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SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 22, 1998 (July 9, 1998)
AMERICAN PAD & PAPER COMPANY
(Exact name of registrant as specified in its charter)
Commission file number 1-11803
Delaware 04-3164298
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
17304 Preston Road, Suite 700, Dallas, TX 75252-5613
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 733-6200
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Item 5. Other Events.
On July 9, 1998, American Pad & Paper Company (the "Company") issued a
press release announcing the appointment of James W. (Jay) Swent, III as Chief
Executive Officer and a member of the Board of Directors ("Board") effective
immediately. Mr. Swent replaces Charles G. Hanson, III who has retired from
his position as Chairman of the Board and Chief Executive Officer. Robert C.
Gay will become Chairman of the Board and Paul B. Edgerley has been added to
the Board. Russell M. Gard is stepping down from his position as President and
Chief Operating Officer, but will continue his duties as Vice Chairman and a
member of the Board. Timothy E. Needham has been promoted to the position of
President and Chief Operating Officer. This press release is incorporated
herein as Exhibit 99.5.
On July 9, 1998, the Company announced that it had received a 30-day waiver
while it seeks to negotiate a permanent amendment to its current lending
agreement. Based on preliminary second quarter results, the Company is in
violation of certain financial covenants of the current facility. This press
release is incorporated herein as Exhibit 99.6.
On July 16, 1998, the Company announced its financial results for the
second quarter and six months ended June 30, 1998. The Company reported a net
loss of $55.9 million or $2.02 per share for the second quarter and a net loss
of $58.0 million or $2.09 per share for the six months ended June 30, 1998.
This loss includes a write-down of the goodwill associated with the
Shade/Allied continuous forms business of $41.0 million or $1.48 per share.
This press release is incorporated herein as Exhibit 99.7.
On July 20, 1998, the Company announced the creation of an Executive Office
and the appointment of William L. Morgan as Executive Vice President,
Operations. The Executive Office will be comprised of James W. Swent III,
Chief Executive Officer, Timothy E. Needham, President and Chief Operating
Officer and William L. Morgan, Executive Vice President, Operations. This
press release is incorporated herein as Exhibit 99.8.
Item 7. Exhibits.
99.5 Press release by the Company dated July 9, 1998.
99.6 Press release by the Company dated July 9, 1998.
99.7 Press release by the Company dated July 16, 1998.
99.8 Press release by the Company dated July 20, 1998.
SIGNATURE
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.
American Pad & Paper Company
July 22, 1998 /s/ James W. Swent, III
- ------------- -----------------------------
Date James W. Swent, III
Chief Executive Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
99.5 Press release by the Company dated July 9, 1998.
99.6 Press release by the Company dated July 9, 1998.
99.7 Press release by the Company dated July 16, 1998.
99.8 Press release by the Company dated July 20, 1998.
</TABLE>
<PAGE> 1
Exhibit 99.5
CONTACT: James W. Swent
Chief Executive Officer
American Pad & Paper Co.
(972) 733-6200
FOR IMMEDIATE RELEASE
Robert P. Jones/Theresa Schillero
Stan Froelich -Press
(212) 850-5600
Ken Pieper
(972) 663-9390
Morgen-Walke Associates
JAMES W. SWENT III NAMED CHIEF EXECUTIVE OFFICER OF AMERICAN PAD & PAPER
DALLAS, Texas, July 9, 1998 --American Pad & Paper Company (NYSE:AGP)
today announced that James W. Swent, III, has been appointed Chief Executive
Officer and a member of its Board of Directors. Mr. Swent replaces Charles G.
Hanson, III, 58, who has elected to retire from his current position as
Chairman and Chief Executive Officer and director of the Company. The
appointment is effective immediately.
Mr. Swent, 47, most recently served as Executive Vice President and
Chief Financial Officer of the Company. He joined American Pad & Paper in May,
1998. Mr. Swent was previously Chief Executive Officer of Cyrix Corporation, a
manufacturer of microprocessors for the PC industry, until its merger with
National Semiconductor. In addition, he has held operations and financial
executive positions with a number of companies, including Nortel and Rodime
Plc.
Mr. Hanson has been involved in executive level sales and management
positions in the office products industry for over 34 years and has served in
his current positions since he co-founded and formed American Pad & Paper.
Robert C. Gay, 46, a Managing Director of Bain Capital will become
Chairman of the Board. Mr. Gay has been a Director of American Pad & Paper
since 1992. In addition, the Company announced that Paul B. Edgerley, 42, a
Managing Director of Bain Capital, has been added to its Board of Directors,
increasing the board size to nine members.
The Company also announced that Russell M. Gard, 50, is stepping down
as President and Chief Operating Officer, but will continue his duties as Vice
Chairman and a member of the Board of Directors. In this role, Mr. Gard, who
was a co-founder of American Pad & Paper and has more than 25 years' experience
in the paper industry, will serve as a special consultant to the Company on
operational issues. Timothy E. Needham, 49, has been promoted to the position
of President and Chief Operating Officer. Mr. Needham, previously Executive
Vice President, joined the Company in 1995 following the acquisition of
Williamhouse where he held the position of Chairman and has more than 25 years'
experience in the paper industry.
"Jay Swent brings more than 20 years' operating and financial
expertise to companies going through transition," stated Robert C. Gay,
Chairman of the Board. "While we have been disappointed with the financial
performance of the Company, we also realize that there are numerous issues to
address and we are committed to getting them solved."
"We appreciate the contribution Charles Hanson made to the Company and
look forward to his continued support," added Mr. Gay.
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American Pad & Paper Co., which invented the legal pad in 1888, is a leading
manufacturer and marketer of paper-based office products in North America. In
its 20 U.S. facilities, the Company manufactures and distributes writing pads,
file folders, machine papers, envelopes and other office products. Name brands
include: Ampad, Century, Embassy, Gold Fibre, Huxley, Karolton, Kent, Peel &
Seel, SCM, Williamhouse and World Fibre.
<PAGE> 1
Exhibit 99.6
CONTACT: James W. Swent
Chief Executive Officer
American Pad & Paper Co.
(972) 733-6200
FOR IMMEDIATE RELEASE
Robert P. Jones/Theresa Schillero
Stan Froelich -Press
(212) 850-5600
Ken Pieper
(972) 663-9390
Morgen-Walke Associates
AMERICAN PAD & PAPER RECEIVES
30-DAY WAIVER FROM BANK GROUP
DALLAS, Texas, July 9, 1998 --American Pad & Paper Company (NYSE:AGP)
today announced that its bank group has given the Company a 30-day waiver while
it seeks to negotiate a permanent amendment to its current lending agreement.
Based on preliminary second quarter results, the Company is in violation of
certain financial covenants of the current facility. The Company expects to
report second quarter results within the next two weeks.
American Pad & Paper Co., which invented the legal pad in 1888, is a leading
manufacturer and marketer of paper-based office products in North America. The
Company manufactures and distributes writing pads, file folders, machine
papers, envelopes and other office products. Name brands include: Ampad,
Century, Embassy, Gold Fibre, Huxley, Karolton, Kent, Peel & Seel, SCM,
Williamhouse and World Fibre.
This release contains forward-looking statements to future financial results.
Actual results may differ significantly as a result of factors over which the
Company has no control, including the strength of domestic and foreign
economies, slower than anticipated sales growth, price and product competition,
and increases in raw material prices. Additional information which could
affect the Company's financial results is included in the Company's prospectus
on file with the Securities and Exchange Commission.
<PAGE> 1
Exhibit 99.7
CONTACT: James W. Swent
Chief Executive Officer
American Pad & Paper Co.
(972) 733-6200
FOR IMMEDIATE RELEASE
Robert P. Jones/Theresa Schillero
Leslie Feldman -Press
(212) 850-5600
Ken Pieper
(972) 663-9390
Morgen-Walke Associates
AMERICAN PAD & PAPER REPORTS SECOND QUARTER RESULTS
-Retains Bain & Company And Goldman Sachs -
DALLAS, Texas, July 16, 1998 -American Pad & Paper Company (NYSE: AGP)
(AP&P) today reported financial results for the second quarter and six months
ended June 30, 1998.
For the second quarter the company reported a net loss of $55.9 million,
or $2.02 per share, on net sales of $146.7 million. The net loss includes
approximately $41.0 million, or $1.48 per share, in the write-down of goodwill
associated with the Shade/Allied continuous forms business. The write-down of
goodwill does not affect cash. Year to date, the company reported a net loss
of $58.0 million, or $2.09 per share, on net sales of $308.3 million. As of
June 30, 1998, the company reported it had a net working capital of $163.6
million, including cash of $31.4 million.
Comparable period results for the second quarter 1997 were net income of
$4.7 million, or $.16 per share, on net sales of $167.2 million. For the first
six months of 1997 net income was $8.7 million, or $.30 per share, on net sales
of $317.0 million.
AP&P also announced it has retained the management consulting firm Bain
& Company and the investment banking firm Goldman Sachs & Company to assist the
company in evaluating its current position in the marketplace and setting the
Company's long-term strategic direction.
"Bain & Company will work closely with our customers and suppliers to
evaluate our core strengths and identify opportunities for improvement. They
will also assist the Company to restructure manufacturing to best serve each of
our markets. Restructuring charges in the third quarter are likely," said
James W. Swent, III, Chief Executive Officer of the Company. "Goldman Sachs
will explore external strategic and financial alternatives for the Company to
maximize shareholder value."
-more -
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Reviewing quarterly results, the Company said second quarter results
reflected lower net sales comprised of lower volumes and higher customer
incentives partially offset by higher prices and favorable product mixes at
both the Ampad and Williamhouse divisions. Reacting to the lower sales
volumes, the Company took action to reduce its inventories by slowing
production at several facilities. This resulted in increased manufacturing
costs being reflected in current operating results. Given changes in the
current business environment, the Company has reevaluated the realization of
certain assets resulting in additional current period charges.
Commenting on the Company's financial position Mr. Swent said, "Earlier
this week we announced we are not in compliance with certain bank financial
covenants. However, we have obtained a 30 day waiver from our banks allowing
us time to present a plan and pursue an amendment to our credit agreement. I
am encouraged by the support our lenders have given us to date."
"We remain confident of the long-term market strength of AP&P in its
core markets," said Mr. Swent. "AP&P is a leader in the markets we serve with
strong customer and supplier relationships. These inherent strengths provide a
solid base on which we can restructure, rebuild, and grow the Company. We have
the right strategy, products, customers, and the right people."
Regarding near term objectives, Mr. Swent stated, "Our immediate
challenges are to rebuild market share, reduce debt, and return the Company to
profitability."
American Pad & Paper Company is a leading manufacturer and marketer of
paper-based office products in North America. In its 22 U.S. facilities, the
company manufacturers and distributes writing pads, file folders, machine
papers, envelopes and other office products. Name brands include Ampad,
Century, Embassy, Gold Fibre, Huxley, Karolton, Kent, Peel & Seel, SCM,
Williamhouse and World Fibre.
This release contains forward-looking statements relating to future results.
Actual results may differ significantly as a result of factors over which the
company has no control, including the strength of domestic and foreign
economies, slower than anticipated sales growth, price and product competition
and increases in raw material costs. Additional information which could affect
the company's financial results is included in the company's prospectus on file
with the Securities and Exchange Commission.
* * *
(Tables to Follow)
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AMERICAN PAD & PAPER COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
-------------------------------- ---------------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 146,724 $ 167,160 $ 308,319 $ 316,994
Cost of sales 143,327 136,433 285,500 257,558
------------ ------------ ------------ ------------
Gross profit 3,397 30,727 22,819 59,436
Operating expenses:
Selling and marketing 5,504 5,241 10,193 9,830
General and administrative 9,273 3,440 14,705 8,163
Loss on sale of accounts receivable 714 631 1,461 1,393
Amortization of intangible assets 1,608 1,483 3,195 2,869
Write-down of assets -Shade/Allied 41,000 - 41,000 -
Management fees and services 530 1,837 1,060 3,692
------------ ------------ ------------ ------------
Income (loss) from operations (55,232) 18,095 (48,795) 33,489
Other income (expense):
Interest (11,063) (9,584) (21,806) (17,795)
Other income, net (36) 49 15 121
------------ ------------ ------------ ------------
Income (loss) before income taxes (66,331) 8,560 (70,586) 15,815
Provision for (benefit from) income taxes (10,394) 3,852 (12,564) 7,115
------------ ------------ ------------ ------------
Net income (loss) $ (55,937) $ 4,708 $ (58,022) $ 8,700
============ ============ ============ ============
Earnings (loss) per share (Basic) $ (2.02) $ 0.17 $ (2.09) $ 0.32
============ ============ ============ ============
Earnings (loss) per share (Diluted) - $ 0.16 - $ 0.30
============ ============
Weighted average number of
common shares (Basic) 27,724 27,436 27,710 27,436
============ ============ ============ ============
Weighted average number of
common shares (Diluted) - 29,316 - 29,369
============ ============
</TABLE>
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AMERICAN PAD & PAPER COMPANY
COMPARATIVE CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------------ -----------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 31,419 $ 4,855
Accounts receivable 37,596 74,203
Inventories 140,698 154,359
Refundable income taxes 751 4,059
Prepaid expenses and other current assets 2,579 1,402
Deferred income taxes 24,740 11,992
------------------ -----------------
Total current assets 237,783 250,870
Property, plant and equipment 153,350 151,390
Intangible assets 189,545 233,698
Other 2,793 2,443
------------------ -----------------
Total assets $ 583,471 $ 638,401
================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,018 $ 1,538
Accounts payable 33,414 56,356
Accrued expenses 39,796 40,157
Income taxes payable - -
------------------ -----------------
Total current liabilities 74,228 98,051
Long-term debt 425,542 398,577
Deferred income taxes 39,477 39,477
Other 1,569 1,630
------------------ -----------------
Total liabilities 540,816 537,735
------------------ -----------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, 150 shares authorized,
no shares issued and outstanding, respectively - -
Common stock, voting, $.01 par value, 75,000
shares authorized, 27,724 and 27,436 shares issued
and outstanding, respectively 277 274
Additional paid-in capital 301,287 301,279
Accumulated deficit (258,909) (200,887)
------------------ -----------------
Total stockholders' equity 42,655 100,666
------------------ -----------------
Total liabilities and stockholders' equity $ 583,471 $ 638,401
================== =================
</TABLE>
Note: At June 30, 1998, American Pad & Paper Company (AP & P) was not in
compliance with certain financial covenants of its Credit Agreement. AP & P has
received a 30 day waiver of these covenants and is pursuing a permanent
amendment to the Credit Agreement. If AP & P is unable to obtain such an
amendment and if the Bank Group then accelerates the debt, $286,900 of Long-
term debt would be reclassified to Current portion of long-term debt.
<PAGE> 1
Exhibit 99.8
CONTACT: James W. Swent
Chief Executive Officer
American Pad & Paper Co.
(972) 733-6200
FOR IMMEDIATE RELEASE
Robert P. Jones/Theresa Schillero
Leslie Feldman -Press
(212) 850-5600
Ken Pieper
(972) 663-9390
Morgen-Walke Associates
AMERICAN PAD & PAPER COMPANY CREATES EXECUTIVE OFFICE -
APPOINTS WILLIAM L. MORGAN AS EXECUTIVE
VICE PRESIDENT, OPERATIONS
DALLAS, Texas, July 20, 1998 -American Pad & Paper Company (NYSE: AGP)
(AP&P) today announced the creation of an Executive Office and the appointment
of William L. Morgan, 59, to the position Executive Vice President, Operations.
Comprising the Executive Office will be James W. Swent III, 47, Chief
Executive Officer, Timothy E. Needham, 49, President and Chief Operating
Officer, and Mr. Morgan, all of whom will share joint leadership of the
Company.
Mr. Morgan has over 35 years manufacturing and operations experience
with publicly traded, multi-national manufacturing companies in large scale,
entrepreneurial and fast growth industries. His most recent position was
President, Transmission, Connection and Broadband Systems, with Northern
Telecom. Prior to this assignment he held numerous senior executive positions
with Fujitsu, Memorex, and Texas Instruments. In his new position he will be
responsible for all the Company's manufacturing and operations activities,
including purchasing, planning, and distribution.
Mr. Morgan received his bachelor's degree in Mechanical Engineering from
Southern Methodist University in 1962 and currently resides in McKinney, Texas
with his wife, Sally.
Commenting on the appointment, James W. Swent, III, Chief Executive
Officer, stated, "A cornerstone of AP&P's strategy is to continue to align
ourselves with world class customers in the markets we serve. These customers
demand excellence from us in everything we do. I am extremely pleased to have
someone with Bill's extensive expertise in building world class manufacturing,
logistics, operations and customer service join our organization. I am
confident that with the combination of Bill, Tim, and his more than 25 years of
paper industry experience, and myself working in joint partnership to manage
and lead this Company, we will progress to the next level."
"As a Company we have a wealth of experience in the paper and converting
industries, but we need experience in high growth, fast-paced operations and
logistics support", added Timothy E. Needham, President and Chief Operating
Officer. "Bill brings this to American Pad & Paper and will be a valuable
addition to our team and our future."
American Pad & Paper Company is a leading manufacturer and marketer of
paper-based office products in North America. In its 22 U.S. facilities, the
company manufacturers and distributes writing pads, file folders, machine
papers, envelopes and other office products. Name brands include Ampad,
Century, Embassy, Gold Fibre, Huxley, Karolton, Kent, Peel & Seel, SCM,
Williamhouse and World Fibre.
# # #
