<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 8-K/A
AMENDMENT NO. 1 TO
CURRENT REPORT ON FORM 8-K DATED JANUARY 21, 1997
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JANUARY 21, 1997
Rock-Tenn Company
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Georgia 0-23340 62-0342590
- ------------------------ ------------------------ ---------------------------------
(State of incorporation) (Commission File Number) (IRS Employer Identification No.)
504 Thrasher Street 30071
Norcross, Georgia ------------
- ---------------------------------------- (Zip Code)
(Address of principal executive offices)
</TABLE>
Registrant's telephone number, including area code: (770) 448-2193
---------------------------------------------------
(Former name or former address, if changed since last report)
================================================================================
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired.
The following audited financial statements and notes thereto
of Waldorf Corporation, together with a manually signed
independent auditors' report thereon, are included in Exhibit
99.2:
(i) Independent Auditors' Report;
(ii) Balance Sheets as of June 30, 1996 and 1995;
(iii) Statements of Income for the years ended June 30,
1996, 1995 and 1994; (iv) Statements of Stockholders'
Equity (Deficit) for the years ended June 30, 1996,
1995 and 1994;
(v) Statements of Cash Flows for the years ended June 30,
1996, 1995 and 1994; and
(vi) Notes to Financial Statements.
The following unaudited financial statements and notes thereto
of Waldorf Corporation are also included in Exhibit 99.2:
(i) Balance Sheet as of September 30, 1996;
(ii) Statements of Income for the three months ended
September 30, 1996 and 1995;
(iii) Statement of Stockholders' Equity (Deficit) for the
three months ended September 30, 1996;
(iv) Statements of Cash flows for the three months ended
September 30, 1996 and 1995; and
(v) Notes to Financial Statements.
(b) Pro Forma Financial Information.
The unaudited Pro Forma Combined Consolidated Financial
Statements of Rock-Tenn Company for the year ended September
30, 1996 and as of and for the three months ended December 31,
1996, and the notes thereto, are included in Exhibit 99.3.
(c) Exhibits.
2.1* Stock Purchase Agreement by and among Rock-Tenn
Company and the Shareholders of Wabash Corporation
dated January 21, 1997. The Exhibits and Schedules
which are referenced in the table of contents and
elsewhere in the Stock Purchase Agreement are hereby
incorporated by reference. Such Exhibits and
Schedules have been omitted for purposes of this
filing, but will be furnished to the Commission
supplementally upon request.
4.1* Credit Agreement dated as of January 21, 1997 among
Rock-Tenn Company, the Lenders named therein and
SunTrust Bank, Atlanta, as Agent.
23.1 Consent of Price Waterhouse LLP.
99.1* Text of Press Release of Rock-Tenn Company, dated
December 20, 1996.
99.2 Financial Statements of Waldorf Corporation, as
described in Item 7(a) of this Form 8-K.
- 2 -
<PAGE> 3
99.3* Unaudited Pro Forma Combined Consolidated Financial
Statements of Rock-Tenn Company, as described in Item
7(b) of this Form 8-K.
- --------------------
*Previously filed.
- 3 -
<PAGE> 4
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 hereunto duly authorized.
Date: February 12, 1997 ROCK-TENN COMPANY
By: /s/ David C. Nicholson
----------------------
David C. Nicholson
Senior Vice President, Chief
Financial Officer, Secretary
- 4 -
<PAGE> 5
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequentially
No. Exhibit Numbered Page
--- ------- -------------
<S> <C>
2.1* Stock Purchase Agreement by and
among Rock-Tenn Company and
the Shareholders of Wabash
Corporation dated January 21, 1997
4.1* Credit Agreement dated as of
January 21, 1997 among Rock-Tenn
Company, the Lenders named
therein and SunTrust Bank, Atlanta,
as Agent
23.1 Consent of Price Waterhouse LLP
99.1* Text of Press Release of Rock-Tenn
Company, dated December 20,
1996 (Incorporated by reference to
the Company's Current Report on
Form 8-K dated December 20,
1996)
99.2 Financial Statements of Waldorf
Corporation
99.3* Unaudited Pro Forma Combined
Consolidated Financial Statements
of Rock-Tenn Company
</TABLE>
- --------------
*Previously filed.
- 5 -
<PAGE> 1
EXHIBIT 23.1
We hereby consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 33-83304) pertaining to the Rock-Tenn Company 1993
Employee Stock Option Plan, the Rock-Tenn Company 1993 Employee Stock Purchase
Plan, the Rock-Tenn Company Incentive Stock Option Plan, the Rock-Tenn Company
1989 Stock Option Plan, and the Rock-Tenn Company 1987 Stock Option Plan, and in
the Registration Statement (Form S-3 No. 33-93934) of Rock-Tenn Company and in
the related Prospectus pertaining to debt securities, of our report dated August
9, 1996, except as to Note 15 which is as of January 21, 1997, with respect to
the consolidated financial statements of Waldorf Corporation included in this
Current Report on Form 8-K/A dated as of January 21, 1997.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Minneapolis, Minnesota
February 12, 1997
- 6 -
<PAGE> 1
EXHIBIT 99.2
REPORT OF INDEPENDENT ACCOUNTANTS
August 9, 1996, except as to
Note 15 which is as of
January 21, 1997
To the Board of Directors and Stockholder
of Waldorf Corporation
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, stockholder's equity (deficit) and of cash
flows present fairly, in all material respects, the financial position of
Waldorf Corporation (a wholly-owned subsidiary of Wabash Corporation) and its
subsidiary at June 30, 1996 and 1995, and the results of their operations and
their cash flows for each of the three years in the period ended June 30, 1996
in conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
As described in Note 15, on January 21, 1997, Rock-Tenn Company purchased all of
the issued and outstanding shares of Wabash Corporation, the Company's parent.
Price Waterhouse LLP
Minneapolis, Minnesota
<PAGE> 2
(See accompanying notes to the consolidated financial statements)
WALDORF CORPORATION
CONSOLIDATED BALANCE SHEET
(dollars in thousands)
<TABLE>
<CAPTION>
September 30, June 30,
------------------------
1996 1996 1995
---- ---- ----
(Unaudited)
ASSETS
Current assets:
<S> <C> <C> <C>
Cash and cash equivalents $ 4,185 $ 1,617 $ 1,628
Accounts receivable, less allowance fordoubtful accounts
of $442, $453 and $530, respectively 25,848 25,244 30,324
Inventories 22,736 24,759 25,363
Prepaid items and other assets 4,365 4,543 5,057
Deferred income taxes 4,236 4,186 4,126
Prepaid income taxes 79 1,301
----------- ----------- -----------
Total current assets 61,449 60,349 67,799
Property, plant and equipment:
Land and buildings 31,363 31,756 30,741
Machinery and equipment 184,213 182,262 160,098
----------- ----------- -----------
215,576 214,018 190,839
Less - accumulated depreciation (84,065) (80,736) (67,886)
----------- ----------- -----------
131,511 133,282 122,953
Other assets 2,693 3,267 5,463
----------- ----------- -----------
Total assets $ 195,653 $ 196,898 $ 196,215
=========== =========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
- ----------------------------------------------
Current liabilities:
Current portion of long-term debt $ 2,405 $ 2,699 $ 21,811
Accounts payable 19,866 21,497 27,666
Accrued liabilities 23,654 27,894 25,640
Accrued income taxes 2,159 2,815
----------- ----------- -----------
Total current liabilities 48,084 54,905 75,117
Long-term debt 146,500 143,081 142,018
Deferred income taxes 21,279 20,829 18,452
----------- ----------- -----------
Total liabilities 215,863 218,815 235,587
Commitments and contingencies (Note 11)
Stockholder's equity (deficit):
Common stock, $1 par value; 12,500 shares
authorized; 10,000, 10,000 and
10,892 shares issued, respectively;
10,000 outstanding 10 10 11
Treasury stock (13,966)
Capital in excess of par 11,238
Accumulated deficit (19,426) (21,124) (35,769)
Cumulative translation adjustment (794) (803) (886)
----------- ----------- -----------
Total stockholder's equity (deficit) (20,210) (21,917) (39,372)
----------- ----------- -----------
Total liabilities and stockholder's equity (deficit) $ 195,653 $ 196,898 $ 196,215
=========== =========== ===========
</TABLE>
<PAGE> 3
WALDORF CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended For the Years Ended
September 30, June 30,
-------------------------- ------------------------------------
1996 1995 1996 1995 1994
---- ---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Net sales $ 86,980 $ 99,413 $ 377,069 $ 371,215 $ 343,479
Costs and expenses:
Cost of goods sold 75,672 81,979 309,685 309,361 274,593
Selling, general and administrative 5,605 7,105 24,565 27,366 23,988
Other (income) expenses, net (472) (320) (3,267) (633) 2,531
----------- ----------- ----------- ----------- -----------
80,805 88,764 330,983 336,094 301,112
----------- ----------- ----------- ----------- -----------
Income before interest and taxes 6,175 10,649 46,086 35,121 42,367
Interest expense 3,063 4,713 14,215 13,122 7,776
----------- ----------- ----------- ----------- -----------
Income before taxes 3,112 5,936 31,871 21,999 34,591
Provision for income taxes 1,414 2,675 14,499 9,853 14,145
----------- ----------- ----------- ----------- -----------
Net income $ 1,698 $ 3,261 $ 17,372 $ 12,146 $ 20,446
=========== =========== =========== =========== ===========
</TABLE>
<PAGE> 4
WALDORF CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended For the Years Ended
September 30, June 30,
------------------------- -----------------------------------
1996 1995 1996 1995 1994
---- ---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Cash flow from operating activities:
Net income $ 1,698 $ 3,261 $ 17,372 $ 12,146 $ 20,446
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 3,509 2,967 15,379 13,218 14,280
Deferred income taxes 400 500 2,317 1,442 1,441
Net changes in assets and liabilities:
Accounts receivable (604) (3,633) 5,094 (7,023) 552
Inventories 2,023 (1,931) 650 (2,564) 2,841
Prepaid items and other assets 513 492 (388)
Other assets 562 (1,338) (389) (1,517) (1,862)
Accounts payable (1,631) (4,082) (6,188) 4,049 644
Accrued liabilities (4,240) 1,404 2,134 453 784
Accrued/prepaid income taxes (657) 1,362 4,237 (2,534) (2,782)
----------- ----------- ----------- ----------- -----------
Net cash provided (used) by
operating activities 1,060 (1,490) 41,119 18,162 35,956
Cash flows from investing activities:
Capital expenditures (1,617) (8,849) (23,256) (27,200) (11,283)
Proceeds from sale of equipment 53 291 1,371
----------- ----------- ----------- ----------- -----------
Net cash used in investing activities (1,617) (8,849) (23,203) (26,909) (9,912)
Cash flows from financing activities:
Proceeds from borrowings 3,478 166,543 166,543 27,236 131,000
Payments on long-term debt (353) (156,369) (184,456) (10,889) (77,322)
Proceeds from issuance of common
stock 536
Dividend to parent company (80,000)
Redemption of common stock (7,841) (1,785)
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in)
financing activities 3,125 10,174 (17,913) 8,506 (27,571)
Effect of exchange rate on cash balances (14) (12) (14)
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents 2,568 (165) (11) (253) (1,541)
Cash and cash equivalents at beginning
of year 1,617 1,628 1,628 1,881 3,422
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents at end
of year $ 4,185 $ 1,463 $ 1,617 $ 1,628 $ 1,881
=========== =========== =========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 10,651 $ 12,890 $ 7,732
Cash paid for income taxes $ 75,000 $ 10,700 $ 15,000
</TABLE>
<PAGE> 5
WALDORF CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY (DEFICIT)
(dollars in thousands)
<TABLE>
<CAPTION>
Total
Capital Cumulative Stockholder's
Common Treasury in Excess Accumulated Translation Equity
Stock Stock of Par Deficit Adjustment (Deficit)
--------- --------- --------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1993 $ 11 $ (1,663) $ 10,702 $ 11,639 $ (442) $ 20,247
Net income 20,446 20,446
Dividend to parent company (80,000) (80,000)
Issuance of 53 shares of common stock 536 536
Repurchase of 181 shares of common stock (1,785) (1,785)
Foreign currency translation adjustment (492) (492)
--------- --------- -------- ---------- --------- -----------
Balance at June 30, 1994 11 (3,448) 11,238 (47,915) (934) (41,048)
Net income 12,146 12,146
Repurchase of 892 shares of common stock (10,518) (10,518)
Foreign currency trnslation adjustment 48 48
--------- --------- -------- ---------- --------- -----------
Balance at June 30, 1995 11 (13,966) 11,238 (35,769) (886) (39,372)
Retirement of treasury stock (1) 13,966 (11,238) (2,727)
Net income 17,372 17,372
Foreign currency translation adjustment 83 83
--------- --------- -------- ---------- --------- -----------
Balance at June 30, 1996 10 (21,124) (803) (21,917)
Net income (unaudited) 1,698 1,698
Foreign currency translation adjustment (unaudited) 9 9
--------- --------- -------- ----------- --------- -----------
Balance at September 30, 1996 (unaudited) $ 10 $ $ $ (19,426) $ (794) $ (20,210)
========= ========= ======== ========== ========= ===========
</TABLE>
<PAGE> 6
WALDORF CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands, except as otherwise noted)
NOTE 1 - ORGANIZATION AND OPERATIONS
Waldorf Corporation, ("Waldorf" or the "Company"), a wholly-owned subsidiary of
Wabash Corporation ("Wabash"), is a manufacturer of recycled coated paperboard,
recycled corrugated medium, and folding cartons used in consumer packaging.
NOTE 2 - ACCOUNTING POLICIES
A. Principles of Consolidation - The consolidated financial statements include
the accounts of Waldorf Corporation and its Canadian subsidiary, WALDORF
INC. All intercompany accounts and transactions have been eliminated.
B. Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reported period. Actual results could differ from those
estimates.
C. Revenue Recognition - Revenue is recognized when product is shipped to the
customer.
D. Cash and Cash Equivalents - Cash and cash equivalents include investments
with original maturities of less than 90 days.
E. Inventories - Inventories are valued at the lower of cost or market. Cost
is determined by the last-in, first-out (LIFO) method for inventories held
by U.S. operations and by the first-in, first-out (FIFO) method for
inventories held by the Company's Canadian subsidiary. Substantially all
inventories are purchased or manufactured subject to customer purchase
orders.
F. Property, Plant, and Equipment - Property, plant and equipment are stated
at cost and depreciated for financial reporting purposes over estimated
useful lives using the straight-line method. Gains or losses on the
disposition of assets are recorded in current income. Maintenance and
repairs are charged to operations and improvements are capitalized.
G. Income Taxes - Deferred income taxes are provided using the liability
method. Under this method, deferred tax assets and liabilities are measured
using the tax rates expected to be in effect when the assets are realized
or liabilities settled. Deferred income taxes arise primarily due to
differences in the treatment of depreciation and certain accrued
liabilities for financial statement and income tax purposes.
H. Pensions - Pension costs are determined on an actuarial basis. The
Company's funding policy is to contribute annually the maximum amount that
can be deducted for federal income tax purposes. Benefits are determined
using a career-pay formula.
I. Treasury Stock - Treasury stock is recorded at cost. During fiscal 1996,
the Company's Board of Directors authorized the retirement of all stock
held in treasury.
J. Foreign Currency Translation - Foreign currency transactions and financial
statements are translated into U.S. dollars at current rates, except that
revenues, costs and expenses are translated at average rates during the
reporting period. Gains and losses resulting from foreign currency
transactions are included in income currently, while those resulting from
translation of financial statements are excluded from the statement of
income and are credited or charged directly to a separate component of
stockholder's equity.
K. Financial Instruments - Interest rate swaps and collars are used to hedge
financial risk caused by fluctuating interest rates. The differential to be
paid or received is accrued and included in interest expense.
<PAGE> 7
L. Fair Value Disclosure of Financial Instruments - The carrying amounts of
the cash, short-term trade receivables and payables approximate fair market
value. Additionally, the fair value of the senior notes is determined using
discounted cash flows based on the Company's estimated current interest
rate for similar types of borrowings. The carrying values of other
long-term debt approximate their fair value. The fair value of the interest
rate swap and collar agreements is estimated based upon current settlement
prices.
M. Unaudited Interim Financial Statements - The interim financial data as of
and for the three months ended September 30, 1996 and 1995 is unaudited;
however, in the opinion of management, the interim data includes all
adjustments, consisting only of normal recurring adjustments, necessary for
a fair statement of the results for the interim periods.
NOTE 3 - INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
September 30, June 30,
-------------------------
1996 1996 1995
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Raw materials $ 5,548 $ 5,724 $ 10,446
Work-in-process 4,875 4,730 3,692
Finished goods 12,313 14,305 11,225
----------- ----------- -----------
Total inventories $ 22,736 $ 24,759 $ 25,363
=========== =========== ===========
</TABLE>
Inventories valued using the LIFO method comprised approximately 86% and 83% of
consolidated inventories at June 30, 1996 and 1995, respectively. LIFO
inventories are valued at less than current cost by $12,055, $11,805 and $17,473
at September 30, 1996, June 30, 1996 and 1995, respectively.
NOTE 4 - ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
September 30, June 30,
-------------------------
1996 1996 1995
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Employee benefits $ 12,450 $ 11,951 $ 12,774
Insurance 2,228 3,493 3,089
Property taxes 1,289 1,336 2,302
Salaries and wages 2,504 2,166 2,506
Interest 2,064 4,187 623
Customer deposits 448 508
Other expenses 3,119 4,313 3,838
----------- ----------- -----------
Total accrued liabilities $ 23,654 $ 27,894 $ 25,640
=========== =========== ===========
</TABLE>
<PAGE> 8
NOTE 5 - EMPLOYEE BENEFITS
The Company provides all qualified U.S. employees participation in the Waldorf
Employees' Pension Plan. Pension expense under this plan for the years ended
June 30, 1996, 1995 and 1994, was $2,241, $2,373 and $2,416, respectively.
The components of net periodic pension cost under the U.S. plan are:
<TABLE>
<CAPTION>
June 30,
-------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Service cost - benefits earned during the period $ 2,262 $ 2,234 $ 2,183
Interest cost on projected benefit obligation 2,251 1,890 1,781
Actual return on plan assets (4,058) (2,335) (343)
Net amortization and deferral 1,786 584 (1,205)
----------- ----------- -----------
$ 2,241 $ 2,373 $ 2,416
=========== =========== ===========
</TABLE>
The following table sets forth the funded status of the U.S. plan:
<TABLE>
<CAPTION>
June 30,
-------------------------
1996 1995
---- ----
<S> <C> <C>
Actuarial present value of accumulated benefit obligation:
Vested benefits $ 24,398 $ 22,021
Nonvested benefits 1,285 1,214
----------- -----------
Total accumulated benefit obligation $ 25,683 $ 23,235
Projected benefit obligation $ 30,547 $ 26,835
Market value of plan assets 31,063 27,000
----------- -----------
Overfunded pension obligation 516 165
Unrecognized net loss (gain) (1,912) (37)
Unrecognized prior service cost 21 24
----------- -----------
Prepaid pension cost (pension liability) $ (1,375) $ 152
=========== ===========
</TABLE>
The weighted-average discount rate and rate of increase in future compensation
levels used in determining the actuarial present value of the projected benefit
obligation under the U.S. plan were 7.5% and 4.5% for 1996, 7.5% and 4.0% for
1995, and 7.5% and 4.0% for 1994. The expected long-term rate of return on
assets for the U.S. plan was 8.5%, 7.5% and 7.5% for 1996, 1995 and 1994,
respectively.
The Company also offers all full-time U.S. employees with 1,000 hours of
qualified service participation in the Capital Accumulation Plan. The Plan is a
defined contribution employee retirement savings plan which provides a Company
matching of employees' contributions. The Plan also includes a profit sharing
feature which provides an additional Company contribution based on the Company's
performance. The Company's contributions to the Plan for the years ended June
30, 1996, 1995 and 1994, were $3,137, $3,839 and $3,166, respectively.
Canadian employees are offered similar benefits, except as otherwise dictated by
existing collective bargaining agreements or Canadian legislation, under
separate pension and Capital Accumulation plans. Pension expense under the
Canadian plans was $203, $45 and $165 during the years ended June 30, 1996, 1995
and 1994, respectively.
<PAGE> 9
NOTE 6 - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
June 30,
--------------------------------------
1996 1995
-------------------------
Carrying Fair Carrying
Amount Value Amount
------ ----- ------
<S> <C> <C> <C>
Senior notes $ 100,000 $ 99,067
Term loan $ 120,715
U.S revolving loan 1,000
U.S. bankers' acceptances, net of unamortized interest
of $131 and $26 38,869 38,869 26,974
Term loan on equipment 3,223 3,223 4,402
Canadian Loans 7,680
Other debt 3,688 3,688 3,058
----------- ----------- -----------
Total long-term debt $ 145,780 $ 144,847 $ 163,829
=========== =========== ===========
</TABLE>
At June 30, 1995, the Company was party to a credit facility comprised of a Term
Loan in the original amount of $130,000 and a Revolving Loan not to exceed
$50,000. At June 30, 1995, the Company's Canadian subsidiary had a loan
agreement with Toronto Dominion Bank comprised of a Canadian $8,250 Term loan
and a revolving Loan not to exceed Canadian $10,000.
In July 1995, the Company refinanced the U.S. and Canadian loan facilities with
7.42% fixed rate $100,000 Senior Unsecured Notes and a floating rate $110,000
Unsecured Syndicated Revolving Loan Facility. The Senior notes mature on June
30, 2005 with annual repayments of $14,286 beginning on June 30, 1999. The
Revolving Loan Commitment expires on June 30, 2000. The Company has $39,000 of
domestic bankers' acceptances outstanding at June 30, 1996, which have a
weighted average interest rate of 5.75%. The bankers' acceptances have been
classified as long-term debt in accordance with the Company's intention and
ability to refinance such obligations on a long-term basis. At June 30, 1996,
the Company had outstanding letters of credit totaling $5,756. A facility fee
ranging from .2% to .375% is charged on the entire Revolving Loan facility based
on quarterly leverage ratios. As a result of the refinancing, unamortized fees
of $1,523 related to the prior credit agreement were expensed in July 1995.
The Company has entered into several contracts to hedge against fluctuation in
interest rates. The agreements, which expire on February 28, 2000 and 2001, vary
from interest rate swaps, whereby the Company makes payments based on fixed
rates of interest and receives payments based on floating interest rate indices,
to interest rate collars, whereby exposure is protected within a range of rates.
The fair value of the contracts, which have an aggregate notional amount of
$80,000, was approximately $2,773 at June 30, 1996. This represents the
estimated amount the Company would pay to terminate the agreements, taking into
consideration the current interest rate and market conditions. The Company does
not hold or issue financial instruments for trading purposes.
In December 1990, the Company entered into a $9,704, seven-year note secured by
certain capital equipment. The note bears interest at 9.7% and is payable in
monthly principal installments of $98 plus interest with a balloon payment of
$1,554 in December 1997.
Scheduled maturities of the Company's long-term debt for fiscal years ending
June 30 are as follows:
<TABLE>
<S> <C>
1997 $ 2,699
1998 3,209
1999 14,559
2000 53,430
2001 14,563
Thereafter 57,320
-----------
$ 145,780
===========
</TABLE>
<PAGE> 10
NOTE 7 - LONG-TERM LEASES
The Company and its Canadian subsidiary lease equipment and a facility under
long-term operating leases. Minimum annual lease commitments under the lease are
as follows:
<TABLE>
<CAPTION>
Year Ended June 30,
-------------------
<S> <C>
1997 $ 1,368
1998 1,368
1999 1,368
2000 1,368
2001 1,563
Thereafter 13,753
-----------
$ 20,788
===========
</TABLE>
Rent expense for the years ended June 30, 1996, 1995 and 1994 was $1,285,
$1,111, and $1,318, respectively.
NOTE 8 - INCOME TAXES
The Company is included in the consolidated federal and certain state income tax
returns of Wabash and is party to a tax allocation agreement with Wabash which
allocates taxes to the Company as if it filed a separate tax return.
The provision for income taxes is comprised of the following:
<TABLE>
<CAPTION>
For the Years Ended June 30,
-------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $ 9,836 $ 7,057 $ 10,679
State 2,346 1,354 2,025
----------- ----------- -----------
12,182 8,411 12,704
Deferred:
Federal 2,027 1,262 1,260
State 290 180 181
----------- ----------- -----------
$ 14,499 $ 9,853 $ 14,145
=========== =========== ===========
</TABLE>
The Company's effective tax rate differs from the federal statutory rate as
follows:
<TABLE>
<CAPTION>
For the Years Ended June 30,
-------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Federal statutory tax rate 35.0% 35.0% 35.0%
Increase in taxes resulting from:
State taxes, net of federal benefit 4.5% 4.8% 4.6%
Canadian subsidiary net operating loss 4.9% 4.5%
Other 1.1% .5% 1.3%
-------- -------- --------
45.5% 44.8% 40.9%
======== ======== ========
</TABLE>
<PAGE> 11
Domestic deferred tax assets and (liabilities) are comprised of the following at
June 30:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Tax over book depreciation $ (20,511) $ (18,557)
Vacation accrual 2,026 1,883
Workers' compensation accrual 891 990
Other, net 951 1,358
----------- -----------
Net deferred tax liability $ (16,643) $ (14,326)
=========== ===========
</TABLE>
The Company's Canadian subsidiary has a net operating loss available for
carryforward as follows:
<TABLE>
<CAPTION>
Canadian $s
<S> <C>
Tax loss carryforwards through June 30, 1996 $ 13,000
Temporary differences, primarily depreciation (3,200)
-----------
Book loss carryforward at June 30, 1996 9,800
Less valuation reserve (9,800)
-----------
Net asset recorded $ 0
===========
</TABLE>
If not utilized, $400 of the carryforward will expire in 1998, $2,600 in 1999,
$1,000 in 2000, $4,500 in 2001, and $4,500 in 2002.
The Internal Revenue Service has examined the 1989, 1990, and 1991 consolidated
federal income tax returns of Wabash and issued a deficiency notice in March,
1993. Several issues have been settled with the IRS, but Wabash is currently
petitioning one remaining issue in U. S. Tax Court. Management believes that
resolution of this matter will not have a material adverse impact on the results
of operations, cash flows or financial position of Wabash or the Company.
NOTE 9 - FOREIGN OPERATIONS
The Company owns a Canadian subsidiary, WALDORF INC, which is a manufacturer of
folding cartons. WALDORF INC's assets and liabilities totaled $14,040 and
$4,767, at June 30, 1996 and $15,345 and $11,930 at June 30, 1995. WALDORF INC's
net sales were $27,663, $25,625 and $31,004 during the years ended June 30,
1996, 1995 and 1994, respectively. WALDORF INC's net income (loss) for the years
ended June 30, 1996, 1995 and 1994 was ($4,446), ($2,833) and $109,
respectively.
NOTE 10 - STOCKHOLDER'S EQUITY
During fiscal year 1995, the Company repurchased 892 shares of common stock held
by management employees at a defined book value per share of $11,829 (not in
thousands).
NOTE 11 - COMMITMENTS AND CONTINGENCIES
In the normal course of its operations, the Company is party to a long-term
contract for energy supply at its paper mill operations.
The Company is party to a contingent interest agreement which requires the
Company, Wabash, or the stockholders of Wabash, in the event of "disposition",
as defined, of the Company, to pay a former creditor a percentage of the net
proceeds received from such disposition (see Note 15).
<PAGE> 12
NOTE 12 - STOCK APPRECIATION RIGHTS
During fiscal year 1995, the Company adopted a Stock Appreciation Rights (SAR)
Plan to provide incentives to certain executives. SAR units are granted at the
discretion of the Company's Board of Directors at reference share values
generally at or above fair market value at the date of grant. Granted SAR units
have varying vesting provisions and vested SAR units may be exercised at any
time during the SAR holder's employment, but only after the fifth anniversary of
the SAR grant date. An eligible employee may not exercise more than one third of
their vested SAR units in any calendar year. Additionally, a portion of certain
executives' bonuses are distributed in SARs which vest on the distribution date.
Upon exercise, SAR holders are entitled to receive payment equal to the
difference between the reference share value as of the exercise date and the
reference share value as of the grant date. Additionally, in the event of a
change in control of the Company, as defined, on or before December 31, 1999,
certain SAR holders are entitled to an additional payment as determined by the
Board of Directors (see Note 15). Compensation expense is recognized ratably
over the SAR vesting periods for increases in the reference share value, as
determined annually by an independent appraiser. During the years ended June 30,
1996 and 1995, the Company recorded approximately $329 and $215 of compensation
expense related to the SAR Plan. At June 30, 1996, the reference share value was
$26 (not in thousands) and approximately 422,000 (not in thousands) purchased
and granted SAR units were outstanding.
NOTE 13 - MAJOR CUSTOMERS
For the years ended June 30, 1996, 1995 and 1994, one customer represented 15%,
16% and 18%, respectively, of the Company's total net sales. A second customer
represented 11%, 11% and 8%, respectively, of the Company's net sales during
fiscal 1996, 1995 and 1994. No other customer represented more than 10% of net
sales.
NOTE 14 - SEGMENT INFORMATION
The Company operates principally in two business segments. The converted
products segment is comprised of facilities that produce folding cartons.
The paperboard segment consists of facilities that manufacture 100% recycled
paperboard and corrugated medium and that recover recycled fiber. Intersegment
sales are accounted for at prices which approximate market prices.
Following is a tabulation of business segment information for each of the past
three fiscal years:
<TABLE>
<CAPTION>
For the Years Ended June 30,
--------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net sales (aggregate):
Converted products $ 257,160 $ 242,717 $ 244,188
Paperboard 192,101 195,599 161,521
----------- ----------- -----------
449,261 438,316 405,709
Less net sales (intersegment):
Converted products
Paperboard (72,192) (67,101) (62,230)
----------- ----------- -----------
Net sales (unaffiliated customers) $ 377,069 $ 371,215 $ 343,479
=========== =========== ===========
Net sales (unaffiliated customers):
Converted products $ 257,160 $ 242,717 $ 244,188
Paperboard 119,909 128,498 99,291
----------- ----------- -----------
$ 377,069 $ 371,215 $ 343,479
=========== =========== ===========
</TABLE>
<PAGE> 13
<TABLE>
<CAPTION>
For the Years Ended June 30,
--------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Operating income (expense):
Converted products $ (2,846) $ 5,656 $ 6,292
Paperboard 53,827 37,067 42,019
----------- ----------- -----------
50,981 42,723 48,311
Less: Corporate expense (4,895) (7,602) (5,944)
Interest expense (14,215) (13,122) (7,776)
----------- ----------- -----------
Income before income taxes $ 31,871 $ 21,999 $ 34,591
=========== =========== ===========
Identifiable assets:
Converted products $ 102,474 $ 106,646 $ 99,055
Paperboard 84,748 79,668 58,862
Corporate 9,676 9,901 8,681
----------- ----------- -----------
Total $ 196,898 $ 196,215 $ 166,598
=========== =========== ===========
Capital expenditures:
Converted products $ 10,306 $ 5,043 $ 5,062
Paperboard 11,894 21,179 5,929
Corporate 1,056 978 292
----------- ----------- -----------
Total $ 23,256 $ 27,200 $ 11,283
=========== =========== ===========
Depreciation and amortization:
Converted products $ 7,851 $ 7,626 $ 7,237
Paperboard 5,361 4,496 4,685
Corporate 2,167 1,096 2,358
----------- ----------- -----------
Total $ 15,379 $ 13,218 $ 14,280
=========== =========== ===========
</TABLE>
NOTE 15 - SUBSEQUENT EVENTS
On January 21, 1997, Rock-Tenn Company ("Rock-Tenn") purchased all of the
outstanding common stock of Wabash, the Company's parent. The sale of Wabash's
common stock effected a "change in control" as defined by the Company's SAR Plan
and coincident with the closing of the stock sale the Company paid an aggregate
of approximately $7 million to certain SAR holders. Additionally, in settlement
of the contingent interest agreement described in Note 11, the Company paid a
former creditor $25 million. The accompanying financial statements do not
reflect any adjustments to reflect Rock-Tenn's cost basis in Wabash or the
Company.
In December 1996, management announced its intentions to discontinue or dispose
of the operations of WALDORF INC. Coincident with the stock sale, the stock of
WALDORF INC. was sold to an entity in which certain Wabash shareholders hold a
non-controlling interest. The Company incurred a pre-tax loss of approximately
$9 million related to the discontinuance of operations at and disposal of
WALDORF INC.
