-----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, ItXMEw36vLUHCV4NN5aKegiiC7tD2z/4VbvIJbdEFkN21lgnQMsxl1mw2qA+8AQq RQCYwAqKHNKwmlm9u+qlCQ== 0001068800-99-000234.txt : 19990514 0001068800-99-000234.hdr.sgml : 19990514 ACCESSION NUMBER: 0001068800-99-000234 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990513 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: 99620427 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 MAIL-WELL, INC. FORM 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 March 31, 1999 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, 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 April 30, 1999, the Registrant had 48,938,291 shares of Common Stock, $0.01 par value, outstanding. ======================================================================== 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 18 Part II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 19 Signature Page 22 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS MAIL-WELL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
MARCH 31, 1999 DECEMBER 31, 1998 -------------- ----------------- (UNAUDITED) CURRENT ASSETS Cash and cash equivalents $ 2,301 $ 1,375 Receivables, net 149,046 130,523 Investment in accounts receivable securitization 14,848 47,069 Accounts receivable -- other 8,935 12,686 Income tax receivable 2,118 10,715 Inventories, net 116,530 114,131 Other current assets 16,813 19,351 ---------- ---------- Total current assets 310,591 335,850 PROPERTY, PLANT AND EQUIPMENT, NET 462,525 437,732 EQUITY INVESTMENT 22,725 - GOODWILL, NET 350,872 322,149 OTHER ASSETS, NET 28,903 32,225 ---------- ---------- TOTAL $1,175,616 $1,127,956 ========== ========== CURRENT LIABILITIES Accounts payable $ 97,338 $ 87,023 Accrued compensation and vacation 45,970 41,401 Other current liabilities 53,894 47,192 Current portion of long-term debt and capital leases 9,865 8,036 ---------- ---------- Total current liabilities 207,067 183,652 LONG-TERM DEBT AND CAPITAL LEASES 582,268 583,427 DEFERRED INCOME TAXES 50,809 47,534 OTHER LONG-TERM LIABILITIES 14,139 10,468 ---------- ---------- Total liabilities 854,283 825,081 ---------- ---------- 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, 48,885,298 and 48,846,904 shares issued and outstanding, respectively (including 3,896,544 shares held by ESOP) 489 488 Paid-in capital 217,342 217,218 Retained earnings 105,512 90,740 Accumulated other comprehensive income (loss) (5,510) (9,071) ---------- ---------- Total shareholders' equity 317,833 299,375 ---------- ---------- TOTAL $1,175,616 $1,127,956 ========== ========== See notes to unaudited consolidated financial statements.
3 MAIL-WELL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS, EXCEPT EARNINGS PER SHARE AMOUNTS)
THREE MONTHS ENDED ------------------ MARCH 31, --------- 1999 1998 ---- ---- NET SALES $440,417 $318,734 COST OF SALES 340,752 249,687 -------- -------- GROSS PROFIT 99,665 69,047 OTHER OPERATING COSTS Selling, administrative and other 62,037 43,270 Merger costs - 2,231 -------- -------- Total other operating costs 62,037 45,501 -------- -------- OPERATING INCOME 37,628 23,546 OTHER (INCOME) EXPENSE Interest expense 12,767 7,390 Other (income) expense (176) (603) -------- -------- INCOME BEFORE INCOME TAXES 25,037 16,759 PROVISION FOR INCOME TAXES 10,265 7,226 -------- -------- NET INCOME $ 14,772 $ 9,533 ======== ======== EARNINGS PER SHARE - BASIC $ 0.30 $ 0.22 EARNINGS PER SHARE - DILUTED $ 0.28 $ 0.20 WEIGHTED AVERAGE SHARES - BASIC 48,864 43,515 WEIGHTED AVERAGE SHARES - DILUTED 58,260 53,717 See notes to unaudited consolidated financial statements.
4 MAIL-WELL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (DOLLARS IN THOUSANDS)
THREE MONTHS ENDED ------------------ MARCH 31, --------- 1999 1998 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 14,772 $ 9,533 Adjustments to reconcile net income to cash provided by operations Depreciation and amortization 12,705 8,355 Deferred income taxes 2,874 2,495 Other 1,007 137 Changes in operating assets and liabilities, net of effects of acquired businesses: Receivables (9,929) (13,612) Inventories (536) (4,954) Accounts payable 9,880 4,906 All other assets and other liabilities 22,408 12,481 -------- --------- Net cash provided by operating activities 53,181 19,341 -------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Acquisition costs, net of cash acquired (46,491) (140,927) Equity investment (22,726) - Capital expenditures (21,907) (14,011) Other investing activities 916 500 -------- --------- Net cash used in investing activities (90,208) (154,438) -------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Changes due to accounts receivable securitization, net 32,443 (20,279) Net proceeds from common stock issuance 124 92,005 Proceeds from long-term debt 101,376 97,388 Repayments of long-term debt and capital leases (96,505) (61,392) Other financing activities (558) (1,239) -------- --------- Net cash provided by financing activities 36,880 106,483 -------- --------- EFFECT OF EXCHANGE RATE CHANGES ON CASH 1,073 702 -------- --------- NET CHANGE IN CASH AND CASH EQUIVALENTS 926 (27,912) BALANCE AT BEGINNING OF PERIOD 1,375 40,911 -------- --------- BALANCE AT END OF PERIOD $ 2,301 $ 12,999 ======== ========= See notes to unaudited consolidated financial statements.
5 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 prints and manufactures envelopes in the United States and Canada and is a leading commercial printer in the United States. 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. The equity investment in Porter Chadburn plc is accounted for on the equity method since control does not exist and we own 29.9% as of March 31, 1999. See Note 3 for further discussion. 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. The Company believes that the report filed on Form 10-Q is representative of its financial position, its results of operations and its cash flows for the three months ended March 31, 1999 and 1998. INVENTORIES-- Detail of inventories, in thousands:
MARCH 31, 1999 DECEMBER 31, 1998 -------------- ----------------- Raw materials $ 46,471 $ 45,720 Work in process 22,552 22,089 Finished goods 51,228 49,256 Reserve for obsolescence, loss and other (3,721) (2,934) -------- -------- $116,530 $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 share owners. A summary of comprehensive income follows:
THREE MONTHS ENDED ------------------ MARCH 31, 1999 MARCH 31, 1998 -------------- -------------- (in thousands) Net income $14,772 $9,533 Currency translation adjustments, net 3,527 302 Unrealized loss on investments, net 34 (132) ------- ------ Comprehensive income $18,333 $9,703 ======= ======
6 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.
INCOME SHARES PER-SHARE (NUMERATOR) (DENOMINATOR) AMOUNT ----------- ------------- ------ (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) FOR THE THREE MONTHS ENDED MARCH 31, 1999 EARNINGS PER SHARE - BASIC Income available to common shareholders $14,772 48,864 $0.30 ===== EFFECT OF DILUTIVE SECURITIES Stock options - 1,173 Convertible Subordinated Notes 1,313 8,003 Other - 220 ------- ------ EARNINGS PER SHARE - DILUTED Income available to common shareholders including assumed conversions $16,085 58,260 $0.28 ======= ====== ===== FOR THE THREE MONTHS ENDED MARCH 31, 1998 EARNINGS PER SHARE - BASIC Income available to common shareholders $ 9,533 43,515 $0.22 ===== EFFECT OF DILUTIVE SECURITIES Stock options - 1,954 Convertible Subordinated Notes 1,083 8,003 Other - 245 ------- ------ EARNINGS PER SHARE - DILUTED Income available to common shareholders including assumed conversions $10,616 53,717 $0.20 ======= ====== =====
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 the year 2000, 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 use software related internal costs as incurred. The effect of adopting the SOP was immaterial to the quarter ended March 31, 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. 7 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 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 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 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 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 accompanying consolidated financial statements reflect certain minor adjustments to conform the accounting policies of the Commercial Printing Group to the Company's. 8 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) (LOSS) 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 ======== ====== ====== ===== Income (loss) includes aggregate merger expenses of the Commercial Printing Group totaling $2.2 million in the first quarter of 1998. These costs consist primarily of investment banking, legal and accounting fees. 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. 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, purchase price allocation to inventory and property, plant and equipment for certain acquisitions have not been finalized. Therefore, the amount of goodwill could be adjusted within one year of the purchase. 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 value of the offer, including the assumption of debt and transaction costs will be approximately $102.5 million. Porter Chadburn earned $8.7 million (pre-tax) on sales of $126.2 million for its fiscal year ended March 27, 1998. For the six months ended September 25, 1998, Porter Chadburn earned $4.5 million (pre-tax) on sales of $62.7 million. (All U.S. dollar amounts are based upon an exchange rate for British pounds of $1.642). 9 As of March 18, 1999, the Company had acquired on the open market 29.9% of the outstanding shares of Porter Chadburn. These costs have been recorded as an equity investment as of March 31, 1999. For the quarter ended March 31, 1999, the Company recorded $70,000 of income in Other Income (Expense) related to its portion of the earnings of Porter Chadburn, net of amortization of the differential between cost and book value of the investment. As of May 12, 1999, the Company owned in excess of 90% of the outstanding shares of Porter Chadburn, and expects to complete the acquisition in the second quarter. 4. LONG-TERM DEBT AND CAPITAL LEASES Long-term debt consists of the following (in thousands):
INTEREST RATE AT MARCH 31, 1999 MARCH 31, 1999 DECEMBER 31, 1998 -------------- -------------- ----------------- Bank Borrowings: Unsecured loan, due June 9, 2003 6.88% $ 24,795 $ 25,461 Unsecured revolving loan facility, due March 31, 2003 5.88% 97,000 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 18,288 20,952 -------- -------- 592,133 591,463 Less current maturities (9,865) (8,036) -------- -------- Long-term debt and capital leases $582,268 $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. The Company also incurred $499,000 of restructuring costs for the quarter ended March 31, 1999 relating to the relocation of personnel, equipment and inventory which under generally accepted accounting principles could not be previously accrued for as part of the Company's previously announced restructuring initiative. These costs are also 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 208 personnel had been terminated as of March 31, 1999 and the remaining terminations are expected to be completed by mid 1999. 10 The following table summarizes the costs associated with the restructuring program (in thousands):
ASSET SEVERANCE & PROPERTY WRITE-DOWNS RELATED COSTS EXIT COSTS TOTAL ----------- ------------- ---------- ----- ENVELOPES Initial reserve $ 8,912 $2,825 $ 500 $12,237 Utilized in 1998 8,912 433 26 9,371 ------- ------ ------ ------- Balance at 12/31/98 - 2,392 474 2,866 Utilized in 1999 - 469 45 514 ------- ------ ------ ------- Balance 3/31/99 $ - $1,923 $ 429 $ 2,352 ======= ====== ====== ======= COMMERCIAL PRINTING Initial reserve $ 2,787 $ 82 $ 855 $ 3,724 Utilized in 1998 2,787 82 55 2,924 ------- ------ ------ ------- Balance 12/31/98 - - 800 800 Utilized in 1999 - - 146 146 ------- ------ ------ ------- Balance 3/31/99 $ - $ - $ 654 $ 654 ======= ====== ====== ======= 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 - 469 191 660 ------- ------ ------ ------- Balance 3/31/99 $ - $1,923 $1,083 $ 3,006 ======= ====== ====== =======
6. 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 Commercial Printing Group 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 Envelopes segment prints and manufactures envelopes designed to customer specifications. 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 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. Early in 1999, the Company combined the High Impact Color Printing segment with the Commercial Printing Group 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 months ended March 31, 1999 and 1998 is presented below: 11
Three Months Ended March 31, ---------------------------- 1999 1998 ---- ---- NET SALES: Commercial Printing $ 183,799 $ 99,493 Envelopes 198,875 190,659 Printing for Distributors 32,876 24,557 Labels 24,867 4,025 ---------- ---------- Total $ 440,417 $ 318,734 ---------- ---------- OPERATING INCOME (LOSS): Commercial Printing $ 13,913 $ 5,753 Envelopes 25,117 21,484 Printing for Distributors 2,757 1,701 Labels 1,681 263 Corporate (5,840) (5,655) ---------- ---------- Total $ 37,628 $ 23,546 ---------- ---------- DEPRECIATION AND AMORTIZATION: Commercial Printing $ 5,076 $ 3,880 Envelopes 3,796 3,449 Printing for Distributors 531 245 Labels 1,123 161 Corporate 1,676 522 ---------- ---------- Total $ 12,202 $ 8,257 ---------- ---------- March 31, December 31, 1999 1998 ---- ---- IDENTIFIABLE ASSETS: Commercial Printing $ 551,751 $ 495,918 Envelopes 511,933 500,355 Printing for Distributors 98,889 98,610 Labels 97,727 93,188 Corporate (84,684) (60,115) ---------- ---------- Total assets $1,175,616 $1,127,956 ---------- ----------
12 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: * 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 financing 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 * 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, HISTORICAL FINANCIAL DATA BY SEGMENT (IN THOUSANDS)
QUARTER ENDED MARCH 31, ----------------------- 1999 1998 ---- ---- Net sales Commercial Printing $183,799 $ 99,493 Envelopes 198,875 190,659 Printing for Distributors 32,876 24,557 Labels 24,867 4,025 -------- -------- Total net sales 440,417 318,734 -------- -------- Operating income Commercial Printing 13,913 5,753 Envelopes 25,117 21,484 Printing for Distributors 2,757 1,701 Labels 1,681 263 Corporate (5,840) (3,424) Merger costs - (2,231) -------- -------- Total operating income 37,628 23,546 Interest expense (12,767) (7,390) Other income (expense) 176 603 Income tax expense (10,265) (7,226) -------- -------- Net income $ 14,772 $ 9,533 ======== ========
13 Net sales for 1999 increased 38.2% to $440.4 million compared to net sales of $318.7 million for 1998. This increase in net sales was attributable to sales from companies acquired during 1999, a full quarter of sales from companies acquired during 1998 and internal growth in each segment, offset by declines in the Canadian exchange rate. Gross profit of $99.7 million for 1999 represents a 44.3% increase over 1998. Expressed as a percent of net sales, gross profit increased by .9% to 22.6% for 1999 compared to 21.7% for 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 decreased 0.2% to 14.1% in 1999 from 14.3% in 1998 due to efficiency improvements as a result of the assimilation of acquisitions. Operating income increased 59.8% from 1998. Earnings for 1999 increased 55.0% to $14.8 million from $9.5 million in the prior year. Earnings per diluted share increased 40.0% to $0.28 in 1999 from $0.20 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 $0.5 million of restructuring costs in the quarter ended March 31, 1999 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. RESULTS OF OPERATIONS BY BUSINESS SEGMENT Commercial Printing The following table presents historical financial data for the Commercial Printing segment, including acquisitions from their purchase dates. The results also 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 High Impact Color Printing segment with the Commercial Printing segment. In addition, Mail-Well Graphics was reclassified from Envelopes to Commercial Printing.
QUARTER ENDED MARCH 31, - ----------------------- 1999 1998 ---- ---- (DOLLARS IN THOUSANDS) $ % $ % -------- ----- ------- ----- Net sales $183,799 100.0 $99,493 100.0 Cost of sales 143,716 78.2 79,105 79.5 Operating expenses 26,170 14.2 14,635 14.7 -------- ----- ------- ----- Operating income $ 13,913 7.6 $ 5,753 5.8 ======== ===== ======= =====
NET SALES --Net sales increased by $84.2 million (84.7%) for the quarter ended March 31, 1999 compared to the quarter ended March 31, 1998, primarily due to acquisitions in 1998 and 1999. Without acquisitions net sales were essentially unchanged as volume gains were offset by declining paper prices. COST OF SALES -- Cost of sales includes material (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 quarter ended March 31, 1998 to 78.2% for the quarter ended March 31, 1999. This decline was primarily due to the impact of the benefits from new acquisitions adopting our corporate purchasing programs and continuous improvement initiatives. 14 OPERATING EXPENSES -- Operating expenses include selling and administrative expenses. For the quarter ended March 31, 1999, operating expenses, as a percent of sales, decreased 0.5% to 14.2% from 14.7% in the prior year due to continuous improvement initiatives. Envelopes The following table presents historical financial data for the Envelopes operations of the Company, including acquisitions from their purchase dates. The results of Mail-Well Graphics for 1998 have been reclassified to the Commercial Printing segment.
QUARTER ENDED MARCH 31, - ----------------------- (DOLLARS IN THOUSANDS) 1999 1998 ---- ---- (DOLLARS IN THOUSANDS) $ % $ % -------- ----- -------- ----- Net sales $198,875 100.0 $190,659 100.0 Cost of sales 149,533 75.2 147,018 77.1 Operating expenses 24,225 12.2 22,157 11.6 -------- ----- -------- ----- Operating income $ 25,117 12.6 $ 21,484 11.3 ======== ===== ======== =====
NET SALES -- Net sales increased by $8.3 million (4.3%) for the quarter ended March 31, 1999 compared to the quarter ended March 31, 1998. Excluding acquisitions, sales decreased $1.1 million. Sales growth was more than offset by declining paper prices and a decline in the average exchange rate for the Canadian dollar. The average selling price per thousand units, excluding acquisitions, decreased 1.9% to $18.98 for the quarter ended March 31, 1999, from $19.35 for the quarter ended March 31, 1998 due to a decrease in paper costs offset by changes in mix. Because paper cost changes have historically been passed through to the customer, the Company uses volumes of units sold and material gross margin (that is, net sales less cost of materials, net of waste recovery revenue) as revenue trend indicators in its envelope operations. Excluding acquisitions, unit volume increased by 2.3% to 10.1 billion units in the first quarter of 1999 from 9.9 billion units in the same quarter in 1998. Material gross margin per thousand units sold, excluding acquisitions, increased 6.6% to $11.81 for the quarter ended March 31, 1999 from $11.08 for the quarter ended March 31, 1998 primarily due to improved product mix and continued improvement in the Canadian business, offset by a decline in the average exchange rate for Canada by 5.5%. COST OF SALES -- Cost of sales includes paper (net of waste recovery revenue), labor, depreciation and other manufacturing and distributions costs. Total cost of sales, as a percent of sales, decreased from 77.1% for the quarter ended March 31, 1998 to 75.2% for the quarter ended March 31, 1999. The decrease was due to the positive benefits of the Company's restructuring plan and the impact of purchasing and productivity programs. OPERATING EXPENSES -- Operating expenses include selling and administrative expenses. For the quarter ended March 31, 1999, operating expenses, as a percent of sales, increased 0.6% to 12.2% from 11.6% in the prior year. The primary reasons were restructuring expenses of $0.2 million incurred in the quarter ended March 31, 1999, acquisition of companies with higher operating expenses as a percent of sales and a decline in the average exchange rate for Canada by 5.5%. 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. 15 Corporate expenses for the quarter ended March 31, 1999 increased $2.4 million 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 quarter ended March 31, 1999. The increase in corporate administrative expense was attributable to expanded treasury and finance operations. MERGER COSTS-Effective May 30, 1998, the Company completed its mergers with six commercial printing companies and one distributor company through the exchange of common stock. In connection with the mergers, transaction costs incurred of $2.2 million were expensed in the quarter ended March 31, 1998. 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 for the quarter ended March 31, 1999 increased $5.4 million compared to 1998 as a result of higher average bank debt balances, primarily due to acquisitions. 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 $100.0 million until November 2001. At March 31, 1999 and 1998 $85.0 million and $71.0 million, respectively, had been sold under this agreement. INCOME TAX EXPENSE - The effective tax rate for both periods was higher than the federal statutory rate due to state and provincial income taxes and certain goodwill amortization that are 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 $53.2 million and $19.3 million for the quarters ended March 31, 1999 and 1998, respectively. Acquisitions and equity investments required cash payments of $69.2 million and $140.9 million for the quarters ended March 31, 1999 and 1998, respectively. Other investing activities include capital expenditures, which were $21.9 million and $14.0 million for the quarters ended March 31, 1999 and 1998, respectively. Net cash flow from financing activities was positively affected by the increase in receivables sold under the securitization agreement at March 31, 1999 and 1998 of $32.4 million and ($20.3) million, respectively. At March 31, 1999 the Company had approximately $203.0 million of available credit under the $300.0 million Bank of America credit facility. The credit available will be reduced by approximately $79.9 million upon completion of the acquisition of the shares of Porter Chadburn. See Recent Developments below for further discussion. In addition, at March 31, 1999, the Company had sold $85.0 million of receivables under the $100.0 million securitization 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 March 31, 1999, there was availability remaining to issue approximately $52.0 million of securities under the shelf registration statement. FOREIGN CURRENCY --With the strengthening U.S. Dollar, the Company's foreign currency exposure currently relates to its Canadian operations. The average Canadian Dollar exchange rate was 0.6615 and 0.6692 USD for the quarters ended March 31, 1999 and 1998, respectively. The Canadian Dollar exchange rate at March 31, 1999 was 0.6678 USD. Net sales provided by the Canadian operations for the quarters ended March 31, 1999 and 1998 was USD $49.3 million and USD $31.4 million, respectively. SEASONALITY AND ENVIRONMENT -- The effects of seasonality and 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. 16 RECENT DEVELOPMENTS 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 value of the offer, including the assumption of debt and transaction costs will be approximately $102.5 million. Porter Chadburn earned $8.7 million (pre-tax) on sales of $126.2 million for its fiscal year ended March 27, 1998. For the six months ended September 25, 1998, Porter Chadburn earned $4.5 million (pre-tax) on sales of $62.7 million. (All U.S. dollar amounts are based upon an exchange rate for British pounds of $1.642). As of March 18, 1999, the Company had acquired on the open market 29.9% of the outstanding shares of Porter Chadburn. As of May 12, 1999, the Company owned in excess of 90% of the outstanding shares of Porter Chadburn, and expects to complete the acquisition in the second quarter. 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 expects 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 March 31, 1999, approximately $5.7 million of the estimated $9 to $11 million has been capitalized. Through April 1999, 45% of the core systems are compliant. By the end of the second quarter we expect 55% of the core systems to be compliant with the remainder to be completed by the end of the third quarter. NETWORKING AND COMMUNICATIONS The Company is also conducting an evaluation of actions required to minimize the risk that its remaining business critical computer systems will be disrupted with respect to dating in the year 2000. The Company has completed or is engaged in the process of updating, replacing and testing certain of its computer systems so as to operate without disruption due to year 2000 issues. These actions are scheduled to be completed through the third quarter of 1999 and, based on current information available, the Company does not anticipate the costs of remedial actions, which are being expensed as incurred, will be material. ANCILLARY SYSTEMS AND VERIFICATION WITH KEY SUPPLIERS The Company has completed a database 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. Based on the information received through March 31, 1999, about 40% of the responses do not indicate whether or not the supplier will be Year 2000 compliant. Therefore, we will be preparing a follow-up mailing to key suppliers during the second quarter. Based on the information received through March 31, 1999, management does not 17 believe such costs to replace year 2000 sensitive devices, plant machinery and desktop software will be material to our financial condition or cash flow. What is the Company doing about contingency planning? The Company plans to prepare a contingency plan during the second quarter of 1999 to be finalized during the third quarter of 1999. The contingency guidelines to be followed throughout the Company will address the following issues: * 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 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. 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 cannot be reasonably estimated at this time. A contingency plan has not yet been developed for dealing with the most reasonably likely worst case scenario, and such scenario has not yet been clearly identified. The Company expects to complete its analysis during the third quarter of 1999. 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 2000, 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 ended March 31, 1999 and is not expected to have a material impact on earnings going forward. 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$ 24,795,000 at March 31, 1999) and the interest rate risk for the investment in accounts receivable securitization ($41,680,000 at March 31, 1999) are 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 March 31, 1999, $97 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. 18 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 June 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. 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 June 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. 19 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 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. 10.22 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. 10.23 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. 10.24 Purchase Agreement dated December 11, 1998, between 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. 20 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 Financial Data Schedule for three months ended March 31, 1999. 27.2 Financial Data Schedule for three months ended March 31, 1998. [FN] - ------------ Filed herewith. (b) Reports on Form 8-K A report on Form 8-K was filed on January 28, 1999, announcing the financial results of the company for the quarter and year ending December 31, 1998. A report on Form 8-K was filed on March 3, 1999, regarding the dismissal of Deloitte & Touche LLP as our independent public accountant and engagement of Ernst & Young LLP as our independent public accountant. 21 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: May 13, 1999 Gerald F. Mahoney Chairman of the Board/ Chief Executive Officer By /s/ Michael A. Zawalski ---------------------------- Date: May 13, 1999 Michael A. Zawalski Senior Vice President, Chief Financial Officer 22 EX-27.1 2 FINANCIAL DATA WORKSHEET FOR MAIL-WELL, INC.
5 1,000 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 2,301 41,680 122,214 0 116,530 310,591 579,769 (117,244) 1,175,616 207,067 0 0 0 489 317,344 1,175,616 440,417 440,417 340,752 402,789 (176) 0 12,767 25,037 10,265 14,772 0 0 0 14,772 0.30 0.28
EX-27.2 3 FINANCIAL DATA WORKSHEET FOR MAIL-WELL, INC.
5 1,000 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 12,999 42,598 95,184 0 105,251 268,044 416,266 (97,929) 829,707 151,799 0 0 0 482 272,558 829,707 318,734 318,734 249,687 295,188 (603) 0 7,390 16,759 7,226 9,533 0 0 0 9,533 0.22 0.20
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