FORM 10-K
Securities and Exchange Commission
Washington DC 20549
FORM 10-K
X Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the fiscal year ended September 30, 1994
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 1-9915
GAYLORD CONTAINER CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-3472452
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
500 Lake Cook Road, Suite 400, Deerfield, Illinois 60015
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (708) 405-5500
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Class A Common Stock, $.0001 par value per share American Stock Exchange
(53,768,325 shares outstanding as of
November 28, 1994)
Redeemable Exchangeable Warrants American Stock Exchange
(31,845,533 warrants outstanding as of
November 28, 1994)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes __X___ No ______
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment of
this Form 10-K. ______
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes ___X__ No ______
The aggregate market value of voting stock held by non-affiliates of the
registrant, computed on the basis of the closing price of such stock as
reported on the composite tape on November 28, 1994, was approximately $405
million. There were 5,266,273 shares of registrant s Class B Common Stock,
$.0001 par value per share, outstanding as of November 28, 1994.
Documents Incorporated by Reference
The registrant's Proxy Statement for the Annual Meeting of Stockholders
scheduled to be held February 8, 1995 is incorporated into Part III of this
Annual Report on Form 10-K.
<PAGE>
PART I
Item 1. BUSINESS
Development
Gaylord Container Corporation (including its subsidiaries, the Company)
acquired businesses which had been owned by Crown Zellerbach Corporation on
November 17, 1986 for approximately $260 million. Since its inception, the
Company has grown its business through strategic acquisitions and capital
investments to expand capacity. The Company financed the acquisitions and
capital investments with cash provided by operations, borrowings under its
credit agreements and the issuance of debt and equity securities. The Company's
facilities currently consist of three containerboard and unbleached kraft
paper mills, 15 corrugated container and sheet plants, two sheet feeder
plants, two multiwall bag plants, two grocery bag and sack plants, a specialty
chemicals facility, a preprint and graphics center and a cogeneration
facility.
On September 11, 1992, the Company filed a voluntary petition for relief and a
plan of reorganization (the Prepackaged Plan) under Chapter 11 of the United
States Bankruptcy Code. On November 2, 1992, the Company consummated the
Prepackaged Plan.
In fiscal 1994, the Company initiated a five-year capital plan that provides
for a total investment of approximately $250 million. The plan targets
approximately 60 percent of the spending to enhance the capacity, flexibility
and cost effectiveness of the Company's converting facilities with the
remainder to be invested at the mills.
General
The corrugated container is unrivaled in most industrial applications for
providing an economical and safe means of transporting products. In addition,
corrugated containers are increasingly utilized as an integrated
transportation and marketing device in the form of point-of-sale displays. The
major corrugated container end-use markets are food, beverage and agricultural
products; paper and fiber products; petroleum, petrochemical resins, plastics
and rubber products; glass and metal containers; electronic products; and
electrical and other machinery. Most corrugated containers are produced and
sold under individual customer orders.
Containerboard, consisting of linerboard and corrugating medium, is the
principal raw material used in the manufacture of corrugated containers.
Linerboard provides the strength component of a container while corrugating
medium provides rigidity. Corrugating medium is fluted and laminated to
linerboard in corrugated container and sheet feeder plants to produce
corrugated sheets. The sheets are subsequently printed, cut, folded and glued
in corrugated container or corrugated sheet plants to produce corrugated
containers.
Corrugated containers generally are delivered by truck because of the large
number of customers and demand for timely service. The dispersion of customers
and the high bulk and low density and value of corrugated containers make
shipping costs a relatively high percentage of total costs. As a result,
corrugated container plants tend to be located close to customers to minimize
freight costs.
To reduce the cost of shipping containerboard from mills to widely dispersed
corrugated plants and to reduce waste by closely matching the width of paper
rolls to their corrugators, vertically integrated containerboard manufacturers
routinely exchange containerboard from mills in one location for
containerboard having a similar value elsewhere in the United States.
Producers also exchange containerboard to take advantage of manufacturing
efficiencies resulting from operating paper machines in their most efficient
weight ranges.
Unbleached kraft paper is the principal raw material used in the manufacture
of multiwall bags and grocery bags and sacks. Multiwall bags are used by
producers in such industries as pet food, chemical, agricultural, food, metal,
plastics and rubber. Multiwall bags and grocery bags and sacks are
manufactured through a process of printing, cutting, folding and gluing kraft
paper to meet customer specifications.
<PAGE>
The basic raw material used in the manufacture of containerboard and
unbleached kraft paper is cellulose fiber (which is produced primarily from
wood chips). The industry's use of recycled fiber, however, has been
increasing. Fiber costs are generally the largest cost component in the
manufacture of containerboard and unbleached kraft paper.
In calendar 1993, corrugated product sales and grocery and multiwall bag sales
by U.S. manufacturers were estimated by industry trade associations to be
$16.8 billion and $1.6 billion, respectively. It has also been estimated that
containerboard and unbleached kraft paper capacity utilization rates in the
United States averaged 94 percent and 91 percent, respectively, in calendar
1993 and 98 percent and 93 percent, respectively, for the first 10 months of
calendar 1994. Annual U.S. containerboard and unbleached kraft paper capacity
in calendar 1994 was estimated to be 31 million tons and 2.6 million tons,
respectively.
Demand for corrugated containers, containerboard and unbleached kraft paper is
affected by the level of growth of economic activity and, in the case of
containerboard, the strength of the U.S. dollar. While overall demand for
unbleached kraft paper has declined in recent years due to displacement by
plastics, this decline has been at least partially offset by a reduction in
the supply of unbleached kraft paper in the United States due to reallocation
of productive capacity. For further information regarding the industry and
factors which influence prices and the demand for packaging products, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-General."
Sales
Corrugated containers and sheets, multiwall bags, grocery bags and sacks and
solid fibre products collectively represent approximately 80 percent of the
Company's net sales while containerboard and unbleached kraft paper represent
approximately 20 percent of such sales. Sales of the Company's products are
not seasonal to any significant degree.
The Company sells its products to thousands of customers, with the 10 largest
accounting for approximately 11 percent of net sales in both fiscal 1994 and
fiscal 1993 and 10 percent in fiscal 1992. The Company's largest customer
accounted for approximately 2 percent of the Company's net sales in each of
fiscal 1994, fiscal 1993 and fiscal 1992. Corrugated containers are generally
produced to customer order for delivery from four to ten days after receipt of
the order. As a result, the Company's backlog at any particular time generally
does not exceed 3 percent of corrugated product sales.
In general, each converting facility has its own sales force which is
responsible for marketing and distribution to local customers. A national
account sales force handles converted product sales to large customers who
utilize centralized purchasing for multiple locations. In total, the Company's
sales force for converted products at September 30, 1994 consisted of
approximately 135 salespersons. Sales and exchanges of containerboard and
unbleached kraft paper are the responsibility of a centralized marketing and
sales group.
The Company exports linerboard, certain converted products and specialty
chemicals. Such sales totaled $45.7 million, $37.2 million and $38.6 million
in fiscal 1994, fiscal 1993 and fiscal 1992, respectively.
Products
Corrugated Products. The Company produces many varieties of corrugated
containers and sells the majority of its production to manufacturing end
users. Corrugated shipments of 12.7 billion square feet in fiscal 1994 were
approximately 7 percent higher than the prior year. The majority of the
increase was attributable to the acquisition of a corrugated sheet feeder
plant in March 1993. From fiscal 1992 to fiscal 1993 corrugated shipments
increased approximately 16 percent. The increase was primarily due to enhanced
marketing efforts and the acquisition of two sheet feeder plants.
Containerboard. The Company's containerboard mills in the aggregate have the
ability to manufacture containerboard in a broad spectrum of grades and
weights. Production of containerboard increased to 1,194,900 tons in fiscal
1994, an increase of approximately 4 percent from the prior year. The increase
in production was primarily due to increased productivity at each of the
Company's mills. During fiscal 1993, the Company produced 1,151,900 tons of
containerboard compared to 1,087,300 tons in fiscal 1992. During fiscal 1994,
fiscal 1993 and fiscal 1992, the Company's corrugated plants consumed the
equivalent of approximately 82 percent, 80 percent and 73 percent,
respectively, of the Company's containerboard production.
<PAGE>
Multiwall Bags. The Company produces many varieties of medium to large
multiwall bags and sells them to manufacturers and processors for packaging
their products. The Company's multiwall bag shipments increased to 51,500 tons
in fiscal 1994, an increase of approximately 6 percent from fiscal 1993. The
Company's multiwall bag shipments increased to 48,700 tons in fiscal 1993, an
increase of approximately 10 percent from fiscal 1992 shipments of 44,100
tons. The increases in multiwall bag shipments in fiscal 1994 and fiscal 1993
are primarily a result of increases in market share in certain product lines.
Grocery Bags and Sacks. The Company produces grocery bags and sacks in a
variety of sizes and sells them to wholesale and retail distributors for
packaging their products. The Company shipped approximately 116,500 tons of
grocery bags and sacks in fiscal 1994, a decrease of approximately 9 percent
versus shipments of 128,600 tons in the prior year. The decline in shipments
in fiscal 1994 is primarily due to the consolidation of two grocery bag and
sack plants, partially offset by significant increases in shipments of Gaylord
Handle Bags (R, registered trademark). The Company's shipments of grocery
bags and sacks in fiscal 1993 decreased approximately 5 percent versus
shipments of 134,800 tons in fiscal 1992.
Unbleached Kraft Paper. The Company is a leading supplier of unbleached kraft
paper to independent multiwall bag and grocery bag and sack converters. During
fiscal 1994, the Company produced 250,700 tons of unbleached kraft paper
compared to 241,100 tons and 227,400 tons in fiscal 1993 and fiscal 1992,
respectively. In addition to its own production, the Company has agreed to
purchase through 1999 approximately 35,000 tons per year of unbleached kraft
paper from Riverwood International USA, Inc. During fiscal 1994, fiscal 1993
and fiscal 1992 the Company's multiwall bag and grocery bag and sack plants
consumed the equivalent of approximately 58 percent, 66 percent and 68
percent, respectively, of the Company's unbleached kraft paper production and
purchase commitments.
Specialty Chemicals. The Company, through its wholly owned subsidiary, Gaylord
Chemical Corporation, utilizes by-product materials from its manufacturing
operations to produce dimethyl sulfide (DMS) and dimethyl sulfoxide (DMSO).
DMS is a low boiling-point liquid used as a presulfiding agent for catalysts
for the petroleum industry, as a natural gas odorant, a processing aid in
ethylene production and a feedstock for the manufacture of DMSO. DMSO is used
as a solvent for a wide range of complex manufacturing processes used in the
chemical, plastic, pesticide and pharmaceutical industries. Management
believes that the Company is the sole domestic producer of DMSO and estimates
that the Company produces 35 to 40 percent of the world's supply of DMSO.
Sales of these products for fiscal 1994, fiscal 1993 and fiscal 1992 were
$14.3 million, $14.9 million and $13.3 million, respectively.
Other Products. At its Bogalusa, Louisiana corrugated container plant, the
Company produces solid fibre products which are primarily used as beverage
carriers and pallet substitutes. Solid fibre is produced using technology and
manufacturing processes similar to those used with corrugated containers.
The Company operates a cogeneration facility at the Antioch, California mill
which produces steam and electricity for the mill. Pursuant to a long-term
agreement, the Company sells to Pacific Gas & Electric Company, subject to
certain adjustments, a specified amount of electricity produced by the
cogeneration facility, which represented the cogeneration facility's
anticipated excess capacity at the contract date. Electricity sales pursuant
to this agreement were $8.5 million, $8.7 million and $10.2 million in fiscal
1994, fiscal 1993 and fiscal 1992, respectively.
Raw Materials
The Bogalusa, Louisiana mill uses approximately 75 percent pulpwood and wood
chips in the manufacture of containerboard and unbleached kraft paper, of
which approximately 46 percent in fiscal 1994 and 42 percent in each of fiscal
1993 and fiscal 1992 were supplied by a division of Hanson Natural Resources
Company (Hanson) and the remainder was purchased on the open market. The
Company has certain agreements through 2016 pursuant to which Hanson is
committed to supply the Company with significant quantities of wood chips,
roundwood and stumpage at prices based on independent market transactions and,
through 1998, hog fuel (which consists of bark and other residual fiber from
trees) at prices derived from prices of an alternative fuel. In addition,
recycled fiber accounts for approximately 25 percent of the mill's fiber
requirements.
<PAGE>
The Antioch, California mill uses 100 percent recycled fiber. Approximately 20
percent of the old corrugated containers (OCC) used as a source of recycled
fiber at the Antioch mill are supplied under contracts with two suppliers
which expire in 1995. Contract prices are based on published industry prices,
as defined. Upon expiration of such contracts, the Company believes it will be
able to negotiate new contracts with these or other suppliers to provide
significant quantities of OCC at market prices. An additional 20 percent of
the Antioch mill's OCC requirements is supplied under contracts with numerous
small suppliers with the remainder purchased on the open market.
The Pine Bluff, Arkansas mill uses approximately 80 percent wood chips, of
which approximately 25 percent in fiscal 1994 and 33 percent in each of fiscal
1993 and fiscal 1992 were supplied by Weyerhaeuser Company (Weyerhaeuser) and
the remainder was purchased on the open market. The Company has an "evergreen"
contract with Weyerhaeuser to provide significant quantities of wood chips at
market prices. The contract is automatically renewed on January 1 for a term
of one year unless either party gives notice of its intention to terminate the
contract by such date. If such notice is given, all contractual obligations
would cease on the following July 1. In addition, recycled fiber accounts for
approximately 20 percent of the mill's fiber requirements.
During fiscal 1994, the Company's performance was adversely affected by higher
fiber costs, primarily as a result of significant increases in OCC prices
which began to escalate in January 1994. While the secondary fiber markets
have been volatile and are difficult to predict, prices for secondary fiber
have recently declined. There can be no assurance, however, what direction
prices will take in the future. In fiscal 1994, fiber represented
approximately one-third of the Company's containerboard and unbleached kraft
paper production cost. Future increases in fiber prices would adversely affect
the Company's profitability.
Energy
The Company's mills require significant amounts of steam and electricity in
their operation. The Company has entered into long-term supply agreements with
James River Corporation of Nevada and Hanson pursuant to which these companies
provide hog fuel for the production of steam at the Bogalusa mill. In fiscal
1994, the Bogalusa mill produced all of its steam and generated approximately
66 percent of its electricity requirements. During the same period, the
Antioch mill produced all of its steam and approximately 81 percent of its
electricity. The Antioch mill has a contract to sell electricity from its
cogeneration facility to a public utility through 2013. See "Products." Certain
aspects of the energy operations of the Bogalusa mill and the Antioch mill are
regulated by the Federal Energy Regulatory Commission. The Pine Bluff mill
produces all of its own steam, but purchases all of its electricity from a
local public utility.
In fiscal 1994, energy costs accounted for approximately 10 percent of the
Company's container-board and unbleached kraft paper production cost. Future
increases in energy prices would adversely affect the Company's profitability.
Competition
Many of the Company's competitors are substantially larger and have
significantly greater financial resources; however, the most important
competitive factors are price, quality and service. The manufacture of
containerboard and unbleached kraft paper is capital intensive with high
barriers to entry because new facilities take at least two years to construct.
Many of the Company's larger competitors own timberlands. Although the Company
does not own timberlands, it has fiber supply agreements described in "Raw
Materials." Such agreements covered approximately 43 percent of its pulpwood
and wood chip requirements in fiscal 1994.
In contrast to the containerboard and unbleached kraft paper segment of the
industry, the converting segment, which manufactures corrugated products,
multiwall bags and grocery bags and sacks, has comparatively low barriers to
entry. Competition in corrugated products and, to a lesser extent, multiwall
bags and grocery bags and sacks, is primarily localized, with proximity to
customers an important factor in minimizing shipping costs. There are a
substantial number of competitors in each of the geographic areas in which the
Company's converting facilities are located. Many of such competing facilities
are owned by other integrated producers.
<PAGE>
Environmental Matters
Compliance with federal, state and local environmental requirements,
particularly relating to air and water quality and waste disposal, is a
significant factor in the Company's business. The Company made capital
expenditures for environmental purposes of approximately $2.3 million, $1.9
million and $2.5 million in fiscal 1994, fiscal 1993 and fiscal 1992,
respectively. The Company's predecessors spent substantial sums for pollution
control facilities, and the Company may be required to do so in the future.
The Company believes that it is in compliance in all material respects with
applicable federal, state and local environmental regulations.
In December 1993, the Environmental Protection Agency (EPA) proposed
regulations implementing portions of the Clean Air Act of 1990 and the Clean
Water Act applicable to the pulp and paper industry known as the "cluster
rules." The EPA has indicated that significant changes to the regulations will
be considered prior to the adoption of the final regulations which are to be
issued in 1996, with compliance required within three years from that date.
The Company is evaluating the potential impact of the proposed rules on its
operations and capital expenditures over the next several years. Preliminary
estimates indicate that the Company could be required to make capital
expenditures of approximately $3 million to $7 million per year between 1996
and 1998 to meet the requirements of the proposed rules. The ultimate
financial impact of the regulations cannot be predicted with any reasonable
certainty and will depend on several factors, including the actual
requirements imposed under the final rules, new developments in control
process technology and inflation.
The Company is unable to predict the effect of additional environmental
regulations that may be adopted in the future. The Company believes it has the
management and technical expertise to respond to anticipated future changes in
environmental requirements.
Employees
At September 30, 1994, the Company employed approximately 4,100 people.
Approximately 71 percent of the Company's employees are hourly wage employees
who are members of various labor unions. The Company's labor agreements
covering its employees at its Antioch, Pine Bluff and Bogalusa mills expire in
fiscal 1995, fiscal 1996 and fiscal 2000, respectively. At September 30, 1994,
labor contracts at nine of the Company's manufacturing facilities covering
approximately 35 percent of the Company's union employees have expired or are
scheduled to expire before the end of fiscal 1995. The Company believes it has
satisfactory relations with its employees and their unions and, based on
previous experience, does not anticipate any significant difficulties in
renegotiating labor contracts as they expire.
<PAGE>
Item 2. PROPERTIES
Manufacturing Properties
The Company's plants are maintained in generally good condition and are
believed to be suitable for their specific purposes. Set forth below is
certain information concerning these facilities.
Owned/
FACILITY Products Leased
- -------------------------------------------------------------------
Mills:
Antioch, California Containerboard Owned
Bogalusa, Louisiana Containerboard and
unbleached kraft paper Owned
Pine Bluff, Arkansas Unbleached kraft paper Owned
Corrugated Plants:
Antioch, California Corrugated containers Owned
Atlanta, Georgia Corrugated containers Owned
Bogalusa, Louisiana Corrugated containers
and solid fibre Owned
Carol Stream, Illinois Corrugated containers Owned
City of Industry, California(1) Corrugated sheets Owned
Dallas, Texas Corrugated containers Leased
Gilroy, California Corrugated containers Leased
Greenville, South Carolina Corrugated containers Owned
Marion, Ohio Corrugated containers Owned
Newark, Delaware Corrugated containers Owned
Phoenix, Arizona Corrugated containers Owned
Raleigh, North Carolina Corrugated containers Owned
San Antonio, Texas Corrugated containers Owned
St. Louis, Missouri Corrugated containers Owned
Sunnyvale, California Corrugated sheets Leased
Tampa, Florida Corrugated containers Leased
Weslaco, Texas Corrugated containers Leased
Bag Plants:
Oakmont, Pennsylvania(2) Multiwall bags Leased
Pine Bluff, Arkansas Multiwall bags Owned
Alsip, Illinois Grocery bags and sacks Leased
Monroe, Louisiana Grocery bags and sacks Leased
Other Facilities:
Antioch, California Electricity cogeneration Owned
Bogalusa, Louisiana Specialty chemicals Owned
Livermore, California Preprinted linerboard Leased
(1) The Company is in the process of relocating this plant from a leased
facility in City of Industry to a plant that is owned.
(2) The Company is in the process of relocating this plant to a leased
facility in Twinsburg, Ohio. The Company has sold the building in which the
plant currently operates, but will lease it until the plant's operations are
transferred to the new facility in fiscal 1995.
<PAGE>
The Bogalusa mill has five paper machines with the capacity to produce
linerboard, corrugating medium and unbleached kraft paper. The mill uses
softwood and hardwood pulp and recycled fiber from OCC and double lined kraft
(DLK) clippings. In fiscal 1994, fiscal 1993 and fiscal 1992, the mill
produced an average of 2,630 tons per day (TPD, calculated on the basis of the
number of days in the period), 2,542 TPD and 2,428 TPD, respectively, of
containerboard and unbleached kraft paper.
The Antioch mill has one paper machine with the capacity to produce recycled
linerboard and corrugating medium using 100 percent recycled fiber. The
Antioch mill produced an average of 894 TPD, 858 TPD and 789 TPD of
containerboard in fiscal 1994, fiscal 1993 and fiscal 1992, respectively.
The Pine Bluff mill has one paper machine with the capacity to produce
unbleached kraft paper. The mill uses softwood pulp and recycled fiber from
DLK. In fiscal 1994, fiscal 1993 and fiscal 1992 the mill produced an average
of 447 TPD, 427 TPD and 395 TPD, respectively, of unbleached kraft paper.
The Company's corrugated container and sheet feeder plants shipped 12.7
billion square feet, 11.9 billion square feet and 10.3 billion square feet of
corrugated products in fiscal 1994, fiscal 1993 and fiscal 1992, respectively.
The Company's multiwall bag plants shipped 51,500 tons, 48,700 tons and 44,100
tons of multiwall bags in fiscal 1994, fiscal 1993 and fiscal 1992,
respectively. The Company shipped 116,500 tons, 128,600 tons and 134,800 tons
of grocery bags and sacks in fiscal 1994, fiscal 1993 and fiscal 1992,
respectively. See "Business - Products."
Other Properties
The Company leases its executive and general and administrative offices in
Deerfield, Illinois. It also leases numerous warehouse facilities and sales
offices.
Item 3. LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings other than litigation
incidental to normal business activities, except as described in "Note 16 of
Notes to Consolidated Financial Statements." The outcome of such litigation is
not expected to have a material adverse effect on the Company.
<PAGE>
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
Executive Officers of the Registrant
Marvin A. Pomerantz has served as Chairman, Chief Executive Officer and a
director of the Company from the date of its organization. In 1971, Mr.
Pomerantz was named Vice President of Continental Can Company, Inc. and in
January 1975 was named Vice President and General Manager of its Forest
Products Brown Systems Operation. Since 1980, Mr. Pomerantz has served as
Chairman or President and a director of Mid-America Group, Ltd., an Iowa
corporation engaged primarily in real estate investment. From 1980 to 1982,
he served as President of the Diversified Group of Navistar International
Corporation, formerly International Harvester Corporation, a manufacturer of
trucks, and Executive Vice President of Navistar. Currently, Mr. Pomerantz
serves on the Board of Directors and the Executive Committee of the American
Forest & Paper Association. Mr. Pomerantz formerly served as President of the
Board of Regents for the state universities in Iowa and on the board of
directors of Stone Container Corporation, a manufacturer of paper packaging
products.
Dale E. Stahl has served as President and Chief Operating Officer of the
Company since August 1988. From March 1988 through August 1988, Mr. Stahl
served as a Vice President of the Company. From March 1978 through March 1988,
he was employed by Union Camp Corporation, an integrated paper packaging
manufacturer, starting in sales and ultimately being promoted to Vice
President-General Manager of the container division.
Daniel P. Casey has served as Executive Vice President of the Company since
February 1990. From July 1988 through February 1990, he served as Senior Vice
President-Financial and Legal Affairs for the Company and from January 1988
through June 1988 in the same position for both the Company and Mid-America
Packaging, Inc. (Mid-America), which merged with the Company in June 1988.
From March 1987 through January 1988, Mr. Casey served as Vice
President-Financial and Legal Affairs for both the Company and Mid-America.
Lawrence G. Rogna has served as Senior Vice President of the Company since
February 1990. From December 1988 through February 1990, Mr. Rogna served as
Vice President-Human Resources of the Company. From 1981 to 1988 he was
employed by Rohr Industries, Inc., a manufacturer of components for aircraft
and space vehicles, where he served as Vice President, Human Resources from
1983 to 1988.
<PAGE>
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON STOCK, WARRANTS
AND RELATED STOCKHOLDER MATTERS
The Company had 586, 12 and 40 holders of record of its Class A Common Stock,
par value $.0001 per share (Class A Common Stock), Class B Common Stock, par
value $.0001 per share(Class B Common Stock and together with the Class A
Common Stock, Common Stock) and redeemable exchangeable warrants (Warrants),
respectively, at November 28, 1994.
The Company's Class A Common Stock and Warrants are listed and traded on the
American Stock Exchange under the symbols GCR and GCRWS, respectively. The
Company's Class B Common Stock is unregistered and not publicly traded. Each
share of Class B Common Stock is convertible into one share of Class A Common
Stock at any time at the option of the holder. In addition, each share of
Class B Common Stock will be automatically converted into one share of Class A
Common Stock under certain conditions (see "Note 12 of Notes to Consolidated
Financial Statements"). Each Warrant is exercisable for one share of Class A
Common Stock subject to adjustment and unless redeemed or exchanged earlier by
the Company. The Warrants will be exercisable on or after July 31, 1996,
except in certain circumstances as described in "Note 12 of Notes to
Consolidated Financial Statements."
Information with respect to quarterly high and low sales prices for the
Company's Class A Common Stock for each quarterly period for fiscal 1994,
fiscal 1993 and fiscal 1992 and the Warrants for each quarterly period for
fiscal 1994 and fiscal 1993 is contained in "Note 19 of Notes to Consolidated
Financial Statements."
The Company neither declared nor paid any dividends on its Common Stock during
fiscal 1994, fiscal 1993 and fiscal 1992. The Company does not currently
intend to pay cash dividends on its Common Stock, but intends instead to
retain future earnings for reinvestment in the business and for repayment of
debt. The Company's ability to declare or pay dividends or distributions on
its capital stock or to repurchase or redeem shares of its capital stock
(Restricted Payments) is limited under the terms of its debt agreements. At
September 30, 1994 the Company was prohibited from making Restricted Payments,
except in certain limited circumstances. See "Note 9 of Notes to Consolidated
Financial Statements."
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected historical consolidated financial data
for the Company. The data set forth below should be read in conjunction with
the Company's consolidated financial statements and notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included herein.
<TABLE>
<CAPTION>
Year Ended September 30, (1)
----------------------------------------------
In millions, except per share data 1994 1993 1992 1991 1990
Income Statement Data:
<S> <C> <C> <C> <C> <C>
Net sales $784.4 $733.5 $722.8 $723.8 $718.3
Cost of goods sold 691.4 652.1 608.4 630.6 611.2
------- ------- --------- ------- ---------
Gross margin 93.0 81.4 114.4 93.2 107.1
Selling and administrative costs (2) (81.0) (73.8) (77.0) (69.6) (65.7)
Non-recurring
operating charges (2)(3)(6)(7)(8)(9) (15.5) (9.9) (58.9) (135.1) (5.0)
------- ------- --------- ------- ---------
Operating earnings (loss) (3.5) (2.3) (21.5) (111.5) 36.4
Interest expense - net (80.3) (68.2) (110.8) (107.0) (72.4)
Other income (expense) - net (0.2) 0.5 (0.2) (1.0) (2.5)
------- ------- --------- ------- ---------
Loss before income taxes (84.0) (70.0) (132.5) (219.5) (38.5)
Income taxes - - - (39.2) (15.3)
------- ------- --------- ------- ---------
Loss before extraordinary
item and accounting change (84.0) (70.0) (132.5) (180.3) (23.2)
Extraordinary gain (4) - 201.5 - - -
Accounting change (5) - (1.3) - - -
------- ------- --------- ------- ---------
Net income (loss) $(84.0) $130.2 $(132.5) $(180.3) $(23.2)
====== ====== ====== ====== ======
Earnings per common and
common equivalent share:
Loss before extraordinary item
and accounting change $(1.57) $(1.40) $(8.54) $(11.68) $(1.47)
Extraordinary gain (4) - 4.04 - - -
Accounting change (5) - (0.03) - - -
------- ------- ------ ------ -------
Net income (loss) $(1.57) $2.61 $(8.54) $(11.68) $(1.47)
====== ====== ====== ====== ======
Weighted average common and
common equivalent shares
outstanding (10) 53.6 49.8 15.5 15.4 15.8
====== ====== ====== ====== ======
September 30,
----------------------------------------------
In millions 1994 1993 1992 1991 1990
Balance Sheet Data:
Current assets $206.7 $199.4 $229.7 $205.5 $178.4
Property - net 592.9 611.1 637.5 669.8 838.2
Other assets 43.5 49.6 34.5 90.4 82.9
------- ------- --------- -------- ---------
Total assets $843.1 $860.1 $901.7 $965.7 $1,099.5
====== ====== ====== ====== ======
Current liabilities (11) $135.1 $99.5 $98.7 $931.0 $157.3
Pre-petition liabilities
subject to compromise (12) - - 907.1 - -
Long-term debt (less
current maturities) 696.8 670.1 28.5 29.7 733.7
Other long-term liabilities and
deferred income taxes 35.0 36.9 23.1 28.0 55.2
------- ------- --------- -------- ---------
Total liabilities 866.9 806.5 1,057.4 988.7 946.2
Stockholders' equity (deficit) (23.8) 53.6 (155.7) (23.0) 153.3
------- ------- --------- -------- ---------
Total liabilities and
stockholders' equity (deficit) $843.1 $860.1 $901.7 $965.7 $1,099.5
====== ====== ====== ====== ======
</TABLE>
<PAGE>
(1) The Company operates on a 52/53 week fiscal year. Fiscal 1991 through
fiscal 1994 were 52-week years. Fiscal 1990 was a 53-week year.
(2) The Company recognized fees and expenses in connection with a debt
restructuring during fiscal 1993, fiscal 1992 and fiscal 1991 of $7.8 million,
$21.0 million (including approximately $4.0 million of employee retention
costs which were classified as "Selling and administrative costs") and $9.9
million, respectively. See "Note 2 of Notes to Consolidated Financial
Statements."
(3) In fiscal 1994, the Company recorded charges against operating earnings of
$15.5 million primarily for various asset write-downs and other costs
associated with the relocation of three facilities, the closure of a
corrugated container plant and the sale of a corrugated container plant. See
"Note 2 of Notes to Consolidated Financial Statements."
(4) In fiscal 1993, the Company recorded an extraordinary gain of $201.5
million, net of $1.2 million of income taxes, as a result of the forgiveness
of debt pursuant to the terms of the Prepackaged Plan. See "Note 3 of Notes to
Consolidated Financial Statements."
(5) The Company adopted Financial Accounting Standard No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions" (FAS No. 106), on
October 1, 1992. As a result, the Company recorded a charge to earnings of
$1.3 million for the effect of an accounting change in fiscal 1993 related to
the immediate recognition of its accumulated benefit obligation pursuant to
the provisions of FAS No. 106. See "Note 15 of Notes to Consolidated Financial
Statements."
(6) In fiscal 1993, the Company recorded a pre-tax charge of $2.1 million for
the consolidation of certain grocery bag and sack manufacturing facilities.
(7) In fiscal 1991, the Company recorded a non-cash pre-tax charge of $125.2
million primarily consisting of the write-down of the Antioch, California
virgin fiber mill's fixed assets to their then estimated recovery value net of
estimated carrying costs. In fiscal 1992, the Company recorded a non-cash
pre-tax charge of $32.9 million primarily consisting of an asset write-down, a
provision for future demolition costs, costs of asbestos removal and estimated
carrying costs pending disposition of the virgin fiber mill. See "Note 2 of
Notes to Consolidated Financial Statements."
(8) In fiscal 1992, the Company recorded a pre-tax charge of approximately
$9.0 million for the cost of acquiring the remaining ownership interest in
Gaylord Bag Partnership and Bay Sheets, Inc. See Note 4 of Notes to
Consolidated Financial Statements.
(9) In fiscal 1990, the Company recorded a provision of $5.0 million for
losses on asset disposals and costs associated with consolidation of the
Company's corrugated container facilities in Ohio. This amount has been
reclassified from "Other income (expense) - net" to conform with the
current-year presentation.
(10) In fiscal 1993, pursuant to the terms of the Prepackaged Plan, the
Company issued 6 million shares of Class A Common Stock and approximately 31.8
million Warrants to obtain one share of Class A Common Stock per Warrant.
(11) The Company's failure to pay interest on its subordinated debt was an
event of default under the subordinated debt indentures and under the Company's
prior bank credit agreement, and its failure to pay principal when due under
its prior bank credit agreement was an event of default under the Company's
Export-Import Bank agreement. As a result, the Company's subordinated notes
($580.4 million) and all amounts outstanding under the bank credit agreement
($201.5 million) were subject to acceleration and at September 30, 1991 were
classified as "Current liabilities." In addition, at September 30, 1992 and
1991 amounts outstanding under the Company's Export-Import Bank facility
($11.7 million and $13.8 million, respectively) could have been subject to
acceleration and were classified as "Current liabilities."
(12) As a result of filing the Prepackaged Plan, the Company's subordinated
notes ($582.8 million aggregate principal amount plus $134.5 million accrued
but unpaid interest less $11.4 million of related deferred financing costs)
and all amounts outstanding under its prior bank credit agreement ($201.2
million) were subject to compromise and at September 30, 1992 were classified
as "Pre-petition liabilities subject to compromise." See "Note 3 of Notes to
Consolidated Financial Statements."
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Demand for corrugated containers, containerboard and unbleached kraft paper is
cyclical and has historically corresponded to changes in the rate of growth in
the U.S. economy and exchange rates for the U.S. dollar. Growth in the U.S.
economy generally stimulates demand for packaging products. In addition,
weakness of the U.S. dollar versus the currencies of the United States' major
trading partners stimulates domestic demand for corrugated products and makes
export sales of containerboard more price competitive.
The cyclicality of demand is accentuated by the inelasticity of supply due to
the capital intensive nature of the industry. Because productive capacity
cannot be added quickly, during periods of rising demand containerboard and
unbleached kraft paper inventory levels tend to fall, exerting upward pressure
on prices. In periods where capacity exceeds demand, efforts to control
inventory levels are limited because containerboard and unbleached kraft paper
mills operate most economically near capacity operating levels.
Demand for unbleached kraft paper has declined in recent years due to
displacement by plastics. This decline has been at least partially offset by a
reduction in the supply of unbleached kraft paper in the United States due to
reallocation of productive capacity. The Company can vary its production of
unbleached kraft paper, depending on market conditions, because three of the
Company's four paper machines that produce unbleached kraft paper also have
the capability to produce containerboard.
In 1985, weaker demand in the domestic market and the effect of a stronger
U.S. dollar on export shipments of containerboard combined to lower
containerboard, corrugated container and unbleached kraft paper prices. In
1986, prices began to recover and by mid-1988 prices had reached historic
highs. Between the fall of 1989 and the fall of 1993, published linerboard and
grocery sack paper transaction prices declined approximately 27 percent and 34
percent, respectively. Prices for linerboard and grocery sack paper recovered
significantly in the second half of Fiscal 1994. With implementation of a $40
per ton price increase for linerboard and a $40 to $50 per ton price increase
for unbleached kraft paper in October 1994 and corresponding price increases
for corrugated products, current prices exceed the 1988 and 1989 record highs.
The Company has announced additional price increases on these products of at
least $50 per ton effective at the beginning of calendar 1995. While the
current pricing environment is expected to continue due to favorable industry
conditions, including low inventories, strong demand for primary and converted
products and a strong export market, there can be no assurance that these or
any future price increases will be realized.
RESULTS OF OPERATIONS
Year ended September 30, 1994 (Fiscal 1994) Compared with Year ended September
30, 1993 (Fiscal 1993). Net sales for Fiscal 1994 were a record $784.4
million, an increase of approximately 7 percent compared with net sales of
$733.5 million for Fiscal 1993. The operating loss for Fiscal 1994 was $3.5
million compared with an operating loss of $2.3 million for Fiscal 1993 after
$15.5 million and $9.9 million of non-recurring operating charges in Fiscal
1994 and Fiscal 1993, respectively.
The net loss in Fiscal 1994 was $84.0 million, or $1.57 per share, versus net
income of $130.2 million, or $2.61 per share, after recording an extraordinary
gain of $201.5 million for the forgiveness of debt, or $4.04 per share, in
Fiscal 1993. Net income in Fiscal 1993 was reduced by a charge of $1.3
million, or $0.03 per share, for an accounting change as a result of the
Company's adoption of FAS No. 106. The earnings per share amounts were
calculated based on 53.6 million weighted average shares and 49.8 million
weighted average shares for Fiscal 1994 and Fiscal 1993, respectively. The
increase in weighted average shares was primarily due to the additional shares
issued upon consummation of the Prepackaged Plan being outstanding for a full
year in Fiscal 1994.
<PAGE>
Sales and earnings in Fiscal 1994 benefited from a series of product price
increases which resulted in higher average selling prices for linerboard,
corrugated products and multiwall bags compared with Fiscal 1993. Higher
average selling prices in Fiscal 1994 increased operating earnings by
approximately $34 million versus the prior fiscal year. Almost all of the
pricing improvement occurred in the second half of the fiscal year as price
increases for linerboard and unbleached kraft paper were passed through to
converted products, and the cumulative benefit of the increases was realized.
Average selling prices for the Company's linerboard, corrugated products and
multiwall bags increased approximately 7 percent, 3 percent and 1 percent,
respectively, in Fiscal 1994 compared with the prior year. Average selling
prices for the Company's unbleached kraft paper and grocery bags and sacks
decreased approximately 4 percent and 8 percent, respectively, in Fiscal 1994
versus Fiscal 1993 as selling prices for these products continued to decline
during the first half of Fiscal 1994 before recovering in the second half of
the year.
Sales and earnings for Fiscal 1994 also benefited from record mill production
and corrugated product and multiwall bag shipments. Increased volume had a
positive effect on operating earnings of approximately $17 million. Production
of both linerboard and unbleached kraft paper increased approximately 4
percent to 3,282 tons per day (TPD, calculated on the basis of the number of
days in the period) and 689 TPD, respectively, in Fiscal 1994 from 3,165 TPD
and 662 TPD, respectively, in the prior year.
Corrugated shipments of 12.7 billion square feet for Fiscal 1994 were
approximately 7 percent higher than Fiscal 1993. The majority of the increase
in the Company's corrugated shipments was attributable to the acquisition of a
corrugated sheet feeder plant in March 1993. Multiwall bag shipments of 51,500
tons in Fiscal 1994 were approximately 6 percent higher than the prior year
primarily as a result of increases in market share in certain product lines.
Grocery bag and sack shipments were 116,500 tons, a decrease of approximately
9 percent versus shipments of 128,600 tons in Fiscal 1993. The decline in
shipments in Fiscal 1994 is primarily due to the consolidation of two grocery
bag and sack plants, partially offset by significant increases in shipments of
Gaylord Handle Bags.
Gross margin as a percentage of net sales for Fiscal 1994 increased to 11.9
percent from 11.1 percent in the prior year. The margin improvement was due to
higher average selling prices, partially offset by increased fiber costs
(approximately $30 million) primarily for OCC. Year-over-year, fiber costs
increased approximately 29 percent in Fiscal 1994. Further, operating earnings
were adversely affected by higher mill energy costs (approximately $3 million)
due to increased prices, increased maintenance and supplies costs
(approximately $2 million) and general inflation of other manufacturing costs.
Selling and administrative costs for Fiscal 1994 were $7.2 million higher than
Fiscal 1993. The increase is primarily the result of higher incentive
compensation costs and the cost of enhanced marketing efforts related to the
record sales volume.
Operating earnings were adversely affected by $15.5 million of non-recurring
operating charges in Fiscal 1994. These charges included (i) $9.9 million
primarily for equipment abandonments, asset write-downs, lease termination
costs and other costs related to the relocation of three of the Company's
converting facilities in the fourth quarter (ii) $3.5 million for costs
associated with closure of a corrugated container plant and (iii) $2.1 million
for a loss on the sale and costs associated with the disposition of a
corrugated container plant. The non-recurring operating charges in Fiscal 1993
included $7.8 million of debt restructuring costs and $2.1 million for costs
associated with the consolidation of two grocery bag plants. Consummation of
the Prepackaged Plan resulted in an extraordinary gain of $201.5 million in
Fiscal 1993.
Net interest expense increased to $80.3 million in Fiscal 1994 from $68.2
million in Fiscal 1993. The increase was primarily due to the Company's debt
refinancing in the third quarter of Fiscal 1993 which resulted in higher
average debt levels and higher weighted average interest rates. Non-cash
interest expense increased to $41.3 million in Fiscal 1994 from $15.9 million
in Fiscal 1993, primarily due to accretion of the discount on subordinated
debt issued in May 1993.
<PAGE>
Year ended September 30, 1993 Compared with Year ended September 30, 1992
(Fiscal 1992). Net sales for Fiscal 1993 were $733.5 million, an increase of
approximately 2 percent compared with net sales of $722.8 million for Fiscal
1992. The operating loss for Fiscal 1993 was $2.3 million compared with an
operating loss of $21.5 million for Fiscal 1992 after non-recurring operating
charges of $9.9 million and $58.9 million in Fiscal 1993 and Fiscal 1992,
respectively.
In Fiscal 1993, the Company reported net income of $130.2 million, or $2.61
per share, after recording an extraordinary gain of $201.5 million, versus a
net loss of $132.5 million, or $8.54 per share, in the prior year. In
addition, net income in Fiscal 1993 was reduced by a charge of $1.3 million
for an accounting change as a result of the Company's adoption of FAS No. 106.
The earnings per share amounts were calculated based on 49.8 million weighted
average shares and 15.5 million weighted average shares for Fiscal 1993 and
Fiscal 1992, respectively. The increase in weighted average shares in Fiscal
1993 was primarily due to the additional shares issued in November 1992 upon
consummation of the Prepackaged Plan.
Sales and earnings in Fiscal 1993 were adversely affected by lower average
selling prices for the Company's products. Lower average net selling prices in
Fiscal 1993 reduced operating earnings by approximately $45 million versus the
prior fiscal year. Average selling prices for the Company's containerboard and
unbleached kraft paper decreased approximately 10 percent and 3 percent,
respectively, in Fiscal 1993 compared with the prior year. Average selling
prices for the Company's corrugated products, multiwall bags and grocery bags
and sacks decreased approximately 3 percent, 3 percent and 12 percent,
respectively, in Fiscal 1993 versus Fiscal 1992.
Sales and earnings for Fiscal 1993 benefited from increased mill production
and converted product shipments. Increased volume had a positive effect on
operating earnings of approximately $24 million. Production of containerboard
and unbleached kraft paper both increased approximately 6 percent to 3,165 TPD
and 662 TPD, respectively, in Fiscal 1993 from 2,987 TPD and 625 TPD,
respectively, in the prior year.
Corrugated shipments of 11.9 billion square feet for Fiscal 1993 were
approximately 16 percent higher than Fiscal 1992. The increase was primarily
due to enhanced marketing efforts and the acquisition of two sheet feeder
plants. Multiwall bag shipments of 48,700 tons were approximately 10 percent
higher than Fiscal 1992 shipments of 44,100 tons primarily as a result of an
increase in market share in certain product lines. Grocery bag and sack
shipments of 128,600 tons were approximately 5 percent lower than the prior
year.
Gross margin as a percentage of net sales for Fiscal 1993 decreased to 11.1
percent from 15.8 percent in the prior year. The margin decline was primarily
due to lower primary and converted product selling prices.
Selling and administrative costs for Fiscal 1993 were $3.2 million lower than
Fiscal 1992. The decline is primarily due to costs in Fiscal 1992 for employee
benefit plans designed to assure the continued services of employees
throughout the debt restructuring.
Operating earnings for Fiscal 1993 were adversely affected by $7.8 million of
debt restructur-ing expenses as compared to $17.0 million in Fiscal 1992. In
addition, in the fourth quarter, the Company recorded a charge of $2.1 million
for the consolidation of two grocery bag and sack plants. Operating earnings
in Fiscal 1992 were adversely affected by $32.9 million for an asset
write-down and $9.0 million of equity acquisition costs.
Net interest expense declined to $68.2 million in Fiscal 1993 from $110.8
million in Fiscal 1992. The reduction was primarily due to lower outstanding
debt levels and interest rates, primarily as a result of the consummation of
the Prepackaged Plan in November 1992. As a result of the refinancing its
subordinated debt in Fiscal 1993, the Company recognized approximately $2.8
million of net interest expense related to the subordinated debt being
redeemed for the period May 18, 1993 (the date the new securities were issued)
through June 17, 1993 (the redemption date). In addition, as part of the debt
refinancing, the Company recorded a charge of $2.5 million to write-off
deferred financing fees related to a prepayment on the term-loan portion of
the Company's bank credit agreement.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
General - The Company has historically financed its operations through cash
provided by operations, borrowings under its credit agreements and the
issuance of debt and equity securities. The Company's principal uses of cash
are to pay operating expenses, fund capital expenditures and service debt.
Net cash provided by operations for Fiscal 1994 was $32.0 million compared
with $15.5 million for the prior year. The favorable comparison to Fiscal 1993
was primarily due to increased gross margin and lower interest payments.
Capital expenditures of $40.4 million in Fiscal 1994 increased $16.7 million
from Fiscal 1993. In Fiscal 1994, the Company initiated a five-year capital
plan that provides for a total investment of approximately $250 million. The
plan targets approximately 60 percent of the spending to enhance the capacity,
flexibility and cost effectiveness of the Company's converting facilities with
the remainder to be invested at the mills. The Company has the ability to
adjust the timing of capital projects depending upon industry conditions.
Should industry conditions not continue to improve as anticipated, the Company
can defer certain capital projects. The Company plans to finance this
five-year capital plan with cash provided by operations and borrowings under
its credit agreements. In addition, certain capital assets acquired will be
leased or financed by debt obligations secured by those assets.
Liquidity - At September 30, 1994, the Company had cash and equivalents of
$17.4 million, a decrease of $10.2 million from September 30, 1993 as cash
used for investments and financing exceeded cash provided by operations. Total
debt increased by $35.5 million from $675.8 million at September 30, 1993 to
$711.3 million at September 30, 1994 due to accretion of the discount on
subordinated debt issued in May 1993. At September 30, 1994, the Company had
no amounts outstanding and approximately $123 million of credit available
under the revolving portion of its credit agreements. See "Note 9 to Notes to
Consolidated Financial Statements."
During Fiscal 1994, the Company implemented successive $25 per ton, $30 per
ton and $40 per ton increases in linerboard prices and corresponding increases
for corrugated products. The Company has implemented an additional $40 per ton
price increase for linerboard and corresponding price increases for corrugated
products in the first quarter of fiscal 1995. The Company has announced
additional price increases on these products of at least $50 per ton effective
at the beginning of calendar 1995. While the current pricing environment is
expected to continue due to favorable industry conditions, including low
inventories, strong demand for primary and converted products and a strong
export market, there can be no assurance that these or any future price
increases will be realized. The effect of higher product prices has been
partially offset by increased fiber costs, particularly the price of OCC,
which began to escalate in January 1994. While the secondary fiber markets
have been volatile and are difficult to predict, prices for secondary fiber
have recently declined. There can be no assurance, however, what direction
secondary fiber prices will take in the future.
Based upon November 1994 product prices and fiber costs, the Company believes
that cash provided by operations and borrowings available under its credit
agreements will provide adequate liquidity to meet its debt service
obligations and other liquidity requirements over the next 12 to 24 months.
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Gaylord Container Corporation and Subsidiaries
INDEX TO FINANCIAL STATEMENTS
- -----------------------------------------------
Page
Independent Auditors' Report 17
Consolidated Balance Sheets at
September 30, 1994 and 1993 18
Consolidated Statements of
Operations for the Years
Ended September 30, 1994, 1993 and 1992 19
Consolidated Statements of
Stockholders' Equity for the Years
Ended September 30, 1994, 1993 and 1992 20
Consolidated Statements of
Cash Flows for the Years
Ended September 30, 1994, 1993 and 1992 21
Notes to Consolidated Financial Statements 22
<PAGE>
INDEPENDENT AUDITORS' REPORT
GAYLORD CONTAINER CORPORATION:
We have audited the accompanying consolidated balance sheets of Gaylord
Container Corporation and its subsidiaries (the Company) at September 30, 1994
and 1993 and the related consolidated statements of operations, of
stockholders' equity and of cash flows for each of the three years in the
period ended September 30, 1994. Our audits also included the financial
statement schedules of the Company for each of the three years in the period
ended September 30, 1994, listed in item 14a. These financial statements and
the financial statement schedules 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company at September 30, 1994
and 1993 and the results of its operations and its cash flows for each of the
three years in the period ended September 30, 1994 in conformity with
generally accepted accounting principles. Also, in our opinion, such financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly in all material respects
the information shown therein.
Deloitte & Touche LLP
Chicago, Illinois
November 1, 1994
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
Gaylord Container Corporation and Subsidiaries
September 30, 1994 and 1993
In millions
1994 1993
------- -------
Assets
Current assets:
<S> <C> <C>
Cash and equivalents $ 17.4 $ 27.6
Trade receivables
(less allowances of $3.7 and
$4.5, respectively) (Note 9) 121.8 103.2
Inventories (Note 5) 59.6 61.2
Prepaid expenses 3.1 1.6
Other 4.8 5.8
------- -------
Total current assets 206.7 199.4
Property - net (Note 6) 592.9 611.1
Other assets:
Deferred charges (Note 7) 28.1 34.5
Other (Note 9) 15.4 15.1
------- -------
Total $ 843.1 $ 860.1
====== ======
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-term
debt (Note 9) $ 14.5 $ 5.7
Trade payables 58.6 43.7
Accrued interest payable 10.4 10.3
Accrued and other liabilities (Note 10) 51.6 39.8
------- -------
Total current liabilities 135.1 99.5
------- -------
Long-term debt (Note 9) 696.8 670.1
Other long-term liabilities (Note 10) 30.7 32.6
Deferred income taxes (Note 8) 4.3 4.3
Commitments and contingencies (Note 16) - -
Stockholders' equity (deficit)
(Notes 11, 12 and 13):
Class A common stock - -
Class B common stock - -
Capital in excess of par value 170.5 169.4
Retained earnings (deficit) (Note 9) (188.9) (104.9)
Common stock in treasury - at cost (0.8) (0.8)
Recognition of minimum pension
liability (Note 15) (4.6) (10.1)
------- -------
Total stockholders' equity (deficit) (23.8) 53.6
------- -------
Total $843.1 $860.1
====== ======
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
Gaylord Container Corporation and Subsidiaries
For the years ended September 30, 1994, 1993 and 1992
In millions except per share data 1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Net sales $ 784.4 $ 733.5 $ 722.8
Cost of goods sold 691.4 652.1 608.4
-------- -------- --------
Gross margin 93.0 81.4 114.4
Selling and administrative costs (81.0) (73.8) (77.0)
Non-recurring operating
charges (Note 2) (15.5) (9.9) (58.9)
-------- -------- --------
Operating loss (3.5) (2.3) (21.5)
Interest expense - net (Note 9) (80.3) (68.2) (110.8)
Other income (expense) - net (0.2) 0.5 (0.2)
-------- -------- --------
Loss before income taxes (84.0) (70.0) (132.5)
Income taxes (Note 8) - - -
-------- -------- --------
Loss before extraordinary
item and accounting change (84.0) (70.0) (132.5)
Extraordinary gain (Note 3) - 201.5 -
Accounting change (Note 15) - (1.3) -
-------- -------- --------
Net income (loss) $ (84.0) $ 130.2 $ (132.5)
====== ====== ======
Earnings per common and common equivalent share:
Loss before extraordinary
item and accounting change $ (1.57) $ (1.40) $ (8.54)
Extraordinary gain (Note 3) - 4.04 -
Accounting change (Note 15) - (0.03) -
-------- -------- --------
Net income (loss) $ (1.57) $ 2.61 $ (8.54)
====== ====== ======
Average number of common and common
equivalent shares outstanding 53.6 49.8 15.5
====== ====== ======
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Gaylord Container Corporation and Subsidiaries
For the years ended September 30, 1994, 1993 and 1992
Total
-------------Common Stock----------- Capital in Retained Minimum stockholders'
-----Class A------ -----Class B---- excess of earnings --Treasury Stock- pension equity
Shares Dollars Shares Dollars par value (deficit) Shares Dollars liability (deficit)
------- ------- ------ ------- --------- ------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
September 30, 1991 9,569,667 $0.1 5,983,809 $0.1 $80.2 $(102.6) 85,700 $(0.8) $ - $(23.0)
Net loss - - - - - (132.5) - - - (132.5)
Options exercised 52,747 - - - 0.4 - - - - 0.4
Restricted stock - net 250 - - - - - - - - -
Recognition of minimum
pension liability - - - - - - - - (0.9) (0.9)
Other - - - - 0.3 - - - - 0.3
---------- ---- --------- ---- ------ ------ ------ ---- ----- ------
Balance at
September 30, 1992 9,622,664 0.1 5,983,809 0.1 80.9 (235.1) 85,700 (0.8) (0.9) (155.7)
Net income - - - - - 130.2 - - - 130.2
Debt restructuring
(Note 3) 37,845,543 (0.1) - (0.1) 88.2 - - - - 88.0
Restricted stock - net 10,200 - - - - - - - - -
Recognition of minimum
pension liability - - - - - - - - (9.2) (9.2)
Other 32,382 - (32,382) - 0.3 - - - - 0.3
----------- ---- --------- ---- ------ ------ ------- ---- ---- ------
Balance at
September 30, 1993 47,510,789 - 5,951,427 - 169.4 (104.9) 85,700 (0.8) (10.1) 53.6
Net loss - - - - - (84.0) - - - (84.0)
Option exercised 124,416 - - - 0.7 - - - - 0.7
Restricted stock - net 190,500 - - - - - - - - -
Reversal of minimum
pension liability - - - - - - - - 5.5 5.5
Other 685,154 - (685,154) - 0.4 - (2,722) - - 0.4
----------- ---- --------- ---- ------ ------ ------ ----- ----- ------
Balance at
September 30, 1994 48,510,859 $ - 5,266,273 $ - $170.5 $(188.9) 82,978 $(0.8) $(4.6) $(23.8)
========== ==== ========= ==== ====== ====== ====== ==== ==== ======
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Gaylord Container Corporation and Subsidiaries
For the years ended September 30, 1994, 1993 and 1992
In millions
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Cash Flows From Operations:
Loss before extraordinary item
and accounting change $ (84.0) $ (70.0) $ (132.5)
Adjustments to reconcile loss to
net cash provided by operations:
Depreciation and amortization 61.2 61.1 59.3
Non-cash interest expense 41.3 15.9 2.3
Asset write-down 13.4 2.1 32.9
Loss (gain) on asset
dispositions 2.1 (0.6) 0.5
Equity acquisitions - - 9.0
Change in current assets and
liabilities, excluding
acquisitions and dispositions:
Receivables (18.6) 0.2 (3.7)
Inventories 1.6 (4.8) 3.0
Prepaid expenses and other
current assets (0.6) (0.7) 7.4
Accounts payable and other
accrued liabilities 15.6 11.1 81.2
Other - net 0.6 1.2 (0.7)
--------- --------- ---------
Net cash provided by operations 32.6 15.5 58.7
--------- --------- ---------
Cash Flows From Investments:
Capital expenditures (40.4) (23.7) (22.9)
Capitalized interest (0.9) (0.5) (0.5)
Proceeds from asset sales 4.5 0.4 3.1
Acquisitions - (5.9) (4.1)
Acquisition restructuring
expenditures (2.9) (2.5) (2.1)
Other investments - net 1.9 0.4 -
--------- --------- ---------
Net cash used for investments (37.8) (31.8) (26.5)
--------- --------- ---------
Cash Flows From Financing:
Issuance of senior
notes (Note 9) - 225.0 -
Issuance of subordinated
debentures (Note 9) - 300.0 -
Refinancing - debt
redeemed (Note 9) - (460.5) -
Restructuring closing (Note 3) - (53.1) -
Senior debt repayments (5.4) (13.8) (10.5)
Revolver borrowings - net - - 3.3
Debt issuance costs - (21.3) -
Other financing - net 0.4 3.1 0.1
--------- --------- ---------
Net cash used for financing (5.0) (20.6) (7.1)
--------- --------- ---------
Net (decrease) increase
in cash and equivalents (10.2) (36.9) 25.1
Cash and equivalents, beginning
of year 27.6 64.5 39.4
-------- -------- --------
Cash and equivalents, end of year $ 17.4 $ 27.6 $ 64.5
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Notes to Consolidated Financial Statements
Gaylord Container Corporation and Subsidiaries
1. GENERAL/SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General - Gaylord Container Corporation (including its subsidiaries, the
Company) is engaged in the integrated production, conversion and sale of
paper packaging products. The Company is a major national manufacturer and
distributor of corrugated containers, corrugated sheets, containerboard,
unbleached kraft paper, multiwall bags, grocery bags and sacks and specialty
chemicals. Corrugated containers are produced to customer order primarily for
use in shipping their products and as point-of-sale displays. Containerboard,
consisting of linerboard and corrugating medium, is the principal raw material
used to manufacture corrugated containers. The Company also produces unbleached
kraft paper which is converted by the Company into bags and sacks for sale to a
wide range of industries or sold to independent converters.
The Company's facilities, which are located throughout the United States,
consist of three containerboard and paper mills, 15 corrugated container and
sheet plants, two sheet feeder plants, two multiwall bag plants, two grocery
bag and sack plants, a specialty chemicals facility, a preprint and graphics
center and a cogeneration facility.
Summary of Significant Accounting Policies - The Company's accounting policies
conform to generally accepted accounting principles. Significant policies
followed are described below:
Basis of Consolidation - The consolidated financial statements at September
30, 1994 and 1993 and for the years ended September 30, 1994 (Fiscal 1994),
September 30, 1993 (Fiscal 1993) and September 30, 1992 (Fiscal 1992) include
all of the accounts of the Company after elimination of intercompany
transactions and balances. The Company operates on a 52/53 week fiscal year.
Fiscal 1994, Fiscal 1993 and Fiscal 1992 are 52-week fiscal years. Certain
amounts for Fiscal 1993 and Fiscal 1992 have been reclassified to conform with
the current-year presentation.
Revenue Recognition - Sales are recognized when the Company's products are
shipped. Sales to customers with whom the Company has reciprocal purchase
agreements are accounted for in the same manner as intercompany transactions
and are eliminated in the financial statements.
Cash and Equivalents - For purposes of the statement of cash flows, the
Company considers all highly liquid debt instruments, including time deposits,
bank repurchase agreements and commercial paper, with an original maturity of
three months or less, to be cash equivalents.
Inventories are stated at the lower of cost or market value. Cost includes
materials, transportation, direct labor and manufacturing overhead. Cost is
determined by the last-in, first-out (LIFO) method of inventory valuation.
Property is stated at cost, including interest expense capitalized during
construction periods. Maintenance and repairs are charged to expense as
incurred.
Depreciation is computed using the straight-line method over estimated useful
lives ranging from 10 to 45 years for buildings and improvements and 3 to 20
years for machinery and equipment.
Deferred Financing Costs - Costs incurred in connection with the issuance of
long-term debt or other financing arrangements are capitalized. Amortization
of deferred financing costs is computed using the straight-line method over
the term of the related debt and is reported as interest expense.
Start-Up Costs incurred in bringing major new or expanded facilities into
operation are capitalized and charged to expense over periods of not more than
five years.
Income Taxes - Deferred income taxes are provided using the liability method
for those items for which the period of reporting differs for financial
reporting and income tax purposes in accordance with Financial Accounting
Standard No. 109, "Accounting for Income Taxes" (FAS No. 109) which was
adopted effective October 1, 1992 (See Note 8). There was no cumulative impact
on the Company's effective tax rate from the adoption of FAS No. 109 due to
the Company's previous adoption of Financial Accounting Standard No. 96,
"Accounting for Income Taxes."
Post-retirement Benefits Other Than Pensions - On October 1, 1992, the Company
adopted Financial Accounting Standard No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," (FAS No. 106) and elected to
immediately recognize its accumulated benefit obligation. See Note 15.
<PAGE>
Business Segment - The Company manufactures paper packaging products including
corrugated containers, corrugated sheets, preprinted linerboard,
containerboard, unbleached kraft paper, multiwall bags and grocery bags and
sacks.
Net Income Per Common and Common Equivalent Share is based on the weighted
average number of common shares outstanding during the period plus the
weighted average number of common shares issuable upon exercise of outstanding
stock options (Note 13) for which the market price of the related stock
exceeds the exercise price of the option, less shares which could have been
purchased with the assumed proceeds from the sale of such stock (treasury
stock method).
2. NON-RECURRING OPERATING CHARGES
In Fiscal 1994, the Company recorded non-recurring operating charges of (i)
$9.9 million for asset write-downs and other costs associated with the
relocation of three converting facilities in the fourth quarter, (ii) $3.5
million for costs associated with the closure of a corrugated container plant
in the third quarter and (iii) $2.1 million for a loss on the sale and costs
associated with the disposition of a corrugated container plant in the second
quarter. In Fiscal 1993, the Company incurred $7.8 million of debt
restructuring costs in the first quarter and $2.1 million for costs associated
with the consolidation of two grocery bag plants in the fourth quarter. In
Fiscal 1992, the Company incurred non-recurring operating charges of (i) $32.9
million for an asset write-down related to the closure of the Antioch,
California virgin fiber containerboard mill in the fourth quarter, (ii) $17.0
million for debt restructuring charges throughout the fiscal year (see Note 3)
and (iii) $9.0 million of equity acquisition costs in the third quarter (see
Note 4).
3. EXTRAORDINARY GAIN
On September 11, 1992, the Company filed a voluntary petition for relief and a
plan of reorganization (the Prepackaged Plan) under Chapter 11 of the United
States Bankruptcy Code. On November 2, 1992, the Company consummated the
Prepackaged Plan, which involved an exchange of securities with holders of
subordinated debt. The Company s other creditors were unaffected by the
Prepackaged Plan, and their claims were paid in the ordinary course of
business.
The Company accounted for the consummation of the Prepackaged Plan in
accordance with the provisions of the American Institute of Certified Public
Accountants Statement of Position 90-7, "Financial Accounting by Entities in
Reorganization Under the Bankruptcy Code." The Company exchanged all of its
then outstanding subordinated debt for newly issued 13-1/2% Senior
Subordinated Debentures Due 2003, the 10-1/4% Senior Subordinated PIK Notes
Due 2001 (collectively, the Senior Subordinated Notes), shares of Class A
Common Stock (as defined in Note 12) and redeemable exchangeable warrants (the
Warrants), which resulted in a forgiveness of debt. The forgiveness of debt
resulted in an extraordinary gain of $201.5 million, net of $1.2 million of
income taxes. The deferred tax provision was recorded at less than the
statutory tax rate due to the recognition of deferred tax benefits which the
Company was previously unable to utilize due to limitations on its ability to
carryforward tax losses sustained in prior years. A provision of $1.2 million
for certain state income taxes was required due to limitations on the use of
such net operating loss carryforwards. The Senior Subordinated Notes were
redeemed in a refinancing in May 1993 (see Note 9).
4. INVESTMENT IN AFFILIATES
In fiscal 1989, the Company acquired an ownership interest in Gaylord Bag
Partnership (GBP) which entitled it to 65 percent of GBP's profits or losses
and 50 percent voting control. In Fiscal 1992, the Company acquired the
remaining interest in GBP and recorded a charge of approximately $8 million
for the cost of such interest, severance costs associated with personnel
reductions, other expenses associated with the integration of GBP into the
Company and a write-down of certain GBP assets.
In fiscal 1991, the Company acquired a 50 percent interest in Bay Sheets, Inc.
(BSI), which produces corrugated sheets. In Fiscal 1992, the Company purchased
the remaining ownership interest in BSI and recorded a one-time pre-tax charge
of approximately $1 million related to the write-off of cost in excess of net
assets acquired.
<PAGE>
In fiscal 1989, the Company purchased a 50 percent ownership interest in
Gaylord Central National, Inc. (GCN), a joint venture corporation formed with
Central National-Gottesman, Inc. GCN is the primary agent for the Company's
export sales of containerboard. Product sales to GCN during Fiscal 1994,
Fiscal 1993 and Fiscal 1992 were approximately $16.6 million, $12.7 million
and $18.2 million, respectively.
5. INVENTORIES
<TABLE>
<CAPTION>
Inventories consist of:
September 30,
-----------------
In millions 1994 1993
------- -------
<S> <C> <C>
Finished products $13.0 $13.3
In process 38.7 34.6
Raw materials 8.6 6.7
Supplies 9.6 9.4
------- -------
69.9 64.0
LIFO valuation adjustment (10.3) (2.8)
------- -------
Total $59.6 $61.2
====== ======
</TABLE>
As a result of a LIFO inventory liquidation in Fiscal 1994, the Company's "Cost
of Goods Sold" in Fiscal 1994 was approximately $0.2 million less than it
would have been had a liquidation not occurred.
6. PROPERTY - NET
<TABLE>
<CAPTION>
Property consists of:
September 30,
-----------------
In millions 1994 1993
------- -------
<S> <C> <C>
Land $15.1 $15.4
Buildings and improvements 117.3 121.9
Machinery and equipment 753.4 740.8
Construction-in-progress 31.6 9.2
------- -------
917.4 887.3
Accumulated depreciation (324.5) (276.2)
------- -------
Total $592.9 $611.1
====== ======
</TABLE>
7. DEFERRED CHARGES
<TABLE>
<CAPTION>
Deferred charges consist of:
September 30,
-----------------
In millions 1994 1993
------- -------
<S> <C> <C>
Deferred financing costs $36.3 $36.4
Capitalized start-up costs 10.0 10.0
Cost in excess of net assets acquired 3.7 3.7
Other 2.3 3.0
------- -------
52.3 53.1
Accumulated amortization (24.2) (18.6)
------- -------
Total $28.1 $34.5
====== ======
</TABLE>
Amortization of deferred charges during Fiscal 1994, Fiscal 1993 and Fiscal
1992 was approximately $6.3 million, $7.3 million and $7.4 million,
respectively.
<PAGE>
8. INCOME TAXES
<TABLE>
<CAPTION>
The components of the deferred income tax liabilities and assets,
substantially all of which are non-current, were as follows:
September 30,
-----------------
In millions 1994 1993
------- -------
Deferred tax liabilities:
<S> <C> <C>
Depreciation $171.4 $164.1
Capitalized interest 11.0 11.4
Miscellaneous 1.6 0.7
------- -------
184.0 176.2
------- -------
Deferred tax assets:
Net operating loss 182.0 149.0
Asset write-down 48.4 46.3
Debt restructuring expenses 4.2 4.0
Other long-term liabilities 4.2 2.7
Deferred compensation 5.2 4.1
Inventory valuation 6.0 3.3
Miscellaneous 5.0 4.9
------- -------
Sub-total 255.0 214.3
Less: Valuation allowance (75.3) (42.4)
------- -------
179.7 171.9
------- -------
Net deferred tax liability $4.3 $4.3
====== ======
</TABLE>
A reconciliation of income tax expense (benefit) to the amount computed by
applying the statutory Federal income tax rates to loss before income taxes
follows (dollars in millions):
<TABLE>
<CAPTION>
Year Ended September 30,
------------------------------------------------------------
1994 1993 1992
------------------- ----------------- -------------------
Percentage of Percentage of Percentage of
loss before loss before loss before
income income income
Amount taxes Amount taxes Amount taxes
------- ------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Federal statutory income tax $(29.4) (35)% $(24.5) (35)% $(45.0) (34)%
State income taxes-net of Federal benefit (4.2) (5) (3.5) (5) (4.4) (3)
Limitation on use of net operating losses 33.6 40 28.0 40 49.4 37
------- ------- ------- ------- ------- --------
Total income taxes $ - - % $ - - % $ - - %
======= ======= ======= ======= ======= ========
</TABLE>
Income tax benefits were not recognized in Fiscal 1994, Fiscal 1993 and Fiscal
1992 due to substantial uncertainty regarding realization of such benefits as
a result of the Company's substantial net operating loss carryforwards. The
income tax benefit that would have been recognized under FAS No. 109 in Fiscal
1994 was offset by the change in the valuation allowance. During Fiscal 1993,
the Company recognized an extraordinary gain of $201.5 million, net of $1.2
million of deferred state income taxes. The Company recognized the state
income tax provision due to limitations on the use of certain net operating
loss carryforwards.
<PAGE>
Deferred income taxes result from temporary differences in the period of
reporting revenues, expenses and credits in the financial statements and
income tax return. Such temporary differences for Fiscal 1994, Fiscal 1993 and
Fiscal 1992 and their related deferred income tax effect follow:
<TABLE>
<CAPTION>
Year Ended September 30,
---------------------------
In millions 1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Depreciation expense $7.3 $20.1 $16.9
Asset write-down (2.1) (0.5) (12.8)
Restructuring fees (0.2) (0.8) (12.7)
Inventory differences (2.7) (0.4) (1.8)
Limitation on use of net
operating loss (33.0) (44.7) 11.4
Other - net (2.2) (1.7) (1.0)
Change in valuation allowance 32.9 28.0 -
------- ------ ------
Total deferred income taxes $ - $ - $ -
======= ====== =======
</TABLE>
The Company's use of its cumulative regular and Alternative Minimum Tax (AMT)
net operating loss carryforwards generated prior to filing the Prepackaged
Plan could have been limited by the Internal Revenue Code, due to the issuance
of Class A Common Stock and Warrants in the Prepackaged Plan.
The Company has reduced each of the cumulative regular and AMT net operating
loss carryforwards by approximately $168 million rather than limit the annual
use of its cumulative regular and AMT net operating loss carryforwards. The
Company's net operating loss has been reduced by approximately $10.2 million
as a result of an Internal Revenue Service audit of the fiscal 1988 and fiscal
1989 tax returns.
At September 30, 1994, the Company had cumulative regular and AMT net
operating losses of approximately $441 million and $160 million, respectively,
which may be carried forward and expire at various dates through the year
2009. AMT credits of approximately $1 million for tax purposes may be carried
forward indefinitely to be applied against regular tax.
9. LONG-TERM DEBT
<TABLE>
<CAPTION>
Long-term debt consists of the following:
September 30,
-----------------
In millions 1994 1993
------- -------
<S> <C> <C>
Term Loan, varying interest rates (a) $96.3 $96.3
Revolving Credit Facility,
varying interest rates (a) - -
Trade Receivables Facility,
varying interest rates (b) - -
Senior Notes, 11.5%, due May 2001 (c) 225.0 225.0
Pollution control and industrial revenue bonds,
interest at 4.7% to 8.3%, due at various
dates to 2008 (d) 12.4 12.9
Other senior debt, interest at 6.5% to 13.5%,
due at various dates to 1999 22.7 28.0
------- -------
Total senior debt 356.4 362.2
------- -------
Senior Subordinated Discount Debentures,
12.75%, due May 2005 (net of unamortized
discount of $79.3million and $120.6 million,
respectively) (e) 354.9 313.6
------- -------
Total subordinated debt 354.9 313.6
------- -------
Total debt 711.3 675.8
Less: Current maturities (14.5) (5.7)
------- -------
Total $696.8 $670.1
====== ======
</TABLE>
Scheduled aggregate annual principal payments due on long-term debt during
each of the next five years are (in millions) $14.5, $45.3, $56.8, $2.8 and
$1.4, respectively.
<PAGE>
(a) In July 1992, the Company and its bank group entered into a bank credit
agreement (the Bank Credit Agreement), which is comprised of (i) a $175
million term loan (the Term Loan), $70 million of which was repaid in the May
1993 debt refinancing, (ii) a $66 million revolving credit facility (the
Revolving Credit Facility), and (iii) an approximately $25.7 million letter of
credit facility (the L/C Facility). The final maturity of these facilities is
September 30, 1997. All obligations under the Bank Credit Agreement are
secured by liens on substantially all of the Company's assets. In addition,
the Company is required to maintain certain financial covenants including
tests for current ratio, minimum net worth and interest coverage ratio. In
connection with creation of a trade receivables-backed revolving credit
facility, the Company sold substantially all of its accounts receivable to a
wholly owned special purpose subsidiary, and such accounts receivable are not
subject to a lien under the Bank Credit Agreement.
The Term Loan is payable in quarterly installments of approximately $8.8
million, with the next installment due in July 1995. In addition, the Company
is required to make an annual principal repayment to be applied pro rata to
the remaining installments on the Term Loan, if it has excess cash flow (as
defined). The Company has the right to prepay the Term Loan in whole or in
part from time to time without incurring any prepayment penalty. The highest
outstanding principal balance under the facility during Fiscal 1994 was $96.3
million and the weighted average interest rate was 7.0 percent. At September
30, 1994, the weighted average interest rate was 8.0 percent.
The Revolving Credit Facility provides the Company the ability to borrow funds
and to repay such funds in whole or in part from time to time without
incurring any prepayment penalty. In addition, up to $25 million of letters of
credit, which reduce the facility by a like amount, may be issued under this
agreement. At September 30, 1994, no amounts were outstanding under the
Revolving Credit Facility, $57 million of credit was available and
approximately $9.0 million of letters of credit had been issued. The highest
outstanding principal balance under the facility during Fiscal 1994 was $4.0
million and the weighted average interest rate was 8.9 percent. A commitment
fee of 0.5 percent per year is paid on the unused portion of the facility.
The L/C Facility provides for standby letter of credit loans which are
incurred only in the event that the standby letters of credit are drawn, due
to nonpayment of principal or interest on certain debt instruments which are
secured by these standby letters of credit. The standby letter of credit
commitment is permanently reduced periodically to reflect principal
repayments. The Company has the right to prepay the standby letter of credit
loans in whole or in part from time to time without incurring any prepayment
penalty. At September 30, 1994, the aggregate standby letter of credit
commitment was approximately $19.2 million. A fee of 3.75 percent per annum is
payable on outstanding letters of credit under the Revolving Credit Facility
or the L/C Facility.
The Company has various interest rate options for Bank Credit Agreement
borrowings based on one or a combination of the following three rates: (i)
prime rate loans at the prime rate in effect from time to time plus a
borrowing margin of 2.0 percent per annum, (ii) certificate of deposit (CD)
rate loans at the relevant CD rate plus a borrowing margin of 3.125 percent
per annum, or (iii) Eurodollar rate loans at the relevant Eurodollar rate plus
a borrowing margin of 3.0 percent per annum. The Company has the option of
incurring Eurodollar and CD rate loans for 30, 60, 90, 120 or 180-day periods.
Interest is payable monthly.
(b) On September 24, 1993, the Company sold substantially all of its accounts
receivable to a wholly owned special purpose subsidiary, Gaylord Receivables
Corporation (GRC). GRC transferred the accounts receivable to a trust in
exchange for certain trust certificates representing ownership interests in
the accounts receivable. Concurrently, GRC and a group of banks established a
$70 million trade receivables-backed revolving credit facility (the Trade
Receivable Facility) collateralized by one series of such trust certificates.
In accordance with the provisions of this program, GRC purchases (on an
on-going basis) substantially all of the accounts receivable of the Company.
<PAGE>
Such purchased accounts receivable are transferred to a special purpose trust.
The trust certificates received by GRC from the trust are solely the assets of
GRC, a wholly owned but separate corporate entity from the Company with its
own creditors. In the event of liquidation of GRC, such creditors would be
entitled to satisfy their claims from GRC's assets prior to any distribution
to the Company. GRC has various interest rate options for Trade Receivable
Facility borrowings based on one or a combination of the following two rates:
(i) prime rate loans at the higher of (a) the prime rate in effect from time
to time or (b) the Federal Funds Rate plus 0.5 percent per annum, or (ii)
LIBOR rate loans at the relevant LIBOR rate plus a borrowing margin of 0.75
percent per annum. Interest is payable monthly. GRC is obligated to pay a
commitment fee of 0.5 percent per annum on the unused credit available under
the Trade Receivables Facility. Credit availability under the Trade
Receivables Facility is based on a borrowing base formula (as defined). As a
result, the full amount of the facility may not be available at all times. The
Company is required to use proceeds from Trade Receivables Facility borrowings
in excess of approximately $53 million to prepay quarterly installments due
under the Term Loan in order of maturity. At September 30, 1994, no amounts
were outstanding under the Trade Receivables Facility and approximately $66
million of credit was available to GRC pursuant to the borrowing base formula.
The highest outstanding principal balance under the Trade Receivables Facility
during Fiscal 1994 was $25.0 million and the weighted average interest rate
was 5.8 percent. At September 30, 1994, the Company's consolidated balance
sheet included $106.3 million of accounts receivable sold to GRC.
(c) On May 18, 1993, the Company issued $225 million aggregate principal
amount of 11-1/2% Senior Notes Due 2001 (the Senior Notes). The Senior Notes
are general unsecured obligations of the Company and rank senior in right of
payment to the Subordinated Discount Debentures (as defined in (e) below) and
all other existing and future subordinated indebtedness of the Company. The
Senior Notes rank pari passu with all senior debt of the Company, including
indebtedness under the Bank Credit Agreement. Indebtedness under the Bank
Credit Agreement, however, is secured by liens on substantially all of the
assets of the Company. Interest on the Senior Notes is payable semiannually on
May 15 and November 15, commencing November 15, 1993. The Senior Notes will
mature on May 15, 2001 and are subject to redemption on or after May 15, 1997
at the option of the Company, in whole or in part, at declining redemption
prices commencing at 104.93 percent of the principal amount and declining to
100 percent of the principal amount at May 15, 2000 and thereafter, plus
accrued interest to the date of redemption.
Upon the occurrence of a change of control (as defined), each holder of the
Senior Notes has the right to require the Company to repurchase such holder's
Senior Notes at a price equal to 101 percent of the principal amount thereof,
plus accrued interest to the date of repurchase. In addition, the Company will
be required to make an offer to repurchase the Senior Notes at 100 percent of
the principal amount, plus accrued interest to the date of repurchase, in the
event of certain asset sales.
(d) The pollution control and industrial revenue bonds were assumed by the
Company from Crown Zellerbach Corporation (Crown Zellerbach). The Company also
acquired a note receivable from Crown Zellerbach for an identical amount and
with terms identical to those of the bonds. At September 30, 1994 and
September 30, 1993, such note receivable was approximately $12.4 million and
approximately $12.9 million, respectively, and was classified as "Other
assets."
(e) On May 18, 1993, the Company issued approximately $434.2 million aggregate
principal amount (approximately $300 million of gross proceeds) of 12-3/4%
Senior Subordinated Discount Debentures Due 2005 (the Subordinated Discount
Debentures). The Subordinated Discount Debentures are general unsecured
obligations of the Company and are subordinated in right of payment to all
senior debt of the Company. The Subordinated Discount Debentures were issued
at approximately 69 percent of their principal amount. Commencing May 15,
1996, interest will accrue until maturity on the Subordinated Discount
Debentures at the rate of 12.75 percent per annum. Interest on the
Subordinated Discount Debentures is payable semiannually on May 15 and
November 15, commencing November 15, 1996. The Subordinated Discount
Debentures will mature on May 15, 2005 and are subject to redemption on or
<PAGE>
after May 15, 1998 at the option of the Company, in whole or in part, at
declining redemption prices commencing at 106.38 percent of the principal
amount and declining to 100 percent of the principal amount at May 15, 2003
and thereafter, plus accrued interest to the date of redemption.
Upon the occurrence of a change of control (as defined), each holder of the
Subordinated Discount Debentures has the right to require the Company to
repurchase such holder's Subordinated Discount Debentures at a price equal to
101 percent of the principal amount thereof, plus accrued interest to the date
of repurchase; provided that, prior to May 15, 1996, such purchase will be at
a price equal to 101 percent of the accreted value of the Subordinated
Discount Debentures. In addition, the Company will be required to make an
offer to repurchase the Subordinated Discount Debentures at 100 percent of the
principal amount, or accreted value thereof, plus accrued interest to the date
of repurchase, in the event of certain asset sales.
The Company has various restrictions under (a), (c) and (e) which limit, among
other things, its ability (i) to incur additional obligations for money
borrowed, (ii) to incur certain liens on the Company's assets, (iii) to make
capital expenditures, (iv) to incur guarantees, (v) to acquire the assets or
capital stock of other businesses, (vi) to dispose of any assets constituting
collateral, (vii) to make any voluntary prepayments of any indebtedness for
money borrowed, (viii) to pay, declare, or distribute dividends on or
repurchase its capital stock or warrants, except in certain limited
circumstances and (ix) to make certain transactions with affiliates.
10. ACCRUED AND OTHER LIABILITIES
<TABLE>
<CAPTION>
Accrued and other liabilities consist of the following:
September 30,
-----------------
In millions 1994 1993
------- -------
Current:
<S> <C> <C>
Accrued salaries and wages $23.6 $16.6
Other 28.0 23.2
------- -------
Total current 51.6 39.8
------- -------
Long-Term:
Accrued acquisition
restructuring costs 3.1 2.5
Accrued pension expense 9.2 13.5
Casualty insurance liabilities 7.6 9.6
Other 10.8 7.0
------- -------
Total long-term 30.7 32.6
------- -------
Total $82.3 $72.4
====== ======
</TABLE>
11. PREFERRED STOCK
The Company is authorized to issue up to 25,000,000 shares of preferred stock.
The right of the holders of Class A Common Stock (see Note 12) voting as a
class are not to be limited by the grant of voting rights to any series of
preferred stock. Upon consummation of the Prepackaged Plan, the Company's
Certificate of Incorporation was amended to prohibit the issuance of
non-voting preferred stock.
12. COMMON STOCK
At September 30, 1994 and 1993, the Company's authorized capital stock
consisted of 125,000,000 shares of Class A Common Stock, par value $.0001 per
share (Class A Common Stock), of which 48,510,859 shares and 47,510,789 shares
were issued, respectively, and 48,427,881 shares and 47,425,089 shares were
outstanding, respectively, and 15,000,000 shares of Class B Common Stock, par
value $.0001 per share (Class B Common Stock and together with the Class A
Common Stock, the Common Stock), of which 5,266,273 shares and 5,951,427
shares were issued and outstanding, respectively.
<PAGE>
Each share of Class B Common Stock is convertible into one share of Class A
Common Stock at any time at the option of the holder. In addition, except in
connection with certain permitted transfers (as defined), a share of Class B
Common Stock will be automatically converted into one share of Class A Common
Stock upon the sale or transfer of such share by the holder. Each share of
Class B Common Stock will automatically convert into one share of Class A
Common Stock on July 31, 1995 if the closing price of the Class A Common Stock
has not equaled or exceeded $15.25 per share on any 20 trading days during any
period of 30 consecutive trading days prior to such date. During Fiscal 1994,
685,154 shares of Class B Common Stock were converted to Class A Common Stock.
At September 30, 1994, the Company had reserved 5,266,273 shares of Class A
Common Stock for issuance upon conversion of the outstanding shares of Class B
Common Stock.
Pursuant to the Prepackaged Plan, the Company issued approximately 31.8
million Warrants to obtain one share of Class A Common Stock per Warrant.
Contemporaneously with the issuance of the Warrants, the Company issued an
equal number of shares of Class A Common Stock to the Warrant Trustee for
issuance upon exercise of the Warrants (the Trust Stock). The Warrants are
exercisable only for the shares of Trust Stock held by the Warrant Trustee and
the Company has no obligation to issue or deliver shares of stock pursuant to
the Warrants. The Warrant Trustee has agreed to hold the Trust Stock in trust
and to deliver shares of Trust Stock upon exercise of the Warrants by the
holders thereof or exchange of the Warrants on behalf of the Company. The
Warrant Trustee will vote all shares of Trust Stock in proportion to all other
votes by holders of the Common Stock (accounting for the disparate voting
power between the two classes of common stock, if applicable), except upon the
occurrence of certain votes (as defined).
Through the earlier of (a) July 31, 1996 and (b) such time as no Warrants
(other than Warrants which are exercisable) are outstanding (the Termination
Date), the holders of Class A Common Stock voting as a separate class are
entitled to elect three directors (the Special Class A Directors) and the
holders of Class B Common Stock voting as a separate class are entitled to
elect eight directors. The term of the Special Class A Directors began on
November 2, 1992 and will continue until the Termination Date and, thereafter,
holders of Class A Common Stock will be entitled to elect 25 percent of the
members of the Company's Board of Directors (the Board) and the holders of
Class B Common Stock will be entitled to elect the remaining members of the
Board. However, if and as long as the number of outstanding shares of Class B
Common Stock constitutes less than 12 1/2 percent of the total number of
outstanding shares of Common Stock, the holders of Class A Common Stock and
Class B Common Stock, voting together as a single class and entitled to one
vote per share and 10 votes per share, respectively, shall be entitled to
elect the Class B Directors (as defined). In the event of any vacancy on the
Board as a result of the disability, resignation or other termination of a
Special Class A Director, such vacancy may be filled by the affirmative vote
of a majority of the remaining Special Class A Directors or by the holders of
the Class A Common Stock voting as a separate class if there are no remaining
Special Class A Directors. In any vote by holders of Common Stock with respect
to (i) confirmation of a plan of reorganization pursuant to the Bankruptcy
Code or (ii) a change of control (as defined), the holders of Class A Common
Stock and the holders of Class B Common Stock will have one vote per share. In
addition, certain actions of the Company including, but not limited to, a
change of control (as defined) require approval by the Majority Directors (as
defined in the Company's Amended and Restated Certificate of Incorporation).
In all other respects, including any dividends or other distributions, shares
of Class A Common Stock and shares of Class B Common Stock are identical and
entitle the holders thereof to the same rights and privileges.
The Warrants become exercisable on or after July 31, 1996 and expire on
November 2, 2002. Each Warrant will be exercisable into one share of Class A
Common Stock at an exercise price of $.0001 per Warrant, which amount was paid
upon consummation of the Prepackaged Plan with a portion of the consideration
received from exchanging noteholders and is non-refundable. The Company may
elect to exchange each unexercised Warrant for a fraction of one share of
Class A Common Stock if the average market price of the Class A Common Stock
exceeds specified exchange prices ($11.40 in calendar 1994, $13.65 in calendar
1995 and $16.65 in calendar 1996 and thereafter). The Company will have the
<PAGE>
option to redeem any or all of the unexercised Warrants for cash at any time
at the applicable exchange price. Warrant holders may elect to exercise a
portion of their Warrants on July 31, 1995 under the terms and conditions
described in the Warrant agreement. On July 31, 1995, the number of Warrants
exercisable will be equal to the number of Warrants then outstanding
multiplied by a fraction (i) the numerator of which is (A) 50 percent of the
aggregate number of Warrants originally issued minus (B) the aggregate number
of Warrants previously redeemed or exchanged by the Company and (ii) the
denominator of which is the aggregate number of Warrants originally issued.
In February 1989, the Board authorized the repurchase of up to 500,000 shares
of Class A Common Stock. Shares purchased under the program are held as
treasury stock for issuance under the Company s employee stock purchase plan.
The Company has no current intention to repurchase additional shares. At
September 30, 1994 and 1993, 82,978 shares and 85,700 shares of Class A Common
Stock were held as treasury stock.
On July 1, 1994, the Company established a stock purchase plan (the Plan) for
all full-time employees. The Plan permits employees to invest up to 10 percent
of their after-tax compensation (as defined) for the purchase of shares of
Class A Common Stock. All brokerage fees for the purchase of such shares are
paid by the Company. During Fiscal 1994, the Company issued 2,722 shares of
Class A Common Stock held as treasury stock to satisfy employee purchases
pursuant to the Plan.
The Company neither declared nor paid dividends on its Common Stock during
Fiscal 1994, Fiscal 1993 or Fiscal 1992. The Company does not currently intend
to pay cash dividends on its Common Stock, but intends instead to retain
future earnings for reinvestment in the business and for repayment of debt. At
September 30, 1994, the Company was prohibited from declaring or paying cash
dividends on its Common Stock, except under certain limited circumstances (see
Note 9).
13. STOCK OPTION PLANS
The Company maintains three stock-based plans pursuant to which stock options
may be granted at no less than the market price of the Class A Common Stock on
the date of grant: (i) the 1989 Long-Term Incentive Plan (the 1989 Plan), (ii)
the 1987 Key Employee Stock Option Plan (the 1987 Plan) and (iii) the Outside
Director Stock Option Plan (the Director Option Plan) which was terminated in
September 1991.
1989 Plan - The 1989 Plan authorizes the Company to grant options (including
both incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended, and nonqualified stock options), stock
appreciation rights, stock indemnification rights, restricted stock and
performance awards to officers and key employees. The Company has granted only
nonqualified stock options and restricted stock under the 1989 Plan. At
September 30, 1994, the Company was authorized to issue 1,679,833 shares of
Class A Common Stock under the 1989 Plan and had outstanding nonqualified
stock options covering 1,098,235 shares of Class A Common Stock at exercise
prices from $2.56 per share to $4.25 per share. In general, the options have
10-year terms and vest at the rate of 33 1/3 percent per year commencing
approximately one year after the date of grant so long as the optionee remains
continuously in the employ of the Company or one of its subsidiaries;
provided, however, that 100 percent of such options will vest immediately upon
a change in control of the Company (as defined) or the optionee's death or
disability.
At September 30, 1994, options to purchase 523,624 shares of Class A Common
Stock at exercise prices ranging from $2.56 per share to $4.25 per share were
exercisable, 58,163 options had been exercised and 85,910 shares were
available for future grants under the 1989 Plan.
At September 30, 1994, the Company had outstanding 437,525 restricted shares
of Class A Common Stock under the 1989 Plan. Such shares are restricted in
that unvested shares will be forfeited in the event that the optionee's
employment terminates other than due to death, disability or retirement. The
restricted shares will vest 100 percent in the event of a change in control of
the Company or upon the recipient's retirement, death or disability. During
Fiscal 1994, the Company awarded 213,600 restricted shares of Class A Common
Stock (23,000 of which have been forfeited). As to the restricted shares
<PAGE>
granted during Fiscal 1994, 1,000 shares, 172,600 shares, 9,000 shares, 4,000
shares and 4,000 shares will become 100 percent vested in fiscal 1995, fiscal
1996, fiscal 1997, fiscal 1998 and fiscal 1999, respectively. As to 246,925
restricted shares granted prior to Fiscal 1994, 235,825 shares were 100
percent vested at September 30, 1994 and 4,100, 3,000, 2,000 and 2,000 will
become 100 percent vested in fiscal 1995, fiscal 1996, fiscal 1997 and fiscal
1998, respectively.
1987 Plan - The 1989 Plan superseded the 1987 Plan under which no additional
options may be granted except for shares of Class A Common Stock which become
available after September 30, 1988 due to expiration, termination without
exercise, unexercisability or forfeiture of any option granted under the 1987
Plan. The Company has reserved 854,467 shares of Class A Common Stock in
connection with grants under the 1987 Plan.
At September 30, 1994, the Company had outstanding nonqualified stock options
under the 1987 Plan covering 698,068 shares of Class A Common Stock at
exercise prices ranging from $1.24 per share to $6.25 per share. During Fiscal
1994, the Company granted nonqualified stock options under the 1987 Plan
covering 27,000 shares of Class A Common Stock (none of which have been
forfeited) at exercise prices ranging from $5.25 per share to $6.25 per share.
The options have 10-year terms and vest at the rate of 33 1/3 percent per year
commencing approximately one year after the date of grant so long as the
optionee remains continuously in the employ of the Company or one of its
subsidiaries; provided, however, that 100 percent of such options will vest
immediately upon a change in control of the Company (as defined) or the
optionee's death or disability.
At September 30, 1994, options to purchase 522,212 shares of Class A Common
Stock at exercise prices ranging from $1.24 to $3.75 per share were
exercisable and 141,932, 24,924 and 9,000 will become exercisable in fiscal
1995, fiscal 1996 and fiscal 1997, respectively. At September 30, 1994,
options for 139,501 shares had been exercised and 16,898 shares were available
for future grants.
Director Option Plan - The Director Option Plan authorized grants of stock
options to each director who was not an employee of the Company to receive
stock options in lieu of all or some specified portion of certain cash fees.
The Director Option Plan was terminated on September 26, 1991.
The Company has reserved 115,700 shares of Class A Common Stock in connection
with grants under the Director Option Plan. In the aggregate, the Company
granted options on 121,000 shares (5,300 of which have been forfeited) of Class
A Common Stock at exercise prices of $3.50 and $12.50 per share in lieu of
$220,000 of cash fees payable with respect to fiscal 1991 and fiscal 1990.
At September 30, 1994, options to purchase 96,800 shares of Class A Common
Stock at exercise prices of $3.50 and $12.50 per share were exercisable and
options for 18,900 shares had been exercised under the Director Option Plan.
The following table details stock option activity (excluding restricted stock)
for Fiscal 1994, Fiscal 1993 and Fiscal 1992:
<TABLE>
<CAPTION>
Stock Options Exercise Price
--------------- -------------------
<S> <C> <C>
Balance at September 30, 1991 1,362,595 $1.24 - $23.00
Grants during Fiscal 1992 355,200 $3.63 - $4.38
Exercises (52,747) $1.24 - $3.75
Cancellations (305,169) $1.24 - $23.00
----------
Balance at September 30, 1992 1,359,879 $1.24 - $12.50
Grants during Fiscal 1993 452,500 $2.56 - $3.75
Cancellations (59,956) $2.56 - $4.38
-----------
Balance at September 30, 1993 1,752,423 $1.24 - $12.50
Grants during Fiscal 1994 357,000 $3.75 - $6.25
Exercises (124,416) $1.24 - $3.75
Cancellations (91,904) $1.24 - $3.75
----------
Balance at September 30, 1994 1,893,103 $1.24 - $12.50
==========
</TABLE>
<PAGE>
The following table details restricted stock activity for Fiscal 1994, Fiscal
1993 and Fiscal 1992:
<TABLE>
<CAPTION>
Restricted Stock
-----------------
<S> <C>
Balance at September 30, 1991 236,575
Issued during Fiscal 1992 1,250
Cancellations (1,000)
-------
Balance at September 30, 1992 236,825
Issued during Fiscal 1993 11,400
Cancellations (1,200)
-------
Balance at September 30, 1993 247,025
Issued during Fiscal 1994 213,600
Cancellations (23,100)
-------
Balance at September 30, 1994 437,525
======
</TABLE>
14. LEASES
All of the Company's leases are operating leases. Lease expenses related to
operating leases are charged to expense as incurred.
<TABLE>
<CAPTION>
Future minimum lease payments at September 30, 1994 are as follows
(in millions):
Fiscal Year
<S> <C>
1995 $9.2
1996 7.2
1997 6.0
1998 3.8
1999 2.9
2000 and thereafter 9.0
------
Total future minimum lease payments $38.1
======
</TABLE>
Rent expense for Fiscal 1994, Fiscal 1993 and Fiscal 1992 was $10.8 million,
$10.2 million and $8.9 million, respectively.
15. EMPLOYEE BENEFIT PLANS
Pension Plan - The Company has a noncontributory defined benefit pension plan
covering substantially all employees who are age 21 or older and have one or
more years of service. Pension benefits provided for certain union hourly
employees are established pursuant to the collective bargaining agreements in
effect with their respective unions. For hourly employees, the normal
retirement benefit is determined by multiplying years of benefit service by a
dollar amount benefit factor separately determined for each bargaining unit.
For salaried employees, the plan generally provides a normal retirement
benefit equal to the greater of the benefit accrued at June 30, 1987 or 1.0
percent of final average earnings (as defined) multiplied by years of credited
service before January 1, 1994 plus 1.25 percent of final average earnings
multiplied by years of credited service after January 1, 1994 less 1.0 percent
of primary Social Security benefits for each year of credited service.
Supplemental Retirement Plan - The Company has a supplemental retirement plan
covering officers of the Company whose earned pension benefits would otherwise
be restricted by maximum benefit limitations imposed by Internal Revenue
Service regulations.
<PAGE>
At September 30, 1994, the actuarial present value of accumulated benefit
obligations exceeded the fair market value of plan assets, and the Company
recognized a minimum pension liability adjustment of $5.2 million and a
corresponding reduction to stockholders' equity of $3.9 million. See below for
the impact on the minimum pension liability of a supplemental executive
retirement plan. The balance sheet provisions of Financial Accounting Standard
No. 87, "Employers' Accounting For Pensions" do not impact the Company's
required contributions under the Employee Retirement Income Security Act
(ERISA) or pension expense recognized for financial reporting.
The components of net periodic pension cost follow:
<TABLE>
<CAPTION>
Year Ended September 30,
---------------------------
In millions 1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Service cost $4.1 $2.8 $2.6
Interest cost 7.8 7.4 6.7
Return on plan assets (2.7) (12.1) (8.4)
Net amortization and deferral (5.3) 4.7 1.9
------- ------- -------
Net pension cost $3.9 $2.8 $2.8
====== ====== ======
Assumptions used to develop the net periodic pension costs were:
Discount rate 7.0% 8.5% 9.0%
Expected rate of return on
plan assets 9.0% 9.0% 8.5%
Expected rate of salary increases 5.0% 5.0% 5.5%
</TABLE>
The discount rate used to determine the accrued pension liability at September
30, 1994 and 1993 was 8.0 percent and 7.0 percent, respectively. The discount
rate which will be used to determine net periodic pension cost in fiscal 1995
is 8.0 percent.
The status of the pension plan follows:
<TABLE>
<CAPTION>
September 30,
-----------------
In millions 1994 1993
------- -------
Actuarial present value of benefit obligations:
<S> <C> <C>
Vested $93.6 $98.0
Nonvested 6.8 5.5
------- -------
Accumulated benefit obligation 100.4 103.5
Effect of salary progression 8.2 6.8
------ ------
Projected benefit obligation 108.6 110.3
Plan assets at market value
(primarily government securities,
corporate bonds and common stocks) (92.0) (92.4)
------ ------
Plan assets less than
projected benefit obligations 16.6 17.9
Unrecognized net loss (12.1) (15.9)
Prior service benefit not yet
recognized in net periodic
pension cost (1.3) -
Adjustment required to
recognize minimum pension liability 5.2 9.0
------ ------
Accrued pension liability $8.4 $11.0
====== ======
</TABLE>
The Company's funding policy is to contribute annually amounts necessary to
satisfy the statutory requirements of ERISA.
Supplemental Executive Retirement Plan - Under the terms of their employment
agreements, Marvin A. Pomerantz (Chairman, Chief Executive Officer and a
Director of the Company) and Warren J. Hayford (Former Vice Chairman and a
Director of the Company) will receive supplemental annual retirement income
payments at age 65 equal to approximately 50 percent of their average base
salary and bonus for their four most highly compensated years of service with
the Company, less primary Social Security benefits and any amounts received
under the Company's pension plan. The agreements also provide for the
reduction of benefits for early retirement. Mr. Hayford elected early
retirement on December 31, 1992 and is receiving benefits under the
supplemental retirement plan.
<PAGE>
At September 30, 1994 and 1993, the actuarial present value of projected
benefit obligations under the agreements were approximately $6.1 million and
$4.7 million, respectively. At September 30, 1994, the actuarial present value
of accumulated benefit obligations exceeded the accrual for the vested portion
of the obligation and the Company recognized a minimum pension liability
adjustment of $0.7 million and a corresponding reduction to stockholders'
equity. Funding under the agreements is not subject to the statutory
requirements of ERISA and no assets have been set aside to satisfy the
liability. Supplemental annual retirement income payments required under the
agreements will be made from general corporate funds.
The components of net periodic pension cost for the supplemental pension plan
follow:
<TABLE>
<CAPTION>
Year Ended September 30,
---------------------------
In millions 1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Service cost $0.2 $0.6 $0.5
Interest cost 0.3 0.3 0.2
Return on plan assets
Net amortization and deferral 0.2 0.1 0.1
------- ------- -------
Net pension cost $0.7 $1.0 $0.8
====== ====== ======
Assumptions used to develop the net periodic pension costs were:
Discount rate 7.0% 8.5% 9.0%
Expected rate of return on
plan assets 9.0% 9.0% 8.5%
Expected rate of salary increases. 0.0% 0.0% 5.5%
</TABLE>
The discount rate used to determine the supplemental annual retirement income
liability at September 30, 1994 and 1993 was 8.0 percent and 7.0 percent,
respectively. The discount rate which will be used to determine net periodic
pension cost in fiscal 1995 is 8.0 percent.
Post-retirement Benefits Other Than Pensions - In connection with the
acquisition of its facilities, the Company assumed a liability for the
estimated cost of providing post-retirement medical coverage to age 65 for 96
salaried employees who elected to take early retirement prior to June 30, 1987.
In addition, the Company has obligations to provide post-retirement medical
benefits to age 65 pursuant to collective bargaining agreements at four of its
facilities.
On October 1, 1992, the Company adopted FAS No. 106. Pursuant to the provisions
of FAS No. 106, the Company elected to immediately recognize its accumulated
benefit obligation under collective bargaining agreements at its facilities.
As a result, the Company recorded a charge to earnings in Fiscal 1993 for the
effect of an accounting change of $1.3 million. The net post-retirement
benefit cost for both Fiscal 1994 and Fiscal 1993 was $0.3 million. The
Company funds benefit costs on a pay-as-you-go basis, and, for both Fiscal
1994 and Fiscal 1993, the Company made benefit payments of approximately $0.5
million.
<PAGE>
The following table sets forth the plan's funded status, reconciled with
amounts recognized in the Company's balance sheet.
<TABLE>
<CAPTION>
September 30,
-----------------
In millions 1994 1993
------- -------
Actuarial present value of
post-retirement benefits:
<S> <C> <C>
Retirees $1.7 $2.2
Fully eligible active plan
participants 0.8 0.6
Other active plan participants 0.6 0.5
------- -------
Accumulated post-retirement
benefit obligation 3.1 3.3
Plan assets at market value - -
------- -------
Accumulated post-retirement
benefit obligation in excess
of plan assets $3.1 $3.3
====== ======
</TABLE>
The assumed health care cost trend rate used in measuring the accumulated
post-retirement benefit obligation at September 30, 1994 was 10.0 percent in
1995 gradually declining to 6.0 percent in 1999 and thereafter. The assumed
health care cost trend rate used in measuring the accumulated post-retirement
benefit obligation at September 30, 1993 was 12.0 percent in 1994 gradually
declining to 6.0 percent in 2000 and thereafter. The discount rate used in
determining the accumulated post-retirement benefit obligation at September
30, 1994 and 1993 was 8.0 percent and 7.0 percent, respectively. If the health
care cost trend rate assumptions were increased by 1 percent, the accumulated
post-retirement benefit obligation at September 30, 1994 would be increased by
approximately $0.2 million or 6 percent. The effect of this change on the sum
of the service cost and interest cost components of net periodic
post-retirement benefit costs would be an increase of approximately 7 percent.
Savings Plan - On October 1, 1987, the Company established a defined
contribution retirement savings plan (Section 401K Plan) covering
substantially all salaried employees of the Company subject to certain service
requirements for different aspects of participation. The Section 401K Plan
provides for employees to make contributions on a pre-tax basis up to a
maximum of 15 percent of their compensation (as defined) each year, with their
maximum annual contribution determined pursuant to Internal Revenue Service
regulations. Prior to January 1, 1994, the Company contributed to each
participant's plan account an amount equal to 50 percent of the participant's
contribution up to a maximum of 2 percent of the participant's compensation.
Subsequent to January 1, 1994, the Company contributed to each participant's
plan account an amount equal to 75 percent of the participant's contribution
up to a maximum of 3 percent of the participant's compensation. The Company
may also make additional discretionary contributions to the Section 401K Plan.
For Fiscal 1994, Fiscal 1993 and Fiscal 1992, the Company's cost relating to
the Section 401K Plan was $1.4 million, $2.0 million and $1.2 million,
respectively.
16. COMMITMENTS AND CONTINGENCIES
The Company has various agreements which provide for the purchase at market
prices of wood chips, hog fuel (bark and other residual fiber from trees) and
stumpage.
The Company has a commitment to purchase approximately $46 million of
equipment from various vendors in fiscal 1995.
The Company has a commitment to sell electricity from its cogeneration
facility to a utility through 2013. The Company does not intend to terminate
this contract; however, if terminated, penalties of approximately $8.2 million
could be imposed.
The Company has an agreement through 1999 to purchase, at market prices, the
entire production of an unbleached kraft paper machine at a Riverwood
International USA, Inc. pulp and paper mill. The capacity of this machine is
estimated to be 35,000 tons per year.
<PAGE>
The Company has agreements through April 1996 and January 1997 to purchase, at
market prices, approximately 12,000 tons per year and 24,000 tons per year,
respectively, of corrugating medium from Newark Group Industries, Inc.
The Company is not a party to any legal proceedings other than litigation
incidental to normal business activities, except as described below:
The Company and certain of its officers and directors have been named in a
civil suit filed in Cook County Circuit Court alleging that they omitted or
misrepresented facts about the Company's operations in connection with the
Company's initial public offering of stock in 1988 and in certain periodic
reports. The complaint, a purported class action under the Illinois Consumer
Fraud and Deceptive Practices Act and common law fraud, seeks unspecified
damages. A similar lawsuit, based on the same factual allegations, but
alleging violations of Federal securities laws and filed in the United States
District Court for the Northern District of Illinois, was voluntarily
dismissed by the same plaintiff in July 1993. The Company believes that, after
investigation of the facts, the allegations in the complaint are without
merit, and the Company is vigorously defending itself and its officers and
directors. The outcome of such litigation is not expected to have a material
adverse effect on the Company.
17. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company adopted Financial Accounting Standard No. 107, "Disclosure About
Fair Value of Financial Instruments" (FAS No. 107), for the year ended
September 30, 1993. The following disclosure of the fair value of financial
instruments is made in accordance with the requirements of FAS No. 107. The
estimated fair value amounts have been determined by the Company using
available market information and appropriate valuation methodologies.
Considerable judgment is necessarily required, however, in interpreting market
data to develop the estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts that the
Company could realize in a current market exchange. The use of different
market assumptions and/or methodologies could have a material effect on the
estimated fair value amounts.
The estimated fair value of financial instruments at September 30, 1994 is as
follows:
<TABLE>
<CAPTION>
Estimated
Carrying Fair
Amount Value
In millions ------- -------
Assets
<S> <C> <C>
Cash and equivalents $17.4 $17.4
Trade receivables 121.8 121.8
Long-term note receivables 13.1 13.1
Liabilities
Trade payables 58.6 58.6
Bank debt 96.3 96.3
Senior and subordinated notes 579.9 593.3
Other debt 35.1 34.8
</TABLE>
Cash and equivalents, trade receivables, note receivables, trade payables and
bank debt - The carrying amount of these items are a reasonable estimate of
their fair value.
Senior and subordinated notes - Estimated fair value is based on estimates
obtained from dealers/brokers.
Other debt - Interest rates that are currently available to the Company for
similar terms and maturities are used to estimate fair value.
The fair value estimates presented herein are based on pertinent information
available to the Company at September 30, 1994. Although the Company is not
aware of any factors that would significantly affect the estimated fair value
amounts, such amounts have not been revalued for purposes of these financial
statements since that date, and current estimates of fair value may differ
significantly from the amounts presented herein.
<PAGE>
18. SUPPLEMENTAL CASH FLOW DISCLOSURES
The balance sheet effects of non-cash transactions which are not reflected in
the consolidated statement of cash flows and other supplemental cash flow
disclosures are as follows:
<TABLE>
<CAPTION>
Year Ended September 30,
--------------------------
In millions 1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Cash paid for interest expense $37.8 $42.4 $22.0
====== ====== ======
Supplemental schedule of non-cash
investing and financing activities:
Fair value of non-cash assets
acquired - 4.9 1.6
====== ====== ======
Liabilities assumed in
acquisitions - - 6.5
====== ====== ======
Property additions 8.4 - -
====== ====== ======
Increase in accrued and
other liabilities 4.5 - -
====== ====== ======
Increase in other long-term
liabilities 3.9 - -
====== ====== ======
Write-off of deferred
financing fees - 11.4 -
====== ====== ======
Exchange of old subordinated
debt - 582.8 -
====== ====== ======
Cancellation of accrued
interest on old subordinated
debt exchanged - 134.5 -
====== ====== ======
Issuance of Senior Subordinated
Notes - 377.7 -
====== ====== ======
Accrued interest from January 1,
1992 through November 1, 1992
paid in additional 10-1/4%
Senior Subordinated PIK Notes
Due 2001 - 10.6 -
====== ====== ======
Deferred tax on
extraordinary gain - 1.2 -
====== ====== ======
Issuance of Class A Common Stock - 18.0 -
====== ====== ======
Issuance of Class A Common
Stock to Warrant Trustee - 70.0 -
====== ====== ======
</TABLE>
<PAGE>
19. QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
Quarter
-------------------------------------
In millions, except per share data 1st 2nd 3rd 4th Year
------- ------- ------- ------- -------
Fiscal 1994(a)
<S> <C> <C> <C> <C> <C>
Net sales $183.9 $182.5 $203.2 $214.8 $784.4
Gross margin 16.7 19.1 23.9 33.3 93.0
Net loss (23.0) (22.6) (19.7) (18.7) (84.0)
Net loss per common
and common equivalent share (0.43) (0.42) (0.37) (0.35) (1.57)
Weighted average common and common
equivalent shares outstanding 53.5 53.6 53.6 53.7 53.6
Common stock price (AMEX)
High 4-3/4 6-7/8 6-1/4 8-3/4 8-3/4
Low 2 4-3/8 4-3/8 5-1/4 2
Warrant price (AMEX)
High 4 5-3/8 4-3/4 7-1/8 7-1/8
Low 1-5/8 3-1/4 3-1/8 3-7/8 1-5/8
Fiscal 1993(a)
Net sales $176.8 $181.5 $188.0 $187.2 $733.5
Gross margin 25.8 23.4 15.5 16.7 81.4
Loss before extraordinary item and
accounting change (13.7) (11.8) (24.0) (20.5) (70.0)
Extraordinary item 201.5 - - - 201.5
Accounting change (1.3) - - - (1.3)
Net income (loss) 186.5 (11.8) (24.0) (20.5) 130.2
Earnings per common and common
equivalent share:
Loss before extraordinary
item and accounting change (0.35) (0.22) (0.45) (0.38) (1.40)
Extraordinary item 5.14 - - - 4.04
Accounting change (0.03) - - - (0.03)
Net income (loss) 4.76 (0.22) (0.45) (0.38) 2.61
Weighted average common and common
equivalent shares outstanding(b) 39.2 53.4 53.4 53.4 49.8
Common stock price (AMEX)
High 3-3/4 4 3-1/4 2-3/4 4
Low 2-3/8 2-5/8 2-3/16 1-7/8 1-7/8
Warrant price (AMEX)(b)
High 3-1/4 3-1/2 2-9/16 2-1/4 3-1/2
Low 1-13/16 2-1/4 1-5/8 1-3/8 1-3/8
Fiscal 1992(a)
Net sales $168.9 $177.0 $190.0 $186.9 $722.8
Gross margin 25.8 29.6 28.1 30.9 114.4
Net loss (23.8) (21.7) (32.9) (54.1) (132.5)
Net loss per common and
common equivalent share (1.54) (1.39) (2.13) (3.48) (8.54)
Weighted average common and common
equivalent shares outstanding 15.5 15.5 15.5 15.5 15.5
Common stock price (AMEX)
High 4 4-7/8 4-1/2 4-1/8 4-7/8
Low 2-7/8 3 3-3/4 2-1/2 2-1/2
</TABLE>
(a) See Note 2 for a summary of non-recurring operating charges.
(b) On November 2, 1992, upon consummation of the Prepackaged Plan, the
Company issued approximately 37.8 million shares of Class A Common Stock
(including shares issuable upon exercise of Warrants) and approximately 31.8
million Warrants (See Note 12).
<PAGE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
Not applicable.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
See the section captioned Executive Officers of the Registrant under Part I of
this Report for information concerning the Company's executive officers.
For information concerning the directors of the Company, see the sections
captioned Nominees for Election At The 1995 Annual Meeting and Class A
Directors in the Company's definitive Proxy Statement for the Annual Meeting
of Stockholders scheduled to be held February 8, 1995. Said sections are
incorporated by reference herein.
Item 11. EXECUTIVE COMPENSATION
There is incorporated by reference herein from the Company's definitive Proxy
Statement for the Annual Meeting of Stockholders scheduled to be held February
8, 1995 the sections therein captioned Executive Compensation and Employment
Agreements.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There is incorporated by reference herein from the Company's definitive Proxy
Statement for the Annual Meeting of Stockholders scheduled to be held February
8, 1995 the section therein captioned Information With Respect to Certain
Stockholders.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There is incorporated by reference herein from the Company's definitive Proxy
Statement for the Annual Meeting of Stockholders scheduled to be held February
8, 1995 the section therein captioned Certain Transactions.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
a. Financial Statement Schedules. The following Financial Statement Schedules
are filed with this Annual Report on Form 10-K on the pages indicated:
Description Page
---------------------------------------------------------
V. Property 46
VI. Allowance for Depreciation 46
VIII. Valuation and Qualifying Accounts and Reserves 47
X. Supplementary Income Statement Information 47
All other schedules have been omitted because the information is either not
required or is included in the Consolidated Financial Statements or Notes to
Consolidated Financial Statements listed under Item 8.
b. No reports on Form 8-K have been filed in the reporting period.
c. Exhibits. Each Exhibit is listed according to the number assigned to it in
the Exhibit Table of Item 601 of Regulation S-K.
For the purposes of complying with the amendments to the rules governing Form
S-8 (effective July 13, 1990) under the Securities Act of 1933, the undersigned
registrant hereby undertakes as follows, which undertaking shall be incorporated
by reference into registrant's Registration Statements on Form S-8 No. 33-25675
(filed November 28, 1988), No. 33-32221 (filed November 27, 1989), No. 33-33977
(filed March 21, 1990), No. 33-33871 (filed March 21, 1990) and No. 33-54367
(filed June 29, 1994):
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expense incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
<PAGE>
EXHIBIT INDEX
Number and Description of Exhibit
3.1(a) Amended and Restated Certificate of Incorporation of the Registrant, as
amended, incorporated by reference to Exhibit 3.1 of the Registrant s Current
Report on Form 8-K filed on October 30, 1992 under the Securities Exchange Act
of 1934 as amended (the October 30, 1992 Form 8-K)
3.2(a) Bylaws of the Registrant, as amended, incorporated by reference to
Exhibit 3.2 of the Registrant s Registration Statement on Form S-1 (No.
33-13455), as amended, filed under the Securities Act of 1933, as amended (the
1986 Debt Registration Statement)
4.1(a) Master Credit Agreement dated as of July 31, 1992 between the
Registrant, the financial institutions signatory thereto, Bankers Trust
Company, as Agent and Co-Manager, and Wells Fargo Bank National Association,
as Co-Manager, incorporated by reference to Exhibit 10.1 of the Registrant s
Current Report on Form 8-K filed on September 22, 1992 under the Securities
Exchange Act of 1934 as amended
4.2(a) First Amendment to Amended and Restated Credit Agreement dated as of
April 28, 1993 by and between the Registrant, the financial institutions
signatory thereto, Bankers Trust Company, as Agent and Co-Manager, and Wells
Fargo National Association, as Co-Manager, incorporated by reference to
Exhibit 4.2 of the Registrant s Annual Report on Form 10-K (No. 1-9915) for
the year ended September 30, 1993, filed under the Securities Exchange Act of
1934, as amended (the 1993 Form 10-K)
4.3(a) Second Amendment to Amended and Restated Credit Agreement dated as of
December 8, 1993 by and between the Registrant, the financial institutions
signatory thereto, Bankers Trust Company, as Agent and Co-Manager, and Wells
Fargo Bank National Association, as Co-Manager, incorporated by reference to
Exhibit 4.3 of the 1993 Form 10-K
4.4(a) Third Amendment to Amended and Restated Credit Agreement dated as of
July 31, 1994 by and between the Registrant, the financial institutions
signatory thereto, Bankers Trust Company, as Agent and Co-Manager, and Wells
Fargo Bank National Association, as Co-Manager, incorporated by reference to
Exhibit 4.1 of the Registrant s Quarterly Report on Form 10-Q (No. 1-9915) for
the quarter ended June 30, 1994, filed under the Securities Exchange Act of
1934, as amended
4.5(a) Credit agreement dated as of October 31, 1989 between the Registrant and
the Export-Import Bank of the United States incorporated by reference to
Exhibit 4.21 of the Registrant s Annual Report on Form 10-K (No. 1-9915) for
the year ended September 30, 1990, filed under the Securities Exchange Act of
1934, as amended
4.6(a) Specimen Certificate for the Class A Common Stock, par value $.0001 per
share, of the Registrant, incorporated by reference to Exhibit 4.5 of the
October 30, 1992 Form 8-K
4.7(a) Warrant Agreement between the Registrant and Harris Trust and Savings
Bank, as Warrant Agent, relating to the Registrant s Redeemable Exchangeable
Warrants, incorporated by reference to Exhibit 4.3 of the October 30, 1992
Form 8-K
4.8(a) Specimen Certificate for the Redeemable Exchangeable Warrants of the
Registrant, incorporated by reference to Exhibit 4.6 of the October 30, 1992
Form 8-K
4.9(a) Trust Agreement between the Registrant and Harris Trust and Savings
Bank, as Warrant Agent, relating to the Class A Common Stock obtainable upon
exercise of the Redeemable Exchangeable Warrants, incorporated by reference to
Exhibit 4.4 of the October 30, 1992 Form 8-K
4.10(a) Form of Indenture between the Registrant and Shawmut Bank Connecticut,
National Association as Trustee, relating to the Registrant s 11-1/2% Senior
Notes Due 2001, incorporated by reference to Exhibit 4(a) of the Registrant s
Registration Statement on Form S-3 (No. 33-60016), as amended, filed under the
Securities Act of 1933, as amended (the 1993 Debt Registration Statement)
(a) Incorporated by reference.
(b) Filed with this Annual Report.
<PAGE>
Number and Description of Exhibit
4.11(a) Specimen Certificate of the Registrant s 11-1/2% Senior Notes Due
2001, incorporated by reference to Exhibit 4(b) of the 1993 Debt Registration
Statement
4.12(a) Form of Indenture between the Registrant and Ameritrust Texas,
National Association as Trustee, relating to the Registrant s 13-3/4% Senior
Subordinated Discount Debentures Due 2005, incorporated by reference to
Exhibit 4(c) of the 1993 Debt Registration Statement
4.13(a) Specimen Certificate of the Registrant s 13-3/4% Senior Subordinated
Discount Debentures Due 2005, incorporated by reference to Exhibit 4(d) of the
1993 Debt Registration Statement
4.14(a) Subscription and Stockholder Agreement dated as of September 24, 1993
between the Registrant and Gaylord Receivables Corporation, incorporated by
reference to Exhibit 4.13 of the 1993 Form 10-K
4.15(a) Receivables Purchase Agreement dated as of September 24, 1993 between
the Registrant and Gaylord Receivables Corporation, incorporated by reference
to Exhibit 4.14 of the 1993 Form 10-K
4.16(a) Gaylord Receivables Master Pooling and Servicing Agreement dated as of
September 24, 1993 between the Registrant and Gaylord Receivables Corporation,
incorporated by reference to Exhibit 4.15 of the 1993 Form 10-K
4.17(a) Revolving Credit Agreement dated as of September 24, 1993 between
Gaylord Receivables Corporation, the financial institutions signatory thereto
and Harris Trust and Savings Bank as Facility Agent, incorporated by reference
to Exhibit 4.16 of the 1993 Form 10-K
4.18(a) Security Agreement dated as of September 24, 1993 between Gaylord
Receivables Corporation and Harris Trust and Savings Bank, incorporated by
reference to Exhibit 4.17 of the 1993 Form 10-K
4.19(a) Series 1993-1 A-RI Supplemental Issuance Agreement dated as of
September 24, 1993 by and between the Registrant, Gaylord Receivables
Corporation and Manufacturers and Traders Trust Company, as Trustee,
incorporated by reference to Exhibit 4.1 of the Registrant s Quarterly Report
on Form 10-Q (No. 1-9915) for the quarter ended December 31, 1993, filed under
the Securities Exchange Act of 1934, as amended
10.1(a) Employee Benefits Agreement, as amended, by and between the
Registrant, Crown Zellerbach Corporation and Gaylord Holdings Limited dated as
of March 28, 1986, incorporated by reference to Exhibit 10.5 of the 1986 Debt
Registration Statement
10.2(a) Bogalusa Hog Fuel Supply Agreement by and between the Registrant and
Cavenham Forest Industries, Inc. dated as of March 28, 1986, incorporated by
reference to Exhibit 10.8 of the 1986 Debt Registration Statement
10.3(a) Bogalusa Hog Fuel Supply Agreement (St. Francisville) by and between
the Registrant and Crown Zellerbach Corporation dated as of March 31, 1986,
incorporated by reference to Exhibit 10.9 of the 1986 Debt Registration
Statement
10.4(a) Bogalusa Sawmill Agreement by and between the Registrant and Cavenham
Forest Industries, Inc. dated as of March 28, 1986, incorporated by reference
to Exhibit 10.11 of the 1986 Debt Registration Statement
10.5(a) Bogalusa Timberland Agreement by and between the Registrant and
Cavenham Forest Industries, Inc. dated as of March 28, 1986, incorporated by
reference to Exhibit 10.12 of the 1986 Debt Registration Statement
10.6(a) Transfer and Assumption Agreement by and between the Registrant and
Gaylord Container Limited dated as of November 17, 1986, incorporated by
reference to Exhibit 10.16 of the 1986 Debt Registration Statement
(a) Incorporated by reference.
(b) Filed with this Annual Report.
<PAGE>
Number and Description of Exhibit
10.7(a) Undertaking by and between the Registrant and Crown Zellerbach
Corporation dated as of May 2, 1986, incorporated by reference to Exhibit
10.17 of the 1986 Debt Registration Statement
10.8(a) Transaction Agreement by and between James River Corporation of
Virginia and Crown Zellerbach Corporation dated as of December 14, 1985,
incorporated by reference to Exhibit 10.18 of the 1986 Debt Registration
Statement
10.9(a) Chip Supply Agreement by and between Registrant and Fibreboard
Corporation dated as of February 22, 1988, incorporated by reference to
Exhibit 10.19 of the Registrant s Registration Statement on Form S-1 (No.
33-17898), as amended, filed under the Securities Act of 1933, as amended (the
1988 Stock Registration Statement)
10.10(a) Wood Chip Purchase and Sale Agreement by and between Registrant and
Louisiana-Pacific Corporation dated as of February 22, 1988, incorporated by
reference to Exhibit 10.20 of the 1988 Stock Registration Statement
10.11(a) Stockholder Agreement by and among the Registrant and the Persons
listed on the signature pages thereto dated as of June 1, 1988, incorporated
by reference to Exhibit 10.22 of the Registrant s Registration Statement on
Form S-1 (No. 33-21227), as amended, filed under the Securities Act of 1933,
as amended (the 1988 Debt Registration Statement)
10.12(a) Agreement among the Registrant and the Persons listed on the
signature pages thereto dated as of June 1, 1988, incorporated by reference to
Exhibit 10.23 of the 1988 Debt Registration Statement
10.13(a) Bogalusa Roundwood Supply and Cutting Rights Agreement by and between
the Registrant and Cavenham Forest Industries, Inc. dated as of March 28,
1986, incorporated by reference to Exhibit 10.10 of the 1986 Debt Registration
Statement
10.14(a) Letters dated March 1, 1991 and March 19, 1991 between the Registrant
and Cavenham Forest Industries Inc., amending the Bogalusa Roundwood Supply
and Cutting Rights Agreement dated as of March 28, 1986, incorporated by
reference to Exhibit 10(e) of the Registrant s Proxy Statement - Prospectus on
Form S-4 (No. 33-41799) as amended, filed under the Securities Act of 1933, as
amended (the 1991 Proxy Statement - Prospectus)
10.15(a) Bogalusa Wood Chip Supply Agreement by and between the Registrant and
Cavenham Forest Industries, Inc., dated as of March 28, 1986, incorporated by
reference to Exhibit 10.13 of the 1986 Debt Registration Statement
10.16(a) Letters dated March 1, 1991 and March 19, 1991 between the Registrant
and Cavenham Forest Industries, Inc. amending the Bogalusa Wood Chip Supply
Agreement dated as of March 28, 1986, incorporated by reference to Exhibit
10(i) of the 1991 Proxy Statement - Prospectus
10.17(a) Power Purchase Agreement by and between Pacific Gas & Electric
Company and Crown Zellerbach Corporation dated as of December 29, 1982,
incorporated by reference to Exhibit 10.14 of the 1986 Debt Registration
Statement
10.18(a) Indemnification Agreement by and between the Registrant, Crown
Zellerbach Corporation and Cavenham Forest Industries, Inc. dated as of
November 17, 1986 regarding Power Purchase Agreement by and between Pacific
Gas & Electric Company and Crown Zellerbach Corporation dated as of December
29, 1982, incorporated by reference to Exhibit 10.15 of the 1986 Debt
Registration Statement
10.19(a) Employment Agreement by and between the Registrant and Marvin A.
Pomerantz dated as of May 18, 1988, incorporated by reference to Exhibit 10.1
of the 1988 Debt Registration Statement
(a) Incorporated by reference.
(b) Filed with this Annual Report.
<PAGE>
Number and Description of Exhibit
10.20(a) Amendment No. 1 to Employment Agreement between the Registrant and
Marvin A. Pomerantz dated February 8, 1989, incorporated by reference to
Exhibit 10.25 of the Registrant s Registration Statement on Form S-1 (No.
33-29722), as amended, filed under the Securities Act of 1933, as amended (the
1989 Debt Registration Statement)
10.21(a) Employment Agreement by and between the Registrant and Marvin A.
Pomerantz dated January 1, 1993, incorporated by reference to Exhibit 10.20 of
the 1993 Form 10-K
10.22(a) Employment Agreement by and between the Registrant and Warren J.
Hayford dated as of May 18, 1988, incorporated by reference to Exhibit 10.2 of
the 1988 Debt Registration Statement
10.23(a) Amendment No. 1 to Employment Agreement between the Registrant and
Warren J. Hayford dated February 8, 1989, incorporated by reference to Exhibit
10.26 of the 1989 Debt Registration Statement
10.24(a) Employment Letter Agreement by and between the Registrant and Dale E.
Stahl, dated as of November 22, 1993, incorporated by reference to Exhibit
10.25 of the 1993 Form 10-K
10.25(a) Employment Letter Agreement by and between the Registrant and Daniel
P. Casey, dated as of November 22, 1993, incorporated by reference to Exhibit
10.27 of the 1993 Form 10-K
10.26(a) Employment Letter Agreement by and between the Registrant and
Lawrence G. Rogna, dated as of November 22, 1993, incorporated by reference to
Exhibit 10.29 of the 1993 Form 10-K
10.27(a) Stock Retention Agreement dated June 25, 1992 between the Registrant
and Mid-America Group, Ltd., incorporated by reference to Exhibit 10(nn) of
the 1991 Proxy Statement - Prospectus
10.28(a) Stock Retention Agreement dated June 25, 1992 between the Registrant
and Warren J. Hayford, incorporated by reference to Exhibit 10(pp) of the 1991
Proxy Statement - Prospectus
10.29(a) Gaylord Container Corporation 1987 Key Employee Stock Option Plan,
incorporated by reference to Exhibit 28 of the Registrant s Registration
Statement on Form S-8 (No. 33-25675) filed under the Securities Act of 1933,
as amended
10.30(a) Gaylord Container Corporation 1989 Long-Term Incentive Plan,
incorporated by reference to Exhibit 28.1 of the Registrant s Registration
Statement on Form S-8 (No. 33-33977) filed under the Securities Act of 1933,
as amended
10.31(a) Gaylord Container Corporation Outside Director Stock Option Plan,
incorporated by reference to Exhibit 28 of the Registrant s Registration
Statement on Form S-8 (No. 33-33871) filed under the Securities Act of 1933,
as amended
10.32(a) Gaylord Container Corporation Retirement Plan
10.33(a) Gaylord Container Corporation Retirement Savings Plan
10.34(a) Gaylord Container Corporation Management Incentive Plan
10.35(a) Gaylord Container Corporation Key Performance Compensation Plan
10.36(a) Gaylord Container Corporation Shareholder Value Plan
10.37(b) Gaylord Container Corporation Supplemental Retirement Plan
21.1(a) Subsidiaries of the Registrant, incorporated by reference to Exhibit
21.1 of the 1993 Form 10-K
23.1(b) Consent of Deloitte & Touche LLP
24.1(b) Power of Attorney
(a) Incorporated by reference.
(b) Filed with this Annual Report.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on the 9th day of
December, 1994.
Gaylord Container Corporation
By /s/ Marvin A.Pomerantz
--------------------------
Marvin A. Pomerantz
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed on the 9th day of December, 1994, by the following
persons on behalf of the Registrant and in the capacities indicated.
Signature Title
/s/ Marvin A. Pomerantz Chairman, Chief Executive Officer and Director
- --------------------------- (Principal Executive Officer)
Marvin A. Pomerantz
/s/ Daniel P. Casey Executive Vice President
- --------------------------- (Principal Financial Officer)
Daniel P. Casey
/s/ Jeffrey B. Park Vice President - Corporate Controller
- --------------------------- (Principal Accounting Officer)
Jeffrey B. Park
/s/ Frank E. Babb* Director
- ---------------------------
Frank E. Babb
/s/ Norman H. Brown Jr.* Director
- ---------------------------
Norman H. Brown Jr.
/s/ Harve A.Ferrill* Director
- ---------------------------
Harve A.Ferrill
/s/ John E. Goodenow* Director
- ---------------------------
John E. Goodenow
/s/ David B. Hawkins* Director
- ---------------------------
David B. Hawkins
/s/ John Hawkinson* Director
- ---------------------------
John Hawkinson
/s/ Warren J. Hayford* Director
- ---------------------------
Warren J. Hayford
/s/ Richard S. Levitt* Director
- ---------------------------
Richard S. Levitt
/s/ Ralph L. MacDonald Jr.* Director
- ---------------------------
Ralph L. MacDonald Jr.
/s/ Thomas H. Stoner* Director
- ---------------------------
Thomas H. Stoner
*By Daniel P. Casey
Attorney-in-fact
<PAGE>
GAYLORD CONTAINER CORPORATION and SUBSIDIARIES
Schedule V - Property
<TABLE>
<CAPTION>
Other
Balance at Changes Balance
Beginning Additions Retirements Add at End of
In Millions of Year at Cost or Sales (Deduct) Year
------- -------- -------- -------- --------
For the Year ended September 30, 1992:
<S> <C> <C> <C> <C> <C>
Land $ 15.3 $ - $(0.1) $ - $ 15.2
Buildings and improvements(1) 111.5 6.4 (1.0) 1.2 118.1
Machinery and equipment(2) 695.9 21.5 (4.9) 1.8 714.3
Construction in progress 18.4 (4.5) - (0.6) 13.3
------- ------- ------- ------- -------
Total $841.1 $23.4 $(6.0) $2.4 $860.9
====== ====== ====== ====== ======
For the Year ended September 30, 1993:
Land $ 15.2 $ 0.2 $ - $ - $15.4
Buildings and improvements(1) 118.1 4.3 - (0.5) 121.9
Machinery and equipment(2) 714.3 23.8 (1.3) 4.0 740.8
Construction in progress 13.3 (4.1) - - 9.2
------- ------- ------- ------- -------
Total $860.9 $24.2 $(1.3) $3.5 $887.3
====== ====== ====== ====== ======
For the Year ended September 30, 1994:
Land $ 15.4 $ - $(0.3) $ - $15.1
Buildings and improvements(1) 121.9 1.4 (6.2) 0.2 117.3
Machinery and equipment(2) 740.8 25.9 (13.1) (0.2) 753.4
Construction in progress 9.2 22.4 - - 31.6
------- ------- ------- ------- -------
Total $887.3 $49.7 $(19.6) $ - $917.4
====== ====== ====== ====== ======
</TABLE>
(1) Depreciated over lives of 10 years to 45 years.
(2) Depreciated over lives of 3 years to 20 years.
Schedule VI - Allowance for Depreciation
<TABLE>
<CAPTION>
Other
Balance at Additions Changes Balance
Beginning Charged Retirements Add at End of
In Millions of Year to Costs or Sales (Deduct) Year
------- ------- --------- ------- ---------
For the Year ended September 30, 1992:
<S> <C> <C> <C> <C> <C>
Buildings and improvements $ 19.4 $ 5.7 $(0.2) $ - $ 24.9
Machinery and equipment 151.9 46.2 (1.5) 1.9 198.5
------- ------- ------- ------- -------
Total $171.3 $51.9 $(1.7) $ 1.9 $223.4
====== ====== ====== ====== ======
For the Year ended September 30, 1993:
Buildings and improvements $ 24.9 $ 5.7 $ - $ - $ 30.6
Machinery and equipment 198.5 48.1 (0.8) (0.2) 245.6
------- ------- ------- ------- -------
Total $223.4 $53.8 $(0.8) $(0.2) $276.2
====== ====== ====== ====== ======
For the Year ended September 30, 1994:
Buildings and improvements $ 30.6 $ 5.5 $(3.3) $ - $ 32.8
Machinery and equipment 245.6 48.9 (2.8) - 291.7
------- ------- ------- ------- -------
Total $276.2 $54.4 $(6.1) $ - $324.5
====== ====== ====== ====== ======
</TABLE>
<PAGE>
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
Schedule VIII - Valuation and Qualifying Accounts and Reserves
<TABLE>
<CAPTION>
Additions Additions
Balance at Charged to Charged to Balance
Beginning Costs and Other at End of
In Millions of Year Expenses Accounts Deductions Year
------- ------- --------- ---------- --------
For the Year ended September 30, 1992:
<S> <C> <C> <C> <C> <C>
Allowance for accounts receivable $2.8 $9.4 $0.5 $(8.9) $3.8
====== ====== ====== ====== ======
Reserves - Asset write-down. $- $30.4(1) $1.2 $ - $31.6
====== ====== ====== ====== ======
Reserves - purchase
adjustments-accrued
restructuring costs $1.8 $ - $4.6 $(2.1) $4.3
====== ====== ====== ====== ======
Reserves long-term - purchase
adjustments-accrued
restructuring costs $8.2 $1.0 $(4.6) $ - $4.6
====== ====== ====== ====== ======
For the Year ended September 30, 1993:
Allowance for accounts receivable $3.8 $13.1 $ - $(12.4) $4.5
====== ====== ====== ====== ======
Reserves - Asset write-down $31.6 $ - $ - $(0.9) $30.7
====== ====== ====== ====== ======
Reserves - purchase
adjustments-accrued
restructuring costs $4.3 $ 2.6 $ - $(2.5) $4.4
====== ====== ====== ====== ======
Reserves long-term - purchase
adjustments-accrued
restructuring costs $4.6 $ - $(2.1) $ - $2.5
====== ====== ====== ====== ======
For the Year ended September 30, 1994:
Allowance for accounts receivable $4.5 $ 9.9 $ - $(10.7) $3.7
====== ====== ====== ====== ======
Reserves - Asset write-down $30.7 $ - $ - $ (1.1) $29.6
====== ====== ====== ====== ======
Reserves - Allowance for
abandonments $ - $ 5.3 $ - $ - $5.3
====== ====== ====== ====== ======
Reserves - purchase
adjustments-accrued
restructuring costs $ 4.4 $ - $(0.3) $ (2.9) $1.2
====== ====== ====== ====== ======
Reserves long-term - purchase
adjustments-accrued
restructuring costs $2.5 $ 0.4 $ 0.2 $ - $3.1
====== ====== ===== ====== ======
</TABLE>
(1) Primarily reserves related to a Fiscal 1992 asset write-down.
Schedule X - Supplementary Income Statement Information
<TABLE>
<CAPTION>
In Millions Year Ended September 30,
--------------------------
1994 1993 1992
Charged to Costs and Expenses ------- ------- -------
<S> <C> <C> <C>
Maintenance and Repairs $86.3 $85.8 $77.9
====== ====== ======
Amortization $6.8 $7.3 $7.4
====== ====== ======
Taxes, Other than Income and Payroll Taxes:
Property $6.3 $7.0 $6.9
Sales, use, occupational and other
taxes and licenses 3.7 3.8 3.7
------- ------- -------
Total taxes $10.0 $10.8 $10.6
====== ====== ======
</TABLE>
GAYLORD CONTAINER CORPORATION
SUPPLEMENTAL RETIREMENT PLAN
SECTION 1
Introduction
1.1 The Plan and Its Effective Date. Gaylord
Container Corporation Supplemental Retirement Plan (the "plan")
has been established by Gaylord Container Corporation, a Delaware
corporation (the "company"), effective January 1, 1994 (the
"effective date").
1.2 Purpose. The company maintains the Gaylord
Container Corporation Retirement Plan (the "retirement plan"),
which is intended to meet the requirements of a "qualified plan"
under the Internal Revenue Code. While the Internal Revenue Code
and the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), place limitations on the maximum amount of
benefits which may be paid from a qualified plan, the Act permits
the payment under a nonqualified plan of the benefits which may
not be paid under the qualified plan because of such limitations.
The purpose of this plan is to provide to a select group of
management or highly compensated employees benefits which are
earned but may not be provided under the retirement plan because
of the maximum benefit limitations of the Internal Revenue Code
and ERISA.
SECTION 2
Participation and Benefits
2.1 Eligibility. The persons designated at Schedule A
hereto, as it may be amended from time to time by the
Compensation Committee of the Board of Directors (the
"committee"), shall be participants in the plan.
2.2 Amount of Benefits. Subject to the conditions and
limitations of the plan, if a participant in this plan who is a
participant in the retirement plan becomes entitled to a benefit
thereunder and such benefit has been limited as a result of the
Maximum Benefit Limitations imposed by Sections 401(a)(17) or 415
of the Internal Revenue Code of 1986, as amended (as such Maximum
Benefit Limitations are incorporated in the retirement plan), he
shall be entitled to receive under this plan the portion of his
pension benefit under the retirement plan, determined without
regard to the Maximum Benefit Limitations therein, which exceeds
the pension benefit payable to him under the retirement plan
after applying such Maximum Benefit Limitations.
2.3 Payment of Benefits. A participant's benefit
under this plan shall be paid to him, or in the event of his
death to his beneficiary, in a lump sum or in installments over a
reasonable period of time not to exceed ten years, as determined
by the committee in its discretion. In calculating the amount of
such lump sum or installment payments, actuarial equivalence
shall be calculated based on the actuarial assumptions as set
forth in Section 7.5 of the Retirement Plan; provided, that if
the lump sum payment as calculated in accordance with Section 7.5
of the Retirement Plan is in excess of $25,000, the amount
payable as a lump sum shall be recalculated using an interest
rate equal to 120% of the interest rate specified in the
Retirement Plan; provided, further, that in no event shall the
value determined in such recalculation be less than $25,000.
<PAGE>
2.4 Funding. Benefits payable under this plan to a
participant or his beneficiary shall be paid directly by the
company. The company shall not be required to segregate on its
books or otherwise any amount to be used for payment of benefits
under this plan.
SECTION 3
General Provisions
3.1 Committee. This plan shall be administered by the
committee responsible for administration of the retirement plan.
The committee shall have, to the extent appropriate, the same
powers, rights, duties and obligations with respect to this plan
as it has with respect to the retirement plan.
3.2 Beneficiary. A participant's "beneficiary" under
this plan means any person who becomes entitled to benefits under
the retirement plan because of the participant's death; provided
that, if a participant dies while his benefits under this plan
are payable to him in installments, his beneficiary under this
plan shall be either (i) the person or persons designated by him
by signing and filing a beneficiary designation form in the time
and manner prescribed by the committee or if the beneficiary
designated in (i) above dies before the date of the participant's
death, any one or more of the participant's estate and his
relatives by blood or marriage, in such proportions as the
committee shall determine.
3.3 Employment Rights. Establishment of the plan
shall not be construed to give any participant the right to be
retained in the company's service or to any benefits not
specifically provided by the plan.
3.4 Interests Not Transferable. Except as to
withholding of any tax under the laws of the United States or any
state, the interests of the participants and their beneficiaries
under the plan are not subject to the claims of their creditors
and may not be voluntarily or involuntarily transferred,
assigned, alienated or encumbered. No participant shall have any
right to any benefit payments hereunder prior to his termination
of employment with the company and all other Gaylord Companies,
as defined in the retirement plan.
3.5 Payment with Respect to Incapacitated Participants
or Beneficiaries. If any person entitled to benefits under the
plan is under a legal disability or in the committee's opinion is
incapacitated in any way so as to be unable to manage his
financial affairs, the committee may direct the payment of such
benefit to such person's legal representative or to a relative or
friend of such person for such person's benefit, or the committee
may direct the application of such benefits for the benefit of
such person in any manner which the committee may select that is
consistent with the plan. Any payments made in accordance with
the foregoing provisions of this section shall be a full and
complete discharge of any liability for such payments.
<PAGE>
3.6 Limitation of Liability. To the extent permitted
by law, no person (including the company, its Board of Directors,
the committee, any present or former member of the company's
Board of Directors or the committee, and any present or former
officer of the company) shall be personally liable for any act
done or omitted to be done in good faith in the administration of
the plan.
3.7 Controlling Law. The laws of Illinois shall be
controlling in all matters relating to the plan.
3.8 Gender and Number. Where the context admits,
words in the masculine gender shall include the feminine and
neuter genders, the plural shall include the singular and the
singular shall include the plural.
3.9 Action by the Company. Any action required of or
permitted by the company under the plan shall be by resolution of
the committee.
3.10 Successor to the Company. The term "company" as
used in the plan shall include any successor to the company by
reason of merger, consolidation, the purchase of all or
substantially all of the company's assets or otherwise.
SECTION 4
Amendment and Termination
While the company expect to continue the plan, it must
necessarily reserve and hereby does reserve the right to amend
the plan from time to time or to terminate the plan at any time;
provided that no amendment of the plan, including any amendment
to Schedule A, nor the termination of the plan may cause the
reduction or cessation of any benefits that were accrued as of
the date of such amendment or termination and otherwise would be
payable under this plan, but for such amendment or termination.
IN WITNESS WHEREOF, this plan has been executed on
behalf of the company by its duly authorized officers as of the
day and year first above written.
GAYLORD CONTAINER CORPORATION
By: /s/ Daniel P. Casey
------------------------
Its: Executive Vice President
------------------------
ATTEST:
By: /s/ David F. Tanaka
-------------------
Its: Secretary
-------------------
INDEPENDENT AUDITORS' CONSENT
Gaylord Container Corporation:
We consent to the incorporation by reference in Registration Statement Nos.
33-32221 and 33-33977 on Form S-8/S-3, Registration Statement Nos. 33-25675,
33-33871, and 33-54367 on Form S-8, and in the Prospectuses which are part of
such Registration Statements of our report, dated November 1, 1994, appearing
in this Annual Report on Form 10-K of Gaylord Container Corporation for the year
ended September 30, 1994.
/s/ Deloitte & Touche LLP
- -------------------------
December 13, 1994
POWER OF ATTORNEY
-----------------
Each of the undersigned, being a director or officer, or both, of GAYLORD
CONTAINER CORPORATION, a Delaware corporation (the "Corporation"), does herby
constitute and appoint each of Marvin A. Pomerantz and Daniel P. Casey as his
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Corporation's Form 10-K for the Corporation's 1994
fiscal year and to file same, together with all exhibits thereto and other
attachments and documents in connection therewith, with the Securities and
Exchange Commission, the American Stock Exchange and any other regulatory
authority, and to sign, file or deliver such further documents and to take
such further actions in connection therewith as each of the undersigned might
or could do in person and as each such attorney and agent deems necessary or
desirable; and each of the undersigned does hereby fully ratify and confirm
all that said attorneys and agents, or any of them, or the substitute of any
of them, shall do or cause to be done by virtue hereof.
Signature Title
- ------------------------ ---------------------------------
Chairman, Chief Executive Officer
- -------------------------- and Director
Marvin A. Pomerantz
Executive Vice President
- -------------------------- (Principal Financial Officer)
Daniel P. Casey
Vice President-Corporate Controller
- -------------------------- (Principal Accounting Officer)
Jeffrey B. Park
/s/ Frank E. Babb Director
- --------------------------
Frank E. Babb
/s/ Norman H. Brown Jr. Director
- --------------------------
Norman H. Brown Jr.
/s/ Harve A. Ferrill Director
- --------------------------
Harve A. Ferrill
/s/ John E. Goodenow Director
- --------------------------
John E. Goodenow
/s/ David B. Hawkins Director
- --------------------------
David B. Hawkins
/s/ John Hawkinson Director
- --------------------------
John Hawkinson
/s/ Warren J. Hayford Director
- --------------------------
Warren J. Hayford
/s/ Richard S. Levitt Director
- --------------------------
Richard S. Levitt
/s/ Ralph L. MacDonald Jr. Director
- --------------------------
Ralph L. MacDonald Jr.
/s/ Thomas H. Stoner Director
- --------------------------
Thomas H. Stoner
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1994
<PERIOD-END> SEP-30-1994
<CASH> 17,400
<SECURITIES> 0
<RECEIVABLES> 121,800
<ALLOWANCES> 3,700
<INVENTORY> 59,600
<CURRENT-ASSETS> 206,700
<PP&E> 917,400
<DEPRECIATION> 324,500
<TOTAL-ASSETS> 843,100
<CURRENT-LIABILITIES> 135,100
<BONDS> 711,300
<COMMON> 170,500
0
0
<OTHER-SE> (194,300)
<TOTAL-LIABILITY-AND-EQUITY> (23,800)
<SALES> 784,400
<TOTAL-REVENUES> 784,400
<CGS> 691,400
<TOTAL-COSTS> 772,400
<OTHER-EXPENSES> 96,000
<LOSS-PROVISION> 9,900
<INTEREST-EXPENSE> 80,300
<INCOME-PRETAX> (84,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (84,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (84,000)
<EPS-PRIMARY> (1.57)
<EPS-DILUTED> (1.57)
</TABLE>
