<PAGE>
SECURITIES AND EXCHANGE COMMISSION SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1996 or
-----------------------
[_] Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from to
------------- ------------
Commission file number 0-20231
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SPECIALTY PAPERBOARD, INC.
--------------------------
(Exact name of registrant as specified in its charter)
Delaware 82-0429330
- - -------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Brudies Road, Brattleboro, Vermont, 05302
-----------------------------------------
(Address of principal executive offices)
(802) 257-0365
--------------
(Registrant's telephone number, including area code)
- - --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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
---------- ----------
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock.
Class Outstanding
Common Stock June 30, 1996
$.001 par value 4,034,117
<PAGE>
SPECIALTY PAPERBOARD, INC.
I N D E X
PART I. FINANCIAL INFORMATION
Page
----
ITEM 1. Financial Statements:
Consolidated Balance Sheets 3
June 30, 1996 and December 31, 1995
Consolidated Statements of Income 4
Three Months and Six Months Ended
June 30, 1996 and 1995
Consolidated Statements of Cash Flows 5
Three Months and Six Months Ended
June 30, 1996 and 1995
Notes To Financial Statements 6
ITEM 2. Management's Discussion and Analysis of Financial 7-9
Condition and Results of Operations
EXHIBIT 11 Statement Regarding Computations of Net Earnings 10
Per Share
PART II. OTHER INFORMATION
ITEM 4: Submission of Matters to a Vote of Security Holders 11
ITEM 6: Exhibits and Reports on Form 8-K 12
SIGNATURES 13
<PAGE>
PART I, FINANCIAL INFORMATION
ITEM 1, FINANCIAL STATEMENTS
SPECIALTY PAPERBOARD, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands)
Unaudited
Unaudited
June 30 December 31
------------ ------------
1996 1995
------------ ------------
ASSETS
CURRENT ASSETS:
Cash $ 1,576 $ 1,518
Accounts Receivable 11,579 9,406
Cogen Receivable 1,512 1,680
Inventories 15,863 16,856
Other 869 2,948
------------ ------------
TOTAL CURRENT ASSETS 31,399 32,408
LONG TERM COGEN RECEIVABLE - 1,832
PROPERTY, PLANT AND EQUIPMENT, NET 35,928 33,551
ORGANIZATIONAL AND FINANCING COSTS 1,783 2,199
OTHER LONG TERM ASSETS 491 500
DEFERRED INCOME TAXES 4,128 4,128
TOTAL ASSETS $ 73,729 $ 74,618
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable 7,465 7,702
Accrued Liabilities 6,879 5,546
Current Portion of Long Term Debt - 1,688
------------ ------------
TOTAL CURRENT LIABILITIES 14,344 14,936
LONG TERM LIABILITIES:
Revolving Debt -
Senior Term Debt 2,251 4,625
------------ ------------
TOTAL LONG TERM DEBT 2,251 4,625
Deferred Gain 13,463 14,322
------------ ------------
TOTAL LONG TERM LIABILITIES 15,714 18,947
STOCKHOLDERS' EQUITY:
Common Stock 4 4
Additional Paid in Capital 44,716 44,713
Unearned Compensation (53) (121)
Accumulated Deficit (996) (3,861)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 43,671 40,735
TOTAL LIABILITY AND STOCKHOLDERS' EQUITY $ 73,729 $ 74,618
============ ============
(The accompanying notes are an integral part
of the consolidated financial statements.)
<PAGE>
SPECIALTY PAPERBOARD, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share amounts)
Unaudited
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
----------------------------- -----------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales $ 26,086 $ 31,879 $ 50,945 $ 67,077
Cost of Sales 21,075 27,510 42,431 57,871
----------- ----------- ----------- -----------
Gross Profit 5,011 4,369 8,514 9,206
General and Administrative Expenses 2,266 2,112 4,227 4,436
----------- ----------- ----------- -----------
Income from Operations 2,745 2,257 4,287 4,770
Other (Income) Expenses, Net (306) (218) (634) (524)
Cogeneration (Income) (6,512)
Loss on Sale of Assets 8,159
Interest Expense 122 101 302 631
----------- ----------- ----------- -----------
Income Before Income Taxes 2,929 2,374 4,619 3,016
Provision for Income Taxes 1,113 802 1,755 979
----------- ----------- ----------- -----------
Net Income 1,816 1,572 2,864 2,037
Net Income Applicable to Common Shares $ 1,816 $ 1,572 $ 2,864 $ 2,037
=========== =========== =========== ===========
Net Income Per Common Share: $ 0.45 $ 0.39 $ .71 $ .51
Average Number of Shares Outstanding 4,035 4,033 4,034 4,033
</TABLE>
(The accompanying notes are an integral part
of the consolidated financial statements.)
<PAGE>
SPECIALTY PAPERBOARD, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Unaudited
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-----------------------
6/30/96 6/30/95
---------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 2,864 $ 2,037
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation and Amortization 1,621 1,892
Amortization of Deferred Gain (859) (858)
Amortization of Unearned Compensation 68 60
Loss on Sale of Assets - 8,159
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Accounts Receivable (2,173) 575
Inventories 993 (1,890)
Other 2,079 (72)
Accounts Payable (237) (1,572)
Accrued Liabilities 1,333 (665)
---------- ---------
Net Cash Provided by Operating Activities 5,689 7,666
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Cogeneration Proceeds 2,000 3,000
Cogeneration Receivable (6,512)
Additions to Property, Plant and Equipment (3,572) (1,090)
Net Proceeds from Sale of Assets - 14,013
Expenses Paid in Connection with Sale of Assets - (1,282)
---------- ---------
Net Cash Provided By (Used In) Investing Activities (1,572) 8,129
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in Revolving Credit Line 56,242 74,685
Payments of Revolving Credit Line (56,079) (81,416)
Repayment of Senior Term Debt (4,225) (8,525)
Exercise of Stock Options 18 -
APIC - Unearned Compensation Adjustment (15) -
---------- ---------
Net Cash Used In Financing Activities (4,059) (15,256)
NET INCREASE (DECREASE) IN CASH 58 539
CASH AT BEGINNING OF PERIOD 1,518 1,367
---------- ---------
CASH AT END OF PERIOD $ 1,576 $ 1,906
========== =========
(The accompanying notes are an integral part
of the consolidated financial statements.)
</TABLE>
<PAGE>
SPECIALTY PAPERBOARD, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1996
(Unaudited)
1. Basis of Presentation:
---------------------
The balance sheet as of June 30, 1996 and the statements of income and cash
flows for the quarter then ended are unaudited and, in the opinion of
management, all adjustments necessary for a fair presentation of such financial
statements have been recorded. Such adjustments consist only of normal
recurring items.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. The year-end balance sheet was derived from
audited financial statements, but does not include disclosures required by
generally accepted accounting principles. It is suggested that these interim
financial statements be read in conjunction with the audited financial
statements for the year ended December 31, 1995 included in the Company's Annual
Report on Form 10-K.
2. Inventories:
-------------
Inventories at June 30, 1996 and December 31, 1995 consisted of the following
(000's):
<TABLE>
<CAPTION>
(Unaudited)
06/30/96 12/31/95
--------- --------
<S> <C> <C>
Raw Materials $ 5,865 $ 7,269
Work in Process 5,198 4,650
Finished Goods 4,800 4,937
------- -------
$15,863 $16,856
</TABLE>
3. Cogeneration Project:
---------------------
The Company has entered into agreements with Kamine/Besicorp Beaver Falls L.P.
("Kamine"), pursuant to which the Company's Latex Fiber Products Division will
be the host for a gas-fired 79-megawatt combined-cycle cogeneration facility
developed by Kamine in Beaver Falls, New York. Construction of the facility has
been completed. The Company received $4.4 million in cash in 1993. The Company
has a firm contract with Kamine to receive a series of cash payments totaling
$7.0 million between May 1995 and May 1997. The present value of these cash
payments, in the amount of $6.5 million was recorded as income in the first
quarter 1995. Cash payments of $3.0 and $2.0 million were received in May
1995 and May 1996 respectively.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW:
- - ---------
The Company's financial results are dependent upon a number of factors,
including the level of orders from key customers, levels of inventory maintained
by such customers, fluctuations in the price of raw materials and actions by
competitors. In addition, the Company's results will continue to be influenced-
- - -as they have been in the past--by the level of growth in the overall economy
and in the markets served by the Company.
RESULTS OF OPERATIONS:
Three Months Ended June 30, 1996 Compared to Three Months Ended June 30, 1995:
- - ------------------------------------------------------------------------------
Net sales decreased to $26,086,000 in the second quarter of 1996 from
$31,879,000 in the comparable quarter in 1995. Sales of office products
materials decreased 21.8% ($3,520,000) to $12,674,000 as compared to $16,194,000
in the comparable quarter in 1995, reflecting an economic slowdown that reduced
customer demand in this market. Sales of saturated specialties decreased 14.0%
($1,454,000) to $8,986,000 as compared to $10,440,000 in the comparable quarter
in 1995, reflecting an economic slowdown that reduced customer demand in this
market. Sales of book cover material increased 10.9% ($384,000) to $3,886,000
as compared to $3,502,000 in the comparable quarter in 1995. Sales of gasket
materials produced under a temporary toll agreement with Armstrong World
Industries Inc., who bought the Company's gasket business in March 1995, totaled
$540,000 in the second quarter of 1996, as compared to $1,743,000 in the
comparable quarter in 1995.
Gross profit margin increased to 19.2% for the second quarter 1996 as compared
to 13.7% for the comparable quarter in 1995. This improvement was caused by
higher selling prices and lower fiber costs, offset in part by a high level of
production trial activity.
General and administrative expenses increased to $2,266,000 (8.7% of net sales)
in the second quarter of 1996 from $2,112,000 (6.6% of net sales) for the
comparable quarter in 1995. This slight increase resulted in part from
increased selling efforts through our Hong Kong subsidiary and the addition of a
Sales and Marketing Development Manager on the Corporate staff.
Income from operations increased to $1,816,000 (7.0% of net sales) in the second
quarter of 1996 from $1,572,000 (4.9% of net sales) for the comparable quarter
in 1995. This improvement was caused by the aforementioned improvement in
selling prices and lower fiber costs, offset in part by expenses related to a
high level of production trial activity.
Other income was $306,000 in the second quarter of 1996 as compared to $218,000
in the comparable 1995 quarter.
<PAGE>
Interest expense increased to $122,000 in the second quarter of 1996 from
$101,000 in the comparable 1995 quarter.
The effective tax rate for the second quarter of 1996 was 38.0%..
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995:
- - --------------------------------------------------------------------------
Net sales decreased to $50,945,000 in the first six months of 1996 from
$67,077,000 in the comparable period in 1995. Sales of office products
materials decreased 17.7% ($5,479,000) to $25,521,000 as compared to $31,000,000
in the comparable period in 1995, reflecting an economic slowdown that reduced
customer demand in this market. Sales of saturated specialties decreased 20.0%
($4,206,000) to $16,813,000 as compared to $21,019,000 in the comparable period
in 1995, reflecting an economic slowdown that reduced customer demand in this
market. Sales of book cover material decreased 4.6% ($369,000) to $7,707,000 as
compared to $8,076,000 in the comparable period in 1995, reflecting an economic
slowdown that reduced customer demand in this market. Sales of gasket materials
produced under a temporary toll agreement with Armstrong World Industries Inc.,
who bought the Company's gasket business in March 1995, totaled $904,000 in the
first half of 1996, as compared to $6,982,000 in the comparable period in 1995.
Gross profit margin increased to 16.7% for the first half 1996 as compared to
13.7% for the comparable period in 1995. This improvement was caused by higher
selling prices and lower fiber costs, offset in part by a high level of
production trial activity.
General and administrative expenses decreased to $4,227,000 (8.3% of net sales)
in the first half of 1996 from $4,436,000 (6.6% of net sales) for the comparable
period in 1995. This decrease resulted from reduced levels of expenses due to
the sale of the Company's gasket business.
Income from operations decreased to $4,287,000 (8.4% of net sales) in the first
half of 1996 from $4,770,000 (7.1% of net sales) for the comparable period in
1995. This was the direct result of decreased sales due to an economic
slowdown that reduced customer demand in the various markets.
Other income was $634,000 in the first half of 1996 as compared to $524,000 in
the comparable 1995 period..
Interest expense decreased to $302,000 in the first half of 1996 from $631,000
in the comparable 1995 period.. This decrease was due to lower levels of debt.
The effective tax rate for the first half of 1996 was 38.0%, as compared to
32.0% for the comparable period in 1995.
Liquidity and Capital Resources:
- - --------------------------------
The Company's historical requirements for capital have been primarily for
servicing debt, capital expenditures and working capital. Cash flows from
operating activities were $5,689,000 and $7,666,000 for the six months ended
June 30, 1996 and June 30, 1995, respectively. During these periods, additions
to property, plant and equipment were $3,572,000 and $1,090,000 respectively.
<PAGE>
The Company has budgeted base level capital spending at $5,000,000 for its
existing facilities in 1996. The Company believes that cash flow from
operations, plus amounts available under credit facilities will be sufficient to
fund its capital requirements, debt service and working capital requirements for
the foreseeable future. As of June 30, 1996, the Company's $15,000,000
revolving credit line had a zero balance.
The Company intends to pursue strategic acquisitions of other specialty mills or
complementary product lines. Any such acquisition could require the Company to
secure independent debt or equity financing to complete the transaction.
Inflation:
- - ----------
The Company's results of operations have experienced no significant impact due
to inflation for the three-month period ended June 30, 1996. The Company does
not anticipate any unusual effects of inflation over the foreseeable future.
<PAGE>
PART II. OTHER INFORMATION
Item 4: Submission of Matters to a Vote of Security Holders:
The Annual Meeting of Stockholders of the Company was held on May 9,
1996.
Alex Kwader, K. Peter Norrie, George E. McCown, Brian C. Kerester,
Glenn S. McKenzie, Jon H. Miller, Wayne T. Stephens, Fred P. Thompson,
Jr., and John D. Weil were each elected to the Board of Directors to
hold office until the next annual meeting of stockholders and until
his successor is elected and has qualified or until such director's
earlier death, resignation or removal.
The members voted upon at the meeting and the voting of stockholders
with respect thereto are as follows:
Proposal 1
----------
The election of Alex Kwader, K. Peter Norrie, George E. McCown, Brian
C. Kerester, Glenn S. McKenzie, Jon H. Miller, Wayne T. Stephens, Fred
P. Thompson, Jr., and John D. Weil to the Board of Directors to hold
office until the next annual meeting of stockholders and until his
successor is elected and has qualified, or until such director's
earlier death, resignation or removal.
<TABLE>
<CAPTION>
<S> <C> <C>
Alex Kwader 3,719,907 16,235
K. Peter Norrie 3,719,907 16,235
George E. McCown 3,719,407 16,735
Brian Kerester 3,719,907 16,235
Glenn S. McKenzie 3,719,707 16,435
Jon H. Miller 3,719,907 16,235
Wayne T. Stephens 3,719,907 16,235
Fred P. Thompson, Jr. 3,719,707 16,435
John D.Weil 3,719,907 16,235
</TABLE>
Proposal 2
----------
Ratification of the selection of KPMG Peat Marwick L.L.P. as
independent auditors of the Company for its fiscal year ending
December 31, 1996:
Votes in favor: 3,730,976
Votes against: 1,966
Abstentions: 3,200
Proposal 3
----------
Amendments to the 1994 Directors Stock Option Plan (the "Directors
Plan"), as follows: (I) to create a new class of Options ("New
Options") for directors; (ii) to increase the number of shares of
Common Stock reserved for issuance under the Directors Plan by 100,000
shares to an aggregate of 150,000 shares; and (iii) to provide for the
automatic issuance to each Director of New Options of 10,000 shares of
Common Stock:
Votes in favor: 3,637,392
Votes against: 94,650
Abstentions: 4,100
<PAGE>
PART II. OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K: Page
----
I. Exhibits:
Exhibit 10* Paper Procurement Agreement, effective
as of April 1, 1996 between the Company
Acco USA, Inc. and Acco Mexicana S.A.
de C.V. 14-21
Exhibit 11 Statement Regarding Computation of Net
Earnings Per Share 10
*CERTAIN CONFIDENTIAL MATERIAL CONTAINED IN THIS
DOCUMENT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO 17 CFR (SS)200.80(b)(4), 200.83 AND (240.24(B)(2).
II. Reports on Form 8-K:
On April 22, 1996, the Company filed a Form 8-K
describing the resignation of Coopers & Lybrand as
its independent accountants and the engagement of
KPMG Peat Marwick as its new independent
accountants with respect to the Company's
financial statements for the fiscal year ending
December 31, 1996.
<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.
SPECIALTY PAPERBOARD, INC.
Date: August 12, 1996 /s/ BRUCE MOORE
----------------------------
Bruce Moore, Vice President,
Chief Financial Officer
(Principal Financial and Accounting
Officer and Duly Authorized Officer)
<PAGE>
[LOGO OF SPECIALTY PAPERBOARD APPEARS HERE]
SPECIALTY EXHIBIT 10
PAPERBOARD
CONFIDENTAIL TREATMENT
REQUESTED UNDER 17 CFR
(SS)200,80(b)(4), 200,83 and
240,24(b)(2).
Paper Procurement Agreement
THIS AGREEMENT, effective as of the first day of [*] ("Effective Date"),
is by and between SPECIALTY PAPERBOARD, INC., acting through its Pressboard
Products Division, a Delaware corporation (hereinafter "SPI"); and ACCO USA,
INC., a Delaware corporation (hereinafter "ACCO USA"), specifically on behalf of
its Ogdensburg, NY facility and the Nogales, Mexico facility of its wholly-owned
subsidiary, Industrial de Carpetas Mexicana, S.A., a Mexican corporation; and
ACCO Mexicana S.A. de C.V., a Mexican corporation (hereinafter ACCO MEX");
(collectively "ACCO").
WHEREAS, SPI desires to supply certain grades of paperboard needed in the
manufacturing process employed by ACCO; and
WHEREAS, SPI desires a commitment as to time and quantity from ACCO in order to
facilitate manufacturing scheduling; and
WHEREAS, ACCO desires to purchase grades of paperboard from SPI; and
WHEREAS, ACCO is willing to accept certain quantity commitments in order to
share the economic benefits of manufacturing;
NOW, THEREFORE, in consideration of the premises and of the obligations and
promises contained herein, SPI and ACCO hereby agree to wit:
1. DEFINITIONS. For purposes of this Agreement, the following words and
phrases shall have the indicated meaning:
A. "PAPER" shall mean such grades of paperboard manufactured by SPI made
from virgin chemical pulp and/or recycled paperboard.
B. "TERM" shall mean the period of time during which this Agreement is in
effect.
C. "CONTRACT YEAR" shall mean the period from April 1, [*] of each year
until March of the next year during the TERM.
D. "GROUP I PRODUCTS" shall mean [*] and other grades as designated.
E. "GROUP II PRODUCTS" shall mean all other products purchased by ACCO
not stated above (1D) and others as developed.
[*] Indicates portions of text have been omitted.
A separate filing of such omitted text has been
made with the Commission as part of Registrant's
application for Confidential Treatment.
<PAGE>
2. OBLIGATION OF PURCHASE AND SALE. During each CONTRACT YEAR, SPI shall sell
and deliver to ACCO, [*] no more than [*] in the aggregate, of PAPER. If
ACCO desires, during the term of this Agreement, to buy more than [*] of
PAPER per [*] it will so notify SPI, and SPI will determine whether it is
feasible to expand its production capacity sufficiently to meet such
increase. SPI shall advise ACCO by written notice within fifteen (15) days
of such notice [*] as to whether it commits to meet such increase. SPI's
obligation to sell ACCO more than [*] of PAPER [*] is expressly conditioned
upon receipt of such notice from ACCO and SPI's determination that it is
feasible to meet such increase. During each CONTRACT YEAR, ACCO may request
SPI to supply [*] and SPI may, at its election, supply some or all of such
[*] requested. If SPI elects to supply some or all of such [*] requested by
ACCO, [*] and all other terms and conditions of such purchase and sale
shall be controlled by this Agreement.
3. TERM. This Agreement shall begin on [*] and expire at 11:50 p.m. EST, [*]
This Agreement may be extended in the following manner: either party may
notify the other in writing of its desire to continue the Agreement no
sooner than [*] days and no later than [*] days prior to expiration date.
If the other party indicates, in writing, acceptance of the continuation no
later than [*] days after receipt of the notice, the Agreement shall
continue under the same terms and conditions. If the other party does
nothing or indicates rejection of the continuation, the Agreement shall
expire on the expiration date.
4. PRICE. The price for each grade of PAPER purchased and sold hereunder shall
be [*]SPI shall notify ACCO [*]
5. TERMS OF DELIVERY. Delivery shall be F.O.B. SPI mill unless otherwise
agreed to by both parties.
6. TERMS OF PAYMENT. The terms of payment shall be standard SPI term [*]
7. WARRANTY AND LIMITATION OF LIABILITY. SPI warrants unto ACCO that it will
convey good and merchantable title to ACCO for all PAPER sold hereunder,
and that the PAPER will meet the specifications that may be established and
agreed upon by both ACCO and SPI from time to time. THE FOREGOING WARRANTY
IS SPI'S SOLE AND EXCLUSIVE WARRANTY HEREWITH AND SHALL BE IN LIEU OF ALL
OTHER EXPRESS OR IMPLIED WARRANTIES, INCLUDING BUT NOT LIMITED TO ANY
IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
SPI does not warrant that any grade of PAPER sold hereunder will
[*] = Confidential Treatment Requested
<PAGE>
possess any particular properties or characteristics or meet any specific
testing after additional manufacturing by ACCO except insofar as such
specifications contemplate. Unless otherwise agreed in this Agreement or
the Exhibits hereto, SPI's liability for breach of warranty shall be
limited to replacement of all defective PAPER. Under no circumstances will
SPI be liable for any consequential damages for breach of this provision.
8. CLAIMS PROCEDURES. Shall be as mutually agreed upon.
9. ORDER PLACEMENT AND SCHEDULING. Shall be as mutually agreed upon.
10. [*]
A. [*]
1. [*]
2. [*]
3. [*]
4. [*]
B. [*]
1. [*]
2. [*]
[*] = Confidential Treatment Requested
<PAGE>
[*]
3. [*]
4. [*]
5. [*]
6. [*]
7. [*]
8. [*]
9. [*]
10. [*]
[*] = Confidential Treatment Requested
<PAGE>
[*]
11. [*]
11. [*]
[*]
[*][*]
12. [*]
[*]
[*][*]
13. [*]
[*]
[*] = Confidential Treatment Requested
<PAGE>
14. DEFAULT
A. Payment of Money. If ACCO shall fail to pay SPI any sum of money
----------------
pursuant to the terms of this Agreement, SPI, upon fifteen (15) days
written notice, may:
1. Suspend performance of this Agreement until all sums owing have
been paid in full; or
2. Make all further shipments subject to payment of cash in advance
of cash against documents of title; or
3. If such sum exceeds [*] and is unrelated to a quality problem and
is not paid within thirty (30) days after the notice, SPI may
cancel this Agreement; or
4. Pursue any remedy to which it may be entitled by relevant law for
such breach.
5. The foregoing remedies for nonpayment are intended to be
cumulative and nonexclusive.
B. Other Defaults. If either party shall commit any material breach of
--------------
its obligations hereunder, the other party may give the party in
breach written notice specifying the nature and details of such
breach. If the breach complained of is not cured within [*] days after
such notice, the party giving such notice may, by written notice to
the party in breach, terminate this Agreement effective upon the date
of such notice. Termination pursuant to this paragraph shall not be
construed to limit the terminating party's right to obtain a damage
remedy for such breach.
15. BANKRUPTCY, RECEIVERSHIP, ETC. If either party is adjudicated as bankrupt
or files a petition for voluntary bankruptcy or a voluntary petition under
the Bankruptcy Act, as from time to time amended, or makes a general
assignment for the benefit of creditors or a composition of creditors or
consents to the appointment of a receiver of itself or of a substantial
part of its property, or if an order or decree is entered by any court of
competent jurisdiction appointing a receiver of either party and such
receiver is not discharged within thirty (30) days from the date of his
appointment, or if a petition under any Chapter of the Bankruptcy Act, as
from time to time amended, is filed against either party and approved by a
court as having been properly filed, and if not dismissed within thirty
(30) days after such approval, or if any judicial proceedings by any person
other than a party of this Agreement, a substantial part of either party's
property shall be attached or seized under any legal process and shall not
be released or discharged therefrom by giving bond or otherwise within
thirty (30) days thereafter, then and in any such event the other party may
terminate this Agreement.
16. FORCE MAJEURE. In the event that either party is prevented from or delayed
in performing any of its obligations hereunder by reason of fire, flood,
wind damage, earthquake, or other Act of God, labor dispute, civil
disturbance, act of war, the
[*] = Confidential Treatment Requested
<PAGE>
regulation, order, or request of any
governmental entity or lack of raw material, labor, fuel, energy, or
transportation beyond the control of such party, or by reason of any other
cause beyond the control of such party, it shall be excused from performing
the obligations so prevented or delayed fro the period of such prevention
or delay; provided, however, that if in consequence of any such cause, the
total demands for PAPER and other products normally produced by SPI's mills
normally producing PAPER cannot be supplied by SPI from such mills, SPI may
allocate the production of such mills, if any, among its then current
customers and its internal users in proportion to the quantity each
customer or internal users purchased during the calendar quarter preceding
the quarter in which allocation began. Neither party shall be required by
reason of this Agreement to operate its business during any labor dispute
nor by reason of this Agreement to settle any labor dispute.
17. [*]
A. [*]
B. ACCO has the right to immediately seek cover as a result of any
default by SPI under Section 14 B, or force majeure under Section 16.
C. In the event performance by SPI is prevented due to any force majeure
under Section 16 for more than ninety (90) days, ACCO shall have the
option to extend the time of resumption of performance, or terminate
this Agreement.
18. Any notice given pursuant to the provisions of this Agreement of relevant
law shall be deemed given three (3) days after deposited in the United
States Mail, postage paid, registered, and return receipt requested, or one
(1) day after deposited, prepaid, with a receipted overnight delivery
service, in each case directed to the address set forth below or such other
address as each party may from time to time designate in writing:
1. If to ACCO: ACCO USA, Inc.
South ACCO Plaza
Wheeling, IL 60090
Attn: President
and
ACCO Mexicana S.A. de C.V.
Circuito de la Industria
Norte No. 6, Lerma, Mexico
Attn: President
[*] = Confidential Treatment Requested
<PAGE>
2. If to SPI: SPECIALTY PAPERBOARD, INC.
Pressboard Products Division
Brudies Road
Brattleboro, VT 05301
Attn: President
19. WAIVER. The failure of either party to insist on strict performance of the
other party's obligation hereunder on one or more occasions shall not be
construed to limit the waiving party's right to insist upon strict
performance of such obligation in the future nor shall it be construed as a
waiver of any other provisions or obligation of this Agreement.
20. ASSIGNMENT. Neither party shall make any assignment of this Agreement or
any of its rights hereunder without the prior written consent of the other
party. Any assignment attempted without such consent shall be voidable by
the non-assigning party.
21. GOVERNING LAW. The performance and construction of this Agreement shall be
governed by the substantive laws of the State of Illinois.
22. MODIFICATIONS. This Agreement shall be modified only in writing signed by
the parties. Any purchase order, acknowledgment, release form, or other
document used to place or accept specific orders for PAPER or to submit any
estimate of quantities desired in the future shall be used solely for the
purpose of specifying quantities and grades desired and shall not be
construed as adding to, deleting from, or modifying the terms of this
Agreement.
23. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties with respect to the subject matter hereof and merges and
replaces all prior negotiations, representations, promises and agreements
with respect to such subject matter.
IN WITNESS HEREOF, each party intending to be legally bound hereby, has caused
this Agreement to be executed by a duly authorized representative corporation on
the date set forth below.
SPECIALTY PAPERBOARD, INC. ACCO USA, INC.
BY: /s/ Stephen A. Steidle BY: /s/ David Graham
-------------------------------- -------------------------------
TITLE: V.P. and General Sales Manager TITLE: Director of Purchasing
-------------------------------- -------------------------------
DATE: July 9, 1996 DATE: July 12, 1996
-------------------------------- -------------------------------
ACCO MEXICANA S.A. DE C.V.
BY: /s/ David Campbell
-------------------------------
TITLE: Senior Vice President
-------------------------------
DATE: 7/12/96
-------------------------------
<PAGE>
EXHIBIT 11
SPECIALTY PAPERBOARD, INC.
STATEMENT REGARDING COMPUTATION
OF NET EARNINGS PER SHARE
(Unaudited)
Exhibit 11 - Statement regarding computation of per share earnings attached to
and made part of Part II of Form 10-Q for the six month period ended June 30,
1996 and 1995.
June 30, 1996 June 30, 1995
------------- -------------
Weighted average number of
shares issued and outstanding 4,034,117 4,033,432
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENT FOR THE THREE MONTHS ENDED JUNE 30, 1996 OF
SPECIALTY PAPERBOARD, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,576
<SECURITIES> 0
<RECEIVABLES> 11,290
<ALLOWANCES> 257
<INVENTORY> 15,863
<CURRENT-ASSETS> 31,399
<PP&E> 47,358
<DEPRECIATION> 11,430
<TOTAL-ASSETS> 73,729
<CURRENT-LIABILITIES> 14,344
<BONDS> 15,714
0
0
<COMMON> 4
<OTHER-SE> 43,667
<TOTAL-LIABILITY-AND-EQUITY> 73,729
<SALES> 50,945
<TOTAL-REVENUES> 50,945
<CGS> 42,431
<TOTAL-COSTS> 46,658
<OTHER-EXPENSES> (634)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 302
<INCOME-PRETAX> 4,619
<INCOME-TAX> 1,755
<INCOME-CONTINUING> 2,864
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,864
<EPS-PRIMARY> 0.71
<EPS-DILUTED> 0.71
</TABLE>
