<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended August 3, 1996
--------------
or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to .
----------------- -----------------------
Commission file number: 0-15077
-----------
SHOREWOOD PACKAGING CORPORATION
(Exact name of registrant as specified in its Charter)
DELAWARE 11-2742734
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
277 PARK AVENUE
NEW YORK, NEW YORK 10172
(Address of principal executive offices)
(212) 371-1500
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 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 / /
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
SEPTEMBER 1, 1996 18,317,135
Date Number of Shares
PAGE 1 OF 13
<PAGE> 2
SHOREWOOD PACKAGING CORPORATION
AND SUBSIDIARIES
<TABLE>
<CAPTION>
INDEX PAGE
<S> <C>
Part I: Financial Statements
Consolidated Condensed Balance Sheets
August 3, 1996 (Unaudited) and
April 27, 1996 (Audited) 3
Consolidated Condensed Statements of Earnings
14 weeks ended August 3, 1996 (Unaudited) and
13 weeks ended July 29, 1995 (Unaudited) 4
Consolidated Condensed Statements of Cash Flows
14 weeks ended August 3, 1996 (Unaudited) and
13 weeks ended July 29, 1995 (Unaudited) 5
Notes to Consolidated Condensed Financial Statements 6 - 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8 - 11
Part II: Other Information 12
</TABLE>
PAGE 2 OF 13
<PAGE> 3
SHOREWOOD PACKAGING CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
AUGUST 3, APRIL 27,
1996 1996
ASSETS (UNAUDITED) (AUDITED)
- ------
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 4,077 $ 4,479
Accounts Receivable, net 42,752 44,306
Inventories 42,200 41,397
Deferred Tax Assets 854 854
Prepaid Expenses and Other Current Assets 4,159 5,193
-------- --------
Total Current Assets 94,042 96,229
Property, Plant and Equipment, net 155,660 153,079
Excess of Cost Over the Fair Value of Net Assets Acquired, net 19,975 20,208
Other Assets 6,840 6,709
-------- --------
$276,517 $276,225
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts Payable $ 27,648 $ 24,071
Accrued Expenses 11,698 17,369
Current Maturities of Long-Term Debt 24,000 24,000
-------- --------
Total Current Liabilities 63,346 65,440
Long-Term Debt 118,960 122,588
Deferred Credit and Other Long-Term Liabilities 1,545 1,641
Deferred Income Taxes 16,181 15,120
-------- --------
Total Liabilities 200,032 204,789
-------- --------
Commitments and Contingencies
Fair Value of Warrants, net of deferred fair value of warrants ($855) -- --
Stockholders' Equity:
Series A Preferred Stock, $10 par value; 50,000 shares
authorized, none issued -- --
Preferred Stock, $10 par value; 5,000,000 shares authorized
none issued -- --
Common Stock, $.01 par value; 40,000,000 shares authorized
22,041,821 issued and 18,338,135 outstanding in August and
21,862,937 issued and 18,292,251 outstanding in April 220 219
Additional Paid-In Capital 42,087 40,589
Retained Earnings 78,398 72,259
Cumulative Foreign Currency Translation Adjustment (2,682) (2,119)
Treasury Stock (3,703,686 and 3,570,686 shares at
cost in August and April) (41,538) (39,512)
-------- --------
Total Stockholders' Equity 76,485 71,436
-------- --------
$276,517 $276,225
======== ========
</TABLE>
PAGE 3 OF 13
<PAGE> 4
SHOREWOOD PACKAGING CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
14 WEEKS 13 WEEKS
ENDED ENDED
AUGUST 3, JULY 29,
1996 1995
<S> <C> <C>
Net Sales $109,747 $90,699
-------- -------
Costs and Expenses:
Cost of Sales 86,462 70,241
Selling, General and Administrative 11,175 9,099
-------- -------
Earnings from Operations 12,110 11,359
Other Income, net 198 207
Interest Expense (2,375) (2,081)
-------- -------
Earnings Before Provision for Income Taxes 9,933 9,485
Provision for Income Taxes 3,794 3,625
-------- -------
Net Earnings $ 6,139 $ 5,860
======== =======
Net Earnings Per Common and Common
Equivalent Share $ .33 $ .30
======== =======
Weighted Average Common and Common Equivalent
Shares Outstanding 18,707 19,842
======== =======
</TABLE>
PAGE 4 OF 13
<PAGE> 5
SHOREWOOD PACKAGING CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
14 WEEKS 13 WEEKS
ENDED ENDED
AUGUST 3, JULY 29,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 6,139 $ 5,860
Adjustments to reconcile net earnings to net cash flows
provided from operations:
Depreciation and amortization 4,430 3,379
Deferred income taxes 1,105 1,066
Changes in operating assets and liabilities:
Accounts receivable 1,342 901
Inventories (966) (3,587)
Prepaid expenses and other current assets 1,013 (390)
Other assets (226) (1,476)
Accounts payable, accrued expenses and other
long term liabilities 2,778 (1,751)
-------- -------
Net cash flows provided from operating activities 15,615 4,002
-------- -------
Cash Flows from Investing Activities:
Capital Expenditures (6,950) (9,301)
Business Acquisitions (5,000) --
-------- -------
Net cash flows used in investing activities (11,950) (9,301)
-------- -------
Cash Flows from Financing Activities:
Net proceeds from (repayments of) long-term borrowings (3,558) 5,560
Purchase of treasury stock (2,026) --
Issuance of common stock 1,499 167
-------- -------
Net cash flows provided from (used in) financing activities (4,085) 5,727
-------- -------
Effect of exchange rate changes on cash and cash equivalents 18 93
-------- -------
(Decrease) Increase in cash and cash equivalents (402) 521
Cash and cash equivalents at beginning of period 4,479 4,100
-------- -------
Cash and cash equivalents at end of period $ 4,077 $ 4,621
======== =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid, net of capitalized amounts $ 2,278 $ 2,102
======== =======
Income taxes paid $ 2,202 $ 488
======== =======
</TABLE>
PAGE 5 OF 13
<PAGE> 6
SHOREWOOD PACKAGING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
1. BASIS OF PRESENTATION
In the opinion of the Company, the accompanying unaudited consolidated condensed
financial statements contain all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the financial position, the
results of operations, and the changes in cash flows at August 3, 1996 and for
all periods presented.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These financial statements should be read in
conjunction with the Consolidated Financial Statements and Notes included in the
Company's April 27, 1996 Annual Report to Stockholders on Form 10-K as filed
with the Securities and Exchange Commission ("1996 Form 10-K").
The Company's fiscal year ends on the Saturday closest to April 30. Fiscal 1997
will be a 53 week year to end May 3, 1997 and the first quarter is a 14 week
period which ended August 3, 1996.
The results of operations for the 14 week period ended August 3, 1996 are not
necessarily indicative of the results for the full year.
2. INCOME TAXES
The effective income tax rate is based on estimates of annual amounts of taxable
income and other factors. These estimates are updated periodically and any
increase or decrease in the provision for income taxes is reflected in the
period in which the estimate is changed.
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
AUGUST 3, 1996 APRIL 27, 1996
<S> <C> <C>
Raw materials and supplies $17,057 $18,111
Work in process 9,397 8,248
Finished Goods 15,746 15,038
------- -------
$42,200 $41,397
======= =======
</TABLE>
4. OTHER ASSETS
In May 1995, the Company loaned $2.0 million to its then Vice Chairman (and now
present Chairman) of the Board and President (the "Executive"). The loan is due
on May 4, 2000, and bears interest payable quarterly equal to the Applicable
Federal Rate as defined (6.01% at August 3, 1996), adjusted monthly. Mandatory
prepayments of this loan are required if the Executive's compensation exceeds
certain thresholds. In March, 1996 the Company loaned the Executive an
additional $800 thousand on a short term basis bearing interest at 6.5%.
PAGE 6 OF 13
<PAGE> 7
SHOREWOOD PACKAGING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(continued)
5. COMMITMENTS AND CONTINGENCIES
a. Treasury Stock
In January 1993, the Company's Board of Directors authorized the purchase of up
to 2.0 million shares of the Company's common stock, and in December 1995,
authorized the purchase of up to an additional 2.0 million shares of the
Company's common stock, from time to time in the open market, subject to the
terms of the Company's new credit agreement. As of August 3, 1996, approximately
1.5 million shares are authorized for purchase under the existing Board of
Directors resolutions. Since August 3, 1996 and through September 1, 1996 the
Company purchased an additional 21 thousand shares of its common stock.
b. Environmental Matters
On a continuing basis, the Company monitors its compliance with applicable
environmental laws and regulations. As part of this process the Company
cooperates with appropriate governmental authorities to perform any necessary
testing and compliance procedures. The purchase agreements relating to the
acquisition of certain acquired companies indemnify the Company from all costs
and expenses relating to environmental matters which existed at the related
acquired facilities on or prior to the respective closing dates. The Company is
not currently aware of any environmental compliance matters that it believes
will have a material effect on the consolidated financial statements.
c. 1995 Performance Bonus Plan
In July 1995, the Board of Directors approved the 1995 Performance Bonus Plan
(the "Plan"), applicable to its then Vice Chairman (and now present Chairman) of
the Board and President only. Under the Plan, for each of the five fiscal years
of the Company commencing with fiscal year 1996, the Executive will be entitled
to a graduated bonus (the "Performance Bonus") based upon a comparison of the
Company's earnings from operations plus depreciation and amortization (the
"Performance Measure") in that award year with the immediately preceding fiscal
year. The size of the Performance Bonus is tied to the level of the Company's
performance, as measured by the Performance Measure, with the larger bonuses
available only in the case of truly superior results. The maximum Performance
Bonus payable in respect of any award year under the Plan is $2.0 million. No
bonus was payable pursuant to the Plan for fiscal 1996.
A shareholder of the Company has brought a suit in the United States District
court, Southern District of New York, seeking to enjoin payment of Performance
Bonuses under the 1995 Performance Bonus Plan described above. The Company
believes that the suit is without merit and expects to pay Performance Bonuses
under the Plan when and if earned. A motion for summary judgment has been filed
on behalf of the Company, which is currently pending.
PAGE 7 OF 13
<PAGE> 8
SHOREWOOD PACKAGING CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company's fiscal year ends on the Saturday closest to April 30. Fiscal 1997
will be a 53 week year to end May 3, 1997 and the first quarter is a 14 week
period which ended August 3, 1996.
RESULTS OF OPERATIONS
Net Sales
Net sales for the quarter ended August 3, 1996 were $109.7 million compared to
net sales of $90.7 million for the corresponding prior period an increase of
21.0%. The Company's new facility in Oregon effectively began production during
the third quarter of fiscal 1996. Sales for the Company's Oregon facility were
approximately $1.8 million for the fourth quarter of fiscal 1996, and
approximately $3.3 million for the quarter ended August 3, 1996.
In addition to accelerating sales growth in Oregon, the Company continues to
penetrate its existing markets by expanding product lines within existing
customer bases, and adding new customers. In fiscal 1996 the Company entered
into certain contracts with existing customers whereby the customer has agreed
to provide the Company with minimum levels of sales, normally for a five year
period. In addition to these agreements, the Company's tobacco business
continues to expand. A large portion of the packaging produced by the Company
for the tobacco industry is sold to North American tobacco companies for
ultimate sale in the export market.
The Company believes that future sales growth will be generated through
continued penetration of its existing markets, and the expanding market of CD
ROM products. The Company believes that its Oregon facility will provide
additional sales growth in future quarters of fiscal 1997.
Cost of Sales
Cost of sales as a percentage of sales for the quarter ended August 3, 1996 was
78.8% as compared to 77.4% for the corresponding prior period. The Company's
Oregon facility had a negative impact on the Company's overall margin in the
quarter ended August 3, 1996 and did not have any impact on the corresponding
prior period. Cost of sales as a percentage of sales for the fourth quarter of
fiscal 1996 was 79.6%. The decrease from the fourth quarter of fiscal 1996 to
the first quarter of fiscal 1997 is due to the favorable trend in raw material
costs, as well as increased sales of value added packaging which has stronger
margins than standard product line sales.
The Company's margins were adversely affected by increases in certain raw
material costs in fiscal 1996 as compared to the prior year, some of which could
not be offset by increases in the selling price to the customer. Recently the
Company has experienced a decline in certain raw material costs which had a
favorable impact during the fourth quarter of fiscal 1996 and the first quarter
of fiscal 1997, and is expected to continue to favorably impact fiscal 1997
operations. The Company remains sensitive to price competitiveness in the
markets that it serves, and in the areas that are targeted for growth and
believes that the installation of state-of-the-art printing and manufacturing
equipment (and related labor and production efficiencies) will enable it to
continue to compete effectively.
PAGE 8 OF 13
<PAGE> 9
SHOREWOOD PACKAGING CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(CONTINUED)
Selling, General and Administrative Expenses
Selling, general and administrative expenses as a percentage of sales for the
quarter ended August 3, 1996 was 10.2% as compared to 10.0% for the
corresponding prior period. The increase in selling, general and administrative
expenses as a percentage of sales is largely due to additional costs associated
with the enhancement of the Company's customer service departments, as well as
increased occupancy and operating costs associated with the Company's corporate
offices, and an increase in legal costs. In addition, selling, general and
administrative expenses as a percentage of sales are higher at the Company's
Oregon facility as a result of its early operations, but are expected to decline
as a percentage of sales as production at that facility increases.
Investment and Other Income
Investment and other income, net, for the quarter ended August 3, 1996 was
primarily related to $126 thousand of investment income and approximately $95
thousand of foreign exchange gains.
Investment and other income, net for quarter ended July 29, 1995 was primarily
related to investment income of $105 thousand, foreign exchange gains of $83
thousand, and gains on the disposition of fixed assets of $17 thousand.
The Company's exposure to foreign exchange transaction gains or losses relate to
the Company's Canadian facilities which have U.S. dollar denominated net current
assets. The Company believes that fluctuations in foreign exchange rates will
not have a material impact on the operations or liquidity of the Company, based
upon current and historical levels of working capital at the Canadian
facilities..
Interest Expense
Interest expense for the quarter ended August 3, 1996 was $2.4 million as
compared to $2.1 million for the corresponding prior period. The increase in
interest costs for the quarter ended August 3, 1996 as compared to the prior
period is due to increased levels of borrowings, primarily related to the
Company's common stock repurchase program, as well as increases in interest
rates and a reduction in the amount of capitalized interest associated with
construction in progress . Interest costs capitalized for the quarter ended
August 3, 1996 relating to the construction of plant and equipment (including
the Company's Oregon facility) amounted to $120 thousand as compared to $262
thousand in the corresponding prior period. The reduction in capitalized
interest costs is a result of the Company's Oregon facility becoming operational
in fiscal 1996. The Company anticipates that the amount of interest to be
capitalized in fiscal 1997 will continue to be significantly less than the
amounts capitalized in the corresponding prior periods of fiscal 1996.
In October 1994, the Company assigned to a bank an interest rate swap agreement
relating to $42.0 million of its debt for cash proceeds of approximately $1.3
million. The proceeds have been recorded as a
PAGE 9 OF 13
<PAGE> 10
SHOREWOOD PACKAGING CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(CONTINUED)
deferred credit which is being amortized as a reduction of interest expense
(amounting to $99 thousand for the quarter ended August 3, 1996 and $146
thousand for the corresponding prior period. At August 3, 1996, $304 thousand of
deferred gain remains which will be amortized: $190 thousand remaining in fiscal
1997; and $114 thousand in fiscal 1998.
The Company has used, and may continue to use, interest rate swaps and caps to
manage its exposure to fluctuating interest rates under its debt agreements.
Income Taxes
The effective income tax rate for the quarter ended August 3, 1996 and the
corresponding prior period was 38.2%. These rates reflect a blend of domestic
and foreign taxes and are adjusted periodically based upon the estimated annual
effective tax rate, which for the entire fiscal year ended April 27, 1996 was
37.9%.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents at August 3, 1996 was $4.1 million as compared to $4.5
million at April 27, 1996, and working capital was $30.7 million as compared to
$30.8 million as of the same dates respectively. The current ratio at August 3,
1996 and April 27, 1996 was approximately 1.5 to one. The Company's cash
balances remain relatively constant as a result of the Company's cash management
program whereby collection of accounts receivable are used to retire revolver
obligations, and payments of accounts payable and accrued expenses are funded
through the revolver obligations.
Cash flow from operating activities for the quarter ended August 3, 1996 was
$11.7 million before changes in operating assets and liabilities as compared to
$10.3 million for the corresponding prior period. Cash flows from operations as
well as borrowings under the Company's credit facilities were used to support
$12.0 million in capital investments, including the payment of $5.0 million of
contingent consideration previously accrued relating to the acquisition of the
Premium Group. In addition, the Company purchased approximately $2.0 million of
treasury stock under the Board of Directors authorized program described below.
The Company has completed the construction of its facility in Oregon. Further
investment in plant and equipment, including that associated with the new
facility, will be dependent upon business needs. The Company anticipates that
such investments will approximate $20.0 million for all of fiscal 1997. The
Company anticipates paying for these investments with funds generated from
operations.
In January 1993, the Company's Board of Directors authorized the purchase of up
to 2.0 million shares of the Company's common stock and in December 1995, the
Board of Directors authorized the purchase of up to an additional 2.0 million
shares from time to time in the open market, subject to the terms of the
Company's new credit agreement. As of August 3, 1996, approximately 1.5 million
shares are authorized for purchase under existing Board of Directors
resolutions. The Board and management of the Company believe the long-term
outlook for the Company to be promising and that the Company's common stock
represents an attractive investment opportunity. The treasury stock purchases
will be made from time to time as market conditions permit.
PAGE 10 OF 13
<PAGE> 11
SHOREWOOD PACKAGING CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(CONTINUED)
To effectuate its Board authorization, the Company entered into a new credit
facility with its lending banks increasing its line of credit by approximately
$41.0 million to $185 million. The new facility consists of $120.0 million of
senior term notes ($12.0 million of which has since been repaid) and $65.0
million of a long-term revolver which bear interest, at the discretion of the
Company, at either the Bank's prime rate or LIBOR plus between 75 to 125 basis
points depending upon certain financial ratios. The senior term notes will be
repaid in various quarterly installments through May 7, 2000 at which time the
revolver will mature.
The loan agreement contains covenants related to levels of debt to cash flow,
current assets to current liabilities, fixed charge coverage, net worth and
investments (including investments in the Company's own common stock), and
restricts the amount of retained earnings available for payment of dividends.
The Loan Agreement requires the Company to prepay the term notes to the extent
of 50% of excess cash flow as defined. To date, no prepayments have been
required.
In May 1995, the Company loaned $2.0 million to its then Vice Chairman (and now
present Chairman) of the Board and President (the "Executive"). The loan is due
on May 4, 2000, and bears interest payable quarterly equal to the Applicable
Federal Rate as defined (6.01% at August 3, 1996), adjusted monthly. Mandatory
prepayments of this loan are required if the Executive's compensation exceeds
certain thresholds. In March, 1996 the Company loaned the Executive an
additional $800 thousand on a short term basis bearing interest at 6.5%.
The Company expects that cash flow from operations together with the borrowing
capacity under the revolving credit facility will be sufficient to meet the
needs of the business. The Company has, as described above, a $65.0 million
long-term revolving credit facility for its working capital requirements.
Borrowings under this facility are limited to the sum of 80% of accounts
receivable and 50% of inventories. At August 3, 1996, the Company had borrowings
under this facility of $36.6 million and additional credit availability under
this facility of $17.4 million.
PAGE 11 OF 13
<PAGE> 12
SHOREWOOD PACKAGING CORPORATION AND SUBSIDIARIES
Part II
Item 1 LEGAL PROCEEDINGS
Information concerning legal and environmental matters is incorporated
by reference from Part I, Footnotes 5(b) and (c) of Notes to
Consolidated Condensed Financial Statements
Item 2 CHANGES IN SECURITIES
None
Item 3 DEFAULTS UPON SENIOR SECURITIES
None
Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Item 5 OTHER INFORMATION
None
Item 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.103 - Sixth Amendment to Amended and Restated Credit Agreement dated
as of July 2, 1996 among Shorewood Packaging Corporation,
Shorewood Packaging Corporation of Canada Limited,
Nationsbank, N.A. (formerly known as NationsBank of North
Carolina, N.A.) and The Bank of Nova Scotia.
10.104 - Promissory Note of Marc P. Shore dated July 13, 1996.
10.105 - Promissory Note of Marc P. Shore dated August 22, 1996.
(b) Reports on Form 8-K
None.
PAGE 12 OF 13
<PAGE> 13
SIGNATURES
Pursuant to the regulations 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.
SHOREWOOD PACKAGING CORPORATION
(Registrant)
by: /s/ Howard M. Liebman
-------------------------------
Howard M. Liebman
Executive Vice President and
Chief Financial Officer
Dated: September 16, 1996
PAGE 13 OF 13
<PAGE> 14
EXHIBIT INDEX
-------------
Exhibit No. Description
- ----------- -----------
10.103 Sixth Amendment to Amended and Restated Credit Agreement dated
as of July 2, 1996 among Shorewood Packaging Corporation,
Shorewood Packaging Corporation of Canada Limited,
Nationsbank, N.A. (formerly known as NationsBank of North
Carolina, N.A.) and The Bank of Nova Scotia.
10.104 Promissory Note of Marc P. Shore dated July 13, 1996.
10.105 Promissory Note of Marc P. Shore dated August 22, 1996.
<PAGE> 1
EXHIBIT 10.103
SIXTH AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
This Sixth Amendment to Amended and Restated Credit Agreement (this
"Amendment") is entered into as of July 2, 1996 among SHOREWOOD PACKAGING
CORPORATION (the "U.S. Borrower") and SHOREWOOD CORPORATION OF CANADA LIMITED
(the "Canadian Borrower") (collectively, the U.S. Borrower and the Canadian
Borrower are referred to as the "Borrowers"), NATIONSBANK, N.A. (formerly known
as NationsBank, N.A. (Carolinas) and NationsBank of North Carolina, N.A.), as
Administrative Agent, THE BANK OF NOVA SCOTIA, as Canadian Administrative Agent
and the Lenders party to the Credit Agreement (as defined below). All
capitalized terms used herein and not otherwise defined shall have the meanings
ascribed to such terms in the Credit Agreement.
RECITALS
A. The Borrowers, the Administrative Agent, the Canadian Administrative
Agent and the Lenders entered into that certain Amended and Restated Credit
Agreement dated as of February 25, 1994 (as amended by that certain First
Amendment to Amended and Restated Credit Agreement dated as of July 18, 1994,
that certain Second Amendment to Amended and Restated Credit Agreement dated as
of November 22, 1994, that certain Third Amendment to Amended and Restated
Credit Agreement dated as of July 28, 1995, that certain Fourth Amendment to
Amended and Restated Credit Agreement dated as of December 12, 1995, and that
certain Fifth Amendment to Amended and Restated Credit Agreement dated as of
January 26, 1996, the "Credit Agreement").
B. The Borrowers have requested, and the Lenders have agreed, to amend
the terms of the Credit Agreement as set forth below.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Definitions.
a. The following definition in Section 1.01 of the Credit
Agreement is amended to read as follows:
"Capital Expenditures" means any current expenditure by the
Consolidated Shorewood Group for fixed or capital assets as reflected
on the financial statement of the Consolidated
<PAGE> 2
Shorewood Group, as prepared in accordance with GAAP; provided,
however, that the expenditures incurred in (i) the Toronto Facility
Transaction, (ii) the acquiring, constructing and equipping of a
manufacturing facility in Springfield, Oregon ("Pacific Northwest
Facility") in an amount not to exceed $22,000,000 and (iii) the
purchase of ink blending systems pursuant to that certain Requirements
& Cooperation Agreement between the U.S. Borrower and Sun Chemical
Corporation, shall not, for the purposes of this Agreement, be
considered to be a Capital Expenditure.
2. Fixed Charge Coverage.
a. Subsection (b) of Section 7.13 of the Credit Agreement is
hereby amended in its entirety to read as follows:
(b) Fixed Charge Coverage.
(i) At the end of the fiscal quarter ending closest
to July 31, 1996, for the four fiscal quarter period ending on
such date, the Fixed Charge Ratio shall not be less than 1.0
to 1.0;
(ii) At the end of the fiscal quarter ending closest
to October 31, 1996, for the four fiscal quarter period ending
on such date, the Fixed Charge Ratio shall not be less than
1.05 to 1.0;
(iii) At the end of the fiscal quarter ending closest
to January 31, 1997, for the four fiscal quarter period ending
on such date, the Fixed Charge Ratio shall not be less than
1.10 to 1.0;
(iv) At the end of the fiscal quarter ending closest
to April 30, 1997, for the four fiscal quarter period ending
on such date, the Fixed Charge Ratio shall not be less than
1.15 to 1.0;
(v) At the end of the fiscal quarter ending closest
to July 31, 1997, for the four fiscal quarter period ending on
such date, the Fixed Charge Ratio shall not be less than 1.20
to 1.0;
(vi) At the end of each fiscal quarter thereafter,
for the four fiscal quarter period ending on that date, the
Fixed Charge Ratio shall not be less than 1.25 to 1.0.
- 2 -
<PAGE> 3
3. Representations and Warranties. Borrowers hereby represent and warrant
to the Agents and the Lenders that (a) subsequent to the execution and
delivery of this Sixth Amendment, no Default or Event of Default exists
under the Credit Agreement or any of the other Loan Documents; (b) all
of the provisions of the Loan Documents, except as amended hereby, are
in full force and effect; (c) the liens created and evidenced by the
Loan Documents (including, without limitation, the Stock Pledge
Agreements) are valid and existing liens of the recited priority; and
(d) since the date of the last financial statements of Borrowers
delivered to Lenders, no material adverse change has occurred in the
business, financial or other conditions of Borrowers.
4. Effect of Amendment. Except as expressly modified and amended in this
Sixth Amendment, all of the terms, provisions and conditions of the
Credit Agreement are and shall remain in full force and effect and are
incorporated herein by reference. The Credit Agreement and any and all
other documents heretofore, now or hereafter executed and delivered
pursuant to the terms of the Credit Agreement are hereby amended so
that any reference to the Credit Agreement shall mean a reference to
the Credit Agreement as amended hereby.
5. Counterparts. This Sixth Amendment may be executed in any number of
counterparts, all of which taken together shall constitute one and the
same instrument.
6. ENTIRETY. THIS SIXTH AMENDMENT AND THE OTHER LOAN DOCUMENTS EMBODY THE
ENTIRE AGREEMENT BETWEEN THE PARTIES AND SUPERSEDE ALL PRIOR AGREEMENTS
AND UNDERSTANDINGS, IF ANY, RELATING TO THE SUBJECT MATTER HEREOF.
THESE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS
BETWEEN THE PARTIES.
- 3 -
<PAGE> 4
This Sixth Amendment shall be deemed to be effective as of the day and
year first above written.
BORROWERS:
SHOREWOOD PACKAGING CORPORATION
By:____________________________
Name: Howard M. Liebman
Title: Executive Vice President &
Chief Financial Officer
SHOREWOOD CORPORATION OF CANADA, LIMITED
By:____________________________
Name: Howard M. Liebman
Title: Vice President
LENDERS:
NATIONSBANK, N.A. (formerly known as
NationsBank, N.A. (Carolinas) and
NationsBank of North Carolina), N.A., in
its capacity as Administrative Agent and
as a Lender
By:____________________________
Name:__________________________
Title:_________________________
THE BANK OF NOVA SCOTIA, in its capacity
as Canadian Administrative Agent and as
a Lender
By:____________________________
Name:__________________________
Title:_________________________
[signatures continued]
<PAGE> 5
CREDITANSTALT-BANKVEREIN
By:____________________________
Name:__________________________
Title:_________________________
CRESTAR BANK
By:____________________________
Name:__________________________
Title:_________________________
UNITED STATES NATIONAL BANK OF OREGON
By:____________________________
Name:__________________________
Title:_________________________
THE CHASE MANHATTAN BANK, N.A.
By:____________________________
Name:__________________________
Title:_________________________
BANQUE PARIBAS
By:____________________________
Name:__________________________
Title:_________________________
By:____________________________
Name:__________________________
Title:_________________________
[signatures continued]
<PAGE> 6
SUMITOMO BANK, LIMITED, CHICAGO BRANCH
By:____________________________
Name:__________________________
Title:_________________________
By:____________________________
Name:__________________________
Title:_________________________
NATWEST BANK N.A.
By:____________________________
Name:__________________________
Title:_________________________
THE BANK OF NEW YORK
By:____________________________
Name:__________________________
Title:_________________________
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By:____________________________
Name:__________________________
Title:_________________________
[signatures continued]
<PAGE> 7
The Subsidiary Guarantors acknowledge and consent to all of the terms and
conditions of this Sixth Amendment and agree that this Sixth Amendment and any
documents executed in connection herewith do not operate to reduce or discharge
the Subsidiary Guarantors' obligations under their respective Guaranty
Agreements.
SHOREWOOD TECHNOLOGIES, INC.
By:____________________________
Name: Howard M. Liebman
Title: Vice President & Treasurer
SHOREWOOD PACKAGING CORPORATION OF
GEORGIA
By:______________________________
Name: Howard M. Liebman
Title: Executive Vice President &
Chief Financial Officer
SHOREWOOD PACKAGING OF NORTH CAROLINA,
INC.
By:_______________________________
Name: Howard M. Liebman
Title: Executive Vice President &
Chief Financial Officer
SPC COMPANY OF VIRGINIA, INC. (f/k/a
SHOREWOOD PACKAGING OF VIRGINIA, INC.)
By:________________________________
Name: Howard M. Liebman
Title: Executive Vice President &
Chief Financial Officer
[signatures continued]
<PAGE> 8
SHOREWOOD PACKAGING OF CALIFORNIA, INC.
By:_______________________________
Name: Howard M. Liebman
Title: Executive Vice President &
Chief Financial Officer
SHOREWOOD PACKAGING COMPANY OF ILLINOIS,
INC.
By:________________________________
Name: Howard M. Liebman
Title: Executive Vice President &
Chief Financial Officer
SHOREWOOD TRANSPORT, INC.
By:________________________________
Name: Howard M. Liebman
Title: Executive Vice President &
Chief Financial Officer
SHOREWOOD PACKAGING OF DELAWARE, INC.
By:________________________________
Name: Howard M. Liebman
Title: Vice President & Treasurer
SHOR-WRAP, INC.
By:________________________________
Name: Howard M. Liebman
Title: Executive Vice President &
Chief Financial Officer
[signatures continued]
<PAGE> 9
SHOREWOOD PACKAGING CORPORATION OF
ALABAMA
By:________________________________
Name: Howard M. Liebman
Title: Executive Vice President &
Chief Financial Officer
SHOREWOOD PACKAGING CORPORATION OF NEW
YORK
By:________________________________
Name: Howard M. Liebman
Title: Executive Vice President &
Chief Financial Officer
SHOREWOOD ACQUISITION CORP. OF DELAWARE
By:________________________________
Name: Howard M. Liebman
Title: Executive Vice President &
Chief Financial Officer
SHOREWOOD PACKAGING CORPORATION OF
VIRGINIA (f/k/a SHOREWOOD PAPERBOARD
CORPORATION OF VIRGINIA)
By:________________________________
Name: Howard M. Liebman
Title: Executive Vice President &
Chief Financial Officer
SPC COMPANY OF NEW YORK, INC. (f/k/a
SHOREWOOD PAPERBOARD CORPORATION OF NEW
YORK)
By:________________________________
Name: Howard M. Liebman
Title: Executive Vice President &
Chief Financial Officer
[signatures continued]
<PAGE> 10
SHOREWOOD PACKAGING CORPORATION OF
CONNECTICUT, (f/k/a SHOREWOOD/HEMINWAY
SET-UP BOX CORPORATION)
By:________________________________
Name: Howard M. Liebman
Title: Executive Vice President &
Chief Financial Officer
TORONTO CARTON CORPORATION LIMITED
By:________________________________
Name: Howard M. Liebman
Title: Vice President
SPC CORPORATION LIMITED (f/k/a SHOREWOOD
PAPERBOARD CORPORATION LIMITED)
By:________________________________
Name: Howard M. Liebman
Title: Vice President
SHOREWOOD PACKAGING CORP. OF CANADA
LIMITED
By:________________________________
Name: Howard M. Liebman
Title: Vice President
SHOREWOOD PACKAGING CORPORATION OF
OREGON
By:________________________________
Name: Howard M. Liebman
Title: Executive Vice President
<PAGE> 1
EXHIBIT 10.104
$800,000 July 13, 1996
Sixty (60) days after date I promise to pay to the order of Shorewood Packaging
Corporation Eight Hundred Thousand and 00/100 dollars payable at 277 Park
Avenue, New York, New York 10172.
Value received with interest at 6.5 percent per annum.
Due September 11, 1996 /s/ Marc P. Shore
--------------------
Marc P. Shore
<PAGE> 1
EXHIBIT 10.105
$800,000 August 22, 1996
Eighty-one (81) days after date I promise to pay to the order of Shorewood
Packaging Corporation Eight Hundred Thousand and 00/100 dollars payable at 277
Park Avenue, New York, New York 10172.
Value received with interest at 6.5 percent per annum.
Due November 11, 1996 /s/ Marc P. Shore
--------------------
Marc P. Shore
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