<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
--------------------------------
For the Quarter Ended March 31, 1996 Commission File Number 33-60714
IVEX PACKAGING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 76-0171625
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
100 Tri-State Drive
Lincolnshire, Illinois 60069
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone number, including area code: (847) 945-9100
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, and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
At May 8, 1996, there were 1,072,246 shares of common stock, par value
$0.01 per share, outstanding.
================================================================================
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
IVEX PACKAGING CORPORATION
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
MARCH 31, DECEMBER 31,
1996 1995
---- ----
<S> <C> <C>
Current Assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . $ 4,965 $ 4,830
Accounts receivable trade, net of allowance . . . . . . . . . 47,870 46,077
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . 43,711 44,050
Prepaid expenses and other . . . . . . . . . . . . . . . . . . 4,261 5,417
--------- ---------
Total current assets . . . . . . . . . . . . . . . . . . . . 100,807 100,374
--------- ---------
Property, Plant and Equipment:
Buildings and improvements . . . . . . . . . . . . . . . . . . 47,171 47,108
Machinery and equipment . . . . . . . . . . . . . . . . . . . 209,005 208,820
Construction in progress . . . . . . . . . . . . . . . . . . . 7,040 4,159
--------- ---------
263,216 260,087
Less - Accumulated depreciation . . . . . . . . . . . . . . . (107,592) (102,098)
--------- ---------
155,624 157,989
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,504 7,504
--------- ---------
Total property, plant and equipment . . . . . . . . . . . . 163,128 165,493
--------- ---------
Other assets:
Goodwill, net of accumulated amortization . . . . . . . . . . 13,817 13,938
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . 14,731 15,106
--------- ---------
Total other assets . . . . . . . . . . . . . . . . . . . . . 28,548 29,044
--------- ---------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . $ 292,483 $ 294,911
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Current installments of long-term debt . . . . . . . . . . . . $ 5,127 $ 5,128
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . 18,017 27,256
Accrued salary and wages . . . . . . . . . . . . . . . . . . . 6,059 7,781
Self insurance reserves . . . . . . . . . . . . . . . . . . . 6,627 6,339
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . 7,514 1,747
Other accrued expenses . . . . . . . . . . . . . . . . . . . . 16,482 14,033
--------- ---------
Total current liabilities . . . . . . . . . . . . . . . . . 59,826 62,284
--------- ---------
Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . 354,797 353,717
--------- ---------
Other Long-Term Liabilities . . . . . . . . . . . . . . . . . . . 6,213 6,472
--------- ---------
Deferred Income Taxes . . . . . . . . . . . . . . . . . . . . . . 8,770 8,770
--------- ---------
Stockholders' Deficit:
Ivex Packaging Corporation common stock, $.01 par value -
2,000,000 shares authorized; and 1,072,246 shares
issued and outstanding . . . . . . . . . . . . . . . . . . . 11 11
Paid in capital in excess of par value . . . . . . . . . . . . 177,375 177,375
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . (313,025) (312,234)
Foreign currency translation adjustment . . . . . . . . . . . (1,484) (1,484)
--------- ---------
Total stockholders' deficit . . . . . . . . . . . . . . . . (137,123) (136,332)
--------- ---------
Total Liabilities and Stockholders' Deficit . . . . . . . . . . . $ 292,483 $ 294,911
========= =========
</TABLE>
The accompanying notes are an integral part of this statement.
2
<PAGE> 3
IVEX PACKAGING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
1996 1995
---- ----
<S> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 104,216 $ 112,890
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . 82,764 91,986
---------- -----------
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,452 20,904
---------- -----------
Operating expenses:
Selling . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,676 4,741
Administrative . . . . . . . . . . . . . . . . . . . . . . . . . 6,442 6,019
Amortization of intangibles . . . . . . . . . . . . . . . . . . 140 285
---------- -----------
Total operating expenses . . . . . . . . . . . . . . . . . . . . . 11,258 11,045
---------- -----------
Income from operations . . . . . . . . . . . . . . . . . . . . . . 10,194 9,859
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . 10,764 10,369
---------- -----------
Loss before income taxes . . . . . . . . . . . . . . . . . . . . . (570) (510)
Income tax provision . . . . . . . . . . . . . . . . . . . . . . . (221) (411)
---------- -----------
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (791) $ (921)
========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
3
<PAGE> 4
IVEX PACKAGING CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Ivex Packaging
Corporation Paid in Foreign
Common Stock Capital Currency
-------------------- In Excess of Accumulated Translation Stockholders'
Shares Amount Par Value Deficit Adjustment Deficit
-------- ------ ------------ ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 . . . . . . . . . . 1,072,246 $11 $177,375 $(287,750) $(902) $(111,266)
Foreign currency translation adjustment . . (582) (582)
Net loss . . . . . . . . . . . . . . . . . . (24,484) (24,484)
---------- ---- -------- ----------- -------- -----------
Balance at December 31, 1995 . . . . . . . . . . 1,072,246 11 177,375 (312,234) (1,484) (136,332)
Net income . . . . . . . . . . . . . . . . . (791) (791)
---------- ---- -------- ---------- -------- -----------
Balance at March 31, 1996 . . . . . . . . . . . . 1,072,246 $11 $177,375 $(313,025) $(1,484) $(137,123)
========== ==== ======== ========== ======== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
4
<PAGE> 5
IVEX PACKAGING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (791) $ (921)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation of properties . . . . . . . . . . . . . . . . . . . 5,590 4,924
Amortization of intangibles and debt issue costs . . . . . . . . 483 786
Non-cash interest . . . . . . . . . . . . . . . . . . . . . . . . 3,033 2,630
--------- ---------
8,315 7,419
Change in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . (1,793) (4,997)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . 339 (4,093)
Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . 1,156 250
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . (9,239) (10,420)
Accrued expenses and other liabilities . . . . . . . . . . . . . . 6,523 3,973
--------- ---------
Net cash from (used by) operating activities . . . . . . . . . . 5,301 (7,868)
--------- ---------
Cash flows from financing activities:
Payment of senior credit facility . . . . . . . . . . . . . . . . . . (1,250) (2,024)
Proceeds from revolving credit facility . . . . . . . . . . . . . . . - 8,600
Payment of revolving credit facility . . . . . . . . . . . . . . . . . (700) -
Payment of debt issue costs . . . . . . . . . . . . . . . . . . . . . (75) (131)
--------- ---------
Net cash from (used by) financing activities . . . . . . . . . . (2,025) 6,445
---------- ---------
Cash flows from investing activities:
Purchase of property, plant and equipment . . . . . . . . . . . . . . (3,373) (1,610)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232 (245)
--------- ----------
Net cash used by investing activities . . . . . . . . . . . . . (3,141) (1,855)
--------- ---------
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . 135 (3,278)
Cash and cash equivalents at beginning of period . . . . . . . . . . . . 4,830 6,289
--------- ---------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . $ 4,965 $ 3,011
========= =========
Supplemental cash flow disclosures:
Cash paid during the year for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,621 $ 2,377
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 434 431
</TABLE>
The accompanying notes are an integral part of this statement.
5
<PAGE> 6
IVEX PACKAGING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
NOTE 1 - ACCOUNTING AND REPORTING POLICIES:
In the opinion of management, the information in the accompanying
unaudited financial statements reflects all adjustments necessary for a fair
statement of results for the interim periods. These interim financial
statements should be read in conjunction with the financial statements and the
notes thereto included in the Annual Report on Form 10-K for the year ended
December 31, 1995 (the "Form 10-K") of Ivex Packaging Corporation (formerly
named Ivex Holdings Corporation) ("Ivex" or the "Company").
The Company is the sole stockholder of its operating subsidiary, IPC,
Inc. ("IPC"). The Company is a holding company with no operations of its own
and is dependent on the operating cash flow of IPC and its subsidiaries in
order to pay principal and interest on its debt; however, IPC has no
contractual obligations to distribute any such cash flow to the Company.
The Company's accounting and reporting policies are summarized in Note 2
of the Ivex Form 10-K.
Accounts Receivable
Accounts receivable at March 31, 1996 and December 31, 1995 consist of
the following:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---- ----
<S> <C> <C>
Accounts receivable . . . . . . . . . . . . . . . $ 50,025 $ 48,089
Less -- Allowance for doubtful accounts . . . . . (2,155) (2,012)
-------- ---------
$ 47,870 $ 46,077
======== =========
</TABLE>
Inventories
Inventories at March 31, 1996 and December 31, 1995 consist of the
following:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---- ----
<S> <C> <C>
Raw materials . . . . . . . . . . . . . . . . . . $ 23,487 $ 24,148
Finished goods . . . . . . . . . . . . . . . . . 20,224 19,902
-------- ---------
$ 43,711 $ 44,050
======== =========
</TABLE>
NOTE 2 - INCOME TAXES
Income taxes are provided at the estimated annual effective tax rate
which differs from the federal statutory rate of 35% primarily due to state
income taxes that are not offset by net operating loss carryovers.
6
<PAGE> 7
IVEX PACKAGING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
NOTE 3 - LONG-TERM DEBT
At March 31, 1996 and December 31, 1995 the long-term debt of Ivex and
its wholly owned subsidiary, IPC, was as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---- ----
<S> <C> <C> <C>
Senior credit facility . . . . . . . . . . . . . . . . $ 66,550 $ 68,500
Industrial revenue bonds . . . . . . . . . . . . . . . 38,293 38,293
12-1/2% IPC Notes, net of discount . . . . . . . . . . 157,257 157,229
13-1/4% Company Discount Debentures, net of discount . 96,371 93,338
Other . . . . . . . . . . . . . . . . . . . . . . . . . 1,453 1,485
---------- ----------
Total debt outstanding . . . . . . . . . . . . . . 359,924 358,845
Less - Current installments of long-term debt . . . . . (5,127) (5,128)
---------- ----------
Long-term debt . . . . . . . . . . . . . . . . . . $ 354,797 $ 353,717
========== ==========
</TABLE>
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
References to the Company or Ivex herein reflect the consolidated results of
Ivex Packaging Corporation.
RESULTS OF OPERATIONS - FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND MARCH 31,
1995
Net Sales
The Company's net sales decreased by 7.7% during the first quarter of
1996 over the Company's net sales during the corresponding period in 1995
primarily as a result of selling price decreases (primarily related to lower
raw material costs) in substantially all product groups and unit volume
decreases in certain product lines. The following table sets forth information
with respect to net sales of the Company's product groups for the period
presented:
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------------
March 31, March 31,
1996 % 1995 %
-------- ------- --------- ------
<S> <C> <C> <C> <C>
Consumer Packaging . . . . . . . . . . . . $ 49,938 47.9 $ 52,447 46.5
Industrial Packaging . . . . . . . . . . . 54,278 52.1 60,443 53.5
-------- ----- -------- -----
Total . . . . . . . . . . . . . . . . $104,216 100.0 $ 112,890 100.0
======== ===== ========== =====
</TABLE>
Consumer Packaging net sales decreased by 4.8% during the first quarter
of 1996 from the corresponding period in 1995. The decrease is the result of
decreased selling prices of extruded sheet (primarily related to lower raw
material costs) and slightly decreased unit sales volume of extruded sheet.
During the first quarter of 1996, pounds of extruded sheet decreased 1.9% and
the average selling price per pound of extruded sheet decreased 15.3% over the
results of the corresponding period in 1995. Net sales of extruded film and
converted plastic and paper products during the first quarter of 1996 were
generally consistent with the corresponding period in 1995.
Industrial Packaging net sales decreased by 10.2% during the first
quarter of 1996 from the corresponding period in 1995, primarily due to volume
decreases of the Company's recycled and specialty papers and of the Company's
coated paper for stamp applications. The unit sales volume of recycled and
specialty paper decreased 16.6% and 37.4%, respectively, principally
reflecting decreased market demand. The average net selling price of the
Company's kraft and specialty paper decreased 3.1% during the first quarter of
1996 compared to the corresponding period in the prior year, principally as a
result of decreases in raw material costs and weakened demand for the Company's
kraft and specialty paper. The first quarter decrease in net sales was
partially offset by incremental sales volume from the Company's third quarter
1995 acquisition of Packaging Products, Inc. ("PPI").
Gross Profit
The Company's gross profit increased 2.6% during the first quarter
compared to the corresponding period in the prior year primarily as a result of
the incremental gross profit from the Company's third quarter 1995 acquisition
of PPI. The increase in gross profit was partially offset by decreased unit
production volume of the Company's kraft and specialty paper and the Company's
coated paper for stamp applications and decreased profitability of the
Company's polymerization operations. Gross profit margin increased during the
first quarter of 1996 to 20.6% from the corresponding period's level of 18.5%
primarily as a result of decreases in the cost of the Company's raw materials
(including styrene, polystyrene, polyethylene, old corrugated containers
("OCC") and doublelined kraft clippings ("DLK")).
8
<PAGE> 9
Operating Expenses
Selling and administrative expenses increased 3.3% during the first
quarter of 1996 and as a percentage of net sales increased to 10.7% during the
first quarter of 1996 compared to 9.5% during the same period in the prior year
primarily as a result of the decrease in the Company's net sales during the
first quarter of 1996.
Amortization of intangibles decreased slightly during the first quarter
of 1996 compared to the same period in 1995 as a result of the accelerated
non-cash write-off of a non-compete agreement and the write-off of goodwill in
the second quarter of 1995.
Income from Operations
Income from operations was $10.2 million during the first quarter of
1996 compared to income from operations of $9.9 million during the first
quarter of 1995. The increase in income from operations during the first
quarter of 1996 is primarily a result of the increased gross profit and the
decreased amortization of intangibles.
Interest Expense
Interest expense during the first quarter of 1996 was $10.8 million
compared to $10.4 million during the same period in 1995. The increase
reflects greater outstanding aggregate indebtedness during 1996 as a result of
accretion on the 13-1/4% Company Discount Debentures and borrowings on IPC's
revolving credit facility. Such increase in interest expense was partially
offset by lower average interest rates during 1996.
Net loss
Net loss was $791,000 during the first quarter of 1996 compared to
$921,000 in the prior year. The decrease in net loss is primarily due to
increased gross profit.
EBITDA
EBITDA includes income from operations adjusted to exclude depreciation
and amortization expenses, goodwill write-off, acquisition related expenses and
restructuring charge. Ivex believes that EBITDA provides additional
information for determining its ability to meet future debt service
requirements. However, EBITDA is not a defined term under generally accepted
accounting principles ("GAAP") and is not indicative of operating income or
cash flow from operations as determined under GAAP.
The following table sets forth information with respect to EBITDA of the
Company's product groups for the period presented.
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------------
March 31, % of March 31, % of
1996 Net Sales 1995 Net Sales
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Consumer Packaging . . . . . . . . . . . . $ 8,779 17.6 $ 7,815 14.9
Industrial Packaging . . . . . . . . . . . 8,643 15.9 8,580 14.2
Corporate Expense . . . . . . . . . . . . . (1,498) - (1,327) -
-------- ---- --------- -----
Total . . . . . . . . . . . . . . . . $ 15,924 15.3 $ 15,068 13.3
======== ==== ======== =====
</TABLE>
9
<PAGE> 10
The Company's EBITDA increased 5.7% from $15.1 million to $15.9 million
and EBITDA margin increased from 13.3% to 15.3% during the first quarter of
1996 compared to the same period in 1995. The 12.3%, or $1.0 million, increase
in Consumer Packaging's EBITDA in the current quarter is primarily attributable
to the improved gross margin on converted plastic and paper products due to
reduced raw material costs and improved operating performance. The increase in
Industrial Packaging's EBITDA of .7%, or $63,000, is primarily due to the
incremental EBITDA from the Company's third quarter 1995 acquisition of PPI
offset by decreased unit sales volume of the Company's recycled and specialty
papers.
Liquidity and Capital Resources
The Company conducts business through IPC and has no operations of its
own. The primary asset of the Company is the common stock of IPC which has
been pledged to secure the obligations of IPC and the subsidiaries under IPC's
senior credit facility. The Company is dependent on the cash flow of IPC and
its subsidiaries in order to pay the principal and interest on the 13-1/4%
Senior Discount Debentures due March 15, 2005 (the "13-1/4% Company Discount
Debentures"); however, IPC has no contractual obligations to distribute any
such cash flow to the Company. In addition, IPC's senior credit facility
contains provisions that (except for certain limited exceptions) prohibit the
payment of dividends and distributions by IPC to the Company. Moreover, the
indenture governing the 12-1/2% Senior Subordinated Notes due 2002 (the
"12-1/2% Subordinated Note Indenture") contains provisions that limit IPC's
ability to pay dividends and make distributions to the Company.
The Company's long-term debt, less current installments, increased to
$354.8 million at March 31, 1996 from $353.7 million at December 31, 1995
reflecting $3.0 million of accretion on the 13-1/4% Company Discount Debentures
less revolving credit facility payments of $700,000 and $1.3 million of
scheduled debt reductions. The Company's long-term debt consists primarily of
the 13-1/4% Company Discount Debentures, with an accreted value of $96.4
million at March 31, 1996. The long-term debt of the Company's wholly-owned
subsidiary, IPC, consists primarily of the $157.3 million of IPC's 12-1/2%
Senior Subordinated Notes (the "12-1/2% IPC Notes"), term loans of $58.8
million under IPC's senior credit facility, $38.3 million of industrial revenue
bonds and revolving credit facility borrowings of $7.8 million.
At March 31, 1996, IPC had cash and cash equivalents of $4.9 million and
$46.1 million was available under the revolving credit portion of IPC's senior
credit facility. IPC's working capital at March 31, 1996 was $40.9 million.
The Company's primary long-term cash requirements are for the debt
service relating to the 13-1/4% Company Discount Debentures. Commencing on
September 15, 2000, cash interest on the 13-1/4% Company Discount Debentures
will be payable semi-annually and on March 15, 2005, the 13-1/4% Company
Discount Debentures will mature and the aggregate principal amount then
outstanding will become due and payable. The Company will be dependent on the
cash flow of IPC and IPC's subsidiaries in order to meet its debt service
obligations. Significant contractual and other restrictions exist on the
payment of dividends and the making of loans by IPC to the Company. In
addition, as a result of the goodwill write-offs in 1993 and 1995, IPC's
ability to make distributions to the Company under the 12-1/2% Subordinated
Note Indenture has been impaired; consequently this Indenture will require
modification before any such distributions to the Company can be made.
Regardless, IPC and IPC's subsidiaries may not generate sufficient cash flows
to distribute to the Company in order for the Company to service the cash
interest payments on the 13-1/4% Company Discount Debentures that commence in
September 2000 or to retire the $160 million principal amount of 13-1/4%
Company Discount Debentures upon their maturity in 2005. Consequently, all or
a portion of the 13-1/4% Company Discount Debentures may require refinancing
prior to such dates. The Company believes that distributions from IPC and its
access to debt financing in the public and private markets should be sufficient
to enable it to retire all or a portion of the principal amount of the 13-1/4%
Company Discount Debentures and to refinance any remaining principal amount of
the 13-1/4% Company Discount Debentures upon their maturity in 2005, although
there can be no assurance that this will be the case. In the event that the
Company is unable to service the cash interest payments on or to retire or
refinance the 13-1/4% Company Discount Debentures or unable to obtain any
required consents from the holders of the 12-1/2% IPC Notes to make interest
payments on the 13-1/4% Company Discount Debentures, the Company may be
required to, among other things, seek appropriate waivers from such
10
<PAGE> 11
creditors or recapitalize its capital structure. During the period prior to
September 15, 2000, the Company does not expect to have significant cash
requirements.
The primary short-term and long-term operating cash requirements for
IPC, the Company's wholly owned operating subsidiary, are for debt service,
working capital and capital expenditures. The Company expects IPC to rely on
cash generated from IPC's and IPC's subsidiaries' operations, supplemented by
revolving credit facility borrowings under IPC's senior credit facility (at
March 31, 1996, $46.1 million was available under the revolving credit portion
of IPC's senior credit facility), to fund IPC's principal short-term and
long-term cash requirements. The Company believes that IPC and IPC's
subsidiaries should generate sufficient cash flows to service the cash interest
payments on the 12-1/2% IPC Notes from 1996 to their maturity in 2002, although
there can be no assurances that such cash flows, if any, will be adequate to
service these interest payments. However, IPC and IPC's subsidiaries may not
generate sufficient cash flows to retire the $158.0 million principal amount of
12-1/2% IPC Notes prior to or upon their maturity in 2002. Consequently, all
or a portion of the 12-1/2% IPC Notes may require refinancing prior to the
maturity thereof. IPC believes that its consolidated cash flow from operations
and access to debt financing in the public and private markets should be
sufficient to enable it to retire all or a portion of the principal amount of
the 12-1/2% IPC Notes and to refinance any remaining principal amount of the
12-1/2% IPC Notes prior to or upon their maturity, although there can be no
assurance that this will be the case. In the event that IPC is unable to
retire or refinance the 12-1/2% IPC Notes, IPC may be required to, among other
things, seek appropriate waivers from such creditors or recapitalize its
capital structure. IPC is required to maintain certain financial ratios and
levels of net worth and, among other things, future indebtedness and dividends
are restricted under these facilities.
The 12-1/2% IPC Notes require semi-annual interest payments on June 15
and December 15 and are subordinated in right of payment to all existing and
future senior indebtedness of IPC. The 12-1/2% IPC Notes are redeemable at the
option of IPC, in whole or in part, on or after December 15, 1997 at the
following redemption prices (expressed in percentages of the principal amount
thereof), plus accrued interest to the date of redemption. If redeemed during
the twelve-month period beginning December 15,
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
1997 . . . . . . . . . . . . . . . . . . . . . 106.250%
1998 . . . . . . . . . . . . . . . . . . . . . 103.125%
1999 and thereafter . . . . . . . . . . . . . . 100.000%
</TABLE>
Each holder of the 12-1/2% IPC Notes may require IPC to repurchase such
holders' 12-1/2% IPC Notes in the event of a change of control at 101% of
principal amount thereof, plus accrued interest to the date of repurchase. The
indenture under which the 12-1/2% IPC Notes are issued contains certain
covenants that, among other things, limit the ability of IPC to incur
additional indebtedness, pay dividends or repurchase stock.
IPC's senior credit facility is comprised of $58.8 million in term
loans, a $45.0 million letter of credit facility and a $55.0 million revolving
credit facility of which approximately $46.1 million was available at March 31,
1996. The term loans require quarterly payments of $1.3 million from March 31,
1996 through September 30, 1997; $1.9 million from December 31, 1997 through
September 30, 1998; $3.0 million from December 31, 1998 through September 30,
1999; $3.5 million from December 31, 1999 through September 30, 2000; $4.1
million from December 31, 2000 through June 30, 2001; and $5.4 million on
September 30, 2001. At the option of IPC, the term loans and borrowings on the
revolving credit facility bear interest at the LIBOR reserve adjusted rate, as
defined, plus 2.25% or the prime rate plus 1.0%. Such rates are subject to
change based on IPC's ability to achieve certain financial ratios as defined in
IPC's senior credit facility. IPC pays a fee of 0.5% on the unused portion of
the revolving credit facility. Borrowings are secured by substantially all the
assets of IPC and its subsidiaries and the stock of IPC and IPC's subsidiaries.
Under IPC's senior credit facility, IPC is required to maintain certain
financial ratios and levels of net worth while future indebtedness and
dividends are restricted.
11
<PAGE> 12
Beginning January 6, 1996, IPC entered into interest rate swap
agreements for the term loans for notional amounts totaling $60.0 million
through January 19, 1999. Such agreements effectively fix IPC's LIBOR base
rate at 5.33% and income or expense related to settlements under the swap
agreements are recorded as adjustments to interest expense in IPC's financial
statements.
IPC's industrial revenue bonds require monthly interest payments and are
due in varying amounts and dates through 2009. Certain letters of credit under
IPC's senior credit facility provide credit enhancement for IPC's industrial
revenue bonds.
Primarily as a consequence of the Company's 1993 and 1995 goodwill
write-offs, as of March 31, 1996, the Company's recorded assets are less than
its recorded liabilities by approximately $137.1 million. The Company believes
that its negative net worth will not have any material consequences on its
operations or its ability to obtain trade credit or financing.
The Company made capital expenditures of $3.4 million and $1.6 million
for each of the three months ended March 31, 1996 and 1995, respectively, and
expects that its capital expenditures in 1996 will approximate $18.0 million to
$22.0 million. The Company was not committed under any material contractual
obligations for capital expenditures as of March 31, 1996.
Special Note Regarding Forward-Looking Statements
Certain statements in " Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 (the "Reform Act"). Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements
of the Company to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the Company's actual performance and highly
leveraged financial condition (see "-- Liquidity and Capital Resources" above).
12
<PAGE> 13
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
From time to time Ivex and its subsidiaries are involved in various
litigation matters arising in the ordinary course of business. Ivex believes
that none of the matters in which IPC or its subsidiaries are currently
involved, either individually or in the aggregate, is material to the Company
or IPC.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
None.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IVEX PACKAGING CORPORATION
By: /s/ Frank V. Tannura
----------------------------
Frank V. Tannura
Vice President and
Principal Financial Officer
May 8, 1996
- - -----------
( Date )
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet at March 31, 1996 (Unaudited) and the Consolidated
Statement of Operations for the three months ended March 31, 1996 (Unaudited)
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 4,965
<SECURITIES> 0
<RECEIVABLES> 50,025
<ALLOWANCES> 2,155
<INVENTORY> 43,711
<CURRENT-ASSETS> 100,807
<PP&E> 270,720
<DEPRECIATION> 107,592
<TOTAL-ASSETS> 292,483
<CURRENT-LIABILITIES> 59,826
<BONDS> 354,797
<COMMON> 11
0
0
<OTHER-SE> (137,134)
<TOTAL-LIABILITY-AND-EQUITY> 292,483
<SALES> 104,216
<TOTAL-REVENUES> 104,216
<CGS> 82,764
<TOTAL-COSTS> 82,764
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,764
<INCOME-PRETAX> (570)
<INCOME-TAX> 221
<INCOME-CONTINUING> (791)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (791)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
