<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1 TO
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
Commission file number 1-12551
MAIL-WELL, INC.
(Exact name of Registrant as specified in its charter.)
COLORADO 84-1250533
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
23 Inverness Way East, Englewood, CO 80112
(Address of principal executive offices) (Zip Code)
303-790-8023
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
INDICATE BY CHECKMARK 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 / /
As of May 12, 1998, the Registrant had 43,051,001 shares of Common Stock,
$0.01 par value, outstanding.
1
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MAIL-WELL, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Page
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<S> <C>
Part I - Financial Information
Item 1. Financial Statements.......................................... 3
</TABLE>
2
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PART I. FINANCIAL INFORMATION, ITEM 1. FINANCIAL STATEMENTS
MAIL-WELL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
(UNAUDITED)
MARCH 31, DECEMBER 31,
1998 1997
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . $ 8,185 $ 37,587
Receivables, net. . . . . . . . . . . . . . . . . . . . . . . 59,288 38,436
Accounts receivable -- other. . . . . . . . . . . . . . . . . 8,257 7,874
Income tax receivable, net. . . . . . . . . . . . . . . . . . -- 1,777
Securitized interest in accounts receivable . . . . . . . . . 42,598 22,319
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . 96,732 78,143
Deferred income taxes . . . . . . . . . . . . . . . . . . . . 2,493 2,410
Other current assets. . . . . . . . . . . . . . . . . . . . . 7,504 5,093
--------- ---------
Total current assets . . . . . . . . . . . . . . . . . . . . 225,057 193,639
PROPERTY, PLANT AND EQUIPMENT -- NET . . . . . . . . . . . . . . 279,766 223,390
DEFERRED FINANCING COSTS -- NET. . . . . . . . . . . . . . . . . 2,485 1,938
GOODWILL -- NET. . . . . . . . . . . . . . . . . . . . . . . . . 220,988 153,524
OTHER ASSETS -- NET. . . . . . . . . . . . . . . . . . . . . . . 15,038 13,710
--------- ---------
TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 743,334 $ 586,201
--------- ---------
--------- ---------
CURRENT LIABILITIES
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . $ 64,180 $ 42,572
Accrued compensation and vacation . . . . . . . . . . . . . . 27,102 26,533
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . 4,114 4,337
Income tax payable, net . . . . . . . . . . . . . . . . . . . 659 --
Other current liabilities . . . . . . . . . . . . . . . . . . 26,313 26,913
Current portion of long-term debt and capital leases. . . . . 464 562
--------- ---------
Total current liabilities . . . . . . . . . . . . . . . . . 122,832 100,917
ACCRUED PENSION. . . . . . . . . . . . . . . . . . . . . . . . . 1,174 1,174
CAPITAL LEASES . . . . . . . . . . . . . . . . . . . . . . . . . 40 2,771
BANK BORROWINGS. . . . . . . . . . . . . . . . . . . . . . . . . 95,710 60,193
SENIOR SUBORDINATED NOTES. . . . . . . . . . . . . . . . . . . . 85,000 85,000
CONVERTIBLE SUBORDINATED NOTES . . . . . . . . . . . . . . . . . 152,050 152,050
DEFERRED INCOME TAXES. . . . . . . . . . . . . . . . . . . . . . 28,757 28,676
OTHER LONG TERM LIABILITIES. . . . . . . . . . . . . . . . . . . 5,439 5,519
--------- ---------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . 491,002 436,300
--------- ---------
MINORITY INTEREST. . . . . . . . . . . . . . . . . . . . . . . . 3,500 3,500
--------- ---------
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value; 25,000 shares authorized,
none issued and outstanding . . . . . . . . . . . . . . . . -- --
Common stock, $0.01 par value; 100,000,000 shares authorized,
42,846,406 and 37,679,638 shares issued and outstanding,
respectively (including 3,896,544 shares held by ESOP). . . 428 377
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . 192,494 99,843
Retained earnings . . . . . . . . . . . . . . . . . . . . . . 59,317 49,807
Unearned ESOP compensation. . . . . . . . . . . . . . . . . . (2,357) (2,406)
Cumulative foreign currency translation adjustment. . . . . . (730) (1,032)
Pension liability adjustment. . . . . . . . . . . . . . . . . (73) (73)
Unrealized loss, net of taxes, on securitized interest in
accounts receivable . . . . . . . . . . . . . . . . . . . . (247) (115)
--------- ---------
Total stockholders' equity . . . . . . . . . . . . . . . . . 248,832 146,401
--------- ---------
TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 743,334 $ 586,201
--------- ---------
--------- ---------
</TABLE>
See notes to unaudited consolidated financial statements.
3
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------
1998 1997
------ ------
<S> <C> <C>
NET SALES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $274,705 $212,032
COST OF SALES
Materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116,205 89,958
Labor and other. . . . . . . . . . . . . . . . . . . . . . . . . . 80,454 59,017
Manufacturing. . . . . . . . . . . . . . . . . . . . . . . . . . . 18,137 15,541
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,620 3,355
Waste recovery . . . . . . . . . . . . . . . . . . . . . . . . . . (3,222) (2,473)
-------- --------
Total cost of sales. . . . . . . . . . . . . . . . . . . . . . 216,194 165,398
GROSS PROFIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,511 46,634
OTHER OPERATING COSTS
Selling. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,867 15,421
Administrative . . . . . . . . . . . . . . . . . . . . . . . . . . 14,529 12,799
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,733 1,117
(Gain) loss on disposal of assets. . . . . . . . . . . . . . . . . (467) 871
-------- --------
Total other operating costs. . . . . . . . . . . . . . . . . . 35,662 30,208
OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,849 16,426
OTHER EXPENSE
Interest expense - debt. . . . . . . . . . . . . . . . . . . . . . 5,589 4,554
Interest expense - amortization of deferred financing costs. . . . 89 724
Discount on sale of accounts receivable. . . . . . . . . . . . . . 807 1,269
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . (195) (530)
-------- --------
INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . 16,559 10,409
PROVISION FOR INCOME TAXES
Current. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,371 2,551
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,678 1,877
-------- --------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,510 $ 5,981
-------- --------
-------- --------
EARNINGS PER BASIC SHARE . . . . . . . . . . . . . . . . . . . . . . . $ 0.25 $ 0.17
EARNINGS PER DILUTED SHARE . . . . . . . . . . . . . . . . . . . . . . $ 0.22 $ 0.16
WEIGHTED AVERAGE SHARES - BASIC. . . . . . . . . . . . . . . . . . . . 38,154,942 35,553,099
WEIGHTED AVERAGE SHARES - DILUTED. . . . . . . . . . . . . . . . . . . 48,357,308 36,413,862
</TABLE>
See notes to unaudited consolidated financial statements.
4
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1998 1997
------ ------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,510 $ 5,981
Adjustments to reconcile net income to cash provided by (used in) operations
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,620 3,355
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,822 1,841
Deferred tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,678 1,877
(Gain), loss on disposal of assets . . . . . . . . . . . . . . . . . . . . . . (467) 871
ESOP compensation expense. . . . . . . . . . . . . . . . . . . . . . . . . . . 719 68
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (132) 20
Change in operating assets and liabilities
Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (32,982) 3,724
Current income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (302) 334
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,559) (3,034)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,527 (1,193)
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (223) (1,658)
Other working capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,907 (1,128)
Accrued pension, current and long term . . . . . . . . . . . . . . . . . . . . (219) (40)
Other assets and other long-term liabilities . . . . . . . . . . . . . . . . . (375) 443
--------- ---------
Net cash provided by (used in) operating activities . . . . . . . . . . . . . (2,476) 11,461
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (140,927) (189)
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,871) (5,601)
Proceeds from sale of property, plant and equipment. . . . . . . . . . . . . . 248 24
--------- ---------
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . (153,550) (5,766)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from common stock issuance. . . . . . . . . . . . . . . . . . . . . . 92,018 44
Cash overdrafts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 361
Proceeds from long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . 93,098 7,000
Repayments of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . (59,107) (11,333)
Repayments of capital lease obligations. . . . . . . . . . . . . . . . . . . . (87) (258)
--------- ---------
Net cash provided by (used in) financing activities . . . . . . . . . . . . . 125,922 (4,186)
--------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH. . . . . . . . . . . . . . . . . . . . . 702 (314)
--------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS. . . . . . . . . . . . . . . . . . . . . . (29,402) 1,195
BALANCE AT BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . 37,587 9,656
--------- ---------
BALANCE AT END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,185 $ 10,851
--------- ---------
--------- ---------
SUPPLEMENTAL DISCLOSURES
Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,812 $ 6,211
Cash paid for taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,178 2,803
</TABLE>
See notes to unaudited consolidated financial statements.
5
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
NATURE OF OPERATIONS -- Mail-Well, Inc. and subsidiaries (the "Company") is
one of the largest printers in North America, specializing in custom envelopes,
high quality printed materials, labels, business communications documents and
filing products. Within envelope printing and filing products, the Company
competes primarily in the consumer direct segment in which envelopes are
designed and manufactured to customer specifications. In addition, the Company
manufactures stock envelopes sold in the office products and merchant/printer
markets. The Company is also a leading high impact commercial printer
specializing in printing advertising literature, high-end catalogs, annual
reports, calendars and computer instruction books and is recognized as an
innovative provider of quality printed products to leading companies in the
United States. With acquisitions in early 1998, the Company is now a major
printer of custom business communications documents for the distributor market
and a major printer of glue-applied paper labels for the beverage, food and
household products industries. The Company commenced operations on February 24,
1994 with the acquisition of the envelope businesses of Georgia-Pacific
Corporation ("GP Envelope") and Pavey Envelope and Tag Corp. ("Pavey").
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION -- The Company, headquartered in Englewood,
Colorado, is organized under Colorado law and its common stock is traded on the
New York Stock Exchange. These financial statements include the accounts of the
Company and all significant intercompany accounts and transactions have been
eliminated.
INTERIM FINANCIAL INFORMATION -- The interim financial information contained
herein is unaudited and includes all normal and recurring adjustments which, in
the opinion of management, are necessary to present fairly the information set
forth. The consolidated financial statements should be read in conjunction with
the Notes to the Consolidated Financial Statements which are included in the
Company's Form 10-K. The results for interim periods are not necessarily
indicative of results to be expected for the Company's fiscal year ending
December 31, 1998. The Company believes that the report filed on Form 10-Q is
representative of its financial position, its results of operations and its cash
flows for the three months ended March 31, 1998 and 1997.
EMPLOYEE STOCK OWNERSHIP PLAN ("ESOP")-- Unearned ESOP compensation balance is
presented in the accompanying financial statements as a reduction of equity. As
the ESOP shares are allocated to participants, the unearned ESOP compensation
balance will decrease and compensation expense will be recorded.
AUTHORIZED CAPITAL STOCK -- At the Company's annual meeting on April 29, 1998,
the shareholders approved an amendment to the Articles of Incorporation to
increase the number of shares of common stock authorized for issuance to a total
of 100,000,000 shares.
COMPREHENSIVE INCOME-- Effective January 1, 1998, the Company adopted
Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
Income. Accordingly, components of other comprehensive income (loss), net of
tax, are as follows,
<TABLE>
<CAPTION>
Balance January 1 Current Period Change Balance March 31,
----------------- --------------------- -----------------
(in thousands) 1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Cumulative foreign currency translation adjustment . . $(1,032) $(115) $ 302 $ (140) $ (730) $(255)
Pension liability adjustment . . . . . . . . . . . . . (73) (110) 0 0 (73) (110)
Unrealized loss, net of taxes, on securitized
interest in accounts receivable . . . . . . . . . . . ( 115) ( 49) (132) 0 (247) ( 49)
-------- ------ ------ -------- -------- ------
Other comprehensive income (loss) . . . . . . . . . (1,220) (274) 170 (140) (1,050) (414)
Net income . . . . . . . . . . . . . . . . . . . . . . 9,510 5,981
------ --------
Comprehensive income. . . . . . . . . . . . . . . . $9,680 $ 5,841
------ --------
------ --------
</TABLE>
6
<PAGE>
RECLASSIFICATION -- Certain amounts in the 1997 financial statements have been
reclassified to conform to the 1998 presentation.
EARNINGS PER SHARE -- In June 1997, the Company's common stock split 3:2 and
in May 1998 the Company declared a 2:1 stock split effective June 1, 1998; all
share and per share information have been retroactively restated to reflect
these splits. In 1997, the Financial Accounting Standards Board issued
"Statement of Financial Accounting Standards No. 128, Earnings Per Share" ("SFAS
128"). The Company has adopted SFAS 128 resulting in the restatement of earnings
per share for all prior periods. Basic earnings per share excludes dilution and
is computed by dividing earnings available to common stockholders by the
weighted average number of common shares outstanding for the period. Diluted
earnings per share reflects the potential dilution of securities that could
share in the earnings. Common shares outstanding excludes unallocated shares
issued under the ESOP.
<TABLE>
<CAPTION>
INCOME SHARES PER-SHARE
(in thousands, except share and per share amounts) (NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ------
<S> <C> <C> <C>
FOR THE THREE MONTHS ENDED MARCH 31, 1998,
EARNINGS PER BASIC SHARE
Income available to common stockholders. . . . . . . . . . . . . . $ 9,510 38,154,942 $0.25
EFFECT OF DILUTIVE SECURITIES
Stock options. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,954,260
Convertible subordinated notes . . . . . . . . . . . . . . . . . . 1,083 8,002,634
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 245,472
EARNINGS PER DILUTED SHARE
Income available to common stockholders including
assumed conversions . . . . . . . . . . . . . . . . . . . . . . $10,593 48,357,308 $0.22
FOR THE THREE MONTHS ENDED MARCH 31, 1997,
EARNINGS PER BASIC SHARE
Income available to common stockholders. . . . . . . . . . . . . . $ 5,981 35,553,099 $0.17
EFFECT OF DILUTIVE SECURITIES
Stock options. . . . . . . . . . . . . . . . . . . . . . . . . . . 812,613
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,150
EARNINGS PER DILUTED SHARE
Income available to common stockholders including
assumed conversions . . . . . . . . . . . . . . . . . . . . . . $ 5,981 36,413,862 $0.16
</TABLE>
3. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS (in thousands)
<TABLE>
<CAPTION>
INVENTORIES:
MARCH 31, 1998 DECEMBER 31, 1997
-------------- -----------------
<S> <C> <C>
Raw materials. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 39,095 $ 30,308
Work in process. . . . . . . . . . . . . . . . . . . . . . . . . . 11,818 9,458
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . 49,147 41,270
Reserve for obsolescence and loss. . . . . . . . . . . . . . . . . (3,328) (2,893)
-------- --------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 96,732 $ 78,143
-------- --------
-------- --------
PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements . . . . . . . . . . . . . . . . . . . . $ 14,918 $ 12,459
Buildings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,542 52,817
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . 6,564 4,914
Machinery and equipment. . . . . . . . . . . . . . . . . . . . . . 196,840 162,112
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . 4,108 3,730
Automobiles and trucks . . . . . . . . . . . . . . . . . . . . . . 761 771
Computers and software . . . . . . . . . . . . . . . . . . . . . . 13,803 11,745
Construction in progress . . . . . . . . . . . . . . . . . . . . . 18,873 10,435
-------- --------
319,409 258,983
Less accumulated depreciation. . . . . . . . . . . . . . . . . . . (39,643) (35,593)
-------- --------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $279,766 $223,390
-------- --------
-------- --------
</TABLE>
7
<PAGE>
4. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
INTEREST RATE AT
MARCH 31, 1998 MARCH 31, 1998 DECEMBER 31, 1997
--------------- -------------- -----------------
<S> <C> <C> <C>
Bank borrowings:
Unsecured line of credit, due March 31, 2003
Mail-Well I Corporation. . . . . . . . . . . . . . . $ - $ -
Supremex . . . . . . . . . . . . . . . . . . . . . . 5.375% 90,238 -
Demand note
Supremex . . . . . . . . . . . . . . . . . . . . . . - 55,393
Senior Subordinated Notes, due 2004 . . . . . . . . . . . 10.5% 85,000 85,000
Convertible Subordinated Notes, due 2002. . . . . . . . . 5.0% 152,050 152,050
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 5,777 5,105
-------- --------
333,065 297,548
Less current maturities . . . . . . . . . . . . . . . . (305) (305)
-------- --------
Long-term debt. . . . . . . . . . . . . . . . . . . . . . $332,760 $297,243
-------- --------
-------- --------
</TABLE>
On March 18,1998, the Company closed a new bank facility totaling $300 million
with Bank of America, the lead agent for its syndicate of banks. The new bank
facility consists of a five-year unsecured line of credit. Proceeds from the
unsecured line of credit were used to repay the Demand Note outstanding at
December 31, 1997.
The indenture to the Senior Subordinated Notes contains restrictive covenants
that, among other things and with certain exceptions, limit the ability of the
Company to incur additional indebtedness, prepay subordinated debt, transfer
assets outside the Company, pay dividends or repurchase shares of common stock.
In addition the Company is required to satisfy financial covenants.
The Convertible Subordinated Notes constitute unsecured subordinated
obligations of the Company. They are convertible at the option of the holder
into shares of the Company's common stock at a conversion price of $38.00 per
share, or $19.00 per share after the 2:1 stock split effective June 1, 1998. In
addition, the Company may be required to repurchase the Notes at a price of 101%
of the principal amount, plus interest, upon occurrence of certain events
constituting a change of control of the Company.
5. COMMON STOCK ISSUANCE
On February 11, 1998, the Company completed the sale of 6,000,000 shares of its
Common Stock, adjusted for the 2:1 stock split, at a price of $19.625 per share
through a group of underwriters led by Prudential Securities Incorporated. Of
these shares, 4,864,600 were sold by the Company and 1,135,400 were sold by a
group of shareholders. Proceeds from the sale of common stock by the Company of
$91.2 million, net of underwriting discounts and commissions, were used for
general corporate purposes. An additional $0.8 million in proceeds was received
on the exercise of options in the first quarter of 1998.
6. STOCK OPTIONS
On February 4, 1998, the Company's Board of Directors adopted a non-qualified
stock option plan (the "1998 Plan") for key employees and directors authorizing
future grants of stock options to purchase up to 1,000,000 shares of the
Company's common stock, adjusted for the 2:1 stock split. The 1998 Plan will be
administered by the Compensation Committee of the Board, and key employees and
directors of the Company and its affiliates may receive options as determined by
the Committee in its discretion. The exercise price of options granted under the
1998 Plan shall not be less than 100% of the fair market value of the Company's
common stock on the date of the grant.
8
<PAGE>
7. ACQUISITIONS
The statements of operations include the operations of acquisitions, all of
which have been accounted for under the purchase method of accounting, from
their acquisition date.
On January 6, 1998, the Company acquired the stock of Poser Business
Forms, Inc., ("Poser"). Poser is the second largest U.S. printer of custom
business communications documents for the distributor market and has annual
sales of $90 million. Poser, headquartered in Fairhope, Alabama, has a
nation-wide network of 14 plants producing four-color process printing, labels,
envelopes, loose-leaf products, laser cut-sheets and business forms. Poser also
has two high-growth trademarked products, VersaSeal, a self-mailing system, and
Security Guard, a line of documents with special security protection. This
acquisition launches the Company in a new highly fragmented, growing operating
segment
On March 3, 1998, the Company acquired substantially all the assets of Rono
Graphic Communications Co. and Hicks-Chatten Engraving Company ("Rono"). Rono is
a printer specializing in high-quality posters, annual reports, advertising and
point-of-purchase displays with $12 million in annual sales located in Portland,
Oregon.
On March 10, 1998, the Company acquired substantially all the assets of the
Lawson Mardon Packaging USA, Inc. label division subsequently renamed Mail-Well
Label ("MW Label"). MW Label is the second largest supplier of glue-applied
labels in North America, providing premium and conventional labels, in-mold
labels, postcards and graphic services to the food, beverage and consumer
household products markets. Headquartered in Toronto, Ontario, with plants in
Montreal, Quebec; Leamington, Ontario; Baltimore, Maryland; and Sparks, Nevada,
MW Label has annual sales of $81 million. This acquisition also launches the
Company in a new highly fragmented segment of the printing industry.
On March 27, 1998, the Company acquired the stock of Denver Forms Company
("Denver Forms"). Denver Forms is a business communications documents and
specialty printing manufacturer based in Denver, Colorado with annual sales of
$12 million.
On March 27, 1998, the Company acquired the stock of the National Graphics
Company ("Natl Graphics"). Natl Graphics is a forms distributor based in Denver,
Colorado with annual sales of $8 million.
On March 27, 1998, the Company acquired substantially all the assets of
EPX DENVER ("EPX"). EPX is a business communications documents and specialty
printing manufacturer based in Denver, Colorado with annual sales of $4 million.
On April 8, 1998, the Company acquired substantially all the assets of Blue
Line Envelope ("Blue Line"). Blue Line, located in Montreal, Quebec, is an
envelope manufacturer for office products outlets and stationers in Canada with
annual sales of $6 million.
On April 21, 1998, the Company acquired the stock of South Press, Inc.
("South Press"). South Press is a high quality printer located in Dallas, Texas
with annual sales of $12 million.
On May 5, 1998, the Company acquired the stock of Century Index Corporation
("Century"). Century is a manufacturer of filing products located in Anaheim,
California, with annual sales of $8 million.
On May 11, 1998, the Company acquired substantially all the assets of the
International Paper label division ("IP Label"). IP Label located in Bowling
Green, Kentucky, prints labels for consumer products and has annual sales of $30
million.
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<PAGE>
8. SEGMENT INFORMATION
The Company's operating segments prepare separate financial information
that is evaluated regularly by the Chief Operating Officer in assessing
performance and deciding how to allocate resources. The Company does not
allocate corporate overhead, interest (income) expense, amortization expense or
income taxes by segment in assessing performance. Operating segments of the
Company are defined primarily by product line and consist of Envelope Printing,
High Impact Printing, Business Communication Printing and Label Printing. The
latter two segments were added via acquisitions in the first quarter of 1998.
The Company's segment information for the three months ending March 31 is as
follows:
<TABLE>
<CAPTION>
Business
Envelope Printing High Impact Communication Label
United States Canada Printing Printing Printing Corporate Total
------------- ------ -------- -------- -------- --------- -----
(in thousands) (a)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales:
1998 $172,202 $28,197 $48,684 $21,597 $4,025 $ - $274,705
1997 139,700 31,616 40,716 - - - 212,032
- -------------------------------------------------------------------------------------------------------------------------
Operating income (loss):
1998 17,361 4,495 2,548 1,606 263 (3,424) 22,849
1997 14,644 4,269 1,849 - - (4,336) 16,426
- -------------------------------------------------------------------------------------------------------------------------
Depreciation and amortization:
1998 3,127 550 1,748 245 161 522 6,353
1997 2,381 579 1,524 - - (12) 4,472
- -------------------------------------------------------------------------------------------------------------------------
Identifiable assets:
Mar 31, 1998 466,497 131,814 151,971 82,158 70,242 (159,348) 743,334
Dec 31, 1997 449,430 95,202 142,008 - - (100,439) 586,201
</TABLE>
(a) Corporate identifiable assets include inter-company balances and adjustments
for the accounts receivable securitization and certain operating leases.
This is done to reflect the return on assets employed within each segment on
a consistent basis.
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.
MAIL-WELL, INC.
(Registrant)
By /s/ PAUL V. REILLY
----------------------------
Paul V. Reilly
President,
Chief Operating Officer
July 6, 1998
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