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UNITED STATES
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):
November 16, 1999 (November 15, 1999)
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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<PAGE>
Item 5. Other Events.
On November 15, 1999, American Pad & Paper Company (OTCBB:AMPP) (AP&P)
announced financial results for the third quarter and nine months ended
September 30, 1999. The Company also announced that a default of its bank credit
agreement will preclude payment of its November 15, 1999, interest payment to
its subordinated debt holders, and that it has engaged Lazard Freres & Co. LLC
to investigate and pursue various strategic and financial alternatives,
including the possible sale of the Williamhouse division.
This press release is incorporated herein as Exhibit 99.033
Exhibit
99.33 Press release by the Company dated November 15, 1999.
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
November 16, 1999 /s/ David N. Pilotte
Date David N. Pilotte
Vice President and Corporate Controller
Principal Accounting Officer
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Exhibit 99.033
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For immediate release CONTACT: Mark Lipscomb
- --------------------- (972) 733-5415
American Pad & Paper Reports THIRD Quarter Results
- Company to Consider Possible Sale of Williamhouse Division-
- Bank Credit Agreement Default Precludes Subordinated Debt Interest Payment-
- Company Engages Lazard Freres & Co. LLC as Strategic and Financial Advisors-
Dallas, November 15, 1999, -- American Pad & Paper Company (OTCBB:AMPP)
(AP&P) today announced financial results for the third quarter and nine months
ended September 30, 1999. AP&P also announced that a default of its bank credit
agreement will preclude payment of its November 15, 1999 interest payment to its
subordinated debt holders and that it has engaged Lazard Freres & Co. LLC to
investigate and pursue various strategic and financial alternatives, including
the possible sale of the Williamhouse division.
Third Quarter and Year-to-Date Results
For the third quarter, the Company reported a net loss of $9.2 million
or 33 cents per share, compared to a net loss of $13.4 million, or 48 cents per
share in the third quarter of 1998. The third quarter 1999 results include
previously announced plant rationalization costs totaling $1.8 million net that
negatively impacted quarterly performance by 6 cents per share. Third quarter
1999 net sales were $144.7 million versus net sales of $174.2 million in the
third quarter of 1998.
AP&P posted EBITDA performance of $10.5 million in the third quarter as
measured by the Company's bank credit agreement, meeting the bank financial
covenant requirements.
Year to date, the Company reported a net loss of $36.2 million, or
$1.30 per share, compared to a net loss of $71.4 million, or $2.58 per share, in
the first nine months of 1998. Results for the first nine months of 1999 include
the negative impact of net plant rationalization costs totaling $6.6 million, or
24 cents per share. Net sales for the first nine months of 1999 were $416.4
million versus net sales of $482.5 million for the first nine months of 1998.
"Our plant rationalization efforts and operational improvements
through the first nine months of this year have created significant cost
savings," said James W. Swent III, Chief Executive Officer. "However, revenue
performance is tracking below our plan due to general softness in both our
retail and paper merchant sales channels and continued inventory level
reductions with our retail customers. Profitability has also been negatively
impacted by customer and product mix as well as multiple paper price increases
experienced during the year."
-more-
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Bank Credit Agreement Default Precludes Subordinated Debt Interest Payment
On Friday November 12, 1999 the Company was notified by its banking
group of a default of its revolving credit facility. The default stems from the
formation of new subsidiaries in December 1997 related to a reorganization of
the Company's corporate structure without proper notification to the banks. The
reorganization was implemented primarily for state tax purposes and included the
transfer of assets between existing entities and transfers to the new
subsidiaries. Certain of these subsidiaries own assets for which the banks'
security interest may not have been perfected, resulting in a default under the
revolving credit facility. The banks' default notice prevents the Company from
making the scheduled November 15, 1999 interest payment to its subordinated debt
holders. AP&P has a 30-day grace period under the subordinated debt indenture to
cure this payment default. The Company has been in discussions with its bank
group and intends to continue to work with them to attempt to resolve the credit
facility default during this grace period.
Company Engages Lazard Freres & Co. LLC as Strategic and Financial Advisors
"The Company has engaged Lazard Freres to analyze our strategic and
financial alternatives, including the possible sale of the Williamhouse
division," Mr. Swent stated. "Williamhouse is a well-run operation that has
benefited from our recent rationalization program. It has a well-established
customer base, significant market share and a highly respected name in the
industry. The main reason for considering this option is that at the proper
valuation, the proceeds from the sale of the Williamhouse division would make
significant progress toward reducing our debt. Lazard will also look at other
actions that would also allow us to address our debt structure."
"The goal of having Lazard as advisors is to strengthen the Company's
financial position as we pursue various strategic and financial options to
reduce our debt," said Mr. Swent. "Our customers will continue to receive the
same high quality products and service they have come to expect from us as we
move forward."
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. Product offerings include envelopes, writing pads, file folders,
machine papers, greeting cards and other office products. The key operating
divisions of the Company are Williamhouse, AMPAD, and Creative Card. Company
revenues in 1998 were $662 million. Additional information is available on the
Company's Website at http://www.americanpad.com.
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, but not limited to the following:
changing economic conditions, slower than anticipated sales growth, price and
product competition and changes in raw material costs. Additional information,
which could affect the Company's financial results, is included in the Company's
filings with the Securities and Exchange Commission.
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(Tables to Follow)
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<TABLE>
<CAPTION>
AMERICAN PAD & PAPER COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
-------------------------- ----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> ....................................... <C> <C> <C> <C>
Net sales ................................. $ 144,717 $ 174,160 $ 416,398 $ 482,479
Cost of sales ............................. 131,984 156,462 382,230 441,962
------------ ------------ ------------ ------------
Gross profit ........................... 12,733 17,698 34,168 40,517
Operating expenses:
Selling and marketing .................. 5,590 5,569 15,844 15,762
General and administrative ............. 5,026 9,608 18,269 24,313
Restructuring charges .................. (1,999) 5,741 (1,999) 5,741
Loss on sale of accounts receivable .... 836 858 2,286 2,319
Amortization of intangible assets ...... 1,282 1,327 3,853 4,522
Write-down of intangible assets ........ -- -- -- 41,000
Management fees and services ........... 375 595 1,125 1,655
------------ ------------ ------------ ------------
Income (loss) from operations ............. 1,623 (6,000) (5,210) (54,795)
Other income (expense):
Interest ............................... (10,912) (11,929) (32,632) (33,735)
Other income, net ...................... 88 192 2,418 207
------------ ------------ ------------ ------------
Loss before income taxes .................. (9,201) (17,737) (35,424) (88,323)
Benefit from income taxes ................. -- 4,343 -- 16,907
------------ ------------ ------------ ------------
Loss before cumulative effect of a change
in accounting principal ................ (9,201) (13,394) (35,424) (71,416)
Cumulative effect of a change
in accounting principal ................. -- -- (726) --
------------ ------------ ------------ ------------
Net loss .................................. $ (9,201) $ (13,394) $ (36,150) $ (71,416)
============ ============ ============ ============
Basic loss per share:
Loss before cumulative effect of a change
in accounting principal ................ $ (0.33) $ (0.48) $ (1.27) $ (2.58)
Cumulative effect of a change
in accounting principal .............. -- -- (0.03) --
------------ ------------ ------------ ------------
Net loss ................................ $ (0.33) $ (0.48) $ (1.30) $ (2.58)
============ ============ ============ ============
Weighted average shares outstanding:
Basic ................................... 27,829 27,724 27,760 27,713
============ ============ ============ ============
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
AMERICAN PAD & PAPER COMPANY
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
(Unaudited)
September 30, December 31,
1999 1998
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ASSETS
Current assets:
<S> ........................................................ <C> <C>
Cash ..................................................... $ 1,545 $ 1,371
Accounts receivable ...................................... 36,915 60,660
Inventories .............................................. 117,408 112,169
Income taxes receivable .................................. 132 1,700
Prepaid expenses and other current assets ................ 2,206 1,240
Deferred income taxes .................................... 40 40
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Total current assets ................................... 158,246 177,180
Property, plant and equipment .............................. 148,938 152,198
Goodwill and intangible assets ............................. 179,205 185,805
Other ...................................................... 2,502 2,654
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Total assets .......................................... $ 488,891 $ 517,837
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt ........................ $ 247,610 $ 1,236
Accounts payable ......................................... 48,455 49,598
Accrued expenses ......................................... 49,107 47,078
Income taxes payable ..................................... 300 300
Restructuring reserve .................................... 2,200 5,660
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Total current liabilities ............................. 347,672 103,872
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Long-term debt ............................................. 137,871 373,675
Deferred income taxes ...................................... 16,364 16,972
Other ...................................................... 1,102 1,288
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Total liabilities ....................................... 503,009 495,807
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock, 150,000 shares authorized,
no shares issued and outstanding ........................ -- --
Common stock, voting, $.01 par value, 75,000,000
shares authorized, 27,926,405 and 27,724,405
shares issued and outstanding, respectively ............. 279 277
Additional paid-in capital ............................... 301,287 301,287
Accumulated deficit ...................................... (315,684) (279,534)
-------------- --------------
Total stockholders' equity (deficit) ................. (14,118) 22,030
-------------- --------------
Total liabilities and stockholders' equity (deficit) ... $ 488,891 $ 517,837
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The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
