FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT AS UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 AS AMENDED AND RESTATED
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
For Quarter Ended March 31, 1995 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
Telephone: (708) 405-5500
(Address, including zip code, and telephone number, including
area code, of registrant's principal offices)
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 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
As of May 8, 1995, the registrant had outstanding 48,756,196 shares
(including 31,845,533 shares held in trust for the benefit of the warrant
holders) of its $0.0001 par value Class A Common Stock, 31,845,533 redeemable
exchangeable warrants and 5,266,273 shares of its $0.0001 par value Class B
Common Stock. One share of Class B Common Stock is convertible into one share
of Class A Common Stock at the option of the holder thereof.
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PAGE
PART I. FINANCIAL INFORMATION NUMBERS
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Item 1. Financial Statements 1 - 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 7 - 12
PART II. OTHER INFORMATION
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Item 1. Legal Proceedings. 13
Item 2. Changes in Securities. 13
Item 3. Defaults Upon Senior Securities. 13
Item 4. Submission of Matters to a Vote of Security Holders. 13 - 14
Item 5. Other Information. 14
Item 6. Exhibits and Reports on Form 8-K. 14
SIGNATURES 15
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GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
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CONDENSED CONSOLIDATED BALANCE SHEETS,
MARCH 31, 1995 AND SEPTEMBER 30, 1994
- --------------------------------------------------------------------------------
MARCH 31, SEPTEMBER 30,
1995 1994
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ASSETS (In millions)
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CURRENT ASSETS:
Cash and equivalents $ 28.3 $ 17.4
Trade receivables (less allowances of
$5.1 million and $3.7 million, respectively) 135.7 121.8
Inventories (Note 2) 78.7 59.6
Other current assets 14.3 7.9
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Total current assets 257.0 206.7
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PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, at cost 986.0 917.4
Less accumulated depreciation 350.7 324.5
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Property - Net (Note 3) 635.3 592.9
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OTHER ASSETS 41.3 43.5
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TOTAL $ 933.6 $ 843.1
===== =====
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Current maturities of long-term debt (Note 5) $ 41.2 $ 14.5
Trade payables 62.9 58.6
Accrued and other liabilities 70.6 62.0
----- -----
Total current liabilities 174.7 135.1
----- -----
LONG-TERM DEBT (Note 5) 714.6 696.8
OTHER LONG-TERM LIABILITIES 23.1 30.7
DEFERRED INCOME TAXES 4.3 4.3
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY:
Class A common stock - par value, $.0001 per share;
authorized 125,000,000 shares; issued 48,750,084
shares and 48,510,859 shares, respectively, and
outstanding 48,684,482 shares and 48,427,881
shares, respectively - -
Class B common stock - par value, $.0001 per share;
authorized 15,000,000 shares; issued and
outstanding 5,266,273 shares - -
Capital in excess of par value 171.7 170.5
Retained deficit (149.6) (188.9)
Common stock in treasury - at cost; 65,602 shares
and 82,978 shares, respectively (0.6) (0.8)
Recognition of minimum pension liability (4.6) (4.6)
----- -----
Total stockholders' equity (deficit) 16.9 (23.8)
----- -----
TOTAL $ 933.6 $ 843.1
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</TABLE>
See notes to condensed consolidated financial statements.
1
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GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED
MARCH 31, 1995 AND 1994 (In millions, except per share data)
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THREE MONTHS ENDED MARCH 31,
-----------------------------
1995 1994
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NET SALES $ 256.3 $ 182.5
COST OF GOODS SOLD 181.8 163.4
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GROSS MARGIN 74.5 19.1
SELLING AND ADMINISTRATIVE COSTS (23.9) (19.6)
NON-RECURRING OPERATING CHARGES (Note 1) - (2.1)
----- -----
OPERATING EARNINGS (LOSS) 50.6 (2.6)
INTEREST EXPENSE - Net (22.4) (19.9)
OTHER EXPENSE - Net - (0.1)
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EARNINGS (LOSS) BEFORE TAXES 28.2 (22.6)
INCOME TAXES (Note 4) 0.7 -
----- -----
NET INCOME (LOSS) 27.5 $ (22.6)
=====
RETAINED DEFICIT:
BEGINNING OF PERIOD (177.1)
-----
END OF PERIOD $(149.6)
=====
NET EARNINGS (LOSS) PER COMMON AND
COMMON EQUIVALENT SHARE $ 0.51 $ (0.42)
===== =====
AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 55.1 53.6
===== =====
</TABLE>
See notes to condensed consolidated financial statements.
2
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GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF INCOME FOR THE SIX MONTHS ENDED
MARCH 31, 1995 AND 1994 (In millions, except per share data)
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SIX MONTHS ENDED MARCH 31,
-----------------------------
1995 1994
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NET SALES $ 497.5 $ 366.4
COST OF GOODS SOLD 365.9 330.6
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GROSS MARGIN 131.6 35.8
SELLING AND ADMINISTRATIVE COSTS (47.9) (39.7)
NON-RECURRING OPERATING CHARGES (Note 1) - (2.1)
----- -----
OPERATING EARNINGS (LOSS) 83.7 (6.0)
INTEREST EXPENSE - Net (43.2) (39.4)
OTHER EXPENSE - Net (0.2) (0.2)
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EARNINGS (LOSS) BEFORE TAXES 40.3 (45.6)
INCOME TAXES (Note 4) 1.0 -
----- -----
NET INCOME (LOSS) 39.3 $ (45.6)
=====
RETAINED DEFICIT:
BEGINNING OF PERIOD (188.9)
-----
END OF PERIOD $(149.6)
=====
NET EARNINGS (LOSS) PER COMMON AND
COMMON EQUIVALENT SHARE $ 0.72 $ (0.85)
===== =====
AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 55.0 53.5
===== =====
</TABLE>
See notes to condensed consolidated financial statements.
3
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GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED
MARCH 31, 1995 AND 1994
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SIX MONTHS ENDED MARCH 31,
--------------------------
1995 1994
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(In millions)
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CASH FLOWS FROM OPERATIONS:
Net income (loss) $ 39.3 $(45.6)
Adjustments to reconcile net income (loss) to
net cash from operating activities:
Depreciation and amortization 31.6 30.6
Non-cash interest expense 22.6 20.0
Change in current assets and liabilities,
excluding acquisitions and dispositions (30.9) (11.7)
Acquisition restructuring expenditures (0.7) (1.7)
Other - net (1.9) 3.3
---- ----
Net cash provided by (used for) operations 60.0 (5.1)
---- ----
CASH FLOWS FROM INVESTMENTS:
Capital expenditures (27.3) (13.5)
Capitalized interest (0.6) (0.3)
Proceeds from asset sales 1.9 4.5
Other investments - net (2.2) 2.4
---- ----
Net cash used for investments (28.2) (6.9)
---- ----
CASH FLOWS FROM FINANCING:
Senior debt - repayments (21.7) (2.7)
Other financing - net 0.8 0.1
---- ----
Net cash used for financing (20.9) (2.6)
---- ----
Net increase (decrease) in cash and equivalents 10.9 (14.6)
Cash and equivalents, beginning of period 17.4 27.6
---- ----
Cash and equivalents, end of period $ 28.3 $ 13.0
==== ====
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for:
Interest expense $ 18.5 $ 17.9
Income taxes $ 0.6 $ -
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES (Note 3):
Property additions $ 43.4 $ -
Increase in total debt $ 43.4 $ -
</TABLE>
See notes to condensed consolidated financial statements.
4
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GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
1. GENERAL
-------
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements include all normal and recurring
adjustments and accruals necessary to present fairly the financial position
as of March 31, 1995 and the results of operations for the three and six
months ended March 31, 1995 and 1994 and cash flows for the six months ended
March 31, 1995 and 1994, including all the accounts of Gaylord Container
Corporation (including its subsidiaries, the Company), and are in conformity
with Securities and Exchange Commission Rule 10-01 of Regulation S-X. In
addition to the normal and recurring adjustments and accruals, for the three
and six months ended March 31, 1995, the Company recognized a non-recurring
operating charge of $2.1 million for a loss on the sale and costs associated
with the disposition of a corrugated container plant. Certain amounts in
the statements of income and cash flows for fiscal 1994 have been
reclassified to conform with the current-year presentation. The financial
statements should be read in conjunction with the audited consolidated
financial statements and the notes thereto on Form 10-K for the fiscal year
ended September 30, 1994.
On October 1, 1994, the Company adopted Financial Accounting Standard No.
112, "Employers' Accounting for Postemployment Benefits" (FAS 112). In
general, the Company does not provide post-employment benefits to its
employees; however, in certain limited circumstances the Company could be
liable for post-employment benefits. The Company believes the occurrence of
such circumstances is not probable and therefore, pursuant to the provisions
of FAS 112, the Company did not recognize a liability for post-employment
benefits.
2. INVENTORIES
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MARCH 31, SEPTEMBER 30,
1995 1994
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(In millions)
Inventories consist of:
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Finished products $16.4 $13.0
In process 59.9 38.7
Raw materials 9.7 8.6
Supplies 9.8 9.6
---- ----
Total 95.8 69.9
LIFO valuation adjustment (17.1) (10.3)
---- ----
Total $78.7 $59.6
==== ====
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3. PROPERTY - NET
--------------
Property additions in the first six months of fiscal 1995 totaled $71.3
million. The Company financed $43.4 million of such additions through
capital leases and debt obligations secured by those assets.
4. INCOME TAXES
------------
In general, the Company has regular and Alternative Minimum Tax (AMT)
operating loss carryforwards that exceed its projected earnings for fiscal
5
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GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
- ----------------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)
- -----------------------------------------------------------------------------
1995. The Company recorded a current tax provision of $0.7 million and $1.0
million, respectively, for the three months and six months ended March 31,
1995 primarily because Internal Revenue Service regulations limit the use of
AMT operating loss carryforwards to 90 percent of the AMT.
5. SUBSEQUENT EVENT
----------------
During April 1995, the Company prepaid $25 million under the term loan
portion of its bank credit agreement. The prepayment will reduce future
quarterly amortization payments, which will commence in July 1995, by
approximately $2.3 million to approximately $5.6 million.
6
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
Second Quarter of Fiscal 1995 Compared with Second Quarter of Fiscal 1994.
Net sales for the second quarter of fiscal 1995 were a record $256.3
million, an increase of approximately 40 percent compared with net sales of
$182.5 million for the second quarter of fiscal 1994. Operating earnings
for the quarter were $50.6 million compared with an operating loss of $2.6
million for the year-ago quarter, which included $2.1 million of
non-recurring operating charges for costs associated with the sale of a
corrugated container plant. Net income for the current quarter was $27.5
million, or $0.51 per share, versus a net loss of $22.6 million, or $0.42
per share, in the second quarter of fiscal 1994.
Sales and earnings in the second quarter of fiscal 1995 benefited from
significantly higher average selling prices for the Company's products
versus the second quarter of fiscal 1994. Higher average selling prices
increased operating earnings by almost $82 million compared with the
prior-year quarter. The price increases were realized due to low industry
inventories and strong domestic and export demand.
The Company implemented a $50 per ton increase for linerboard and
corresponding price increases for corrugated products in the second quarter
of fiscal 1995, which brought total linerboard price increases since October
1993 to $185 per ton. Average selling prices for the Company's domestic
linerboard, export linerboard and corrugated products increased
approximately 58 percent, 81 percent and 33 percent, respectively, in the
second quarter of fiscal 1995 compared with the prior-year quarter. The
Company implemented a $50 per ton increase for unbleached kraft paper and
corresponding increases for converted products in the second quarter of
fiscal 1995. Average selling prices for the Company's unbleached kraft
paper, grocery bags and sacks and multiwall bags in the second quarter of
fiscal 1995 increased approximately 57 percent, 98 percent and 5 percent,
respectively, compared with the year-ago period.
Higher volume increased operating earnings for the second quarter of fiscal
1995 by approximately $3 million. The volume variance includes the benefit
of fixed costs eliminated with the sale or closure of two corrugated
container plants in fiscal 1994, net of incremental fixed operating costs
associated with capital investments to expand capacity in the Company's
other converting operations. Containerboard production in the current
quarter of 3,376 tons per day (TPD, calculated on the basis of the number of
days in the period) increased slightly from 3,356 TPD in the prior-year
quarter, despite approximately three days of scheduled maintenance down time
taken at the Company's Antioch, California mill in the second quarter of
fiscal 1995. Unbleached kraft paper production increased approximately 15
percent to 775 TPD from 675 TPD in the second quarter of fiscal 1994
primarily due to the temporary idling of one paper machine at the Company's
Bogalusa, Louisiana mill as a result of market conditions in the second
quarter of fiscal 1994. In total, mill production increased approximately 3
percent quarter-over-quarter.
Corrugated shipments of approximately 3.0 billion square feet were down
approximately 3 percent when compared to the prior-year quarter; however,
shipments for the year-ago quarter include those from the two corrugated
7
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container plants that were subsequently closed or sold. Adjusting for the
prior-year shipments from these plants, corrugated shipments increased
approximately 4 percent quarter-over-quarter. Multiwall bag shipments of
14.3 thousand tons increased approximately 8 percent when compared with the
year-ago quarter's shipments of 13.2 thousand tons, primarily as a result of
increased production from the Company's existing facilities and the start up
of the Company's Twinsburg, Ohio facility in fiscal 1995. Grocery bag and
sack shipments decreased to 24.3 thousand tons versus shipments of 30.6
thousand tons in the year-ago quarter. This decline was primarily due to
reduced shipments of standard grocery sacks as a result of greater
displacement by plastic bags as prices for grocery sacks increased.
Gross margin as a percentage of net sales for the second quarter of fiscal
1995 increased to 29.1 percent from 10.5 percent in the prior-year quarter
primarily due to significantly higher selling prices for the Company's
products. The margin improvement was partially offset by increased fiber
costs (primarily the cost of old corrugated containers (OCC)), which
adversely affected operating earnings by approximately $22 million. The
Company's average delivered cost of OCC increased approximately $110 per ton
in the second quarter of fiscal 1995 compared with the year-ago quarter.
Selling and administrative costs of $23.9 million for the second quarter of
fiscal 1995 were $4.3 million higher than the prior-year quarter primarily
as a result of increased incentive compensation costs related to improved
profitability.
Net interest expense increased from the prior-year quarter by $2.5 million
to $22.4 million in the second quarter of fiscal 1995 primarily due to
accretion of the discount on subordinated debt, interest on new capital
leases and higher interest rates.
In general, the Company has regular and Alternative Minimum Tax (AMT)
operating loss carryforwards that exceed its projected earnings for fiscal
1995. The Company recorded a current tax provision of $0.7 million in the
second quarter of fiscal 1995 primarily because Internal Revenue Service
regulations limit the use of AMT operating loss carryforwards to 90 percent
of the AMT.
First Six Months of Fiscal 1995 Compared with First Six Months of Fiscal
1994.
Net sales for the first six months of fiscal 1995 were $497.5 million,
approximately 36 percent higher than net sales of $366.4 million for the
first six months of fiscal 1994. Operating earnings for the current period
were $83.7 million compared with an operating loss of $6.0 million for the
year-ago period, which included $2.1 million of non-recurring operating
charges for costs associated with the sale of a corrugated container plant.
Net income reached $39.3 million for the first six months of fiscal 1995, or
$0.72 per share, versus a net loss of $45.6 million, or $0.85 per share, in
the first six months of fiscal 1994.
Sales and earnings in the first six months of fiscal 1995 benefited from
significantly higher average selling prices for the Company's products
compared to the prior-year period. Higher average selling prices increased
operating earnings by approximately $132 million compared with the year-ago
period. The price increases were realized due to low industry inventories
and strong domestic and export demand.
8
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The Company implemented price increases in fiscal 1995 of $40 per ton in the
first quarter and $50 per ton in the second quarter for linerboard and
unbleached kraft paper and corresponding price increases for converted
products. Average selling prices for the Company's domestic
linerboard, export linerboard and corrugated products increased
approximately 48 percent, 72 percent and 27 percent, respectively, in the
first six months of fiscal 1995 compared with the year-ago period. Average
selling prices for the Company's unbleached kraft paper, grocery bags and
sacks and multiwall bags in the first six months of fiscal 1995 increased
approximately 44 percent, 71 percent and 3 percent, respectively, compared
with the year-ago period.
Higher volume increased operating earnings for the first six months of
fiscal 1995 by approximately $10 million. The volume variance includes the
benefit of fixed costs eliminated with the sale or closure of two corrugated
container plants in fiscal 1994, net of incremental fixed operating costs
associated with capital investments to expand capacity in the Company's
other converting operations. Containerboard production in the first six
months of fiscal 1995 was unchanged from the prior-year period at 3,247 TPD.
This was despite additional down time taken at the Bogalusa mill to install
an extended nip press on a linerboard machine in the first quarter of fiscal
1995 and three days of scheduled maintenance down time at the Antioch mill
in the second quarter of fiscal 1995. Unbleached kraft paper production
increased approximately 14 percent to 787 TPD from 693 TPD in the first six
months of fiscal 1994 primarily due to the temporary idling of one paper
machine at the Bogalusa mill as a result of market conditions in the second
quarter of fiscal 1994. In total, mill production increased approximately 2
percent period-over-period.
Corrugated shipments of approximately 6.2 billion square feet were down
approximately 2 percent in the first six months of fiscal 1995 compared to
the year-ago period; however, shipments for the year-ago period include
production from the two corrugated container plants that were subsequently
closed or sold. Adjusting for the prior-year shipments from these plants,
corrugated shipments increased approximately 6 percent in the current
period. Multiwall bag shipments of 28.0 thousand tons increased
approximately 11 percent compared with the year-ago period's shipments of
25.3 thousand tons primarily as a result of increased production from the
Company's existing facilities and the start up of the Twinsburg, Ohio
facility in fiscal 1995. Grocery bag and sack shipments decreased to 56.4
thousand tons versus shipments of 64.4 thousand tons in the first six months
of fiscal 1994. This decline was primarily due to reduced shipments of
standard grocery sacks as a result of greater displacement by plastic bags
as prices for grocery sacks increased.
Gross margin as a percentage of net sales for the first six months of fiscal
1995 increased to 26.5 percent from 9.8 percent in the prior-year period.
The margin improvement, primarily due to significantly higher selling prices
for the Company's products, was partially offset by increased fiber costs
(primarily the cost of OCC) which adversely affected operating earnings by
approximately $34 million. The Company's average delivered cost of OCC
increased approximately $85 per ton in the first six months of fiscal 1995
compared with the year-ago period. Selling and administrative costs of
$47.9 million for the first six months of fiscal 1995 were $8.2 million
higher than the prior-year primarily as a result of increased incentive
compensation costs related to improved profitability.
9
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Net interest expense increased from the prior-year period by $3.8 million to
$43.2 million in the first six months of fiscal 1995 primarily due to
accretion of the discount on subordinated debt, interest on new capital
leases and higher interest rates.
In general, the Company has regular and AMT operating loss carryforwards
that exceed its projected earnings for fiscal 1995. The Company recorded a
current tax provision of $1.0 million in the first six months of fiscal 1995
primarily because Internal Revenue Service regulations limit the use of AMT
operating loss carryforwards to 90 percent of the AMT.
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 the first six months of fiscal 1995 was
$60.0 million, compared with cash used by operations of $5.1 million a year
ago. The favorable comparison to the prior-year period was primarily due to
significantly higher selling prices for the Company's products.
Capital expenditures of $27.3 million in the first six months of fiscal 1995
increased by $13.8 million from $13.5 million in the first six months of
fiscal 1994. In addition to the $27.3 million of capital spending, the
Company acquired $43.4 million of equipment financed by capital leases and
debt obligations secured by those assets. 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 certain capital
projects depending upon industry conditions. If industry conditions remain
strong, the Company may accelerate certain capital projects. The Company
plans to finance the remainder of the five-year capital plan primarily with
cash provided by operations or debt obligations secured by the assets
acquired.
At the end of fiscal 1992, the Company determined it would be unlikely that
its Antioch, California virgin fiber mill (the East Mill), which was closed
in fiscal 1991, could be sold as a mill site or that the East Mill, or some
portion thereof, could be operated economically by the Company. The Company
believed and continues to believe that the most likely outcome will be the
sale of individual assets and the subsequent demolition of the remaining
structures on the mill site. For the six months ended March 31, 1995, the
Company incurred approximately $0.5 million of costs to maintain the East
Mill. Demolition of the remaining structures on the mill site will require
the Company to incur costs for asbestos removal. The Company has deferred
incurring the cost for demolition and asbestos removal until all
uncertainties regarding disposition of the mill assets have been resolved.
At March 31, 1995, accruals for demolition and asbestos removal were
approximately $6.0 million and $15.3 million, respectively.
10
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In fiscal 1994, the Company recognized non-recurring operating charges of
$15.5 million. 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 (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. For
the six months ended March 31, 1995, the Company charged approximately $2.3
million of costs associated with the fiscal 1994 non-recurring operating
charges to balance sheet accruals. At March 31, 1995, the Company had
accruals for such costs of $9.4 million and anticipates incurring
substantially all of the remaining costs (approximately $6.0 million of
which are for non-cash equipment abandonments) by the end of fiscal 1995.
In addition, the Company has remaining accruals of approximately $1.2
million (primarily for lease termination costs) related to non-recurring
operating charges recognized in previous years and anticipates incurring
such costs ratably over the next two and one-half years.
Liquidity
At March 31, 1995, the Company had cash and equivalents of $28.3 million, an
increase of $10.9 million from September 30, 1994 as cash provided by
operations exceeded cash used for investments and financing. Total debt
increased by $44.5 million to $755.8 million at March 31, 1995 from $711.3
million at September 30, 1994. The increase in total debt was due to
capital leases or secured financing associated with the capital plan
described above and accretion of the discount on subordinated debt,
partially offset by a $10 million prepayment under the term loan portion of
the Company's bank credit agreement. The Company has made debt reduction a
priority; therefore, subsequent to the end of the second quarter, the
Company prepaid an additional $25 million under the term-loan portion of its
bank credit agreement. If industry conditions remain strong, the Company
intends to use future excess cash flow to prepay debt. At March 31, 1995,
the Company had no amounts outstanding and approximately $127 million of
credit available under the revolving portions of its credit agreements. The
Company's use of approximately $17 million of its credit availability is
restricted in that if such amount is drawn the Company is required to use
such proceeds to prepay quarterly installments under the term loan portion
of its bank credit agreement in order of maturity.
The Company implemented price increases in fiscal 1995 of $40 per ton in the
first quarter and $50 per ton in the second quarter for linerboard and
unbleached kraft paper and corresponding price increases for converted
products. Effective April 3, 1995, the Company increased linerboard and
unbleached kraft paper prices an additional $50 per ton and is implementing
corresponding increases for converted products. 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 any future price
increases will be realized or that existing price levels will be sustained.
The effect of higher product prices has been partially offset by increased
fiber costs, particularly the cost of OCC, which began to escalate in
January 1994 and peaked in July 1994. After a decline during the fall of
1994, costs escalated and now exceed previous highs. From January 1994 to
March 1995, OCC costs nearly tripled. The secondary fiber market continues
to be volatile and difficult to predict, and there can be no assurance what
direction OCC costs will take in the future.
11
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Based upon April 1995 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.
12
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
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 May 1994 in Cook County (Illinois)
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's
financial position, results of operations or cash flows.
Item 2. Changes in Securities.
Not applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
On February 8, 1995, the Company held its annual meeting of
stockholders at which the following issues were put to a vote by
holders of the Company's Class A common stock and Class B common
stock voting together as a single class and entitled to 1 vote per
share and 10 votes per share, respectively:
The Company's Class B Directors were elected by the following vote:
<TABLE>
<CAPTION>
For Withheld
--- --------
<S> <C> <C>
John E. Goodenow 97,490,571 132,356
David B. Hawkins 97,490,571 132,356
John Hawkinson 97,484,571 138,356
Warren J. Hayford 97,489,571 133,356
Richard S. Levitt 97,490,571 132,356
Ralph L. MacDonald Jr. 97,490,571 132,356
Marvin A. Pomerantz 97,489,771 133,156
Thomas H. Stoner 97,490,571 132,356
</TABLE>
13
<PAGE>
PART II. OTHER INFORMATION - CONCLUDED
The increase in the number of shares of the Company's Class A
Common Stock available under the Gaylord Container Corporation 1989
Long-Term Incentive Plan was approved by a vote of 91,980,506 for;
5,554,513 against; 87,908 withheld.
The appointment of Deloitte & Touche LLP to continue to serve as
the Company's independent auditors in fiscal 1995 was ratified by a
vote of 97,491,691 for; 87,591 against; 43,645 withheld.
Item 5. Other Information.
On April 28, 1995, the Company mailed a Notice of Special Exercise
of Redeemable Exchangeable Warrants and a copy of the Warrant
Agreement to registered holders of such Warrants, pursuant to the
terms of the Warrant Agreement.
Item 6. Exhibits and Reports on Form 8-K.
Number and Description of Exhibit
a) 4.1(a) Fourth Amendment to Amended and Restated Credit
Agreement dated as of January 31, 1995 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
4.2(a) Notice of Special Exercise of Redeemable Exchangeable
Warrants (CUSIP No. 368145 11 6) of Gaylord Container
Corporation
4.3(b) Warrant Agreement between the Registrant and Harris
Trust 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
27.1(a) Financial Data Schedule
b) Not applicable.
- --------------------------------------------------------------------------
(a) Filed with this Quarterly Report.
(b) Incorporated by reference.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
GAYLORD CONTAINER CORPORATION
Date: May 10, 1995 /s/ Marvin A. Pomerantz
-----------------------------
Marvin A. Pomerantz
Chairman and Chief Executive Officer
Date: May 10, 1995 /s/ Jeffrey B. Park
-----------------------------
Jeffrey B. Park
Vice President-Controller
(Principal Accounting Officer)
15
FOURTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
This Fourth Amendment to Amended and Restated Credit
Agreement (this "Amendment") is dated as of January 31, 1995 and is
made among Gaylord Container Corporation, a Delaware corporation
(the "Borrower"), the undersigned financial institutions in their
capacities as lenders (collectively, the "Banks"), Bankers Trust
Company, as both agent (the "Agent") and co-manager for the Banks,
and Wells Fargo Bank, National Association, as co-manager for the
Banks.
W I T N E S S E T H:
WHEREAS, the Borrower, the Banks, the Agent and the co-
managers are parties to that certain Amended and Restated Credit
Agreement dated as of July 31, 1992 (as amended, modified or
supplemented and in effect from time to time, the "Credit
Agreement") pursuant to which the Banks have provided to the
Borrower certain term and revolving credit facilities; and
WHEREAS, the Borrower has requested that the Banks amend
the Credit Agreement in certain respects set forth herein and the
Banks, the Agent and the co-managers are agreeable to the same,
subject to the terms and conditions hereof;
NOW, THEREFORE, in consideration of the premises and of
the mutual covenants contained herein, and other good and valuable
consideration the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Definitions. Terms capitalized herein and not
otherwise defined herein are used with the meanings ascribed to
such terms in the Credit Agreement.
2. Amendment of Credit Agreement. The Credit Agreement
is hereby amended, effective on the Fourth Amendment Effective
Date, as follows:
(a) New Definitions Added to Section 1.1. Section 1.1 of the
Credit Agreement is amended by the addition thereto of the
following additional definitions in their respective proper
alphabetical places:
"Fourth Amendment" means that certain Fourth Amendment to
Amended and Restated Credit Agreement dated as of January 31,
1995, by and among the Borrower, the Required Banks, the Agent
and the Co-Managers.
"Fourth Amendment Effective Date" means the date upon
which each of the conditions precedent set forth in Section 4
of the Fourth Amendment has been either met to the
satisfaction of the Agent and the Required Banks or waived by
the Required Banks.
<PAGE>
(b) Amended Definition. The Definition of "Permitted
Investments" is hereby amended by amending and restating clause
(ix) thereof in its entirety as follows:
(ix) (A) arrangements described in items 17, 18 and 19 of
Schedule 1.1(c), subject to the limitations set forth therein
with respect to such items 17, 18 and 19; and (B) purchases of
capital stock or notes receivable of or contributions of
capital to or other equity investments in one or more
corporations (other than the Borrower), limited liability
companies, partnerships or joint ventures; provided, however
that the aggregate value of all cash, cash equivalents and
other property used to make such purchases or contributions or
other equity investments shall not exceed $25 million, and
provided further that (1) the aggregate value of all such
purchases, contributions to capital and other equity
investments made in cash or cash equivalents shall not exceed
$10 million; and (2) any such purchases, contributions to
capital and other equity investments made in property of the
Borrower shall be made solely with machinery and/or equipment
and/or other property which Borrower has determined in good
faith is outdated, obsolete or no longer used in the
Borrower's business and operations;
3. Borrower's Representations and Warranties. In order
to induce the Agent, the co-managers and the Banks to enter into
this Amendment, the Borrower hereby represents and warrants to the
Agent, the co-managers and the Banks that:
(i) the Borrower has the right, power and capacity and
has been duly authorized and empowered by all requisite
corporate and shareholder action to enter into, execute,
deliver and perform this Amendment;
(ii) this Amendment constitutes the Borrower's legal,
valid and binding obligation, enforceable against it, except
as enforcement thereof may be subject to the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights generally and
general principles of equity (regardless of whether such
enforcement is sought in a proceeding in equity or at law or
otherwise);
(iii) the Borrower's execution, delivery and performance
of this Amendment do not and will not violate its Certificate
of Incorporation or By-laws, any law, rule, regulation, order,
writ, judgment, decree or award applicable to it or any
contractual provision to which it is a party or to which it or
any of its property is subject;
(iv) no authorization or approval or other action by, and
no notice to or filing or registration with, any governmental
authority or regulatory body (other than those which have been
-2-
<PAGE>
obtained and are in force and effect) is required in
connection with its execution, delivery and performance of
this Amendment; and
(v) No Event of Default or Unmatured Event of Default
exists as of the date hereof under the Credit Agreement or
would exist after giving effect to the transactions
contemplated by this Amendment.
4. Conditions to Fourth Amendment's Effectiveness. The
effectiveness of this Amendment is specifically subject to the
satisfaction of the following conditions precedent or concurrent:
(a) No Defaults. No Unmatured Event of Default or Event
of Default under the Credit Agreement (as amended hereby)
shall have occurred and be continuing.
(b) Warranties and Representations. The warranties and
representations of the Borrower contained in this Amendment
and in the Credit Agreement (as amended hereby) shall be true
and correct in all material respects as of the effective date
hereof, with the same effect as though made on such date,
except to the extent that any such warranty or representation
relates to an earlier date, in which case such warranty or
representation shall be true and correct in all material
respects as of such earlier date.
(c) Deliveries. The Borrower shall deliver to the Banks
and the Agent an executed copy of this Amendment and a
certificate of an officer of the Borrower to the effect that
the conditions set forth in clauses (a) and (b) above are each
satisfied.
5. MISCELLANEOUS. The parties hereto hereby further
agree as follows:
(a) Further Assurances. Each of the parties hereto
hereby agrees to take such further actions and to execute, deliver
and acknowledge such additional agreements, powers and instruments
as any other party hereto may reasonably require to carry into
effect the purposes of this Amendment.
(b) Costs, Expenses and Taxes. The Borrower hereby
agrees to pay all reasonable fees, costs and expenses of the Agent
incurred in connection with the negotiation, preparation and
execution of this Amendment and the transactions contemplated
hereby, including, without limitation, the reasonable fees and
expenses of Winston & Strawn, counsel to the Agent and the Banks.
(c) Counterparts. This Amendment may be executed in one
or more counterparts, each of which, when executed and delivered,
shall be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same document with
-3-
<PAGE>
the same force and effect as if the signatures of all of the
parties were on a single counterpart, and it shall not be necessary
in making proof of this Amendment to produce more than one (1) such
counterpart.
(d) Headings. Headings used in this Amendment are for
convenience of reference only and shall not affect the construction
of this Amendment.
(e) Integration. This Amendment and the Credit
Agreement (as amended hereby) constitute the entire agreement among
the parties hereto with respect to the subject matter hereof.
(f) Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS
AND DECISIONS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO
CONFLICT OF LAWS PRINCIPLES).
(g) Binding Effect. This Amendment shall be binding
upon and inure to the benefit of and be enforceable by the
Borrower, the Agent, the co-managers and the Banks and their
respective successors and assigns; provided, however, that the
Borrower may not assign or transfer any of its rights, interests or
obligations hereunder without the prior written consent of the
Required Banks. Except as expressly set forth to the contrary
herein, this Amendment shall not be construed so as to confer any
right or benefit upon any Person other than the Borrower, the
Agent, the co-managers and the Banks and their respective
successors and permitted assigns.
(h) Amendment; Waiver. The parties hereto agree and
acknowledge that nothing contained in this Amendment in any manner
or respect limits or terminates any of the provisions of the Credit
Agreement or any of the other Basic Agreements other than as
expressly set forth herein and further agree and acknowledge that
the Credit Agreement (as amended hereby) and each of the other
Basic Agreements remain and continue in full force and effect and
are hereby ratified and confirmed. Except to the extent expressly
set forth herein, the execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any rights, power or
remedy of the Banks, the Agent or the co-managers under the Credit
Agreement or any other Basic Agreement, nor constitute a waiver of
any provision of the Credit Agreement or any other Basic Agreement.
No delay on the part of any Bank, the Agent or the co-managers in
exercising any of their respective rights, remedies, powers and
privileges under the Credit Agreement or any of the Basic
Agreements or partial or single exercise thereof, shall constitute
a waiver thereof. None of the terms and conditions of this
Amendment may be changed, waived, modified or varied in any manner,
whatsoever, except in accordance with Section 9.1 of the Credit
Agreement.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
agreement to be executed by their respective officers thereunto
duly authorized, as of the date first written above.
GAYLORD CONTAINER CORPORATION
By: /s/ Jeffrey B. Park
-----------------------------------
Title: Vice President, Corp. Controller
--------------------------------
BANKERS TRUST COMPANY, in its individual
capacity, as Agent and as Co-Manager
By: /s/ Robert R. Telesca
------------------------------------
Title: Asst. Vice President
---------------------------------
WELLS FARGO BANK, NATIONAL
ASSOCIATION, in its individual
capacity and as Co-Manager
By: /s/ Brian S. O'Melveny
------------------------------------
Title: Asst. Vice President
---------------------------------
NATIONSBANK OF NORTH CAROLINA, N.A.
By: /s/ Michael O. Lincoln
-------------------------------------
Title: Senior Vice President
---------------------------------
HARRIS TRUST AND SAVINGS BANK
By: /s/ Sharon K. Dickey
------------------------------------
Title: Vice President
---------------------------------
BANKERS TRUST (DELAWARE)
By: /s/ Donna Mitchell
-------------------------------------
Title: Vice President
----------------------------------
-5-
<PAGE>
BARCLAYS BANK PLC
By: /s/ John C. Livingston
-------------------------------------
Title: Vice President
----------------------------------
CAISSE NATIONALE DE CREDIT AGRICOLE
By: /s/ Richard Manix
-------------------------------------
Title: First Vice President
----------------------------------
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Raymond Whiteman
-------------------------------------
Title: Vice President
----------------------------------
CREDIT LYONNAIS CAYMAN ISLAND BRANCH
By: /s/ Raymond Whiteman
-------------------------------------
Title: Vice President
----------------------------------
LEHMAN COMMERCIAL PAPER, INC.
By: /s/ Christopher Ryan
-------------------------------------
Title: Authorized Signatory
----------------------------------
PRIME INCOME TRUST
By: /s/ Rafael Scolari
--------------------------------------
Title: Vice President
----------------------------------
-6-
<PAGE>
PILGRIM PRIME RATE TRUST
By: /s/ Michael D. Hatley
-------------------------------------
Title: Assistant Portfolio Manager
----------------------------------
-7-
NOTICE OF SPECIAL EXERCISE
OF
REDEEMABLE EXCHANGEABLE WARRANTS
(CUSIP No. 368145 11 6)
OF
GAYLORD CONTAINER CORPORATION
April 28, 1995
To the Registered Holder of Gaylord Container
Corporation Redeemable Exchangeable Warrants:
The purpose of this notice is to provide certain information to Registered
Holders of the Redeemable Exchangeable Warrants (the "Warrants") of Gaylord
Container Corporation (the "Company") issued pursuant to the Warrant Agreement
(the "Agreeement") dated November 2, 1992 between the Company and Harris Trust
and Savings Bank (the "Warrant Agent"). A copy of the Agreement is enclosed
with this notice. As of April 28, 1995, there were 31,845,533 Warrants issued
and outstanding.
The Agreement provides that each Warrant is exercisable commencing on July
31, 1996 into one share of the Company's Class A Common Stock (the "Class A
Common"). Section 18 of the Agreement allows each Registered Holder the
opportunity to exercise a portion of such holder's Warrants earlier than July
31, 1996 pursuant to a special exercise on July 31, 1995 (the "Special
Exercise"). This Special Exercise is available only to a Registered Holder of
two or more Warrants as of June 30, 1995 who continues to hold such Warrants
through July 31, 1995. Registered Holders can surrender for Special Exercise on
or before Friday, July 14, 1995 (in the manner described below) all or any
portion of the Warrants held as of June 30, 1995 (but in no event less than two
Warrants). Registered Holders will have no right to withdraw Warrants
surrendered for Special Exercise.
Each Registered Holder who participates in the Special Exercise will be
entitled to exercise a number of Warrants equal to the total number of Warrants
surrendered for Special Exercise by such holder multiplied by the 1995 Exercise
Fraction (as defined In Section 18 of the Agreement and described below). The
1995 Exercise Fraction (which will not be greater than one-half under any
circumstances) will not be determined until July 31, 1995. The operation of
the 1995 Exercise Fraction should be taken into account by Registered Holders
in determining the number of Warrants for which Special Exercise is elected.
Registered Holders will receive one share of Class A Common for each Warrant
exercised.
The "1995 Exercise Fraction" means a fraction, the denominator of which
is approximately 31.8 million (the aggregate number of Warrants issued) and
the numerator of which is approximately 15.9 million (one-half of such Warrants)
minus the number of Warrants, if any, redeemed by the Company prior to July 31,
1995. To date, the Company has not redeemed any Warrants.
<PAGE>
If no redemptions occur prior to July 31, 1995, Registered Holders who
properly surrender their Warrants for Special Exercise will be entitled to
exercise one-half (i.e., 15.9/31.8) of the Warrants surrendered. Under this
scenario, a Registered Holder of 10,000 Warrants on June 30, 1995, who timely
surrendered all 10,000 Warrants for Special Exercise and who continued to hold
all 10,000 Warrants through July 31, 1995 would be entitled to exercise 5,000
of such Warrants on July 31, 1995 and receive 5,000 shares of Class A Common in
exchange therefor. The remaining 5,000 Warrants, which were not exercised,
would be returned to the Registered Holder.
If the Company redeems any portion of the Warrants prior to the Special
Exercise date (July 31, 1995) through an "Optional Redemption" described in
Section 10 of the Agreement, the number of shares redeemed will affect the 1995
Exercise Fraction by reducing the numerator of the 1995 Exercise Fraction by
that number and, therefore, reducing the entire fraction. Such a redemption
would reduce the number of Warrants that can be exercised in the Special
Exercise and, consequently, the number of shares of Class A Common to be
delivered in the Special Exercise. For example, if the Company were to
redeem 25 percent (or approximately 7.95 million) of the outstanding Warrants
pursuant to an Optional Redemption prior to the Special Exercise date, the
1995 Exercise Fraction would be reduced to one-fourth (i.e., (15.9-7.95)/31.8).
Under this Optional Redemption scenario, a Registered Holder of 10,000 Warrants
would have had 2,500 Warrants redeemed (i.e., 25% of 10,000) and would have
7,500 Warrants remaining. If such Registered Holder subsequently elects to
participate in the Special Exercise and surrenders his remaining 7,500
Warrants for Special Exercise, the Registered Holder would be entitled to
exercise 1,875 of such Warrants on July 31, 1995 (i.e., one-fourth of 7,500)
and receive 1,875 shares of Class A Common in exchange therefor. The
remaining 5,625 Warrants, which were not exercised, would be returned to the
Registered Holder.
The scenarios described above are examples of actions that can be taken in
accordance with the terms of the Agreement which would affect the operation of
the Special Exercise. The Company may take other actions in accordance with the
Agreement which affect the operation of the Special Exercise. Registered
Holders are encouraged to review the terms of the Agreement, a copy of which
is enclosed.
In the event that the Company elects to make an Optional Redemption of
all or any of the Warrants prior to the Special Exercise date, each Registered
Holder will receive a notice specifying the number of Warrants to be redeemed,
as well as other information regarding the redemption. Under the terms of the
Agreement, Warrants called for Optional Redemption can no longer be exercised,
including pursuant to the Special Exercise.
2
<PAGE>
To participate in the Special Exercise, you must be a Registerd Holder of
Warrants for the period June 30, 1995 through July 31, 1995 and must surrender
to the Warrant Agent on or before 5:00 p.m., New York City time, on Friday, July
14, 1995 certificate(s) representing the Warrants for which you are electing the
Special Exercise. You must complete the section entitled "1995 Exercise
Subscription Form" on the reverse side of the certificate(s) (the middle
section) and deliver them to:
<TABLE>
<C> <C> <C>
If Delivered by Hand: By Overnight Courier: By Mail:
Harris Trust and Savings Bank Harris Trust and Savings Bank Harris Trust and Savings Bank
c/o Harris Trust Company c/o Harris Trust Company c/o Harris Trust Company
of New York of New York of New York
Receive Window 77 Water Street Wall Street Station
77 Water Street - 5th Floor 4th Floor P.O. Box 1010
New York, NY 10005 New York, NY 10005 New York, NY 10268-1010
</TABLE>
If you elect to surrender for Special Exercise less than all Warrants
represented by a certificate, specify such lesser number of Warrants in the
space provided in the first line of the 1995 Exercise Subscription Form on the
reverse side of the certificate. The number of shares of Class A Common you
will receive will be the number of Warrants so specified multiplied by the 1995
Exercise Fraction. If the first line of the 1995 Exercise Subscription Form is
left blank, the Registered Holder of such certificate will be deemed to have
surrendered for Special Exercise all Warrants represented by the surrendered
certificate. In the event that an Optional Redemption of Warrants by the
Company prior to the Special Exercise date reduces the number of Warrants
represented by a surrendered certificate, the Company will honor the
specified number of Warrants surrendered for Special Exercise (whether all or a
lesser number) up to the total number of remaining Warrants represented by the
surrendered certificate.
Following completion of the Special Exercise on July 31, 1995 (and not
later than August 15, 1995), each Registered Holder who participates in the
Special Exercise will receive from the Warrant Agent: (i) certificates
representing the number of shares of Class A Common to be delivered pursuant
to the Special Exercise, as described above, and (ii) certificates representing
the Warrants which were not exercised. In the event that the Warrant
certificates to be delivered would otherwise include a fraction of a Warrant,
the Company may issue fractional Warrants or may, pursuant to Section 11 of the
Agreement, instruct the Warrant Agent to pay to such Registered Holder an amount
in cash equal to the fraction of the Warrant otherwise deliverable multiplied
by $13.65 (the "Exchange Price" under the Agreement for the 1995 calendar year).
In the event that the Class A Common certificates to be delivered would
otherwise include a fraction of a share of Class A Common, the Company may issue
fractional shares of Class A Common or may, pursuant to Section 11 of the
Agreement, instruct the Warrant Agent to pay to such Registered Holder an
amount in cash equal to the fraction of the share of Class A Common otherwise
deliverable multiplied by $13.65.
3
<PAGE>
Please refer to the sections of the Agreement described herein for a more
detailed explanation of these provisions. Any questions or requests for
assistance may be directed to the Information Agent, Georgeson & Company Inc. at
800-223-2064. This letter and the enclosed copy of the Agreement shall serve
as the notice of rights of the Registered Holders of Warrants as required by
Section 18 of the Agreement.
HARRIS TRUST AND SAVINGS BANK,
as Warrant Agent
4
<PAGE>
The Information Agent for the Special Exercise is:
GEORGESON & COMPANY INC.
------------------------
Wall Street Plaza
New York, New York 10005
(212) 509-6240 (collect)
Banks and Brokers call collect (212) 440-9800
Call Toll Free: 1-800-223-2064
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> MAR-31-1995
<CASH> 28,300
<SECURITIES> 0
<RECEIVABLES> 135,700
<ALLOWANCES> 5,100
<INVENTORY> 78,700
<CURRENT-ASSETS> 257,000
<PP&E> 986,000
<DEPRECIATION> 350,700
<TOTAL-ASSETS> 933,600
<CURRENT-LIABILITIES> 174,700
<BONDS> 714,600
<COMMON> 171,700
0
0
<OTHER-SE> (154,800)
<TOTAL-LIABILITY-AND-EQUITY> 933,600
<SALES> 497,500
<TOTAL-REVENUES> 497,500
<CGS> 365,900
<TOTAL-COSTS> 413,800
<OTHER-EXPENSES> 200
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 43,200
<INCOME-PRETAX> 40,300
<INCOME-TAX> 1,000
<INCOME-CONTINUING> 39,300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39,300
<EPS-PRIMARY> .72
<EPS-DILUTED> .72
</TABLE>
