROM FINANCING ACTIVITIES
Changes in accounts receivable securitization, net 77,400 4,800
Net proceeds from common stock issuance 672 92,476
Proceeds from long-term debt 322,040 372,770
Repayments of long-term debt and capital leases (229,550) (187,015)
Other financing activities (1,433) (3,746)
--------- ---------
Net cash provided by financing activities 169,129 279,285
EFFECT OF EXCHANGE RATE CHANGES ON CASH 107 (1,612)
--------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS 3,772 (37,884)
BALANCE AT BEGINNING OF PERIOD 1,375 40,911
--------- ---------
BALANCE AT END OF PERIOD $ 5,147 $ 3,027
========= =========
See notes to unaudited consolidated financial statements.
6
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS -- Mail-Well, Inc. and subsidiaries
(collectively referred to as the "Company") is one of the largest
printers in North America. The Company is a leading commercial printer
in the United States and manufactures and prints envelopes in the United
States and Canada. The Company is also a printer of custom business
documents for the distributor market and a printer of labels for the
food and beverage industry.
PRINCIPLES OF CONSOLIDATION -- The Company, headquartered in
Englewood, Colorado, is organized under Colorado law and its common
stock is traded on the New York Stock Exchange (ticker: MWL). These
financial statements include the accounts of the Company and its
majority owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
INTERIM FINANCIAL INFORMATION -- The interim financial information
contained herein is unaudited and includes all normal and recurring
adjustments which, in the opinion of management, are necessary to
present fairly the information set forth. The consolidated financial
statements should be read in conjunction with the Notes to the
Consolidated Financial Statements, which are included in the Company's
Form 10-K. The results for interim periods are not necessarily
indicative of results to be expected for the Company's fiscal year
ending December 31, 1999.
INVENTORIES -- Detail of inventories, in thousands:
SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------ -----------------
Raw materials $ 56,858 $ 45,720
Work in process 27,031 22,089
Finished goods 60,804 49,256
Reserve for obsolescence, loss and other (4,922) (2,934)
-------- --------
$139,771 $114,131
======== ========
SHAREHOLDERS' EQUITY -- The change in Common Stock and Paid-in
Capital is caused by the exercise of stock options. The change in
Retained Earnings is net income. See "Other Comprehensive Income" for
an explanation of the change in those accounts.
OTHER COMPREHENSIVE INCOME -- Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income", was adopted January
1, 1998. This statement requires reporting of changes in shareholders'
equity that do not result directly from transactions with shareholders.
A summary of comprehensive income follows:
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998 SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
------------------ ------------------ ------------------ ------------------
(in thousands)
Net income $17,501 $12,723 $47,257 $33,555
Currency translation adjustments, net (312) (4,129) 6,919 (5,871)
Unrealized loss on investments, net 178 (723) 396 (686)
------- ------- ------- -------
Comprehensive income $17,367 $ 7,871 $54,572 $26,998
======= ======= ======= =======
EARNINGS PER SHARE -- In June 1998 the Company's common stock
split 2:1; all share and per share information has been retroactively
restated to reflect these splits. The unallocated shares issued under
the Employee Stock Ownership Plan are excluded from both the basic and
diluted earnings per share calculations.
7
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
EARNINGS PER SHARE - BASIC
Income available to common shareholders $ 17,501 48,972 $ 0.36
======
EFFECT OF DILUTIVE SECURITIES
Stock options - 1,206
Convertible Subordinated Notes 1,314 8,003
Other - 220
-------- ------
EARNINGS PER SHARE - DILUTED
Income available to common shareholders including
assumed conversions $ 18,815 58,401 $ 0.32
======== ====== ======
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998
EARNINGS PER SHARE - BASIC
Income available to common shareholders $ 12,723 47,004 $ 0.27
======
EFFECT OF DILUTIVE SECURITIES
Stock options - 1,452
Convertible Subordinated Notes 1,773 8,003
Other - 345
-------- ------
EARNINGS PER SHARE - DILUTED
Income available to common shareholders including
assumed conversions $ 14,496 56,804 $ 0.25
======== ====== ======
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
EARNINGS PER SHARE - BASIC
Income available to common shareholders $ 47,257 48,923 $ 0.97
======
EFFECT OF DILUTIVE SECURITIES
Stock options - 1,177
Convertible Subordinated Notes 3,940 8,003
Other - 220
-------- ------
EARNINGS PER SHARE - DILUTED
Income available to common shareholders including
assumed conversions $ 51,197 58,323 $ 0.88
======== ====== ======
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
EARNINGS PER SHARE - BASIC
Income available to common shareholders $ 33,555 45,772 $ 0.73
======
EFFECT OF DILUTIVE SECURITIES
Stock options - 1,702
Convertible Subordinated Notes 3,940 8,003
Other - 320
-------- ------
EARNINGS PER SHARE - DILUTED
Income available to common shareholders including
assumed conversions $ 37,495 55,797 $ 0.67
======== ====== ======
8
NEW ACCOUNTING PRONOUNCEMENTS -- In June 1998, the Financial
Accounting Standards Board issued Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" (the "Statement"). The Statement, which will be effective
beginning in the year 2001, requires derivative instruments to be
recorded in the balance sheet at their fair value with changes in fair
value being recognized in earnings unless specific hedging accounting
criteria are met. The Company has minimal hedging and derivative
activity, but it has not determined the impact of this statement on its
operations and financial position.
In March 1998, the Accounting Standards Executive Committee of the
AICPA issued Statement of Position (SOP) 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use". The SOP,
which has been adopted prospectively as of January 1, 1999, requires the
capitalization of certain costs incurred in connection with developing
or obtaining internal use software. Prior to the adoption of the SOP,
the Company expensed all internal costs as incurred. The effect of
adopting the SOP was immaterial to the three and nine months ended
September 30, 1999 and is not expected to have a material impact on
earnings going forward.
RECLASSIFICATION -- Certain amounts in the 1998 financial
statements have been reclassified to conform to the 1999 presentation.
2. MERGERS WITH COMMERCIAL PRINTING COMPANIES
Effective May 30, 1998, the Company completed its mergers with
seven commercial printing companies through the exchange of common
stock, which had a market value of $21.965 per share, as shown in the
table below:
SHARES OF MAIL-WELL
OPERATING COMPANY NAME COMMON STOCK EXCHANGED
---------------------- ----------------------
Color Art, Inc. ("Color Art") 2,351,951
Accu-color, Inc. ("Accu-color") 622,391
Industrial Printing Company ("Industrial Printing") 570,161
IPC Graphics, Inc. ("IPC Graphics") 325,973
United Lithograph, Inc. ("United Lithograph") 519,568
French Bray, Inc. ("French Bray") 538,040
Clarke Printing, Co. ("Clarke Printing") 437,984
The consolidated financial statements give retroactive effect to
the mergers, which have been accounted for using the pooling of
interests method and, as a result, the financial position, results of
operations and cash flows are presented as if the combining companies
had been consolidated for all periods presented. The consolidated
balance sheets reflect the accounts of the Company as if the additional
common stock had been issued during all periods presented.
The companies listed above are hereafter collectively referred to
as the Pooled Companies.
Each of the mergers was negotiated and consummated as separate
transactions and the separate mergers were not contingent upon each
other. Except for French Bray and Clarke Printing, all of the above
entities had elected Subchapter S corporation treatment for U.S. federal
income tax purposes and, accordingly, did not pay U.S. federal income
taxes. Subsequent to May 30, 1998, these companies were included in
Mail-Well's consolidated U.S. federal income tax return. In connection
with the mergers, the Company also issued common stock to acquire the
net assets (including the assumption of the debt associated with such
assets) of certain related real estate ventures owned by shareholders of
the commercial printing companies. The shares of the Company's common
stock exchanged for real estate assets are included with the shares
exchanged for the respective operating company in the table above.
The results of operations and financial conditions of the real
estate assets are reflected in the restated consolidated financial
statements with significant intercompany transactions and balances
eliminated. The mergers with the real
9
estate entities have been accounted for as taxable business combinations
and the recognizable tax benefits attributable to the increase in tax
basis were allocated to additional paid-in capital.
Each of the above transactions has been accounted for individually
as a pooling of interests and, accordingly, the consolidated financial
statements for the periods subsequent to February 24, 1994 (inception)
have been restated to include the accounts of the Pooled Companies.
Prior to the mergers, Industrial Printing's and IPC Graphics' fiscal
year ended on September 30, United Lithograph's fiscal year ended on
June 30 and French Bray's fiscal year ended on July 31. Accordingly,
the accompanying financial statements include those financial statements
of entities with different fiscal years restated on a calendar year
basis. Additionally, the accompanying consolidated financial statements
reflect certain minor adjustments to conform the accounting policies of
the Pooled Companies to the Company's.
Net sales and net income of the separate companies for the periods
preceding the mergers were as follows:
UNAUDITED
UNAUDITED PRO FORMA
NET PRO FORMA DILUTED
NET INCOME NET INCOME EARNINGS
SALES (LOSS) <F1> (LOSS) <F2> PER SHARE
----- ----------- ----------- ---------
(THOUSANDS, EXCEPT PER SHARE AMOUNTS)
QUARTER ENDED MARCH 31, 1998
Mail-Well, Inc. as previously reported $ 274,705 $ 9,510 $ 9,510
Color Art 18,199 (173) (481)
Accu-Color 3,036 215 47
Industrial Printing 5,690 219 63
IPC Graphics 2,960 45 (19)
United Lithograph 5,532 (91) (170)
French Bray 5,756 (258) (258)
Clarke Printing 2,856 66 66
--------- ------- -------
Pooled entities 44,029 23 (752)
--------- ------- -------
$ 318,734 $ 9,533 $ 8,758 $ 0.18
========= ======= ======= ======
<FN>
<F1> Income (loss) includes aggregate merger expenses of the Pooled
Companies totaling $2.2 million in the first quarter of 1998.
These costs consist primarily of investment banking, legal and
accounting fees.
<F2> Unaudited pro forma net income reflects adjustments to net income
to record an estimated provision for income taxes for each period
presented assuming Color Art, Accu-color, Industrial Printing, IPC
Graphics and United Lithograph were tax paying entities.
3. ACQUISITIONS
On February 2, 1999, the Company acquired Colorhouse, Inc., a pre-
press company located in Minneapolis, Minnesota, with approximate annual
sales of $20.7 million. On February 4, 1999, the Company acquired Hill
Graphics, a sheetfed commercial printer located in Houston, Texas, with
approximate annual sales of $20.5 million. On May 29, 1999, the Company
acquired Forman Lithograph, Inc., a commercial printer located in San
Francisco, California, with approximate annual sales of $6.5 million.
On June 1, 1999, the Company acquired Avon Behren Printing Company, a
commercial printer located in San Antonio, Texas, with approximate
annual sales of $4.5 million. On June 1, 1999, the Company also
acquired Design Manufacturing, Inc., a pressure sensitive label company
located in Wareham, Massachusetts, with approximate annual sales of $13
million.
10
On August 2, 1999, the Company acquired Enterprise Press, a
commercial printer located in New York, with approximate annual sales of
$23 million. On August 6, 1999, the Company acquired Direct Graphics,
Inc., specializing in direct mail printing and services, with reported
annual sales of $21 million.
On March 17, 1999, the Company commenced a formal tender offer to
purchase all of the shares of Porter Chadburn plc, a label manufacturing
company based in England with a substantial portion of its operations in
the United States, for a price of approximately $.63 per share (38.5
pence) in cash. The total purchase price, including the assumption of
debt and transaction costs was approximately $101.5 million. Porter
Chadburn earned $7.3 million (pre-tax) on sales of $125.5 million for
its fiscal year ended March 27, 1999. (All U.S. dollar amounts are based
upon an exchange rate for British pounds of $1.642). As of April 8,
1999, the Company gained control of Porter Chadburn through acceptances
of its offers. Therefore, beginning with that date, the operations of
Porter Chadburn have been consolidated in the operations of the Company.
These acquisitions have been accounted for as purchases and,
accordingly, the net purchase price of each acquisition was allocated to
the various assets and liabilities according to their estimated fair
values as of the date of the respective purchase. The results of
operations of each of the acquisitions have been included in the
accompanying consolidated statements of operations from the date of the
acquisition.
Certain purchase agreements require the payment of additional
consideration in the form of cash payments if specific operating
performance criteria are met. Any subsequent payment will be allocated
to goodwill. In addition, the purchase price allocation to inventory,
property, plant and equipment and restructuring charges for closing
certain plants for certain acquisitions have not been finalized.
Therefore, the amount of goodwill could be adjusted within one year of
the purchase.
4. LONG-TERM DEBT AND CAPITAL LEASES
Long-term debt consists of the following (in thousands):
INTEREST RATE AT
SEPTEMBER 30, 1999 SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------ ------------------ -----------------
Bank Borrowings:
Unsecured loan, due June 9, 2003 6.88 % $ 22,832 $ 25,461
Unsecured revolving loan facility, due
March 31, 2003 6.00 % 189,000 93,000
Senior Subordinated Notes, due 2008 8.75 % 300,000 300,000
Convertible Subordinated Notes, due 2002 5.00 % 152,050 152,050
Other Various 18,630 20,952
--------- ---------
682,512 591,463
Less current maturities (9,954) (8,036)
--------- ---------
Long-term debt and capital leases $ 672,558 $ 583,427
========= =========
5. RESTRUCTURING CHARGES
In November 1998, the Company committed to implement a
restructuring program affecting the Envelopes and Commercial Printing
segments and recorded a pre-tax provision of $15,961,000, of which
$11,699,000 represents non-cash charges for asset write-offs and
impairments, primarily machinery and equipment. Impairment losses were
calculated based on the excess of the carrying amount of the assets over
the assets' fair values. The fair value of an asset is generally
determined based on recent comparable sales and independent quotes from
the used equipment market. The remaining $4,262,000 is for severance,
other termination benefits and property exit costs, including
noncancelable operating leases. These charges are a result of the
regionalization of the Company's U.S. Envelopes operations and
reorganization of the Company's Commercial Printing operations,
primarily in the Northwest.
11
The Company also incurred $173,000 and $1,171,000 in expenses for
the three and nine months ended September 30, 1999, respectively,
relating to the relocation of personnel, equipment and inventory which
under generally accepted accounting principles could not be accrued for
as part of the Company's restructuring initiative. These costs are
included in "Selling, administrative and other" in the consolidated
statements of operations. Severance costs for the 616 personnel
included in the restructuring provision resulted from regionalizing
special manufacturing operations (490 personnel) and administrative
functions (126 personnel) in various locations of the Company's U.S.
operations. Approximately 433 personnel had been terminated as of
September 30, 1999 and the remaining terminations are expected to be
completed by March 31, 2000.
The following table summarizes the costs associated with the
restructuring program (in thousands):
ASSET SEVERANCE & PROPERTY
WRITE-DOWNS RELATED COSTS EXIT COSTS TOTAL
----------- ------------- ---------- -----
Initial reserve $ 11,699 $ 2,907 $ 1,355 $ 15,961
Utilized in 1998 11,699 515 81 12,295
-------- ------- ------- --------
Balance 12/31/98 - 2,392 1,274 3,666
Utilized in 1999 - 1,135 683 1,818
-------- ------- ------- --------
Balance 6/30/99 $ - $ 1,257 $ 591 $ 1,848
======== ======= ======= ========
6. COMMITMENT AND CONTINGENCIES
In July 1999, the Company and certain of its subsidiaries
("Originators") entered into an agreement to sell, on a revolving basis,
trade receivables to a wholly-owned subsidiary, Mail-Well Trade
Receivables Corp. ("MTRC"). MTRC was capitalized by the Company as a
bankruptcy-remote special purpose entity that is subject to certain
covenants and restrictions, including a restriction from engaging in any
business or activity unrelated to acquiring and selling interests in
receivables. New receivables, except those failing certain eligibility
criteria, are sold to MTRC on a daily basis as previously sold accounts
receivables are collected. MTRC, in turn, sells an undivided variable
percentage interest in the pool of receivables, up to a maximum of
$150,000,000, to a multi-seller receivables securitization company, for
which there are no repurchase agreements. The Company maintains a
subordinated interest in the portion of the pooled receivables, which
are not transferred to the securitization company.
The Company's securitization is accounted for as a sale in
accordance with FASB Statement No. 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities.
Therefore, the Company's accounts receivable have been reduced by the
amount of receivables sold to MTRC and the retained interest in the pool
of receivables has been reported as an investment available for sale,
recorded at its estimated fair value. An allowance for doubtful
accounts is also maintained for both receivables not included in the
pool and for its retained interest in the pool. As of September 30,
1999, the Company had sold $223.6 million of accounts receivable to MTRC
and MTRC had sold beneficial interests totaling $130.0 million to the
securitization company.
The Company is involved in various lawsuits incidental to its
businesses. In management's opinion, it is not probable that an adverse
determination against the Company relating to these suits would occur
that would be material to the consolidated financial statements. In the
case of administrative proceedings related to environmental matters
involving governmental authorities, management does not believe that any
imposition of monetary sanctions would be material to the Company's
results of operations and financial position.
12
7. SEGMENT INFORMATION
Operating segments are components of an enterprise about which
separate financial information is available that is evaluated regularly
by the chief operating decision maker in deciding how to allocate
resources and in assessing performance. Generally, financial
information is required to be reported on the basis that is used
internally for evaluating segment performance and deciding how to
allocate resources to segments. Additionally, segment information for
all periods has been restated to reflect the mergers of the Pooled
Companies as discussed in Note 2.
The Company's operating segments prepare separate financial
information that is evaluated regularly by the Chief Operating Officer
in assessing performance and deciding how to allocate resources.
Corporate expenses include the costs of maintaining a corporate office.
The Company does not allocate corporate overhead, interest (income)
expense, amortization expense, gains and losses on disposal of assets or
income taxes by segment in assessing performance.
Operating segments of the Company are defined primarily by product
line and consist of Commercial Printing, Envelopes, Printing for
Distributors and Labels. The latter two segments were added via
acquisitions in the first quarter of 1998. The Commercial Printing
segment specializes in printing advertising literature, high-end
catalogs, annual reports, calendars and other materials and provides a
broad range of printing and graphic arts services primarily to the
advertising industry. The Envelopes segment prints and manufactures
envelopes designed to customer specifications. The Printing for
Distributors segment prints a diverse line of custom products addressing
the business documents needs of small and medium-sized end users. The
Labels segment is a leading supplier of labels to the North American
food and beverage markets and has operations in the United Kingdom.
Early in 1999, the Company combined the High Impact Color Printing
segment with the Commercial Printing segment under one organization, now
called the Commercial Printing segment. In addition, Mail-Well Graphics
was reclassified from Envelopes to Commercial Printing since the 1998
Form 10-K. Segment information for all periods has been restated to
reflect these changes. Segment information as of and for the three and
nine months ended September 30, 1999 and 1998 is presented below:
Three Months Ended September 30, Nine months Ended September 30,
-------------------------------- -------------------------------
1999 1998 1999 1998
---- ---- ---- ----
NET SALES:
Commercial Printing $ 217,800 $ 163,172 $ 567,459 $ 378,350
Envelopes 180,478 189,260 560,347 564,386
Printing for Distributors 38,483 28,728 110,425 81,887
Labels 56,026 22,983 134,019 48,313
--------- --------- ----------- -----------
Total $ 492,787 $ 404,143 $ 1,372,250 $ 1,072,936
========= ========= =========== ===========
OPERATING INCOME (LOSS):
Commercial Printing $ 19,693 $ 13,430 $ 46,927 $ 23,959
Envelopes 22,550 20,665 71,286 62,018
Printing for Distributors 3,297 2,098 9,846 6,307
Labels 4,623 1,686 10,245 3,610
Corporate (5,706) (5,432) (17,302) (12,032)
Merger Expenses $ - $ (284) $ (3,286)
--------- --------- ----------- -----------
Total $ 44,457 $ 32,163 $ 121,002 $ 80,576
========= ========= =========== ===========
13
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
1999 1998 1999 1998
---- ---- ---- ----
DEPRECIATION AND AMORTIZATION:
Commercial Printing $ 5,783 $ 4,227 $ 16,375 $ 12,241
Envelopes 3,837 3,613 11,587 10,631
Printing for Distributors 680 426 1,876 1,277
Labels 2,145 1,004 5,004 2,137
Corporate 2,428 1,159 6,323 2,557
----------- ----------- -------- --------
Total $ 14,873 $ 10,429 $ 41,165 $ 28,843
=========== =========== ======== ========
September 30, December 31,
1999 1998
---- ----
IDENTIFIABLE ASSETS:
Commercial Printing $ 635,867 $ 495,918
Envelopes 530,511 500,355
Printing for Distributors 121,538 98,610
Labels 220,859 93,188
Corporate (148,513) (60,115)
----------- -----------
Total assets $ 1,360,262 $ 1,127,956
=========== ===========
8. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
In December 1998, Mail-Well I Corporation ("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 Notes") due in 2008 (see Note 4). 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.
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 eliminate the
equity method investment in subsidiaries and the equity in earnings of
subsidiaries, intercompany payables and receivables and other
transactions between subsidiaries.
14
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
Quarter Ended September 30, 1999
(in thousands)
Combined Combined
Parent Guarantor Nonguarantor
Guarantor Issuer Subsidiaries Subsidiaries Elim. Consolidated
--------- ------ ------------ ------------ ----- ------------
NET SALES $ - $ 84,971 $ 325,848 $ 81,968 $ - $ 492,787
COST OF SALES - 68,251 251,392 60,130 - 379,773
-------- -------- --------- -------- -------- ---------
GROSS PROFIT - 16,720 74,456 21,838 - 113,014
OTHER OPERATING COSTS 42 14,735 41,377 12,403 - 68,557
-------- -------- --------- -------- -------- ---------
OPERATING INCOME (LOSS) (42) 1,985 33,079 9,435 - 44,457
OTHER (INCOME) EXPENSE
Interest expense 2,136 13,202 1,097 506 (2,212) 14,729
Other (income) expense (2,212) 103 109 (148) 2,212 64
-------- -------- --------- -------- -------- ---------
INCOME (LOSS) BEFORE INCOME
TAXES AND EQUITY IN
UNDISTRIBUTED EARNINGS OF
SUBSIDIARIES 34 (11,320) 31,873 9,077 - 29,664
PROVISION (BENEFIT) FOR
INCOME TAXES - (4,640) 14,486 2,317 - 12,163
-------- -------- --------- -------- -------- ---------
INCOME (LOSS) BEFORE EQUITY
IN UNDISTRIBUTED EARNINGS
OF SUBSIDIARIES 34 (6,680) 17,387 6,760 - 17,501
EQUITY IN UNDISTRIBUTED
EARNINGS OF SUBSIDIARIES 17,467 24,147 4,613 - (46,227) -
-------- -------- --------- -------- -------- ---------
NET INCOME $ 17,501 $ 17,467 $ 22,000 $ 6,760 $(46,227) $ 17,501
======== ======== ========= ======== ======== =========
15
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
Quarter Ended September 30, 1998
(in thousands)
Combined Combined
Parent Guarantor Nonguarantor
Guarantor Issuer Subsidiaries Subsidiaries Elim. Consolidated
--------- ------ ------------ ------------ ----- ------------
NET SALES $ - $ 108,463 $ 256,502 $ 39,178 $ - $ 404,143
COST OF SALES - 86,407 203,915 28,199 - 318,521
-------- --------- --------- -------- -------- ---------
GROSS PROFIT - 22,056 52,587 10,979 - 85,622
OTHER OPERATING COSTS
Selling, administrative
and other 283 18,064 30,004 4,824 - 53,175
Merger costs - - 284 - - 284
-------- --------- --------- -------- -------- ---------
Total Other Operating
Costs 283 18,064 30,288 4,824 - 53,459
-------- --------- --------- -------- -------- ---------
OPERATING INCOME (LOSS) (283) 3,992 22,299 6,155 - 32,163
OTHER (INCOME) EXPENSE
Interest expense 1,896 9,167 411 1,717 (2,212) 10,979
Other (income) expense (2,212) (362) 452 (139) 2,212 (49)
-------- --------- --------- -------- -------- ---------
INCOME (LOSS) BEFORE INCOME
TAXES AND EQUITY IN
UNDISTRIBUTED EARNINGS OF
SUBSIDIARIES 33 (4,813) 21,436 4,577 - 21,233
PROVISION FOR
INCOME TAXES - (1,929) 8,726 1,713 - 8,510
-------- --------- --------- -------- -------- ---------
INCOME (LOSS) BEFORE EQUITY
IN UNDISTRIBUTED EARNINGS
OF SUBSIDIARIES 33 (2,884) 12,710 2,864 - 12,723
EQUITY IN UNDISTRIBUTED
EARNINGS OF SUBSIDIARIES 12,690 15,574 2,864 - (31,128) -
-------- --------- --------- -------- -------- ---------
NET INCOME $ 12,723 $ 12,690 $ 15,574 $ 2,864 $(31,128) $ 12,723
======== ========= ========= ======== ======== =========
16
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
Nine-months Ended September 30, 1999
(in thousands)
Combined Combined
Parent Guarantor Nonguarantor
Guarantor Issuer Subsidiaries Subsidiaries Elim. Consolidated
--------- ------ ------------ ------------ ----- ------------
NET SALES $ - $ 274,246 $ 887,706 $ 210,298 $ - $ 1,372,250
COST OF SALES - 214,717 685,873 151,639 - 1,052,229
-------- --------- --------- --------- --------- -----------
GROSS PROFIT - 59,529 201,833 58,659 - 320,021
OTHER OPERATING COSTS 153 47,291 118,752 32,823 - 199,019
-------- --------- --------- --------- --------- -----------
OPERATING INCOME (LOSS) (153) 12,238 83,081 25,836 - 121,002
OTHER (INCOME) EXPENSE
Interest expense 6,407 35,479 2,101 4,194 (6,636) 41,545
Other (income) expense (6,635) (341) (430) 130 6,636 (640)
-------- --------- --------- --------- --------- -----------
INCOME (LOSS) BEFORE INCOME
TAXES AND EQUITY IN
UNDISTRIBUTED EARNINGS OF
SUBSIDIARIES 75 (22,900) 81,410 21,512 - 80,097
PROVISION FOR
INCOME TAXES - (9,387) 35,949 6,278 - 32,840
-------- --------- --------- --------- --------- -----------
INCOME (LOSS) BEFORE EQUITY
IN UNDISTRIBUTED EARNINGS
OF SUBSIDIARIES 75 (13,513) 45,461 15,234 - 47,257
EQUITY IN UNDISTRIBUTED
EARNINGS OF SUBSIDIARIES 47,182 60,695 13,087 - (120,964) -
-------- --------- --------- --------- --------- -----------
NET INCOME $ 47,257 $ 47,182 $ 58,548 $ 15,234 $(120,964) $ 47,257
======== ========= ========= ========= ========= ===========
17
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
Nine-months Ended September 30, 1998
(in thousands)
Combined Combined
Parent Guarantor Nonguarantor
Guarantor Issuer Subsidiaries Subsidiaries Elim. Consolidated
--------- ------ ------------ ------------ ----- ------------
NET SALES $ - $ 310,752 $ 654,299 $ 107,885 $ - $ 1,072,936
COST OF SALES - 248,558 521,677 77,605 - 847,840
-------- --------- --------- --------- -------- -----------
GROSS PROFIT - 62,194 132,622 30,280 - 225,096
OTHER OPERATING COSTS
Selling, administrative
and other 849 48,937 77,583 13,865 - 141,234
Merger costs - - 3,286 - - 3,286
-------- --------- --------- --------- -------- -----------
Total Other Operating
Costs 849 48,937 80,869 13,865 - 144,520
-------- --------- --------- --------- -------- -----------
OPERATING INCOME (LOSS) (849) 13,257 51,753 16,415 - 80,576
OTHER (INCOME) EXPENSE
Interest expense 5,919 18,240 4,844 3,765 (6,636) 26,132
Other (income) expense (6,642) (444) (493) (191) 6,636 (1,134)
-------- --------- --------- --------- -------- -----------
INCOME (LOSS) BEFORE INCOME
TAXES AND EQUITY IN
UNDISTRIBUTED EARNINGS OF
SUBSIDIARIES (126) (4,539) 47,402 12,841 - 55,578
PROVISION FOR
INCOME TAXES - (1,754) 18,899 4,878 - 22,023
-------- --------- --------- --------- -------- -----------
INCOME (LOSS) BEFORE EQUITY
IN UNDISTRIBUTED EARNINGS
OF SUBSIDIARIES (126) (2,785) 28,503 7,963 - 33,555
EQUITY IN UNDISTRIBUTED
EARNINGS OF SUBSIDIARIES 33,681 36,466 7,963 - (78,110) -
-------- --------- --------- --------- -------- -----------
NET INCOME $ 33,555 $ 33,681 $ 36,466 $ 7,963 $(78,110) $ 33,555
======== ========= ========= ========= ======== ===========
18
CONSOLIDATING CONDENSED STATEMENT OF FINANCIAL POSITION
September 30, 1999
(in thousands)
Combined Combined
Parent Guarantor Nonguarantor
Guarantor Issuer Subsidiaries Subsidiaries Elim. Consolidated
--------- ------ ------------ ------------ ----- ------------
CURRENT ASSETS
Cash and cash equivalents $ - $ 16,722 $ (12,920) $ 1,345 $ - $ 5,147
Receivables, net - 3,100 34,989 53,239 - 91,328
Investment in accounts
receivable Securitization - - - 92,891 - 92,891
Accounts receivable - other - 6,058 6,877 2,507 - 15,442
Income tax receivable - 13,537 - 233 (13,770) -
Inventories, net - 35,649 78,261 25,861 - 139,771
Note receivable from Issuer 147,436 - - - (147,436) -
Other current assets 243 8,968 10,676 3,233 - 23,120
--------- ----------- --------- --------- ----------- -----------
Total current assets 147,679 84,034 117,883 179,309 (161,206) 367,699
INVESTMENT IN SUBSIDIARIES 356,577 883,389 93,648 - (1,333,614) -
PROPERTY, PLANT AND
EQUIPMENT, NET - 104,904 314,659 102,885 - 522,448
GOODWILL, NET - 46,908 270,126 126,944 - 443,978
OTHER ASSETS, NET 3,183 34,350 6,393 3,314 (21,103) 26,137
--------- ----------- --------- --------- ----------- -----------
TOTAL $ 507,439 $ 1,153,585 $ 802,709 $ 412,452 $(1,515,923) $ 1,360,262
========= =========== ========= ========= =========== ===========
CURRENT LIABILITIES
Accounts payable $ - $ 19,199 $ 90,604 $ 24,683 $ - $ 134,486
Accrued compensation and
vacation - 11,359 33,494 8,298 - 53,151
Other current liabilities 807 103,438 (139,300) 110,677 (13,770) 61,852
Note payable to Parent - 147,436 - - (147,436) -
Current portion of long-
term debt and capital
leases - 439 4,177 5,338 - 9,954
--------- ----------- --------- --------- ----------- -----------
Total current liabilities 807 281,871 (11,025) 148,996 (161,206) 259,443
LONG-TERM DEBT AND
CAPITAL LEASES 152,050 489,180 7,837 23,491 - 672,558
DEFERRED INCOME TAXES - 19,527 28,991 10,170 - 58,688
OTHER LONG-TERM
LIABILITIES - 2,930 26,326 3,338 (21,103) 11,491
--------- ----------- --------- --------- ----------- -----------
Total liabilities 152,857 793,508 52,129 185,995 (182,309) 1,002,180
MINORITY INTEREST - 3,500 - - - 3,500
SHAREHOLDERS' EQUITY 354,582 356,577 750,580 226,457 (1,333,614) 354,582
--------- ----------- --------- --------- ----------- -----------
TOTAL $ 507,439 $ 1,153,585 $ 802,709 $ 412,452 $(1,515,923) $ 1,360,262
========= =========== ========= ========= =========== ===========
19
CONSOLIDATING CONDENSED STATEMENT OF FINANCIAL POSITION
December 31, 1998
(in thousands)
(Audited)
Combined Combined
Parent Guarantor Nonguarantor
Guarantor Issuer Subsidiaries Subsidiaries Elim. Consolidated
--------- ------ ------------ ------------ ----- ------------
CURRENT ASSETS
Cash and cash equivalents $ - $ 6,952 $ (7,311) $ 1,734 $ - $ 1,375
Receivables, net - 13,607 91,148 25,768 - 130,523
Investment in accounts
receivable securitization - 6,114 40,955 - - 47,069
Accounts receivable - other - 3,981 7,593 1,112 - 12,686
Income tax receivable - 43,908 - - (33,193) 10,715
Inventories, net - 39,267 60,286 14,578 - 114,131
Note receivable from Issuer 147,436 - - - (147,436) -
Other current assets 116 8,515 7,935 2,785 - 19,351
--------- --------- --------- --------- ----------- -----------
Total current assets 147,552 122,344 200,606 45,977 (180,629) 335,850
INVESTMENT IN SUBSIDIARIES 301,447 609,661 76,104 - (987,212) -
PROPERTY, PLANT AND
EQUIPMENT, NET - 121,733 249,002 66,997 - 437,732
GOODWILL, NET - 59,900 210,067 52,182 - 322,149
OTHER ASSETS, NET 3,902 13,111 15,155 57 - 32,225
--------- --------- --------- --------- ----------- -----------
TOTAL $ 452,901 $ 926,749 $ 750,934 $ 165,213 $(1,167,841) $ 1,127,956
========= ========= ========= ========= =========== ===========
CURRENT LIABILITIES
Accounts payable $ - $ 18,171 $ 56,441 $ 12,411 $ - $ 87,023
Accrued compensation and
vacation - 12,320 23,926 5,155 - 41,401
Other current liabilities 1,476 26,759 16,953 35,197 (33,193) 47,192
Note payable to Parent - 147,436 - - (147,436) -
Current portion of long-
term debt and capital
leases - 5 2,796 5,235 - 8,036
--------- --------- --------- --------- ----------- -----------
Total current liabilities 1,476 204,691 100,116 57,998 (180,629) 183,652
LONG-TERM DEBT AND
CAPITAL LEASES 152,050 393,004 15,415 22,958 - 583,427
DEFERRED INCOME TAXES - 19,890 20,078 7,566 - 47,534
OTHER LONG-TERM
LIABILITIES - 4,217 5,664 587 - 10,468
--------- --------- --------- --------- ----------- -----------
Total liabilities 153,526 621,802 141,273 89,109 (180,629) 825,081
MINORITY INTEREST - 3,500 - - - 3,500
SHAREHOLDERS' EQUITY 299,375 301,447 609,661 76,104 (987,212) 299,375
--------- --------- --------- --------- ----------- -----------
TOTAL $ 452,901 $ 926,749 $ 750,934 $ 165,213 $(1,167,841) $ 1,127,956
========= ========= ========= ========= =========== ===========
20
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
Nine-months ended September 30, 1999
(in thousands)
Combined Combined
Parent Guarantor Nonguarantor
Guarantor Issuer Subsidiaries Subsidiaries Elim. Consolidated
--------- ------ ------------ ------------ ----- ------------
CASH FLOWS FROM
OPERATING ACTIVITIES $ 2,568 $ 100,735 ($20,392) $ (92,407) $ 97,400 $ 87,904
CASH FLOWS FROM
INVESTING ACTIVITIES
Acquisition costs, net of
cash acquired - - (77,925) (115,447) - (193,372)
Capital expenditures - (9,905) (44,149) (8,796) - (62,850)
Investment in subsidiaries - (219,680) (91,649) - 311,329 -
Other investing activities (3,240) 1 4,134 1,287 672 2,854
------- --------- --------- --------- --------- ---------
Net cash used in investing
activities (3,240) (229,584) (209,589) (122,956) 312,001 (253,368)
CASH FLOWS FROM FINANCING
ACTIVITIES
Changes due to accounts
receivable securitization,
net - 43,482 53,918 77,400 (97,400) 77,400
Net proceeds from common
stock issuance 672 - - - - 672
Proceeds from long-term debt - 312,235 - 9,805 - 322,040
Repayments of long-term debt
and capital lease
obligations - (216,337) (2,774) (10,439) - (229,550)
Investment by parent - 672 173,228 138,101 (312,001) -
Other financing activities - (1,433) - - - (1,433)
------- --------- --------- --------- --------- ---------
Net cash provided by
financing activities 672 138,619 224,372 214,867 (409,401) 169,129
EFFECT OF EXCHANGE RATE CHANGES
ON CASH - - - 107 - 107
------- --------- --------- --------- --------- ---------
NET CHANGE IN CASH AND CASH
EQUIVALENTS - 9,770 (5,609) (389) - 3,772
BALANCE AT BEGINNING OF YEAR - 6,952 (7,311) 1,734 - 1,375
------- --------- --------- --------- --------- ---------
BALANCE AT END OF YEAR $ - $ 16,722 $ (12,920) $ 1,345 $ - $ 5,147
======= ========= ========= ========= ========= =========
21
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
Nine-months ended September 30, 1998
(in thousands)
Combined Combined
Parent Guarantor Nonguarantor
Guarantor Issuer Subsidiaries Subsidiaries Elim. Consolidated
--------- ------ ------------ ------------ ----- ------------
CASH FLOWS FROM
OPERATING ACTIVITIES $ 3,235 $(28,507) $ 19,053 $ 52,928 $ - $ 46,709
CASH FLOWS FROM
INVESTING ACTIVITIES
Acquisition costs, net
of cash acquired (90) (10,044) (252,094) (51,203) - (313,431)
Capital expenditures - (12,995) (30,596) (5,830) - (49,421)
Investment in subsidiaries (92,476) (324,807) (30,000) - 447,283 -
Other investing activities (3,401) - 3,581 406 - 586
--------- -------- --------- --------- --------- ---------
Net cash used in
investing activities (95,967) (347,846) (309,109) (56,627) 447,283 (362,266)
CASH FLOWS FROM FINANCING
ACTIVITIES
Changes due to accounts
receivable securitization,
net - 443 4,357 - - 4,800
Net proceeds from common
stock issuance 92,476 - - - - 92,476
Proceeds from long-term debt - 242,000 - 130,770 - 372,770
Repayments of long-term debt
and capital lease
obligations - (49) (37,273) (149,693) - (187,015)
Investment by parent - 92,476 324,807 30,000 (447,283) -
Other financing activities - - (3,746) - - (3,746)
--------- -------- --------- --------- --------- ---------
Net cash provided by
financing activities 92,476 334,870 288,145 11,077 (447,283) 279,285
EFFECT OF EXCHANGE RATE
CHANGES ON CASH - - - (1,612) - (1,612)
--------- -------- --------- --------- --------- ---------
NET CHANGE IN CASH AND
CASH EQUIVALENTS (256) (41,483) (1,911) 5,766 - (37,884)
BALANCE AT BEGINNING OF YEAR 256 41,483 (920) 92 - 40,911
--------- -------- --------- --------- --------- ---------
BALANCE AT END OF YEAR $ - $ - $ (2,831) $ 5,858 $ - $ 3,027
========= ======== ========= ========= ========= =========
22
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION.
The following should be read in conjunction with the consolidated
historical financial statements and related notes of Mail-Well, Inc. and
its subsidiaries (the "Company") included elsewhere in this report. In
addition to the historical information contained herein, this report
contains forward-looking statements. The reader of this information
should understand that all such forward-looking statements are subject
to various uncertainties and risks that could affect their outcome. The
Company's actual results could differ materially from those suggested by
such forward-looking statements. Factors which could cause or
contribute to such differences include, but are not limited to the
following:
* availability of acquisition opportunities and their related costs
* ability to obtain productivity savings
* ability to achieve cost savings from integration of acquisitions
* ability to obtain additional financing
* interest and foreign currency exchange rates
* paper and other raw material costs and the ability to pass paper
costs on to customers
* postage rates and other changes in the direct mail industry
* general labor conditions
This entire report should be read to put such forward-looking statements
in context and to gain a more complete understanding of the
uncertainties and risks involved in the Company's business.
OVERVIEW, HISTORICAL FINANCIAL DATA BY SEGMENT (IN THOUSANDS)
The following table presents historical financial data by segment,
including acquisitions from their purchase dates. The Commercial
Printing results include those of the merged businesses described in
Note 2 to the Consolidated Financial Statements (accounted for under the
pooling of interests method), except that the results of IPC Graphics
have been included with the Printing for Distributors segment beginning
January 1, 1997. The results for 1998 have been restated to reflect the
combination of the High Impact Color Printing segment with the
Commercial Printing segment. In addition, amounts were reclassified
from Envelopes to Commercial Printing for transfers of a business unit.
QUARTER ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
--------------------------- -------------------------------
1999 1998 1999 1998
---- ---- ---- ----
Net sales
Commercial Printing $217,800 $163,172 $ 567,459 $ 378,350
Envelopes 180,478 189,260 560,347 564,386
Printing for Distributors 38,483 28,728 110,425 81,887
Labels 56,026 22,983 134,019 48,313
-------- -------- ---------- ----------
Total net sales $492,787 $404,143 $1,372,250 $1,072,936
======== ======== ========== ==========
Operating income
Commercial Printing $ 19,693 $ 13,430 $ 46,927 $ 23,959
Envelopes 22,550 20,665 71,286 62,018
Printing for Distributors 3,297 2,098 9,846 6,307
Labels 4,623 1,686 10,245 3,610
Corporate (5,706) (5,432) (17,302) (12,032)
Merger Expenses - (284) - (3,286)
-------- -------- ---------- ----------
Total operating income $ 44,457 $ 32,163 $ 121,002 $ 80,576
Interest expense (14,729) (10,979) (41,545) (26,132)
Other income (expense) (64) 49 640 1,134
Income tax expense (12,163) (8,510) (32,840) (22,023)
-------- -------- ---------- ----------
Net income $ 17,501 $ 12,723 $ 47,257 $ 33,555
======== ======== ========== ==========
Net sales for the quarter ended September 30, 1999 increased 21.9% to
$492.8 million compared to net sales of $404.1 million for the quarter
ended September 30, 1998. This increase in net sales was attributable to
sales from
23
companies acquired during 1999, a full quarter of sales from companies
acquired during 1998 and internal growth in all but one segment. Gross
profit of $113.0 million for the quarter ended September 30, 1999
represents a 32.0% increase over the quarter ended September 30, 1998.
Expressed as a percent of net sales, gross profit increased by 170 basis
points (BP) to 22.9% for the quarter ended September 30, 1999 compared
to 21.2% for the quarter ended September 30, 1998 primarily due to the
Company's productivity improvements, the impact of purchasing programs
and benefits from restructuring initiatives. Expressed as a percent of
net sales, selling, administrative and other expense increased to 13.9%
for the quarter ended September 30, 1999 from 13.2% in quarter ended
September 30, 1998. The increase was mainly due to increased
amortization expense, the impact of acquisitions and an increase in
corporate administrative expense attributable to expanded treasury and
finance operations. Operating income increased 38.2% from the quarter
ended September 30, 1998.
Earnings for the quarter ended September 30, 1999 increased 37.6% to
$17.5 million from $12.7 million in the third quarter of the prior year.
Earnings per diluted share increased 28.0% to $0.32 in the quarter ended
September 30, 1999 from $0.25 in 1998.
Net sales for the nine-months ended September 30, 1999 increased
27.9% to $1,372.3 million compared to net sales of $1,072.9 million for
the nine-months ended September 30, 1998. This increase in net sales was
attributable to sales from companies acquired during 1999, a full nine-
months of sales from companies acquired during 1998 and internal growth
in each segment. Gross profit of $320.0 million for the nine-months
ended September 30, 1999 represents a 42.2% increase over the nine-
months ended September 30, 1998. Expressed as a percent of net sales,
gross profit increased by 230 BP to 23.3% for the nine-months ended
September 30, 1999 compared to 21.0% for the nine-months ended September
30, 1998 primarily due to the Company's productivity improvements, the
impact of purchasing programs and benefits from restructuring
initiatives. Expressed as a percent of net sales, selling,
administrative and other expense increased to 14.5% for the nine-months
ended September 30, 1999 from 13.5% in nine-months ended September 30,
1998. The increase was mainly due to increased amortization expense, the
impact of acquisitions and an increase in corporate administrative
expense attributable to expanded treasury and finance operations.
Operating income increased 50.2% from the nine-months ended September
30, 1998.
Earnings for the nine-months ended September 30, 1999 increased 40.8%
to $47.3 million from $33.6 million in the nine-month period of the
prior year. Earnings per diluted share increased 31.3% to $0.88 in the
nine-months ended September 30, 1999 from $0.67 in 1998.
RESTRUCTURING CHARGES - In November 1998 the Company committed to
implement a restructuring program affecting the Envelopes and Commercial
Printing segments and recorded a pre-tax provision of $16.0 million, of
which $11.7 million represents non-cash charges for asset write-offs and
impairments. The Company also incurred $0.2 and $1.2 million of costs in
the quarter and nine-months ended September 30, 1999, respectively,
relating to the relocation of equipment which under generally accepted
accounting principles could not be previously accrued for as part of the
Company's restructuring initiative. These costs are included in
"Selling, administrative and other" in the consolidated statements of
operations. For more information on these charges please refer to
Note 5 of the Notes to Consolidated Financial Statements included in
the Annual Report on Form 10-K for the year ended December 31, 1998 and
Note 5 of the Financial Statements included in this Form 10-Q.
RESULTS OF OPERATIONS FOR SIGNIFICANT BUSINESS SEGMENTS
Commercial Printing
QUARTER ENDED SEPTEMBER 30, 1999 COMPARED TO THE QUARTER ENDED
SEPTEMBER 30, 1998
NET SALES -- Net sales increased by $54.7 million (33.5%) for the
quarter ended September 30, 1999 compared to the quarter ended September
30, 1998, primarily due to acquisitions in 1998 and 1999. Without
acquisitions volume increased 5%.
OPERATING INCOME -- The majority of the increase in operating
income from $13.4 million to $19.7 million in the quarter ended
September 30, 1999 was due to acquisitions in 1998 and 1999 and
improvements in operating
24
expenses. Cost of sales includes materials (net of waste recovery
revenue), labor, depreciation and other manufacturing and distribution
costs. Total cost of sales, as a percent of sales, decreased from 77.9%
for the quarter ended September 30, 1998 to 77.7% for the quarter ended
September 30, 1999. This decline was primarily due to the impact of the
benefits from new acquisitions adopting our corporate purchasing
programs.
NINE-MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THE NINE-MONTHS ENDED
SEPTEMBER 30, 1998
NET SALES -- Net sales increased by $189.2 million (50.0%) for the
nine-months ended September 30, 1999 compared to the nine-months ended
September 30, 1998, primarily due to acquisitons in 1998 and 1999.
Without acquisitions and the loss of sales from businesses we planned to
exit, net sales were essentially unchanged as volume gains were offset
by declining paper prices.
OPERATING INCOME -- The majority of the increase in operating
income from $24.0 million to $46.9 million in the nine-months ended
September 30, 1999 was due to acquisitions in 1998 and 1999 and
improvements in gross margins. Cost of sales includes materials (net of
waste recovery revenue), labor, depreciation and other manufacturing and
distribution costs. Total cost of sales, as a percent of sales,
decreased from 79.5% for the nine-months ended September 30, 1998 to
77.8% for the nine-months ended September 30, 1999. This decline was
primarily due to the impact of the benefits from new acquisitions
adopting our corporate purchasing programs and continuous improvement
initiatives.
Envelopes
QUARTER ENDED SEPTEMBER 30, 1999 COMPARED TO THE QUARTER ENDED SEPTEMBER
30, 1998
NET SALES -- Net sales decreased by $8.8 million (4.6%) for the
quarter ended September 30, 1999 compared to the quarter ended September
30, 1998. Volume was impacted by a plant closure, our decision to
abandon low-margin business, and a slowdown in the sweepstakes market.
OPERATING INCOME -- The majority of the increase in operating
income from $20.7 million to $22.6 million in the quarter ended
September 30, 1999 was due to improvements in gross margins. Cost of
sales includes materials (net of waste recovery revenue), labor,
depreciation and other manufacturing and distributions costs. Total
cost of sales, as a percent of sales, decreased from 78.6% for the
quarter ended September 30, 1998 to 76.1% for the quarter ended
September 30, 1999. The decrease was due to the benefits of the
Company's restructuring plan and the impact of purchasing and
productivity programs.
NINE-MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THE NINE-MONTHS ENDED
SEPTEMBER 30, 1998
NET SALES -- Net sales decreased by $4.0 million (0.7%) for the
nine-months ended September 30, 1999 compared to the nine-months ended
September 30, 1998. Adjusting for increases of $12.1 million due to
acquisitions, volume decreased due to the following: a plant closure,
our decision to abandon low-margin business, a slowdown in the
Sweepstakes market in the third quarter and a decrease in paper prices.
Paper price changes (approximately 13% decrease in paper material costs)
were generally passed on to customers.
OPERATING INCOME -- The majority of the increase in operating
income from $62.0 to $71.3 in the nine months ended September 30, 1999
was due to improvements in gross margins. Cost of sales includes
materials (net of waste recovery revenue), labor, depreciation and other
manufacturing and distributions costs. Total cost of sales, as a
percent of sales, decreased from 78.0% for the nine-months ended
September 30, 1998 to 75.0% for the nine-months ended September 30,
1999. The decrease was due to the benefits of the Company's
restructuring plan and the impact of purchasing and productivity
programs.
25
Corporate
Certain major production equipment is accounted for as an
operating lease on a consolidated basis while treated as a purchase on a
segment level. The Company classifies the excess of the operating lease
expense over depreciation as a corporate expense in analyzing segment
operations. The Company does not include the amortization of intangibles
recorded in acquisitions in segment results but rather includes it on a
corporate basis. In addition, corporate expenses include corporate
administrative expense and loss (gain) on disposal of assets.
Corporate expenses for the quarter and nine-months ended September
30, 1999 increased $0.3 million and $5.3 million, respectively, compared
to 1998 as a result of increases in amortization expense and corporate
administrative expense. Amortization expense increased as a result of
the acquisitions made in the year ended December 31, 1998 and the nine-
months ended September 30, 1999.
MERGER COSTS - Effective May 30, 1998, the Company completed its
mergers with six commercial printing companies and one printing for
distributor company through the exchange of common stock. In connection
with the mergers, transaction costs incurred of $3.3 and $0.3 million
were expensed in the nine-months and quarter ended September 30, 1998,
respectively. These costs consist primarily of investment banking, legal
and accounting fees. For more information on these mergers please refer
to Note 2 of the Notes to Consolidated Financial Statements.
INTEREST EXPENSE - Interest expense, including accounts receivable
securitization discount, for the quarter ended September 30, 1999
increased $3.9 million compared to the quarter ended September 30, 1998.
Interest expense for the nine-months ended September 30, 1999 increased
$15.5 million compared to the nine-months ended September 30, 1998.
Both increases occurred as a result of higher average bank debt
balances, primarily due to acquisitions, and a slight increase in the
weighted-average borrowing rate. The Company continued to participate in
its accounts receivable securitization agreement whereby it can sell, on
a revolving basis, an undivided percentage ownership interest in a
designated pool of accounts receivable up to a maximum of $150.0 million
until July 2004. At September 30, 1999 and 1998, $130.0 million and
$76.0 million, respectively, had been sold under this agreement. The
receivables were sold at a discount slightly above the prevailing
commercial paper rate, plus certain other fees.
INCOME TAX EXPENSE - The effective tax rate for all periods was
higher than the federal statutory rate due to state and provincial
income taxes and certain goodwill amortization that is not tax
deductible. See Notes 2 and 9 of the Notes to Consolidated Financial
Statements included in the Company's 1998 Form 10-K.
LIQUIDITY AND CAPITAL RESOURCES
HISTORICAL CASH FLOW -- Net cash flow provided by operating
activities was $87.9 million and $46.7 million for the nine-months ended
September 30, 1999 and 1998, respectively. Acquisitions required cash
payments of $193.4 million and $313.4 million for the nine-months ended
September 30, 1999 and 1998, respectively. Other investing activities,
including capital expenditures, were $60.0 million and $48.8 million for
the nine-months ended September 30, 1999 and 1998, respectively. Net
cash flow from financing activities was positively affected by the
increase in receivables sold under the securitization agreement through
September 30, 1999 and 1998 of $77.4 million and $4.8 million,
respectively.
At September 30, 1999, the Company had approximately $111.0 million
of available credit under the $300.0 million Bank of America credit
facility.
SECURITIES OFFERINGS -- The Company has an effective shelf
registration statement on Form S-3 that permits the Company to issue
debt securities, common stock, preferred stock or warrants. At September
30, 1999, there was availability remaining to issue approximately $52.0
million of securities under the shelf registration statement.
In December 1998 the Company's wholly-owned operating subsidiary,
Mail-Well I Corporation, issued $300.0 million in aggregate principal
amount of 8 3/4% Senior Subordinated Notes due 2008 (the "Senior Notes").
The
26
Senior Notes were sold to qualified institutional buyers pursuant to
Rule 144A under the Securities Act of 1933. In June 1999 Mail-Well I
completed an exchange offer whereby it exchanged $300 million in
aggregate principal amount of 8 3/4% Series B Senior Subordinated Notes
due 2008 for all of the outstanding Senior Notes in a transaction
registered under the Securities Act.
FOREIGN CURRENCY -- The Company's foreign currency exposure primarily
relates to its Canadian operations. Net sales provided by the Canadian
operations for the nine-months ended September 30, 1999 and 1998 was USD
$142.3 million and USD $107.9 million, respectively. The impact of the
change in Canadian Dollar exchange rates was minimal.
SEASONALITY AND ENVIRONMENT -- As the Company expands its operations
into more commercial printing and labels segments, it has become more
impacted by seasonality. Management expects the first and third quarter
to report higher sales for the Commercial Printing segment because of
annual report and car brochure business. In addition, the third quarter
is traditionally the strongest for the Labels segment.
The effects of environmental matters had no material financial impact
on the historical operations of the Company and are not expected to have
a material effect on the Company's liquidity and capital resources.
YEAR 2000
In 1997 the Company began to assess its existing computer systems,
including an assessment of Year 2000 compliance. In May 1998 the
Company instituted a Year 2000 Project whose goal was to develop and
execute a plan for Year 2000 compliance throughout the Company. The
Company has established an individual at every significant operating
entity to be responsible for coordination with the Year 2000 Project.
What is the Company's state of readiness? What are the costs?
The Company's Year 2000 Project is directed to four major areas: core
computer systems, networking and communications, ancillary systems
(including plant machinery) and verification with key suppliers. The
following summarizes our state of readiness and the costs to address the
Company's Year 2000 issues.
CORE COMPUTER SYSTEMS
The Company completed an assessment of its existing computer systems
in 1997 and expected to spend and capitalize approximately $9 to $11
million through 1999 to purchase and install new systems. The new
systems are Y2K compliant. These costs are being funded through
operating cash flows. Several computer systems were due to be replaced
but were accelerated because of the Year 2000 issue. Through September
30, 1999, approximately $11.3 million of the estimated $13 million has
been capitalized. The amount expected to be capitalized has been
increased due to acquisitions and other projects, which were
subsequently added.
Through October 1999, 99% of the core systems are compliant.
NETWORKING AND COMMUNICATIONS
The Company took actions required to minimize the risk that its
remaining business critical networking and communications systems will
be disrupted with respect to dating in the Year 2000. The Company has
completed the process of updating, replacing and testing certain of its
network operating systems and network equipment and firmware so as to
operate without disruption due to Year 2000 issues.
27
ANCILLARY SYSTEMS AND VERIFICATION WITH KEY SUPPLIERS
The Company has completed an inventory of Year 2000 sensitive
devices, plant machinery and desktop software. The Company has also
completed a listing of business critical suppliers, such as paper and
ink suppliers. All such suppliers have been identified and contacted for
information on their actions to mitigate Year 2000 disruptions. Results
of the supplier surveys, of both device and manufacturing suppliers, and
follow-up mailings are reflected in contingency planning at each
division. Based on the information received through September 30, 1999,
management does not believe costs to replace Year 2000 sensitive
devices, plant machinery and desktop software will exceed $1.2 million,
which management does not consider to be material to our financial
condition or cash flow.
What is the Company doing about contingency planning?
Every location of the Company is required to prepare a contingency
plan and to file it with the Mail-Well Y2K Office. As of October 31,
1999, 99% of the locations had completed their contingency plans. The
contingency plans address the following issues, among others:
Response to and recovery from Y2K related failures
* Raw materials inventory stocking levels and alternative sources
* Review of disaster recovery plans
* Comprehensive system backup procedures to preserve 1999 data at
year-end
* Availability of key staff on-site during the New Year's weekend
* Coordination of planning with other Mail-Well plants
What are the risks of the Company's Year 2000 issues?
The Company presently believes it has an effective plan in place to
anticipate and resolve any potential Year 2000 issues in a timely
manner. In the event, however, the Company does not properly identify
Year 2000 issues or the resolution is not timely conducted for those
Year 2000 issued identified, there can be no assurance that Year 2000
issues will not materially and adversely affect the Company's results of
operations or relationships with third parties. In addition,
disruptions in the economy generally resulting from Year 2000 issues
also could materially and adversely affect the Company. Management
believes the amount of potential liability and lost revenue that would
be reasonably likely to result from the failure by the Company and
certain key third parties to achieve Year 2000 compliance on a timely
basis will not have a material impact on our financial condition or cash
flow.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities (the "Statement"). The
Statement, which will be effective for the Year 2001, requires
derivative instruments to be recorded in the balance sheet at their fair
value with changes in fair value being recognized in earnings unless
specific hedging accounting criteria are met. Although the Company
believes it has a minimal current level of hedging and derivative
activity, it has not determined the impact of this statement on its
operations and financial position.
In March 1998, the Accounting Standards Executive Committee of the
AICPA issued Statement of Position (SOP) 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use". The SOP,
which has been adopted prospectively as of January 1, 1999, requires the
capitalization of certain costs incurred in connection with developing
or obtaining internal use software. Prior to the adoption of the SOP,
the Company expensed all internal use software related internal costs as
incurred. The effect of adopting the SOP was immaterial to the quarter
and nine-months ended September 30, 1999 and is not expected to have a
material impact on earnings going forward.
28
ITEM 3.--QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to certain market risks, including foreign
currency and interest rate risks. The foreign currency risk for foreign
currency denominated debt obligations (US $22,832,000 at September 30,
1999) is not considered to be significant since the fair values and
carrying values are not material to the company's financial position.
The Company's cash flows from operations and earnings are affected by
changes in short-term interest rates since a large portion of its credit
agreements include rates variable with LIBOR. As of September 30, 1999,
$189 million of variable rate debt was outstanding. The fair value of
the Company's fixed rate long-term debt is affected by changes in long-
term interest rates. See Item 7A of the Company's 1998 Form 10-K for
quantitative and qualitative disclosures about market risk. No
significant changes in market risk have occurred since that filing.
The interest rate risk for the investment in accounts receivable
securitization will not have an impact on net income or cash flows.
PART II --OTHER INFORMATION
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 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).
4.2 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).
4.3 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).
4.4 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.
29
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.
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 Purchase and Contribution Agreement dated as of November 15,
1996 between Mail-Well I Corporation, Wisco Envelope
Corp., Pavey Envelope and Tag Corp., Mail-Well West, Inc.,
Graphic Arts Center, Inc., Wisco III, L.L.C., Supremex,
Inc., Innova Envelope, Inc., as Sellers, and Mail-Well
Trade Receivables Corp., as Purchaser-incorporated by
reference from Exhibit 10.39 of the Company's Annual
Report on Form 10-K for the year ended December 31, 1996.
10.9 Mail-Well Receivables Master Trust Pooling and Servicing
Agreement dated as of November 15, 1996 by and between
Mail-Well Trade Receivables Corporation, Seller, Mail-Well
I Corporation, Servicer, and Norwest Bank Colorado,
National Association, Trustee-incorporated by reference
from Exhibit 10.40 of the Company's Annual Report on Form
10-K for the year ended December 31, 1996.
10.10 Series 1996-1 Supplement dated as of November 15, 1996 to
Pooling and Servicing Agreement, dated as of November 15,
1996, by and between Mail-Well Trade Receivables
Corporation, Seller, Mail-Well I Corporation, Servicer,
and Norwest Bank Colorado, National Association, as
Trustee on behalf of the Series 1996-1 Certificateholders-
incorporated by reference from Exhibit 10.41 of the
Company's Annual Report on Form 10-K for the year ended
December 31, 1996.
10.11 Series 1996-1 Certificate Purchase Agreement dated as of
November 15, 1996 among Mail-Well Trade Receivables
Corporation, as Seller, Corporate Receivables Corporation,
as Purchaser, Norwest Bank Colorado, National Association,
as Trustee, and Mail-Well I Corporation, as Servicer-
incorporated by reference from Exhibit 10.42 of the
Company's Annual Report on Form 10-K for the year ended
December 31, 1996.
10.12 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
10.13 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.
10.14 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.
10.15 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.
10.16 Credit Agreement dated as of March 16, 1998 among Mail-Well I
Corporation, certain Guarantors, Bank of America National
Trust and Savings Association, as Agent and other
financial institutions party thereto Agreement --
incorporated by reference from Exhibit 10.60 to the
Company's Quarterly report on Form 10-Q for the quarter
ended March 31, 1998.
10.17 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.
10.18 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.
10.19 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.
10.20 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
30
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.
10.21 Purchase Agreement dated as of December 15, 1997 among
Mail-Well I Corporation and Poser Business Forms, Inc. and
other Selling Shareholders party thereto--incorporated by
reference from the Company's report on Form 8-K dated
January 6, 1998.
<F*>10.22 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.
<F*>10.23 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.
<F*>10.24 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.
10.25 Registration Rights Agreement dated December 16, 1998 by and
among MWI and Donaldson, Lufkin & Jenrette Securities
Corporation, Prudential Securities, Incorporated, Bear,
Stearns & Co., Inc. and Hanifen, Imhoff Inc., as Initial
Purchasers, relating to MWI's $300,000,000 aggregate
principal amount of 8 3/4% Senior subordinated Notes due
2008 -- incorporated by reference from Exhibit 10.27 of the
Company's Annual Report on form 10-K for the year ended
December 31, 1998.
27.1<F*> Financial Data Schedule for nine-months ended September 30,
1999
[FN]
- -------------------
<F*> Filed herewith.
(b) Reports on Form 8-K
A report on Form 8-K was filed on July 22, 1999, announcing
the financial results of the company for the quarter ending June 30,
1999.
31
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/ Gerald F. Mahoney
Date: November 12, 1999 ------------------------------
Gerald F. Mahoney
Chairman of the Board/
Chief Executive Officer
By /s/ Gary H. Ritondaro
Date: November 12, 1999 ------------------------------
Gary H. Ritondaro
Senior Vice President,
Chief Financial Officer
32