10-Q 1 tenq.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 June 30, 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 August 1, 2001, the Registrant had 47,653,248 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................................... 14 Item 3. Quantitative and Qualitative Disclosures About Market Risk........................................................... 17 Part II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders....................... 18 Item 6. Exhibits and Reports on Form 8-K ......................................... 18 Signature Page.................................................................................. 21
2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS MAIL-WELL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PER SHARE DATA)
JUNE 30, 2001 DECEMBER 31, 2000 (UNAUDITED) ------------- ------------------- ASSETS Current assets Cash and cash equivalents $ 245 $ 94 Accounts receivable, net 104,874 146,529 Investment in accounts receivable securitization 122,974 75,427 Inventories, net 117,732 131,417 Net assets of discontinued operations 305,233 405,514 Net assets held for sale 55,406 - Other current assets 50,566 48,948 ----------- ----------- Total current assets 757,030 807,929 Property, plant and equipment, net 395,623 431,025 Intangible assets, net 365,677 389,148 Other assets, net 42,814 45,064 ----------- ----------- Total assets $ 1,561,144 $ 1,673,166 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $ 139,844 $ 127,912 Accrued compensation 45,890 48,444 Other current liabilities 63,221 57,905 Current portion of long-term debt 40,725 40,040 ----------- ----------- Total current liabilities 289,680 274,301 Long-term debt 861,741 879,753 Deferred income taxes 89,892 107,047 Other long-term liabilities 25,241 26,212 ----------- ----------- Total liabilities 1,266,554 1,287,313 SHAREHOLDERS' EQUITY Common stock, $0.01 par value; 100,000,000 shares authorized, 47,656,801 and 47,454,879 shares issued and outstanding in 2001 and 2000, respectively 474 474 Paid-in capital 210,092 210,067 Retained earnings 93,937 182,840 Accumulated other comprehensive loss (9,913) (7,528) ----------- ----------- Total shareholders' equity 294,590 385,853 ----------- ----------- Total liabilities and shareholders' equity $ 1,561,144 $ 1,673,166 =========== =========== 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 SIX MONTHS ENDED ------------------ ---------------- JUNE 30, JUNE 30, -------- -------- 2001 2000 2001 2000 ---- ---- ---- ---- Net sales ...................................... $ 418,278 $ 442,148 $ 851,254 $ 876,822 Cost of sales .................................. 332,263 349,398 677,405 689,209 --------- --------- --------- --------- Gross profit ................................... 86,015 92,750 173,849 187,613 Other operating expenses: Selling and administrative expenses .......... 61,071 61,536 123,946 118,756 Amortization of intangibles .................. 3,427 2,691 6,702 5,441 Impairment loss on assets held for sale ...................................... 8,807 - 8,807 - Restructuring charges ........................ 17,674 - 17,674 - --------- --------- --------- --------- Operating income (loss) ........................ (4,964) 28,523 16,720 63,416 Other expense (income): Interest expense ............................. 13,797 17,134 28,548 31,052 Other expense (income) ....................... 538 (55) 1,064 (300) --------- --------- --------- --------- Income (loss) from continuing operations before income taxes .......................... (19,299) 11,444 (12,892) 32,664 Income tax provision (benefit) ................. (4,349) 3,932 (2,129) 12,619 --------- --------- --------- --------- Income (loss) from continuing operations ....... (14,950) 7,512 (10,763) 20,045 Income from discontinued operations: Income (loss) from discontinued operations, net of tax ................................ (1,610) 3,732 (2,175) 7,535 Loss on disposal, net of tax benefit ......... (75,965) - (75,965) - --------- --------- --------- --------- Income (loss) before extraordinary items ....... (92,525) 11,244 (88,903) 27,580 Extraordinary items, net of taxes .............. - - - 1,447 --------- --------- --------- --------- Net income (loss) .............................. $ (92,525) $ 11,244 $ (88,903) $ 29,027 ========= ========= ========= ========= Earnings (loss) per share - basic Continuing operations ..................... $ (0.31) $ 0.15 $ (0.23) $ 0.41 Discontinued operations ................... (1.64) 0.08 (1.64) 0.15 Extraordinary items ....................... - - - 0.03 --------- --------- --------- --------- Earnings (loss) per share - basic ......... $ (1.95) $ 0.23 $ (1.87) $ 0.59 ========= ========= ========= ========= Earnings (loss) per share - diluted Continuing operations ..................... $ (0.31) $ 0.15 $ (0.23) $ 0.39 Discontinued operations ................... (1.64) 0.07 (1.64) 0.13 Extraordinary items ....................... - - - 0.03 --------- --------- --------- --------- Earnings (loss) per share - diluted ....... $ (1.95) $ 0.22 $ (1.87) $ 0.55 ========= ========= ========= ========= Weighted average shares - basic ................ 47,464 49,273 47,460 49,251 Weighted average shares - diluted .............. 47,464 57,116 47,460 57,466 See notes to condensed consolidated financial statements.
4 MAIL-WELL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
SIX MONTHS ENDED ---------------- JUNE 30, -------- 2001 2000 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES Income (loss) from continuing operations ............................... $ (10,763) $ 20,045 Adjustments to reconcile net income (loss) to cash provided by operating activities: Write-down of assets held for sale ................................... 8,807 - Depreciation and amortization ........................................ 30,948 28,355 Extraordinary loss on early retirement of debt ....................... - (2,355) Deferred income taxes ................................................ (979) 2,861 Other ................................................................ (20) 51 Changes in operating assets and liabilities, excluding the effects of businesses acquired: Trade receivables ................................................. 24,912 2,845 Inventories ....................................................... 3,127 (12,361) Accounts payable and accrued expenses ............................. 15,547 5,194 Net change in other current assets and other current liabilities .. 34,510 (8,570) ----------- ----------- Net cash provided by operating activities ......................... 106,089 36,065 CASH FLOWS FROM INVESTING ACTIVITIES Acquisition costs, net of cash acquired ................................ (3,844) (328,093) Capital expenditures ................................................... (15,661) (32,254) Investment in marketable securities, net ............................... 518 (12,594) Proceeds from the sale of assets ....................................... 3,335 1,142 ----------- ----------- Net cash used in investing activities ............................. (15,652) (371,799) CASH FLOWS FROM FINANCING ACTIVITIES Decrease in accounts receivable securitization ......................... (75,000) (73,500) Proceeds from common stock issuance .................................... 6 - Proceeds from long-term debt ........................................... 361,530 940,374 Repayments of long-term debt ........................................... (375,323) (516,239) Debt issuance costs .................................................... (2,260) (14,164) Redemption of a nonvoting common stock of a subsidiary ................. - (3,500) ----------- ----------- Net cash provided by (used in) financing activities ............... (91,047) 332,971 CASH FLOWS FROM DISCONTINUED OPERATIONS Net cash provided by discontinued operations ........................... 773 2,506 ----------- ----------- Effect of exchange rate changes on cash and cash equivalents .............. (12) - ----------- ----------- Net increase (decrease) in cash and cash equivalents ...................... 151 (257) Cash and cash equivalents at beginning of year ............................ 94 290 ----------- ----------- Cash and cash equivalents at end of year .................................. $ 245 $ 33 =========== =========== 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- and six-month periods ended June 30, 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- and six-months ended June 30, 2000 have been reclassified to conform with the current year presentation including the reclassification of billed freight from cost of sales and discontinued operations previously reported as part of the continuing operations. See Exhibit 99.1 filed herewith for the Consolidating Condensed Financial Statements of MWI ("Issuer"), Guarantor Subsidiaries, Non-guarantor Subsidiaries and Parent Guarantor. These statements are provided to comply with the reporting requirements under the indenture for the 8 3/4% Senior Subordinated Notes due in 2008. 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. RESTRUCTURING 2001 Restructuring - In May 2001, the Company approved a new strategic plan. In connection with the new strategic plan, the Company approved plans to consolidated certain of its operations to eliminate excess internal capacity in order to improve its cost effectiveness and long-term competitive position. A liability in the amount of $15.4 million was recorded in the second quarter of 2001 in connections with these plans. Additional cash restructuring charges of $2.3 million were recorded for a total of $17.7 million of restructuring charges. The following table and discussion presents additional detail related to this charge:
COMMERCIAL (IN THOUSANDS) ENVELOPE PRINTING CORPORATE TOTAL --------------------------------------------------------------------------- Termination and related employee costs $ 8,872 $ 372 $ - $ 9,244 Lease termination costs 1,368 346 - 1,714 Exit costs 3,699 1,080 - 4,779 Strategic assessment costs - - 1,937 1,937 --------------------------------------------------------------------------- $13,939 $1,798 $1,937 $17,674 ===========================================================================
The Envelope segment implemented a plan to consolidate nine of its manufacturing facilities into other facilities. This consolidation plan, which will eliminate substantial excess internal capacity, will take 18 months to execute and will result in additional restructuring expenses during that time. The termination and related employee costs recorded in the second quarter of 2001 cover approximately 920 employees expected to be terminated. The first of the plant closures is expected to be completed in August 2001. 6 The Commercial Printing segment implemented a plan to consolidate its two printing operations in the Philadelphia, Pennsylvania area into an existing facility. This plan will improve the cost effectiveness of these two operations and their competitive position in the Philadelphia market. The consolidation is expected to be completed in December 2001 and will result in additional charges as the plan is executed. The termination and related employee costs recorded cover approximately 25 employees expected to be terminated. The Company incurred consulting and other costs in connection with its strategic assessment and expects to incur additional such expenses as its new strategy is implemented. 2000 Restructuring - In December 2000, the Company began the comprehensive review of its business operations and recorded a restructuring charge to cover certain of the expenses of restructuring plans that were approved. During the six months ended June 30, 2001, the Company did not incur material additional restructuring costs. The Envelope segment has completed the closure of its Vancouver, Washington facility, and the Commercial Printing segment has closed its bindery operation in Mexico. Of the total 184 employees expected to be terminated as a result of these two closures, 169 had been terminated as of June 30, 2001. The Commercial Printing segment expects to close a manufacturing facility in the third quarter of 2001, at which time all restructuring plans implemented in December 2000 by the Commercial Printing and Envelope segments will be complete. A summary of activity charged to the restructuring liability during the six-months ended June 30, 2001 was as follows:
(IN THOUSANDS) 2000 RESTRUCTURE ---------------------------------------------------------------- Balance at December 31, 2000 $ 3,146 Transfer of reserves related to discontinued operations (1,575) Cash payments for severance (529) Cash payments for property exit costs (336) Cash payments for other exit activities (414) ---------------------------------------------------------------- Balance at June 30, 2001 $ 292 ================================================================
3. DISCONTINUED OPERATIONS In connection with the new strategic plan, the Company adopted a formal plan to sell its Label and Printed Office Products segments. These segments have been segregated from continuing operations and reported as discontinued operations in the accompanying consolidated financial statements. The reported loss on disposition of these two business segments includes the write-down to net realizable value based on estimated proceeds, costs associated with the planned dispositions, the estimated loss from operations of the discontinued businesses through the expected date of these dispositions and an income tax benefit of approximately $1.7 million. The estimated loss from operations includes allocated interest expense based upon the relative net assets of the Label and Printed Office Products segments in the amounts of $6.3 and $13.1 for the three- and six-months ended June 30, 2001, respectively, and $6.8 and $11.9 for the three- and six-months ended June 30, 2000, respectively. The Company expects to complete the sales of both segments by December 31, 2001. 7 The Company's financial statements have been presented to reflect the Label and Printed Office Products segments as discontinued operations for all periods presented. Operating results of the discontinued operations are summarized as follows:
THREE MONTHS ENDED SIX MONTHS ENDED ------------------ ---------------- JUNE 30, JUNE 30, JUNE 30, JUNE 30, (IN THOUSANDS) 2001 2000 2001 2000 ------------------------------------------------------------------------------------------------------------------------- Label segment: Net sales $ 58,877 $ 59,747 $ 115,420 $ 115,992 Income from operations before interest and taxes 2,355 3,984 4,724 6,710 Allocated interest expense 2,581 3,223 5,344 5,625 Loss on disposal 60,090 - 60,090 - Income tax expense (benefit) (14,602) 318 (14,919) 453 ------------------------------------------------------------------------------------------------------------------------- Income (loss) from the discontinued Label segment $ (45,714) $ 443 $ (45,791) $ 632 ------------------------------------------------------------------------------------------------------------------------- Printed Office Products segment: Net sales $ 94,295 $ 101,076 $ 193,998 $ 174,769 Income from operations before interest and taxes 1,070 8,756 5,430 16,299 Allocated interest expense 3,756 3,587 7,777 6,259 Loss on disposal 17,356 - 17,356 - Income tax expense 11,819 2,266 12,646 4,195 ------------------------------------------------------------------------------------------------------------------------- Income (loss) from the discontinued Printed Office Products segment $ (31,861) $ 2,903 $ (32,349) $ 5,845 ------------------------------------------------------------------------------------------------------------------------- Income from the discontinued Extrusion Coating and Laminating segment - 386 - 1,058 ------------------------------------------------------------------------------------------------------------------------- Total income (loss) from the discontinued operations $ (77,575) $ 3,732 $ (78,140) $ 7,535 -------------------------------------------------------------------------------------------------------------------------
The assets and liabilities of discontinued operations, which have been reflected on a net basis in the consolidated balance sheets, are summarized as follows:
JUNE 30, DECEMBER 31, (IN THOUSANDS) 2001 2000 ------------------------------------------------------------------------------ Label segment: Current assets $ 58,544 $ 57,221 Long-term assets 104,240 148,259 ------------------------------------------------------------------------------ Total assets 162,784 205,480 Current liabilities 43,732 30,732 Long-term liabilities 4,027 1,565 ------------------------------------------------------------------------------ Net assets of the discontinued Label segment 115,025 173,183 ------------------------------------------------------------------------------ Printed Office Products segment: Current assets $ 57,436 $ 59,400 Long-term assets 217,903 210,023 ------------------------------------------------------------------------------ Total assets 275,339 280,423 Current liabilities 50,508 39,410 Long-term liabilities 34,623 8,682 ------------------------------------------------------------------------------ Net assets of the discontinued Printed Office Products segment 190,208 232,331 -------------------------------------------------------------- -------------- Total net assets of discontinued operations 305,233 405,514 ------------------------------------------------------------------------------
8 Net assets of discontinued operations include the write-down of assets to estimated net realizable value, the accrual of obligations associated with the sale of the two segments, and deferred tax assets and liabilities related to these two segments. 4. ASSETS HELD FOR SALE The Company's strategic plan also includes the sale of certain operations that are not strategic to its Envelope and Commercial Printing segments. Certain of these assets were written down to estimated fair market value based on estimated sales proceeds. This resulted in an impairment charge in the second quarter of 2001 of $8.8 million. The Company expects to complete the dispositions of these operations prior to December 31, 2001. The following table presents the sales and operating income of the assets held for sale for the three- and six- months ended June 30, 2001. Also presented are the assets and liabilities of these operations that are reported as "assets held for sale" in the accompanying condensed balance sheet.
(IN THOUSANDS) ------------------------------------------------------- Three-months ended June 30, 2001: Sales $26,761 Operating income 3,326 ------------------------------------------------------- Six-months ended June 30, 2001: Sales $49,994 Operating income 5,638 ------------------------------------------------------- ------------------------------------------------------- Assets of businesses held for sale $65,427 Liabilities of businesses held for (10,021) sale ------------------------------------------------------- Net assets held for sale $55,406 =======
9 5. INVENTORIES Inventory by major category were:
(in thousands) JUNE 30, 2001 DECEMBER 31, 2000 ------------------------------------------------------------------------------ Raw materials $ 31,481 $ 44,083 Work in process 27,241 27,967 Finished goods 63,385 63,684 ------------------------------------------------------------------------------ 122,107 135,734 Reserves (4,375) (4,317) ------------------------------------------------------------------------------ $ 117,732 $ 131,417 =========== =============
6. COMPREHENSIVE INCOME (LOSS) A summary of comprehensive income (loss) is as follows:
THREE MONTHS ENDED SIX MONTHS ENDED ------------------ ---------------- (in thousands) JUNE 30, 2001 JUNE 30, 2000 JUNE 30, 2001 JUNE 30, 2000 ------------- ------------- ------------- ------------- Net income (loss) $ (92,525) $ 11,244 $ (88,903) $ 29,027 Other comprehensive income (loss): Currency translation adjustments, net 5,062 (3,775) (1,465) (4,492) Unrealized gain (loss) on investments, net 1,688 90 547 55 Pension liability adjustment, net (1,583) - (1,467) - ------------------------------------------------------------------------------------------------------------ Total other comprehensive income (loss) 5,167 (3,685) (2,385) (4,547) ------------------------------------------------------------------------------------------------------------ Comprehensive income (loss) $ (87,358) $ 7,559 $ (91,288) $ 24,480 ========= ======== ========== =========
10 7. EARNINGS (LOSS) PER SHARE Basic earnings (loss) per share exclude dilution and are computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. A reconciliation of the amounts included in the computation of basic earnings (loss) per share and diluted earnings (loss) per share is as follows:
THREE-MONTHS ENDED SIX-MONTHS ENDED ------------------ ---------------- JUNE 30, JUNE 30, JUNE 30, JUNE 30, (IN THOUSANDS, EXCEPT PER SHARE AMOUNT) 2001 2000 2001 2000 ------------------------------------------------------------------------------------------------------------ Numerator: Numerator for basic earnings (loss) per share - income (loss) from continuing operations $(14,950) $ 7,512 $(10,762) $20,045 Interest on Convertible Notes - 1,214 - 2,524 ------------------------------------------------------------------------------------------------------------- Numerator for diluted earnings (loss) per share - income (loss) from continuing operations after assumed conversions $(14,950) $ 8,726 $(10,762) $22,569 ============================================================================================================ Denominator: Denominator for basic earnings (loss) per share - weighted average shares 47,464 49,273 47,460 49,251 Effects of dilutive securities: Stock options - 524 - 566 Conversion of Convertible Notes - 7,319 - 7,602 Other - - - 47 ------------------------------------------------------------------------------------------------------------- Denominator for diluted earnings (loss) per share - adjusted weighted average shares and assumed conversions 47,464 57,116 47,460 57,466 ============================================================================================================ Earnings (loss) per share from continuing operations: Basic $ (0.31) $ 0.15 $ (0.23) $ 0.41 ============================================================================================================ Diluted $ (0.31) $ 0.15 $ (0.23) $ 0.39 ============================================================================================================
During the three- and six-months ended June 30, 2001, interest on the Convertible Notes in the amount of $1,214,000 and $2,427,000, respectively, and shares of 7,319,000 that would be issued upon assumed conversion of the Convertible Notes were excluded from the calculation of diluted earnings (loss) per share due to the antidilutive effect on earnings (loss) per share. In addition, in 2001, the outstanding options to purchase approximately 6,500,000 common shares were excluded from the calculation of diluted earnings (loss) per share for the three- and six- months ended June 30, 2001 because the effect would be antidilutive. The outstanding options in 2000 to purchase approximately 1,959,900 and 1,917,510 common shares were excluded from the calculation of diluted earnings per share because the exercise price of the options exceeded the average market price for the three- and six-months ended June 30, 2000, respectively. 11 8. LONG-TERM DEBT Long-term debt consists of the following:
JUNE 30, DECEMBER 31, (IN THOUSANDS) 2001 2000 ---------------------------------------------------------------------------- Bank borrowings: Secured Tranche A term loan, due 2006 $208,630 $237,586 Secured Tranche B term loan, due 2007 193,730 209,603 Unsecured loan, due 2003 12,532 15,559 Unsecured revolving loan facility 1,816 - Secured revolving loan facility 33,000 - Senior Subordinated Notes, due 2008 300,000 300,000 Convertible Subordinated Notes, due 2002 139,063 139,063 Other 13,695 17,982 ---------------------------------------------------------------------------- 902,466 919,793 Less current maturities (40,725) (40,040) ---------------------------------------------------------------------------- Long-term debt $861,741 $879,753 ============================================================================
As of June 30, 2001, the Company had initiated amendments to its various debt agreements necessitated by its plans to sell the Label and Printed Office Products segments, sell certain non-core assets and restructure operations in both the Envelope and Commercial Printing segments. These amendments were executed by August 13, 2001, and the Company is in compliance with all of the covenants of its various debt agreements. 9. SECURITIZATION The Company sold, 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, were sold to MTRC on a daily basis as previously sold accounts receivables were collected. MTRC, in turn, sold 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 were no repurchase agreements. The Company maintained a subordinated interest in the portion of the pooled receivables, which were not transferred to the securitization company. As of June 30, 2001, the Company had sold $123 million of accounts receivable to MTRC; however, MTRC had not sold beneficial interests in the receivables to the securitization company. The amounts reflected in the investment in accounts receivable securitization in the accompanying consolidated balance sheets are $123 million and $75.4 million at June 30, 2001 and December 31, 2000, respectively. The trade receivables securitization facility expired in July 2001. The Company does not expect such expiration to have a material effect on liquidity, and the Company has no plans to replace the facility in the near future. Trade receivables sold to MTRC will be repurchased. 10. SEGMENT INFORMATION The Company operates principally in two 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. 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. 12 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 creating corresponding contra assets which have been included with corporate assets in order to reconcile identifiable assets with the total assets of the Company, excluding discontinued operations. Corporate assets, excluding the contra assets discussed above, consist primarily of cash and cash equivalents, investments in accounts receivable securitization, investment securities, other accounts receivable and deferred tax assets. The following tables present certain business segment information for the three- and six-months ended June 30, 2001 and 2000 as follows:
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 ------------------------------------------------------------------------------------- (IN THOUSANDS) 2001 2000 (a) 2001 2000 (a) ------------------------------------------------------------------------------------- Net external sales: Commercial Printing $ 207,532 $ 229,458 $ 418,892 $ 458,854 Envelope 210,746 212,690 432,362 417,968 ------------------------------------------------------------------------------------- Total $ 418,278 $ 442,148 $ 851,254 $ 876,822 ===================================================================================== Operating income (loss): Commercial Printing $ 6,401 $ 14,934 $ 12,365 $ 32,627 Envelope 21,519 19,653 44,635 41,795 Asset write-downs (8,807) - (8,807) Restructuring charges (17,674) - (17,674) - Corporate (6,403) (6,064) (13,799) (11,006) ------------------------------------------------------------------------------------- Total $ (4,964) $ 28,523 $ 16,720 $ 63,416 ===================================================================================== JUNE 30 DECEMBER 31 ------------------------------------------------------------------------------------- (IN THOUSANDS) 2001 (b) 2000 ------------------------------------------------------------------------------------- Identifiable assets: Commercial Printing $ 634,209 $ 685,871 Envelope 569,878 635,508 Corporate (3,582) (53,727) ------------------------------------------------------------------------------------- Total $1,200,505 $ 1,267,652 ===================================================================================== (a) Net sales for 2000 have been restated to include billed freight previously reported in cost of sales. (b) Excludes assets held for sale in 2001. See Note 4.
Intercompany sales within Commercial Printing were $1,661,0000 and $4,286,000 for the three- and six- months ending June 30, 2001, respectively. Intercompany sales within the Envelope segment were $6,217,000 and $14,001,000 for the three- and six- months ending June 30, 2001, respectively. These amounts, which are eliminated in consolidation, have been excluded above in reported net sales. 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The Company completed a comprehensive review of its operations in May 2001 and adopted a new strategy that focuses on its two largest segments - Envelopes and Commercial Printing. In support of this strategy, the Company plans to sell its Label and Printed Office Products segments and certain other non-core assets. Additionally, the Company plans to consolidate nine of its envelope plants and two of its commercial printing plants. Results for the three- and six-months ended June 30, 2001, which are summarized in the table that follows, were significantly impacted by the Company's new strategy. The table includes acquired businesses from their acquisition dates.
THREE-MONTHS ENDED JUNE 30, SIX-MONTHS ENDED JUNE 30, --------------------------- ------------------------- 2001 2000 2001 2000 ---- ---- ---- ---- Net sales Commercial Printing $ 207,532 $ 229,458 $ 418,892 $ 458,854 Envelope 210,746 212,690 432,362 417,968 --------- --------- --------- --------- Total net sales $ 418,278 $ 442,148 $ 851,254 $ 876,822 ========= ========= ========= ========= Operating income (loss): Commercial Printing $ 6,401 $ 14,934 $ 12,365 $ 32,627 Envelope 21,519 19,653 44,635 41,795 Amortization (3,427) (2,691) (6,702) (5,441) Impairment of assets held for sale (8,807) - (8,807) - Restructuring charges (17,674) - (17,674) - Corporate (2,976) (3,373) (7,097) (5,565) --------- --------- --------- --------- Total operating income (loss) (4,964) 28,523 16,720 63,416 Interest expense 13,797 17,134 28,548 31,052 Other expense (income) 538 (55) 1,064 (300) --------- --------- --------- --------- Income (loss) from continuing operations before income taxes (19,299) 11,444 (12,892) 32,664 Income tax expense (benefit) (4,349) 3,932 (2,129) 12,619 --------- --------- --------- --------- Income (loss) from continuing operations (14,950) 7,512 (10,763) 20,045 Income (loss) from discontinued operations (77,575) 3,732 (78,140) 7,535 Extraordinary items - - - 1,447 --------- --------- --------- --------- Net income (loss) $ (92,525) $ 11,244 $ (88,903) $ 29,027 ========= ========= ========= =========
The following discussion excludes the financial condition and results of operations of the Company's Label and Printed Office Products segments, which have been reported as discontinued operations in all periods covered by this report. RESULTS OF CONTINUING OPERATIONS Sales for the second quarter of 2001 were $418.3 million, 5% below the second quarter of 2000. Sales for the six-months ended June 30, 2001 were $851.3 million, 3% below the comparable period of 2000. Excluding the impact of acquisitions completed in 2000, the sales declines for the second quarter and the first half of 2001 were $30.8 million and $54.8 million, respectively. Sales in both segments have been negatively impacted by the slowdown in the economy as customers have curtailed spending on print advertising and direct mail. The Company lost $15 million, $ 0.31 per share, from its continuing operations in the second quarter of 2001 and $10.8 million, $ 0.23 per share, in the first six months of the year. These losses were primarily due to the $17.7 14 million restructuring charge recorded in connection with the plant consolidations and the $8.8 million impairment charge recognized on certain non-core assets held for sale. Excluding the restructuring and impairment charges, the Company had operating income from continuing operations of $21.5 million and $43.2 million for the three- and six-month periods ended June 30, 2001, respectively, compared to $28.5 million and $63.4 million in the comparable periods of 2000. Operating income, excluding the restructuring and impairment charges, has been lower in 2001 due primarily to lower profits of the Commercial Printing segment which were down significantly from 2000 due to lower sales and lower gross margins, both of which have resulted from lower demand for commercial print services associated with the economic slowdown. Corporate expenses have been higher in 2001 than in 2000 primarily due to staffing vacancies that existed in the first half of 2000 that have since been filled. Finally, acquisitions completed in 2000 increased amortization expense in 2001. Interest expense has been lower in 2001 than in 2000. This was due to lower debt levels since the company has reduced its debt by $243 million since the second quarter of 2000. Additionally, blended interest rates, as they apply to the Company, are approximately 120 basis points lower in 2001 than in 2000. The tax benefit of the loss from continuing operations was only $4.3 million or 16.5% of the loss. This rate was substantially below the statutory rate of 38.5% because of the amount of non-deductible goodwill amortization contributing to the loss. BUSINESS SEGMENT RESULTS ENVELOPE SEGMENT Sales of the Envelope segment were $210.7 million in the second quarter of 2001, $1.9 million lower than sales in the second quarter of 2000. Excluding the impact of acquisitions completed in 2000, sales were down by $4.2 million. Envelope sales for the six months ended June 30, 2001 were $432.4 million, $14.4 million higher than in the comparable period of 2000. Excluding the impact of acquisitions completed in 2000, sales were $1.3 million lower than in the first six months of 2000. The sales declines were due lower sales of specialty envelopes and lower sales to direct mail customers. Operating income of the Envelope segment improved by $1.8 million, $1.6 million excluding the impact of acquisitions, over operating income of $19.7 million in the second quarter of 2000. Gross profit as a percentage of sales improved slightly in the quarter to 20.9% from 20.2% in 2000 due to profit improvement programs that have reduced manufacturing costs since the second quarter of 2000. Selling and administrative expenses were also lower in the quarter than the comparable quarter a year ago. The Envelope segment's operating income for the first half of the year was $44.6 million, an increase of $2.8 million over the same period in 2000. Acquisitions contributed $1.9 million of this increase. The remaining increase was due to lower manufacturing costs and lower selling and administrative expenses. COMMERCIAL PRINTING SEGMENT Sales of the Commercial Printing segment were $207.5 million in the second quarter of 2001, down $21.9 million from the second quarter of 2000. Sales for the first half of the year were $40 million below sales of $458.9 million in the first half of 2000. Excluding acquisitions completed in 2000, sales in the second quarter and first six months of 2001 were below the comparable periods of 2000 by $26.7 and $52.0 million, respectively. Sales to technology and communications companies are down this year compared to 2000 due to the severe economic downturn in those industries. Sales have also been significantly impacted by reduced promotional spending by customers reacting to the slowing economy. Approximately 25% of the Commercial Printing segment's sales are related to print advertising. Operating income of the Commercial Printing segment was $6.4 million in the second quarter of 2001, $8.5 million below operating income reported in the second quarter of 2000. For the first six months of the year, operating income was $12.3 million, $20.3 million below the first half of 2000. The contribution lost on lower sales explains 15 most of the decline in operating income. Contribution margins were lower by 50 basis points in the second quarter and 100 basis points for the six-months ended June 30, 2001 due to competitive pressures and efforts to maintain volume. The impact of these lower margins has been partially offset by cost reduction programs which have lowered fixed manufacturing costs. Additions to the segment staff have caused administrative expenses to be higher in 2001 than a year ago. DISCONTINUED OPERATIONS The Company's Board of Directors approved the divestiture of the Label and Printed Office Products segments in May of 2001. The Company expects to complete these dispositions by the end of 2001 and will use the proceeds from the sales to reduce its debt. The loss reported on disposition of these two business segments includes write-downs to net realizable value based on estimated sales proceeds, costs associated with the dispositions, the estimated loss from operations of the discontinued businesses through the expected disposal date and an income tax benefit of approximately $1.7 million. The estimated loss from operations includes allocated interest expense based upon the relative net assets of the Label and Printed Office Products segments in the amounts of $6.3 and $13.1 for the three- and six-months ended June 30, 2001, respectively, and $6.8 and $11.9 for the three- and six-months ended June 30, 2000, respectively. Discontinued operations incurred a loss of $1.64 per share for the quarter and six-months ended June 30, 2001, compared to income of $0.08 and $0.15 per share for the comparable periods of 2000. The Company expects to complete the sales of both segments by December 31, 2001. RESTRUCTURING The restructuring charge recorded in the second quarter of 2001 includes $17.7 million related to the Company's new strategic plan. The Envelope segment plans to consolidate nine manufacturing facilities during the next 18 months to reduce excess internal capacity. The elimination of this excess capacity will improve the segment's cost effectiveness and long-term competitive position. The costs associated with this consolidation are expected to total approximately $85 million over the 18-month implementation period and include $36.0 million to write down plant and equipment when taken out of service to estimated net realizable value, $8.9 million in severance costs covering approximately 920 employees, $1.4 million of lease termination costs and $33 million in other exit costs. Expenses totaling $13.9 million were recorded in June 2001. The Company expects to record $33.4 million of additional restructuring expenses in the second half of 2001 and $37.7 million in 2002. The savings from these consolidations are expected to be $20 million annually once fully implemented, a two and a half year pay back of cash charges expected to total approximately $49 million. The Commercial Printing segment plans to consolidate two of its operations into an existing facility to optimize capacity and reduce costs. Charges in the second quarter related to this restructuring plan totaled $1.7 million and included severance costs for approximately 25 employees, lease termination costs and other exit expenses. Additional restructuring charges of approximately $1 million are expected prior to the completion of this consolidation. The benefits associated with this consolidation are expected to be $1.4 million annually once fully implemented. The restructuring charge includes $1.9 million of expenses incurred to develop the new strategy. The restructuring plans initiated in December 2000 are substantially complete. LIQUIDITY AND CAPITAL RESOURCES Continuing operations generated cash flow of $106.1 million and $36 million during the six months ended June 30, 2001 and 2000, respectively. Discontinued operations generated cash flow of $0.8 million and $2.5 million in the first six months of 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. Cash flow during 16 the six months ended June 30, 2001 was used to cover capital spending of $15.7 million and to reduce debt by $89 million. The Company expects its ability to generate cash flow to continue. The Company also anticipates that this cash flow and its available credit facilities will be sufficient to fund its capital expenditures, meet working capital requirements, and service and reduce existing debt. See Exhibit 99.1 filed herewith for the Consolidating Condensed Financial Statements of MWI ("Issuer"), Guarantor Subsidiaries, Non-guarantor Subsidiaries and Parent Guarantor. These statements are provided to comply with the reporting requirements under the indenture for the 8 3/4% Senior Subordinated Notes due in 2008. FORWARD-LOOKING INFORMATION Certain statements in this report and, in particular, statements found in Management's Discussion and Analysis, which are not historical in nature, may constitute forward-looking statements. These statements are often identified by the words, "believe", "expect", "plan", "appear", "project", "estimate", "intend", and words of similar import. Such statements reflect the current views of the Company with respect to future events and are considered reasonable as of the date of this filing, but are subject to risks and uncertainties. Actual results may differ materially from those expressed or implied in these statements. Factors that could cause actual results to differ include, among other things, whether conditions influencing the recent economic slowdown will continue or worsen, changes in overall demand, changes in the cost or availability of raw materials, changes in general labor conditions, changes in union relations, changes in interest rates, foreign currency exchange rates, waste paper prices, competition and competitors' actions, changes in the direct mail industry, whether assumed productivity and cost savings can be obtained, whether anticipated savings from restructuring activities and facility consolidations can be achieved, whether discontinued operations and assets held for sale can be sold for the amounts estimated and on a timely basis. In view of such uncertainties, investors are cautioned not to place undue reliance on these forward-looking statements. The Company does not assume any obligation to update these forward-looking statements. 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 June 30, 2001, the Company had outstanding variable rate debt of $444.4 million. A 1% increase in LIBOR on the maximum amount available under the Company's credit agreement, which is $661.4 million, would increase the Company's annual interest expense by $6.6 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. 17 PART II OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS On May 1, 2001, the Company held its Annual Meeting of Stockholders, at which the following matters were voted upon: ELECTION OF DIRECTORS--The following individuals were re-elected to the Board of Directors by the following vote: For Withhold --- -------- Frank P. Diassi 43,384,886 738,974 Frank J. Hevrdejs 43,513,035 610,825 Jerome W. Pickholz 43,458,480 602,254 Paul V. Reilly 43,443,868 679,992 William R. Thomas 43,358,767 765,093 Janice C. Peters 43,517,748 606,112 Tom Stevens 43,521,876 601,984 SELECTION OF AUDITORS--The selection of Ernst & Young LLP as independent auditors of the Company for the fiscal year ending 2001 was ratified by the following vote: 43,161,296 For, 761,184 Against, 201,377 Abstentions. APPROVAL OF 2001 LONG-TERM EQUITY INCENTIVE PLAN--The Company's 2001 Long-Term Equity Incentive Plan was approved by the following vote: 30,199,882 For, 6,324,261 Against, 216,536 Abstentions. 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. 4.1.1.1 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). 4.1.1.2 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). 4.1.1.3 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. 18 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. 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. 19 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. 10.27 Mail-Well, Inc. 2001 Long-Term Equity Incentive Plan. 10.28 Form of Non-Qualified Stock Option Agreement under 2001 Long-Term Equity Incentive Plan. 10.29 Form of Incentive Stock Option Agreement under 2001 Long-Term Equity Incentive Plan. 10.30 Form of Restricted Stock Award Agreement under 2001 Long-Term Equity Incentive Plan. 99.1 Consolidating Condensed Financial Statements of MWI ("Issuer"), Guarantor Subsidiaries, Non-guarantor Subsidiaries and Parent Guarantor for the periods ending June 30, 2001 and 2000. ------------- (b) Reports on Form 8-K 1. Current Report on Form 8-K filed June 14, 2001 included information about the company's announcement of its new strategic plan. 2. Current Report on Form 8-K filed April 26, 2001 included information about the company's first quarter financial results. 20 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: August 13, 2001 Paul V. Reilly Chief Executive Officer By /s/ Michel P. Salbaing -------------------------------- Date: August 13, 2001 Michel P. Salbaing Chief Financial Officer 21