-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EyaFV2Bs82FxfFYfPmmkmTigVjTq8WOcfrw1NkF6IrEitSARFqQJSpShehEUXPC2 ApA10woPHTrzlJO4SSfcVw== 0001047469-98-031275.txt : 19980817 0001047469-98-031275.hdr.sgml : 19980817 ACCESSION NUMBER: 0001047469-98-031275 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MAIL WELL INC CENTRAL INDEX KEY: 0000920321 STANDARD INDUSTRIAL CLASSIFICATION: CONVERTED PAPER & PAPERBOARD PRODS (NO CONTAINERS/BOXES) [2670] IRS NUMBER: 841250533 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12551 FILM NUMBER: 98687237 BUSINESS ADDRESS: STREET 1: 23 INVERNESS WAY EAST STREET 2: STE 160 CITY: ENGLEWOOD STATE: CO ZIP: 80112 BUSINESS PHONE: 3037908023 MAIL ADDRESS: STREET 1: 23 INVERNESS WAY EAST STREET 2: SUITE 160 CITY: ENGLEWOOD STATE: CO ZIP: 80112 FORMER COMPANY: FORMER CONFORMED NAME: MAIL WELL HOLDINGS INC DATE OF NAME CHANGE: 19940328 10-Q 1 10-Q - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 June 30, 1998 Commission file number 1-12551 MAIL-WELL, INC. (Exact name of Registrant as specified in its charter.) COLORADO 84-1250533 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 23 Inverness Way East, Englewood, CO 80112 (Address of principal executive offices) (Zip Code) 303-790-8023 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) INDICATE BY CHECKMARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. Yes /X/ No / / As of August 12, 1998, the Registrant had 48,654,627 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.....................13 Item 3. Quantitative and Qualitative Disclosures About Market Risk 21 Part II - Other Information Item 1. Legal Proceedings .........................................21 Item 2. Changes in Securities.......................................21 Item 3. Defaults upon Senior Securities.............................21 Item 4. Submission of Matters to a Vote of Securities Holders.......21 Item 5. Other Information .........................................22 Item 6. Exhibits and Reports on Form 8-K............................23
2 PART I. FINANCIAL INFORMATION, ITEM 1. FINANCIAL STATEMENTS MAIL-WELL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
(UNAUDITED) JUNE 30, DECEMBER 31, 1998 1997 ----------- ------------ CURRENT ASSETS Cash and cash equivalents..................................................... $ 24,961 $ 40,911 Receivables, net.............................................................. 109,418 64,958 Accounts receivable -- other.................................................. 10,831 8,082 Income tax receivable, net.................................................... 1,963 2,225 Securitized interest in accounts receivable................................... 15,374 22,319 Inventories................................................................... 118,271 86,268 Deferred income taxes......................................................... 4,277 2,558 Other current assets.......................................................... 9,974 7,577 -------- -------- Total current assets......................................................... 295,069 234,898 PROPERTY, PLANT AND EQUIPMENT -- NET.............................................. 378,556 262,797 DEFERRED FINANCING COSTS -- NET................................................... 2,577 1,936 GOODWILL -- NET................................................................... 283,870 153,927 OTHER ASSETS -- NET............................................................... 23,414 17,853 -------- -------- TOTAL............................................................................. $983,486 $671,411 -------- -------- -------- -------- CURRENT LIABILITIES Accounts payable.............................................................. $ 73,808 $ 53,641 Accrued compensation and vacation............................................. 37,473 32,729 Accrued interest.............................................................. 5,014 4,410 Other current liabilities..................................................... 34,281 28,143 Current portion of long-term debt and capital leases.......................... 7,766 10,533 -------- -------- Total current liabilities.................................................... 158,342 129,456 ACCRUED PENSION................................................................... 1,174 1,174 CAPITAL LEASES.................................................................... 6,476 3,128 BANK BORROWINGS................................................................... 244,350 90,179 SENIOR SUBORDINATED NOTES......................................................... 85,000 85,000 CONVERTIBLE SUBORDINATED NOTES.................................................... 152,050 152,050 DEFERRED INCOME TAXES............................................................. 31,300 29,299 OTHER LONG TERM LIABILITIES....................................................... 9,953 5,805 -------- -------- Total liabilities............................................................ 688,645 496,091 -------- -------- MINORITY INTEREST................................................................. 3,500 3,500 -------- -------- STOCKHOLDERS' EQUITY Preferred stock, $0.01 par value; 25,000 shares authorized, none issued and outstanding................................................................ -- -- Common stock, $0.01 par value; 100,000,000 shares authorized, and 48,631,744 and 43,042,959 shares issued and outstanding, respectively (including 3,896,544 shares held by ESOP)..................................... 486 430 Paid-in capital.............................................................. 206,095 102,475 Retained earnings............................................................ 89,948 72,541 Unearned ESOP compensation................................................... (2,264) (2,406) Other........................................................................ (2,924) (1,220) -------- -------- Total stockholders' equity................................................... 291,341 171,820 -------- -------- TOTAL............................................................................. $983,486 $671,411 -------- -------- -------- --------
See notes to unaudited consolidated financial statements. 3 MAIL-WELL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, --------------------------- ------------------------- 1998 1997 1998 1997 -------- -------- -------- ------ NET SALES..................................................... $350,059 $250,474 $668,793 $503,914 COST OF SALES Materials................................................ 147,866 99,237 278,780 202,903 Labor and other.......................................... 103,680 73,561 197,383 145,864 Manufacturing............................................ 23,495 17,794 45,350 37,031 Depreciation............................................. 8,059 5,085 14,514 10,165 Waste recovery........................................... (3,468) (2,193) (6,708) (4,633) -------- -------- -------- -------- Total cost of sales................................. 279,632 193,484 529,319 391,330 GROSS PROFIT.................................................. 70,427 56,990 139,474 112,584 OTHER OPERATING COSTS Selling.................................................. 26,446 19,684 50,919 39,099 Administrative........................................... 16,517 15,718 34,080 31,873 Amortization............................................. 2,098 988 3,900 2,151 Merger costs............................................. 771 -- 3,002 -- (Gain) loss on disposal of assets........................ (272) 83 (750) 943 -------- -------- -------- -------- Total other operating costs......................... 45,560 36,473 91,061 74,066 OPERATING INCOME.............................................. 24,867 20,517 48,413 38,518 OTHER EXPENSE Interest expense - debt.................................. 6,314 5,362 12,799 10,828 Interest expense - amortization of deferred financing costs.................................................... 94 746 192 1,500 Discount on sale of accounts receivable............... 1,355 938 2,162 1,961 Other income ............................................ (482) (446) (1,085) (932) -------- -------- -------- -------- INCOME BEFORE INCOME TAXES.................................... 17,586 13,917 34,345 25,161 PROVISION FOR INCOME TAXES Current.................................................. 5,610 3,334 10,341 5,865 Deferred................................................. 677 1,708 3,172 3,569 -------- -------- -------- -------- NET INCOME.................................................... $ 11,299 $ 8,875 $ 20,832 $ 15,727 -------- -------- -------- -------- -------- -------- -------- -------- EARNINGS PER BASIC SHARE...................................... $ 0.24 $ 0.22 $ 0.46 $ 0.39 EARNINGS PER DILUTED SHARE.................................... $ 0.22 $ 0.21 $ 0.42 $ 0.38 WEIGHTED AVERAGE SHARES - BASIC............................... 46,790 40,377 45,155 40,313 WEIGHTED AVERAGE SHARES - DILUTED............................. 56,786 41,828 55,245 41,423
See notes to unaudited consolidated financial statements. 4 MAIL-WELL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (DOLLARS IN THOUSANDS)
SIX MONTHS ENDED JUNE 30, ------------------------- 1998 1997 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net income................................................................. $ 20,832 $ 15,727 Adjustments to reconcile net income to cash provided by operations Depreciation.............................................................. 14,514 10,165 Amortization............................................................... 4,092 3,651 Deferred tax provision..................................................... 3,172 3,569 (Gain), loss on disposal of assets......................................... (750) 943 ESOP compensation expense.................................................. 2,156 68 Other...................................................................... 23 441 Change in operating assets and liabilities Receivables................................................................ 4,734 10,823 Current income taxes....................................................... (3,347) 1,227 Inventories................................................................ (2,686) (4,452) Accounts payable........................................................... (5,893) (3,555) Accrued interest........................................................... 604 1,230 Other working capital...................................................... (2,054) 4,813 Accrued pension, current and long term.................................... (269) 115 Other assets and other long-term liabilities............................... (3,237) (2,157) --------- --------- Net cash provided by operating activities................................ 31,891 42,608 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Acquisition costs, net of cash acquired.................................... (254,623) (6,800) Capital expenditures....................................................... (31,255) (21,941) Proceeds from sale of property, plant and equipment........................ 690 833 --------- --------- Net cash used in investing activities.................................... (285,188) (27,908) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds from common stock issuance................................... 92,268 194 Cash overdrafts............................................................ 0 (771) Proceeds from long-term debt............................................... 337,130 15,788 Repayments of long-term debt and capital lease obligations................. (186,092) (22,931) Repurchase of stock by pooled entities..................................... (623) (1,069) Dividends and distributions paid by pooled entities........................ (3,035) (2,206) --------- --------- Net cash provided by (used in) financing activities...................... 239,648 (10,995) --------- --------- EFFECT OF EXCHANGE RATE CHANGES ON CASH....................................... (2,301) (315) --------- --------- NET CHANGE IN CASH AND CASH EQUIVALENTS....................................... (15,950) 3,390 BALANCE AT BEGINNING OF PERIOD................................................ 40,911 12,297 --------- --------- BALANCE AT END OF PERIOD...................................................... $ 24,961 $ 15,687 --------- --------- --------- --------- SUPPLEMENTAL DISCLOSURES Cash paid for interest..................................................... $ 12,195 $ 9,805 Cash paid for income taxes................................................. 9,470 6,133 Stock issued for acquisitions.............................................. 7,471 0
See notes to unaudited consolidated financial statements. 5 MAIL-WELL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION NATURE OF OPERATIONS -- Mail-Well, Inc. and subsidiaries (the "Company") is a leading consolidator in the highly fragmented printing industry, specializing in customized envelopes, high impact printing, commercial printing, consumer products labels and business communications documents. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION -- The Company, headquartered in Englewood, Colorado, is organized under Colorado law and its common stock is traded on the New York Stock Exchange. These financial statements include the accounts of the Company and all significant intercompany accounts and transactions have been eliminated. INTERIM FINANCIAL INFORMATION -- The interim financial information contained herein is unaudited and includes all normal and recurring adjustments which, in the opinion of management, are necessary to present fairly the information set forth. The consolidated financial statements should be read in conjunction with the Notes to the Consolidated Financial Statements which are included in the Company's Form 8-K dated May 30, 1998 and its 1997 10-K Form. The results for interim periods are not necessarily indicative of results to be expected for the Company's fiscal year ending December 31, 1998. The Company believes that the report filed on Form 10-Q is representative of its financial position, its results of operations and its cash flows for the quarter and six months ended June 30, 1998 and 1997. EMPLOYEE STOCK OWNERSHIP PLAN ("ESOP")-- Unearned ESOP compensation balance is presented in the accompanying financial statements as a reduction of equity. As the ESOP shares are allocated to participants, the unearned ESOP compensation balance will decrease and compensation expense will be recorded. AUTHORIZED CAPITAL STOCK -- At the Company's annual meeting on April 29, 1998, the shareholders approved an amendment to the Articles of Incorporation to increase the number of shares of common stock authorized for issuance to a total of 100,000,000 shares. RECLASSIFICATION -- Certain amounts in the 1997 financial statements have been reclassified to conform to the 1998 presentation. INVENTORIES-- Detail of inventories, in thousands
JUNE 30, 1998 DECEMBER 31, 1997 ------------- ----------------- Raw materials................................. $ 44,548 $34,656 Work in process............................... 24,114 12,428 Finished goods................................ 52,923 42,132 Reserve for obsolescence and loss............. (3,314) (2,948) -------- ------- Total......................................... $118,271 $86,268 -------- ------- -------- -------
6 OTHER COMPREHENSIVE INCOME-- Effective January 1, 1998, the Company adopted Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income. Accordingly, components of other comprehensive income (loss) are as follows,
Balance March 31, Quarter Ended June 30, Balance June 30, ------------------ ---------------------- ------------------ (in thousands) 1998 1997 1998 1997 1998 1997 -------- ------ -------- ------- -------- ------ Cumulative foreign currency translation adjustment.. $ (730) $(255) $(2,044) $ (3) $(2,774) $(258) Pension liability adjustment........................ (73) (110) 0 0 (73) (110) Unrealized loss, net of taxes, on securitized interest in accounts receivable.................. (247) (49) 169 0 (77) (49) ------- ----- ------- ------ ------- ----- Accumulated other comprehensive loss................ $(1,050) $(414) (1,875) (3) $(2,924) $(417) ------- ----- ------- ----- ------- ----- ------- ----- Net income.......................................... 11,299 8,875 ------- ------ Comprehensive income................................ $ 9,424 $8,872 ------- ------ ------- ------
Balance January 1 Six Months Ended June 30, Balance June 30, ----------------- ------------------------- ----------------- (in thousands) 1998 1997 1998 1997 1998 1997 ------- ----- ------- ------- ------- ----- Cumulative foreign currency translation adjustment.. $(1,032) $(115) $(1,742) $ (143) $(2,774) $(258) Pension liability adjustment........................ (73) (110) 0 0 (73) (110) Unrealized loss, net of taxes, on securitized interest in accounts receivable.................. (115) (49) 37 0 (77) (49) ------- ----- ------- ------- ------- ----- Accumulated other comprehensive loss................ $(1,220) $(274) (1,705) (143) $(2,924) $(417) ------- ----- ------- ----- ------- ----- ------- ----- Net income.......................................... 20,832 15,727 ------- ------- Comprehensive income................................ $19,127 $15,584 ------- ------- ------- -------
EARNINGS PER SHARE -- In June 1997, the Company's common stock split 3:2 and in June 1998 the Company's 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.
INCOME SHARES PER-SHARE (in thousands, except per share amounts) (NUMERATOR) (DENOMINATOR) AMOUNT ----------- ------------- --------- FOR THE THREE MONTHS ENDED JUNE 30, 1998, EARNINGS PER BASIC SHARE Income available to common stockholders......................... $ 11,299 46,790 $ 0.24 EFFECT OF DILUTIVE SECURITIES Stock options................................................... 1,698 Convertible subordinated notes.................................. 1,083 8,003 Other........................................................... 295 EARNINGS PER DILUTED SHARE Income available to common stockholders including assumed conversions........................................ $ 12,382 56,786 $ 0.22 FOR THE THREE MONTHS ENDED JUNE 30, 1997, EARNINGS PER BASIC SHARE Income available to common stockholders......................... $ 8,875 40,377 $ 0.22 EFFECT OF DILUTIVE SECURITIES Stock options................................................... 1,403 Other........................................................... 48 EARNINGS PER DILUTED SHARE Income available to common stockholders including assumed conversions........................................ $ 8,875 41,828 $ 0.21 7 INCOME SHARES PER-SHARE (in thousands, except per share amounts) (NUMERATOR) (DENOMINATOR) AMOUNT ----------- ------------- --------- FOR THE SIX MONTHS ENDED JUNE 30, 1998, EARNINGS PER BASIC SHARE Income available to common stockholders......................... $ 20,832 45,155 $ 0.46 EFFECT OF DILUTIVE SECURITIES Stock options................................................... 1,817 Convertible subordinated notes.................................. 2,166 8,003 Other........................................................... 270 EARNINGS PER DILUTED SHARE Income available to common stockholders including assumed conversions........................................ $ 22,998 55,245 $ 0.42 FOR THE SIX MONTHS ENDED JUNE 30, 1997, EARNINGS PER BASIC SHARE Income available to common stockholders......................... $ 15,727 40,313 $ 0.39 EFFECT OF DILUTIVE SECURITIES Stock options................................................... 1,014 Other........................................................... 96 EARNINGS PER DILUTED SHARE Income available to common stockholders including assumed conversions........................................ $ 15,727 41,423 $ 0.38
3. LONG-TERM DEBT Long-term debt consists of the following (in thousands):
INTEREST RATE AT JUNE 30, 1998 JUNE 30, 1998 DECEMBER 31, 1997 ---------------- ------------- ----------------- Bank borrowings: Unsecured line of credit, due March 31, 2003 5.375% $233,605 $ -- Demand note -- 55,393 Senior Subordinated Notes, due 2004................ 10.5% 85,000 85,000 Convertible Subordinated Notes, due 2002........... 5.0% 152,050 152,050 Other.............................................. 16,633 44,709 -------- -------- 487,288 337,152 Less current maturities............................ (5,888) (9,923) -------- -------- Long-term debt..................................... $481,400 $327,229 -------- -------- -------- --------
On March 18,1998, the Company closed a new bank facility totaling $300 million with Bank of America, the lead agent for its syndicate of banks. The new bank facility consists of a five-year unsecured line of credit. Proceeds from the unsecured line of credit were used to repay the Demand Note outstanding at December 31, 1997. 8 4. COMMON STOCK ISSUANCE On February 11, 1998, the Company completed the sale of 6,000,000 shares of its Common Stock at a price of $19.625 per share through a group of underwriters led by Prudential Securities Incorporated. Of these shares, 4,864,600 were sold by the Company and 1,135,400 were sold by a group of shareholders. Proceeds from the sale of common stock by the Company of $91.2 million, net of underwriting discounts and commissions, were used for general corporate purposes. An additional $1.1 million in proceeds was received on the exercise of stock options year to date. 5. STOCK OPTIONS On February 4, 1998, the Company's Board of Directors adopted a non-qualified stock option plan (the "1998 Plan") for key employees and directors authorizing future grants of stock options to purchase up to 1,000,000 shares of the Company's common stock. The Compensation Committee of the Board has approved stock option grants for 234,000 shares under this plan to date. The exercise price of all options granted is at least the fair market value of the Company's common stock on the date of the grant. 6. ACQUISITIONS The statements of operations include the operations of acquisitions, all of which have been accounted for under the purchase method of accounting, from their acquisition date. On January 6, 1998, the Company acquired the stock of Poser Business Forms, Inc., ("Poser"). Poser is the second largest U.S. printer of custom business communications documents for the distributor market and has annual sales of $90 million. Poser, headquartered in Fairhope, Alabama, has a nation-wide network of 14 plants producing four-color process printing, labels, envelopes, loose-leaf products, laser cut-sheets and business forms. Poser also has two high-growth trademarked products, VersaSeal, a self-mailing system, and Security Guard, a line of documents with special security protection. This acquisition launches the Company in a new highly fragmented, growing operating segment On March 3, 1998, the Company acquired substantially all the assets of Rono Graphic Communications Co. and Hicks-Chatten Engraving Company ("Rono"). Rono is a printer specializing in high-quality posters, annual reports, advertising and point-of-purchase displays with $12 million in annual sales located in Portland, Oregon. On March 10, 1998, the Company acquired substantially all the assets of the Lawson Mardon Packaging USA, Inc. label division subsequently renamed Mail-Well Label ("MW Label"). MW Label is the second largest supplier of glue-applied labels in North America, providing premium and conventional labels, in-mold labels, postcards and graphic services to the food, beverage and consumer household products markets. Headquartered in Toronto, Ontario, with plants in Montreal, Quebec; Leamington, Ontario; Baltimore, Maryland; and Sparks, Nevada, MW Label has annual sales of $81 million. This acquisition also launches the Company in a new highly fragmented segment of the printing industry. On March 27, 1998, the Company acquired the stock of Denver Forms Company ("Denver Forms"). Denver Forms is a business communications documents and specialty printing manufacturer based in Denver, Colorado with annual sales of $12 million. On March 27, 1998, the Company acquired the stock of the National Graphics Company ("Natl Graphics"). Natl Graphics is a forms distributor based in Denver, Colorado with annual sales of $8 million. On March 27, 1998, the Company acquired substantially all the assets of EPX DENVER ("EPX"). EPX is a business communications documents and specialty printing manufacturer based in Denver, Colorado with annual sales of $4 million. 9 On April 8, 1998, the Company acquired substantially all the assets of Blue Line Envelope ("Blue Line"). Blue Line, located in Montreal, Quebec, is an envelope manufacturer for office products outlets and stationers in Canada with annual sales of $6 million. On April 21, 1998, the Company acquired the stock of South Press, Inc. ("South Press"). South Press is a high quality printer located in Dallas, Texas with annual sales of $12 million. On May 5, 1998, the Company acquired the stock of Century Index Corporation ("Century"). Century is a manufacturer of filing products located in Anaheim, California, with annual sales of $8 million. On May 11, 1998, the Company acquired substantially all the assets of the International Paper label division ("IP Label"). IP Label, located in Bowling Green, Kentucky, prints labels for consumer products and has annual sales of $30 million. On May 28, 1998, the Company acquired the stock of Anderson Lithograph ("Anderson"). Anderson is a nationally known high impact printer located in Los Angeles, California, with annual sales of $135 million. On June 1, 1998, the Company acquired the stock of Illinois Envelope, Inc. ("Illinois"). Illinois is an envelope manufacturer located in Kalamazoo, Michigan, with annual sales of $7 million. On June 22, 1998, the Company acquired the stock of Gould Packaging, Inc. ("Gould"). Gould is a distributor of mailing and shipping supplies to the retail mass market located in Vancouver, Washington, with annual sales of $14 million. 7. 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 shares 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 Company's 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. Color Art is a commercial printer with offices located in St. Louis and Osage Beach, Missouri, and also the operator of a short-run printing and graphics company through its subsidiary Graphic Links, LLC. Accu-Color, located in St. Louis, Missouri, is primarily a supplier of color separation and other graphic arts services to the printing and advertising industries. Industrial Printing is located in Toledo, Ohio and is engaged in the printing and selling of advertising pieces, labels and general commercial printing. IPC Graphics prints and sells advertising pieces, mailers and business forms from its facilities in Toledo, Ohio. 10 United Lithograph provides commercial printing services to individuals and businesses located in the New England region from its offices in Somerville, Massachusetts. French Bray, located in Glen Burnie, Maryland, provides commercial, high quality, multi-color printing in the Mid-Atlantic region. Clarke Printing designs, manufactures and sells printed materials throughout Texas and Mexico. The companies listed above are hereafter collectively referred to as the Commercial Printing Group. 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 will be 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 consolidated financial statements with significant intercompany transactions and balances eliminated. 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 Commercial Printing Group. 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 consolidated financial statements reflect certain minor adjustments to conform the accounting policies of the Commercial Printing Group with the Company's. In connection with the mergers, transaction costs incurred by the Commercial Printing Group of approximately $3.0 million were expensed in 1998. These costs consist primarily of investment banking, legal and accounting fees. 11 8. SEGMENT INFORMATION The Company's operating segments prepare separate financial information that is evaluated regularly by the Chief Operating Officer in assessing performance and deciding how to allocate resources. The Company does not allocate corporate overhead, interest (income) expense, amortization expense or income taxes by segment in assessing performance. Operating segments of the Company are defined primarily by product line and consist of Envelope Printing, High Impact Printing, Commercial Printing, Business Communication Printing and Label Printing. The latter two segments were added via acquisitions in the first quarter of 1998. The Company's segment information for the three and six months ended June 30 is as follows:
Envelope Printing High Business ----------------- Impact Commercial Communications Label (in thousands) U.S. Canada Printing Printing Printing Printing Corporate Total ---- ------ -------- ---------- -------------- -------- --------- ----- (b) (a) Net Sales: For the three months ended June 30, 1998 $162,069 $ 28,476 $ 70,973 $ 38,634 $28,602 $ 21,305 -- $350,059 1997 139,677 27,466 40,339 40,241 2,751 -- -- 250,474 For the six months ended June 30, 1998 334,271 56,673 119,657 79,703 53,159 25,330 -- 668,793 1997 279,377 59,082 81,055 78,689 5,711 -- -- 503,914 Operating Income: For the three months ended June 30, 1998 15,502 4,655 2,501 1,987 2,508 1,661 (3,947) 24,867 1997 14,614 4,273 1,765 3,026 230 -- (3,391) 20,517 For the six months ended June 30, 1998 32,863 9,150 5,049 4,878 4,209 1,924 (9,660) 48,413 1997 29,258 8,542 3,614 4,638 439 -- (7,973) 38,518 Depreciation: For the three months ended June 30, 1998 3,220 587 2430 1465 606 972 (1,221) 8,059 1997 2,382 579 1,529 1,725 -- -- (1,130) 5,085 For the six months ended June 30, 1998 6,346 1,137 4,178 3,300 851 1,133 (2,431) 14,514 1997 4,827 1,142 3,038 3,487 -- -- (2,329) 10,165 Identifiable Assets: Jun 30, 1998 396,672 109,450 303,956 72,915 85,308 95,264 (80,079) 983,486 Mar 31, 1998 379,020 95,722 174,517 80,900 84,782 69,927 (55,161) 829,707 Dec 31, 1997 374,715 93,997 161,070 85,210 -- -- (43,581) 671,411
(a) Corporate identifiable assets include adjustments for the accounts receivable securitization and certain significant operating leases. This is done to reflect the return on assets employed within each segment on a consistent basis. (b) 1997 operating results in business communications printing are those of IPC Graphics which was part of the merger completed on May 30, 1998 and accounted for under the pooling of interests method. 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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, product demand and sales, growth rate, ability to obtain assumed productivity savings, quality controls, availability of acquisition opportunities and their related costs, cost savings due to integration and synergies associated with acquisitions, ability to obtain additional financings and bank debt restructuring, interest rates, foreign currency exchange rates, paper and raw material costs, waste paper prices, ability to pass through paper costs to customers, postage rates, changes in the direct mail industry, competition, ability to develop new products, labor costs, labor relations and advertising costs. 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 Three Months Ended June 30, Six Months Ended June 30, ---------------------------- ---------------------------- 1998 1997 1998 1997 ------------ ----------- ------------- ----------- Net sales U.S. envelope $ 162,069 $ 139,677 $ 334,271 $ 279,377 Canadian envelope 28,476 27,466 56,673 59,082 High impact color printing 70,973 40,339 119,657 81,055 Commercial printing 38,634 40,466 79,703 79,294 Business communication printing 28,602 2,526 53,159 5,106 Label printing 21,305 0 25,330 0 ------------ ----------- ------------- ----------- Total net sales 350,059 250,474 668,793 503,914 ------------ ----------- ------------- ----------- Operating income U.S. envelope 15,502 14,614 32,863 29,258 Canadian envelope 4,655 4,273 9,150 8,542 High impact color printing 2,501 1,765 5,049 3,614 Commercial printing 1,987 3,085 4,878 4,763 Business communication printing 2,508 171 4,209 314 Label printing 1,661 0 1,924 0 Corporate (3,947) (3,391) (9,660) (7,973) ------------ ----------- ------------- ----------- Total operating income 24,867 20,517 48,413 38,518 Interest and amortization of deferred financing costs 7,763 7,046 15,153 14,289 Other (income) (482) (446) (1,085) (932) Income tax expense 6,287 5,042 13,513 9,434 ------------ ----------- ------------- ----------- Net income $ 11,299 $ 8,875 $ 20,832 $ 15,727 ------------ ----------- ------------- ----------- ------------ ----------- ------------- -----------
OVERALL OPERATING RESULTS Sales for the quarter ended June 30, 1998 rose $99.6 million, or 39.8%, from the quarter ended June 30, 1997. Net income for the quarter ended June 30, 1998 increased by $2.4 million ($0.01 per diluted share), or 27.3%, compared with the prior year period. Sales for the six months ended June 30, 1998 increased $164.9 million, or 32.7%, from the year ago period. Net income for the six months ended June 30, 1998 increased $5.1 million ($0.04 per diluted share), or 32.5%, from the prior year period. During the first half of 1998 and the most recent quarter the Company continued to focus its efforts on the operations of recently acquired businesses, especially the newly merged commercial printing segment. These efforts included establishing strategic direction in the commercial printing segment, as well as continued focus on business communications and labels, the other segments entered via acquisitions in 1998. In addition, the Company reviewed acquired operations in existing operating segments to determine changes in cost structures and marketing strategy. 13 ACQUISITIONS The presentation below summarizes the Company's acquisitions,
ESTIMATED MONTH OPERATING ANNUAL LOCATION AQUIRED SEGMENT SALES ------------------------------------------------------------- (MILLIONS) 1995 ACQUISITIONS Supremex, Inc. ("Supremex") Canada July Envelope $ 93 Graphic Arts Center, Inc. ("GAC") Portland, Oregon August High Impact 150 ------ Aggregate purchase price was $148.1 million, with $71.2 million goodwill recorded 243 1996 ACQUISITIONS Quality Park Products, Inc. ("Quality") St. Paul, Minnesota April Envelope 80 Pac National Group Products, Inc. ("PNG") Canada August Envelope 30 Shepard Poorman Communications Corp ("SP") Indianapolis, Indiana December High Impact 50 ------ Aggregate purchase price was $68.2 million, with $17.7 million goodwill recorded 160 1997 ACQUISITIONS Griffin Envelope, Inc. ("Griffin") Seattle, Washington June Envelope 12 The Allied Printers ("Allied") Seattle, Washington July High Impact 17 Murray Envelope Corporation ("Murray") Hattiesburg, Mississippi July Envelope 48 National Color Graphics, Inc. ("NCG") Atlanta, Georgia September High Impact 23 Intertec Mailing Services ("MW Services") Nashville, Tennessee October Envelope 7 Cambridge, Maryland plant of Western Cambridge, Maryland December Envelope 33 ------ Graphics Communications ("MW Graphics") Aggregate purchase price was $87.0 million, with $32.7 million goodwill recorded 140 1998 ACQUISITIONS THROUGH JUNE 1998 Poser Business Forms, Inc. ("Poser") Fairhope, Alabama January Documents 90 Rono Graphic Communications Co. ("Rono") Portland, Oregon March High Impact 12 Lawson Mardon Label Division ("MW Label") Toronto, Ontario March Labels 81 Denver Forms Company ("Denver Forms") Denver, Colorado March Documents 12 National Graphics Company ("Natl Graphics") Denver, Colorado March Envelope 8 EPX Denver ("EPX") Denver, Colorado March Documents 4 Blue Line Envelope ("Blue Line") Montreal, Quebec April Envelope 6 South Press, Inc. ("South Press") Dallas, Texas April High Impact 12 Century Index Corporation ("Century") Anaheim, California May Envelope 8 Label Division, IP Paper ("IP Label") Bowling Green, Kentucky May Labels 30 Anderson Lithograph ("Anderson") Los Angeles, California May High Impact 135 Illinois Envelope, Inc ("Illinois") Kalamazoo, Michigan June Envelope 7 Gould Packaging, Inc ("Gould") Vancouver, Washington June Envelope 14 ------ Aggregate purchase price was $254.6 million, with $133.2 million goodwill recorded 419 1998 MERGERS, COMMERCIAL PRINTING GROUP Color Art, Inc. ("Color Art") St. Louis, Missouri May Commercial 76 Accu-Color, Inc. ("Accu-Color") St. Louis, Missouri May Commercial 14 Industrial Printing Company ("IPC") Toledo, Ohio May Commercial 20 IPC Graphics ("IPC Graphics") Toledo, Ohio May Commercial 11 United Lithograph, Inc.("United Litho") Somerville, Mass. May Commercial 21 French Bray, Inc. ("French Bray") Glen Burnie, Maryland May Commercial 23 Clarke Printing Co. ("Clarke") San Antonio, Texas May Commercial 11 ------ 176
All of the acquisitions have been accounted for under the purchase method of accounting. Accordingly the historical results of operations of the Company include results of operations of each of the acquisitions from their date of purchase. The mergers, as more fully described in Note 7 to the financial statements included elsewhere herein, were accounted for as poolings of interests and, accordingly, the Company's consolidated financial statements since inception have been restated to include the operations of the Commercial Printing Group, adjusted to conform with the Company's accounting policies and presentation. 14 The table below presents the historical sales and cost of sales of the Company, restated for the mergers, adjusted to show the effects of the acquisitions as if the acquisitions had occurred on January 1 of the year prior to their actual purchase date.
Three Months Ended June 30, Six Months Ended June 30, --------------------------- ------------------------- 1998 1997 1998 1997 -------- -------- -------- -------- Net sales as reported $350,059 $250,474 $668,793 $503,914 1997 acquisitions in the aggregate 0 32,260 0 69,296 1998 acquisitions in the aggregate 34,820 98,727 107,078 203,187 -------- -------- -------- -------- Net sales, pro forma 384,879 381,461 775,871 776,397 -------- -------- -------- -------- Cost of sales, as reported 279,632 193,484 529,319 391,330 1997 acquisitions in the aggregate 0 26,545 0 56,419 1998 acquisitions in the aggregate 26,449 82,517 83,633 167,015 -------- -------- -------- -------- Cost of sales, pro forma 306,081 302,546 612,952 614,764 -------- -------- -------- -------- Gross profit, as reported $ 70,427 $ 56,990 $139,474 $112,584 -------- -------- -------- -------- -------- -------- -------- -------- 20.1% 22.8% 20.9% 22.3% Gross profit, pro forma $ 78,798 $ 78,915 $162,919 $161,633 -------- -------- -------- -------- -------- -------- -------- -------- 20.5% 20.7% 21.0% 20.8%
15 U.S. ENVELOPE The following table presents historical financial data for the U.S. Envelope operations of the Company including acquisitions from their purchase dates.
QUARTER ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, ----------------------- ------------------------- 1998 1997 1998 1997 - ------------------------------------------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS) $ % $ % $ % $ % - ------------------------------------------------------------------------------------------------------------------- Net sales............................ $162,069 100.0 $139,677 100.0 $334,271 100.0 $279,377 100.0 Cost of sales........................ 129,333 79.8 108,325 77.5 264,952 79.3 216,648 77.5 Operating expenses................... 17,234 10.6 16,738 12.0 36,456 10.9 33,471 12.0 -------- ----- -------- ----- -------- ----- -------- ----- Operating income..................... $ 15,502 9.6 $ 14,614 10.5 $ 32,863 9.8 $ 29,258 10.5 -------- ----- -------- ----- -------- ----- -------- ----- -------- ----- -------- ----- -------- ----- -------- -----
QUARTER ENDED JUNE 30, 1998 COMPARED TO QUARTER ENDED JUNE 30, 1997 NET SALES -- Net sales increased by $22.4 million (16.0%) for the quarter ended June 30, 1998 compared to the quarter ended June 30, 1997, due primarily to acquisitions. Excluding acquisitions, the average selling price per thousand units decreased $0.60 (3.1%) to $18.48 for the quarter ended June 30, 1998, from the same period in the prior year. However in envelope operations, because of the Company's historical ability to pass through paper cost fluctuations to customers, the Company uses units sold and material margin (that is, net sales less net cost of materials) per unit as revenue trend indicators. Unit volume of 7.3 billion units, excluding acquisitions, in the second quarter of 1998 was flat compared to 1997. Material margin per thousand units, excluding acquisitions, decreased $0.48 (4.3%) to $10.61 in the second quarter of 1998 from the year-ago period, due to the generally soft market conditions and competitive pricing pressure. COST OF SALES -- Total cost of sales, as a percentage of sales, increased 2.3% from 77.5% in the three months ended June 30, 1997, to 79.8% in the second quarter of 1998, primarily as a result of the decrease in average selling price. Cost of sales includes materials, net of waste recovery revenue, labor, depreciation and other manufacturing costs. As discussed above changes in material costs have historically been passed through to customers. All other manufacturing costs, as a percent of sales, increased to 37.1% in the second quarter of 1998 from 35.7% in the second quarter of 1997, mainly due to the impact of acquisitions. Excluding acquisitions, all other manufacturing costs per thousand units increased only 0.7% to $6.86 in the second quarter of 1998 from the year earlier period due to increased costs offset by efficiency improvements. OPERATING EXPENSES -- Operating expenses decreased to 10.6% of sales in the second quarter of 1998 from 12.0% in the same period in 1997. This decline is due to the continuing consolidation and reorganization of the Company's envelope operations including acquisitions. SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1997 NET SALES -- Net sales increased by $54.9 million (19.6%) for the six months ended June 30, 1998 compared to the six months ended June 30, 1997, due primarily to acquisitions. Excluding acquisitions, the average selling price per thousand units decreased $0.62 (3.2%) to $18.65 for the six months ended June 30, 1998, from the same period in the prior year. However, because of the Company's historical ability to pass through paper cost fluctuations to customers, the Company uses units sold and material margin per unit as revenue trend indicators. Unit volume of 15.0 billion units, excluding acquisitions, in the six months ended June 30, 1998, represented a 3.2% increase compared to the same period in 1997. Material margin per thousand units, excluding acquisitions, decreased $0.48 (4.3%) to $10.70 in the six months ended June 30, 1998, from the year-ago period, due to competitive price pressures. 16 COST OF SALES -- Total cost of sales, as a percentage of sales, increased 1.8% from 77.5% in the first six months of 1997 to 79.3% in the first six months of 1998, primarily as a result of the decrease in average selling price. Cost of sales includes materials, net of waste recovery revenue, labor, depreciation and other manufacturing costs. As discussed above changes in material costs have historically been passed through to customers. All other manufacturing costs, as a percent of sales, increased to 37.3% in the six months ended June 30, 1998, from 35.6% in the first half of 1997, due to a combination of the decrease in average selling price and the impact of acquisitions. Excluding acquisitions, all other manufacturing costs per thousand units decreased 1.6% to $6.75 in the six months ended June 30, 1998, from the year earlier period due to efficiency improvements partially offset by increased costs. OPERATING EXPENSES -- Operating expenses decreased to 10.9% of sales in the six months ended June 30, 1998, from 12.0% in the same period in 1997. This decline is due to the continuing consolidation and reorganization of the Company's envelope operations including acquisitions. CANADIAN ENVELOPE The following table presents financial information with respect to the Canadian Envelope operations including acquisitions from their purchase dates. All amounts are in U.S. dollars. QUARTER ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, ---------------------- ------------------------- 1998 1997 1997 1998 - ------------------------------------------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS) $ % $ % $ % $ % - ------------------------------------------------------------------------------------------------------------------- Net sales............................ $28,476 100.0 $27,466 100.0 $56,673 100.0 $59,082 100.0 Cost of sales........................ 20,070 70.5 19,017 69.2 40,216 71.0 41,794 70.7 Operating expenses................... 3,751 13.2 4,176 15.2 7,307 12.9 8,746 14.8 ------- ----- ------- ----- ------- ----- ------- ----- Operating income..................... $ 4,655 16.3 $ 4,273 15.6 $ 9,150 16.1 $ 8,542 14.5 ------- ----- ------- ----- ------- ----- ------- ----- ------- ----- ------- ----- ------- ----- ------- -----
QUARTER ENDED JUNE 30, 1998 COMPARED TO THE QUARTER ENDED JUNE 30, 1997 NET SALES -- Net sales for the second quarter of 1998 were up 3.7% compared to the second quarter of 1997 despite a 4.0% reduction in the average exchange rate in the second quarter of 1998 compared to the same period in 1997. The average selling price in Canadian dollars increased 6.1% in the second quarter of 1998 compared to the year ago quarter but was diluted by the reduction in the average exchange rate previously discussed. Again, due to the ability to pass through material cost changes to customers, the Company primarily uses unit sales and material margin (that is, net sales less net cost of materials) per unit as revenue trend indicators in its envelope operations. Unit sales increased 1.8% to 1.4 billion in the second quarter of 1998 from the second quarter of 1997. Material margin per thousand units decreased 1.0% in the second quarter of 1998 compared to the second quarter of 1997, due to generally soft market conditions and competitive pricing pressures. COST OF SALES -- Total cost of sales, as a percentage of sales, increased from 69.2% in the second quarter of 1997 to 70.5% in the second quarter of 1998. Cost of sales includes materials, net of waste recovery revenue, labor, depreciation and other manufacturing costs. As discussed previously material cost changes have historically been passed through to customers. All other manufacturing costs, as a percent of sales, decreased 2.6% in the second quarter of 1998 compared to the same period in 1997, primarily due to the successful integration of PNG and Blue Line operations with Supremex. OPERATING EXPENSES - As a percentage of net sales, operating expenses decreased to 13.2% for the quarter ended June 30, 1998, from 15.2% in the same quarter of 1997. This represents a 13.2% decrease which is also due to the complete assimilation of the PNG and Blue Line operations, as well as continuing efficiency improvements. 17 SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1997 NET SALES -- Net sales for the six months ended June 30, 1998, decreased 4.1% compared to the six months ended June 30, 1997, due primarily to a 4.5% reduction in the average exchange rate between the periods. As previously discussed the Company primarily uses unit sales and material margin (that is, net sales less net cost of materials) per unit as revenue trend indicators in its envelope operations. Unit sales increased 0.4% to 3.0 billion in the six months ended June 30, 1998 from the year ago period. Material margin per thousand units decreased 3.9% in the six months ended June 30, 1998, compared to the first half of 1997, due to mix changes resulting from acquisitions and competitive price pressure. COST OF SALES -- Total cost of sales, as a percentage of sales, increased from 70.7% in the first six months of 1997 to 71.0% in 1998. Cost of sales includes materials, net of waste recovery revenue, labor, depreciation and other manufacturing costs. As discussed previously material cost changes have historically been passed through to customers. All other manufacturing costs, as a percent of sales, decreased 2.0% in the first six months of 1998 compared to the same period in 1997, primarily due to the successful integration of PNG and Blue Line operations with Supremex. OPERATING EXPENSES - As a percentage of net sales, operating expenses decreased to 12.9% for the six months ended June 30, 1998, from 14.8% in the same period of 1997. This represents a 12.8% decrease which is also attributable to the complete assimilation of the PNG and Blue Line operations, as well as continuing efficiency improvements. HIGH IMPACT COLOR PRINTING The following table presents financial information with respect to the High Impact Color Printing operations including acquisitions from their purchase dates.
QUARTER ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, 1998 1997 1998 1997 - ------------------------------------------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS) $ % $ % $ % $ % - ------------------------------------------------------------------------------------------------------------------- Net sales............................ $70,973 100.0 $40,339 100.0 $119,657 100.0 $81,055 100.0 Cost of sales........................ 59,829 84.3 33,319 82.6 99,144 82.9 67,021 82.7 Operating expenses................... 8,643 12.2 5,255 13.0 15,464 12.9 10,420 12.9 ------- ----- ------- ----- -------- ----- ------- ----- Operating income..................... $ 2,501 3.5 $ 1,765 4.4 $ 5,049 4.2 $ 3,614 4.4 ------- ----- ------- ----- -------- ----- ------- ----- ------- ----- ------- ----- -------- ----- ------- -----
QUARTER ENDED JUNE 30, 1998 COMPARED TO THE QUARTER ENDED JUNE 30, 1997 NET SALES -- Net sales increased by $30.6 million (75.9%) for the quarter ended June 30, 1998 compared to the quarter ended June 30, 1997. The increase in net sales includes $23.9 million of net sales related to acquisitions, augmented by $6.7 million (16.6%) internal growth. COST OF SALES -- Total cost of sales, as a percent of sales, increased 1.7% from 82.6% in the second quarter of 1997 to 84.3% in the second quarter of 1998. Paper costs, as a percent of sales, increased 5.2% in the second quarter of 1998 compared to the year ago period due to an increase in customer-specified paper and the impact of acquisitions. Other manufacturing costs, as a percent of sales, decreased 3.5% in the second quarter of 1998 compared to the prior year second quarter. This reduction is the result of continuing manufacturing improvements and the assimilation of acquisitions into GAC's management systems. OPERATING EXPENSES -- As a percent of sales, operating expense decreased 0.8% from 13.0% in the second quarter of 1997 to 12.2% in the second quarter of 1998. This cost improvement came from administrative expense savings, primarily reduced professional fees and bad debt expense. 18 SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1997 NET SALES -- Net sales increased by $38.6 million (47.6%) for the six months ended June 30, 1998 compared to the six months ended June 30, 1997. The increase in net sales includes $34.1 million attributable to acquisitions and $4.5 million (5.5%) from internal growth. Again the internal sales growth was attained despite competitive price pressures which were largely offset by manufacturing cost savings. COST OF SALES -- Total cost of sales, as a percent of sales, increased 0.2% from 82.7% in the first half of 1997 to 82.9% in the first half of 1998. Paper costs, as a percent of sales, increased 2.7% in the six months ended June 30, 1998 compared to the year ago period due to the sales price declines, as well as an increase in customer-specified paper and the impact of acquisitions. Other manufacturing costs, as a percent of sales, decreased 2.5% in the first six months of 1998 compared to the prior year period. This reduction is the result of continuing manufacturing improvements and successful assimilation of acquisitions into GAC's management systems. OPERATING EXPENSES -- As a percent of sales, operating expense were flat at 12.9% in the first six months of 1998 and 1997. Administrative cost savings as a result of efficiency improvements and assimilation of acquisitions are offset by increases in selling costs. COMMERCIAL PRINTING The following table presents financial information with respect to the Commercial Printing operations as a result of the merger effective May 30, 1998 accounted for using the pooling of interests method whereby prior period results of the combining companies are consolidated for all periods presented.
QUARTER ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, ---------------------- ------------------------- 1998 1997 1997 1998 - --------------------------------------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS) $ % $ % $ % $ % - --------------------------------------------------------------------------------------------------------------- Net sales............................ $38,634 100.0 $40,466 100.0 $79,703 100.0 $79,294 100.0 Cost of sales........................ 29,683 76.8 30,252 74.8 60,726 76.2 60,552 76.4 Operating expenses................... 6,964 18.0 7,129 17.6 14,099 17.7 13,979 17.6 ------- ----- ------- ----- ------- ----- ------- ----- Operating income..................... $ 1,987 5.2 $ 3,085 7.6 $ 4,878 6.1 $ 4,763 6.0 ------- ----- ------- ----- ------- ----- ------- ----- ------- ----- ------- ----- ------- ----- ------- -----
QUARTER ENDED JUNE 30, 1998 COMPARED TO THE QUARTER ENDED JUNE 30, 1997 NET SALES -- Net sales declined by $1.8 million (4.5%) for the quarter ended June 30, 1998 compared to the quarter ended June 30, 1997. The sales decline is attributable to a generally soft market in the second quarter of 1998 and continued pricing pressures due to competition. COST OF SALES -- Total cost of sales, as a percent of sales, increased 2.0% from 74.8% in the second quarter of 1997 to 76.8% in the second quarter of 1998. This is primarily the result of price declines as well as the management focus on merger issues in the second quarter of 1998. OPERATING EXPENSES -- As a percent of sales, operating expense increased 0.4% from 17.6% in the second quarter of 1997 to 18.0% in the second quarter of 1998, although the actual expense declined $165,000 as a result of efficiency improvements instituted to offset sales price declines. SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1997 NET SALES -- Net sales increased by $0.4 million (0.5%) for the six months ended June 30, 1998 compared to the six months ended June 30, 1997. The total sales dollar improvement was hampered by price declines as a result of competitive pressures and diversion of management attention to the second quarter merger. 19 COST OF SALES -- Total cost of sales, as a percent of sales, decreased 0.2% from 76.4% in the first half of 1997 to 76.2% in the first half of 1998. Additional cost improvements were affected by management focus on the second quarter merger transaction. OPERATING EXPENSES -- As a percent of sales, operating expense increased 0.1% from 17.6% in the first six months of 1997 to 17.7% in the first half of 1998. The increase is due to increased selling costs partially offset by efficiency improvements. BUSINESS COMMUNICATION PRINTING The business communications segment was initiated with the Poser acquisition on January 6, 1998. The 1997 financial results for this segment are those of IPC Graphics which was part of the mergers completed on May 30, 1998 and accounted for under the pooling of interest method under which prior year periods are restated. LABEL PRINTING The label printing segment was established via the MW Label acquisition on March 10, 1998. CORPORATE EXPENSES MERGER EXPENSES - Expenses of $771,000 and $3,002,000 were incurred for the three and six months ended June 30, 1998 related to the merger transactions completed May 30, 1998. AMORTIZATION EXPENSE -- Amortization expense increases of $1,110,000 and $1,749,000 for the three and six months ended June 30, 1998 compared to 1997 are the result of increased goodwill from acquisition activity in 1997 and 1998. GAIN (LOSS) ON DISPOSAL OF ASSETS --The gains of $272,000 and $750,000 for the three and six months ended June 30, 1998 relate primarily to the disposal of an excess warehouse facility in Portland and net gains on equipment disposals. The loss on disposal of assets of $83,000 and $943,000 for the three and six months ended June 30, 1997 primarily relates to building and equipment losses arising from the closing of the Pittsburgh warehouse and reorganizations of the plants in Salt Lake City and Chicago. INTEREST EXPENSE AND AMORTIZATION OF DEFERRED FINANCING COSTS -- The Company wrote off deferred financing costs of $6.1 million relating to bank debt which was repaid in November 1997, which resulted in a $652,000 and $1,308,000 decrease in the amortization of deferred financing costs in the three and six months ended June 30, 1998 compared to 1997. This expense decrease was offset by increased interest expense as a result of increased borrowings, principally the issuance in November 1997 of the Convertible Subordinated Notes in the amount of $152.1 million, as well as increased fees under the accounts receivable securitization program due to increased activity in 1998. INCOME TAXES -- The effective income tax rate for all periods was higher than the federal statutory rate due to state and provincial income taxes and certain goodwill amortization and a portion of the employee stock ownership contribution that are not tax deductible. The effective tax rate also reflects the impact of merging various Commercial Printing companies that had elected nontaxable status prior to the merger. For periods subsequent to the mergers, the Company expects its effective income tax rate to be approximately 43%. 20 LIQUIDITY AND CAPITAL RESOURCES HISTORICAL CASH FLOW -- Net cash provided by operating activities was $31.9 million for the first six months of 1998 as compared to $42.6 million in the same period for 1997. Capital expenditures totaled $31.3 million for the first six months of 1998 as compared to $21.9 million for the first six months of 1997, mainly due to the capital expenditures of companies acquired. Acquisition costs totaled $254.6 million in the first six months of 1998 compared to $6.8 million in the first six months of 1997. COMMON STOCK ISSUANCE -- In February 1998 the Company sold 4,864,600 shares of its common stock at a price of $19.625 per share through a group of underwriters led by Prudential Securities Incorporated. Net proceeds from the sale of stock of $91.2 million were used for general corporate purposes. Additional proceeds have resulted from the exercise of stock options. CAPITAL REQUIREMENTS -- The Company estimates that, based on current utilization of its existing equipment and expected demand, it will spend approximately $35.0 to $40.0 million per year on capital expenditures exclusive of acquisitions. In addition the Company expects to spend and capitalize approximately $7.0 to $9.0 million in 1998 and 1999 to upgrade its existing computer systems. The Company completed an assessment of existing computer systems in 1997 addressing "Year 2000" among other issues. The Company is in the process of updating the assessment of "Year 2000" issues to include companies acquired in 1998. Management presently believes that with the planned modifications to existing software in process and conversions to new software, as discussed above, the "Year 2000" issues will be largely mitigated. The estimated expense to modify existing software for "Year 2000" is not considered material. The Company expects to use net cash from operations and/or bank and leasing company borrowings to fund these expenditures. RECENT DEVELOPMENTS ACQUISITIONS -- Acquisitions pending or closed subsequent to June 30, 1998, are as follows, Effective July 31, 1998, the Company acquired Graphics Illustrated, Inc. and its affiliate Digital X-Press located in West Palm Beach, Florida. The combined companies had 1997 sales of approximately $10 million and the closing is expected in August. On August 10, 1998, the Company announced that it had agreed to acquire McLaren, Morris & Todd Limited of Mississauga, Ontario, Canada. McLaren, Morris and Todd Limited, a general commercial and label printer, had 1997 sales of approximately U.S. $34 million (C$50 million). Closing is expected in August. ITEM 3.--QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK --None PART II -- OTHER INFORMATION ITEM 1.--LEGAL PROCEEDINGS -- None ITEM 2.--CHANGES IN SECURITIES -- None ITEM 3.--DEFAULTS UPON SENIOR SECURITIES -- None ITEM 4.--SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS On April 29, 1998, the Company held its Annual Meeting of Stockholders, at which the following matters were voted upon: ELECTION OF DIRECTORS--The following individuals were re-elected to the Board of Directors; Gerald F. Mahoney, Paul V. Reilly, Frank P. Diassi, J. Bruce Duty, Frank J. Hevrdejs and Jerome W. Pickholz. 1998 INCENTIVE STOCK OPTION PLAN--The Company's 1998 Incentive Stock Option Plan was approved by the following vote: 10,964,638 For, 6,007,700 Against, 99,227 Abstentions. 21 AMENDMENT OF ARTICLES OF INCORPORATION--An amendment to the Company's Articles of Incorporation increasing the number of authorized shares from 30,000,000 to 100,000,000 was approved by the following vote: 10,903,013 For, 6,071,880 Against, 96,672 Abstentions. SELECTION OF AUDITORS--The selection of Deloitte & Touche, LLP as independent auditors of the Company for the fiscal year ending 1998 was ratified by the following vote: 16,981,661 For, 10,325 Against, 79,579 Abstentions. ITEM 5.--OTHER INFORMATION - NONE 22 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 June 30, 1997. 3(i)(a)* Amendment to Articles of Incorporation of the Company. 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 Indenture dated February 24, 1994 by and between the Company and Shawmut Bank, National Association, as Trustee, with respect to the $39,500,000 in aggregate principal amount of Original Senior Deferred Coupon Notes and Exchange Senior Deferred Coupon Notes due 2006, including the form of Deferred Coupon Note - incorporated by reference from Exhibit 4.2 of the Company's Registration Statement on Form S-1 dated March 25, 1994. 4.3 Indenture dated as of February 24, 1994 by and between M-W Corp. and Shawmut Bank, National Association, as Trustee, with respect to the 10-1/2% Original Senior Subordinated Notes and the 10-1/2% Exchange Senior Subordinated Notes due 2004, including the form of Note and the guarantees of the Company, Wisco and Pavey - incorporated by reference from Exhibit 4.3 of the Company's Registration Statement on Form S-1 dated March 25, 1994. 4.3.1 Supplemental Indenture dated July 31, 1995 to the Indenture identified in Exhibit 4.3 - incorporated by reference from Exhibit 4.4.1 of the Company's Registration Statement on Form S-1 dated September 21, 1995. 4.3.2 Form of Second Supplemental Indenture to the Indenture identified in Exhibit 4.3 - incorporated by reference from Exhibit 4.4.2 of the Company's Registration Statement on Form S-1 dated September 21, 1995. 4.4 Form of Stockholders Agreement among the Company and certain holders of the Common Stock effective as of February 24, 1994 and Amendment No. 1 thereto - incorporated by reference from Exhibit 4.4 of the Company's Registration Statement on Form S-1 dated March 25, 1994. 4.5 Form of Employee Stockholders Agreement among the Company and certain employee holders of the Common Stock effective as of February 24, 1994 - incorporated by reference from Exhibit 4.5 of the Company's Registration Statement on Form S-1 dated March 25, 1994. 4.6 Form of American Mail-Well Employee Stockholders Agreement among the Company and certain holders of the Common Stock - incorporated by reference from Exhibit 10.44 of the Company's Registration Statement on Form S-1 dated May 9, 1995. 4.7 Form of Registration Rights Agreement among the Company and certain holders of the Common Stock effective as of February 24, 1994 - incorporated by reference from Exhibit 4.6 of the Company's Registration Statement on Form S-1 dated March 25, 1994. 4.8 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). 4.9 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). 10.1 Asset Purchase Agreement dated December 7, 1993 by and among GP Envelope, G-P, M- W Corp. and the Company, as amended - incorporated by reference from Exhibit 10.1 of the Company's Registration Statement on Form S-1 dated March 25, 1994. 23 10.2 General Indemnity Agreement between M-W Corp. and Amwest Surety Insurance Company together with form of Letter of Credit - incorporated by reference from Exhibit 10.16 of the Company's Registration Statement on Form S-1 dated March 25, 1994. 10.3 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. 10.4 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. 10.5 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. 10.6 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. 10.7 Company 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 June 30, 1997. 10.8 Form of the Company 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. 10.9 Form of the Company Nonqualified Stock Option Agreement - incorporated by from Exhibit 10.23 of the Company's Registration Statement on Form S-1 dated March 25, 1994. 10.10 Asset Purchase Agreement dated October 31, 1994 by and between American and M-W Corp., as amended - incorporated by reference from Exhibit 10.30 of the Company's Registration Statement on Form S-1 dated May 9, 1995. 10.11 Share Purchase Agreement dated July 20, 1995, by and among the shareholders of Supremex, 3159051 Canada Inc. and Schroder Investment Canada Limited and Schroder Venture Managers (North America) Inc. - incorporated by reference from Exhibit 10.25 of the Company's Registration Statement on Form S-1 dated September 21, 1995. 10.12 Indemnification Escrow Agreement dated July 31, 1995, by and among 3159051 Canada Inc., Royal Trust Company of Canada and Schroder Investment Canada Limited and Schroder Venture Mangers (North America) Inc. - incorporated by reference from Exhibit 10.26 of the Company's' Registration Statement on Form S-1 dated September 21, 1995. 10.13 Guaranty dated July 31, 1995, executed by M-W Corp. in favor of Schroder Investment Canada Limited and Schroder Venture Mangers (North America) Inc., as Agents - incorporated by reference from Exhibit 10.27 of the Company's Registration Statement on Form S-1 dated September 21, 1995. 10.14 Securities Purchase Agreement dated as of August 2, 1995, as amended, by and among GAC Acquisition Company, Inc., GAC and the securityholders of GAC and McCown De Leeuw & Co., as Agents - incorporated by reference from Exhibit 10.28 of the Company's Registration Statement on Form S-1 dated September 21, 1995. 10.15 Guaranty dated as of August 2, 1995, by M-W Corp. in favor of McCown De Leeuw & Co., as Agents - incorporated by reference from Exhibit 10.30 of the Company's Registration Statement on Form S-1 dated September 21, 1995. 10.16 Asset Purchase Agreement dated April 26, 1996 by and between Quality Park Products, Inc. and Mail-Well I Corporation - incorporated by reference from Exhibit 1 of the Company's Form 8-K dated May 2, 1996. 10.17 Acquisition Agreement and Plan of Share Exchange by and among Graphic Arts Center, Inc. and Shepard Poorman Communications Corporation dated November 6, 1996-incorporated by reference from Exhibit 10.33 of the Company's Annual Report on Form 10-K for the year ended December 31, 1996. 10.18 Amendment No. 1 to Acquisition Agreement and Plan of Share Exchange by and among Graphic Arts Center, Inc. and Shepard Poorman Communications Corporation dated November 6, 1996-incorporated by reference from Exhibit 10.34 of the Company's Annual Report on Form 10-K for the year ended December 31, 1996. 24 10.19 Asset Purchase Agreement dated as of October 15, 1996 by and between Supremex, Inc. and PNG Products, Inc. Pac National Group and PNG Envelope Internationale, Inc.-incorporated by reference from Exhibit 10.35 of the Company's Annual Report on Form 10-K for the year ended December 31, 1996 10.20 Master Lease Agreement dated as of August 1, 1996 between General Electric Capital Corporation and Mail-Well, Inc., Mail-Well I Corporation, Graphic Arts Center, Inc., Mail-Well West, Pavey Envelope and Tag Corp., Wisco II, L.L.C and Wisco Envelope Corp-incorporated by reference from Exhibit 10.36 of the Company's Annual Report on Form 10-K for the year ended December 31, 1996. 10.21 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. 10.22 Mail-Well Receivables Master Trust Pooling and Servicing Agreement dated as of November 15, 199 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. 10.23 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. 10.24 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. 10.25 Intercreditor Agreement dated as of November 15, 1996 by and among Citicorp North America, Inc., as Securitization Company Agent, Banque Paribas, New York Branch, as Liquidity Agent, Banque Paribas, as Credit Lenders' Agent, Norwest Bank Colorado, National Association, as Trustee, Mail-Well Trade Receivables Corporation, as Servicer, originator and Mail-Well Credit Borrower, Supremex, Inc., as the Supremex Credit Borrower and the other parties hereto-incorporated by reference from Exhibit 10.43 of the Company's Annual Report on Form 10-K for the year ended December 31, 1996. 10.26 Series 1996-1 Asset Purchase Agreement among Corporate Receivables Corporation, the Liquidity Providers Parties hereto, Citicorp North America, Inc., as Securitization Company Agent, Banque Paribas, New York Branch, as Liquidity Agent, and Norwest Bank Colorado, National Association, as trustee, dated as of November 15, 1996-incorporated by reference from Exhibit 10.44 of the Company's Annual Report on Form 10-K for the year ended December 31, 1996. 10.27 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 10.28 Company's 1998 Incentive Stock Option Plan--incorporated by reference from the Company's definitive proxy statement for the regular annual meeting of stockholders held April 29, 1998 10.29 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-incorporated by reference from the Company's 10-Q for the quarter ended March 31, 1998. 10.30 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 the Company's 10-Q for the quarter ended March 31, 1998. 25 10.31 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 the Company's 10-Q for the quarter ended March 31, 1998. 10.32 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 the Company's 10-Q for the quarter ended March 31, 1998. 10.33 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 the Company's 10-Q for the quarter ended March 31, 1998. 10.34 Stock 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. 10.35 Asset Purchase Agreement dated as of January 31, 1998 among Lawson Mardon Packaging USA, Inc (USA), incorporated by reference from the Company's report on Form 8-K dated March 10, 1998. 10.36 Asset Purchase Agreement dated as of January 31, 1998 among 3014597 Nova Scotia Company and Lawson Mardon Packaging Inc. (Canada), incorporated by reference from the Company's report on Form 8-K dated March 10, 1998. 10.37 Agreement and Plan of Merger among Mail-Well I Corporation, Mail-Well, Inc. and Anderson Lithograph Holding Corp. dated April 23, 1998, incorporated by reference from the Company's report on Form 8-K dated May 28, 1998. 10.38 Acquisition Agreement and Plan of Merger among Mail-Well, Inc., Mail-Well I Corporation, Color Art, Inc. and certain controlling shareholders thereof, dated May 15, 1998, incorporated by reference from the Company's report on Form 8-K dated May 30, 1998. 27.1* Financial Data Schedule - as of and for the three months ended June 30, 1998. 27.2* Restated Financial Data Schedule - as of and for the six months ended June 30, 1996 and 1997, and as of and for the nine months ended September 30, 1996 and 1997.
- ------------- * Filed herewith. (b) REPORTS ON FORM 8-K 1. Current report filed on Form 8-K dated as of May 28, 1998 in connection with the acquisition of Anderson Lithograph Holding Corp. 2. Current report on Form 8-K dated as of May 30, 1998 in connection with the acquisition of the commercial printing group. 3. Amendment to Form 8-K dated May 30, 1998 incorporating the restated financial statements of the Company. SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED. MAIL-WELL, INC. (Registrant) By /s/ PAUL V. REILLY --------------------------- Paul V. Reilly President, Chief Operating Officer August 12, 1998 26 EX-3.(I)(A) 2 EXHIBIT 3(I)(A) ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF MAIL-WELL, INC. Mail-Well, Inc. (the "Company"), a corporation duly organized and existing under and by virtue of the Colorado Business Corporation Act, does hereby certify: FIRST: The name of the corporation is Mail-Well, Inc. SECOND: The following amendment to the Articles of Incorporation was adopted by the Board of Directors of the Company, at a regular meeting of the Board on February 4, 1998, and adopted by a vote of shareholders on April 29, 1998, with a number of votes cast by each voting group sufficient for approval under the Colorado Business Corporation Act: RESOLVED, that the Articles of Incorporation of the Company, as amended (the "Articles of Incorporation"), be amended by deleting the first sentence of Article IV in its entirety and substituting the following sentence: The total number of shares of stock which the Corporation shall have the authorioty to issue is one hundred million twenty-five thousand (100,025,000) shares, of whichi twenty-five thousnad (25,000) shares are to be preferred stock, par value $0.01 per share (the "Preferred Stock"), and one hundred million (100,000,000) shares are to be shares of common stock, par value $0.01 per share (the "Common Stock"). IN WITNESS WHEREOF, Mail-Well, Inc. has caused these Articles of Amendment to be signed by Roger Wertheimer as Vice President--General Counsel and Secretary this 18th day of May, 1998. MAIL-WELL, INC. By: /s/ Roger Wertheimer ------------------------------------ Roger Wertheimer Vice President-General Counsel and Secretary EX-27.1 3 EXHIBIT 27.1
5 1,000 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 24,961 15,374 120,249 0 118,271 295,069 480,495 (101,939) 983,486 158,342 0 0 0 486 290,855 983,486 668,793 668,793 529,319 620,380 1,077 0 12,991 34,345 13,513 20,832 0 0 0 20,832 0.46 0.42
EX-27.2 4 EXHIBIT 27.2
5 1,000 6-MOS 9-MOS 6-MOS 9-MOS DEC-31-1996 DEC-31-1996 DEC-31-1997 DEC-31-1997 JAN-01-1996 JAN-01-1996 JAN-01-1997 JAN-01-1997 JUN-30-1996 SEP-30-1996 JUN-30-1997 SEP-30-1997 2,542 3,487 15,687 15,703 0 0 0 20,143 117,767 135,101 67,942 78,009 0 0 0 0 80,882 76,528 82,696 86,747 211,611 224,912 166,786 197,642 297,731 282,548 280,814 295,002 (48,771) (48,558) (53,963) (54,221) 586,097 595,736 562,185 629,988 114,832 125,373 140,266 150,655 0 0 0 0 0 0 0 0 0 0 0 0 307 307 424 424 129,554 135,075 156,628 165,887 586,097 595,736 562,185 629,988 459,126 701,828 503,914 782,709 459,126 701,828 503,914 782,709 364,687 553,701 391,330 609,345 428,931 651,802 465,396 721,348 (90) (190) 1,029 2,376 0 0 0 0 17,475 26,658 12,328 18,817 12,810 23,558 25,161 40,168 5,182 9,464 9,434 15,620 7,628 14,094 15,727 24,548 0 0 0 0 0 0 0 0 0 0 0 0 7,628 14,0904 15,727 24,548 0.19 0.36 0.39 0.61 0.19 0.35 0.38 0.59
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