-----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, CvGHRwmmPWh7kkz8GfHWNoYRvlbWigH3RxRDrpM8MiUGCacXYW4LIzvw+vg5iQ67 4L5+66C8W7buwZcaVpsSNg== 0001068800-01-500139.txt : 20010516 0001068800-01-500139.hdr.sgml : 20010516 ACCESSION NUMBER: 0001068800-01-500139 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010515 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: 1634452 BUSINESS ADDRESS: STREET 1: 8310 S. VALLEY HIGHWAY STREET 2: #400 CITY: ENGLEWOOD STATE: CO ZIP: 80112 BUSINESS PHONE: 3037908023 MAIL ADDRESS: STREET 1: 8310 S. VALLEY HIGHWAY STREET 2: #400 CITY: ENGLEWOOD STATE: CO ZIP: 80112 FORMER COMPANY: FORMER CONFORMED NAME: MAIL WELL HOLDINGS INC DATE OF NAME CHANGE: 19940328 10-Q 1 mw10q.txt 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, 2001 Commission file number 1-12551 MAIL-WELL, INC. (Exact name of Registrant as specified in its charter.) COLORADO 84-1250533 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 8310 S. Valley Highway, #400 Englewood, CO 80112 (Address of principal executive offices) (Zip Code) 303-790-8023 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) INDICATE BY CHECKMARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. Yes /X/ No / / As of May 10, 2001, the Registrant had 49,274,376 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........... 17 Item 3. Quantitative and Qualitative Disclosures About Market Risk .................................. 20 Part II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K ................. 22 Signature Page.......................................................... 24 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS MAIL-WELL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PER SHARE DATA)
MARCH 31, 2001 DECEMBER 31, 2000 (UNAUDITED) ------------------ --------------------- ASSETS Current assets Cash and cash equivalents $ 494 $ 462 Accounts receivable, net 215,163 222,707 Investment in accounts receivable securitization 104,528 75,427 Inventories, net 173,089 166,433 Other current assets 53,298 54,007 ----------- ----------- Total current assets 546,572 519,036 Property, plant and equipment, net 555,174 570,022 Intangible assets, net 621,189 619,215 Other assets, net 46,165 45,282 ----------- ----------- Total assets $ 1,769,100 $ 1,753,555 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $ 213,804 $ 157,715 Accrued compensation 60,492 63,186 Other current liabilities 78,403 83,000 Current portion of long-term debt 39,228 40,542 ----------- ----------- Total current liabilities 391,927 344,443 Long-term debt 854,628 888,602 Deferred income taxes 108,397 108,445 Other long-term liabilities 32,219 26,212 ----------- ----------- Total liabilities 1,387,171 1,367,702 SHAREHOLDERS' EQUITY Preferred stock, $0.01 par value; 25,000 shares authorized, no shares issued - - Common stock, $0.01 par value; 100,000,000 shares authorized, 47,457,829 and 47,454,879 shares issued and outstanding in 2001 and 2000, respectively 474 474 Paid-in capital 210,073 210,067 Retained earnings 186,463 182,840 Accumulated other comprehensive loss (15,081) (7,528) ----------- ----------- Total shareholders' equity 381,929 385,853 ----------- ----------- Total liabilities and shareholders' equity $ 1,769,100 $ 1,753,555 =========== =========== See notes to condensed consolidated financial statements.
3 MAIL-WELL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED ------------------ MARCH 31, --------- 2001 2000 ---- ---- Net sales........................................................................... $ 589,887 $ 563,821 Cost of sales ...................................................................... 458,718 433,764 --------- --------- Gross profit........................................................................ 131,169 130,057 Other operating expenses: Selling and administrative expenses ........................................... 96,033 80,671 Amortization of intangibles.................................................... 6,010 3,919 Restructuring charges.......................................................... 665 - --------- --------- Operating income.................................................................... 28,461 45,467 Other expense (income): Interest expense............................................................... 21,546 18,992 Other expense (income) ........................................................ 560 (122) --------- --------- Income from continuing operations before income taxes............................... 6,355 26,597 Provision for income taxes ......................................................... 2,732 10,933 --------- --------- Income from continuing operations................................................... 3,623 15,664 Income from discontinued operations, net of taxes ($420) ........................... - 672 --------- --------- Income before extraordinary items................................................... 3,623 16,336 Extraordinary items, net of taxes ($907) ........................................... - 1,447 --------- --------- Net income ......................................................................... $ 3,623 $ 17,783 ========= ========= Earnings per share - basic Continuing operations.......................................................... $ 0.08 $ 0.32 Discontinued operations........................................................ - 0.01 Extraordinary items............................................................ - 0.03 --------- --------- Earnings per share - basic..................................................... $ 0.08 $ 0.36 Earnings per share - diluted Continuing operations.......................................................... $ 0.08 $ 0.31 Discontinued operations........................................................ - 0.01 Extraordinary items............................................................ - 0.01 --------- --------- Earnings per share - diluted................................................... $ 0.08 $ 0.33 Weighted average shares - basic..................................................... 47,457 49,229 Weighted average shares - diluted................................................... 47,752 57,753 See notes to condensed consolidated financial statements.
4 MAIL-WELL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
THREE MONTHS ENDED ------------------ MARCH 31, --------- 2001 2000 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES Net income................................................................ $ 3,623 $ 17,783 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization........................................... 22,694 18,736 Extraordinary loss on early retirement of debt.......................... - (2,354) Deferred income taxes................................................... 1,421 3,179 Other................................................................... (153) (225) Changes in operating assets and liabilities, excluding the effects of acquired businesses: Trade receivables................................................... 3,663 (16,833) Inventories......................................................... (7,354) (14,826) Accounts payable and accrued expenses............................... 65,002 18,869 Net change in other current assets and other current liabilities.... 4,536 (6,051) Other, net................................................................ 2,149 (7,870) ----------- ----------- Net cash provided by operating activities........................... 95,581 10,408 CASH FLOWS FROM INVESTING ACTIVITIES Acquisition costs, net of cash acquired................................... (3,904) (301,700) Capital expenditures...................................................... (9,387) (21,512) Investment in marketable securities, net.................................. 239 (12,245) Proceeds from the sale of assets.......................................... 1,826 551 ----------- ----------- Net cash used in investing activities............................... (11,226) (334,906) CASH FLOWS FROM FINANCING ACTIVITIES Increase (decrease) in accounts receivable securitization................. (50,000) (98,500) Proceeds from common stock issuance....................................... 6 110 Proceeds from long-term debt.............................................. 85,367 843,415 Repayments of long-term debt ............................................. (117,803) (396,108) Debt issuance costs....................................................... (1,841) (13,831) Redemption of a nonvoting common stock of a subsidiary.................... - (3,500) ----------- ----------- Net cash provided by (used in) financing activities................. (84,271) 331,586 Effect of exchange rate changes on cash and cash equivalents................. (52) (6) ----------- ----------- Net increase in cash and cash equivalents.................................... 32 7,082 Cash and cash equivalents at beginning of year............................... 462 3,618 ----------- ----------- Cash and cash equivalents at end of year..................................... $ 494 $ 10,700 =========== =========== See notes to condensed consolidated financial statements.
5 MAIL-WELL, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION The accompanying condensed consolidated financial statements of Mail-Well, Inc. and subsidiaries (collectively, the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-month period ended March 31, 2001 are not necessarily indicative of the results that may be expected for the year ended December 31, 2001. The balance sheet at December 31, 2000 has been derived from the audited financial statements at that date but does not include all of the information and footnote disclosures required by generally accepted accounting principles for complete financial statements. Certain amounts included in the statement of operations for the three-months ended March 31, 2000 have been reclassified to conform with the current year presentation including the reclassification of billed freight from cost of sales and a discontinued operation previously reported as part of the continuing operations. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2000. 2. INVENTORIES Inventory by major category were:
(in thousands) MARCH 31, 2001 DECEMBER 31, 2000 - ------------------------------------------------------------------------------------------------------------------ Raw materials $ 59,019 $ 62,709 Work in process 36,550 32,772 Finished goods 84,013 78,237 - ------------------------------------------------------------------------------------------------------------------ 179,582 173,718 Reserves (6,493) (7,285) - ------------------------------------------------------------------------------------------------------------------ $ 173,089 $ 166,433 =========== ==============
3. OTHER COMPREHENSIVE INCOME (LOSS) A summary of comprehensive income (loss) is as follows:
THREE MONTHS ENDED (in thousands) MARCH 31, 2001 MARCH 31, 2000 - ----------------------------------------------------------------------------------------------------------------- Net income $ 3,623 $ 17,783 Currency translation adjustments, net (6,528) (717) Unrealized loss on investments, net (1,140) (145) Pension liability adjustment 115 - - ----------------------------------------------------------------------------------------------------------------- Comprehensive income (loss) $ (3,930) $ 16,921 ========== ==========
6 4. EARNINGS PER SHARE Basic earnings per share exclude dilution and are computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. A reconciliation of the amounts included in the computation of basic earnings per share and diluted earnings per share is as follows:
MARCH 31, MARCH 31, (IN THOUSANDS, EXCEPT PER SHARE AMOUNT) 2001 2000 --------------------------------------------------------------------------------------------------- Numerator: Numerator for basic earnings per share - income from continuing operations $ 3,623 $ 17,783 Interest on Convertible Notes - 1,310 --------------------------------------------------------------------------------------------------- Numerator for diluted earnings per share - income from continuing operations after assumed conversions $ 3,623 $ 19,093 =================================================================================================== Denominator: Denominator for basic earnings per share - weighted average shares 47,457 49,229 Effects of dilutive securities: Stock options 295 548 Conversion of Convertible Notes - 7,883 Other - 93 --------------------------------------------------------------------------------------------------- Denominator for diluted earnings per share - adjusted weighted average shares and assumed conversions 47,752 57,753 =================================================================================================== Earnings per share: Basic $ 0.08 $ 0.36 =================================================================================================== Diluted $ 0.08 $ 0.33 ===================================================================================================
During the three-months ended March 31, 2001, interest on the Convertible Notes in the amount of $1,214,000 and shares of 7,319,000 issued upon assumed conversion were excluded from the calculation of diluted earnings per share due to their antidilutive effect on earnings per share. In addition, outstanding options to purchase approximately 5,675,000 and 1,151,000 common shares were excluded from the calculation of diluted earnings per share because their exercise price exceeded the average market price for the quarters ended March 31, 2001 and March 31, 2000, respectively. 5. LONG-TERM DEBT Long-term debt consists of the following:
MARCH 31, DECEMBER 31, (IN THOUSANDS) 2001 2000 --------------------------------------------------------------------------------------- Bank borrowings: Secured Tranche A term loan, due 2006 $215,487 $237,586 Secured Tranche B term loan, due 2007 194,221 209,603 Unsecured loan, due 2003 15,051 15,559 Unsecured revolving loan facility 3,361 - Secured revolving line 5,000 - Senior Subordinated Notes, due 2008 300,000 300,000 Convertible Subordinated Notes, due 2002 139,063 139,063 Other 21,673 27,333 -------------------------------------------------------------------------------------- 893,856 929,144 Less current maturities (39,228) (40,542) -------------------------------------------------------------------------------------- Long-term debt $854,628 $888,602 ======================================================================================
7 As of March 31, 2001, the Company was in compliance with all of the covenants of its various debt agreements. In March 2001, the Company amended its $800 million Senior Secured Credit Facility to maintain the leverage ratio requirements which were in effect December 31, 2000, through March 2002. In addition, the margin over LIBOR used to determine the interest rate was increased 50 basis points. The Company incurred fees of approximately $1.7 million in connection with this amendment. 6. SECURITIZATION The Company sells, on a revolving basis, trade receivables to a wholly owned subsidiary, Mail-Well Trade Receivables Corp. ("MTRC"). MTRC is a bankruptcy-remote special purpose entity that is subject to certain covenants and restrictions. New receivables, except those failing certain eligibility criteria, are sold to MTRC on a daily basis as previously sold accounts receivables are collected. MTRC, in turn, sells an undivided interest in the pool of receivables, up to a maximum of $75 million, to a multi-seller receivables securitization company, for which there are no repurchase agreements. The Company maintains a subordinated interest in the portion of the pooled receivables, which are not transferred to the securitization company. The selling price of the receivables interest reflects a discount based on the A-1 rated commercial paper borrowing rate (5.51% at March 31, 2001). The Company remains responsible for servicing the underlying balance and receives a fee for this service as indicated in the servicing agreement, which it believes represents adequate compensation. The Company estimates the fair value of its retained interests by considering two key assumptions: the payment rate, which is derived from the average life of the accounts receivable which is less than 45 days, and the rate of expected credit losses. Based on the Company's favorable collection experience and the very short-term nature of the receivables, both assumptions are considered to be highly predictable. Therefore, the Company's estimated fair value of its retained interests in the pool of eligible receivables is approximately equal to the previous cost, less the associated allowance for doubtful accounts. As of March 31, 2001 and December 31, 2000, the Company had sold $130.2 million and $151.1 million of accounts receivable to MTRC, respectively. MTRC had sold beneficial interests totaling $25.0 million and $75.0 million to the securitization company at March 31, 2001 and December 31, 2000, respectively. The amounts reflected in the investment in accounts receivable securitization in the accompanying consolidated balance sheets are $104.5 million and $75.4 million at March 31, 2001 and December 31, 2000, respectively. The current securitization agreement's liquidity provisions have been extended through June 6, 2001. Negotiations are under way to assign the facility to a new liquidity provider, with expectations that the negotiations will be successful. 7. RESTRUCTURING In 2000, the Company began a comprehensive review of its business operations in response to changes in the industry and in customer demand and recorded a restructuring charge to cover certain of the expenses of restructuring plans that were approved. During the three months ended March 31, 2001, the Company incurred $665,000 of additional restructuring costs related to employee and equipment costs incurred for moving major equipment which under generally accepted accounting principles could not be accrued for as part of the Company's restructuring initiative at year-end. A summary by segment of the restructuring plans implemented in 2000 follows. The restructuring in the Printed Office Products segment was in response to the declining documents segment of its market. It involved the closure of three manufacturing facilities and substantially curtailing another facility. The majority of the restructuring plan has been completed and 114 employees have been terminated to date. The restructuring plan of the Label segment included closing two unprofitable operations, closure of a sales office and replacing equipment to better support customer and market requirements. The majority of these restructure initiatives have been completed and 36 employees have been terminated to date. 8 The Commercial Printing segment closed its bindery operation in Mexico to reduce costs. Another manufacturing facility, which was part of the announced restructure plan, will be closed in the third quarter. To date, 150 employees have been terminated. The Envelope segment has closed one plant to reduce cost and consolidate capacity. The closure of this plant resulted in the termination of 19 employees. A summary of activity charged to the restructuring liability during the three-months ended March 31, 2001 was as follows:
(IN THOUSANDS) 2000 RESTRUCTURE - -------------------------------------------------------------------------- Balance at December 31, 2000 $3,146 Cash payments for severance (289) Cash payments for property exit costs (107) Cash payments for other exit activities (231) - -------------------------------------------------------------------------- Balance at March 31, 2001 $2,519 ==========================================================================
The Company is currently evaluating its strategy and expects to complete this evaluation during the second quarter of 2001. Additional restructuring plans may be an outcome of this strategic evaluation. 8. SEGMENT INFORMATION The Company operates principally in four business segments. The Commercial Printing segment specializes in printing annual reports, brand marketing collateral, catalogs, brochures, maps and guidebooks, calendars, financial communications and CD packaging. The Envelope segment manufactures customized and stock envelopes for direct mail advertising, filing systems, billing and remittance, photo processing, medical records and catalog orders. The Envelope segment is also a producer of specialty packaging products and a manufacturer of stock products for the resale market. The Printed Office Products segment provides customized and stock labels, envelopes, commercial printing and business documents to small and mid-size businesses through printing distributors. The Label segment is a leading supplier of glue-applied and pressure-sensitive labels to the food, beverage and consumer products industries. Operating income is net of all costs and expenses directly related to the segment involved. Corporate expenses include corporate general and administrative expenses, lease expense, amortization expense, restructuring charges, gains or losses on disposal of assets and other miscellaneous expenses. Identifiable assets are accumulated by facility within each business segment. Certain operating assets, which are under lease, are reported as business segment assets for evaluation purposes. Corresponding contra assets have been included with corporate assets in order to reconcile identifiable assets with the total assets of the Company. Corporate assets consist primarily of cash and cash equivalents, investments in accounts receivable securitization, investment securities, other accounts receivable and deferred tax assets. The following tables presents certain business segment information for the three-months ended March 31, 2001 and 2000 as follows:
THREE MONTHS ENDED MARCH 31 - ------------------------------------------------------------------------------------------- (IN THOUSANDS) 2001 2000 (a)(b) - ------------------------------------------------------------------------------------------- Net external sales: Commercial Printing $212,025 $229,398 Envelope 221,616 205,277 Printed Office Products 99,703 73,294 Label 56,543 55,852 - ------------------------------------------------------------------------------------------- Total $589,887 $563,821 =========================================================================================== Operating income: Commercial Printing $ 6,206 $17,693 Envelope 23,126 22,142 Printed Office Products 7,196 8,184 Label 2,964 3,555 Corporate (11,031) (6,107) - ------------------------------------------------------------------------------------------- Total $28,461 $45,467 =========================================================================================== MARCH 31 DECEMBER 31 - ------------------------------------------------------------------------------------------- (IN THOUSANDS) 2001 2000 - ------------------------------------------------------------------------------------------- Identifiable assets: Commercial Printing $ 691,602 $ 685,871 Envelope 619,335 635,508 Printed Office Products 284,382 275,025 Label 198,581 205,480 Corporate (24,800) (48,329) - ------------------------------------------------------------------------------------------- Total $1,769,100 $1,753,555 =========================================================================================== (a) Net sales for 2000 have been restated to include billed freight previously reported in cost of sales. (b) Restated to include in the Label segment an operation previously reported in Printed Office Products.
Intercompany sales by segment were $2,476,000, $7,784,000, $3,336,000 and $699,000 for Commercial Printing, Envelope, Printed Office Products and Label, respectively. These amounts have been excluded above in reported net sales and eliminated in consolidation. 9 9. CONDENSED CONSOLIDATING FINANCIAL INFORMATION In December 1998, MWI ("Issuer" or "MWI"), the Company's wholly-owned subsidiary, and the only direct subsidiary of the Company, issued $300.0 million aggregate principal amount of 8 3/4% Senior Subordinated Notes ("Senior Notes") due in 2008. The Senior Notes are guaranteed by the majority of the U.S. subsidiaries (the "Guarantor Subsidiaries") of MWI, all of which are wholly owned, and by Mail-Well, Inc. ("Parent Guarantor"). The guarantees are joint and several, full, complete and unconditional. There are no material restrictions on the ability of the Guarantor Subsidiaries to transfer funds to MWI in the form of cash dividends, loans or advances, other than ordinary legal restrictions under corporate law, fraudulent transfer and bankruptcy laws. The following condensed consolidating financial information illustrates the composition of the Parent Guarantor, Issuer, Guarantor Subsidiaries and non-guarantor subsidiaries. The Issuer, the Guarantor Subsidiaries and the non-guarantor subsidiaries comprise all of the direct and indirect subsidiaries of the Parent Guarantor. Management has determined that separate complete financial statements would not provide additional material information that would be useful in assessing the financial composition of the Guarantor Subsidiaries. Investments in subsidiaries are accounted for under the equity method, wherein the investor company's share of earnings and income taxes applicable to the assumed distribution of such earnings are included in net income. In addition, investments increase in the amount of permanent contributions to subsidiaries and decrease in the amount of distributions from subsidiaries. The elimination entries remove the equity method investment in subsidiaries and the equity in earnings of subsidiaries, intercompany payables and receivables and other transactions between subsidiaries. 10 CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS Quarter Ended March 31, 2001 (in thousands)
Combined Combined Parent Guarantor Nonguarantor Guarantor Issuer Subsidiaries Subsidiaries Eliminations Consolidated --------- ------ ------------ ------------ ------------ ------------ Net sales $ - $112,823 $408,809 $68,255 $ - $589,887 Cost of sales - 90,161 317,422 51,135 - 458,718 -------- -------- -------- ------- --------- -------- Gross profit - 22,662 91,387 17,120 - 131,169 Other operating costs 91 18,102 76,392 8,123 - 102,708 -------- -------- -------- ------- --------- -------- Operating income (loss) (91) 4,560 14,995 8,997 - 28,461 Other expense (income): Interest expense 1,738 18,768 19,368 1,652 (19,980) 21,546 Other expense (income) (1,976) (17,282) (234) 72 19,980 560 -------- -------- -------- ------- --------- -------- Income (loss) before income taxes and equity in undistributed earnings of subsidiaries 147 3,074 (4,139) 7,273 - 6,355 Provision (benefit) for income taxes - 1,346 (2,038) 3,424 - 2,732 -------- -------- -------- ------- --------- -------- Income (loss) before equity in undistributed earnings of subsidiaries 147 1,728 (2,101) 3,849 - 3,623 Equity in undistributed earnings of subsidiaries 3,476 1,748 8,333 - (13,557) - -------- -------- -------- ------- --------- -------- Net income $ 3,623 $ 3,476 $ 6,232 $ 3,849 $ (13,557) $ 3,623 ======== ======== ======== ======= ========= ========
11 CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS Quarter Ended March 31, 2000 (in thousands)
Combined Combined Parent Guarantor Nonguarantor Guarantor Issuer Subsidiaries Subsidiaries Eliminations Consolidated --------- ------ ------------ ------------ ------------ ------------ Net sales $ - $117,283 $335,220 $111,318 $ - $563,821 Cost of sales - 93,707 260,351 79,706 - 433,764 -------- -------- -------- -------- -------- -------- Gross profit - 23,576 74,869 31,612 - 130,057 Other operating costs 42 16,885 49,144 18,519 - 84,590 -------- -------- -------- -------- -------- -------- Operating income (loss) (42) 6,691 25,725 13,093 - 45,467 Other expense (income): Interest expense 2,116 17,012 7,096 339 (7,571) 18,992 Other expense (income) (2,212) (5,604) (32) 155 7,571 (122) -------- -------- -------- -------- -------- -------- Income (loss) from continuing operations before income taxes and equity in undistributed earnings of subsidiaries 54 (4,717) 18,661 12,599 - 26,597 Provision (benefit) for income taxes - (1,961) 7,673 5,221 - 10,933 -------- -------- -------- -------- -------- -------- Income (loss) from continuing operations before equity in undistributed earnings of subsidiaries 54 (2,756) 10,988 7,378 - 15,664 Equity in undistributed earnings of subsidiaries 15,891 19,722 4,159 - (39,772) - -------- -------- -------- -------- -------- -------- Income (loss) from continuing operations 15,945 16,966 15,147 7,378 (39,772) 15,664 Income from discontinued operations, net of taxes ($420) - (684) - 1,356 - 672 Extraordinary items 1,838 (391) - - - 1,447 -------- -------- -------- -------- -------- -------- Net income $ 17,783 $ 15,891 $ 15,147 $ 8,734 $(39,772) $ 17,783 ======== ======== ======== ======== ======== ========
12 CONSOLIDATING CONDENSED STATEMENT OF FINANCIAL POSITION March 31, 2001 (in thousands)
Combined Combined Parent Guarantor Nonguarantor Guarantor Issuer Subsidiaries Subsidiaries Elim. Consolidated --------- ------ ------------ ------------ ----- ------------ Current assets: Cash and cash equivalents $ - $ 123 $ 236 $ 135 $ - $ 494 Trade receivable, net - 863 159,599 38,635 - 199,097 Investment in accounts receivable securitization - - - 104,528 - 104,528 Accounts receivable, other - 3,955 11,686 425 - 16,066 Inventories, net - 55,065 96,315 21,709 - 173,089 Note receivable from Issuer 147,436 - - - (147,436) - Other current assets 175 24,853 35,865 2,911 (10,506) 53,298 -------- ---------- ---------- -------- ----------- ---------- Total current assets 147,611 84,859 303,701 168,343 (157,942) 546,572 Investment in subsidiaries 381,433 366,778 67,759 - (815,970) - Property, plant and equipment, net - 131,021 342,365 81,788 - 555,174 Intangible assets, net - 47,734 492,120 81,335 - 621,189 Note receivable from Subsidiaries - 784,400 - - (784,400) - Other assets, net 3,342 30,567 48,257 5,499 (41,500) 46,165 -------- ---------- ---------- -------- ----------- ---------- Total assets $532,386 $1,445,359 $1,254,202 $336,965 $(1,799,812) $1,769,100 ======== ========== ========== ======== =========== ========== Current liabilities: Accounts payable $ - $ 42,915 $ 151,810 $ 19,079 $ - $ 213,804 Accrued compensation - 26,890 28,519 5,083 - 60,492 Other current liabilities 11,394 76,299 (172,352) 173,568 (10,506) 78,403 Note payable to Parent - 147,436 - - (147,436) - Current portion of long-term debt - 30,591 2,680 5,957 - 39,228 -------- ---------- ---------- -------- ----------- ---------- Total current liabilities 11,394 324,131 10,657 203,687 (157,942) 391,927 Long-term debt 139,063 685,821 18,864 10,880 - 854,628 Note payable to issuer - - 784,400 - (784,400) - Deferred income taxes - 28,287 86,920 14,698 (21,508) 108,397 Other long-term liabilities - 25,395 26,233 583 (19,992) 32,219 -------- ---------- ---------- -------- ----------- ---------- Total liabilities 150,457 1,063,634 927,074 229,848 (983,842) 1,387,171 Shareholders' equity 381,929 381,725 327,128 107,117 (815,970) 381,929 -------- ---------- ---------- -------- ----------- ---------- Total liabilities and shareholders' equity $532,386 $1,445,359 $1,254,202 $336,965 $(1,799,812) $1,769,100 ======== ========== ========== ======== =========== ==========
13 CONSOLIDATING CONDENSED STATEMENT OF FINANCIAL POSITION December 31, 2000 (in thousands)
Combined Combined Parent Guarantor Nonguarantor Guarantor Issuer Subsidiaries Subsidiaries Elim. Consolidated --------- ------ ------------ ------------ ----- ------------ Current assets: Cash and cash equivalents $ - $ 9,596 $ (9,846) $ 712 $ - $ 462 Receivables, net - 8,669 151,978 41,883 - 202,530 Investment in accounts receivable Securitization - - - 75,427 - 75,427 Accounts receivable - other - 13,499 5,615 1,063 - 20,177 Inventories, net - 51,359 91,815 23,259 - 166,433 Note receivable from Issuer 147,436 - - - (147,436) - Other current assets 262 25,741 24,399 3,786 (181) 54,007 --------- ---------- ---------- -------- ----------- ---------- Total current assets 147,698 108,864 263,961 146,130 (147,617) 519,036 Investment in subsidiaries 385,505 357,592 64,348 - (807,445) - Property, plant and equipment, net - 132,522 350,964 86,536 - 570,022 Intangible assets, net - 49,455 483,515 86,245 - 619,215 Note receivable from Subsidiaries - 784,400 - - (784,400) - Other assets, net 3,481 55,581 1,101 4,001 (18,882) 45,282 --------- ---------- ---------- -------- ----------- ---------- Total assets $ 536,684 $1,488,414 $1,163,889 $322,912 $(1,758,344) $1,753,555 ========= ========== ========== ======== =========== ========== Current liabilities: Accounts payable $ - $ 32,446 $ 107,569 $ 17,700 $ - $ 157,715 Accrued compensation - 24,556 31,144 7,486 - 63,186 Other current liabilities 11,768 100,773 (184,734) 155,374 (181) 83,000 Note payable to Parent - 147,436 - - (147,436) - Current portion of long-term debt - 30,767 2,662 7,113 - 40,542 --------- ---------- ---------- -------- ----------- ---------- Total current liabilities 11,768 335,978 (43,359) 187,673 (147,617) 344,443 Long-term debt 139,063 718,147 18,471 12,921 - 888,602 Note payable to issuer - - 784,400 - (784,400) - Deferred income taxes - 28,288 66,688 13,469 - 108,445 Other long-term liabilities - 20,496 23,992 606 (18,882) 26,212 --------- ---------- ---------- -------- ----------- ---------- Total liabilities 150,831 1,102,909 850,192 214,669 (950,899) 1,367,702 Shareholders' equity 385,853 385,505 313,697 108,243 (807,445) 385,853 --------- ---------- ---------- -------- ----------- ---------- Total liabilities and shareholders' equity $ 536,684 $1,488,414 $1,163,889 $322,912 $(1,758,344) $1,753,555 ========= ========== ========== ======== =========== ==========
14 CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS Three-months ended March 31, 2001 (in thousands)
Combined Combined Parent Guarantor Nonguarantor Guarantor Issuer Subsidiaries Subsidiaries Eliminations Consolidated --------- ------ ------------ ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES $ 5,194 $ (39,444) $ 82,117 $ 47,714 $ - $ 95,581 CASH FLOWS FROM INVESTING ACTIVITIES Acquisition costs, net of cash acquired - (3,904) - - (3,904) Capital expenditures - (1,400) (7,146) (841) - (9,387) Investment in marketable securities, net - 239 - - - 239 Investment in subsidiaries (5) 10,416 - - (10,411) - Other investing activities (5,195) (873) 54,569 3,325 (50,000) 1,826 ------- --------- --------- -------- -------- --------- Net cash used in investing activities (5,200) 4,478 47,423 2,484 (60,411) (11,226) CASH FLOWS FROM FINANCING ACTIVITIES Changes due to accounts receivable securitization, net - (3,487) (46,513) (50,000) 50,000 (50,000) Net proceeds from common stock issuance 6 - - - - 6 Proceeds from long-term debt - 82,006 - 3,361 - 85,367 Repayments of long-term debt and capital lease obligations - (114,609) (566) (2,628) - (117,803) Debt issuance costs - (1,841) - - - (1,841) Proceeds from parent guarantor - 63,419 (63,419) - - - Investment by parent - 5 (10,416) - 10,411 - Other financing activities - - 979 (979) - - ------- --------- --------- -------- -------- --------- Net cash provided by financing activities 6 25,493 (119,935) (50,246) 60,411 (84,271) EFFECT OF EXCHANGE RATE CHANGES ON CASH - - - (52) - (52) ------- --------- --------- -------- -------- --------- NET CHANGE IN CASH AND CASH EQUIVALENTS - (9,473) 9,605 (100) - 32 BALANCE AT BEGINNING OF YEAR - 9,596 (9,369) 235 - 462 ------- --------- --------- -------- -------- --------- BALANCE AT END OF YEAR $ - $ 123 $ 236 $ 135 $ - $ 494 ======= ========= ========= ======== ======== =========
15 CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS Three-months ended March 31, 2000 (in thousands)
Combined Combined Parent Guarantor Nonguarantor Guarantor Issuer Subsidiaries Subsidiaries Eliminations Consolidated --------- ------ ------------ ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES $(2,994) $ (11,923) $ 49,296 $ (23,971) $ - $ 10,408 CASH FLOWS FROM INVESTING ACTIVITIES Acquisition costs, net of cash acquired - - (10,646) (291,054) - (301,700) Capital expenditures - (2,764) (16,685) (2,063) - (21,512) Investment in marketable securities, net - (100) - (12,145) - (12,245) Investment in subsidiaries (110) (336,796) - - 336,906 - Other investing activities 12,992 (63,140) 48,072 101,127 (98,500) 551 ------- --------- -------- --------- --------- --------- Net cash used in investing activities 12,882 (402,800) 20,741 (204,135) 238,406 (334,906) CASH FLOWS FROM FINANCING ACTIVITIES Changes due to accounts receivable securitization, net - (31,572) (66,928) (98,500) 98,500 (98,500) Net proceeds from common stock issuance 110 - - - - 110 Proceeds from long-term debt - 841,000 - 2,415 - 843,415 Repayments of long-term debt and capital lease obligations (9,998) (382,121) (1,337) (2,652) - (396,108) Debt issuance costs - (13,831) - - - (13,831) Investment by parent - 110 10,638 326,158 (336,906) - Other financing activities - (3,500) - - - (3,500) ------- --------- -------- --------- --------- --------- Net cash provided by financing activities (9,888) 410,086 (57,627) 227,421 (238,406) 331,586 EFFECT OF EXCHANGE RATE CHANGES ON CASH - - - (6) - (6) ------- --------- -------- --------- --------- --------- NET CHANGE IN CASH AND CASH EQUIVALENTS - (4,637) 12,410 (691) - 7,082 BALANCE AT BEGINNING OF YEAR - 27,667 (28,003) 3,954 - 3,618 ------- --------- -------- --------- --------- --------- BALANCE AT END OF YEAR $ - $ 23,030 $(15,593) $ 3,263 $ - $ 10,700 ======= ========= ======== ========= ========= =========
16 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION. SUMMARY OF FINANCIAL DATA BY SEGMENT (IN THOUSANDS) The following table presents historical financial data by segment, including acquisitions from their purchase dates.
QUARTER ENDED MARCH 31, ----------------------- 2001 2000 ---- ---- Net sales Commercial Printing $ 212,025 $ 229,398 Envelope 221,616 205,277 Printed Office Products 99,703 73,294 Label 56,543 55,852 ------------- ------------- Total net sales $ 589,887 $ 563,821 ============= ============= Operating income Commercial Printing $ 6,206 $ 17,693 Envelope 23,126 22,142 Printed Office Products 7,196 8,184 Label 2,964 3,555 Corporate (11,031) (6,107) ------------- ------------- Total operating income 28,461 45,467 Interest expense 21,546 18,992 Other expense (income) 560 (122) Income tax expense 2,732 10,933 ------------- ------------- Income from continuing operations $ 3,623 $ 15,664 ============= =============
CONSOLIDATED RESULTS OF OPERATIONS Sales for the first quarter of 2001 were $589.9 million, an increase of $26.1 million from the first quarter of 2000. Excluding the incremental sales of acquisitions consummated during 2000, sales were $529.9 million, down 6% from the prior year. This sales decline was primarily the result of lower spending on print advertising by many of the Company's customers in response to the current economic environment. The Company also experienced lower sales in its Printed Office Products segment as the market for traditional documents continued to decline. Sales of the Envelope and Label segments were higher in the quarter compared to the first quarter of 2000. Operating income declined to $28.5 million from $45.5 million in the first quarter of 2000. Overall margins were lower in the current quarter due to efforts to maintain volume in the slowing economy. Additionally, the mix of business in the first quarter of 2001 was considerably different than in the first quarter of 2000 due to acquisitions and lower sales of commercial printing and traditional documents. Higher corporate administrative expenses commensurate with the growth of the Company, consulting expenses incurred in connection with Company's strategic review, expenses associated with the Company's restructuring program, and higher amortization expense associated with acquisitions in 2000 also contributed to lower operating income in 2001. Interest expense for the quarter ended March 31, 2001 increased $2.6 million compared to the quarter ended March 31, 2000. The increase occurred as a result of higher average bank debt balances, primarily due to acquisitions, and an increase in the weighted-average borrowing rate. The effective tax rate for the quarters ended March 31, 2001 and 2000 was 43% and 41%, respectively. The effective tax rate was higher than the prior year due to lower pre-tax income, which increased the impact of nondeductible goodwill amortization on the effective rate. 17 Net income for the quarter was $3.6 million, or $0.08 per diluted share, down from $17.8 million, or $0.33 per diluted share, in the first quarter of 2000. RESULTS OF OPERATIONS BY BUSINESS SEGMENT COMMERCIAL PRINTING Sales of the Commercial Printing segment were $212.0 million in the first quarter of 2001 compared to sales of $229.4 million reported in the first quarter of 2000. Excluding the impact of companies acquired in 2000, sales were $203.3 million. Reduced promotional spending by customers, especially advertising agencies and technology companies, contributed significantly to this sales decline. Approximately 25% of Commercial Printing's sales are related to the advertising segment of the commercial print market. Gross profit margin declined to 18.9% from 22.1% earned in 2000 primarily due to competitive pressures and the segment's efforts to maintain volume. Additionally, energy problems in California reduced gross profits of the segment's operations in California by more than $1 million in the quarter. The segment has continued to invest in its sales force since the first quarter of 2000. This has resulted in higher selling expenses which were partially offset by lower administrative expenses. The Commercial Printing segment's operating income of $6.2 million in the quarter was down $11.5 million from the $17.7 million earned in the first quarter of 2000. ENVELOPE Sales of the Envelope segment grew 8% in the first quarter of 2001. Sales were $221.6 million compared to sales of $205.3 million in the first quarter of 2000. Excluding the impact of companies acquired in 2000, sales grew 1.4% to $208.2 million. Sales in Canada were especially strong in the quarter as were sales of the segment's resale division. A reduction in promotional spending by direct mail customers had a negative impact on the Envelope segment in the quarter. Gross profit margin of the Envelope segment was 20.7% for the quarter, down 1% from the prior year. Lower waste paper prices, which are down approximately 20% in the quarter, account for a portion of this decline. Lower contribution from products sold by companies acquired in 2000 also contributed to the lower gross margin. The operating income of the Envelope segment was $23.1 million in the quarter, which included $1.7 million earned by companies acquired in 2000. LABEL Sales of the Label segment were $56.5 million in the first quarter of 2001, slightly higher than sales in the first quarter of 2000. Sales of pressure- sensitive labels in North America were 16% higher than a year ago. Sales of glue-applied and industrial labels were flat year-over-year, and sales of the segment's operation in the United Kingdom were down 3% from the prior year. Gross profit margin of the segment declined nearly 1% in the quarter to 21.8%. This decline was due to higher fixed manufacturing costs. The operating income of the Label segment in the first quarter was $3 million, compared to $3.6 million earned in the first quarter of 2000. 18 PRINTED OFFICE PRODUCTS First quarter sales of the Printed Office Products segment were $99.7 million, 36% higher than sales reported for the first quarter of 2000. Excluding the sales of companies acquired in 2000, sales were 14% below the prior year. The decline in the demand for traditional documents has continued into 2001, and sales of label products and the segment's distribution business have been affected by the slowdown of the economy. Revenues from the segment's specialty documents have increased 40% from the prior year. Gross profit margin of Printed Office Products increased to 30% from 29% in 2000. Companies acquired in 2000 accounted for most of this increase. The operating income of Printed Office Products was $7.2 million in the quarter, down 12% from the first quarter of 2000. The incremental earnings by the companies acquired in 2000 were not sufficient to offset the impact of lower sales of traditional documents, the lower profitability of the segment's distribution business and higher administrative expenses. RESTRUCTURING PLAN In 2000, the Company began a comprehensive review of its business operations in response to changes in the industry and in customer demand and recorded a restructuring charge to cover certain of the expenses of restructuring plans that were approved. Once fully implemented, the Company anticipates operating cost savings of approximately $15.0 million annually. During the three months ended March 31, 2001, the Company incurred $665,000 of additional restructuring costs related to employee and equipment costs incurred for moving major equipment which under generally accepted accounting principles could not be accrued for as part of the Company's restructuring initiative at year-end. A summary by segment of the restructuring plans implemented in 2000 follows. The restructuring in the Printed Office Products segment was in response to the declining documents segment of its market. It involved the closure of three manufacturing facilities and substantially curtailing another facility. The majority of the restructuring plan has been completed and 114 employees have been terminated to date. The restructuring plan of the Label segment included closing two unprofitable operations, closure of a sales office and replacing equipment to better support customer and market requirements. The majority of these restructure initiatives have been completed and 36 employees have been terminated to date. The Commercial Printing segment closed its bindery operation in Mexico to reduce costs. Another manufacturing facility, which was part of the announced restructure plan, will be closed in the third quarter. To date, 150 employees have been terminated. The Envelope segment has closed one plant to reduce cost and consolidate capacity. The closure of this plant resulted in the termination of 19 employees. The Company is currently evaluating its strategy and expects to complete this evaluation during the second quarter of 2001. Additional restructuring plans may be an outcome of this strategic evaluation. LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operating activities (see Condensed Consolidated Statements of Cash Flows on page 5) was $95.6 million and $10.4 million for the three-months ended March 31, 2001 and 2000, respectively. The increase in cash provided by operating activities was due primarily to improved collections of accounts receivable and revisions of vendor payment terms. The effect of the latter was $46.0 million. Operating cash flow was used primarily to fund capital expenditures of $9.4 million and reduce outstanding debt by $82 million, which included the reduction of $50 million borrowed under the Company's accounts receivable securitization program. At March 31, 2001, the Company had approximately $300.0 million of unused credit under its various credit facilities. The Company believes it has sufficient credit to meet its current operating requirements. 19 NEW ACCOUNTING STANDARDS In 2000, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. This statement revises the accounting standards for securitizations and other transfers of financial assets and collateral and requires certain disclosures. This statement is effective for transfers and servicing of financial assets occurring after March 31, 2001. The adoption of this statement will not have a material impact on the Company's financial statements. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"). SFAS 133, which is effective for 2001, requires derivative instruments to be recorded in the balance sheet at their fair value, with changes in fair value being recognized in earnings unless specific hedge accounting criteria are met. Adoption of SFAS 133 did not have a material effect on the Company's consolidated financial position, consolidated results of operations, or liquidity. FORWARD-LOOKING INFORMATION "Management's Discussion and Analysis of Financial Condition and Results of Operations" may contain various "forward-looking statements," within the meaning of Section 21E of the Securities Exchange Act of 1934, that are based on management's belief and assumptions, as well as information currently available to management. Although the Company believes that the expectations reflected in any such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Any such statements are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, the Company's actual financial results, performance or condition may vary materially form those expected. Some of the key factors that may have a direct bearing on the Company's actual financial results, performance or condition are as follows: * paper and other raw material costs; * the degree and nature of competition; * the ability to execute restructuring plans and achieve productivity and cost savings goals; * postage rate and other changes in the direct mail industry; * interest rates and foreign currency exchanges rates; * ability to obtain additional financing; * general economic conditions; and * general labor conditions ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to market risks such as changes in interest and foreign currency exchange rates, which may adversely affect results of operations and financial position. Risks from interest and foreign currency exchange rate fluctuations are managed through normal operating and financing activities. The Company does not utilize derivatives for speculative purposes, nor does it hedge interest rate exposure through the use of swaps and options or foreign exchange exposure through the use of forward contracts. Exposure to market risk from changes in interest rates relates primarily to the Company's variable rate debt obligations. The interest on this debt is the London Interbank Offered Rate ("LIBOR") plus a margin. At March 31, 2001, the Company had outstanding variable rate debt outstanding of $423.7 million. A 1% increase in LIBOR on 20 the maximum amount available under the Company's credit agreement, which is $668.7 million, would increase the Company's annual interest expense by $6.7 million and reduce annual net income by approximately $4.1 million. The Company has subsidiaries in Canada, the United Kingdom and Mexico, and thus is exposed to market risk for changes in foreign currency exchange rates of the Canadian dollar, the British pound and the Mexican peso. 21 PART II OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------- ---------------------- 3(i) Articles of Incorporation of the Company - incorporated by reference from Exhibit 3(i) of the Company's Form 10-Q for the quarter ended September 30, 1997. 3(ii) Bylaws of the Company - incorporated by reference from Exhibit 3.4 of the Company's Registration Statement on Form S-1 dated September 21, 1995. 4.1.1 Form of Certificate representing the Common Stock, par value $0.01 per share, of the Company - incorporated by reference from Exhibit 4.1 of the Company's Amendment No. 1 to Form S-3 dated October 29, 1997 (Reg. No. 333-35561). 4.1.2 Form of Indenture between the Company and The Bank of New York, as Trustee, dated November 1997, relating to the Company's $152,050,000 aggregate principal amount of 5% Convertible Subordinated Notes due 2002--incorporated by reference from Exhibit 4.2 to the Company's Amendment No. 2 to Form S-3 dated November 10, 1997 (Reg. No. 333-36337). 4.1.3 Form of Supplemental Indenture between the Company and The Bank of New York, as Trustee, dated November 1997, relating to the Company's $152,050,000 aggregate principal amount of 5% Convertible Subordinated Notes due 2002 and Form of Convertible Note-- incorporated by reference from Exhibit 4.5 to the Company's Amendment No. 2 to Form S-3 dated November 10, 1997 (Reg. No. 333-36337). 4.2 Indenture dated as of December 16, 1998 between Mail-Well I Corporation ("MWI") and State Street Bank and Trust Company, as Trustee, relating to MWI's $300,000,000 aggregate principal amount of 8 3/4% Senior Subordinated Notes due 2008 - incorporated by reference from the Company's Annual Report on Form 10-K for the year ended December 31, 1998. 4.5 Form of Senior Subordinated Note. Incorporated by reference from the company's Annual Report of Form 10-K for the year ended December 31, 1998. 10.1 Form of Indemnity Agreement between the Company and each of its officers and directors - incorporated by reference from Exhibit 10.17 of the Company's Registration Statement on Form S-1 dated March 25, 1994. 10.2 Form of Indemnity Agreement between Mail-Well I Corporation and each of its officers and directors - incorporated by reference from Exhibit 10.18 of the Company's Registration Statement on Form S-1 dated March 25, 1994. 10.3 Form of M-W Corp. Employee Stock Ownership Plan effective as of February 23, 1994 and related Employee Stock Ownership Plan Trust Agreement - incorporated by reference from Exhibit 10.19 of the Company's Registration Statement on Form S-1 dated March 25, 1994. 10.4 Form of M-W Corp. 401(k) Savings Retirement Plan - incorporated by reference from Exhibit 10.20 of the Company's Registration Statement on Form S-1 dated March 25, 1994. 10.5 Mail-Well, Inc. 1994 Stock Option Plan, as amended on May 7, 1997 - incorporated by reference from Exhibit 10.56 of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997. 10.6 Form of 1994 Incentive Stock Option Agreement - incorporated by reference from Exhibit 10.22 of the Company's Registration Statement on Form S-1 dated March 25, 1994. 10.7 Form of the Company Nonqualified Stock Option Agreement - incorporated by reference from Exhibit 10.23 of the Company's Registration Statement on Form S-1 dated March 25, 1994. 10.8 Mail-Well, Inc. 1997 Non-Qualified Stock Option Plan -- incorporated by reference from exhibit 10.54 of the Company's Form 10-Q for the quarter ended March 31, 1997. 10.9 1997 Non-Qualified Stock Option Agreement -- incorporated by reference from exhibit 10.54 of the Company's Form 10-Q for the quarter ended March 31, 1997. 10.10 Mail-Well, Inc. 1998 Incentive Stock Option Plan -- incorporated by reference from Exhibit 10.58 to the Company's Quarterly report on Form 10-Q for the quarter ended March 31, 1998. 10.11 Form of 1998 Incentive Stock Option Agreement -- incorporated by reference from Exhibit 10.59 to the Company's Quarterly report on Form 10-Q for the quarter ended March 31, 1998. 22 10.12 Credit Agreement dated as of March 16, 1998 among Supremex Inc., certain Guarantors, Bank of America National Trust and Savings Association, as Agent and other financial institutions party thereto -- incorporated by reference from Exhibit 10.61 to the Company's Quarterly report on Form 10-Q for the quarter ended March 31, 1998. 10.13 Participation Agreement dated as of December 15, 1997 among Mail-Well I Corporation, Keybank National Association, as Trustee and other financial institutions party thereto--incorporated by reference from Exhibit 10.62 to the Company's Quarterly report on Form 10-Q for the quarter ended March 31, 1998. 10.14 Equipment Lease dated as of December 15, 1997 among Mail-Well I Corporation, Keybank National Association, as Trustee and other financial institutions party thereto--incorporated by reference from Exhibit 10.63 to the Company's Quarterly report on Form 10-Q for the quarter ended March 31, 1998. 10.15 Guaranty Agreement dated as of December 15, 1997 among Mail-Well, Inc., Graphic Arts Center, Inc., Griffin Envelope Inc., Murray Envelope Corporation, Shepard Poorman Communications Corporation, Wisco Envelope Corp., Wisco II, LLC, Wisco III, LLC, Mail-Well I Corporation, Keybank National Association, as Trustee and other financial institutions party thereto--incorporated by reference from Exhibit 10.64 to the Company's Quarterly report on Form 10-Q for the quarter ended March 31, 1998. 10.16 Receivables Purchase Agreement dated as of July 1, 1999 among Mail-Well Trade Receivables Corporation, as Seller, Quincy Capital Corporation, as Issuer, The Alternative Purchasers from Time to Time Party thereto, Mail-Well I Corporation, as Servicer and Bank of America National Trust and Savings Association, as Administrator; and First Amendment thereto--incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999. 10.17 Purchase and Sales Agreement between Mail-Well I Corporation as initial Servicer and as Guarantor, The Originators from Time to Time Party thereto and Mail-Well Trade Receivable Corporation, as Purchaser dated as of July 1, 1999; and First Amendment thereto--incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999. 10.18 Servicing Agreement dated as of July 1, 1999 by and among Mail-Well I Corporation, as Servicer, Mail-Well Trade Receivables Corporation, as Seller under the Receivables Purchase Agreement and Bank of America National Trust and Saving Association, as Administrator; and First Amendment thereto--incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999. 10.19 Merger Agreement and Plan of Merger by and among American Business Products, Inc., Mail-Well, Inc. and Sherman Acquisition Corporation dated January 13, 2000--incorporated by reference from Exhibit (c) (1) to the Registrant's Tender Offer Statement on Schedule 14D-1 filed with the commission on January 21, 2000. 10.20 Change of Control Agreement dated November 15, 1999, between the Company and Paul V. Reilly--incorporated by reference from the Company's Annual Report on Form 10-K for the year ended December 31, 1999. 10.21 Change of Control Agreement dated November 15, 1999, between the Company and Gary Ritondaro--incorporated by reference from the Company's Annual Report on Form 10-K for the year ended December 31, 1999. 10.22 Change of Control Agreement dated November 15, 1999, between the Company and Robert Meyer--incorporated by reference from the Company's Annual Report on Form 10-K for the year ended December 31, 1999. 10.23 Change of Control Agreement dated November 15, 1999, between the Company and Michael A. Zawalski--incorporated by reference from the Company's Annual Report on Form 10-K for the year ended December 31, 1999. 10.24 Credit Agreement dated as of February 18, 2000 among Mail-Well I Corporation, Bank of American, N.A., as Administrative Agent and Letter of Credit Issuing Bank, ABN AMRO Bank, N.V., as Syndication Agents, the Bank of Nova Scotia, as Documentation Agent and certain other financial institutions party thereto. 10.25 Security Agreement dated as of February 18, 2000, by and among Mail-Well I Corporation, Mail-Well, Inc., certain other affiliates of the Company and Bank of America, N.A., as agent. 10.26* Second Amendment to Credit Agreement dated as of March 28, 2001 among Mail-Well I Corporation, Mail-Well, Inc., certain Mail-Well subsidiaries, Bank of American, N.A., as Administrative Agent and Letter of Credit Issuing Bank, ABN AMRO Bank, N.V., as Syndication Agents, the Bank of Nova Scotia, as Documentation Agent and certain other financial institutions party thereto. [FN] - ------------- * Filed herewith. (b) Reports on Form 8-K 23 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MAIL-WELL, INC. (Registrant) By /s/ Paul V. Reilly ------------------------- Date: May 14, 2001 Paul V. Reilly Chief Executive Officer By /s/ Michel P. Salbaing ------------------------- Date: May 14, 2001 Michel P. Salbaing Chief Financial Officer 24 EX-10.26 2 ex10.txt SECOND AMENDMENT TO CREDIT AGREEMENT SECOND AMENDMENT TO CREDIT AGREEMENT This SECOND AMENDMENT TO CREDIT AGREEMENT (this "Second Amendment") is ---------------- entered into as of March 28, 2001 among Mail-Well I Corporation, a Delaware corporation (the "Company"), as borrower, Mail-Well, Inc., a Colorado ------- corporation (the "Parent"), and certain other U.S. Subsidiaries of the ------ Parent, as guarantors, the several financial institutions from time to time party to the Credit Agreement referred to below (individually, a "Lender" ------ and, collectively, the "Lenders"), ABN AMRO Bank N.V., as syndication agent, ------- The Bank of Nova Scotia, as documentation agent, SunTrust Bank, Union Bank of California, N.A. and Wells Fargo Bank, N.A., as managing agents, and Bank of America, N.A., as Issuing Bank, Swingline Bank and as administrative agent for itself and the other Lenders (in such capacity, the "Agent"). ----- WHEREAS, the Company, the Parent and the other Loan Parties, the Lenders and the Agent entered into a Credit Agreement dated as of February 18, 2000, as amended by that certain First Amendment to Credit Agreement dated as of July 28, 2000 (as so amended, the "Credit Agreement"); and ---------------- WHEREAS, the Company has requested that the Majority Lenders agree to certain amendments to the Credit Agreement, and the Majority Lenders have agreed to such request, subject to the terms and conditions of this Second Amendment; NOW, THEREFORE, the parties hereto agree as follows: 1. Definitions; References; Interpretation. --------------------------------------- (a) Unless otherwise specifically defined herein, each term used herein (including in the Recitals hereof) which is defined in the Credit Agreement shall have the meaning assigned to such term in the Credit Agreement. (b) Each reference to "this Second Amendment", "hereof", "hereunder", "herein" and "hereby" and each other similar reference contained in the Credit Agreement, and each reference to "the Credit Agreement" and each other similar reference in the other Loan Documents, shall from and after the Effective Date refer to the Credit Agreement as amended hereby. (c) The rules of interpretation set forth in Section 1.02 of the Credit Agreement shall be applicable to this Second Amendment. 2. Amendments to the Credit Agreement. Subject to the terms and conditions ---------------------------------- hereof, the Credit Agreement is amended as follows, effective as of the date of satisfaction of the conditions set forth in Section 4 (the "Effective Date"): -------------- (a) Subsection 8.21(b) of the Credit Agreement is amended and restated in its entirety as follows: "(b) The Parent shall not permit the Total Leverage Ratio as of the last day of any fiscal quarter to be greater than (i) 4.50 to 1.00 for the fourth fiscal quarter of 2000, for each of the first, second, third and fourth fiscal quarters of 2001, and for the first fiscal quarter of 1 2002, (ii) 4.25 to 1.00 for the second fiscal quarter of 2002, and (iii) 4.00 to 1.00 for the third fiscal quarter of 2002 and each fiscal quarter ending thereafter; provided that, at any time on or after the Collateral Release -------- Date, the Parent shall not permit the Total Leverage Ratio to be greater than 3.50 to 1.00." (b) Annex I to the Credit Agreement is amended and restated in its ------- entirety as set forth on Annex I to this Second Amendment. ------- 3. Representations and Warranties. The Parent and the Company hereby ------------------------------ represent and warrant to the Agent and the Lenders as follows: (a) No Default or Event of Default has occurred and is continuing (or would result from the amendment of the Credit Agreement contemplated hereby). (b) The execution, delivery and performance by the Parent, the Company and the other Loan Parties of this Second Amendment and the Credit Agreement (as amended by this Second Amendment) have been duly authorized by all necessary corporate and other action and do not and will not require any registration with, consent or approval of, or notice to or action by, any Person (including any Governmental Authority) in order to be effective and enforceable. (c) This Second Amendment and the Credit Agreement (as amended by this Second Amendment) constitute the legal, valid and binding obligations of the Parent, the Company and each other Loan Party, enforceable against it in accordance with their respective terms. (d) All representations and warranties of the Parent, the Company and the other Loan Parties contained in the Credit Agreement are true and correct (except to the extent such representations and warranties expressly refer to an earlier date, in which case they shall be true and correct as of such earlier date and except that this subsection (d) shall be deemed instead to refer to the last day of the most recent quarter and year for which financial statements have then been delivered in respect of the representation and warranty made in subsection 6.11(a) of the Credit Agreement and to take into account any amendments to the Schedules to the Credit Agreement and other disclosures made in writing by the Parent or the Company to the Agent and the Lenders after the Closing Date and approved by the Agent and the Majority Lenders). (e) The Parent, the Company and each other Loan Party is entering into this Second Amendment on the basis of its own investigation and for its own reasons, without reliance upon the Agent and the Lenders or any other Person. (f) The Parent's, the Company's and each other Loan Party's obligations under the Credit Agreement and under the other Loan Documents are not subject to any defense, counterclaim, set-off, right of recoupment, abatement or other claim. 4. Conditions of Effectiveness. --------------------------- (a) The effectiveness of Section 2 of this Second Amendment shall be subject to the satisfaction of each of the following conditions precedent: 2 (1) The Agent shall have received from the Company all amounts payable under that certain fee letter dated as of March 28, 2001 delivered by the Company to the Agent in connection herewith. (2) The Agent shall have received from the Parent, the Company and each other Loan Party and the Majority Lenders a duly executed original (or, if elected by the Agent, an executed facsimile copy) of this Second Amendment. (3) The Agent shall have received all other documents it or the Majority Lenders may reasonably request relating to any matters relevant hereto, all in form and substance satisfactory to the Agent and the Majority Lenders. (4) The representations and warranties in Section 3 of this Second Amendment shall be true and correct on and as of the Effective Date with the same effect as if made on and as of the Effective Date. (b) For purposes of determining compliance with the conditions specified in Section 4(a), each Lender that has executed this Second Amendment shall be deemed to have consented to, approved or accepted, or to be satisfied with, each document or other matter either sent, or made available for inspection, by the Agent to such Lender for consent, approval, acceptance or satisfaction, or required hereunder to be consented to or approved by or acceptable or satisfactory to such Lender. (c) From and after the Effective Date, the Credit Agreement is amended as set forth herein. Except as expressly amended pursuant hereto, the Credit Agreement shall remain unchanged and in full force and effect and is hereby ratified and confirmed in all respects. (d) The Agent will notify the Parent, the Company and the Lenders of the occurrence of the Effective Date. 5. Consent of Guarantors. Each of the Parent and the other Guarantors, --------------------- in its capacity as a Guarantor, acknowledges that its consent to this Second Amendment and the amendments to the Credit Agreement contemplated hereby is not required, but each of such Persons nevertheless does hereby consent to this Second Amendment and the amendments to the Credit Agreement contemplated hereby and to the documents and agreements referred to herein. Nothing herein shall in any way limit any of the terms or provisions of the Guaranty of the Parent or any of the other Guarantors or the Collateral Documents executed by the Parent or any of the other Guarantors in the Agent's and the Lenders' favor, or any other Loan Document executed by the Parent or any of the other Guarantors (as the same may be amended from time to time), all of which are hereby ratified and affirmed in all respects. 6. Miscellaneous. ------------- (a) The Parent, the Company and each other Loan Party acknowledges and agrees that the execution and delivery by the Agent and the Majority Lenders of this Second Amendment shall not be deemed to create a course of dealing or an obligation to execute similar waivers or amendments under the same or similar circumstances in the future. 3 (b) This Second Amendment and the Credit Agreement as amended by this Second Amendment shall be binding upon and inure to the benefit of the parties hereto and thereto and their respective successors and assigns. (c) This Second Amendment shall be governed by and construed in accordance with the law of the State of California, provided that the Agent -------- and the Lenders shall retain all rights arising under Federal law. (d) This Second Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. Each of the parties hereto understands and agrees that this document (and any other document required herein) may be delivered by any party thereto either in the form of an executed original or an executed original sent by facsimile transmission to be followed promptly by mailing of a hard copy original, and that receipt by the Agent of a facsimile transmitted document purportedly bearing the signature of a Lender or any Loan Party shall bind such Lender or such Loan Party, respectively, with the same force and effect as the delivery of a hard copy original. Any failure by the Agent to receive the hard copy executed original of such document shall not diminish the binding effect of receipt of the facsimile transmitted executed original of such document of the party whose hard copy page was not received by the Agent. (e) This Second Amendment contains the entire and exclusive agreement of the parties hereto with reference to the matters discussed herein. This Second Amendment supersedes all prior drafts and communications with respect hereto. This Second Amendment may not be amended except in accordance with the provisions of Section 11.01 of the Credit Agreement. (f) If any term or provision of this Second Amendment shall be deemed prohibited by or invalid under any applicable law, such provision shall be invalidated without affecting the remaining provisions of this Second Amendment, the Credit Agreement or the other Loan Documents. (g) The Company agrees to pay or reimburse BofA (including in its capacity as Agent), upon demand, for all reasonable costs and expenses (including reasonable Attorney Costs) incurred by BofA (including in its capacity as Agent) in connection with the development, preparation, negotiation, execution and delivery of this Second Amendment. 4 IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to be duly executed and delivered in San Francisco, California, by their proper and duly authorized officers as of the day and year first above written. MAIL-WELL, INC. By: /s/ Robert Meyer ------------------------------------- Robert Meyer Title: V.P. Treasury and Tax MAIL-WELL I CORPORATION By: /s/ Robert Meyer ------------------------------------ Robert Meyer Title: V.P. Treasury and Tax EACH SUBSIDIARY GUARANTOR LISTED ON ANNEX II By: /s/ Robert Meyer ------------------------------------ Robert Meyer Title: V.P. Treasury and Tax BANK OF AMERICA, N.A., as Agent, Issuing Bank, Swingline Bank and as a Lender By: ------------------------------------ Title: --------------------------------- 5 IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to be duly executed and delivered in San Francisco, California, by their proper and duly authorized officers as of the day and year first above written. MAIL-WELL, INC. By: ------------------------------------ Title: --------------------------------- MAIL-WELL I CORPORATION By: ------------------------------------ Title: --------------------------------- EACH SUBSIDIARY GUARANTOR LISTED ON ANNEX II By: ------------------------------------ Title: --------------------------------- BANK OF AMERICA, N.A., as Agent, Issuing Bank, Swingline Bank and as a Lender By: /s/ Kevin C. Leader ------------------------------------ Kevin C. Leader Title: Managing Director 5 ABN AMRO BANK N.V. By: /s/ Mary L. Honda ------------------------------------- Mary L. Honda Title: Group Vice President By: /s/ Christopher Luke ------------------------------------- Christopher Luke Title: Senior Vice President Diversified Industries Central BANK OF CHINA, LOS ANGELES BRANCH By: /s/ Luo Xiaoming ------------------------------------- Luo Xiaoming Title: Branch Manager Dated: 3/27/01 --------------------------------- BANK OF CHINA SIGNATURE PAGE MAIL-WELL CORP. - BANK OF AMERICA FINAL SECOND AMENDMENT TO MAIL-WELL I CREDIT AGREEMENT BANK OF HAWAII By: /s/ Andrew Ishii ------------------------------------- Andrew Ishii Title: Vice President THE BANK OF NEW YORK By: /s/ Lisa Y. Brown ------------------------------------- Lisa Y. Brown Title: Vice President THE BANK OF NOVA SCOTIA By: /s/ Signature ------------------------------------- Title: Managing Director BHF (USA) CAPITAL CORPORATION By: /s/ Hans J. Scholz /s/ Jennifer M. U -------------------------------------------- Hans J. Scholz Jennifer M. U Title: Vice President Associate BNP PARIBAS By: /s/ David W. Low ------------------------------------- David W. Low Title: Director THE CIT GROUP/EQUIPMENT FINANCING, INC. By: /s/ Undrae L. Mitchell ------------------------------------- Undrae L. Mitchell Title: Senior Credit Analyst COMERICA BANK By: /s/ Signature ------------------------------------- Title: Assistant Vice President THE DAI-ICHI KANGYO BANK LIMITED By: /s/ Signature ------------------------------------- Title: Vice President FIRST UNION NATIONAL BANK By: /s/ Signature ------------------------------------- Title: Vice President FIRSTAR BANK, N.A. By: /s/ Signature ------------------------------------- Title: Vice President FLEET NATIONAL BANK By: /s/ Jeffrey C. Lynch ------------------------------------- Jeffrey C. Lynch Title: Managing Director THE FUJI BANK, LTD. By: /s/ Masahito Fukuda ------------------------------------- Masahito Fukuda Title: Senior Vice President GMAC COMMERCIAL CREDIT LLC By: /s/ Signature ------------------------------------- Title: Senior Vice President HARRIS TRUST AND SAVINGS BANK By: /s/ Scott M. Ferris ------------------------------------- Scott M. Ferris Title: Managing Director Second Amendment to Mail-Well Credit Agreement dated 28 March 2001-03-28 - ------------------------------------------------------------------------ IKB Deutsche Industriebank AG Luxembourg Branch as a Lender By: /s/ Signature ------------------------------------- Name Title: Manager By: /s/ Manfred Ziwey ------------------------------------- Manfred Ziwey Title: Director THE INDUSTRIAL BANK OF JAPAN, LIMITED NEW YORK BRANCH By: /s/ Ryusuke Aya ----------------------------------------- Ryusuke Aya Title: Senior Vice President, Houston Office KEYBANK NATIONAL ASSOCIATION By: /s/ Cheryl L. Ebner ------------------------------------- Cheryl L. Ebner Title: Senior Vice President THE MITSUBISHI TRUST & BANKING CORPORATION By: /s/ Signature --------------------------------------- Title: Senior Vice President NATIONAL CITY BANK By: /s/ Peter W. Richer ------------------------------------- Peter W. Richer Title: Vice President NORWEST BANK COLORADO, N.A. By: /s/ Catherine M. Jones ------------------------------------- Title: Vice President SUNTRUST BANK By: /s/ Charles C. Pick ------------------------------------- Charles C. Pick Title: Vice President TRANSAMERICA BUSINESS CAPITAL CORPORATION, as successor in interest to Transamerica Business Credit Corporation By: /s/ Signature ------------------------------------- Title: Senior Vice President UNION BANK OF CALIFORNIA, N.A. By: /s/ Signature ------------------------------------- Title: Vice President U.S. BANK NATIONAL ASSOCIATION By: /s/ Signature ------------------------------------- Title: Vice President WASHINGTON MUTUAL BANK, FA, as successor in interest to BANK UNITED FSB By: /s/ David M. Purcell ------------------------------------- David M. Purcell Title: Vice President Signature page to the Second Amendment to MAIL-WELL CREDIT AGREEMENT Addison CDO, Limited (Acct 1279) By: Pacific Investment Management Company LLC, as its Investment Advisor By: /s/ Mohan V. Phansalkar -------------------------------- Mohan V. Phansalkar Executive Vice President AIMCO CDO Series 2000-A By: /s/ Jerry D. Zinkula ------------------------------------- Jerry D. Zinkula Title: Authorized Signatory By: /s/ Patricia W. Wilson ------------------------------------- Patricia W. Wilson Title: Authorized Signatory ALLSTATE LIFE INSURANCE COMPANY By: /s/ Jerry D. Zinkula ------------------------------------- Jerry D. Zinkula Title: Authorized Signatory By: /s/ Patricia W. Wilson ------------------------------------- Patricia W. Wilson Title: Authorized Signatory Signature page to the Second Amendment to MAIL-WELL CREDIT AGREEMENT Athena CDO, Limited (Acct 1277) By: Pacific Investment Management Company LLC, as its Investment Advisor By: /s/ Mohan V. Phansalkar -------------------------------- Mohan V. Phansalkar Executive Vice President BALANCE HIGH-YIELD FUND I LTD. BY: ING Capital Advisors LLC, as Asset Manager By: /s/ Michael J. Campbell ------------------------------------- Michael J. Campbell Title: Managing Director Signature page to the Second Amendment to MAIL-WELL CREDIT AGREEMENT CAPTIVA III Finance Ltd. (Acct. 275), as advised by Pacific Investment Management Company LLC By: /s/ David Dyer ------------------------------- Name: David Dyer ------------------------- Title: Director ------------------------ Signature page to the Second Amendment to MAIL-WELL CREDIT AGREEMENT CAPTIVA IV Finance Ltd. (Acct. 1275), as advised by Pacific Investment Management Company LLC By: /s/ David Dyer -------------------------------- Name: David Dyer ------------------------- Title: Director ------------------------ CARLYLE HIGH YIELD PARTNERS II, LTD. By: /s/ Linda M. Pace ------------------------------------- Linda M. Pace Title: Vice President CYPRESSTREE INSTITUTIONAL FUND, LLC By: CypressTree Investment Management Company as Portfolio Manager /s/ Philip C. Robbins By: Philip C. Robbins Title: Vice President CYPRESSTREE FOCUSED INVESTMENT FUND, LLC By: CypressTree Investment Management Company as Portfolio Manager /s/ Philip C. Robbins By: Philip C. Robbins Title: Vice President CYPRESSTREE INVESTMENT PARTNERS I, LTD. By: CypressTree Investment Management Company as Portfolio Manager /s/ Philip C. Robbins By: Philip C. Robbins Title: Vice President CYPRESSTREE INVESTMENT PARTNERS II, LTD By: CypressTree Investment Management Company as Portfolio Manager /s/ Philip C. Robbins By: Philip C. Robbins Title: Vice President Signature page to the Second Amendment to MAIL-WELL CREDIT AGREEMENT DELANO Company (Acct 274) By: Pacific Investment Management Company LLC, as its Investment Advisor By: /s/ Mohan V. Phansalkar -------------------------------- Mohan V. Phansalkar Executive Vice President ELT LTD. By: /s/ Ann E. Morris ------------------------------------- Ann E. Morris Title: Authorized Agent CITIBANK, N.A. as Additional Investment Manager for and on behalf of FIVE FINANCE CORPORATION By: /s/ Mike Regan ------------------------------------- Mike Regan Title: Alternative Investment Strategies 399 Park Ave./7th Fl./7.n. 2 Ph: (212) 559-9121 By: /s/ Daniel Slotkin ------------------------------------- Daniel Slotkin Title: Vice President FIRST DOMINION FUNDING I By: /s/ Andrew H. Marshak ------------------------------------- Andrew H. Marshak Title: Authorized Signatory FIRST DOMINION FUNDING II By: /s/ Andrew H. Marshak ------------------------------------- Andrew H. Marshak Title: Authorized Signatory FRANKLIN CLO I, LIMITED By: /s/ Chauncey Lufkin ------------------------------------- Chauncey Lufkin Title: Vice President FRANKLIN FLOATING RATE MASTER SERIES By: /s/ Chauncey Lufkin ------------------------------------- Chauncey Lufkin Title: Vice President FRANKLIN FLOATING RATE TRUST By: /s/ Chauncey Lufkin ------------------------------------- Chauncey Lufkin Title: Vice President HARBOURVIEW CDO II, LTD. By: /s/ Lisa Chaffee ------------------------------------- Lisa Chaffee Title: Manager HELLER FINANCIAL, INC. /s/ David R. Campbell By: David R. Campbell Title: Vice President Signature page to the Second Amendment to MAIL-WELL CREDIT AGREEMENT Jissekikun Funding, Ltd. (Acct 1288) By: Pacific Investment Management Company LLC, as its Investment Advisor By: /s/ Mohan V. Phansalkar -------------------------------- Mohan V. Phansalkar Executive Vice President KEMPER FLOATING RATE FUND By: /s/ Kelly D. Babson ------------------------------------- Name: Kelly D. Babson Title: Managing Director KZH CYPRESSTREE-I LLC By: /s/ Susan Lee ------------------------------------- Susan Lee Title: Authorized Agent KZH LANGDALE LLC By: /s/ Susan Lee ------------------------------------- Susan Lee Title: Authorized Agent KZH SHOSHONE LLC By: /s/ Susan Lee ------------------------------------- Susan Lee Title: Authorized Agent KZH SOLEIL-2 LLC By: /s/ Susan Lee ------------------------------------- Susan Lee Title: Authorized Agent ML CLO XII PILGRIM AMERICA (CAYMAN) LTD. By: ING Pilgrim Investments, as its investment manager By: /s/ Robert L. Wilson ------------------------------------- Robert L. Wilson Title: Vice President ML CLO XV PILGRIM AMERICA (CAYMAN) LTD. By: ING Pilgrim Investments, as its investment manager By: /s/ Robert L. Wilson ------------------------------------- Robert L. Wilson Title: Vice President ML CLO XX PILGRIM AMERICA (CAYMAN) LTD. By: ING Pilgrim Investments, as its investment manager By: /s/ Robert L. Wilson ------------------------------------- Robert L. Wilson Title: Vice President PILGRIM AMERICA HIGH INCOME INVESTMENTS LTD. By: ING Pilgrim Investments, as its investment manager By: /s/ Robert L. Wilson ------------------------------------- Robert L. Wilson Title: Vice President PILGRIM PRIME RATE TRUST By: ING Pilgrim Investments, as its investment manager By: /s/ Robert L. Wilson ------------------------------------- Robert L. Wilson Title: Vice President PILGRIM CLO 1999-1 LTD. By: ING Pilgrim Investments, as its investment manager By: /s/ Robert L. Wilson ------------------------------------- Robert L. Wilson Title: Vice President Monument Capital Ltd., as Assignee By: Alliance Capital Management L.P., as Investment Manager By: Alliance Capital Management Corporation as General Partner By: /s/ Teresa McCarthy ------------------------------------- Name: Teresa McCarthy Title: Vice President Second Amendment to Credit Agreement for Mail-Well, Inc. MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST By: /s/ Sheila A. Finnerty ------------------------------------- Sheila A. Finnerty Title: Senior Vice President MOUNTAIN CAPITAL CLO I, LTD. By: /s/ Darren P. Riley ------------------------------------- Darren P. Riley Title: Director MOUNTAIN CAPITAL CLO II, LTD. By: /s/ Darren P. Riley ------------------------------------- Darren P. Riley Title: Director MUIRFIELD TRADING LLC By: /s/ Ann E. Morris ------------------------------------- Ann E. Morris Title: Asst. Vice President NORTH AMERICAN SENIOR FLOATING RATE FUND By: CypressTree Investment Management Company as Portfolio Manager /s/ Philip C. Robbins By: Philip C. Robbins Title: Vice President OLYMPIC FUNDING TRUST, SERIES 1999-1 By: /s/ Ann E. Morris ------------------------------------- Ann E. Morris Title: Authorized Agent PPM SPYGLASS FUNDING TRUST By: /s/ Ann E. Morris ------------------------------------- Ann E. Morris Title: Authorized Agent Signature page to the Second Amendment to MAIL-WELL CREDIT AGREEMENT ROYALTON COMPANY (Acct 280) By: Pacific Investment Management Company LLC, as its Investment Advisor By: /s/ Mohan V. Phansalker ------------------------------------- Mohan V. Phansalker Executive Vice President Sankaty Advisors, Inc. as Collateral Manager for GREAT POINT CLO I 1999-1 LTD., as Term Lender By: /s/ Diane J. Exter ----------------------------------------- Diane J. Exter Title: Managing Director, Portfolio Manager SANKATY HIGH YIELD PARTNERS II, L.P. By: /s/ Diane J. Exter ----------------------------------------- Diane J. Exter Title: Managing Director, Portfolio Manager STEIN ROE FLOATING RATE LIMITED LIABILITY COMPANY By: /s/ James R. Fellows --------------------------------------------- James R. Fellows Title: Senior Vice President Stein Roe & Farnham Incorporated as Advisor to the Stein Roe Floating Rate Limited Liability Company LIBERTY-STEIN ROE ADVISOR FLOATING RATE ADVANTAGE FUND By: /s/ James R. Fellows --------------------------------------------- James R. Fellows Title: Senior Vice President & Portfolio Manager STEIN ROE & FARNHAM CLO I LTD. By: Stein Roe & Farnham Inc., as Portfolio Manager By: /s/ James R. Fellows ------------------------------------------ James R. Fellows Title: Sr. Vice President & Portfolio Manager STRATEGIC MANAGED LOAN PORTFOLIO By: CITIBANK, N.A. as Manager By: /s/ Mike A. Regan ------------------------------------- Mike A. Regan Title: Alternative Investment Strategies 309 Park Ave./7th Fl./7.n. 2 Ph: (212) 559-9221 THE SUMITOMO TRUST AND BANKING COMPANY LTD., New York Branch By: /s/ Stephen A. Stratico ----------------------------------------- Stephen A. Stratico Title: Vice President TORONTO DOMINION (NEW YORK), INC. By: /s/ Stacey Malek ----------------------------------------- Stacey Malek Title: Vice President VAN KAMPEN CLO I, LIMITED By: VAN KAMPEN MANAGEMENT INC., as Collateral Manager By: /s/ Darvin D. Pierce ---------------------------------------- Darvin D. Pierce Title: Principal VAN KAMPEN CLO II, LIMITED By: VAN KAMPEN MANAGEMENT INC., as Collateral Manager By: /s/ Darvin D. Pierce ----------------------------------------- Darvin D. Pierce Title: Principal VAN KAMPEN PRIME RATE INCOME TRUST By: Van Kampen Investment Advisory Corp. By: /s/ Darvin D. Pierce ----------------------------------------- Darvin D. Pierce Title: Principal VAN KAMPEN SENIOR INCOME TRUST By: Van Kampen Investment Advisory Corp. By: /s/ Darvin D. Pierce ----------------------------------------- Darvin D. Pierce Title: Principal WEBSTER BANK By: /s/ Signature ----------------------------------------- Title: Vice President ANNEX I To Second Amendment to Credit Agreement --------------------------------------- ANNEX I ------- PRICING GRID ------------ From the Closing Date until the date on which the Parent delivers a Compliance Certificate pursuant to Section 7.02(c) of the Credit Agreement for the fiscal quarter ending June 30, 2000 (the "Initial Period"), the -------------- Applicable Margin and the Applicable Fee Amount shall be fixed at Level 5. From and after the last day of the Initial Period, the Applicable Margin and the Applicable Fee Amount for any day shall be the amount per annum set forth below based on the Total Leverage Ratio set forth in the most recently delivered Compliance Certificate delivered by the Parent pursuant to Section 7.02(c) of the Credit Agreement. Changes in the Applicable Margin and the Applicable Fee Amount resulting from a change in the Total Leverage Ratio shall become effective on the date of delivery by the Parent to the Agent of a new Compliance Certificate pursuant to Section 7.02(c), except that no such change shall take effect until the end of the Initial Period. If the Parent shall fail to deliver a Compliance Certificate and accompanying financial statements within the number of days after the end of any fiscal quarter or fiscal year as required pursuant to Section 7.02(c), the parties agree that the Applicable Margin and the Applicable Fee Amount shall be fixed at Level 5 until such time as the Parent delivers such new Compliance Certificate and accompanying financial statements pursuant to Section 7.02(c). Notwithstanding the foregoing, the Applicable Margin for Tranche B Term Loans shall be 3.00% for Offshore Rate Loans and 1.75% for Base Rate Loans at all times.
OFFSHORE RATE BASE RATE LETTER OF COMMITMENT LEVEL TOTAL LEVERAGE RATIO SPREAD SPREAD CREDIT FEE FEE - --------------------------------------------------------------------------------------------- Level 5 greater than or equal to 2.75% 1.50% 2.75% 0.500% 4.25 to 1.00 - --------------------------------------------------------------------------------------------- Level 4 greater than or equal to 2.50% 1.25% 2.50% 0.500% 3.50 to 1.00 and less than 4.25 to 1.00 - --------------------------------------------------------------------------------------------- Level 3 greater than or equal to 2.25% 1.00% 2.25% 0.500% 3.00 to 1.00 and less than 3.50 to 1.00 - --------------------------------------------------------------------------------------------- Level 2 greater than or equal to 2.00% 0.75% 2.00% 0.500% 2.50 to 1.00 and less than 3.00 to 1.00 - --------------------------------------------------------------------------------------------- Level 1 less than 2.50 to 1.00 1.75% 0.50% 1.75% 0.375% - ---------------------------------------------------------------------------------------------
ANNEX I--PAGE 1 ANNEX II To Second Amendment to Credit Agreement --------------------------------------- ABP Books, Inc. Curtis 1000, Inc. Discount Labels, Inc. Hill Graphics, Inc. Mail-Well Canada Holdings, Inc. Mail-Well Commercial Printing, Inc. Mail-Well Europe Holdings, LLC Mail-Well Label USA, Inc. Mail-Well Mexico Holdings, Inc. Mail-Well Services, Inc. Mail-Well West, Inc. National Graphics Company Poser Business Forms, Inc. Vanier Graphics Corporation Wisco III, LLC ANNEX II--PAGE 1 -----END PRIVACY-ENHANCED MESSAGE-----