<PAGE>
<PAGE>
As filed with the Securities and Exchange Commission on May 6, 1999
Registration No. 333-74409
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________
AMENDMENT NO. 2 TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
_________________________
MAIL-WELL I CORPORATION
AFFILIATE GUARANTORS LISTED ON SCHEDULE ATTACHED HERETO
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 2677 84-1250533
-------- (Primary Standard ----------
(State or Other Industrial (I.R.S. Employer
Jurisdiction of Classification Code Identification No.)
Incorporation or Number)
Organization)
23 INVERNESS WAY EAST, SUITE 160
ENGLEWOOD, CO 80112
(303) 790-8023
(Address, Including Zip Code and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
_________________________
COPIES TO:
Mail-Well, Inc. Herbert H. Davis III, Esq.
Roger Wertheimer, Esq. Rothgerber Johnson & Lyons LLP
23 Inverness Way, Suite 160 1200 Seventeenth Street, Suite 3000
Englewood, CO 80112 Denver, Colorado 80202
(303) 790-8023 (303) 623-9000
(Name, Address, Including Zip Code and Telephone Number,
Including Area Code, of Agent for Service for the Registrant)
_________________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE
SECURITIES TO THE PUBLIC: As soon as practicable after this
Registration Statement becomes effective.
_________________________
If the securities being registered on this form are being
offered in connection with the formation of a holding
company and there is compliance with General Instruction G,
check the following box. [ ]
<PAGE>
<PAGE>
If this form is filed to register additional securities for
an offering pursuant to Rule 462(b) under the Securities
Act, check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to
Rule 42(d) under the Securities Act, check the following box
and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. [ ]
_________________________
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in
accordance with section 8(a) of the Securities Act of 1933, as amended,
or until this Registration Statement shall become effective on such date
as the Commission, acting pursuant to said section 8(a), may determine.
<TABLE>
SCHEDULE OF ADDITIONAL AFFILIATE GUARANTORS
<CAPTION>
Exact Name of Guarantor Primary Standard I.R.S. Employer
Registrants as Specified in State of Industrial Identification
Their Respective Charters Formation Classification Number Number
--------------------------- --------- --------------------- ---------------
<S> <C> <C> <C>
Graphics Arts Center, Inc. Delaware 2752 93-1008554
Mail-Well Commercial Printing, Inc. Delaware 2752 84-1461875
Mail-Well Canada Holdings, Inc. Delaware 6719 84-1313090
Mail-Well, Inc. Colorado 6719 84-1250533
Mail-Well Label Holdings, Inc. Colorado 6719 84-1449291
Mail-Well Label USA, Inc. Colorado 2752 84-1449292
Mail-Well West, Inc. Delaware 2677 84-1313079
Murray Envelope Holdings, Inc. Colorado 6719 84-1421627
Murray Envelope Corporation Mississippi 2677 64-0271038
N-M Envelope, Inc. Mississippi 2677 64-0840384
National Graphics Company Colorado 2761 84-0692676
Poser Business Forms, Inc. Delaware 2761 75-2195786
Wisco II, L.L.C. Delaware 2677 84-1313080
Wisco Envelope Corp. Tennessee 2677 62-1555311
</TABLE>
<PAGE>
<PAGE>
**********************************************************************
* The information contained in this prospectus is not complete and *
* may be changed. We may not sell these securities until the *
* registration statement filed with the Securities and Exchange *
* Commission is effective. This prospectus is not an offer to sell *
* these securities and it is not soliciting an offer to buy these *
* securities in any state where the offer or sale is not permitted. *
**********************************************************************
Subject to completion, dated May 6, 1999
PROSPECTUS
Offer to Exchange All Outstanding
8 3/4% Senior Subordinated Notes due 2008 for
8 3/4% Series B Senior Subordinated Notes due 2008 of
MAIL-WELL I CORPORATION
We are offering, on the terms and conditions described in this
prospectus, to exchange all of our outstanding 8 3/4% senior
subordinated notes due 2008 for our registered 8 3/4% Series B senior
subordinated notes due 2008. We issued the old notes on December 16,
1998, and a total principal amount of $300 million is outstanding. The
terms of the new notes are identical to the terms of the old notes
except that the new notes are registered under federal securities laws
and will not contain any legends restricting their transfer.
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THE EXCHANGE OFFER:
Our offer to exchange old notes for new notes will be open until 5:00
p.m., New York City time, on ____________, 1999, unless we extend the
offer
You should carefully review the procedures for tendering the old notes
beginning on page 21 of this prospectus
If you fail to tender your old notes, you will continue to hold
unregistered securities and your ability to transfer them could be
adversely affected
THESE NOTES:
Maturity: December 15, 2008
Interest Payment: semi-annually in cash in arrears on June 15 and
December 15, commencing June 15, 1999
Redemption: redeemable on or after December 15, 2003, in whole or in
part, at our option. Up to 35% of these notes will be redeemable prior
to December 15, 2001, with the proceeds from common stock offerings in
some circumstances
Ranking: these notes are general unsecured obligations of Mail-Well I
Corporation and:
* are subordinated to debt under our bank credit agreement
* are subordinated to our other senior debt and the senior debt of
the guarantors of the notes
* are of equal rank with our other existing and future debt, and our
other obligations and those of the guarantors, unless the terms of
that debt or other obligations expressly provide otherwise
Guarantees: these notes are guaranteed by our parent company,
Mail-Well, Inc., and our domestic operating subsidiaries
TRADING FORMAT:
The over-the-counter market. No active public market is anticipated
THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 12.
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Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
passed upon the adequacy or accuracy of this prospectus. Any
representation to the contrary is a criminal offense.
The date of this prospectus is __________________, 1999
<PAGE>
<PAGE>
TABLE OF CONTENTS
Page
----
CURRENCY TRANSLATION 3
SUMMARY 4
RISK FACTORS 12
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS 20
THE EXCHANGE OFFER 21
USE OF PROCEEDS 28
DESCRIPTION OF THE NOTES 28
PLAN OF DISTRIBUTION 72
TAXATION 74
DESCRIPTION OF OUTSTANDING DEBT 78
COMPARATIVE CONSOLIDATED HISTORICAL FINANCIAL DATA 82
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS 83
BUSINESS 93
MANAGEMENT 111
WHERE YOU CAN FIND MORE INFORMATION 113
LEGAL MATTERS 114
EXPERTS 114
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES F-1
Printed by
Color-Art Financial Printing
A Mail-Well Company
-2-
<PAGE>
<PAGE>
We are not making an offer of the new notes in any jurisdiction
except where an offer or sale is legally permitted. You should
understand that you may be required to bear the financial risks of your
investment until the new notes mature.
Portions of this prospectus are based on information provided by
us and by other sources that we believe are reliable. We cannot assure
you that this information is accurate or complete. This prospectus
summarizes certain documents and other information and we refer you to
them for a more complete understanding of what we discuss in this
prospectus. In making an investment decision, you must rely on your own
examination of our company and the terms of the exchange offer and the
new notes, including the merits and risks involved.
This prospectus incorporates important business and financial
information about Mail-Well I Corporation that is not included in or
delivered with this prospectus. This information is available without
charge to security holders upon written or oral request to Mail-Well,
Inc., Attention: Investor Relations, 23 Inverness Way East, Suite 160,
Englewood, Colorado 80112, telephone: (303) 790-8023. To obtain timely
delivery of such information, you must request the information no later
than _____________, 1999.
You should rely only on the information contained or incorporated
by reference in this prospectus. We have not authorized any other
person to provide you with different information. If anyone provides
you with different or inconsistent information, you should not rely on
it. You should assume that the information appearing in this prospectus
is accurate as of the date on the front cover of this prospectus only.
Our business, financial condition, results of operations and prospects
may have changed since that date.
CURRENCY TRANSLATION
We report our financial statements in U.S. dollars. Unless
otherwise indicated, references to dollars or "$" are to U.S. dollars.
-3-
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<PAGE>
SUMMARY
The following is a summary of the more detailed information
appearing elsewhere in this prospectus and in the documents incorporated
herein by reference. You should read the entire prospectus, including
the "Risk Factors" and the financial statements, including all the
notes. Mail-Well, Inc. is a holding company which is not engaged in any
business other than holding the capital stock of Mail-Well I
Corporation.
The data used in this prospectus are drawn from the financial
condition, results of operations and cash flows of Mail-Well, Inc. and
its subsidiaries on a consolidated basis. Because Mail-Well, Inc. has
immaterial operating assets, revenues and expenses, other than through
ownership of Mail-Well I Corporation, the financial condition and
results of operations of Mail-Well I Corporation and its subsidiaries on
a consolidated basis do not materially differ from those of Mail-Well,
Inc. on a consolidated basis. Mail-Well, Inc. will guarantee all of Mail-Well I
Corporation's obligations under the new notes.
THE EXCHANGE OFFER
Issuer Mail-Well I Corporation.
Exchange Offer On December 16, 1998, we issued
$300,000,000 aggregate principal amount
of Mail-Well I Corporation's 8 3/4%
senior subordinated notes due 2008 in a
transaction that was exempt from the
registration requirements of the
Securities Act of 1933, as amended. We
are now offering to exchange $1,000
principal amount of Mail-Well I
Corporation's 8 3/4% Series B senior
subordinated notes due 2008 for each
$1,000 principal amount of old notes.
As of the date of this prospectus, old
notes representing $300,000,000
aggregate principal amount are
outstanding. The terms of the new notes
and the old notes are identical in all
material respects, except that the new
notes will be freely transferable by the
holders except as otherwise described in
this prospectus. See "Description of
the Notes."
We believe that new notes issued
pursuant to this exchange offer in
exchange for old notes may be offered
for resale, resold or otherwise
transferred by holders without
compliance with the registration and
prospectus delivery requirements of the
Securities Act. Our belief is based on
interpretations by the staff of the
Securities and Exchange Commission, as
set forth in no-action letters issued to
persons unrelated to us, and is
conditioned upon the new notes being
acquired in the ordinary course of the
holders' business and the holders having
no arrangement with any person to engage
in a distribution of new notes.
Furthermore, each holder, other than a
broker-dealer, must acknowledge that it
is not engaged in, and does not intend
to engage in, a distribution of the new
notes and has
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<PAGE>
<PAGE>
no arrangement or understanding to
participate in a distribution of new
notes.
Each broker-dealer that receives new
notes for its own account in this
exchange offer must acknowledge that it
will comply with the prospectus delivery
requirements of the Securities Act in
connection with any resale of the new
notes. Broker-dealers that acquired old
notes directly from us and not as a
result of market-making activities or
other trading activities may not rely on
the staff's interpretations discussed
above or participate in the exchange
offer and must comply with the
prospectus delivery requirements of the
Securities Act in order to resell the
old notes.
Please note that the Commission has not
considered this exchange offer in the
context of a no-action letter and we
cannot be sure that the staff of the
Commission would make a similar
determination with respect to this
exchange offer as it did in the no-
action letters to the unrelated persons.
Registration Rights
Agreement We sold the old notes on December 16,
1998, in a private placement relying on
Section 4(2) of the Securities Act. The
old notes were immediately resold by the
initial purchasers in reliance on Rule
144A under the Securities Act. In
connection with the sale, we entered
into a registration rights agreement
with the initial purchasers requiring us
to make this exchange offer. The
registration rights agreement also
provides that we must use our reasonable
best efforts to:
* cause the registration statement for
this exchange offer to be declared
effective within 180 days of the date
on which we issued the old notes and
* consummate this exchange offer no
earlier than 20 and no later than 30
business days after the effective
date of the registration statement
for this exchange offer.
Expiration Date The exchange offer will expire at 5:00
p.m., New York City time, on
__________________, 1999, or a later
date and time to which we extend it.
Withdrawal You may withdraw your tender of the old
notes pursuant to the exchange offer at
any time prior to 5:00 p.m., New York
City time, on ______________, 1999, or a
later date and time to which we extend
the offer. We will return any old notes
that we do not accept for exchange for
any reason without expense to the
tendering holder as soon as practicable
after the exchange offer expires or
terminates.
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<PAGE>
<PAGE>
Interest on the New Notes
and the Old Notes Interest on the new notes will accrue
from the date of the original issuance
of the old notes or from the date of the
last periodic payment of interest on the
old notes, whichever is later. No
additional interest will be paid on old
notes tendered and accepted for
exchange.
Conditions of the
Exchange Offer The exchange offer is subject to
customary conditions, some of which we
may waive. See "The Exchange Offer--
Conditions of the Exchange Offer."
Procedures for Tendering
Old Notes To accept the exchange offer, you must
complete, sign and date the letter of
transmittal in accordance with the
instructions contained in this
prospectus and in the letter of
transmittal, and send the letter of
transmittal and the old notes and any
other required documentation to the
exchange agent at the following address:
State Street Bank and Trust Company,
Exchange Agent
Attn: Susan Lavey, Corporate Actions
Two International Place, Fourth Floor
Boston, Massachusetts 02110
Telecopier No.: (617) 664-5290
If you hold the old notes through the
Depository Trust Company, to accept the
exchange offer you must use the DTC's
Automated Tender Offer Program, by which
each tendering participant will agree to
be bound by the letter of transmittal.
By executing or agreeing to be bound by
the letter of transmittal, each holder
will represent to us that, among other
things,
* the new notes acquired pursuant to
the exchange offer are being obtained
in the ordinary course of business of
the person receiving the new notes,
whether or not the person is the
registered holder of the old notes,
* the holder is not engaging in and
does not intend to engage in a
distribution of the new notes,
* the holder does not have an
arrangement or understanding with any
person to participate in the
distribution of the new notes, and
* the holder is not an "affiliate," as
defined under Rule 405 promulgated
under the Securities Act, of Mail-
Well I Corporation.
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<PAGE>
We will accept for exchange any and all
old notes which are properly tendered
and not withdrawn in the exchange offer
prior to 5:00 p.m., New York City time,
on ______________, 1999. The exchange
agent will deliver the new notes issued
pursuant to the exchange offer promptly
following the expiration date. See "The
Exchange Offer--Terms of the Exchange
Offer; Period for Tendering Old Notes."
Federal Income Tax
Considerations In the opinion of special tax counsel,
the exchange of old notes for new notes
in the exchange offer should not
constitute an exchange of the old notes
under Section 1001 of the Internal
Revenue Code of 1986, as amended. See
"Taxation."
Effect of Not Tendering Old notes that are not tendered or that
are tendered but not accepted will,
following the completion of the exchange
offer, continue to be subject to the
existing restrictions on transfer. We
will have no further obligation to
provide for the registration under the
Securities Act of the old notes.
Holders of old notes do not have any
appraisal or dissenters' rights in
connection with the exchange offer.
Securities $300,000,000 aggregate principal amount
of Mail-Well I Corporation's 8 3/4%
Series B senior subordinated notes due
2008.
Maturity Date December 15, 2008.
Interest Payment Dates Interest on the new notes will accrue at
the rate of 8 3/4% per year, payable
semi-annually in cash in arrears on June
15 and December 15 of each year,
commencing June 15, 1999.
Optional Redemption We can redeem the new notes, in whole or
in part, on or after December 15, 2003,
at the redemption prices set forth in
this prospectus, plus accrued and unpaid
interest. In addition, before December
15, 2001, we can redeem up to 35% of the
new notes at 108.75% of their principal
amount, plus accrued and unpaid
interest, with the net cash proceeds
from common stock offerings in some
circumstances. See "Description of the
Notes--Optional Redemption."
Guarantees The new notes will be unconditionally
guaranteed by Mail-Well, Inc. as well as
by our existing domestic operating
subsidiaries and significant future
domestic operating subsidiaries. These
guarantees will be subordinated in right
of payment to all existing and future
senior debt of the guarantors, including
guarantees of debt by substantially all
of our domestic subsidiaries under our
existing senior bank credit agreement.
These guarantees will rank equal to
other existing
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<PAGE>
and future senior subordinated debt of
the guarantors and senior in right of
payment to all of the existing and
future obligations of the guarantors
that are expressly subordinated in right
of payment to the guarantees of the new
notes. See "Description of the
Notes--Note Guarantees; Restrictions on
Mail-Well, Inc. and Subsidiaries."
Change of Control Upon the occurrence of certain change of
control events, you may require us to
repurchase all or a portion of your new
notes at 101% of their principal amount,
plus accrued and unpaid interest. See
"Description of the Notes--Repurchase at
the Option of Holders--Change of
Control."
Ranking The new notes will be general unsecured
obligations of Mail-Well I Corporation
and will rank equally with all of Mail-
Well I Corporation's other existing and
future senior subordinated debt and
senior in right of payment to existing
and future obligations expressly
subordinated in right of payment to the
new notes. The new notes will rank
junior to all existing and future senior
debt. In addition, the new notes will
effectively rank junior to all existing
and future debt and other liabilities of
our foreign subsidiaries. See
"Description of the
Notes--Subordination."
Anti-Layering We will not, and will not permit any of
our subsidiaries to, incur any debt that
is subordinate in right of payment to
any of our senior debt and senior in
right of payment to the new notes.
Covenants in the
Indenture The indenture governing the new notes
contains covenants that, among other
things, limit our ability and the
ability of our subsidiaries to:
* pay or permit payment of dividends
on, or redeem or repurchase, capital
stock;
* make investments;
* incur additional debt;
* allow the imposition of dividend
restrictions on subsidiaries;
* sell assets;
* guarantee debt;
* issue capital stock;
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<PAGE>
* create liens;
* engage in certain transactions with
affiliates; and
* consolidate or merge or sell all or
substantially all our assets and the
assets of our subsidiaries.
All of these limitations are subject to
important exceptions and qualifications
described under "Description of the
Notes--Covenants in the Indenture."
REGULATORY MATTERS
We are not aware of any governmental or regulatory approvals that
are required in order to complete the exchange offer.
RISK FACTORS
An investment in the new notes involves risks associated with our
business, the printing industry and the exchange offer. For a more
detailed discussion of these risks, see "Risk Factors" on page 12.
MAIL-WELL I CORPORATION
Mail-Well I Corporation is a direct, wholly owned subsidiary of
Mail-Well, Inc., a Colorado corporation, whose common stock is traded on
the New York Stock Exchange under the symbol "MWL." Unless specifically
stated otherwise, all financial information presented in this prospectus
is that of Mail-Well, Inc. on a consolidated basis. You can contact
Mail-Well I Corporation at the following address, telephone number and
fax number:
Mail-Well I Corporation
c/o Mail-Well, Inc.
23 Inverness Way East
Englewood, Colorado 80112
(303) 790-8023
(303) 397-7400 (Fax)
We are a leading consolidator in the printing industry, with
revenues of $1.5 billion for the year ended December 31, 1998. We
compete in the following four market segments of the printing industry:
* Envelopes
* Commercial Printing
* Printing for Distributors
* Labels
Since our inception in February 1994 through March 10, 1999, we
have completed 44 acquisitions in the printing industry. We are the
largest printer and manufacturer of envelopes in the United States and
Canada and one of the leading commercial printers in the United States.
We are also
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the largest printer of custom business documents for the distributor
market in the United States and a leading printer of glue-applied paper
labels for the food and beverage industry. We currently operate 100
printing facilities throughout North America, serving over 40,000
customers.
Please refer to Note 12 of Mail-Well's consolidated financial
statements included elsewhere in this prospectus for additional
information concerning our operating and geographic segments.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The summary of historical consolidated financial data presented
below is derived from the historical audited consolidated financial
statements of Mail-Well, Inc. and its predecessors, the envelope
business of Georgia-Pacific and Pavey Envelope and Tag Corp., and in the
opinion of management reflects all adjustments, consisting of only
normal, recurring adjustments, necessary for a fair presentation of such
information. The operations of the acquisitions accounted for under the
purchase method have been included in the historical income statement
data of Mail-Well, Inc. from their respective dates of acquisitions.
Amounts derived from the consolidated financial statements for periods
subsequent to February 23, 1994, the date of inception of Mail-Well, Inc.,
have been restated as appropriate to reflect mergers accounted for as
poolings of interests. The data presented below should be read in
conjunction with Management's Discussion and Analysis of Financial
Condition and Results of Operations, the consolidated financial statements
and the related notes thereto included elsewhere in this document.
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<TABLE>
<CAPTION>
Predecessor
Companies
Period -----------
from Period
Feb. 24 from
1994 Jan. 1, 1994
Year Ended December 31 through through
---------------------------------------------- December Feb. 23
1998 1997 1996 1995 1994 1994
---- ---- ---- ---- ---- ----
(in millions, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Net sales $1,504.7 $1,073.9 $944.5 $758.9 $389.3 $36.6
Income (loss) before extraordinary
item 25.8<Fc> 35.0 21.2 15.4 9.4 (1.3)
Net income (loss) 21.7<Fc> 28.9 21.2 13.0 9.4 (1.3)
Earnings per basic share: <Fb>
Income per share before extraordinary
item $0.55 $0.86 $0.53 $0.58 $0.42 <Fa>
Extraordinary item (0.08) (0.15) -- (0.09) --
----- ----- ----- ----- -----
Net income per basic share $0.47 $0.71 $0.53 $0.49 $0.42 <Fa>
===== ===== ===== ===== =====
Earnings per diluted share: <Fb>
Income per share before extraordinary
item $0.53<Fc> $0.82 $0.52 $0.56 $0.42 <Fa>
Extraordinary item (0.08) (0.14) -- (0.09) --
----- ----- ----- ----- -----
Net income per diluted share $0.45 $0.68 $0.52 $0.47 $0.42 <Fa>
===== ===== ===== ===== =====
Total assets $1,128.0 $671.4 $552.0 $582.6 $392.5 N/A
Total long-term debt 583.4 330.4 237.8 347.4 259.1 N/A
Book value per share $6.13 $3.99 $3.29 $2.80 $1.90 N/A
Ratio of earnings to fixed charges<Fd> 2.1x<Fc> 2.6x 1.9x 1.7x 1.7x N/A
<FN>
- ------------
<Fa> Earnings per share is not presented for these periods as
operations were those of predecessor companies.
<Fb> Earnings per share data has been retroactively restated to reflect
the 3:2 stock split in June 1997 and the 2:1 stock split in June
1998.
<Fc> The 1998 results include an after-tax charge of $21.8 million,
$28.9 million pre-tax, or $0.41 per diluted share related to the
restructuring of the Envelopes and Commercial Printing segments
and the termination of a leveraged Employee Stock Ownership Plan.
See Note 11 of notes to the consolidated financial statements
included elsewhere herein. Excluding the restructuring and other
unusual charge, the amounts would be as follows:
Income before extraordinary item $47.6
Net income 43.5
Income per diluted share before extraordinary item 0.94
Ratio of earnings to fixed charges 2.7x
<Fd> For purposes of computing the ratio of earnings to fixed charges,
earnings consist of income before income taxes plus fixed charges,
other than capitalized interest, and amortization of previously
capitalized interest. Fixed charges consist of interest expense
and debt issuance cost, capitalized interest and that portion of
rental expenses representative of the interest factor, deemed to
be one-third.
</TABLE>
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RISK FACTORS
An investment in the new notes involves a high degree of risk.
You should consider carefully the following factors, in addition to the
other information contained in this prospectus, in evaluating the risks
of the new notes.
WHAT ARE THE RISKS RELATED TO THE NEW NOTES?
THE AMOUNT OF DEBT WE OWE MAY AFFECT OUR OPERATIONS AND OUR
ABILITY TO PAY OUR DEBT
We have borrowed substantial amounts in order to finance
acquisitions and operations. As of December 31, 1998, our total debt
was $591.5 million, representing approximately 1.98 times total
shareholders' equity.
The amount of debt we owe could have several important effects on
future operations of our business. For example:
* our ability to obtain additional financing for working
capital, acquisitions, capital expenditures or other
corporate purposes in the future may be limited;
* a substantial portion of our cash flow from operations is
dedicated to the payment of principal and interest on debt,
and is not available to fund working capital, capital
expenditures, acquisitions and other business purposes;
* we may be more vulnerable to economic downturns or other
adverse developments than less leveraged competitors;
* borrowings under our bank credit agreement bear interest at
fluctuating rates which could result in higher interest
expense in the event of an increase in interest rates; and
* we may be unable to repurchase all of the new notes tendered
to us if we undergo a change of control.
Our ability to make scheduled payments of principal or interest
on, or to reduce or refinance, debt depends on our future operating
performance and resulting cash flow. To some extent, future performance
will be subject to prevailing economic conditions and financial,
competitive and other factors beyond our control. We cannot be certain,
however, that our business, or businesses that we acquire in the future,
will generate sufficient cash flow from operations to enable us to
service all of our debt, including the new notes. We may need
additional funding from either debt or equity offerings in the future in
order to refinance existing debt, including the new notes, or to
continue to grow our business through acquisitions or internally. We
cannot be sure that we will have access to any such sources of funding
on satisfactory terms or on a timely basis or at all.
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<PAGE>
THERE ARE ADDITIONAL BORROWINGS AVAILABLE TO US, WHICH MAY FURTHER
AFFECT OUR OPERATIONS AND OUR ABILITY TO PAY OUR DEBT
Despite current debt levels, we may be able to incur substantial
additional debt in the future. The terms of the indenture for the new
notes do not fully prohibit us from doing so. If new debt is added to
our current debt levels, the risks discussed above could intensify. We
may incur additional debt if our fixed charge coverage ratio for the
four most recent fiscal quarters would have been at least two-to-one,
determined as if the additional debt had been incurred and the net
proceeds received at the beginning of the four-quarter period. For
example, our bank credit agreement permits additional borrowings of up
to $207.0 million and all of those borrowings would be senior to the new
notes and the guarantees on the new notes. Also, we may issue
additional notes that would be equal in right of payment to the new
notes.
OUR SUBSIDIARIES THAT ARE NOT GUARANTORS HAVE SIGNIFICANT DEBT AND
YOUR RIGHT TO RECEIVE PAYMENTS MAY BE ADVERSELY AFFECTED IF ANY
NON-GUARANTOR SUBSIDIARY DECLARES BANKRUPTCY
Your right to receive payments on the new notes could be adversely
affected if any of our non-guarantor subsidiaries declares bankruptcy,
liquidates or reorganizes.
Some but not all of our subsidiaries guarantee the new notes. In
the event of a bankruptcy, liquidation or reorganization of any of the
non-guarantor subsidiaries, holders of their debt and their trade
creditors will generally be entitled to payment of their claims from the
assets of those subsidiaries before any assets are made available for
distribution to us. As of December 31, 1998, the old notes were
effectively junior to $81.5 million of debt and other liabilities,
including trade payables, of these non-guarantor subsidiaries. In
addition, an indeterminate amount may be available to those subsidiaries
for future borrowing. The non-guarantor subsidiaries generated 10.3% of
our consolidated revenues in the year ended December 31, 1998, and held
14.6% of our consolidated assets as of December 31, 1998. Please refer
to Note 14 of Mail-Well's consolidated financial statements included
elsewhere in this prospectus for additional information concerning
guarantor and non-guarantor subsidiaries.
FRAUDULENT CONVEYANCE LAWS MAY ALLOW COURTS TO VOID GUARANTEES AND
REQUIRE NOTEHOLDERS TO RETURN PAYMENTS RECEIVED FROM GUARANTORS
Federal and state statutes allow courts, under specific
circumstances, to void guarantees and require noteholders to return
payments received from guarantors. If a court were to void the
guarantee of any of the guarantors, holders of new notes could not look
to that guarantor for payments on the new notes.
Under the federal bankruptcy law and comparable provisions of
state fraudulent transfer laws, a guarantee could be voided, or claims
in respect of a guarantee could be subordinated to all other debts of
that guarantor if, among other things, the guarantor, at the time it
incurred the debt evidenced by its guarantee, received less than
reasonably equivalent value or fair consideration for the incurrence of
such guarantee and:
* was insolvent or rendered insolvent by reason of such
incurrence;
* was engaged in a business or transaction for which the
guarantor's remaining assets constituted unreasonably small
capital; or
* intended to incur, or believed that it would incur, debts
beyond its ability to pay such debts as they mature.
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In addition, any payment by a guarantor of the new notes pursuant
to its guarantee could be voided and required to be returned to the
guarantor, or to a fund for the benefit of the creditors of the
guarantor.
The measures of insolvency for purposes of these fraudulent
transfer laws vary depending upon the law applied in any proceeding to
determine whether a fraudulent transfer has occurred. Generally,
however, a guarantor would be considered insolvent if:
* the sum of its debt, including contingent liabilities, was
greater than the fair saleable value of all of its assets;
* the present fair saleable value of its assets was less than
the amount that would be required to pay its probable
liability on its existing debts, including contingent
liabilities, as they become absolute and mature; or
* it could not pay its debts as they become due.
THE NEW NOTES AND GUARANTEES ARE SUBORDINATED TO SENIOR CREDITORS
The new notes and the guarantees of the new notes are unsecured,
which means that you have no recourse to specific assets of Mail-Well I
Corporation or the guarantors upon any event of default under the
indenture. In addition, we may borrow up to $300.0 million under an
existing bank credit agreement. Under the terms of the indenture for
the new notes, we may borrow additional funds from our banks in the
future, subject to important limitations. Your right to be repaid
principal and interest on the new notes is secondary to the right of our
lenders to be repaid for all current and future borrowings under the
bank credit agreement and other senior debt. We may also issue
additional senior subordinated debt which will rank equally with your
right to be repaid. Your right to be repaid amounts owing under the
guarantees of the new notes ranks equally to the rights of other senior
subordinated obligations of the guarantors. Under some circumstances,
we may also incur secured debt to creditors who will have the right to
be repaid out of specific property.
If we default on the new notes, become bankrupt, liquidate or
reorganize:
* from our remaining assets, you would be entitled to be
repaid only after any secured creditors have been paid out
of proceeds from the sale of their collateral;
* from our remaining assets, you would be paid principal and
interest on the new notes only after all of our senior debt
has been paid; and
* to the extent there are assets available after all of the
foregoing creditors have been paid, then you will be
entitled to be repaid on a pro rata basis with and only to
the extent that there are sufficient assets to repay the
holders of any obligations of Mail-Well I Corporation and
its subsidiaries which rank equally with the new notes in
right of payment.
In addition, all payments on the new notes and the guarantees will
be blocked in the event of a payment default on senior debt and may be
blocked for up to 365 consecutive days in the event of non-payment
default on senior debt.
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In the event of a bankruptcy, liquidation or reorganization or
similar proceeding relating to Mail-Well I Corporation or the guarantors
of the new notes, if we have senior debt, the holders of the new notes
will participate with all other holders of our subordinated debt in the
assets remaining after we have paid all senior debt, including trade and
other general creditors. In any of these cases, we may not have
sufficient funds to pay all of our creditors in which event holders of
new notes would receive less, ratably, than the holders of senior debt.
If, at the time of a bankruptcy, liquidation, reorganization or similar
proceeding relating to Mail-Well I Corporation or the guarantors, we had
no senior debt, holders of the new notes would participate ratably with
trade and other general creditors and all other holders of our
subordinated debt in our assets.
As of December 31, 1998, the old notes and the guarantees of the
old notes were subordinated to $139.4 million of senior debt and
approximately $207.0 million was available for borrowing as additional
senior debt under our bank credit agreement. We will be permitted to
borrow substantial additional debt, including senior debt, in the future
under the terms of the indenture for the new notes. See "Description of
the Notes--Covenants in the Indenture--Incurrence of Debt."
WE MAY NOT BE ABLE TO FINANCE A CHANGE OF CONTROL OFFER
We may not have the ability to raise the funds necessary to
finance the change of control offer required by the indenture for the
new notes.
Upon the occurrence of certain specific kinds of change of control
events, we will be required to offer to repurchase all outstanding
notes. However, it is possible that we will not have sufficient funds
at the time of the change of control to make the required repurchase of
notes, or that restrictions in our bank credit agreement will not allow
such repurchases. In addition, certain important corporate events, such
as leveraged recapitalizations that would increase the level of our
debt, would not constitute a "change of control" under the indenture for
the new notes.
BECAUSE THERE IS NO PUBLIC MARKET FOR THE NEW NOTES, HOLDERS MAY
HAVE TO BEAR THE RISKS OF INVESTMENT UNTIL MATURITY
The new notes will be a new issue of securities for which there
will be a limited trading market. Therefore, holders of the new notes
may have to bear the risks of holding the new notes until their
maturity.
The initial purchasers of the old notes have advised us that they
are making a market in the old notes and will do so for the new notes in
the over-the-counter market. However, the initial purchasers are not
obligated to continue to do so, and may discontinue any market-making
activities with respect to the new notes at any time without notice. In
addition, such market-making activities are subject to the limitations
imposed by the Securities Act and the Securities Exchange Act of 1934,
as amended, and may be limited during this exchange offer.
If an active market for the new notes were to develop, the new
notes might trade at prices lower than the initial offering price of the
old notes. The trading price would depend on many factors, such as
prevailing interest rates and the market for similar securities, general
economic conditions and our financial condition, performance and
prospects. We do not intend to apply for listing or quotation of the
new notes on any securities exchange or automated quotation system.
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THERE ARE CROSS DEFAULT PROVISIONS IN OUR DEBT INSTRUMENTS, SO A
DEFAULT UNDER ONE INSTRUMENT COULD CAUSE THE DEBTS UNDER OTHER
INSTRUMENTS TO BECOME IMMEDIATELY DUE AND PAYABLE
Our bank credit agreement and the indenture for the new notes
contain numerous financial and operating covenants and require us to
meet certain financial ratios and tests. Our failure to comply with the
obligations contained in the bank credit agreement or the indenture
could result in an event of default under the bank credit agreement or
the indenture, which could result in the related debt and the debt
issued under other instruments to become immediately due and payable.
In this event, we would need to raise funds through any number of
alternative available sources, which funds may not be available on
favorable terms, on a timely basis or at all. Alternatively, such a
default would require us to sell assets and otherwise curtail operations
in order to pay our creditors.
WHAT ARE THE RISKS RELATED TO OUR BUSINESS?
THE GROWTH OF OUR BUSINESS DEPENDS UPON OUR ABILITY TO ACQUIRE
OTHER BUSINESSES AND INTEGRATE THEM INTO OUR OWN
We have grown rapidly through acquisitions. Although we believe
that our experience in making acquisitions is an important asset, we
cannot be certain that current management, personnel and other corporate
infrastructure will be adequate to manage continued growth. In
addition, to the extent that our continued growth and success depend on
making further acquisitions, we cannot be certain that we will be able
to continue to identify and acquire other businesses on favorable terms
or that, if we are able to acquire businesses on favorable terms, we
will be able to successfully integrate the acquired businesses into our
current business or profitably manage them. There may also be increased
competition for acquisition candidates, in which event we may have fewer
acquisition opportunities available to us, or be faced with the prospect
of paying higher prices for target companies, and we may generate less
cash flow as a result.
In addition, the acquisition of target companies outside of our
traditional business of envelope converting and printing may create
additional risks due to management's lack of familiarity with new
markets and other factors. In particular, should we be able to
identify, acquire and successfully integrate acquired businesses into
our own, we may incur substantial costs, delays or other operational or
financial problems in doing so, and we may not be able to profitably
manage them. Furthermore, each particular acquisition may involve a
number of special risks, including possible adverse effects on the
acquired company's operating results, diversion of management's
attention, failure to retain key acquired personnel, unanticipated
events or liabilities and amortization of acquired intangible assets,
some or all of which could have a material adverse effect on our
business, cash flow and profitability.
We may finance future acquisitions through any one of the
following:
* additional debt, under our bank credit agreement or
otherwise;
* cash from operations;
* the issuance of common stock or other securities to the
sellers;
* the sale of common stock or other securities in public or
private offerings; or
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* any combination of the above.
In the event that any of these financing structures are
unavailable, our ability to make acquisitions would be limited. We
cannot be certain that we will be able to obtain all the financing we
will need in the future on satisfactory terms or at all. Our failure to
obtain such financing may require us to curtail our growth plans which
may in turn make it more difficult for us to repay our debt.
THE PRINTING BUSINESS DOES NOT GENERALLY USE LONG-TERM AGREEMENTS,
SO REPEAT BUSINESS IS NOT ASSURED
The printing industry in which we compete is generally
characterized by individual orders from customers or short-term
contracts. Most of our customers are not contractually obligated to
purchase products or services from us. Most customer orders are for
specific printing jobs, and repeat business largely depends on our
customers' satisfaction with the work we do. Although our business is
not dependent upon any one customer or group of customers, we cannot be
sure that any particular customer will continue to do business with us
for any period of time even though we believe that we have and will
continue to have the ability to provide the highest quality printed
products and services to our customers. In addition, the timing of
particular jobs or types of jobs at particular times of year may cause
fluctuations in the operating results of our various printing operations
in any given quarter.
COMPETITION IN OUR INDUSTRY COULD REDUCE OUR CASH FLOW AND
PROFITABILITY
The North American printing industry in which we compete is
extremely fragmented and highly competitive. In the envelope market, we
compete primarily with a few multi-plant and many single-plant companies
servicing regional and local markets. In the commercial printing,
consumer labels and custom business communications documents printing
markets, we compete against a number of large, diversified and
financially stronger printing companies, as well as regional and local
commercial printers, many of which are capable of competing with us on
volume, price and production quality. We are constantly seeking ways to
reduce our costs and become more efficient competitors, and we believe
that our consolidation strategy in each of our markets has been and will
continue to be successful in achieving these goals. However, we cannot
be certain that these efforts will continue to be successful or that our
competitors will not be more successful in their similar efforts to
reduce costs and become more efficient. If we fail to reduce costs and
increase productivity, we may face decreased profit margins in markets
where we encounter price competition, which in turn could reduce our
cash flow and profitability.
THE UNITED STATES AND CANADIAN POSTAL SERVICES CAN INDIRECTLY
AFFECT OUR BUSINESS
Because the great majority of envelopes used in the United States
and Canada are sent through the mail, postal rates are a significant
factor affecting envelope usage. Historically, increases in postal
rates, relative to changes in the cost of alternative delivery means
and/or advertising media, have resulted in temporary reductions in the
growth rate of mail sent, including direct mail, which is a significant
portion of our envelope volume. The U.S. Postal Commission recently
approved rate increases of approximately 4% for direct mail and 3% for
first class mail, effective January 1999. The Canadian Post Corporation
increased the basic postal rate by approximately 6.7% in 1996,
contributing to a leveling off of the growth rate of mail sent. The CPC
raised rates a further 4.7% in 1998. These postal rate increases are
significantly less than the cumulative rate of inflation since the last
postal rate increases. We cannot be sure that direct mail marketers will
not reduce their volume as a result of these increases. Because
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rate increases in the U.S. and Canada are largely outside our control,
we can provide no assurance that future increases in U.S. and/or
Canadian postal rates will not have a negative effect on the level of
mail sent, or the volume of envelopes purchased, in either or both
countries. In such event, we would expect to experience a decrease in
cash flow and profitability or financial position.
AN ADVERSE CHANGE IN OUR LABOR RELATIONS COULD ADVERSELY AFFECT
OUR BUSINESS
As of December 31, 1998, we had approximately 12,100 full-time
employees, of whom approximately 3,000 were members of various local
labor unions. If unionized employees were to engage in a concerted
strike or other work stoppage, or if other employees were to become
unionized, we could experience a disruption of operations, higher labor
costs or both. A lengthy strike could result in a material decrease in
cash flow or profitability.
INCREASES IN THE COST OF PAPER MAY RESULT IN DECREASED DEMAND FOR
OUR PRODUCTS AND A DECREASE IN PROFITS
The cost of paper represents a significant portion of our cost of
materials. Increases in paper costs could have a material adverse effect
on our business. Historically, we have been able to maintain gross
profit on a dollars per unit basis when paper prices increase by passing
paper price increases on to our customers and by receiving increased
proceeds from waste paper sales. We cannot be certain, however, that we
will be able to continue to pass on future increases in the cost of
paper. Moreover, rising paper costs and their consequent impact on our
pricing could lead to a decrease in our volume of units sold. For
example, successive paper price increases during the latter part of 1995
and early 1996 resulted in a decline in demand for our products,
particularly from the direct-mail advertising industry. Although we
have been successful in negotiating favorable pricing relationships with
paper vendors, the overall paper market is largely beyond our control.
As a result, we cannot be certain that future paper price increases will
not result in decreased volumes and decreased cash flow and
profitability.
Due to the significance of paper in the manufacture of most of our
products, we are dependent upon the availability of paper. During
periods of tight paper supply, many paper producers allocate shipments
of paper based on the historical purchase levels of customers. As a
result of our large volume paper purchases from several paper producers,
we generally have not experienced difficulty in obtaining adequate
quantities of paper, although we have occasionally experienced minor
delays in delivery. Although we believe that our attractiveness to
vendors as a large volume paper purchaser will continue to enable us to
receive adequate supplies of paper in the future, unforeseen
developments in world paper markets coupled with shortages of raw paper
could result in a decrease in supply, which would cause a decrease in
the volume of product we could produce and sell, and a corresponding
decrease in cash flow and profitability.
OUR BUSINESS DEPENDS ON THE DEMAND FOR ENVELOPES, PRINTED ADVERTISING
AND PRINTED BUSINESS FORMS, AND THE AVAILABILITY OF THE INTERNET AND
OTHER ALTERNATIVE MEDIA MAY ADVERSELY AFFECT DEMAND FOR THESE PRODUCTS
Our envelope printing and manufacturing business is highly
dependent upon the demand for envelopes sent through the mail. Such
demand comes from utility companies, banks and other financial
institutions, among others. Our printing business also depends upon
demand for printed advertising and business forms, among others. Usage
of the Internet and other electronic media continues to grow. Consumers
use these media to purchase goods and services, and for other purposes
such as paying utility and credit card bills. Advertisers use them for
targeted campaigns directed at specific electronic user groups. Large
and small businesses use electronic media to conduct business, send
invoices and collect bills. We expect the demand for envelopes and
other printed materials for these purposes to decline.
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Although we expect countervailing trends, for example the growth of
targeted direct mail campaigns based upon mailing lists generated by
electronic purchases, to cause overall demand for envelopes and other
printed materials to continue to grow at rates comparable to recent
historical levels, we cannot be certain that the acceleration of the
trend towards electronic media such as the Internet and other
alternative media will not cause a decrease in the demand for our
products, which would result in a decrease in our sales, cash flow and
profitability.
ENVIRONMENTAL LAWS MAY ADVERSELY AFFECT OUR BUSINESS
Our operations are subject to federal, state and local
environmental laws and regulations relating to air emissions, waste
generation, handling, management and disposal, and at some of our
facilities, wastewater treatment and discharge. In addition, some of
the sellers from whom we have bought businesses in the past have been
designated as potentially responsible parties under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 with
respect to off-site disposal of hazardous waste. We believe that we
have minimal exposure as a result of such designations, as a result of
indemnities obtained in the course of acquisitions or because of the de
minimis nature of the claims, or both. We also believe that our current
operations are in substantial compliance with applicable environmental
laws and regulations. We cannot be certain, however, that currently
unknown matters, new laws and regulations, or stricter interpretations
of existing laws and regulations will not materially affect our business
or operations in the future.
WE DEPEND ON KEY MANAGEMENT
Our success will continue to depend to a significant extent on our
executive officers and other key management personnel. We do not, as a
matter of policy, have employment agreements with executive officers.
We cannot be certain that we will be able to retain our executive
officers and key personnel or attract additional qualified management in
the future. In addition, the success of our acquisitions may depend, in
part, on our ability to retain management personnel of the acquired
companies. We do not carry key-person insurance on any of our
managerial personnel.
YEAR 2000 ISSUES MAY ADVERSELY AFFECT OUR BUSINESS
The year 2000 issue concerns the potential exposures related to
the erroneous generation of business and financial information resulting
from the fact that many computer systems and programs use two digits,
rather than four, to define the applicable year of business
transactions. These programs may not properly recognize a year that
begins with "20" instead of the familiar "19," and as a result may
process data incorrectly or stop processing data altogether. We rely
upon our own and vendor-supplied technology and recognize the potential
business risk to our assets and systems associated with the arrival of
the year 2000. We completed an assessment of our existing computer
systems in 1997 and have purchased and installed a number of new systems
which are year 2000 compliant. We are conducting an evaluation of
actions required to ensure that our remaining computer systems will not
be disrupted due to year 2000 issues. Failure to be year 2000 compliant
could have a material adverse effect on our results of operations,
business, prospects and financial condition.
All business critical vendors and customers have been identified
and contacted for information on their actions to mitigate year 2000
disruptions. We are in the process of evaluating the information
supplied to date and contacting those who have not responded to our
inquiries. If year 2000 issues of our business critical vendors and
customers are not addressed satisfactorily, there could be a disruption
in
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our business that may cause a decline in earnings. These theoretical
consequences are of a kind and magnitude not unique to us, but are
generally shared with other manufacturing companies. Contingency plans
will be developed by the third quarter of 1999 to address year 2000
issues related to our business critical vendors and customers. Although
we believe our contingency plans will mitigate the impact of year 2000
on our business critical systems, there can be no assurance such plans
will be successful.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements made in this prospectus are forward-looking
in nature and are not statements that are historical facts. The
occurrence of the events described, and the achievement of the intended
results, depend on many events, some or all of which are not predictable
or within our control. Actual results may differ materially from those
anticipated in any forward-looking statements. Many risks and
uncertainties are inherent in the printing industry. Others are more
specific to the operations of our company. Many of the significant
risks related to our business are described in this prospectus. These
include, among others, risks associated with product demand and sales
growth rate, ability to obtain assumed productivity savings, quality
controls, availability of acquisition opportunities and their related
costs, cost savings due to integration and synergies associated with
acquisitions, ability to obtain additional financing, interest rates,
foreign currency exchange rates, paper and raw material costs, waste
paper prices, ability to pass through paper costs to customers, postage
rates, changes in the direct mail industry, competition, ability to
develop new products, effect on our business resulting from the
availability and proliferation of alternative delivery media such as the
Internet, labor costs, labor relations and advertising costs. See "Risk
Factors."
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THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
Mail-Well I Corporation originally issued and sold the
$300,000,000 aggregate principal amount of senior subordinated notes due
2008 on December 16, 1998, in an offering that was exempt from
registration under the Securities Act pursuant to Section 4(2), Rule
144A and Regulation S of the Securities Act. Accordingly, the old notes
may not be transferred in the United States unless registered under the
Securities Act or unless an exemption from the registration requirements
of the Securities Act and applicable state securities laws is available.
As a condition to the sale of the old notes, we entered into a
registration rights agreement dated as of December 16, 1998, with the
initial purchasers of the old notes. In the registration rights
agreement, we agreed to file with the Securities and Exchange Commission
a registration statement under the Securities Act no later than
March 16, 1999, with respect to the $300,000,000 aggregate principal
amount of 8 3/4% Series B senior subordinated notes due 2008 offered by
this prospectus. We also agreed to use our reasonable best efforts to
have the registration statement declared effective within 90 days after
March 16, 1999. In addition, we agreed to use our best efforts to cause
the registration statement to be effective continuously, to keep the
exchange offer open for a period of not less than 20 business days and
to cause the exchange offer to be consummated no later than the 30th
business day after the registration statement is declared effective by
the Commission.
Pursuant to the exchange offer, holders of the old notes may
exchange their old notes for registered new notes. For each old note
surrendered pursuant to the exchange offer, the holder of the old note
will receive a new note having a principal amount equal to that of the
surrendered old note. Interest on each new note will accrue from the
last interest payment date on which interest was paid on the old note
surrendered in exchange for the new note or, if no interest has been
paid on such old note, from the date the old note was issued.
To participate in the exchange offer, each holder must represent
that:
* it is not an "affiliate" of Mail-Well I Corporation, as
defined in Rule 405 of the Securities Act;
* it is not engaged in, and does not intend to engage in, and
has no arrangement or understanding with any person to
participate in, a distribution of the new notes that are
issued in the exchange offer; and
* it is acquiring the new notes in the exchange offer in its
ordinary course of business.
Broker-dealers receiving new notes in the exchange offer will have a
prospectus delivery requirement with respect to resales of the new
notes. The Commission has taken the position that these broker-dealers
may fulfill their prospectus delivery requirements with respect to new
notes, other than a resale of an unsold allotment from the original sale
of the old notes, with this prospectus. Under the registration rights
agreement, we are required to allow these broker-dealers and other
persons, if any, with similar prospectus delivery requirements to use
this prospectus in connection with the resale of the new notes. Mail-
Well, Inc. filed a copy of the registration rights agreement as an
exhibit to its Annual Report on Form 10-K for the year ended
December 31, 1998.
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RESALE OF THE NEW NOTES
Based on no-action letters issued by the staff of the Commission
to persons who are not associated with us, we believe that the new notes
issued in exchange for old notes pursuant to this exchange offer will in
general be freely transferable after this exchange offer without further
registration under the Securities Act and without the holder's delivery
of a prospectus under the Securities Act. This presumes that the holder
of the new notes makes the representations described above and, if the
holder is a broker-dealer, it represents that it will receive new notes
for its own account in exchange for old notes that were acquired as a
result of market-making activities or other trading activities and that
it will deliver a prospectus in connection with any resale of the new
notes. However, the Commission has not considered this exchange offer
in the context of a no-action letter and there can be no assurance that
the staff of the Commission would make a similar determination with
respect to this exchange offer as it made in the no-action letters to
the unrelated persons.
Holders of old notes wishing to accept this exchange offer must
complete and sign the enclosed letter of transmittal, which contains the
required representations described above and an agreement to comply with
the agreements and covenants set forth in the registration rights
agreement.
This prospectus, as it may be amended or supplemented from time to
time, may be used by broker-dealers in connection with resales of new
notes received in exchange for old notes where the old notes were
acquired by the broker-dealer as a result of market-making activities or
other trading activities. A broker-dealer that signs a letter of
transmittal and delivers a prospectus to purchasers in connection with
resales may be deemed to be an "underwriter" within the meaning of the
Securities Act; however, the holder will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and subject to the conditions described in this
prospectus and contained in the letter of transmittal, we will accept
for exchange any and all old notes which are properly tendered on or
prior to the expiration date of the exchange offer, _____________, 1999,
and are not withdrawn as permitted below. We will issue $1,000
principal amount of new notes in exchange for each $1,000 principal
amount of outstanding old notes surrendered pursuant to this exchange
offer. Old notes may be tendered only in integral multiples of $1,000.
The form and terms of the new notes are the same as the form and
terms of the old notes except that:
* the new notes will be registered under the Securities Act
and hence the new notes will not bear legends restricting
their transfer, and
* holders of the new notes will not be entitled to most rights
under the registration rights agreement, which will
terminate upon the closing of the exchange offer.
The new notes will evidence the same debt as the old notes and will be
issued under, and be entitled to the benefits of, the same indenture.
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As of the date of this prospectus, an aggregate of $300,000,000 in
principal amount of the old notes is outstanding. This prospectus,
together with the letter of transmittal, is first being sent on or about
_________________, 1999, to all holders of old notes known to us.
Holders of the old notes do not have any appraisal or dissenters'
rights under the indenture in connection with the exchange offer. We
intend to conduct the exchange offer in accordance with the provisions
of the registration rights agreement and the applicable requirements of
the federal securities laws.
We expressly reserve the right, at any time or from time to time,
to extend the period of time during which the exchange offer is open,
and by the extension to delay acceptance for exchange of any old notes.
Notice of any extension will be issued by means of a press release or
other public announcement no later than 9:00 a.m., New York City time,
on the next business day after the previously scheduled expiration date.
During the extension, all old notes previously tendered will remain
subject to the exchange offer and may be accepted for exchange by Mail-
Well I Corporation. We will return any old notes not accepted for
exchange for any reason without expense to the tendering holder as
promptly as practicable after the expiration of the exchange offer. We
will give written notice of any extension, amendment or nonacceptance to
the holders of the old notes as promptly as practicable.
PROCEDURES FOR TENDERING OLD NOTES
Your tender to Mail-Well I Corporation of old notes as described
below and our acceptance of the old notes will create a binding
agreement between us upon the terms and subject to the conditions set
forth in this prospectus and in the letter of transmittal. Except as
set forth below, a holder who wishes to tender old notes for exchange
must send a completed and signed letter of transmittal, including all
other documents required by the letter of transmittal, to the exchange
agent, State Street Bank and Trust Company, at the address set forth
below under "--Exchange Agent" on or before the expiration date. In
addition, either:
(1) certificates for the old notes must be received by the
exchange agent, or
(2) a timely confirmation of a book-entry transfer of the old
notes into the exchange agent's account at The Depository
Trust Company pursuant to the procedure for book-entry
transfer described below, must be received by the exchange
agent before the expiration date, or
(3) the holder must comply with the guaranteed delivery
procedures described below.
The method of delivery of old notes, letters of transmittal and
all other required documents is at the election and risk of the holders.
If the delivery is by mail, we recommend you use registered mail,
properly insured, with return receipt requested. In all cases, you
should allow sufficient time to assure timely delivery. No letters of
transmittal or old notes should be sent to Mail-Well I Corporation.
Any beneficial owner whose old notes are registered in the name of
a broker, dealer, commercial bank, trustee or other nominee and who
wishes to tender should contact the registered holder of the old notes
promptly and instruct the registered holder to tender on behalf of the
beneficial owner. If the beneficial owner wishes to tender on its own
behalf, the beneficial owner must, prior to completing and executing the
letter of transmittal and delivering its old notes, either make
appropriate arrangements to
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register ownership of the old notes in the beneficial owner's name or
obtain a properly completed power of attorney from the registered holder
of the old notes. The transfer of record ownership may take
considerable time.
Signatures on a letter of transmittal or a notice of withdrawal
need not be guaranteed if the old notes surrendered for exchange are
tendered:
(1) by a registered holder of the old notes who has not
completed the box entitled "Special Issuance Instructions"
or "Special Delivery Instructions" on the letter of
transmittal, or
(2) for the account of an eligible institution.
An "eligible institution" means a firm which is a member of a registered
national securities exchange or a member of the National Association of
Securities Dealers, Inc. or a commercial bank or trustee having an
office or correspondent in the United States. In the event that
signatures on a letter of transmittal or a notice of withdrawal are
required to be guaranteed, the guarantees must be by an eligible
institution. If old notes are registered in the name of a person other
than a signer of the letter of transmittal, the old notes surrendered
for exchange must be endorsed by the registered holder, or be
accompanied by appropriate powers of attorney or by a written instrument
or instruments of transfer or exchange, in satisfactory form as
determined by Mail-Well I Corporation in its sole discretion, signed by
the registered holder with the signature guaranteed by an eligible
institution.
We will determine all questions as to the validity, form,
eligibility and acceptance of old notes tendered for exchange in our
sole discretion, and our determination shall be final and binding. We
reserve the absolute right to reject any tenders of any particular old
notes not properly tendered or not to accept any particular old notes
whose acceptance might, in our judgment or the judgment of our counsel,
be unlawful. We also reserve the absolute right to waive any defects or
irregularities or conditions of the exchange offer as to any particular
old notes either before or after the expiration date, including the
right to waive the ineligibility of any holder who seeks to tender old
notes in the exchange offer. Our interpretation of the terms and
conditions of the exchange offer as to any particular old notes either
before or after the expiration date shall be binding on all parties.
Unless waived, any defects or irregularities in connection with tenders
of old notes for exchange must be cured within a reasonable period of
time as we shall determine. Neither Mail-Well I Corporation, the
exchange agent nor any other person shall be under any duty to give
notification of any defect or irregularity with respect to any tender of
old notes for exchange, nor shall any of them incur any liability for
failure to give the notification.
If the letter of transmittal or any old notes or powers of
attorney are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, those persons should so indicate
when signing, and, unless waived by Mail-Well I Corporation, proper
evidence satisfactory to Mail-Well I Corporation of their authority to
so act must be submitted.
BOOK-ENTRY TRANSFER
The exchange agent will request to establish an account for the
old notes at DTC for the exchange offer within two business days after
the date of this prospectus. Any financial institution that is a
participant in DTC's systems may make book-entry delivery of old notes
by causing DTC to transfer the old notes into the exchange agent's
account at DTC in accordance with DTC's procedures for transfer.
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Although delivery of old notes may be effected through book-entry
transfer at DTC, the letter of transmittal or facsimile, or an agent's
message, with any required signature guarantees and any other required
documents, must, in any case, be received by the exchange agent at the
address set forth below under "--Exchange Agent" on or before the
expiration date or the guaranteed delivery procedures described below
must be complied with.
The term "agent's message" means a message, transmitted by DTC to,
and received by, the exchange agent and forming a part of a book-entry
confirmation, which states that DTC has received an express
acknowledgment from the tendering participant stating that the
participant has received and agrees to be bound by the terms of the
letter of transmittal, and Mail-Well I Corporation may enforce the
letter of transmittal against the participant.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the old notes wishes to tender the old
notes and the old notes are not immediately available, or time will not
permit the holder's old notes or other required documents to reach the
exchange agent before the expiration date, or the procedure for book-
entry transfer cannot be completed on time, a tender may be effected if:
(1) the tender is made through an eligible institution;
(2) prior to the expiration date, the exchange agent has
received from the eligible institution:
(a) a completed and signed letter of transmittal, or a
facsimile;
(b) notice of guaranteed delivery substantially in the
form provided by Mail-Well I Corporation, setting
forth the name and address of the holder of the old
notes and the amount of old notes, stating that the
tender is being made by that holder and guaranteeing
that within three Nasdaq National Market trading days
after the date of execution of the notice of
guaranteed delivery the certificates for all
physically tendered old notes, in proper form for
transfer, or a book-entry confirmation, and any other
documents required by the letter of transmittal will
be deposited by the eligible institution with the
exchange agent; and
(3) the certificates for all physically tendered old notes, in
proper form for transfer, or a book-entry confirmation and
all other documents required by the letter of transmittal,
are received by the exchange agent within three Nasdaq
National Market trading days after the date of signing the
notice of guaranteed delivery.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the
exchange offer, we will accept, promptly after the expiration date, all
old notes properly tendered and will then promptly issue the new notes.
For purposes of the exchange offer, we will be deemed to have accepted
properly tendered old notes for exchange when, as and if we have given
either oral or written notice to the exchange agent. Oral notices will
promptly be confirmed in writing. Holders whose old notes are accepted
for exchange will be deemed to have waived the right to receive any
accrued but unpaid interest on the old notes.
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In all cases, the issuance of new notes for old notes that are
accepted for exchange pursuant to the exchange offer will be made only
after timely receipt by the exchange agent of certificates for the old
notes or a timely book-entry confirmation of the old notes into the
exchange agent's account at DTC, a completed and signed letter of
transmittal, or an agent's message, and all other required documents.
If any tendered old notes are not accepted, or if old notes are
submitted for a greater amount than the holder desires to exchange, the
unaccepted or non-exchanged old notes will be returned without expense
to the tendering holder as promptly as practicable after the exchange
offer expires or terminates. In the case of old notes tendered by book-
entry procedures described above, the non-exchanged old notes will be
credited to an account maintained with DTC designated by the tendering
holder as promptly as practicable after the exchange offer expires or
terminates.
CONDITIONS OF THE EXCHANGE OFFER
Notwithstanding any other term of the exchange offer, we will not
be required to accept for exchange, or to issue new notes in exchange
for, any old notes. We may terminate or amend the exchange offer prior
to the expiration date if any of the conditions to the exchange offer
are not met. These conditions include that the exchange offer, or the
making of any exchange by a holder of old notes, does not violate
applicable law or any applicable interpretation of the staff of the
Commission. The conditions also include that none of the following
which, in our judgment, would reasonably be expected to impair our
ability to proceed with the exchange offer has occurred:
(1) an action or proceeding has been instituted or threatened in
any court or by or before any governmental agency or body
with respect to the exchange offer;
(2) there has been adopted or enacted any law, statute, rule or
regulation;
(3) a banking moratorium has been declared by United States
federal or New York State authorities; or
(4) trading on the New York Stock Exchange or generally in the
United States over-the-counter market has been suspended by
order of the Commission or any other governmental authority.
In addition, we may impose such other conditions as may be reasonably
acceptable to the initial purchasers of the old notes. We will give
written notice of any termination to the holders of the old notes as
promptly as practicable.
WITHDRAWAL RIGHTS
Tenders of old notes may be withdrawn at any time prior to the
expiration date. For a withdrawal to be effective, a written notice of
withdrawal must be received by the exchange agent at the address set
forth below under "--Exchange Agent." Any notice of withdrawal must
specify the name of the person who tendered the old notes to be
withdrawn, identify the old notes to be withdrawn, including the amount
of the old notes, and specify the name in which the old notes are
registered, if different from that of the withdrawing holder. If
certificates for old notes have been delivered or otherwise identified
to the exchange agent, then, prior to the release of the certificates
the withdrawing holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of
withdrawal with signatures guaranteed by an eligible institution unless
the holder is an eligible institution.
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If old notes have been tendered pursuant to the procedure for
book-entry transfer described above, any notice of withdrawal must
specify the name and number of the account at DTC to be credited with
the withdrawn old notes and otherwise comply with the procedures of DTC.
We will determine all questions as to the validity, form and
eligibility of the notices, and our determination shall be final and
binding on all parties. Any old notes so withdrawn will be deemed not
to have been validly tendered for exchange for purposes of the exchange
offer. Any old notes that have been tendered for exchange but that are
not exchanged for any reason will be returned to the holder without cost
to the holder as soon as practicable after withdrawal, rejection of
tender or termination of the exchange offer. In the case of old notes
tendered by book-entry transfer into the exchange agent's account at DTC
pursuant to the book-entry transfer procedures described above, the old
notes will be credited to an account with DTC specified by the holder as
soon as practicable after withdrawal, rejection of tender or termination
of the exchange offer. Properly withdrawn old notes may be re-tendered
by following one of the procedures for tendering old notes as previously
described at any time on or before the expiration date.
EXCHANGE AGENT
State Street Bank and Trust Company has been appointed as the
exchange agent for the exchange offer. All signed letters of
transmittal should be directed to the exchange agent at the address set
forth below. Questions and requests for assistance, requests for
additional copies of this prospectus or of the letter of transmittal and
requests for notices of guaranteed delivery should be directed to the
exchange agent addressed as follows:
Delivery to: State Street Bank and Trust Company, Exchange Agent
Two International Place, Fourth Floor
Boston, Massachusetts 02110
Telecopier No.: (617) 664-5290
Attention: Susan Lavey, Corporate Actions
Delivery of a letter of transmittal to an address other than as
set forth above or transmission of instructions via facsimile other than
as set forth above does not constitute a valid delivery of the letter of
transmittal.
FEES AND EXPENSES
We will pay the cash expenses we will incur in connection with the
exchange offer. Also, in connection with the registration statement for
the new notes, we will reimburse the holders for the reasonable fees and
disbursements of not more than one counsel, who shall be chosen by the
holders of a majority in principal amount of the old notes for whose
benefit the registration statement has been prepared.
ACCOUNTING TREATMENT
For accounting purposes, we will recognize no gain or loss as a
result of the exchange offer. The expenses of the exchange offer will
be amortized over the term of the new notes.
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TRANSFER TAXES
Holders who tender their old notes for exchange will not be
required to pay any transfer taxes, except that holders who instruct
Mail-Well I Corporation to register new notes in the name of, or request
that old notes not tendered or not accepted in the exchange offer be
returned to, a person other than the registered tendering holder, will
be responsible for paying any applicable transfer tax.
REGULATORY MATTERS
We are not aware of any governmental or regulatory approvals that
are required in order to complete the exchange offer.
CONSEQUENCES OF FAILURE TO EXCHANGE
Participation in the exchange offer is voluntary. Holders of the
old notes are urged to consult their financial and tax advisors in
making their own decisions on what action to take. See "Taxation."
The old notes that are not exchanged for the new notes in the
exchange offer will remain restricted securities. Accordingly, those
old notes may only be transferred:
(1) to Mail-Well I Corporation or any of its subsidiaries,
(2) to a person whom the seller reasonably believes is a
qualified institutional buyer purchasing for its own account
or for the account of a qualified institutional buyer in a
transaction meeting the requirements of Rule 144A,
(3) in an offshore transaction meeting the requirements of Rule
903 or Rule 904 under the Securities Act,
(4) in a transaction meeting the requirements of Rule 144 under
the Securities Act,
(5) in accordance with another exemption from the registration
requirements of the Securities Act, and based upon an
opinion of counsel acceptable to Mail-Well I Corporation, or
(6) pursuant to an effective registration statement and, in each
case, in accordance with the applicable securities laws of
any state of the United States or any other applicable
jurisdiction.
USE OF PROCEEDS
We will not receive any proceeds from the issuance of the new
notes or the consummation of this exchange offer or any sale of new
notes to any broker-dealer.
DESCRIPTION OF THE NOTES
Mail-Well I Corporation will issue the new notes under an
indenture dated December 16, 1998, among itself, the guarantors and
State Street Bank and Trust Company, as trustee. The terms of the new
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notes include those stated in the indenture and those made part of the
indenture by reference to the Trust Indenture Act of 1939.
The following description is a summary of the material provisions
of the indenture for the old notes and the new notes. The description
does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the indenture. We
incorporate the indenture into this prospectus by this reference. A
copy of the indenture has been filed as an exhibit to Mail-Well, Inc.'s
Annual Report on Form 10-K for the year ended December 31, 1998. You
may obtain a copy of the indenture from the Commission, Mail-Well I
Corporation or from any of the initial purchasers of the old notes.
BRIEF DESCRIPTION OF THE NEW NOTES AND THE GUARANTEES
THE NEW NOTES
These new notes:
* are identical to the old notes in all material respects,
including the guarantees on the notes, except that the new
notes are registered under federal securities laws and will
not contain any legends restricting their transfer;
* are general unsecured obligations of Mail-Well I
Corporation;
* are subordinated in right of payment to the existing and any
future senior debt of Mail-Well I Corporation, including
borrowings under Mail-Well I Corporation's bank credit
agreement;
* are equal in right of payment to any senior subordinated
debt incurred by Mail-Well I Corporation in the future;
* are senior in right of payment to existing and any future
subordinated debt of Mail-Well I Corporation, including
existing intercompany subordinated debt from Mail-Well I
Corporation to Mail-Well, Inc., that expressly provides by
its terms that is subordinated to the new notes; and
* are unconditionally guaranteed by the guarantors.
THE GUARANTEES
The new notes are unconditionally guaranteed on an unsecured
senior subordinated basis, jointly and severally, by Mail-Well, Inc. and
each of the entities that is not a special purpose financing vehicle, is
currently more than 50% owned by Mail-Well I Corporation or its
subsidiaries, was formed under the laws of a state of the United States
or the District of Columbia, and has its principal place of business
within the United States. The following is a list of the subsidiary
guarantors as of the date of this prospectus:
Graphics Arts Center, Inc.
Mail-Well Commercial Printing, Inc.
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Mail-Well Canada Holdings, Inc.
Mail-Well Label Holdings, Inc.
Mail-Well Label USA, Inc.
Mail-Well West, Inc.
Murray Envelope Holdings, Inc.
Murray Envelope Corporation
N-M Envelope, Inc.
National Graphics Company
Poser Business Forms, Inc.
Wisco II, L.L.C.
Wisco Envelope Corp.
The following former subsidiaries of Mail-Well I Corporation were
guarantors of the old notes, but were merged into Mail-Well I
Corporation or one of the subsidiary guarantors on December 31, 1998:
Anderson Lithograph Company
Armstrong-White, Inc.
Barkley, Inc.
Denver Forms Company
Digital X-Press, Inc.
Gould Packaging, Inc.
Graphics Illustrated, Inc.
Griffin Envelope, Inc.
Imperial Litho and Dryography, Inc.
John D. Lucas Printing Co.
Production Press, Inc.
Richtman's Printing of Colorado, LLC
Trafton Printing, Inc.
The new notes will be guaranteed by each new subsidiary of either
Mail-Well I Corporation or Mail-Well, Inc., other than any special
purpose financing vehicle, that:
* has not been designated as an unrestricted subsidiary by
Mail-Well I Corporation's Board of Directors under the
indenture,
* is or becomes a "significant subsidiary," as defined in
Article 1, Rule 1-02 of Regulation S-X under the Securities
Act of 1933, of Mail-Well I Corporation or Mail-Well, Inc.,
as applicable,
* is formed under the laws of a state of the United States or
the District of Columbia, and
* has its principal place of business within the United
States.
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The guarantees of these new notes:
* are general unsecured obligations of each guarantor. The
guarantors are Mail-Well, Inc., each subsidiary guarantor
and each other subsidiary that executes a note guarantee in
the form attached to the indenture;
* are subordinated in right of payment to all existing and any
future senior debt of each guarantor including guarantees of
each guarantor of senior debt of Mail-Well I Corporation;
* are equal in right of payment to all existing and any future
senior subordinated debt of each guarantor, including
guarantees of any future senior subordinated debt of Mail-
Well I Corporation; and
* are senior in right of payment to any existing and future
subordinated debt of each guarantor that expressly provides
by its terms that it is subordinated to the guarantee of
such guarantor on the new notes.
As of December 31, 1998, the old notes and the guarantees on the
old notes were subordinated to $139.4 million of senior debt and
approximately $207.0 million available under our bank credit agreement.
As indicated above and as discussed in detail below under the subheading
"Subordination," payments on the new notes and under the guarantees on
the new notes will be subordinated to the payment of senior debt. The
indenture permits Mail-Well I Corporation and the guarantors to incur
additional senior debt.
Not all of our subsidiaries will guarantee the new notes. In the
event of a bankruptcy, liquidation or reorganization of any of these
non-guarantor subsidiaries, these non-guarantor subsidiaries will pay
the holders of their debt and their trade creditors before they will be
able to distribute any of their assets to us. The non-guarantor
subsidiaries generated 10.3% of our consolidated revenues in the year
ended December 31, 1998, and held 14.6% of our consolidated assets as of
December 31, 1998.
PRINCIPAL, MATURITY AND INTEREST
Mail-Well I Corporation will issue new notes with an aggregate
principal amount of $300 million in exchange for the old notes, which
have an aggregate outstanding principal amount of $300 million. Mail-
Well I Corporation will issue new notes in denominations of $1,000 and
integral multiples of $1,000 in exchange for each $1,000 and integral
multiple of $1,000 in old notes. The new notes will mature on December
15, 2008.
Interest on the new notes will accrue at the rate of 8 3/4% per
year and will be payable semiannually for the preceding six months on
June 15 and December 15 commencing on June 15, 1999. Mail-Well I
Corporation will make each interest payment to the registered holders of
record on the June 1 and December 1 immediately before the next payment
date.
Interest on the new notes will accrue from the date the old notes
were issued or, if interest has already been paid on the old notes, from
the date it was most recently paid. Interest will be computed on the
basis of a 360-day year comprised of twelve 30-day months.
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NOTE GUARANTEES; RESTRICTIONS ON MAIL-WELL, INC. AND SUBSIDIARIES
The guarantors jointly and severally guarantee Mail-Well I
Corporation's obligations under the new notes. The new notes will also
be guaranteed by each new restricted subsidiary of either Mail-Well I
Corporation or Mail-Well, Inc. that is not a special purpose financing
vehicle, is a significant subsidiary of either Mail-Well I Corporation
or Mail-Well, Inc. formed under the laws of a state of the United States
or the District of Columbia, and has its principal place of business
within the United States. Each note guarantee will be subordinated to
the prior payment in full of all existing and future senior debt of that
guarantor and the guarantees of that guarantor of Mail-Well I
Corporation's senior debt. Each note guarantee will be equal in rank
with all senior subordinated debt of that guarantor and the guarantees
of that guarantor of Mail-Well I Corporation's existing and any future
senior subordinated debt.
The guarantees on the new notes will rank at least on a parity
with claims of all unsecured creditors including unsecured trade
creditors and tort claimants, other than holders of senior debt, of the
respective guarantors; however, because of the subordination provisions
of the note guarantees, unless sufficient sums are available to pay the
full amounts required under the note guarantees and to pay the unsecured
creditors of the respective guarantors, such other unsecured creditors
of the guarantors may recover more, ratably, than the holders of the new
notes would recover with respect to the guarantees on the new notes.
Each guarantor will be prohibited from making payments under its
guarantee on the new notes if defaults and certain other events with
respect to senior debt of a guarantor have occurred that prohibit the
guarantor from making payment on the new notes pursuant to the note
guarantees.
The obligations of each guarantor under its note guarantee will be
limited as necessary to prevent that note guarantee from constituting a
fraudulent conveyance under applicable law. See "Risk Factors--What are
the Risks Related to the New Notes--Fraudulent Conveyance Matters."
Neither Mail-Well, Inc. nor any restricted subsidiary may sell or
otherwise dispose of all or substantially all of its assets, or
consolidate with or merge with or into another entity, other than
another restricted subsidiary, unless:
(1) either:
(a) Mail-Well, Inc. or restricted subsidiary is the
surviving corporation; or
(b) the entity formed by or surviving the consolidation or
merger or to which a sale, assignment, transfer,
conveyance or other disposition shall have been made
is a corporation organized or existing under the laws
of the United States, any U.S. state or the District
of Columbia or the jurisdiction in which the
restricted subsidiary is organized;
(2) the entity formed by or surviving the consolidation or
merger, if other than Mail-Well, Inc. or the restricted
subsidiary, or the entity to which a sale, assignment,
transfer, conveyance or other disposition shall have been
made, assumes all the obligations of Mail-Well, Inc. or
restricted subsidiary, as applicable, under the note
guarantees and the indenture pursuant to agreements
reasonably satisfactory to the trustee;
(3) immediately after such transaction no default or event of
default under the indenture exists; and
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(4) Mail-Well, Inc., the restricted subsidiary or the other
entity formed by or surviving the consolidation or merger
will have consolidated net worth immediately after the
transaction equal to or greater than the consolidated net
worth of Mail-Well, Inc. or the restricted subsidiary
immediately preceding the transaction.
In addition, neither Mail-Well, Inc. nor any restricted subsidiary
may, directly or indirectly, sell or lease all or substantially all of
its properties or assets, in one or more related transactions, to any
other individual or entity.
The note guarantee of a subsidiary guarantor will be released:
(1) in connection with any sale or other disposition of all or
substantially all of the assets of that subsidiary
guarantor, including by way of merger or consolidation, if
Mail-Well I Corporation applies the net proceeds of that
sale or other disposition in accordance with the applicable
provisions of the indenture; or
(2) in connection with any sale of all of the capital stock of a
subsidiary guarantor, if Mail-Well I Corporation applies the
net proceeds of that sale in accordance with the applicable
provisions of the indenture.
SUBORDINATION
The payment of principal, premium, liquidated damages and
interest, if any, on the new notes will be subordinated to the prior
payment in full of all senior debt of Mail-Well I Corporation.
The holders of senior debt will be entitled to receive payment in
full of all obligations due in respect of senior debt, including
interest after the commencement of any such proceeding at the rate
specified in the applicable senior debt, before the registered holders
of new notes will be entitled to receive any payment with respect to the
new notes, in the event of any distribution to creditors of Mail-Well I
Corporation:
(1) in a liquidation or dissolution of Mail-Well I Corporation;
(2) in a bankruptcy, reorganization, insolvency, receivership or
similar proceeding relating to Mail-Well I Corporation or
its property;
(3) in an assignment for the benefit of creditors; or
(4) in any marshaling of Mail-Well I Corporation's assets and
liabilities.
Mail-Well I Corporation also may not make any payment in respect
of the new notes if:
(1) a payment default on designated senior debt occurs and is
continuing beyond any applicable grace period; or
(2) any other default occurs and is continuing on designated
senior debt that permits holders of the designated senior
debt to accelerate its maturity and the trustee receives a
payment
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blockage notice from Mail-Well I Corporation or the holders
of any designated senior debt.
Payments on the new notes may and shall be resumed:
(1) in the case of a payment default, upon the date on which
such default is cured or waived; and
(2) in case of a nonpayment default, the earlier of the date on
which such nonpayment default is cured or waived or 179 days
after the date on which the applicable payment blockage
notice is received, unless the maturity of any designated
senior debt has been accelerated.
No new payment blockage notice may be delivered unless and until
365 days have elapsed since the effectiveness of the immediately prior
payment blockage notice.
No nonpayment default that existed or was continuing on the date
of delivery of any payment blockage notice to the trustee shall be, or
be made, the basis for a subsequent payment blockage notice unless such
default shall have been cured or waived for a period of not less than 90
days.
Mail-Well I Corporation must promptly notify holders of senior
debt if payment of the new notes is accelerated because of an event of
default under the indenture.
As a result of the subordination provisions described above, in
the event of a bankruptcy, liquidation or reorganization of Mail-Well I
Corporation, registered holders of the new notes may recover less than
creditors of Mail-Well I Corporation who are holders of senior debt.
The term "designated senior debt" means:
(1) all senior debt under Mail-Well I Corporation's and the
restricted subsidiaries' credit facilities; and
(2) any senior debt permitted under the indenture the principal
amount of which is $50 million or more and that has been
designated by Mail-Well I Corporation as "designated senior
debt."
OPTIONAL REDEMPTION
The new notes will not be redeemable at Mail-Well I Corporation's
option prior to December 15, 2003. After December 15, 2003, Mail-Well I
Corporation may redeem all or a part of the new notes upon not less than
30 nor more than 60 days' notice, at the redemption prices set forth below
plus accrued and unpaid interest on the new notes, if any, to the applicable
redemption date, if redeemed during the twelve-month period beginning on
December 15 of the years indicated below. The redemption prices are expressed
as percentages of principal amount:
Year Percentage
---- ----------
2003 104.375%
2004 102.917%
2005 101.458%
2006 and subsequent 100.000%
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Notwithstanding the foregoing, prior to December 15, 2001, Mail-
Well I Corporation may on any one or more occasions redeem up to 35% of
the aggregate principal amount of new notes originally issued under the
indenture at a redemption price of 108.75% of their principal amount,
plus accrued and unpaid interest to the redemption date, with the net
cash proceeds of one or more private or underwritten public offerings of
common stock of Mail-Well I Corporation or Mail-Well, Inc. in which the
gross proceeds to Mail-Well I Corporation or Mail-Well, Inc., as
applicable, are at least $50 million and, in the case of an offering by
Mail-Well, Inc., the net proceeds are contributed to Mail-Well I
Corporation; provided that:
* at least $130 million in aggregate principal amount of new
notes remains outstanding immediately after the occurrence
of such redemption, excluding new notes held by Mail-Well,
Inc., Mail-Well I Corporation and their subsidiaries; and
* the redemption must occur within 45 days of the date of the
closing of the equity offering.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
If a change of control under the indenture occurs, each holder of
new notes will have the right to require Mail-Well I Corporation to
repurchase all or any part of that holder's new notes in an amount equal
to $1,000 or an integral multiple of $1,000. In a change of control
offer, Mail-Well I Corporation will offer cash equal to 101% of the
aggregate principal amount of new notes repurchased plus accrued and
unpaid interest, if any, to the date of purchase. Within 30 days
following any change of control, Mail-Well I Corporation will mail a
notice to each holder describing the transaction or transactions that
constitute the change of control and offering to repurchase new notes on
the date specified in the notice, pursuant to the procedures required by
the indenture and described in the notice. Mail-Well I Corporation will
comply with the requirements of Rule 14e-l under the Exchange Act and
any other securities laws and regulations to the extent such laws and
regulations are applicable in connection with the repurchase of the new
notes as a result of a change of control.
On the payment date for a change of control offer, Mail-Well I
Corporation will, to the extent lawful:
* accept for payment all new notes or portions of new notes
properly tendered pursuant to the change of control offer;
* deposit with the paying agent an amount equal to the payment
due on all new notes or portions so tendered; and
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* deliver or cause to be delivered to the trustee the new
notes so accepted together with an officers' certificate
stating the aggregate principal amount of new notes or
portions being purchased by Mail-Well I Corporation.
The paying agent will promptly mail to each holder of new notes
tendered the payment for such new notes, and the trustee will promptly
authenticate and mail, or cause to be transferred by book entry, to each
holder a replacement new note equal in principal amount to any
unpurchased portion of the new notes surrendered, if any; provided that
each such replacement new note will be in a principal amount of $1,000
or an integral multiple of $1,000.
Prior to complying with any of the provisions of the change of
control covenant, but in any event within 90 days following a change of
control, Mail-Well I Corporation will either repay all outstanding
senior debt or obtain the requisite consents, if any, under all
agreements governing outstanding senior debt to permit the repurchase of
new notes required by this covenant. Mail-Well I Corporation will
publicly announce the results of the change of control offer on or as
soon as practicable after the payment date.
The provisions described above that require Mail-Well I
Corporation to make an offer for the new notes following a change of
control will be applicable regardless of whether or not any other
provisions of the indenture are applicable. Except as described above
with respect to a change of control, the indenture does not contain
provisions that permit the registered holders of the new notes to
require that Mail-Well I Corporation repurchase or redeem the new notes
in the event of a takeover, recapitalization or similar transaction.
In the event a change of control occurs at a time when Mail-Well I
Corporation is prohibited from purchasing new notes, Mail-Well I
Corporation could seek the consent of its senior lenders to the purchase
of new notes or could attempt to refinance the borrowings that contain
such prohibition. If Mail-Well I Corporation does not obtain such a
consent or repay such borrowings, Mail-Well I Corporation will remain
prohibited from purchasing new notes. In such case, Mail-Well I
Corporation's failure to purchase tendered new notes would constitute an
event of default under the indenture which would, in turn, constitute a
default under such senior debt. In such circumstances, the
subordination provisions in the indenture would likely restrict payments
to the registered holders of new notes.
Mail-Well I Corporation will not be required to make an offer for
the new notes upon a change of control if a third party makes the offer
in the manner, at the times and otherwise in compliance with the
requirements set forth in the indenture applicable to a change of
control offer made by Mail-Well I Corporation and purchases all new
notes validly tendered and not withdrawn under its change of control
offer.
A "change of control" means the occurrence of any of the
following:
(1) the sale, transfer, conveyance or other disposition, other
than by way of merger or consolidation, in one or a series
of related transactions, of all or substantially all of the
assets of Mail-Well I Corporation and its subsidiaries taken
as a whole to any "person," as such term is used in Section
13(d)(3) of the Exchange Act, other than a principal or a
related party of a principal;
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(2) the adoption of a plan relating to the liquidation or
dissolution of Mail-Well I Corporation;
(3) the consummation of any transaction, including, without
limitation, any merger or consolidation, the result of which
is that any "person," other than the principals and their
related parties, becomes the beneficial owner, directly or
indirectly, of more than 35% of the voting stock of Mail-
Well I Corporation or Mail-Well, Inc., measured by voting
power rather than number of shares;
(4) the first day on which a majority of the members of the
Board of Directors of Mail-Well I Corporation or Mail-Well,
Inc. are not individuals who either were members of the
Board on the issue date of the old notes or were nominated
or elected to the Board with the approval of a majority of
the continuing directors; or
(5) Mail-Well I Corporation or Mail-Well, Inc. consolidates
with, or merges with or into, any entity, or any entity
consolidates with, or merges with or into, Mail-Well I
Corporation or Mail-Well, Inc., in any such event pursuant
to a transaction in which any of the outstanding voting
stock of Mail-Well I Corporation or Mail-Well, Inc. is
converted into or exchanged for cash, securities or other
property, other than any such transaction where the voting
stock of Mail-Well I Corporation or Mail-Well, Inc.
outstanding immediately prior to such transaction is
converted into or exchanged for voting stock or other voting
equity interests of the surviving or transferee entity
constituting a majority of the outstanding shares of such
voting stock or other voting equity interests of such
surviving or transferee entity immediately after giving
effect to such issuance.
The term "principals" means the officers and directors of Mail-
Well, Inc. at the issue date of the old notes, their affiliates and Mail-
Well, Inc.'s and Mail-Well I Corporation's Employee Stock Ownership Plan
and Trust. The term "affiliate" is used in this paragraph with the same
meaning it has under the Exchange Act.
The term "related party" with respect to any principal means:
(1) any controlling stockholder, 80% or more owned subsidiary,
or in the case of an individual, the spouse or any immediate
family member of the principal; or
(2) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or other
individuals or entities beneficially holding an 80% or more
controlling interest of which consist of the principal
and/or such other individuals or entities, referred to in
the immediately preceding clause (1).
The term "beneficial owner" has the meaning assigned to it in Rule
l3d-3 and Rule l3d-5 under the Exchange Act, except that in calculating
the beneficial ownership of any particular person, the person shall
be deemed to have beneficial ownership of all securities that the
person has the right to acquire, whether the right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition. The term "person" is used in this paragraph with the same
meaning it has for purposes of Section 13(d)(3) of the Exchange Act.
The above definition of change of control includes a phrase
relating to the sale, lease, transfer, conveyance or other disposition
of "all or substantially all" of the assets of Mail-Well I Corporation
and
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its subsidiaries taken as a whole. Although there is a limited body of
case law interpreting the phrase "substantially all," there is no
precise established definition of the phrase under applicable law.
Accordingly, the ability of a holder of new notes to require Mail-Well I
Corporation to repurchase such new notes as a result of a sale, lease,
transfer, conveyance or other disposition of less than all of the assets
of Mail-Well I Corporation and its subsidiaries taken as a whole to
another individual, entity or group may be uncertain.
ASSET SALES
Mail-Well I Corporation will not, and will not permit any of its
restricted subsidiaries to, consummate an asset sale unless:
(1) Mail-Well I Corporation or the restricted subsidiary, as the
case may be, receives consideration at the time of such
asset sale at least equal to the fair market value of the
assets or equity interests issued or sold or otherwise
disposed of;
(2) such fair market value is determined by Mail-Well I
Corporation's Board of Directors and evidenced by a
resolution of the Board of Directors set forth in an
officers' certificate delivered to the trustee; and
(3) at least 80% of the net proceeds received by Mail-Well I
Corporation or such restricted subsidiary is in the form of
cash. For purposes of this provision, each of the following
shall be deemed to be cash:
(a) any liabilities shown on Mail-Well I Corporation's or
such restricted subsidiary's most recent balance
sheet, other than contingent liabilities and
liabilities that are by their terms subordinated to
the new notes or any note guarantee, that are used by
the transferee of any such assets pursuant to a
customary novation agreement that releases Mail-Well I
Corporation or such restricted subsidiary from further
liability; and
(b) any securities, notes or other obligations received by
Mail-Well I Corporation or any such restricted
subsidiary from such transferee that are
contemporaneously converted by Mail-Well I Corporation
or such restricted subsidiary into cash, to the extent
of the cash received in that conversion.
Within 360 days after the receipt of any net proceeds from an
asset sale, Mail-Well I Corporation, or a restricted subsidiary must
apply such net proceeds:
(1) by reinvesting in the business of Mail-Well I Corporation or
such restricted subsidiary;
(2) by repaying outstanding senior debt; or
(3) by offering to purchase the new notes at 100% of principal
amount, plus accrued and unpaid interest, if any.
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The term "asset sale" means:
(1) the sale, lease, conveyance or other disposition of any
assets or rights, including sales and leasebacks, but
excluding sales of inventory in the ordinary course of
business consistent with past practices. However, the sale,
lease, conveyance or other disposition of all or
substantially all of the assets of Mail-Well I Corporation
and its restricted subsidiaries taken as a whole will be
governed by the provisions of the indenture described above
under the caption "--Change of Control," and/or the
provisions described below under the caption "Covenants in
the Indenture--Merger, Consolidation or Sale of Assets" and
not by the provisions described under this caption; and
(2) the issuance of equity interests by any of Mail-Well I
Corporation's restricted subsidiaries or the sale of equity
interests in any of its subsidiaries,
The following items shall not be deemed to be asset sales:
(1) any single transaction or series of related transactions
that:
(a) involves assets having a fair market value of less than
$5 million; or
(b) results in net proceeds to Mail-Well I Corporation and its
restricted subsidiaries of less than $5 million;
(2) a transfer of assets between or among Mail-Well I
Corporation and its wholly owned restricted subsidiaries;
(3) an issuance of equity interests by a wholly owned restricted
subsidiary to Mail-Well I Corporation or to another wholly
owned restricted subsidiary; and
(4) a restricted payment that is permitted by the covenant
described above under the caption "Covenants in the
Indenture--Restricted Payments."
The term "equity interests" means corporate stock or other
ownership interests or participations and all warrants, options or other
rights to acquire corporate stock or other ownership interests or
participations, but excluding any debt security that is convertible
into, or exchangeable for, corporate stock or other ownership interests
or participations.
SELECTION AND NOTICE
If less than all of the new notes are to be redeemed at any time,
the trustee will select new notes for redemption on a pro rata basis, by
lot or by such method as the trustee shall deem fair and appropriate.
No new notes of $1,000 or less shall be redeemed in part. Notices
of redemption shall be mailed by first class mail at least 30 but not
more than 60 days before the redemption date to each registered holder
of new notes to be redeemed at its registered address. Notices of
redemption may not be conditional.
If any new note is to be redeemed in part only, the notice of
redemption that relates to that new note shall state the portion of the
principal amount of the new note to be redeemed. A replacement new note
in principal amount equal to the unredeemed portion of the original new
note will be issued in the name of the registered holder of the original
new note upon cancellation of the original new note. New
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notes called for redemption become due on the date fixed for redemption.
On and after the redemption date, interest ceases to accrue on new notes
or portions of them called for redemption.
COVENANTS IN THE INDENTURE
RESTRICTED PAYMENTS
Mail-Well I Corporation will not, and will not permit any of its
restricted subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any other payment or
distribution on account of Mail-Well I Corporation's or any
of its restricted subsidiaries' equity interests, including,
without limitation, any payment in connection with any
merger or consolidation involving Mail-Well I Corporation or
any of its restricted subsidiaries, or to the direct or
indirect holders of Mail-Well I Corporation's or any of its
restricted subsidiaries' equity interests in their capacity
as such, other than dividends or distributions payable in
equity interests of Mail-Well I Corporation or a restricted
subsidiary or to Mail-Well I Corporation or a restricted
subsidiary of Mail-Well I Corporation;
(2) purchase, redeem or otherwise acquire or retire for value,
including, without limitation, in connection with any merger
or consolidation involving Mail-Well I Corporation, any
equity interests of Mail-Well I Corporation or any direct or
indirect parent of Mail-Well I Corporation or any restricted
subsidiary of Mail-Well I Corporation, other than any such
equity interests owned by Mail-Well I Corporation or any
restricted subsidiary of Mail-Well I Corporation;
(3) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any debt
that is of equal rank with or subordinated to the new notes
or the note guarantees, other than the new notes or the note
guarantees, except a payment of interest or principal at the
stated maturity of such debt; or
(4) make any restricted investment.
All the payments and other actions discussed in (1) through (4) above
are collectively referred to as "restricted payments," unless
immediately before and after the restricted payment:
(1) no default or event of default under the indenture shall
have occurred and be continuing or would occur as a
consequence of the restricted payment;
(2) Mail-Well I Corporation, at the time of the restricted
payment and after giving pro forma effect to it as if it had
been made at the beginning of the applicable four-quarter
period, would have been permitted to incur at least $1.00 of
additional debt pursuant to the fixed charge coverage ratio
test set forth in the first paragraph of the covenant
described below under the caption "--Incurrence of Debt";
and
(3) such restricted payment, together with the aggregate amount
of all other restricted payments made by Mail-Well I
Corporation and its restricted subsidiaries after the date
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of the indenture, excluding restricted payments permitted by
clauses (2), (3), (4), (6), (8) and (9) of the next
succeeding paragraph, is less than the sum, without
duplication, of:
(a) 50% of the consolidated net income, minus 100% of any
consolidated net loss, of Mail-Well I Corporation
since January 1, 1999; plus
(b) the aggregate net cash proceeds received after the
issue date of the old notes from the sale of equity
interests or any debt that is convertible into
corporate stock or other ownership interests and has
been so converted; plus
(c) the aggregate cash received by Mail-Well I Corporation
as capital contributions after the issue date of the
old notes; plus
(d) $15 million.
So long as no default under the indenture has occurred and is
continuing or would be caused by an event described in this paragraph,
the preceding provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date it
is declared, if at the date of declaration the payment would
have complied with the provisions of the indenture;
(2) the repurchase, redemption, defeasance, retirement or other
acquisition of any equal rank or subordinated debt of Mail-
Well I Corporation or any guarantor or of any equity
interests of Mail-Well I Corporation or any restricted
subsidiary in exchange for, or out of the net cash proceeds
of the substantially concurrent sale of, equity interests of
Mail-Well I Corporation other than a sale to a subsidiary of
Mail-Well I Corporation;
(3) the redemption, repurchase, defeasance, retirement or other
acquisition of any equal rank or subordinated debt of Mail-
Well I Corporation or any guarantor with the net cash
proceeds from an incurrence of permitted refinancing
indebtedness;
(4) the payment of any dividend by a restricted subsidiary of
Mail-Well I Corporation to the holders of its common equity
interests on a pro rata basis;
(5) the repurchase, redemption or other acquisition or
retirement for value of any equity interests of Mail-Well,
Inc. or Mail-Well I Corporation or any restricted subsidiary
of Mail-Well I Corporation held by any member of Mail-Well,
Inc.'s or Mail-Well I Corporation's management, or the
management of any of Mail-Well I Corporation's subsidiaries,
pursuant to any management equity subscription agreement or
stock option agreement in effect as of the date of the
indenture; provided that the aggregate price paid for all
such repurchased, redeemed, acquired or retired equity
interests shall not exceed $1 million in any twelve-month
period;
(6) the making of any restricted investment, directly or
indirectly, out of the net cash proceeds of substantially
concurrent sales of equity interests of Mail-Well I
Corporation, other than to a subsidiary;
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(7) the repurchase, redemption, retirement or other acquisition
of equity interests of Mail-Well I Corporation or any
restricted subsidiary issued, or debt incurred, by Mail-Well
I Corporation or any restricted subsidiary in connection
with the acquisition of any entity or any assets to the
former owners of such entity or assets; and
(8) permitted payments to Mail-Well, Inc.
The amount of all restricted payments other than cash shall be the
fair market value on the date of the restricted payment of the asset(s)
or securities proposed to be transferred or issued by Mail-Well I
Corporation or such restricted subsidiary, as the case may be, pursuant
to the restricted payment. The fair market value of any assets or
securities that are required to be valued by this covenant shall be
determined by the Board of Directors whose resolution with respect
thereto shall be delivered to the trustee. The Board of Directors'
determination must be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing if
the fair market value exceeds $5 million. Not later than 15 days after
the end of the fiscal quarter in which any restricted payment is made,
Mail-Well I Corporation shall deliver to the trustee an officers'
certificate stating that such restricted payment is permitted and
setting forth the basis upon which the calculations required by the
restricted payments covenant, were computed, together with a copy of any
fairness opinion or appraisal required by the indenture.
INCURRENCE OF DEBT
Mail-Well I Corporation will not, and will not permit any of its
restricted subsidiaries to, directly or indirectly, create, incur,
issue, assume, guarantee or otherwise become directly or indirectly
liable, contingently or otherwise, with respect to any debt, including
acquired debt; provided, however, that Mail-Well I Corporation and any
restricted subsidiary may incur debt, including acquired debt, if the
fixed charge coverage ratio for Mail-Well I Corporation's most recently
ended four full fiscal quarters for which internal financial statements
are available immediately preceding the date on which such additional
debt is incurred would have been at least 2 to 1, determined on a pro
forma basis, including a pro forma application of the net proceeds of
the additional debt, as if the additional debt had been incurred at the
beginning of the four-quarter period.
The term "acquired debt" means:
* Debt of an entity existing at the time the entity is merged
with or into or became a subsidiary of Mail-Well I
Corporation or any restricted subsidiary, whether or not
such debt is incurred in connection with, or in
contemplation of, such entity merging with or into, or
becoming a subsidiary of, Mail-Well I Corporation or any
restricted subsidiary; and
* Debt secured by a lien or other encumbrance encumbering any
asset acquired by such entity.
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The covenant described in the first paragraph of this subsection
will not prohibit the incurrence of any of the following items of debt:
(1) the incurrence by Mail-Well I Corporation and any restricted
subsidiary of the debt under credit facilities; provided
that the aggregate principal amount of all debt, under such
credit facilities does not exceed an amount equal to $300
million;
(2) the incurrence by Mail-Well I Corporation and its
subsidiaries of debt existing on the issue date of the old
notes;
(3) the incurrence by Mail-Well I Corporation and the subsidiary
guarantors of debt represented by the new notes and the note
guarantees;
(4) the incurrence by Mail-Well I Corporation or any of its
restricted subsidiaries of debt represented by capital lease
obligations, mortgage financings or purchase money
obligation, in each case, incurred for the purpose of
financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment
used in the business of Mail-Well I Corporation or such
restricted subsidiary, in an aggregate principal amount not
to exceed $25 million at any time outstanding;
(5) the incurrence by Mail-Well I Corporation or any of its
restricted subsidiaries of permitted refinancing
indebtedness in exchange for, or the net proceeds of which
are used to refund, refinance or replace, debt, other than
intercompany debt, that was permitted by the indenture to be
incurred under the first paragraph of this covenant or
clause (2) or (3) of this paragraph;
(6) the incurrence by Mail-Well I Corporation or any of its
restricted subsidiaries of intercompany debt between or
among Mail-Well I Corporation and any of its wholly owned
restricted subsidiaries; provided, however, that:
(a) if Mail-Well I Corporation or any subsidiary guarantor
is the obligor on such debt, such debt must be
expressly subordinated to the prior payment in full in
cash of all obligations with respect to the new notes,
in the case of Mail-Well I Corporation, or the note
guarantee of such subsidiary guarantor, in the case of
a subsidiary guarantor; and
(b) (I) any subsequent issuance or transfer of equity
interests that results in any such debt being held by
an individual or entity other than Mail-Well I
Corporation or a wholly owned restricted subsidiary of
Mail-Well I Corporation, and
(II) any sale or other transfer of any such debt to a person
that is not either Mail-Well I Corporation or a wholly owned
restricted subsidiary of Mail-Well I Corporation,
shall be deemed, in each case, to constitute an
incurrence of such debt by Mail-Well I Corporation or
such restricted subsidiary, as the case may be, that
was not permitted by this clause (6);
(7) the incurrence by Mail-Well I Corporation or any of its
restricted subsidiaries of hedging obligations that are
incurred for the purpose of fixing or hedging interest rate
risk with respect to any floating rate debt that is
permitted by the terms of the indenture to be outstanding;
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(8) the guarantee by Mail-Well I Corporation or any of its
restricted subsidiaries of debt of Mail-Well I Corporation
or a restricted subsidiary of Mail-Well I Corporation that
was permitted to be incurred by another provision of this
covenant;
(9) the incurrence by Mail-Well I Corporation or any of its
restricted subsidiaries of additional debt in an aggregate
principal amount or accrued value, as applicable, at any
time outstanding, including all permitted refinancing
indebtedness incurred to refund, refinance or replace any
debt incurred pursuant to this clause (9), not to exceed $50
million;
(10) the incurrence by Mail-Well I Corporation's unrestricted
subsidiaries of non-recourse debt; provided, however, that
if any such debt ceases to be non-recourse debt of an
unrestricted subsidiary, such event shall be deemed to
constitute an incurrence of debt by a restricted subsidiary
of Mail-Well I Corporation that was not permitted by this
clause (10);
(11) the incurrence by Mail-Well I Corporation or any of its
restricted subsidiaries of debt in respect of judgment,
appeal, surety, performance and other like bonds, bankers
acceptances and letters of credit provided by Mail-Well I
Corporation and its subsidiaries in the ordinary course of
business, including any debt incurred to refinance, retire,
renew, defease, refund or otherwise replace any debt
referred to in this clause (11); and
(12) Debt incurred by Mail-Well I Corporation or any of its
subsidiaries arising from agreements or their respective
bylaws providing for indemnification, adjustment of purchase
price or similar obligations, or from guarantees of letters
of credit, surety bonds or performance bonds securing the
performance of Mail-Well I Corporation or any of its
subsidiaries to any individual or entity acquiring all or a
portion of such business or assets of a subsidiary of Mail-
Well I Corporation for the purpose of financing such
acquisition.
For purposes of determining compliance with the incurrence of debt
covenant, in the event that an item of proposed debt meets the criteria
of more than one of the categories of permitted debt described in
clauses (1) through (12) above, or is entitled to be incurred pursuant
to the first paragraph of this covenant, Mail-Well I Corporation will be
permitted to classify such item of debt on the date of its incurrence in
any manner that complies with this covenant.
ANTI-LAYERING
Mail-Well I Corporation will not incur, create, issue, assume,
guarantee or otherwise become liable for any debt that is subordinate or
junior in right of payment to any senior debt of Mail-Well I Corporation
and senior in any respect in right of payment to the new notes. No
guarantor will incur, create, issue, assume, guarantee or otherwise
become liable for any debt that is subordinate or junior in right of
payment to any senior debt of such guarantor and senior in any respect
in right of payment to such guarantor's note guarantee.
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LIENS
Mail-Well I Corporation will not, and will not permit any of its
restricted subsidiaries to, directly or indirectly, create, incur,
assume or suffer to own any lien or other encumbrance of any kind
securing debt, attributable debt or trade payables on any asset now
owned or acquired in the future, except permitted liens.
The term "attributable debt" in respect of a sale and leaseback
transaction means, at the time of determination, the present value of
the obligation of the lessee for net rental payments during the
remaining term of the lease included in such sale and leaseback
transaction, including any period for which such lease has been extended
or may, at the option of the lessor, be extended. Such present value
shall be calculated using a discount rate equal to the rate of interest
implicit in such transaction, determined in accordance with Generally
Accepted Accounting Principles, which we refer to as "GAAP".
The term "permitted liens" means:
(1) liens and other encumbrances securing senior debt;
(2) liens and other encumbrances in favor of Mail-Well I
Corporation or the guarantors;
(3) liens and other encumbrances when the new notes are secured
by the lien on an equal and ratable basis unless the
obligation secured by the lien is subordinate or junior in
right of payment to the new notes, in which case the lien
securing the obligation must be subordinate and junior to
the lien securing the new notes with the same or lesser
relative priority as such obligation shall have been with
respect to the new notes;
(4) liens and other encumbrances on property of an entity
existing at the time such entity is merged with or into or
consolidated with Mail-Well I Corporation or any restricted
subsidiary of Mail-Well I Corporation, provided that the
liens were in existence prior to the contemplation of such
merger or consolidation and do not extend to any assets
other than those of the entity merged into or consolidated
with Mail-Well I Corporation or the restricted subsidiary;
(5) liens and other encumbrances on property existing at the
time of acquisition of the property by Mail-Well I
Corporation or any restricted subsidiary of Mail-Well I
Corporation, provided that the liens were in existence prior
to the contemplation of such acquisition;
(6) liens and other encumbrances to secure the performance of
statutory obligations, surety or appeal bonds, performance
bonds or other obligations of a like nature incurred in the
ordinary course of business;
(7) liens and other encumbrances to secure debt, including
capital lease obligations, permitted by clause (4) of the
second paragraph under the caption "--Incurrence of Debt"
covering only the assets acquired with such debt;
(8) liens and other encumbrances existing on the date of the
indenture;
(9) liens and other encumbrances on assets of restricted
subsidiaries to secure senior debt of such restricted
subsidiaries that was permitted by the indenture to be
incurred;
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(10) liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly
instituted and diligently concluded, provided that any
reserve or other appropriate provision as shall be required
in conformity with GAAP shall have been made;
(11) liens and other encumbrances incurred or deposits made in
the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of
social security, old age pension or public liability
obligations or to secure the payment or performance of bids,
tenders, statutory or regulatory obligations, surety, stay,
or appeal bonds, performance bonds or other obligations of a
like nature incurred in the ordinary course of business;
(12) easements, rights-of-way, restrictions, defects or
irregularities in title and other similar charges or
encumbrances not interfering in any material respect with
the business of Mail-Well I Corporation or any of its
subsidiaries;
(13) purchase money liens, including extensions and renewals;
(14) liens and other encumbrances securing reimbursement
obligations with respect to letters of credit which encumber
only documents and other property relating to such letters
of credit and the products and proceeds of the documents and
other property;
(15) judgment and attachment liens not giving rise to an event of
default under the indenture;
(16) liens and other encumbrances encumbering deposits made to
secure obligations arising from statutory, regulatory,
contractual or warranty requirements;
(17) liens and other encumbrances arising out of consignment or
similar arrangements for the sale of goods;
(18) any interest or title of a lessor in property subject to any
capital lease obligation or operating lease;
(19) statutory liens of landlords and liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen
and other liens imposed by law incurred in the ordinary
course of business for sums not yet delinquent or being
contested in good faith by appropriate proceeding, if such
reserve or other appropriate provision, if any, as shall be
required by GAAP shall have been made in respect of the
liens;
(20) liens and other encumbrances upon specific items of
inventory or other goods and proceeds of any individual or
entity securing such individual's or entity's obligations in
respect of bankers' acceptances issued or created for the
account of the individual or entity to facilitate the
purchase, shipment, or storage of such inventory or other
goods;
(21) liens and other encumbrances securing hedging obligations that
are otherwise permitted under the indenture;
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(22) leases or subleases granted to others that do not materially
interfere with the ordinary course of business of Mail-Well
I Corporation and its subsidiaries;
(23) liens and other encumbrances arising from filing Uniform
Commercial Code financing statements regarding leases;
(24) liens and other encumbrances in favor of customs and revenue
authorities arising as a matter of law to secure payment of
custom duties in connection with the importation of goods;
(25) liens and other encumbrances in favor of collecting or payor
banks having a right of setoff, revocation, refund or
chargeback with respect to money or instruments of Mail-Well
I Corporation or any subsidiary on deposit with or in
possession of the collecting or payor banks;
(26) liens and other encumbrances to secure non-recourse debt;
and
(27) liens and other encumbrances not otherwise permitted by
clauses (1) through (26) that are incurred in the ordinary
course of business of Mail-Well I Corporation or any
subsidiary of Mail-Well I Corporation with respect to
obligations that do not exceed $10 million at any one time
outstanding.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
Mail-Well I Corporation will not permit any of its restricted
subsidiaries to, directly or indirectly, create or permit to exist or
become effective any encumbrance or restriction on the ability of any
restricted subsidiary to pay dividends or make any other distributions
or pay debt to Mail-Well I Corporation or any of Mail-Well I
Corporation's restricted subsidiaries, or with respect to any other
interest or participation in, or measured by, its profits, or pay any
debt owed to Mail-Well I Corporation or any of Mail-Well I Corporation's
restricted subsidiaries.
MERGER, CONSOLIDATION OR SALE OF ASSETS
Mail-Well I Corporation may not, directly or indirectly:
* consolidate or merge with or into another entity, whether or
not Mail-Well I Corporation is the surviving corporation;
or
* sell, assign, transfer, convey or otherwise dispose of all
or substantially all of its properties or assets, in one or
more related transactions, to another individual or entity;
unless:
(1) either:
(a) Mail-Well I Corporation is the surviving corporation;
or
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(b) the entity formed by or surviving any such
consolidation or merger, if other than Mail-Well I
Corporation, or to which such sale, assignment,
transfer, conveyance or other disposition shall have
been made is a corporation organized or existing under
the laws of the United States, any U.S. state or the
District of Columbia;
(2) the entity formed by or surviving any such consolidation or
merger, if other than Mail-Well I Corporation, or the entity
to which such sale, assignment, transfer, conveyance or
other disposition shall have been made, expressly assumes
all the obligations of Mail-Well I Corporation under the new
notes and the indenture pursuant to agreements reasonably
satisfactory to the trustee;
(3) immediately after such transaction no default or event of
default under the indenture exists; and
(4) Mail-Well I Corporation or the other entity formed by or
surviving any such consolidation or merger:
(a) will have consolidated net worth immediately after the
transaction equal to or greater than the consolidated
net worth of Mail-Well I Corporation immediately
preceding the transaction; and
(b) will, on the date of such transaction after giving pro
forma effect thereto and any related financing
transactions as if the same had occurred at the
beginning of the applicable four-quarter period, be
permitted to incur at least $1.00 of additional debt
pursuant to the fixed charge coverage ratio test set
forth in the first paragraph of the covenant described
above under the caption "--Incurrence of Debt."
In addition, Mail-Well I Corporation may not, directly or
indirectly, lease all or substantially all of its properties or assets,
in one or more related transactions, to any other individual or entity.
The "Merger, Consolidation or Sale of Assets" covenant will not apply to
a merger, consolidation, sale, assignment, transfer, conveyance or other
disposition of assets between or among Mail-Well I Corporation and any
of its wholly owned subsidiaries.
TRANSACTIONS WITH AFFILIATES
Mail-Well I Corporation will not, and will not permit any of its
restricted subsidiaries to, enter into an "affiliate transaction,"
which means to make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property
or assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any affiliate, unless:
(1) the affiliate transaction is on terms that are no less
favorable to Mail-Well I Corporation or the relevant
restricted subsidiary than those that would have been
obtained in a comparable transaction by Mail-Well I
Corporation or such restricted subsidiary with an unrelated
individual or entity; and
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(2) Mail-Well I Corporation delivers to the trustee:
(a) with respect to any affiliate transaction or series of
related affiliate transactions involving aggregate
consideration in excess of $1 million, a resolution of
the Board of Directors set forth in the officers'
certificate certifying that the affiliate transaction
complies with this covenant and that the affiliate
transaction has been approved by a majority of the
disinterested members of the Board of Directors; and
(b) with respect to any affiliate transaction or series of
related affiliate transactions involving aggregate
consideration in excess of $10 million, an opinion as
to the fairness to new note holders of such affiliate
transaction from a financial point of view issued by
an accounting, appraisal or investment banking firm of
national standing.
The following items shall not be deemed to be affiliate
transactions and, therefore, will not be subject to the provisions of
the prior paragraph:
* any employment agreement entered into by Mail-Well I
Corporation or any of its restricted subsidiaries in the
ordinary course of business and consistent with the past
practice of Mail-Well I Corporation or such restricted
subsidiary;
* indemnification agreements permitted by law entered into by
Mail-Well I Corporation or any of its restricted
subsidiaries with any of its affiliates who are directors,
employees or agents of Mail-Well I Corporation or any of its
restricted subsidiaries;
* transactions between or among Mail-Well I Corporation and/or
its restricted subsidiaries;
* payment of reasonable directors fees to individuals who are
not otherwise affiliates of Mail-Well I Corporation; and
* restricted payments that are permitted by the provisions of
the indenture described above under the caption
"--Restricted Payments."
An "affiliate" of any specified entity means any other individual
or entity directly or indirectly controlling or controlled by or under
direct or indirect common control with the specified entity. The term
"control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of the
entity, whether through the ownership of voting securities, by agreement
or otherwise; provided that beneficial ownership of 10% or more of the
voting stock or other voting equity interests of an entity shall be
deemed to be control.
ADDITIONAL SUBSIDIARY GUARANTEES
If Mail-Well I Corporation, Mail-Well, Inc. or any restricted
subsidiary of Mail-Well I Corporation acquires or creates another
restricted subsidiary that is not a special purpose finance vehicle, and
such restricted subsidiary is formed under the laws of a state of the
United States or the District of Columbia and has its principal place of
business within the United States, then when the new restricted
subsidiary first becomes a significant subsidiary of Mail-Well I
Corporation or Mail-Well, Inc., as
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applicable, that newly acquired or created restricted subsidiary must
become a guarantor and execute a supplemental indenture satisfactory to
the trustee and deliver an opinion of counsel to the trustee within 10
business days of the date on which it was acquired or created.
DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES
As of the issue date of the old notes, all of the subsidiaries of
Mail-Well I Corporation that were not special purpose financing vehicles
were restricted subsidiaries. The Board of Directors may designate any
subsidiary to be an unrestricted subsidiary if that designation would
not cause a default under the indenture. If a subsidiary is designated
as an unrestricted subsidiary, all outstanding investments owned by
Mail-Well I Corporation and its subsidiaries in the subsidiary so
designated will be deemed to be an investment made as of the time of the
designation and will reduce the amount available for restricted payments
under the first paragraph of the covenant described above under the
caption "--Restricted Payments" or "--Permitted Investments", as applicable.
All such outstanding investments will be valued at their fair market
value at the time of the designation. In addition, the designation will
only be permitted if the restricted payment would be permitted at that
time and if the subsidiary otherwise meets the definition of an
unrestricted subsidiary. The Board of Directors may redesignate any
unrestricted subsidiary to be a restricted subsidiary if the
redesignation would not cause a default under the indenture.
Unrestricted subsidiaries will not be subject to many of the restrictive
covenants in the indenture. Unrestricted subsidiaries will not
guarantee the new notes.
The term "investments" means, with respect to any individual or
entity, all investments by the individual or entity in other entities,
including affiliates, in the forms of:
* direct or indirect loans, including guarantees of debt or
other obligations;
* advances or capital contributions, excluding commission,
travel and similar advances to officers and employees made
in the ordinary course of business;
* purchases or other acquisitions for consideration of debt;
and
* equity interests or other securities,
together with all items that would be classified as investments on a
balance sheet prepared in accordance with GAAP excluding hedging
obligations. If Mail-Well I Corporation or any restricted subsidiary of
Mail-Well I Corporation sells or otherwise disposes of any equity
interests of any direct or indirect restricted subsidiary of Mail-Well I
Corporation such that, after giving effect to any such sale or
disposition, the entity is no longer a restricted subsidiary of Mail-
Well I Corporation, Mail-Well I Corporation shall be deemed to have made
an investment on the date of any such sale or disposition equal to the
fair market value of the equity interests of such restricted subsidiary
not sold or disposed of in an amount determined as provided in the final
paragraph of the covenant described above under the caption "Covenants
in the Indenture--Restricted Payments."
LIMITATIONS ON ISSUANCES OF GUARANTEES OF DEBT
Mail-Well I Corporation will not permit any restricted subsidiary
that is not a guarantor of the new notes, directly or indirectly, to
guarantee or pledge any assets to secure the payment of any other debt
of Mail-Well I Corporation or Mail-Well, Inc. unless the restricted
subsidiary simultaneously
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executes and delivers a supplemental indenture providing for the
guarantee of the payment of the new notes by the such restricted
subsidiary to the same extent as the guarantee of the other debt, which
guarantee shall be senior to or of equal rank with such restricted
subsidiary's guarantee of or pledge to secure the other debt, unless the
other debt is senior debt, in which case the guarantee of the new notes
may be subordinated to the guarantee of the senior debt to the same
extent as the new notes are subordinated to the senior debt.
Notwithstanding the preceding paragraph, any note guarantee of the
new notes provides by its terms that it will be automatically and
unconditionally released and discharged under the circumstances
described above under the caption "Note Guarantees; Restrictions on
Mail-Well, Inc. and Subsidiaries." The form of the note guarantee is
attached as an exhibit to the indenture.
BUSINESS ACTIVITIES
Mail-Well I Corporation will not, and will not permit any
restricted subsidiary to, engage in any business other than the printing
business generally, including the business conducted by Mail-Well I
Corporation and its subsidiaries as of the issue date of the old notes
and any other business or businesses ancillary, complementary or related
to the printing business.
ADVANCES TO SUBSIDIARIES
Any advance made by Mail-Well I Corporation to a restricted
subsidiary that is not a guarantor will be evidenced by an intercompany
note in favor of Mail-Well I Corporation. Each intercompany note will
be payable upon demand and will bear interest at the same rate as the
new notes. A form of intercompany note is attached as an exhibit to the
indenture.
PAYMENTS FOR CONSENT
Mail-Well I Corporation will not, and will not permit any of its
subsidiaries to, directly or indirectly, pay or cause to be paid any
consideration to or for the benefit of any registered holder of new
notes for or as an inducement to any consent, waiver or amendment of any
of the terms or provisions of the indenture or the new notes unless the
consideration is offered to be paid and is paid to all registered
holders of the new notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to the
consent, waiver or agreement.
REPORTS
Whether or not required by the Commission, so long as any new
notes are outstanding, Mail-Well I Corporation will furnish to the
registered holders of new notes, within the time periods specified in
the Commission's rules and regulations:
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on
Forms 10-Q and 10-K, if Mail-Well I Corporation were
required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results
of Operations" and, with respect to the annual information
only, a report on the annual financial statements by Mail-
Well I Corporation's certified independent accountants; and
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(2) all current reports that would be required to be filed with
the Commission on Form 8-K if Mail-Well I Corporation were
required to file such reports.
The quarterly and annual financial information required by the
preceding paragraph shall include a reasonably detailed presentation,
either on the face of the financial statements or in the footnotes, and
in Management's Discussion and Analysis of Financial Condition and
Results of Operations, of the financial condition and results of
operations of Mail-Well I Corporation and its subsidiary guarantors
separate from the financial condition and results of operations of the
other subsidiaries of Mail-Well I Corporation.
In addition, whether or not required by the Commission, Mail-Well
I Corporation will file a copy of all of the information and reports
referred to in clauses (1) and (2) above with the Commission for public
availability within the time periods specified in the Commission's rules
and regulations, unless the Commission will not accept such a filing,
and make such information available to securities analysts and
prospective investors upon request.
The foregoing reporting obligation may be satisfied by reports
prepared and filed by Mail-Well, Inc. on a consolidated basis under the
requirements of the Exchange Act.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
Mail-Well I Corporation and the guarantors, which we refer to
collectively as the "obligors," and the initial purchasers of the old
notes entered into the registration rights agreement on December 16,
1998. In the registration rights agreement, the obligors agreed,
among other things, to file with the Commission the registration
statement of which this prospectus is a part.
If any of the following occurs:
(1) this exchange offer is not permitted by applicable law or
Commission policy;
(2) this exchange offer is not consummated within 210 days of
the issue date of the old notes; or
(3) any registered holder of the old notes which are transfer
restricted securities notifies Mail-Well I Corporation prior
to the 20th business day following the consummation of the
exchange offer that:
(a) it is prohibited by law or Commission policy from
participating in the exchange offer,
(b) it may not resell the new notes acquired by it in the
exchange offer to the public without delivering a
prospectus, and the prospectus contained in the
registration statement of which this prospectus is a
part is not appropriate or available for such resales
by it, or
(c) it is a broker-dealer and holds the old notes acquired
directly from Mail-Well I Corporation or any of Mail-
Well I Corporation's affiliates,
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then the obligors:
(y) will cause to be filed on or prior to 30 days after the date
on which Mail-Well I Corporation determines that it is not
required to file the registration statement pursuant to
clause (1) above, 30 days after the date on which the
obligation specified in clause (2) above becomes not
satisfied or 30 days after the date on which Mail-Well I
Corporation receives the notice specified in clause (3)
above, a shelf registration statement relating to all
transfer restricted securities; and
(z) will use their best efforts to cause the shelf registration
statement to be declared effective under the Securities Act
on or prior to 90 days after the date on which the obligors
become obligated to file such shelf registration statement
and keep the shelf registration statement effective until
the earlier of:
(A) the time when the old notes covered by the shelf
registration statement can be sold pursuant to Rule
144 without any limitations under clauses (c), (e),
(f) and (h) of Rule 144; and
(B) three years from the issue date of the old notes.
Mail-Well I Corporation will, in the event the shelf registration
statement is filed, among other things, provide to each registered
holder for whom the shelf registration statement was filed copies of the
prospectus which is part of the shelf registration statement, notify
each such registered holder when the shelf registration statement has
become effective and take certain other actions as are required to
permit unrestricted resales of the old notes or the new notes, as the
case may be. A registered holder selling such old notes or new notes
pursuant to the shelf registration statement generally would be required
to be named as a selling security holder in the related prospectus and
to deliver a prospectus to purchasers, will be subject to certain of the
civil liability provisions under the Securities Act in connection with
such sales and will be subject to certain of the civil liability
provisions under the Securities Act in connection with such sales and
will be bound by the provisions of the registration rights agreement
which are applicable to such holder, including indemnification
obligations.
For the purposes of the registration rights agreement, "transfer
restricted securities" means each old note until the earliest of the
date on which:
(1) the old note is exchanged in the exchange offer and entitled
to be resold to the public by the holder without complying
with the prospectus delivery requirements of the Securities
Act,
(2) the old note has been disposed of in accordance with the
shelf registration statement,
(3) the old note is disposed of by a broker-dealer pursuant to
the "Plan of Distribution" contemplated by the registration
statement, including delivery of the prospectus, or
(4) the old note is distributed to the public pursuant to Rule
144 under the Securities Act.
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The registration rights agreement provides that upon any "registration
default," which occurs:
(1) if the obligors failed to file the registration statement of
which this prospectus is a part with the Commission on or
prior to the 90th day after the issue date of the old notes,
(2) if the registration statement of which this prospectus is a
part were not declared effective by the Commission on or
prior to the 180th day after the issue date of the old
notes,
(3) if the exchange offer is not consummated on or before the
30th business day after the registration statement of which
this prospectus is a part is declared effective,
(4) if obligated to file the shelf registration statement and
the obligors fail to file the shelf registration statement
with the Commission on or prior to the 30th business day
after the filing obligation arises, but no earlier than 90
days after the issue date of the old notes,
(5) if obligated to file a shelf registration statement and the
shelf registration statement is not declared effective on or
prior to the 90th day after the obligation to file a shelf
registration statement arises, but no earlier than 180 days
after the issue date of the old notes, or
(6) if the registration statement of which this prospectus is a
part or the shelf registration statement, as the case may
be, is declared effective but later ceases to be effective
or useable in connection with resales of the transfer
restricted securities,
then for such time of non-effectiveness or non-usability, the obligors
agree to pay to each registered holder of transfer restricted securities
affected by the registration default liquidated damages in an amount
equal to $0.05 per week per $1,000 in principal amount of transfer
restricted securities held by the affected registered holder for each
week or portion of a week that the registration default continues for
the first 90-day period immediately following the occurrence of such
registration default. The amount of the liquidated damages shall
increase by an additional $0.05 per week per $1,000 in principal amount
of transfer restricted securities at the beginning of and for each
subsequent 90-day period until all registration defaults have been
cured, up to a maximum amount of liquidated damages of $0.50 per week,
per $1,000 in principal amount of transfer restricted securities.
The obligors shall not be required to pay liquidated damages for more
than one registration default at any given time. No registered holder
of transfer restricted securities will be entitled to receive liquidated
damages pursuant to the registration rights agreement unless and until
such registered holder has provided certain information to Mail-Well I
Corporation for use in connection with the applicable shelf registration
statement. Following the cure of all registration defaults, the accrual
of liquidated damages will cease.
All accrued liquidated damages shall be paid by the obligors to
registered holders entitled to liquidated damages in the same manner as
interest payments on the old notes on semi-annual damages payment dates
which correspond to interest payment dates for the old notes.
This summary of provisions of the registration rights agreement
does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the registration
rights agreement. We incorporate the registration rights agreement into
this prospectus by this reference. A copy of the registration rights
agreement has been filed as an exhibit to Mail-Well, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 1998, and is
available from Mail-Well I Corporation or the Commission upon request.
See "Where You Can Find More Information."
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EVENTS OF DEFAULT AND REMEDIES
Each of the following is an event of default under the indenture:
(1) default for 30 days in the payment when due of interest on,
or liquidated damages with respect to, the new notes,
whether or not prohibited by the subordination provisions of
the indenture;
(2) default in payment when due of the principal of or premium,
if any, on the new notes, whether or not prohibited by the
subordination provisions of the indenture for the new notes;
(3) failure by Mail-Well I Corporation or any of its restricted
subsidiaries to comply with the provisions described under
the captions "--Change of Control," "--Asset Sales,"
"--Restricted Payments," "--Incurrence of Debt" or
"--Merger, Consolidation or Sale of Assets";
(4) failure by Mail-Well I Corporation or any of its restricted
subsidiaries to comply with any of the other agreements in
the indenture for 60 days after notice to Mail-Well I
Corporation by the trustee or the registered holders of at
least 25% in aggregate principal amount of the new notes
then outstanding;
(5) default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured
or evidenced any debt for money borrowed by Mail-Well I
Corporation or any of its restricted subsidiaries, or the
payment of which is guaranteed by Mail-Well I Corporation or
any of its restricted subsidiaries, whether such debt or
guarantee now exists, or is created after the date of the
indenture, if that default:
(a) is caused by a failure to pay principal of or premium,
if any, or interest on such debt prior to the
expiration of the grace period provided in such debt
on the date of such default; or
(b) results in the acceleration of such debt prior to its
express maturity,
and, in each case, the principal amount of any such debt,
together with the principal amount of any other such debt
under which there has been a payment default or the maturity
of which has been so accelerated, aggregates $10 million or
more;
(6) failure by Mail-Well I Corporation or any of its restricted
subsidiaries to pay final judgments aggregating in excess of
$10 million, which judgments are not paid, discharged or
stayed for a period of 60 days;
(7) except as permitted by the indenture, any note guarantee
shall be held in any judicial proceeding to be unenforceable
or invalid or shall cease for any reason to be in full force
and effect or any guarantor, or any person acting on behalf
of any guarantor, shall deny or disaffirm its obligations
under its note guarantee; and
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(8) certain events of bankruptcy or insolvency with respect to
Mail-Well I Corporation or any of its restricted
subsidiaries.
In the case of an event of default arising from certain events of
bankruptcy or insolvency, with respect to Mail-Well I Corporation, any
restricted subsidiary that is a significant subsidiary or any group of
restricted subsidiaries that, taken together, would constitute a
significant subsidiary, all outstanding new notes will become due and
payable immediately without further action or notice. If any other
event of default occurs and is continuing, the trustee or the registered
holders of at least 25% in principal amount of the then outstanding new
notes may declare all the new notes to be due and payable immediately.
Holders of the new notes may not enforce the indenture or the new
notes except as provided in the indenture. Subject to limitations,
registered holders of a majority in principal amount of the then
outstanding new notes may direct the trustee in its exercise of any
trust or power.
The registered holders of a majority in aggregate principal amount
of the new notes then outstanding by notice to the trustee may on behalf
of the holders of all of the new notes waive any existing default or
event of default and its consequences under the indenture except a
continuing default or event of default in the payment of interest on, or
the principal of, the new notes. The term "default" under the indenture
means any event that is, or with the passage of time or the giving of
notice or both would be, an event of default under the indenture.
In the case of any event of default occurring under the indenture
by reason of any willful action or inaction taken or not taken by or on
behalf of Mail-Well I Corporation with the intention of avoiding payment
of the premium that Mail-Well I Corporation would have had to pay if
Mail-Well I Corporation then had elected to redeem the new notes
pursuant to the optional redemption provisions of the indenture, an
equivalent premium shall also become and be immediately due and payable
to the extent permitted by law upon the acceleration of the new notes.
If an event of default occurs under the indenture prior to December 15,
2003, by reason of any willful action or inaction taken or not taken by
or on behalf of Mail-Well I Corporation with the intention of avoiding
the prohibition on redemption of the new notes prior to December 15,
2003, then the premium specified in the indenture shall also become
immediately due and payable to the extent permitted by law upon the
acceleration of the new notes.
Mail-Well I Corporation is required to deliver to the trustee
annually a statement regarding compliance with the indenture. Upon
becoming aware of any default or event of default under the indenture,
Mail-Well I Corporation is required to deliver to the trustee a
statement specifying the default or event of default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of
Mail-Well I Corporation or any guarantor, as such, shall have any
liability for any obligations of our company or the guarantors under the
new notes, the indenture, the note guarantees, or for any claim based
on, in respect of, or by reason of, such obligations or their creation.
Each registered holder of new notes by accepting a new note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the new notes. The waiver may not be
effective to waive liabilities under the federal securities laws.
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SATISFACTION AND DISCHARGE OF THE INDENTURE
Mail-Well I Corporation may terminate its obligations and the
obligations of the guarantors under the new notes, the indenture, and
the guarantees when:
(1) either
(A) all outstanding new notes have been delivered to
the trustee for cancellation, or
(B) all such new notes not already delivered to the trustee for
cancellation have become due and payable, will become due
and payable within one year or are to be called for redemption
within one year under irrevocable arrangements satisfactory to
the trustee for the giving of notice of redemption by the trustee
in the name and at the expense of Mail-Well I Corporation, and
Mail-Well I Corporation has irrevocably deposited or caused
to be deposited with the trustee funds in an amount sufficient
to pay and discharge the entire debt on the new notes not already
delivered to the trustee for cancellation, for principal of and
interest to the date of deposit or stated maturity or date of
redemption;
(2) Mail-Well I Corporation has paid or caused to be paid all
sums then due and payable by Mail-Well I Corporation under
the indenture; and
(3) Mail-Well I Corporation has delivered an officers'
certificate and an opinion of counsel relating to compliance
with the conditions set forth in the indenture.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Mail-Well I Corporation may, at its option and at any time, elect
to have all of its obligations discharged with respect to the outstanding
new notes, which we refer to as "legal defeasance," except for:
(1) the rights of registered holders of outstanding new notes to
receive payments in respect of the principal of, premium, if
any, and interest and liquidated damages on such new notes
when such payments are due from the trust referred to below;
(2) Mail-Well I Corporation's obligations with respect to the
new notes concerning issuing temporary new notes,
registration of new notes, mutilated, destroyed, lost or
stolen new notes and the maintenance of an office or agency
for payment and money for security payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the
trustee, and Mail-Well I Corporation's obligations in
connection with the trustee; and
(4) the legal defeasance provisions of the indenture.
In addition, Mail-Well I Corporation may, at its option and at any
time, elect to have the obligations of Mail-Well I Corporation released
with respect to certain covenants that are described in the indenture
and any later failure to comply with such obligations shall not constitute
a default or event of default under the indenture with respect to the new
notes. We refer to this election as "covenant defeasance." In the event
covenant defeasance occurs, items (3) through (7) described under the caption
"Events of Default and Remedies" will no longer constitute an event of
default with respect to the new notes.
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In order to exercise either legal defeasance or covenant
defeasance,
(1) Mail-Well I Corporation must irrevocably deposit with the
trustee, in trust, for the benefit of the registered holders
of the new notes, cash in U.S. dollars, non-callable U.S.
government securities or a combination of the two, in
amounts that will be sufficient, in the opinion of a
nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and
interest and liquidated damages on the outstanding new notes
on the stated maturity or on the applicable redemption date,
as the case may be, and Mail-Well I Corporation must specify
whether the new notes are being defeased to maturity or to a
particular redemption date;
(2) in the case of legal defeasance, Mail-Well I Corporation
shall deliver to the trustee an opinion of counsel in the
United States reasonably acceptable to the trustee
confirming that
(A) Mail-Well I Corporation has received from, or there has
been published by, the Internal Revenue Service a ruling, or
(B) since the issue date of the old notes, there has been a
change in the applicable federal income tax law, in either
case to the effect that, and based on the applicable ruling
or law, the opinion of counsel shall confirm that, the
registered holders of the outstanding new notes will not
recognize income, gain or loss for federal income tax
purposes as a result of the legal defeasance and will be
subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the
case if the legal defeasance had not occurred;
(3) in the case of covenant defeasance, Mail-Well I Corporation
shall have delivered to the trustee an opinion of counsel in
the United States reasonably acceptable to the trustee
confirming that the registered holders of the outstanding
new notes will not recognize income, gain or loss for
federal income tax purposes as a result of the covenant
defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as
would have been the case if the covenant defeasance had not
occurred;
(4) no event of default or default under the indenture shall
have occurred and be continuing on the date of the deposit,
other than an event of default or default resulting from the
borrowing of funds to be applied to such deposit;
(5) the legal defeasance or covenant defeasance will not result
in a breach or violation of, or constitute a default under,
Mail-Well I Corporation's bank credit agreement, credit
facilities or any other material agreement or instrument,
other than the indenture, to which Mail-Well I Corporation or
any of its subsidiaries is a party or by which Mail-Well I
Corporation or any of its subsidiaries is bound;
(6) Mail-Well I Corporation must have delivered to the trustee
an opinion of counsel to the effect that after the 91st day
following the deposit, the trust funds will not be subject
to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights
generally;
(7) Mail-Well I Corporation must deliver to the trustee an
officers' certificate stating that the deposit was not made
by Mail-Well I Corporation with the intent of preferring the
registered holders of new notes over the other creditors of
Mail-Well I Corporation with the intent of defeating,
hindering, delaying or defrauding creditors of Mail-Well I
Corporation or others; and
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(8) Mail-Well I Corporation must deliver to the trustee an
officers' certificate and an opinion of counsel, each
stating that all conditions precedent provided for, in the
case of the officers' certificate, (1) through (7) and, in
the case of the opinion of counsel, clause (1) with respect
to the validity and perfection of the security interest, and
clauses (2), (3) and (5) of this paragraph relating to the
legal defeasance or the covenant defeasance, as applicable,
have been complied with.
AMENDMENT, SUPPLEMENT AND WAIVER
Without the consent of each registered holder affected, an
amendment or waiver may not with respect to any new notes held by a
non-consenting registered holder:
(1) reduce the principal amount of new notes whose registered
holders must consent to an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any
new note or alter or waive the provisions with respect to
the redemption of the new notes, other than provisions
relating to the covenants described above under the caption
"--Repurchase at the Option of Holders";
(3) reduce the rate of or change the time for payment of
interest on any new note;
(4) waive a default or event of default in the payment of
principal or premium, if any, or liquidated damages or
interest on the new notes, except a rescission of
acceleration of the new notes by the registered holders of
at least a majority in aggregate principal amount of the new
notes and a waiver of the payment default that resulted from
such acceleration;
(5) make any new note payable in money other than that stated in
the new notes;
(6) make any change in the provisions of the indenture relating
to waivers of past defaults or the rights of registered
holders of new notes to receive payments of principal of or
premium, if any, or liquidated damages or interest on the
new notes;
(7) waive a redemption payment with respect to any new note,
other than a payment required by one of the covenants
described above under the caption "--Repurchase at the
Option of Holders"; or
(8) release any guarantor from any of its obligations under its
note guarantee or the indenture, or amend the provisions of
the indenture relating to the release of guarantors; or
(9) make any change in the preceding amendment and waiver
provisions.
In addition, any amendment to, or waiver of, the provisions of the
indenture relating to subordination that adversely affects the rights of
the registered holders of the new notes will require the consent of the
registered holders of at least 75% in aggregate principal amount of new
notes then outstanding.
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Notwithstanding the preceding, without the consent of any
registered holder of new notes, Mail-Well I Corporation and the trustee
may amend or supplement the indenture or the new notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated new notes in addition to or in
place of certificated new notes;
(3) to provide for the assumption of Mail-Well I Corporation's
obligations to registered holders of new notes in the case
of a merger or consolidation or sale of all or substantially
all of Mail-Well I Corporation's assets;
(4) to make any change that would provide any additional rights
or benefits to the registered holders of new notes or that
does not adversely affect the legal rights under the
indenture of any such registered holder; or
(5) to comply with requirements of the Commission in order to
effect or maintain the qualification of the indenture under
the Trust Indenture Act.
CONCERNING THE TRUSTEE
If the trustee becomes a creditor of Mail-Well I Corporation or
any guarantor, the indenture limits its right to obtain payment of
claims in certain cases, or to realize on certain property received in
aspect of any such claim as security or otherwise. The trustee will be
permitted to engage in other transactions; however, if it acquires any
conflicting interest it must eliminate such conflict within 90 days,
apply to the Commission for permission to continue or resign.
The registered holders of a majority in principal amount of the
then outstanding new notes will have the right to direct the time,
method and place of conducting any proceeding for exercising any remedy
available to the trustee, subject to exceptions. The indenture provides
that in case an event of default shall occur and be continuing, the
trustee will be required, in the exercise of its power, to use the
degree of care of a prudent person the conduct of his own affairs.
Subject to such provisions, the trustee will be under no obligation to
exercise any of its rights or powers under the indenture at the request
of any registered holder of new notes, unless such registered holder
shall have offered to the trustee security and indemnity satisfactory to
it against any loss, liability or expense.
METHODS OF RECEIVING PAYMENTS ON THE NEW NOTES
If a registered holder has given wire transfer instructions to
Mail-Well I Corporation, Mail-Well I Corporation will make all
principal, premium, liquidated damages and interest payments on those
new notes in accordance with those instructions. All other payments on
these new notes will be made at the office or agency of the paying agent
and registrar within the City and State of New York unless Mail-Well I
Corporation elects to make interest payments by check mailed to the
registered holders at their address set forth in the register of
registered holders.
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PAYING AGENT AND REGISTRAR FOR THE NEW NOTES
The trustee will initially act as paying agent and registrar.
Mail-Well I Corporation may change the paying agent or registrar without
prior notice to the registered holders of the new notes, and Mail-Well I
Corporation or any of its subsidiaries may act as paying agent or
registrar.
BOOK-ENTRY; DELIVERY; FORM AND TRANSFER
The new notes initially will be in the form of one or more
registered "global notes" without interest coupons. Upon issuance,
the global notes will be deposited with the trustee, as custodian for
The Depository Trust Company in New York, New York and registered in
the name of DTC or its nominee for credit to the accounts of DTC's
direct participants and indirect participants, each as defined.
The global notes may be transferred, in whole and not in part,
only to another nominee of DTC or to a successor DTC or its nominee in
certain limited circumstances. Beneficial interests in the global notes
may be exchanged for new notes in certificated form in certain limited
circumstances. See "--Transfer of Interests in Global Notes for
Certificated Notes." Such certificated notes may, unless the global
note has previously been exchanged for certificated notes, be exchanged
for an interest in the global note representing the principal amount of
new notes being transferred. In addition, transfer of beneficial
interests in global notes will be subject to the applicable rules and
procedures of DTC and its direct participants or indirect participants,
including, if applicable, those of Euroclear and CEDEL, which may change
from time to time.
The new notes may be presented from registration of transfer and
exchanged at the offices of the registrar.
DEPOSITARY PROCEDURES
DTC has advised Mail-Well I Corporation that DTC is a
limited-purpose trust company created to hold securities for its
participating organizations, which we refer to collectively as the
"direct participants," and to facilitate the clearance and settlement
of transactions in those securities between direct participants through
electronic book-entry changes in accounts of participants. The direct
participants include securities brokers and dealers, including the initial
purchasers of the old notes, banks, trust companies, clearing corporations
and certain other organizations, including the Euroclear System, which we
abbreviate as "Euroclear," and CEDEL Bank, societe anonyme, which we
abbreviate as "CEDEL." Access to DTC's system is also available to other
entities that clear through or maintain a direct or indirect, custodial
relationship with a direct participant. We refer to these other entities
collectively as the "indirect participants." DTC may hold securities
beneficially owned by other persons only through the direct participants
or indirect participants and such other person's ownership interest and
transfer of ownership interest will be recorded only on the records of
the direct participant and/or indirect participant and not on the
records maintained by DTC.
DTC has also advised Mail-Well I Corporation that, pursuant to
DTC's procedures,
(1) upon deposit of the global notes, DTC will credit the accounts of
direct participants with portions of the principal amount of the
global notes allocated to them by the initial purchasers, and
(2) DTC will maintain records of the ownership interests of such direct
participants in the global notes and the transfer of ownership
interests by and between direct participants.
DTC will not maintain records of the ownership interests of, or the transfer
of ownership interests by and between, indirect participants or other owners of
beneficial interests in the global notes. Direct participants and indirect
participants must maintain their own records of the ownership interests of,
and the transfer of ownership interests by
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and between, indirect participants and other owners of beneficial
interests in the global notes. Mail-Well I Corporation expects that
payments by direct participants to owners of beneficial interests in
such global notes held through the direct participants will be governed
by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers registered in the
name of nominees for such customers. These payments will be the
responsibility of the applicable direct participants.
Investors in the global notes may hold their interests in the
global notes directly through DTC if they are direct participants in DTC
or indirectly through organizations that are direct participants in DTC.
Euroclear and CEDEL will hold interests in the global notes on behalf of
their participants through customers' securities accounts in their
respective names on the books of their respective depositaries, which
are Morgan Guaranty Trust Company of New York, Brussels office, as
operator and depositary of Euroclear, and Citibank, N.A. as the operator
and depositary of CEDEL. We refer to each of these institutions as a
"nominee" of Euroclear and CEDEL, respectively. The depositaries, in turn,
will hold the interests in the global notes in customers' securities accounts
in the depositaries' names on the books of DTC. All ownership interests in
any global notes, including those of customers' securities accounts held
through Euroclear or CEDEL, may be subject to the procedures and requirements
of DTC.
The laws of some states in the United States require that certain
persons take physical delivery in definitive, certificated form, of
securities that they own. This may limit or curtail the ability to
transfer beneficial interests in a global note to these persons.
Because DTC can act only on behalf of direct participants, which in turn
act on behalf of indirect participants and others, the ability of a
person having a beneficial interest in a global note to pledge that
interest to persons or entities that are not Direct participants in DTC,
or to otherwise take actions in respect of that interest, may be
affected by the lack of physical certificates evidencing the interest.
For certain other restrictions on the transferability of the new notes
see "--Transfers of Interests in Global Notes for Certificated Notes."
EXCEPT AS DESCRIBED IN "--TRANSFERS OF INTEREST IN GLOBAL NOTES
FOR CERTIFICATED NOTES," OWNERS OF BENEFICIAL INTERESTS IN THE GLOBAL
NOTES WILL NOT HAVE NEW NOTES REGISTERED IN THEIR NAMES, WILL NOT
RECEIVE PHYSICAL DELIVERY OF NEW NOTES IN CERTIFICATED FORM AND WILL NOT
BE CONSIDERED THE REGISTERED OWNERS OR HOLDERS OF NEW NOTES UNDER THE
INDENTURE FOR ANY PURPOSE.
Under the terms of the indenture, Mail-Well I Corporation, the
guarantors and the trustee will treat the persons in whose names the new
notes are registered, including new notes represented by global notes,
as the owners of the new notes for the purpose of receiving payments and
for any and all other purposes whatsoever. Payments in respect of the
principal, premium, liquidated damages, if any, and interest on global
notes registered in the name of DTC or its nominee will be payable by
the trustee to DTC or its nominee as the registered holder under the
indenture. Consequently, none of Mail-Well I Corporation, the
guarantors, the trustee or any agent of Mail-Well I Corporation, the
guarantors or the trustee has or will have any responsibility or
liability for:
(1) any aspect of DTC's records or any direct participant's or
indirect participant's records relating to or payments made
on account of beneficial ownership interests in the global
note or for maintaining, supervising or reviewing any of
DTC's records or any direct participant's or indirect
participant's records relating to the beneficial ownership
interests in any global note; or
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(2) any other matter relating to the actions and practices of
DTC or any of its direct participants or indirect
participants.
DTC has advised Mail-Well I Corporation that its current payment
practice for payments of principal, interest and the like, with respect
to securities such as the new notes is to credit the accounts of the
relevant direct participants with such payment on the payment date in
amounts proportionate to the direct participants' respective ownership
interests in the global notes as shown on DTC's records. Payments by
direct participants and indirect participants to the beneficial owners
of the new notes will be governed by standing instructions and customary
practices between them and will not be the responsibility of DTC, the
trustee, Mail-Well I Corporation or the guarantors. None of Mail-Well I
Corporation, the guarantors or the trustee will be liable for any delay
by DTC or its direct participants or indirect participants in
identifying the beneficial owners of the new notes, and Mail-Well I
Corporation and the trustee may conclusively rely on and will be
protected in relying on instructions from DTC or its nominee as the
registered owner of the new notes for all purposes.
The global notes will trade in DTC's Same-Day Funds Settlement
System and, therefore, transfers between direct participants in DTC will
be effected in accordance with DTC's procedures, and will be settled in
immediately available funds. Transfers between indirect participants,
other than indirect participants who hold an interest in the new notes
through Euroclear or CEDEL, who hold an interest through a direct
participant will be effected in accordance with the procedures of such
direct participant but generally will settle in immediately available
funds. Transfers between and among indirect participants who hold
interests in the new notes through Euroclear and CEDEL will be effected
in the ordinary way in accordance with their respective rules and
operating procedures.
Cross-market transfers between direct participants in DTC, on the
one hand, and indirect participants who hold interests in the new notes
through Euroclear or CEDEL, on the other hand, will be effected by
Euroclear's or CEDEL's respective nominee through DTC in accordance with
DTC's rules on behalf of Euroclear or CEDEL; however, delivery of
instructions relating to crossmarket transactions must be made directly
to Euroclear or CEDEL, as the case may be, by the counterparty in
accordance with the rules and procedures of Euroclear or CEDEL and
within their established deadlines, using Brussels time for Euroclear and U.K.
time for CEDEL. Indirect participants who hold interest in the new
notes through Euroclear and CEDEL may not deliver instructions directly
to Euroclear's or CEDEL's nominee. Euroclear or CEDEL will, if the
transaction meets its settlement requirements, deliver instructions to
its respective nominee to deliver or receive interests on Euroclear's or
CEDEL's behalf in the relevant global note in DTC, and make or receive
payment in accordance with normal procedures for same-day funds
settlement applicable to DTC.
Because of time zone differences, the securities of accounts of an
Indirect participant who holds an interest in the new notes through
Euroclear or CEDEL purchasing an interest in a global note from a direct
participant in DTC will be credited, and any such crediting will be
reported to Euroclear or CEDEL during the European business day
immediately following the settlement date of DTC in New York. Although
recorded in DTC's accounting records as of DTC's settlement date in New
York, Euroclear and CEDEL customers will not have access to the cash
amount credited to their accounts as a result of a sale of an interest
in a global note to a DTC Participant until the European business day
for Euroclear or CEDEL immediately following DTC's settlement date.
DTC has advised Mail-Well I Corporation that it will take any
action permitted to be taken by a holder of new notes only at the
direction of one or more direct participants to whose account interest
in
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the global notes are credited and only in respect of the portion of the
aggregate principal amount of the new notes to which the direct
participant or direct participants has or have given direction.
However, if there is an event of default under the new notes, DTC
reserves the right to exchange global notes for new notes in
certificated form without the direction of one or more of its direct
participants, and to distribute the certificated forms of new notes to
its direct participants. See "--Transfers of Interests in Global Notes
for Certificated Notes."
Although DTC, Euroclear and CEDEL have agreed to the foregoing
procedures to facilitate transfers of interest in the global notes among
direct participants, including Euroclear and CEDEL, they are under no
obligation to perform or to continue to perform the procedures, and the
procedures may be discontinued at any time. None of Mail-Well I
Corporation, the guarantors, the initial purchasers or the trustee shall
have any responsibility for the performance by DTC, Euroclear or CEDEL
or their respective direct participants and indirect participants of
their respective obligations under the rules and procedures governing
any of their operations.
The information in this section concerning DTC, Euroclear and
CEDEL and their book-entry systems has been obtained from sources that
Mail-Well I Corporation believes to be reliable, but Mail-Well I
Corporation takes no responsibility for the accuracy of the information.
TRANSFERS OF INTERESTS IN GLOBAL NOTES FOR CERTIFICATED NOTES
An entire global note may be exchanged for "certified notes," which
are definitive new notes in registered, certificated form with interest
coupons, if:
(1) DTC
(a) notifies Mail-Well I Corporation that it is unwilling
or unable to continue as depositary for the global
notes and Mail-Well I Corporation fails to appoint a
successor depositary within 90 days, or
(b) has ceased to be a clearing agency registered under
the Exchange Act;
(2) Mail-Well I Corporation, at its option, notifies that
trustee in writing that it elects to cause the issuance of
certificated notes; or
(3) there shall have occurred and be continuing a default or an
event of default with respect to the new notes.
In any of these cases, Mail-Well I Corporation will notify the trustee
in writing that, upon surrender by the direct participants and indirect
participants of their interest in the global note, certificated notes
will be issued to each person that the direct participants and indirect
participants and the DTC identify as being the beneficial owner of the
related new notes.
Beneficial interests in global notes held by any direct participants
or indirect participant may be exchanged for certificated notes upon request
to DTC, by such direct participant for itself or on behalf of an indirect
participant, to the trustee in accordance with customary DTC procedures.
Certificated notes delivered in exchange for any beneficial interests in any
global note will be
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registered in the names, and issued in any approved denominations,
requested by DTC on behalf of the direct participants or indirect
participants, in accordance with DTC's customary procedures.
None of Mail-Well I Corporation, the guarantors or the trustee
will be liable for any delay by the holder of any global note or DTC in
identifying the beneficial owners of new notes, and Mail-Well I
Corporation and the trustee may conclusively rely on, and will be
protected in relying on, instructions from the holder of the global note
or DTC for all purposes.
SAME DAY SETTLEMENT AND PAYMENT
The indenture requires that payments in respect of the new notes
represented by the global notes, including principal, premium, if any,
interest and liquidated damages, if any, be made by wire transfer of
immediately available same day funds to the accounts specified by the
registered holder of interests in the global note. With respect to
certificated notes, Mail-Well I Corporation will make all payments of
principal, premium, if any, interest and liquidated damages, if any, by
wire transfer of immediately available same day funds to the accounts
specified by the registered holders of certificated notes or, if no such
account is specified, by mailing a check to each such registered
holder's registered address. Mail-Well I Corporation expects that
secondary trading in the certificated notes will also be settled in
immediately available funds.
DEFINITIONS IN THE INDENTURE
Set forth below are certain defined terms used in this prospectus.
Reference is made to the indenture for a full disclosure of all terms,
as well as any other capitalized terms used in this prospectus for which
no definition is provided.
"Consolidated cash flow" means, with respect to any entity for any
period, the consolidated net income of such entity for such period plus:
(1) an amount equal to any extraordinary loss plus any net loss
realized in connection with an asset sale, to the extent
such losses were deducted in computing such consolidated net
income; plus
(2) provision for taxes based on income or profits of such
entity and its subsidiaries for such period, to the extent
that such provision for taxes was deducted in computing such
consolidated net income; plus
(3) consolidated interest expense of such entity and its
subsidiaries for such period, whether paid or accrued and
whether or not capitalized, including, without limitation,
amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component
of any deferred payment obligations, the interest component
of all payments associated with capital lease obligations,
imputed interest with aspect to attributable debt,
commissions, discounts and other fees and charges incurred
in respect of letter of credit or bankers' acceptance
financings, and net payments, if any, pursuant to hedging
obligations, to the extent that any such expense was
deducted in computing such consolidated net income; plus
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(4) depreciation, amortization, including amortization of
goodwill and other intangibles, and other non-cash expenses
of such entity and its subsidiaries for such period to the
extent that such depreciation, amortization and other
non-cash expenses were deducted in computing such
consolidated net income; minus
(5) non-cash items increasing such consolidated net income for
such period, other than items that were accrued in the
ordinary course of business, in each case, on a consolidated
basis and determined in accordance with GAAP.
Notwithstanding the preceding, the provision for taxes based on
the income or profits of, and the depreciation and amortization and
other non-cash charges of, a subsidiary of Mail-Well I Corporation shall
be added to consolidated net income to compute consolidated cash flow of
Mail-Well I Corporation only to the extent that a corresponding amount
would be permitted at the date of determination to be dividended to
Mail-Well I Corporation by such subsidiary without prior approval that
has not been obtained, pursuant to the terms of its charter and all
agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that subsidiary or its
stockholders.
"Consolidated net income" means, with respect to any specified
entity for any period, the aggregate of the net income of such entity
and its restricted subsidiaries for such period, on a consolidated
basis, determined in accordance with GAAP; provided that:
(1) the net income, but not loss, of any entity that is not a
restricted subsidiary or that is accounted for by the equity
method of accounting shall be included only to the extent of
the amount of dividends or distributions paid in cash to the
specified entity or a wholly owned subsidiary of the entity;
(2) the net income of any restricted subsidiary shall be
excluded to the extent that the declaration or payment of
dividends or similar distributions by that restricted
subsidiary of that net income is not at the date of
determination permitted without any prior governmental
approval that has not been obtained, or, directly or
indirectly, by operation of the terms of its charter or any
agreement, judgment, decree, order, statute, rule or
governmental regulation applicable to that restricted
subsidiary or its stockholders;
(3) the net income of any entity acquired in a pooling of
interests transaction for any period prior to the date of
such acquisition shall be excluded;
(4) the net income, but not loss, of any unrestricted subsidiary
shall be excluded, whether or not distributed to the
specified entity or one of its subsidiaries; and
(5) the cumulative effect of a change in accounting principles
shall be excluded.
"Fixed charges" means, with respect to any entity for any period,
the sum, without duplication, of:
(1) the consolidated interest expense of such entity and its
restricted subsidiaries for such period, whether paid or
accrued, including, without limitation, amortization of debt
issuance costs and original issue discount, non-cash
interest payments, the interest
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component of any deferred payment obligations, the interest
component of all payments associated with capital lease
obligations, imputed interest with respect to attributable
debt, commissions, discounts, and other fees and charges
incurred in respect of letter of credit or bankers'
acceptance financings, and net payments, if any, pursuant to
hedging obligations; plus
(2) the consolidated interest expense of such entity and its
restricted subsidiaries that was capitalized during such
period; plus
(3) any interest expense on debt of another entity that is
guaranteed by such entity or one of its restricted
subsidiaries or secured by a lien or other encumbrance on
assets of such entity or one of its restricted subsidiaries,
whether or not such guarantee or lien is called upon; plus
(4) all cash dividend payments on any series of preferred stock
of such entity or any of its restricted subsidiaries.
"Fixed charge coverage ratio" means, with respect to any specified
entity for any period, the ratio of the consolidated cash flow of such
entity and its restricted subsidiaries for such period to the fixed
charges of such entity for such period. In the event that the specified
entity or any of its restricted subsidiaries incurs, assumes, guarantees
or redeems any debt, other than revolving credit borrowings, or issues
or redeems preferred stock subsequent to the commencement of the period
for which the fixed charge coverage ratio is being calculated but prior
to the "calculation date," which is the date on which the event for which
the calculation of the fixed charge coverage ratio is made, then the fixed
charge coverage ratio shall be calculated giving pro forma effect to
such incurrence, assumption, guarantee or redemption of debt, or such
issuance or redemption of preferred stock, as if the same had occurred
at the beginning of the applicable four-quarter reference period.
In addition, for purposes of calculating the fixed charge coverage
ratio:
(1) acquisitions that have been made by the specified entity or
any of its restricted subsidiaries, including through
mergers or consolidations and including any related
financing transactions, during the four-quarter reference
period or subsequent to such reference period and on or
prior to the calculation date shall be deemed to have
occurred on the first day of the four-quarter reference
period and consolidated cash flow for such reference period
shall be calculated without giving effect to clause (3) of
the proviso set forth in the definition of consolidated net
income;
(2) the consolidated cash flow attributable to discontinued
operations, as determined in accordance with GAAP, and
operations or businesses disposed of prior to the
calculation date, shall be excluded; and
(3) the fixed charges attributable to discontinued operations,
as determined in accordance with GAAP, and operations or
businesses disposed of prior to the calculation date, shall
be excluded, but only to the extent that the obligations
giving rise to such fixed charges will not be obligations of
the specified entity or any of its restricted subsidiaries
following the calculation date.
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"Hedging obligations" means, with respect to any individual or
entity, the obligations of such individual or entity under:
(1) interest rate swap agreements, interest rate cap agreements
and interest rate collar agreements; and
(2) other agreements or arrangements designed to protect such
individual or entity against fluctuations in interest rates
or the value of currencies purchased or received by such
individual or entity in the ordinary course of business.
"Net income" means, with respect to any entity, the net income
or loss of such entity and its restricted subsidiaries, determined in
accordance with GAAP and before any reduction in respect of preferred
stock dividends, excluding, however:
(1) any gain, but not loss, together with any related provision
for taxes on such gain, but not loss, realized in connection
with:
(a) any asset sale; or
(b) the disposition of any securities by such entity or
any of its restricted subsidiaries or the
extinguishment of any debt of such entity or any of
its restricted subsidiaries; and
(2) any extraordinary or nonrecurring gain, but not loss,
together with any related provision for taxes on such
extraordinary or nonrecurring gain, but not loss.
"Non-recourse debt" means debt:
(1) as to which neither Mail-Well I Corporation nor any of its
restricted subsidiaries
(a) provides credit support of any kind, including any
undertaking, agreement or instrument that would
constitute debt;
(b) is directly or indirectly liable as a guarantor or
otherwise; or
(c) constitutes the lender;
(2) no default with respect to which, including any rights that
the holders of the debt may have to take enforcement action
against an unrestricted subsidiary, would permit upon
notice, lapse of time or both any holder of any other debt,
other than the new notes, of Mail-Well I Corporation or any
of its restricted subsidiaries to declare a default on the
other debt or cause the payment of the other debt to be
accelerated or payable prior to its stated maturity; and
(3) as to which the lenders have been notified in writing that
they will not have any recourse to the stock or assets of
Mail-Well I Corporation or any of its restricted
subsidiaries.
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"Permitted investments" means:
(1) any investment in Mail-Well I Corporation or in a restricted
subsidiary of Mail-Well I Corporation;
(2) any investment in Cash Equivalents;
(3) any investment by Mail-Well I Corporation or any restricted
subsidiary of Mail-Well I Corporation in an entity if as a
result of such investment:
(a) such entity becomes a restricted subsidiary of
Mail-Well I Corporation; or
(b) such entity is merged, consolidated or amalgamated
with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, Mail-Well
I Corporation or a restricted subsidiary of Mail-Well
I Corporation;
(4) any investment made as a result of the receipt of non-cash
consideration from an asset sale that was made pursuant to
and in compliance with the covenant described above under
the caption "--Repurchase at the Option of Holder--Asset
Sales";
(5) investments existing as of the issue date of the old notes;
(6) any acquisition of assets solely in exchange for the
issuance of equity interests of Mail-Well I Corporation;
(7) accounts receivable, endorsements for collection, deposits
or similar investments arising in the ordinary course of
business;
(8) any investment by Mail-Well I Corporation or a restricted
subsidiary in assets of a company engaged in the printing
business or a related business, or assets to be used in the
printing business or a related business;
(9) stock, obligations or securities received in settlement of
debts created in the ordinary course of business and owing
to Mail-Well I Corporation or any subsidiary or in
satisfaction of judgments;
(10) the acceptance of notes payable from employees of Mail-Well
I Corporation or its subsidiaries in payment for the
purchase of capital stock by such employees; and
(11) any other investment in any entity having an aggregate fair
market value, measured on the date each such investment was
made and without giving effect to subsequent changes in
value, when taken together with all other investments made
pursuant to this clause (11) since the date of the issue
date of the old notes and existing at the time such
investment was made, did not exceed $25 million.
"Permitted payments to Mail-Well, Inc." means
(1) payments to Mail-Well, Inc. in an amount sufficient to
permit Mail-Well, Inc. to pay reasonable and necessary
operating expenses and other general corporate expenses to
the extent such expenses relate or are fairly allocable to
Mail-Well I Corporation and its
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subsidiaries including any reasonable professional fees and
expenses not in excess of $1 million in the aggregate during
any consecutive 12-month period; and
(2) payment, which we refer to as a "tax payment," to Mail-Well, Inc.
to enable Mail-Well, Inc. to pay foreign, federal, state or local
tax liabilities, not to exceed the amount of any tax liabilities
that would be otherwise payable by Mail-Well I Corporation
and its subsidiaries to the appropriate taxing authorities
if they filed separate tax returns, to the extent that Mail-
Well, Inc. has an obligation to pay such tax liabilities
relating to the operations, assets or capital of Mail-Well I
Corporation or its subsidiaries; provided, however that:
(a) notwithstanding the foregoing, in the case of
determining the amount of a tax payment that is
permitted to be paid by Mail-Well I Corporation and
any of its U.S. subsidiaries in respect of their
Federal income tax liability, such payment shall be
determined assuming that Mail-Well I Corporation is
the parent company of an affiliated group filing a
consolidated federal income tax return and that Mail-
Well, Inc. and each such U.S. subsidiary is a member
of that affiliated group; and
(b) any tax payments shall either be used by Mail-Well,
Inc. to pay such tax liabilities within 90 days of
Mail-Well, Inc.'s receipt of such payment or refunded
to the party from whom Mail-Well, Inc. received such
payments.
"Permitted refinancing indebtedness" means any debt of Mail-Well I
Corporation any of its restricted subsidiaries issued in exchange for,
or the net proceeds of which are used to extend, refinance, renew, replace,
defease or refund other debt of Mail-Well I Corporation or any of its
restricted subsidiaries, other than intercompany debt; provided that:
(1) the principal amount, or accreted value, if applicable of
such permitted refinancing indebtedness does not exceed the
principal amount of, or accreted value, if applicable, plus
accrued interest on the debt so extended, refinanced,
renewed, replaced, defeased or refunded, plus the amount of
reasonable expenses incurred in connection with the debt
including premiums paid, if any, to the holders of the debt;
(2) such permitted refinancing indebtedness has a final maturity
date later than the final maturity date of, and has a
weighted average life to maturity equal to or greater than
the weighted average life to maturity of, the debt being
extended, refinanced, renewed, replaced, defeased or
refunded;
(3) if the debt being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to
the new notes, such permitted refinancing indebtedness has a
final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the new notes on
terms at least as favorable to the registered holders of new
notes as those contained in the documentation governing the
debt being extended, refinanced, renewed, replaced, defeased
or refunded; and
(4) such debt is incurred either by Mail-Well I Corporation or
by the restricted subsidiary who is the obligor on the debt
being extended, refinanced, renewed, replaced, defeased or
refunded.
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"Restricted investment" means an investment other than a permitted
investment.
"Weighted average life to maturity" means, when applied to any
debt at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying
(a) the amount of each then remaining installment, sinking fund,
serial maturity or other required payments of principal,
including payment at final maturity, in respect of the debt,
by
(b) the number of years, calculated to the nearest one-twelfth,
that will elapse between such date and the making of such
payment; by
(2) the then outstanding principal amount of such debt.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives new notes for its own account
pursuant to this exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of the new notes. A broker-
dealer may use this prospectus, as it may be amended or supplemented
from time to time, in connection with resales of new notes received in
exchange for old notes where such old notes were acquired as a result of
market-making activities or other trading activities. Mail-Well I
Corporation has agreed to make this prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with
any such resale.
Mail-Well I Corporation will not receive any proceeds from any
sale of new notes by any broker-dealer. New notes received by broker-
dealers for their own account pursuant to this exchange offer may be
sold from time to time in one or more transactions in the following
manners:
* in the over-the-counter market
* in negotiated transactions
* through the writing of options on the new notes
* through a combination of such methods of resale.
The sales may be at any of the following prices:
* market prices prevailing at the time of resale
* prices related to such prevailing market prices
* negotiated prices.
Any resale may be made directly to purchasers or to or through brokers
or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any
such new notes.
Any broker-dealer that resells new notes that were received by it
for its own account pursuant to this exchange offer and any broker or
dealer that participates in a distribution of such new notes may be
deemed to be an "underwriter" within the meaning of the Securities Act.
Any profit on any such resale of new notes and any commissions or
concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The letter of
transmittal states that by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act.
Mail-Well I Corporation has agreed to send additional copies of
this prospectus and any amendment or supplement to this prospectus to
any broker-dealer that requests such documents in the letter of
transmittal. Mail-Well I Corporation has agreed to pay all expenses
incident to Mail-Well I Corporation's performance of, or compliance
with, the registration rights agreement and all expenses incident to
this exchange offer, including the expenses of one counsel for the
registered holders of the old notes, other than commissions or
concessions of any brokers or dealers, and will indemnify the
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registered holders, including any broker-dealers, against certain
liabilities, including liabilities under the Securities Act.
Mail-Well I Corporation has not entered into any arrangements or
understandings with any person to distribute the new notes to be
received in this exchange offer.
There is no existing market for the new notes and although the new
notes will be traded in the over-the-counter market, there can be no
assurance as to the liquidity of any market that may develop for the new
notes, the ability of the holders of the new notes to sell their new
notes or the price at which holders would be able to sell their new
notes. Future trading prices of the new notes will depend on many
factors, including, among other things:
* prevailing interest rates
* Mail-Well I Corporation's operating results
* the market for similar securities.
Mail-Well I Corporation has been advised by the initial purchasers
of the old notes that the initial purchasers are making a market in the
old notes, and intend to make a market in the new notes, subject to the
limits imposed by the Securities Act and the Exchange Act; however, they
are not obligated to do so, and may discontinue such market-making at
any time without notice. Therefore, no assurance can be given as to the
liquidity of the trading market for the new notes. In addition, such
market-making activities may be limited during the exchange offer and
the pendency of any shelf registration statement relating to the new
notes.
This prospectus does not constitute an offer to purchase or a
solicitation of an offer to sell any of the new notes in any
jurisdiction in which such an offer or a solicitation is unlawful.
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TAXATION
The following discussion is a summary of certain of the expected
material United States federal income tax considerations with respect to
the new notes relevant to each registered holder who, except as noted
below, is a U.S. holder of the old notes, and who:
(1) purchased the old notes from Mail-Well I Corporation for
cash,
(2) exchanges the old notes for new notes in this exchange
offer, and
(3) holds the old notes and the new notes as capital assets.
The term "U.S. holder" means a beneficial owner of a new note that
is, for U.S. federal income tax purposes,
(1) an individual who is a citizen or resident of the United
States,
(2) a corporation or other entity taxable as a corporation
created or organized in the United States or under the laws
of the United States or of any U.S. state or the District
of Columbia,
(3) an estate the income of which is includable in gross income
for U.S. federal income tax purposes regardless of its
source or
(4) a trust if a U.S. court is able to exercise primary
supervision over the trust's administration and one or more
U.S. persons have authority to control all substantial
decisions of such trust.
This discussion does not purport to deal with the tax consequences
of owning the new notes to all categories of investors, some of which,
such as insurance companies, tax-exempt organizations, financial
institutions, dealers in securities, investors who own 5% or more of our
shares, and investors whose functional currency is not the U.S. dollar,
may be subject to special rules. We advise prospective holders of new
notes to consult their own tax advisors concerning the overall tax
consequences arising in their own particular situations under U.S.
federal, state, local or foreign law of the ownership of the new notes.
FEDERAL INCOME TAX CONSIDERATIONS
This discussion is based on currently existing provisions of the
Internal Revenue Code of 1986, as amended, existing, temporary and
proposed Treasury regulations promulgated under the I.R.C., and
administrative and judicial interpretations of the I.R.C. and the
regulations under it, all as in effect or proposed on the date of this
prospectus and all of which are subject to change, possibly with
retroactive effect, or different interpretations. This discussion does
not address the tax consequences to subsequent purchasers of new notes
and is limited to purchasers who hold the new notes as capital assets
within the meaning of section 1221 of the I.R.C. Moreover, this
discussion is for general information only and does not address all of
the tax consequences that may be relevant to particular registered
holders in light of their personal circumstances, including, for
example, persons subject to the alternative minimum tax provisions of
the I.R.C., or to certain types of initial purchasers, such as certain
financial institutions,
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insurance companies, tax-exempt entities, dealers in securities, persons
holding new notes as part of a hedging or conversion transaction,
straddle or other risk reduction transactions or U.S. expatriates or
persons who have hedged the risk of owning a senior note, and purchasers
whose functional currency is not U.S. dollars. This discussion also
does not address any aspect of foreign, state or local tax law, or U.S.
federal estate and gift tax law.
Holders are urged to consult their own tax advisors as to the
particular tax consequences to them of the exchange, ownership and
disposition of the new notes, including the applicability of any U.S.
federal tax laws or any foreign, state or local tax laws, and any
changes or proposed changes in applicable tax laws or interpretations
of them.
U.S. FEDERAL INCOME TAXATION OF THE EXCHANGE OF OLD NOTES FOR NEW
NOTES
The federal income tax regulations provide that gain or loss is
realized on the sale of property or on the "exchange of property for
other property differing materially, either in kind or in extent."
Treas. Reg. Section 1.1001-1(a).
Earlier this decade, the United State Supreme Court reviewed this
regulation in Cottage Savings Association v. Commissioner, 499 U.S. 554
-------------------------------------------
(1991). In Cottage, a savings and loan association engaged in a series
-------
of purchases and sales of mortgage participation interests. In each
transaction, the taxpayer sold mortgage participation interests to
another financial institution and purchased substantially identical
mortgage participation interests from the other institution. Although
cast as sales and purchases, the holders exchanged mortgage
participation interests. The taxpayer treated the exchanges as
realization events under section 1001 of the I.R.C. and claimed losses.
The I.R.S. sought to disallow the losses on the ground that the
exchanged properties were economically equivalent and thus did not
differ materially within the meaning of Section 1.1001-1(a) of the
regulations.
The Court held that the taxpayer had realized a loss. After
concluding that Section 1.001-1 of the regulations is a reasonable
interpretation of section 1001(a) of the I.R.C., the Court determined
that, because the participation interests exchanged by the taxpayer were
derived from loans made to different obligors and secured by different
homes, the exchanged interests embodied legally distinct entitlements
and therefore were materially different. Thus, the transaction resulted
in a taxable sale or disposition under section 1001 of the I.R.C.
In response to the issues raised by the Cottage decision, and in
-------
an effort to provide certainty, the I.R.S. issued regulations under
section 1001 of the I.R.C. to deal explicitly with the modification of
debt instruments. The regulations define when a modification will be
deemed to be an exchange of the original instrument or a modified
instrument that differs materially either in kind or in extent.
The new regulations are found in Treas. Reg. Section 1.1001-3.
Under the general rule, a "significant modification" of a debt
instrument is treated as an exchange of the original instrument for a
modified instrument that differs materially either in kind or extent.
Modifications that are not significant modifications are not exchanges.
As special tax counsel, Rothgerber Johnson & Lyons LLP has issued
an opinion that the exchange of the old notes for the new notes will not
constitute an exchange as set forth in the regulations. Mail-Well I
Corporation encourages holders of the old notes to refer to the full
text of this legal opinion attached as an exhibit to this prospectus.
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TAXATION OF INTEREST
This discussion assumes that the new notes will be treated as
debt, not equity, for U.S. federal income tax purposes. Interest paid or
accrued on a new note will be taxable to a U.S. holder as ordinary
interest income, generally at the time it is received or accrued, in
accordance with such holder's regular method of accounting for U.S.
federal income tax purposes.
We intend to take the position, which generally will be binding on
all U.S. holders, that the new notes are not issued with "OID," or original
issue discount, for U.S. federal income tax purposes and that no amounts other
than stated interest will be treated as interest. This position is based on
the assumption that the price at which the new notes are sold to the public
will equal their face amount, or will be within the de minimis exception for
OID. This position also is based on the view that the likelihood of the
payment of liquidated damages, as of the date the new notes are issued, is
remote. In the unlikely event that liquidated damages are paid, then such
liquidated damages may be treated as OID, includable by a U.S. holder in income
as such interest accrues, in advance of receipt of any cash payment of such
interest.
SALE, REDEMPTION OR RETIREMENT OF THE NEW NOTES
Upon the sale, redemption, retirement at maturity or other taxable
disposition of a new note, a U.S. holder generally will recognize gain
or loss equal to the difference, if any, between
(1) the sum of cash plus the fair market value of all other property
received on disposition, except to the extent such cash or property
is attributable to accrued but unpaid interest not previously included
in income, which will be taxable as ordinary income, and
(2) the U.S. holder's tax basis in the new note, which is generally its
cost.
Gain or loss recognized on the disposition of a new note generally
will be capital gain or loss and will be long-term capital gain or loss
if, at the time of disposition, the new note had been held for more than
one year. In the case of a U.S. holder who is an individual, the
maximum long-term capital gains rate is 20%.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Information reporting requirements may apply to certain payments
made by a U.S. paying agent or other U.S. intermediary of principal,
premium, if any, and interest on a new note and to proceeds of the sale
or other disposition of a new note. In addition, backup withholding at
the rate of 31% may apply to these payments if a U.S. holder fails to
furnish its taxpayer identification number, which is its social security or
employer identification number, certify that the number is correct, certify
that the U.S. holder is not subject to backup withholding or otherwise comply
with the applicable requirements of the backup withholding rules.
Certain U.S. holders, including corporations, generally are not subject
to backup withholding and information reporting. Recently issued
Treasury Regulations modify some of the certification requirements for
backup withholding. These modifications generally will apply to
payments made after December 31, 1998. Any amounts withheld under the
backup withholding rules from a payment to a U.S. holder generally will
be allowed as a credit against the U.S. holder's U.S. federal income tax
and may entitle the U.S. holder to a refund, provided that the required
information is furnished to the Internal Revenue Service.
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U.S. FEDERAL INCOME TAXATION OF NON-U.S. HOLDERS
The following discussion is limited to the U.S. federal income tax
consequences relevant to a holder of a new note that is not a U.S.
holder. We refer to these holders as "non-U.S. holders."
PAYMENT OF INTEREST ON NEW NOTES
Payment of interest on the new notes to a non-U.S. holder
generally will be exempt from U.S. federal income and withholding tax if
the interest is not effectively connected with the conduct of a trade or
business within the United States by the non-U.S. holder and the
non-U.S. holder:
(1) does not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of Mail-
Well I Corporation;
(2) is not a controlled foreign corporation with respect to
which Mail-Well I Corporation is a "related person" within
the meaning of the I.R.C.; and
(3) certifies, under penalties of perjury, that the holder is
not a U.S. person and provides the holder's name and
address.
SALE, REDEMPTION OR RETIREMENT OF THE NEW NOTES
A non-U.S. holder generally will not be subject to U.S. federal
income tax, and generally no tax will be withheld, with respect to gain
realized on the sale, redemption, retirement at maturity or other
disposition of a new note unless:
(1) the non-U.S. holder is an individual who is present in the United
States for 183 or more days in the taxable year of the sale,
redemption, retirement at maturity or other disposition of the new
note and certain other conditions are met; or
(2) the gain is treated as effectively connected with a U.S. trade or
business conducted by the non-U.S. holder.
WITHHOLDING, REPORTING AND CERTIFICATION REQUIREMENTS
New regulations effective for payments made after December 31,
1999, do not alter the substantive withholding and incorporation
reporting requirements, but unify current certification procedures
regarding withholding, backup withholding and information reporting on
certain amounts paid to persons other than "United States persons"
within the meaning of the I.R.C. Prospective investors should consult
their tax advisors concerning the effect, if any, of these new
regulations on an investment in the new notes.
THE FOREGOING SUMMARY OF UNITED STATES TAX CONSEQUENCES IS BASED
ON THE APPLICABLE UNITED STATES LAW AND REGULATIONS, ADMINISTRATIVE
RULINGS AND PRACTICES OF THE UNITED STATES, ALL AS THEY EXIST AS OF THE
DATE OF THIS PROSPECTUS. THIS SUMMARY DOES NOT DISCUSS ALL ASPECTS THAT
MAY BE RELEVANT TO PROSPECTIVE INVESTORS IN LIGHT OF THEIR PARTICULAR
CIRCUMSTANCES. PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THEIR OWN PARTICULAR CIRCUMSTANCES, INCLUDING
THE APPLICABILITY AND EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS,
ESTATE TAX LAWS AND PROPOSED CHANGES IN APPLICABLE LAWS.
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DESCRIPTION OF OUTSTANDING DEBT
The following descriptions of significant outstanding debt of
Mail-Well I Corporation and Mail-Well, Inc. do not purport to be
complete and are qualified in their entirety by reference to the
provisions of the various agreements and indentures related to the debt,
copies of which may be obtained from Mail-Well I Corporation.
THE CREDIT AGREEMENT
On March 16, 1998, Mail-Well I Corporation entered into a bank
credit agreement and Mail-Well I Corporation's Canadian subsidiary
Supremex, Inc. also entered into a bank credit agreement, in each case
with Bank of America National Trust & Savings Association, which we
abbreviate "BA," acting as administrative agent for a syndicate of
financial institutions. We refer to these agreements collectively as
the "credit agreement." The credit agreement establishes a five year,
unsecured revolving loan facility in the maximum principal amount of
$300 million, of which $100 million in U.S. dollar equivalents may be
borrowed by Supremex in Canadian dollars. The credit agreement also
provides a letter of credit subfacility which Mail-Well I Corporation
has yet to utilize. The subfacility does not increase the maximum principal
amount of the credit agreement. All current and future debt outstanding
under the credit agreement will constitute senior debt.
Borrowings under the credit agreement bear interest at the
applicable margin plus, at Mail-Well I Corporation's option, either:
(1) the base rate, which is the higher of
(a) 50 basis points above the most recently published Federal
Funds Rate, or
(b) BA's most recently published "reference rate"; or
(2) the prime rate, which is the rate publicly announced by Bank
of America Canada in Toronto, Ontario as its "prime rate";
or
(3) offshore rate, which is the quotient of the London Interbank
Offer Rate for deposits in U.S. or Canadian dollars, as
applicable, divided by one minus the regulatory reserve
requirement for Eurocurrency funding.
The applicable margin is fixed at 0.0% for base rate and prime rate
loans, and varies for other loans based on Mail-Well I Corporation's
ratio of consolidated funded debt to EBITDA, each as defined in the
credit agreement. Outstanding borrowings under the credit agreement
currently bear interest at the offshore rate plus an applicable margin
of 0.75%.
The obligations of Mail-Well I Corporation under the credit
agreement are guaranteed by Mail-Well, Inc. and by each of Mail-Well I
Corporation's existing or after-acquired Material Subsidiaries.
Generally, a "Material Subsidiary" is defined as a subsidiary of Mail-
Well I Corporation where:
(1) the subsidiary exceeds 10% of Mail-Well I Corporation's
consolidated assets,
(2) Mail-Well I Corporation's investments in such subsidiary
exceed 10% of Mail-Well I Corporation's consolidated assets,
or
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(3) Mail-Well I Corporation's income from such subsidiary
exceeds 10% of Mail-Well I Corporation's consolidated
income.
The obligations of Supremex under the credit agreement are guaranteed by
Mail-Well, Inc. and Mail-Well I Corporation. The obligations are not
otherwise secured.
The credit agreement contains covenants and provisions that
restrict, among other things, Mail-Well I Corporation and its
subsidiaries' ability to:
(1) incur liens;
(2) dispose of assets outside the ordinary course of business;
(3) effect certain mergers, consolidations or bulk asset sales;
(4) make certain loans or investments, other than investments in
similar businesses that do not otherwise cause a default
under the credit agreement;
(5) incur additional secured debt and certain contingent
obligations;
(6) engage in certain transactions with affiliates;
(7) pay dividends and other distributions on, and make
repurchases or redemptions of, capital stock; and
(8) modify or prepay certain debt and other agreements.
In addition, the credit agreement requires Mail-Well I Corporation to
satisfy certain financial requirements, including:
(A) maintaining a minimum consolidated net worth not less than
the sum of 85% of Mail-Well I Corporation's consolidated net
worth as of September 30, 1997, plus 50% of consolidated net
income through the end of each fiscal quarter after that
date, and 75% of the net proceeds from the sale of equity
securities since that date;
(B) not to exceed a maximum leverage ratio of 3.75 to 1.00,
which ratio may be reduced to 3.25 to 1.00 under certain
circumstances; and
(C) a minimum interest coverage ratio of less than 2.00 to 1.00.
The events of default under the credit agreement include the
following:
* failure to pay interest within three days after it becomes
due;
* failure to pay the principal when due;
* breach of any representation or warranty;
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* failure to perform any covenant or agreement in the credit
agreement, or in some cases only if the failure continues for a
certain period of time;
* certain defaults under other agreements, debts and other
obligations, including certain contingent obligations;
* imposition of certain judgments or decrees against Mail-Well
I Corporation or any subsidiary;
* certain events of bankruptcy, insolvency or reorganization;
* certain violations of the Employee Retirement Income
Security Act;
* certain changes of control of Mail-Well I Corporation; and
other customary provisions.
Mail-Well I Corporation's Supremex subsidiary is also party to an
unsecured term loan directly with BA in Canada. At December 31, 1998,
Mail-Well I Corporation owed $25.5 million under the loan, which matures
in 2003, bearing interest at 6.88%. This term loan will constitute
senior debt under the indenture.
5% CONVERTIBLE SUBORDINATED NOTES
Mail-Well, Inc. has outstanding $152.1 million in aggregate
principal amount of 5% convertible subordinated notes due November 1,
2002. The convertible notes are direct, unsecured obligations of Mail-
Well, Inc. The convertible notes may be converted at the option of the
holder into shares of Mail-Well, Inc. Stock at a conversion price of
$19.00 per share, which is equivalent to a conversion rate of 13.1579
shares per $1,000 principal amount of new notes, subject to adjustments.
The convertible notes are traded on the NYSE under the symbol "MWL 02."
Subject to exceptions, the convertible notes are subordinated to
all current and future senior debt of Mail-Well I Corporation. The
indenture governing the convertible notes defines senior debt as debt of
Mail-Well, Inc. that is not expressly made, by its governing
instruments, subordinate to or of equal rank with the convertible notes.
The convertible notes are also effectively subordinated to all existing
and future debt and liabilities of subsidiaries of Mail-Well, Inc.,
including Mail-Well I Corporation. The convertible notes will be
effectively subordinated to the new notes.
Approximately $147.5 million of the proceeds of the convertible
notes were loaned to Mail-Well I Corporation by Mail-Well, Inc. under a
loan agreement that will be subordinated to the new notes.
The indenture for the convertible notes does not restrict the
amount of senior debt or other debt that may be incurred in the future
by Mail-Well, Inc. or any subsidiary of Mail-Well, Inc.
Mail-Well, Inc. may from time to time reduce the conversion price
of the convertible notes by any amount for any period of at least 20
days, in which case Mail-Well, Inc. must give at least 15 days' notice
of such reduction, if the Board of Directors of Mail-Well, Inc. has made
a determination that such reduction would be in the best interests of
Mail-Well, Inc.
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<PAGE>
<PAGE>
The events of default under the indenture for the convertible
notes include the following:
* failure to pay interest upon any convertible note when it becomes
due and payable, and continuance of such default for a period of 30
days;
* failure to pay the principal of, or premium, if any, on, any
convertible note at its maturity;
* failure to pay the redemption price or the repurchase price when
and as due;
* failure to perform any covenant or agreement in the indenture
for the convertible notes which continues for 60 days after written
notice;
* certain defaults under any mortgage, indenture or instrument of
debt of Mail-Well, Inc. or any of its subsidiaries, or the payment
of which is guaranteed by Mail-Well, Inc. or any of its
subsidiaries;
* imposition of certain judgments or decrees against Mail-Well, Inc.
or any subsidiary;
* certain events of bankruptcy, insolvency or reorganization of Mail-
Well, Inc. or certain subsidiaries.
The convertible notes may be redeemed at the option of Mail-Well,
Inc., in whole or in part, at any time on or after November 1, 2000, at
the redemption prices set forth below, together with accrued and unpaid
interest, if any, to the date of redemption. The redemption price
beginning on November 1, 2000, is 102% of the principal amount; the
redemption price beginning on November 1, 2001, is 101% of the principal
amount; and the redemption price beginning on November 1, 2002 is 100%
of the principal amount.
In case of a "change in control," which means the acquisition of more than
50% of Mail-Well, Inc. Stock by another person, any merger or consolidation
of Mail-Well, Inc. or the sale or conveyance by Mail-Well, Inc. of all or
substantially all of its assets, or in case of a termination of trading
in Mail-Well, Inc. Stock on a national securities exchange, each holder
of convertible notes will have the right, at the holder's option, to
require Mail-Well, Inc. to purchase all or part of the holder's
convertible notes at a redemption price equal to 101% of the principal
amount of the convertible notes, together with accrued and unpaid
interest provided that a change in control shall not be deemed to have
occurred if:
(1) the sales price of Mail-Well, Inc. Stock is at least equal to 110%
of the conversion price, or
(2) at least 90% of the consideration for the change in control
transaction consists of common stock trading on a national exchange
or the over the counter system.
The right to require Mail-Well, Inc. to repurchase convertible notes as
a result of a change in control could have the effect of delaying or
preventing a change in control or other attempts to acquire control of
Mail-Well, Inc. unless arrangements have been made to enable Mail-Well,
Inc. to repurchase all the convertible notes.
In case of any merger or consolidation of Mail-Well, Inc. or the
sale or conveyance by Mail-Well, Inc. of all or substantially all its
assets, the holder of each outstanding convertible note will have the
right to convert the convertible note into the kind and amount of shares
of stock and other securities and property, including cash, received in
such transaction by a holder of the number of shares of Mail-Well, Inc.
Stock into which the convertible note was convertible immediately prior
to the effective date of such transaction.
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<PAGE>
COMPARATIVE CONSOLIDATED HISTORICAL FINANCIAL DATA
The comparative consolidated historical financial data for the
periods ended December 31, 1994, through 1998 are derived from our
audited consolidated financial statements and notes.
Since the information presented below is only a summary and does
not provide all of the information contained in our financial
statements, including the related notes, you should read "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements.
<TABLE>
<CAPTION>
PERIOD FROM
FEB. 24, 1994
(INCEPTION)
THROUGH DEC. 31 YEARS ENDED DECEMBER 31
----------------------------------------------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales $389,262 $758,903 $944,494 $1,073,937 $1,504,686
Costs of sales 302,374 596,359 740,665 834,212 1,185,373
-------- -------- -------- ---------- ----------
Gross profit 86,888 162,544 203,829 239,725 319,313
Selling, administrative and
other 58,870 105,739 133,697 153,897 200,193
Restructuring and other unusual
charge -- -- -- -- 28,922
Merger costs -- -- -- -- 3,318
-------- -------- -------- ---------- ----------
Operating income 28,018 56,805 70,132 85,828 86,880
Interest expense 16,456 33,154 34,869 30,157 38,127
Other (income) expense (991) 152 478 (2,088) (1,036)
Provision for income taxes 3,134 8,118 13,627 22,783 23,948
Extraordinary charge -- 2,412 -- 6,100 4,132
-------- -------- -------- ---------- ----------
Net income $ 9,419 $ 12,969 $ 21,158 $ 28,876 $ 21,709
======== ======== ======== ========== ==========
OTHER DATA:
Ratio of earnings to fixed
charges<F1> 1.7x 1.7x 1.9x 2.6x 2.1x
<CAPTION>
DECEMBER 31
-------------------------------------------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT YEAR END):
Working capital (including cash
and cash equivalents) $ 79,313 $101,305 $ 32,225 $105,442 $ 152,198
Total assets 392,459 582,567 551,986 671,411 1,127,956
Total debt (including current
maturities) 280,606 348,923 258,394 337,152 583,580
Shareholders' equity 43,778 121,999 143,411 171,820 299,375
<FN>
- ----------
<F1> For purposes of computing the ratio of earnings to fixed charges,
earnings consist of income before income taxes plus fixed charges,
other than capitalized interest, and amortization of previously
capitalized interest. Fixed charges consist of interest expense
and debt issuance cost, capitalized interest and that portion of
rental expenses representative of the interest factor, deemed to
be one-third.
</TABLE>
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following should be read in conjunction with the consolidated
historical financial statements and related notes of Mail-Well, Inc. and
its subsidiaries included elsewhere in this prospectus. In addition to
the historical information contained herein, this report contains
forward-looking statements. The reader of this information should
understand that all such forward-looking statements are subject to
various uncertainties and risks that could affect their outcome. Mail-
Well's actual results could differ materially from those suggested by
such forward-looking statements. Factors which could cause or
contribute to such differences include, but are not limited to, the
following:
* product demand and sales growth rate
* ability to obtain assumed productivity savings
* quality controls
* availability of acquisition opportunities and their related
costs
* cost savings due to integration and synergies associated
with acquisitions
* ability to obtain additional financing and bank debt
restructuring
* interest rates
* foreign currency exchange rates
* paper and raw material costs
* waste paper prices
* ability to pass through paper costs to customers
* postage rates
* changes in the direct mail industry
* competition
* ability to develop new products
* labor costs
* labor relations
* advertising costs
This entire prospectus should be read to put such forward-looking
statements in context and to gain a more complete understanding of the
uncertainties and risks involved in Mail-Well's business.
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OVERVIEW, HISTORICAL FINANCIAL DATA BY SEGMENT (IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net sales
Envelopes $ 795,881 $ 709,531 $638,153
Commercial printing 522,801 353,977 306,341
Printing for distributors 113,590 10,429 --
Labels 72,414 -- --
---------- ---------- --------
Total net sales 1,504,686 1,073,937 944,494
---------- ---------- --------
Operating income
Envelopes 88,241 82,212 68,440
Commercial printing 34,519 20,273 15,341
Printing for distributors 8,943 532 --
Labels 4,280 -- --
Corporate (16,863) (17,189) (13,649)
Restructuring and other unusual charge (28,922) -- --
Merger costs (3,318) -- --
---------- ---------- --------
Total operating income 86,880 85,828 70,132
Interest expense (38,127) (30,157) (34,869)
Other income (expense) 1,036 2,088 (478)
Income tax expense (23,948) (22,783) (13,627)
---------- ---------- --------
Income before extraordinary item 25,841 34,976 21,158
Extraordinary item, net of tax benefit (4,132) (6,100) --
---------- ---------- --------
Net income $ 21,709 $ 28,876 $ 21,158
========== ========== ========
</TABLE>
YEAR ENDED DECEMBER 31, 1998, COMPARED TO THE YEAR ENDED DECEMBER 31,
1997
Net sales for 1998 increased 40.1% to $1,504.7 million compared to
net sales of $1,073.9 million for 1997. This increase in net sales was
attributable to sales from companies acquired during 1998, a full year
of sales from companies acquired during 1997 and internal growth in each
segment, offset by declines in the Canadian exchange rate and pricing
declines. Gross profit of $319.3 million for 1998 represents a 33.2%
increase over 1997. Expressed as a percent of net sales, gross profit
decreased by 1.1% to 21.2% for 1998 compared to 22.3% for 1997 primarily
due to the impact of acquisitions. Expressed as a percent of net sales,
selling, administrative and other expense decreased 1.0% to 13.3% in
1998 from 14.3% in 1997 due to efficiency improvements as a result of
the assimilation of acquisitions. Operating income, before
restructuring and other unusual charge and merger costs, of $119.1 million
for 1998 increased 38.8% from 1997 primarily due to acquisitions. See
Note 11 of the Notes to Consolidated Financial Statements.
Earnings for 1998 before extraordinary item and restructuring and
other unusual charge increased 36.0% to $47.6 million from $35.0 million
in the prior year. Earnings per diluted share before extraordinary item
and the effect of the restructuring and other unusual charge increased
14.6% to $0.94 in 1998 from $0.82 in 1997. Due primarily to the effect
of the restructuring and other unusual charge, earnings per diluted
share decreased to $0.45 in 1998 from $0.68 in 1997.
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<PAGE>
YEAR ENDED DECEMBER 31, 1997, COMPARED TO THE YEAR ENDED DECEMBER 31,
1996
Net sales for 1997 increased to $1,073.9 million, 13.7% higher
than net sales of $944.5 million for 1996. This increase in net sales
was primarily attributable to a full year of sales from companies
acquired during 1996 and acquisitions in 1997. Excluding acquisitions,
sales volume increases for 1997 were offset by price declines
attributable to the pass through of lower paper cost and competitive
pressure. Gross profit of $239.7 million for 1997 reflected a 17.6%
increase over 1996. Expressed as a percent of net sales, gross profit
increased by 0.7% to 22.3% for 1997 compared to 21.6% for 1996. This
increase was mainly due to reductions of material cost as a percent of
sales resulting from mix changes and efficiency improvements. Expressed
as a percent of net sales, selling, administrative and other expense
increased 0.1% to 14.3% in 1997 from 14.2% in 1996. Operating income,
expressed as a percent of net sales increased from 7.4% in 1996 to 8.0%
in 1997 primarily due to efficiency gains from assimilation of
acquisitions.
Income before extraordinary item for the year ended December 31,
1997, was $35.0 million, an increase of 65.3% over the same period in
1996. Earnings per diluted share before extraordinary item increased
57.7% to $0.82 for 1997, up from $0.52 for 1996.
RESULTS OF OPERATIONS BY BUSINESS SEGMENT
ENVELOPES
The following table presents historical financial data for the
Envelopes operations of Mail-Well, including acquisitions from their
purchase dates.
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------------------------
1998 1997 1996
---------------- ---------------- ----------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Net sales $795,881 100.0% $709,531 100.0% $638,153 100.0%
Cost of sales 615,590 77.3 543,217 76.6 495,278 77.6
Operating expenses 92,050 11.6 84,102 11.8 74,435 11.7
-------- ----- -------- ----- -------- -----
Operating income $ 88,241 11.1 $ 82,212 11.6 $ 68,440 10.7
======== ===== ======== ===== ======== =====
</TABLE>
Year Ended December 31, 1998, Compared to the Year Ended December 31,
1997
Net Sales. Net sales increased by $86.4 million, or 12.2%, for the
year ended December 31, 1998 compared to the year ended December 31,
1997. The average selling price per thousand units increased 6.5%
to $20.79 for the year ended December 31, 1998, from $19.52 for the year
ended December 31, 1997, due to companies acquired in 1997 and 1998
selling higher value added product. Excluding acquisitions, the average
selling price per thousand units decreased 3.0% in 1998 compared to 1997
due to lower paper costs. Because paper cost changes have historically
been passed through to customers, Mail-Well uses volumes of units sold
and material gross margin, that is, net sales less cost of materials net
of waste recovery revenue, as revenue trend indicators in its envelope
operations. Unit volume increased 5.2% to 38.3 billion units for the
year ended December 31, 1998 from 36.4 billion units for the year ended
December 31, 1997, driven by the impact of acquisitions and internal
growth. Material gross margin per thousand units sold increased 6.7% to
$12.03 for the year ended December 31, 1998 from $11.27 for the year
ended December 31, 1997.
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<PAGE>
<PAGE>
Cost of Sales. Total cost of sales, as a percent of sales,
increased from 76.6% for the year ended December 31, 1997 to 77.3% for
the year ended December 31, 1998, primarily due to the effect of
acquisitions. Cost of sales includes paper net of waste recovery
revenue, labor, depreciation and other manufacturing and distribution
costs. Before the effect of higher cost products from acquisitions,
material cost per thousand units sold decreased 3.2% in 1998 versus 1997
due primarily to lower paper costs. On a per thousand units sold basis,
other manufacturing and distribution costs, excluding the product mix
effect from acquisitions, decreased 2.0% in 1998 compared to 1997.
Inflationary cost increases were offset by efficiency improvements and
volume increases.
Operating expenses. Operating expenses include selling and
administrative expenses. For the year ended December 31, 1998,
operating expenses, as a percent of sales, decreased 0.2% to 11.6% from
11.8% in the prior year due to efficiency improvements as acquisitions
were assimilated in 1998.
Year Ended December 31, 1997, Compared to the Year Ended December 31,
1996
Net Sales. Net sales increased by $71.4 million, or 11.2%, for the
year ended December 31, 1997, compared to the year ended December 31,
1996, due to acquisitions. The average selling price per thousand
units decreased 2.8% to $19.52 for the year ended December 31, 1997,
from $20.08 for the year ended December 31, 1996, due to product
mix changes as a result of acquisitions as well as lower paper costs.
Because paper cost changes have historically been passed through to
customers, Mail-Well uses volumes of units sold and material gross
margin, that is, net sales less cost of materials net of waste recovery
revenue, as revenue trend indicators in its envelope operations. Unit
volume increased 14.5% to 36.4 billion units for the year ended December
31, 1997 from 31.8 billion units for the year ended December 31, 1996,
driven by the impact of acquisitions and internal growth. Material
gross margin per thousand envelopes sold increased 2.5% to $11.27 for
the year ended December 31, 1997, from $10.99 for the year ended
December 31, 1996.
Cost of Sales. Total cost of sales, as a percent of sales,
decreased from 77.6% for the year ended December 31, 1996 to 76.6% for
the year ended December 31, 1997. Cost of sales includes material net
of waste recovery revenue, labor, depreciation and other manufacturing
and distribution costs. Material cost per thousand units sold decreased
9.2% in the year ended December 31, 1997, versus 1996 due primarily to
lower paper costs. On a per thousand units sold basis, other
manufacturing and distribution costs increased 3.1% in the year ended
December 31, 1997 versus 1996, due primarily to inflationary cost
increases offset by efficiency improvements and volume increases, as
well as the product mix effect from acquisitions.
Operating Expenses. Operating expenses include selling and
administrative expenses. For the year ended December 31, 1997,
operating expenses, as a percent of sales, increased 0.1% to 11.8% from
11.7% compared to the prior year, primarily as a result of the decrease
in selling prices. On a per thousand units sold basis, operating
expenses decreased 1.3% in the year ended December 31, 1997 versus 1996,
due to efficiency improvements and assimilation of acquisitions offset
by inflationary cost increases.
COMMERCIAL PRINTING
The following table presents historical financial data for the
Commercial Printing segment, including acquisitions from their purchase
dates. The results also include those of the merged businesses
described in Note 2 to the Consolidated Financial Statements, accounted
for under the pooling of interests method, except that the results of
IPC Graphics have been included with the Printing for Distributors
segment beginning January 1, 1997.
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<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------------------------------------
1998 1997 1996
---------------- ---------------- ----------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Net sales $522,801 100.0% $353,977 100.0% $306,341 100.0%
Cost of sales 415,902 79.6 280,069 79.1 245,192 80.0
Operating expenses 72,380 13.8 53,635 15.2 45,808 15.0
-------- ----- -------- ----- -------- -----
Operating income $ 34,519 6.6 $ 20,273 5.7 $ 15,341 5.0
======== ===== ======== ===== ======== =====
</TABLE>
Year Ended December 31, 1998, Compared to the Year Ended December 31,
1997
Net Sales. Net sales for the year ended December 31, 1998, were
up 47.7% over the year ended December 31, 1997, primarily due to
acquisitions in 1997 and 1998. Without acquisitions net sales were
essentially unchanged, as volume gains in the financial services sector
and advertising literature were offset by declining paper prices.
Cost of Sales. Total cost of sales, as a percent of sales,
increased from 79.1% for the year ended December 31, 1997 to 79.6% for
the year ended December 31, 1998. Cost of sales includes material net
of waste recovery revenue, labor, depreciation and other manufacturing
and distribution costs. Material costs net of waste recovery revenue,
as a percentage of sales, were 35.6% and 34.2% for the years ended
December 31, 1998 and 1997, respectively. This increase is attributable
to material cost increases not passed through to customers due to
competitive pricing pressure. Other manufacturing costs, as a percent
of sales, decreased from 44.9% for the year ended December 31, 1997 to
44.0% for the year ended December 31, 1998. This decline is
attributable to increased web capacity in 1998 versus 1997 as well as
other plant efficiency improvements offset by inflationary cost
increases.
Operating Expenses. Operating expenses include selling and
administrative expenses. For the year ended December 31, 1998, operating
expenses, as a percent of sales, decreased 1.4% to 13.8% from 15.2% in
the year ended December 31, 1997. Operating expenses decreased, as a
percent of sales, due to the assimilation of acquisitions and
consolidation of selling and administrative functions, offset by
inflationary cost increases.
Year Ended December 31, 1997, Compared to the Year Ended December 31,
1996
Net Sales. Net sales for the year ended December 31, 1997
increased 15.5% as compared to sales for the year ended December 31,
1996, primarily due to acquisitions in 1996 and 1997, offset by a 6.9%
decline in sales of the base business. The reasons for the sales decline
of the base business include high turnover in sales staff at the
Portland facility in 1996 resulting in the temporary loss of business
from some significant accounts and the continuing trend of computer
related companies to utilize electronic medium as opposed to printed
manuals. In addition average paper costs declined in 1997 compared to
1996 resulting in approximately a 1.0% decline in sales prices as the
lower cost was passed through to customers.
Cost of Sales. Cost of sales, as a percentage of sales, decreased
to 79.1% for the year ended December 31, 1997, as compared to 80.0% for
the year ended December 31, 1996. Cost of sales includes material net
of waste recovery revenue, labor, depreciation and other manufacturing
and distribution costs. Material costs net of waste recovery revenue,
as a percentage of sales, were 34.2% and 35.7% for
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<PAGE>
the years ended December 31, 1997 and 1996, respectively. This decrease
is attributable to material cost decreases as well as changes in product
mix resulting from acquisitions, which were primarily sheet fed
operations. Other manufacturing costs, as a percent of sales, increased
from 44.3% for the year ended December 31, 1996 to 44.9% for the year
ended December 31, 1997. This increase is attributable to increased
sheet fed production in 1997 versus 1996 as well as inflationary cost
increases.
Operating Expenses. Operating expenses include selling and
administrative expenses. For the year ended December 31, 1997,
operating expenses, as a percent of sales, increased 0.2% to 15.2% from
15.0% in the year ended December 31, 1996. Operating expenses
increased, as a percent of sales, due to the decline in sales prices and
inflationary cost increases.
CORPORATE EXPENSES
Corporate expenses include amortization expense related to
intangibles, administrative expenses and loss or gain on disposal of
assets. Some of our major production equipment is accounted for as an
operating lease on a consolidated basis while treated as a purchase on a
segment level. Mail-Well also classifies the excess of the operating
lease expense over depreciation as a corporate expense in analyzing segment
operations.
Corporate expenses for the year ended December 31, 1998 decreased
1.9% over the year ended December 31, 1997, primarily due to the
increase in gain on disposal of assets of $3.9 million and an excess of
operating lease expense over depreciation of $0.9 million offset by an
increase in amortization expense of $4.5 million. Amortization expense
has increased as a result of the significant number of acquisitions made
in the years ended December 31, 1998 and 1997. Corporate expense for the
year ended December 31, 1997 increased 25.9% over the year ended December 31,
1996 primarily due to an excess of operating lease expense over depreciation,
as the first operating leases were initiated in November 1996.
Restructuring and Other Unusual Charge. In November 1998 Mail-
Well committed to implement a restructuring program affecting the
Envelopes and Commercial Printing segments and recorded a pre-tax
provision of $16.0 million, of which $11.7 million represents non-cash
charges for asset write-offs and impairments. Mail-Well also incurred
$0.8 million of restructuring costs in December 1998 relating to the
relocation of personnel, equipment and inventory which under generally
accepted accounting principles cannot be accrued up front as part of
Mail-Well's restructuring initiative. In October 1998 Mail-Well, Inc.
committed to release all shares of stock held by the leveraged Employee
Stock Ownership Plan, which we abbreviate the "ESOP," to plan participants
and recorded a non-cash, pre-tax charge of $12.2 million. For more
information on these charges please refer to Note 11 of the Notes to
Consolidated Financial Statements.
Merger Costs. Effective May 30, 1998, Mail-Well completed its
mergers with six commercial printing companies and one distributor
company through the exchange of common stock. In connection with the
mergers, transaction costs incurred of $3.3 million were expensed in
1998. These costs consist primarily of investment banking, legal and
accounting fees. For more information on these mergers please refer to
Note 2 of the Notes to Consolidated Financial Statements.
Interest Expense. Interest expense for the year ended December
31, 1998, compared to the prior year increased $8.0 million as a result
of higher average bank debt balances, primarily due to acquisitions,
offset by lower average interest rates resulting from the November 1997
issuance of 5.0% convertible subordinated notes and decreased
amortization of deferred financing costs. Since the
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<PAGE>
proceeds from the 5.0% convertible subordinated notes were used to repay
debt for which a major portion of the deferred financing costs were
incurred, amortization of deferred financing costs decreased $1.4
million in 1998 compared to 1997.
In November 1996, Mail-Well I Corporation and some of its
subsidiaries entered into a five-year accounts receivable securitization
agreement by which Mail-Well I Corporation can sell, on a revolving
basis, an undivided percentage ownership interest in a designated pool
of accounts receivable up to a maximum of $100.0 million. At December
31, 1998, 1997 and 1996 $52.6, $72.0 and $71.0 million, respectively,
had been sold under this agreement. Interest expense for the year ended
December 31, 1997, decreased $4.7 million from 1996 primarily as a
result of lower average bank debt balances as well as a decrease in
amortization of deferred financing costs resulting from the early
retirement of debt.
Income Taxes. The effective tax rate for all periods was higher
than the federal statutory rate due to state and provincial income taxes
and certain goodwill amortization and a major portion of the leveraged
employee stock ownership plan contribution that are not tax deductible.
The effective tax rate also reflects the impact of merging various
commercial printing companies that had elected nontaxable status prior
to the mergers on May 30, 1998. See Notes 2 and 9 of the Notes to
Consolidated Financial Statements. For 1999 Mail-Well expects its
effective tax rate to be approximately 41.0%.
LIQUIDITY AND CAPITAL RESOURCES
HISTORICAL CASH FLOW
Net cash flow provided by operating activities was $93.1 million,
$94.4 million and $95.3 million for the years ended December 31, 1998,
1997 and 1996, respectively. Acquisitions required cash payments of
$351.6 million, $82.9 million and $64.3 million for the years ended
December 31, 1998, 1997 and 1996, respectively. Other investing
activities include capital expenditures which were $87.3 million, $36.8
million and $22.0 million for the years ended December 31, 1998, 1997
and 1996, respectively. The capital expenditures were offset by the
proceeds of $9.7 million, $1.8 million and $35.4 million from the
disposal of assets for the years ended December 31, 1998, 1997 and 1996,
respectively, including $30.0 million in 1996 from an equipment
sale/leaseback transaction. Net cash flow from financing activities
was negatively affected by the decrease in receivables sold under the
securitization agreement at December 31, 1998, of $19.4 million
compared to December 31, 1997. Net cash flow from financing activities
in 1996 was positively impacted by the $71.0 million sale of accounts
receivable under the securitization program initiated in November 1996
offset by the increase in receivables sold of $9.5 million.
At December 31, 1998, Mail-Well I Corporation had approximately
$207.0 million of available credit under the $300.0 million Bank of
America credit facility. In addition, at December 31, 1998, Mail-Well I
Corporation had sold $52.6 million of receivables under the $100.0
million securitization facility.
DEBT OBLIGATIONS
In November 1998, Mail-Well I Corporation issued the old notes,
the net proceeds of which were used to legally extinguish the $85.0
million of 10 1/2% senior subordinated notes and repay a portion of the
Bank of America unsecured credit facility. In March 1998, Mail-Well I
Corporation closed a new five-year unsecured line of credit for up to
$300.0 million with Bank of America, the lead agent for a syndicate of
banks, at an interest rate of LIBOR plus a margin based on Mail-Well I
Corporation's
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<PAGE>
leverage ratio. In November 1997, Mail-Well, Inc. issued $152.1 million
of convertible subordinated notes due in 2002 with interest payable at
5% per annum. The notes are convertible at the option of the holder at
any time into shares of Mail-Well, Inc.'s common stock at a conversion
price of $19.00 per common share. Proceeds were used to pay off
outstanding amounts on a revolving credit facility and a bank term loan
and these facilities were canceled. Concurrently, Supremex, Mail-Well I
Corporation's Canadian subsidiary, signed an unsecured demand note with
a bank for $60.0 million at an interest rate of LIBOR plus 0.75% per
annum. These proceeds were used to pay off Supremex's outstanding term
loan which was also canceled. The demand note was subsequently replaced
by the bank credit agreement and a term loan with the same bank.
SECURITIES OFFERINGS
On November 13, 1997, Mail-Well, Inc.'s shelf registration
statement on Form S-3 was declared effective by the Securities and
Exchange Commission. The shelf permits Mail-Well, Inc. to issue up to
$300.0 million in debt securities, common stock, preferred stock or
warrants over the two-year period following the effective date. The
convertible subordinated notes were issued under the shelf registration
statement and, in February 1998 Mail-Well, Inc. raised $90.7 million in
net proceeds from the sale of its common stock off of the shelf through
a group of underwriters. Proceeds were used for general corporate
purposes. At December 31, 1998, there was availability to issue another
$52.0 million of securities under the shelf registration statement.
CAPITAL REQUIREMENTS
Mail-Well estimates that, based on current utilization of its
equipment and expected volume growth at existing businesses it will
spend $65.0 to $70.0 million per year on capital expenditures. This is
in addition to the capital expenditures required for systems upgrades as
discussed below under "--Year 2000."
INFLATION
The effects of inflation have not been material to Mail-Well.
However, due to the competitive nature of its business, it may not
always be able to pass on inflationary cost increases in the future.
FOREIGN CURRENCY
The effects of foreign currency exchange have not been material to
Mail-Well to date. With the strengthening U.S. Dollar, Mail-Well's
foreign currency exposure currently relates to its Canadian operations.
The average Canadian Dollar exchange rate was 0.674, 0.723 and 0.734 USD
for the years ended December 31, 1998, 1997 and 1996, respectively.
The Canadian Dollar exchange rate at December 31, 1998 was 0.648 USD.
Net sales provided by the Canadian operations for the years ended
December 31, 1998, and 1997 was USD $154.5 million and USD $115.3
million, respectively.
SEASONALITY AND ENVIRONMENT
The effects of seasonality and environmental matters had no
material financial impact on the historical operations of Mail-Well and
are not expected to have a material effect on Mail-Well's liquidity and
capital resources.
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<PAGE>
RECENT DEVELOPMENTS
The following developments have occurred since December 31, 1998.
ACQUISITIONS
On February 2, 1999, Mail-Well acquired Colorhouse, Inc., a pre-
press company located in Minneapolis, Minnesota, with approximate annual
sales of $20.7 million. On February 4, 1999, Mail-Well acquired Hill
Graphics, a sheetfed commercial printer located in Houston, Texas, with
approximate annual sales of $20.5 million. On March 16, 1999, Mail-Well
announced an offer to purchase all of the shares of Porter Chadburn plc,
a label manufacturing company located in Great Britain, with approximate
annual sales of $125.1 million. Mail-Well expects to close the purchase
during the second quarter of 1999.
POSTAL RATE INCREASE
On January 10, 1999, the U.S. Postal Service increased rates for
the first time in nearly four years. The average increase was 2.9% for
all types of domestic mail. Management does not believe the new rates
will negatively affect mail volume.
YEAR 2000
Mail-Well completed an assessment of its existing computer systems
in 1997 and expects to spend and capitalize approximately $9 to $11
million through 1999 to purchase and install new systems. The new
systems are capable of distinguishing between the year 1900 and the year
2000. Mail-Well is also conducting an evaluation of actions required to
ensure its remaining business critical computer systems will not be
disrupted with respect to dating in the year 2000. Mail-Well has
completed or is engaged in the process of updating, replacing and
testing certain of its computer systems so as to operate without
disruption due to year 2000 issues. These actions are scheduled to be
completed through the third quarter of 1999 and, based on current
information available, Mail-Well does not anticipate the costs of
remedial actions, which are being expensed as incurred, will be
material. Since there can be no assurance that remedial actions can be
completed on a timely basis contingency plans will be developed by the
third quarter of 1999 to address business critical systems which may not
be year 2000 compliant.
All business critical vendors and customers have been identified
and contacted for information on their actions to mitigate year 2000
disruptions. Mail-Well is in the process of evaluating information
supplied to date and contacting those who have not responded to our
inquiries. If year 2000 issues of our business critical vendors and
customers are not addressed satisfactorily, there could be a disruption
in our business that may cause a decline in earnings. These theoretical
consequences are of a kind and magnitude not unique to Mail-Well, but
are generally shared with other manufacturing companies. Contingency
plans will be developed by the third quarter of 1999 to address year
2000 issues related to our business critical vendors and customers.
Although there is inherent uncertainty with respect to these year 2000
issues, particularly with respect to the year 2000 readiness of our
vendors and customers, at this time management does not believe that
Mail-Well's business will be materially affected by year 2000 issues.
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NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities. The statement, which will
be effective for the year 2000, requires derivative instruments to be
recorded in the balance sheet at their fair value with changes in fair
value being recognized in earnings unless specific hedging accounting
criteria are met. Although Mail-Well I Corporation believes it has a
minimal current level of hedging and derivative activity, it has not
determined the impact of this statement on its operations and financial
position.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Mail-Well is exposed to market risks, including foreign currency
and interest rate risks. The foreign currency risk for foreign currency
denominated debt obligations, which totaled US$25,461,000 at December 31, 1998,
and the interest rate risk for the investment in accounts receivable
securitization, which totaled $41,669,000 at December 31, 1998, are not
considered to be significant since the fair values and carrying values are not
material to Mail-Well's financial position. Mail-Well's cash flows from
operations and earnings are affected by changes in short-term interest
rates since a large portion of its credit agreements includes rates
variable with LIBOR. As of December 31, 1998, $93 million of variable
rate debt was outstanding. The fair value of Mail-Well's fixed rate
long-term debt is affected by changes in long-term interest rates.
If LIBOR were to increase 1% from the rate at December 31, 1998,
and Mail-Well borrowed the maximum amount available under its variable
rate debt, $320 million, Mail-Well's interest expense would increase
and income after income taxes would decrease by approximately $2.0
million. The marginal income tax rate of 38.5% was used. This analysis
does not consider the effects of the reduced level of overall economic
activity that could exist in such an environment. Further, in the event
of a change of such magnitude, management would likely take actions to
further mitigate its exposure to the change. For example, in November
1998, Mail-Well paid down its variable rate debt with proceeds from
fixed rate debt to manage its interest rate risk. However, due to the
uncertainty of the specific actions that would be taken and their
possible effects, the sensitivity analysis assumes no changes in Mail-
Well's financial structure.
If the interest rates were to decrease 1%, the fair value of Mail-
Well's fixed rate debt, excluding other long-term debt, $457.4 million
at December 31, 1998, would decrease by approximately $25.3 million.
The fair values were determined based on the discounted values of their
related cash flows. The sensitivity analysis does not consider the
impact of changes in Mail-Well's stock price on the fair value of its
convertible subordinated notes or the conversion of the convertible
debt. The change in other long-term debt is immaterial to Mail-Well's
financial position.
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<PAGE>
BUSINESS
We are a leading consolidator in the highly fragmented printing
industry, competing in the following market segments:
* Envelopes
* Commercial Printing
* Printing for Distributors
* Labels
Since our inception in February 1994, we have completed 44
acquisitions in the printing industry, for purchase prices ranging from
$2.5 million to $97.4 million. We are the largest printer and
manufacturer of envelopes in the United States and Canada and one of the
leading commercial printers in the United States. We are also the
largest printer of custom business documents for the distributor market
in the United States and a leading printer of glue-applied paper labels
for the food and beverage industry. We currently operate 100 printing
facilities throughout North America, serving over 40,000 customers.
We believe that we have competitive advantages in the printing
industry, including the ability to:
* use our network of strategically located plants and sales
offices to attract customers that require production from
multiple locations;
* realize cost savings as a result of volume related purchases
of paper, ink and other raw materials;
* reduce overhead expense by consolidating most administrative
functions for insurance, employee benefits and financial
management;
* increase profitability by optimizing equipment use among
facilities;
* offer customers greater flexibility in meeting their needs
due to more available capacity and equipment capabilities;
and
* combine the responsiveness of a local or regional facility
with the resources of a large national company.
Please refer to Note 12 of our consolidated financial statements
included elsewhere in this prospectus for additional information
concerning our operating and geographic segments.
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<PAGE>
GROWTH STRATEGY
Our objective is to continue to increase our cash flows and
profits, and to maximize shareholder value, through acquisitions and an
operating strategy that enhances operating leverage and achieves cost
efficiencies. The key elements of our strategy include:
BROAD RANGE OF QUALITY PRODUCTS AND SERVICES
We have chosen to operate in areas of the printing industry in
which we believe we can capture a larger share of our customers'
business by offering a broad array of high quality products and
services, cost-effective distribution, advanced technological
capabilities and competitive pricing. We intend to continue to increase
our services and expand our geographic presence in order to provide our
customers a full range of digital archiving, prepress, printing and
print management needs. Our commitment to quality, combined with our
broad range of services offered, has formed the basis for deepening our
long-standing customer relationships. As a result of our diverse
product mix, geographic presence and reputation for quality, we have
been able to attract new customers as well as capture incremental sales
from existing customers.
STRATEGIC ACQUISITIONS
We believe that the industry is highly fragmented and presents
significant opportunities for consolidation. Our growth strategy
includes the acquisition of established and profitable printing
businesses in markets with attractive growth opportunities. We seek
acquisition targets with strong management infrastructures and
opportunities to increase operating efficiencies as well as to expand
our customer base, presence in geographic areas and product lines. Our
management team has extensive experience in identifying attractive
acquisition targets and integrating acquired businesses into our
operations.
OPERATING LEVERAGE
We believe that we will continue to realize cost savings as a
result of volume related purchases of paper, ink and other raw materials
used in the printing process. As we acquire additional businesses in
each of our market segments, we believe we will be able to leverage
these cost structures to realize additional savings. We have also
achieved cost savings through the consolidation of insurance
administration, financial management and other administrative functions.
We believe that by continuing to centralize administrative and support
functions the management of our operating subsidiaries and businesses
acquired in the future will be able to focus on pursuing new customers
and business opportunities and increasing capacity utilization.
OPERATING EFFICIENCIES
We believe that there are opportunities to eliminate redundant
facilities and equipment by consolidation or through coordination among
our current operations as well as operations to be acquired in the
future. We periodically review our operations at the local, regional
and national operating levels, as well as examining other industry
practices, in order to identify "best practices" that can be
standardized and implemented throughout our operations.
NATIONAL SALES AND MARKETING PROGRAM
We have established a sales and marketing program targeting
national accounts as a means to expand our printing businesses. This
program allows us to both utilize our current network of strategically
located plants and sales offices to attract new customers that require
production from multiple locations, as well as to increase sales to
existing customers by offering greater flexibility in meeting their
product needs due to more available capacity and equipment capabilities.
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<PAGE>
INTERNAL SALES GROWTH
A component of our strategy is to accelerate internal sales growth
for all of our printing segments. The key elements of our internal
growth strategy include the expansion of the products and services sold
to existing customers and the addition of new customers. We believe
that we have the ability to combine the responsiveness of a local
facility with the full service advantages of a large national company.
We intend to increase growth in each of our regions by adding
manufacturing facilities to expand our product offerings and complement
our product lines on a regional basis. By targeting markets in which we
believe there is demand for additional product lines, we believe we may
be able to achieve significant internal growth.
THE PRINTING INDUSTRY
The printing industry is one of the largest and most fragmented
industries in the United States with total estimated 1997 sales of $142
billion among an estimated 52,000 printing businesses, according to the
Printing Industries of America, Inc. The printing industry includes
general commercial printing, financial printing, printing and publishing
of books, newspapers and periodicals, quick printing and production of
business forms and greeting cards. Due to the fragmented nature of the
printing industry, we believe an abundance of acquisition opportunities
exist. The printing industry is characterized by a significant number
of locally oriented, privately held businesses, many of which are viable
acquisition candidates. Owners of these independent companies are often
motivated to sell their printing businesses to access the financial
capital and other operating strengths we have to offer to grow the
business, increase their personal financial liquidity or facilitate
retirement. Moreover, by consolidating independent companies we expect
to achieve the substantial economies of scale of a large multi-plant and
geographically diverse organization.
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<PAGE>
ACQUISITIONS
Mail-Well, Inc. commenced operations in February 1994 with the
acquisition of the Mail-Well envelope division of Georgia Pacific and
Pavey Envelope and Tag Corp. From 1994 to 1997 we made 12 acquisitions
in the envelope and commercial printing segments. During 1998, we
completed the following 30 acquisitions in various printing segments:
<TABLE>
<CAPTION>
Company Location Date Segment Revenues<F1>
- ------- -------- ---- ------- ------------
<S> <C> <C> <C> <C>
Poser Business Forms, Inc. Fairhope, Alabama January Distributor $ 90
Rono Graphic Communications Co. Portland, Oregon March Commercial 12
Lawson Mardon Label Division Toronto, Ontario March Labels 81
Denver Forms Company Denver, Colorado March Distributor 12
National Graphics Company Denver, Colorado March Envelopes 8
EPX Denver Denver, Colorado March Distributor 4
Blue Line Envelope Montreal, Quebec April Envelopes 6
South Press, Inc. Dallas, Texas April Commercial 12
Century Index Corporation Anaheim, California May Envelopes 8
Label Division, IP Paper Bowling Green, Kentucky May Labels 30
Anderson Lithograph Los Angeles, California May Commercial 135
Color Art, Inc. St. Louis, Missouri May Commercial 76
Accu-color, Inc. St. Louis, Missouri May Commercial 14
Industrial Printing Company Toledo, Ohio May Commercial 20
IPC Graphics, Inc. Toledo, Ohio May Distributor 11
United Lithograph, Inc. Somerville, Mass. May Commercial 21
French Bray, Inc. Glen Burnie, Maryland May Commercial 23
Clarke Printing Co. San Antonio, Texas May Commercial 11
Illinois Envelope, Inc. Kalamazoo, Michigan June Envelopes 7
Gould Packaging, Inc. Vancouver, Washington June Envelopes 14
Graphics Illustrated, Inc. West Palm Beach, Florida August Commercial 11
McLaren, Morris and Todd Ltd. Mississauga, Ontario August Commercial 34
John D. Lucas Printing Co. Baltimore, Maryland August Commercial 27
Armstrong-White, Inc. Bloomfield Hills, Michigan August Commercial 2
Richtman Printing Englewood, Colorado Sept. Commercial 6
Production Press, Inc. Jacksonville, Illinois Sept. Commercial 9
APICO Corp. and Perfection Forms Girard, Kansas October Distributor 20
Trafton Printing, Inc. Amarillo, Texas October Commercial 9
Imperial Litho & Dryography Phoenix, Arizona Nov. Commercial 26
----
Total $739
<FN>
- ----------
<F1> Represents most recent revenues in millions for the full twelve-
month period for which financial information was available
immediately preceding the acquisition as provided to Mail-Well,
Inc. by the respective sellers and may not be indicative of
revenue generated or to be generated following the date of
acquisition. In many cases, these estimated revenue amounts were
not derived from audited financial statements and may not coincide
with the revenue generated by the acquired business for a full
fiscal year prior to the date of acquisition. The information
relating to estimated revenue prior to the date of acquisition set
forth above is presented solely for the purpose of providing
information with respect to the relative sizes of the businesses
acquired and is not intended to depict information relating to
profitability or cash flow.
</TABLE>
On February 2, 1999, Mail-Well acquired Colorhouse, Inc., a pre-
press company located in Minneapolis, Minnesota, with approximate annual
sales of $20.7 million. On February 4, 1999, Mail-Well acquired Hill
Graphics, a sheetfed commercial printer located in Houston, Texas, with
approximate annual sales of $20.5 million. On March 16, 1999, Mail-Well
announced an offer to purchase all of the shares of Porter Chadburn plc,
a label manufacturing company located in Great Britain, with approximate
annual sales of $125.1 million. Mail-Well expects to close the purchase
during the second quarter of 1999.
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<PAGE>
Please refer to Notes 2 and 3 of our consolidated financial
statements included elsewhere in this prospectus for additional
information concerning our acquisitions.
PRODUCTS
ENVELOPES
The approximately $3.2 billion United States and Canadian envelope
market is divided into two primary segments:
(1) the consumer direct segment, which consists of customized
conventional and specialty envelopes and packaging products sold
directly to end users or to independent distributors who sell to
end users,
(2) the wholesale segment, which consists of envelope and other products
sold to wholesalers, paper merchants, printers, brokers, office product
establishments and superstores.
In the consumer direct segment, we offer printed customized
conventional envelopes to direct mail marketers and other end-users,
such as banks, brokers and credit card companies. We have focused a
significant part of our marketing efforts on the direct mail market and
have developed envelopes with assorted features such as vivid graphics,
multiple colors, various closures, and interactive devices such as pull-
tabs, scratch-offs, perforations and three-dimensional viewing devices.
These customized features are designed to catch the attention of the
recipient, and therefore increase responses to the solicitation. By
doing so, these envelopes are more valuable to our direct mail customers
who are therefore willing to pay the higher cost of producing them.
We also compete in the wholesale segment, particularly in the
office products market. Through our Quality Park Products and Murray
Envelope divisions, we manufacture and print a broad line of custom
envelopes, which are featured in national catalogs for the office
products market or offered through office products retailers, including
contract stationers.
We sell the following envelope products:
* Customized Conventional Envelopes
* Specialty Envelopes and Packaging Products
* Commodity Oriented Products
* Two-Way Envelopes
For the fiscal year ended December 31, 1998, customized
conventional envelopes accounted for approximately 64.9% and commodity-
oriented products accounted for approximately 20.3% of the envelope
segment's net sales, respectively.
COMMERCIAL PRINTING
Our commercial printing group was recently formed by the
combination of our High Impact Color Printing Division, which was formed
with the acquisition of Graphic Arts Center in 1996, and the General
Commercial Printing Division, which was formed in May 1998 with the
simultaneous merger of six geographically dispersed commercial printing
businesses. This group produces a wide range of printing, from premium
color printing requiring sophisticated graphic design techniques to more
commonplace printed materials. We consider each of our commercial
printers to be a market leader in the geographic area it serves.
The group prints virtually every type of product in the commercial
market including:
* Advertising Literature * High-end Catalogs
* Annual Reports * Calendars and Posters
* Brochures * Manuals
* Catalogs * Financial Printing
* Advertising Circulars * Point of Purchase Displays (POPs)
* Maps * Direct Mail
* Magazines * Greeting Cards
* Web In-line Products
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The commercial printing group offers a wide range of commercial
printing services to its customers, including electronic pre-press,
digital archiving, direct-to-plate technology and high-speed web and
sheet-fed presses.
PRINTING FOR DISTRIBUTORS
This division, which was acquired in 1998, prints a diverse line
of custom products addressing the business document needs of small and
medium-sized end users. This is a market made up of businesses with
generally less than 500 employees and average annual purchases of
business forms of between $5,000 and $200,000. These products include
both traditional and specialty products, many of which are targeted for
non-impact laser applications designed to meet the desktop needs of the
end-user, as well as the growing use of minicomputers and local area
networks.
* Custom Continuous Forms--forms printed from a continuous
roll of paper
* Snap-a-Parts--designed for quick separation
* Very Short Run, or "VSR" Forms--produced in small quantities:
500 to 10,000 units
* Mailers--continuous forms with glued margins and custom
carbon or carbonless coatings
* Cut Sheets--forms primarily used in non-impact laser
printers
* Labels and Label Forms--made of paper or film and
temporarily affixed to carrier sheets with pressure
sensitive adhesive
We also offer the following specialized products:
* VersaSeal(TM)--This is a proprietary print-to-mail system
that allows the user to print data on a single ply cut sheet
form that is then folded and sealed automatically so that
the form becomes an outgoing envelope. We offer stand alone
and desktop folders that also seal the form. Applications
include checks, notices, packing slips, invoices, grade
reports and transcripts. These forms may also be used for
smaller, customized direct mail advertising campaigns.
* High-Color/Offline Finishing--High-color, or web, products
are typically forms that are printed in larger quantities
with multiple colors. They are printed on our heat set web
offset presses. Offline finishing features include foil
stamping, embossing, die cutting and other processes which
enhance the design, security and effectiveness of the
product. Their main application is in marketing and sales,
including direct mail.
LABELS
In 1998, we acquired substantially all of the assets of the North
American paper label division of Lawson Mardon Packaging, a leading
supplier of glue-applied labels to the North American food and beverage
markets. We operate this division under the name "Mail-Well Label."
Mail-Well Label is one of the largest suppliers in the $6.5 billion
North American label printing market. It currently operates
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<PAGE>
five production facilities, two in Canada and three in the United
States, producing glue-applied labels primarily for the food and
beverage markets.
The primary function of a label is to decorate a container such as
a metal can, glass container or plastic bottle or jar. The label plays
a key role in creating a brand image and in communicating product
information. Glue-applied labels are typically printed for application
to various container formats by customers or third party packing
operations. These products are generally divided into two categories:
conventional labels and premium labels.
* Conventional Labels. Conventional labels are typically
offset printed in up to 7 colors on coated one sided paper
with standard press varnishes and either square cut or die
cut into other simple shapes. Conventional labels are then
applied to food and beverage containers by the customer.
* Premium Labels. Premium labels are typically characterized
by superior print fidelity, often in 8 or more colors,
unique or specialty substrates, high gloss or matte
coatings, and specialized finishes such as embossing, foil
stamping and tailored die-cut shapes.
SERVICES
We believe that the success of all of our printing businesses is
largely due to our emphasis on customer responsiveness and service. Our
sales force works closely with customers from product design to
delivery. Most of our products are made to customer specifications. We
also offer our customers related services, such as digital archiving,
flexible "just-in-time" delivery programs, warehousing, inventory
management systems and electronic communications systems. We have a
large number of customers across diverse geographic and product markets.
Many of our customers have been supplied by Mail-Well, Inc. or its
predecessors for over ten years.
We provide the following services to our customers:
* Prepress. The traditional design phase typically requires
us to set type, incorporate customer-submitted graphics,
photograph the artwork, develop the negative and prepare a
plate from which to print.
* Electronic Prepress. This is a fully automated electronic
process which allows the customer to submit its artwork and
other data in digital format, either on a diskette or via
modem, or in hard copy that can be computer-scanned. We can
then manipulate the image, prepare color separations and
edit the design on a computer to create the negative from
which the printing plate is made. Electronic prepress
greatly reduces the time and the number of people involved
in the production of plates, and we believe that we are an
industry leader in fully automated electronic prepress
operations.
* Digital Archiving. We allow customers to store digitally
rendered artwork on our file servers. The artwork can then
be accessed and retrieved either at the plant during the
prepress stage, or from a remote site via high speed
transmission during the design stage.
* Delivery Systems. We offer a flexible "just-in-time"
delivery program. This program allows customers to receive
their products just prior to when they are needed.
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<PAGE>
* Warehousing Services. A customer will often place an order
for significantly more envelopes than it may need at the
time. When this occurs, we offer to store the finished
product and drop-ship the envelopes on an "as-needed" basis.
* Inventory Management Systems. We offer this service
primarily to large national organizations with centralized
purchasing and supply departments that service multiple
locations. We facilitate order processing by giving
customers information on usage by item and/or available
supply in our warehouses and provide for summary billing.
* Electronic Data Communications Interface, or "EDI". EDI is a
direct computer link between customers and our plant which
allows customers to send orders electronically. This allows
streamlining of the order process, which in turn allows for
quicker order delivery and more efficient and accurate
communications with our customers. EDI also allows
customers to make payments electronically.
Our goal is to offer the highest standards in meeting our printing
customers' needs with our primary focus on responding quickly and
competitively to customer demands and requirements. Many of our
production facilities are open 24 hours a day, seven days a week, to
allow for timely production of materials. At some facilities we also
offer a number of unique services to our customers such as complimentary
transportation between the airport and our offices, in-plant overnight
accommodations, on-site meeting rooms and lounge, travel and hotel
arrangements and computers for use by the customers when on-site.
At some of our advanced printing facilities we offer digital
direct-to-plate technology, which eliminates the production of film and
several manual functions in the platemaking process. This technology
offers a complete digital workflow, providing a better printed product
with faster turn around without additional cost.
We believe that the ongoing consolidation of the printing industry
is being driven in part by the rapid pace of technological change.
Recent advances in computer-based prepress equipment, for example, now
enable printers to output plate-ready film directly from digital files,
allowing for faster and more precise manipulation of images and text
prior to printing. Similarly, recent advances in photo imaging
technology have greatly increased the quality of the final image
produced in the printing process. These advances have increased the
capital requirements for maintaining technologically advanced equipment.
We believe that many smaller local and regional commercial printers will
find it increasingly difficult to obtain adequate financial resources to
remain competitive in the segments of the commercial printing market in
which we operate.
MARKETING AND DISTRIBUTION
ENVELOPES
As a result of the wide array of applications, customer
preferences and order sizes, our envelope marketing and advertising
efforts vary significantly among markets and by region. We believe that
our customer responsiveness and service have resulted in the long-term
retention of a significant number of our customers. Although our
marketing efforts have traditionally been local or regional, we continue
to emphasize a more focused national account program to attract
customers whose needs are national or cover multiple regions.
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<PAGE>
We market the majority of our envelopes and packaging products
through sales representatives, who generally work with customers from
the initial product design stage through product delivery to ensure that
finished products meet the customers' applications and marketing needs.
Our sales representatives are the primary points of contact for
customers in the consumer direct market segment. Accordingly, our goal
is to retain an experienced, well-qualified sales force by providing
appropriate training and competitive compensation. Compensation is
typically either salary plus commission or straight commission depending
on several factors including customer size and type, plant location and
order size. Our plans call for increased coordination among regions,
which will help us to compete for national account business, enhance the
internal dissemination of successful new product ideas, efficiently
allocate our production equipment, share technical expertise and
increase company-wide selling of specialty products manufactured at
selected facilities.
Products not marketed by our own sales force are sold through
distributors to better serve selected wholesale markets, geographic
regions without direct sales representation and certain specialty
markets, including the medical and photo finishing packaging markets.
Our office products sales staff attends trade shows to market products.
These products are also featured in national catalogs produced for the
office products market.
COMMERCIAL PRINTING
The vast majority of commercial printing is sold through sales
representatives, the exception being occasional "house" or company
accounts. Our sales representatives work closely with customers from
the initial concept through prepress, proofing and finally the press
run. Because our sales representatives are our primary contacts with
our customers, our goal is to attract, train and retain an experienced,
qualified sales force in the commercial printing group. Sales
representatives are typically compensated by straight commission.
Commissions generally depend on such factors as order size, prepress
work, reruns or rework and overall profitability of the job.
The group's marketing efforts differ between two broad product
areas: high impact color products, such as auto brochures, annual
reports and high end catalogs, and general commercial work. We market
high impact printing primarily on a regional basis, through sales
representatives working out of sales offices across the United States.
Our customers include Fortune 500 companies, graphic designers and
advertising agencies. We maintain one of the largest sales staffs in
the industry dedicated to marketing to and through the graphic design
community. This sales staff represents the primary point of contact for
many customers and reinforces our policy of providing the highest level
of customer service possible.
Because of the fragmented nature of the commercial printing
business, and the wide array of customer needs and preferences, we
market general commercial printing locally. Each of our commercial
printing facilities is a leader in their respective commercial printing
markets. Our sales efforts vary by market, but typically our sales
representatives work closely with our design, prepress and pressroom
teams to implement the customer solutions we offer. We believe that our
customer responsiveness, combined with our state of the art facilities,
distinguish us from our competitors in the commercial printing markets
we serve. We also believe that our ability to cross sell throughout the
commercial printing group products and services that have not been
available to our local plants will enhance our leadership position in
these markets.
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We believe that the level of quality and customer service that we
provide is well-suited for buyers in these market segments who require
superior printed materials to complement the quality and features of
their products, services and corporate images. We serve a broad base of
customers, including manufacturers, retailers, service organizations and
advertising agencies. Due to the project-oriented nature of the
commercial printing industry, sales to particular customers may vary
significantly from year to year depending upon the number and size of
their projects.
PRINTING FOR DISTRIBUTORS
We sell custom printed business documents through 83 sales service
representatives to over 7,000 independent distributor customers located
throughout the United States. These distributors resell the products to
hundreds of thousands of end users.
We believe that the key to a successful sales and marketing effort
in this segment is maintaining frequent contact with our distributor
customers. Account development is driven through the use of written
sales plans that profile targeted distributors for sales development.
Our sales plans provide for a coordinated approach in developing
accounts with specific roles and responsibilities within the sales
organization. We have made a strong commitment to direct and
personalized marketing to both existing and potential distributor
accounts. This strategy is different from that of the majority of
distributor manufacturers who primarily market using direct mail.
Sales service representatives and telemarketing representatives
are located at each plant to assist specifically assigned customers and
new prospect development. Sales office managers co-ordinate the
activities of sales service representatives and monitor customer
interaction. National account managers have responsibility for
developing new "key accounts," providing distributor education,
attending industry trade shows, and maintaining and developing business
relations. Call schedules and reports are automated on each national
account manager's laptop computer and disseminated to the division in
which a lead is generated. Senior management actively maintains an
ongoing relationship with our largest accounts as well as those that
indicate the most opportunity for growth.
LABELS
We market our label printing through a sales force that is
specialized according to product lines and geographic coverage, and is
supported by a team of customer service representatives located at each
plant. The sales and marketing function is organized into national and
regional teams. The sales force is supported by a technical service
team which provides customers with highly customized label solutions.
All of our label printing facilities have Customer Service
Representatives, or CSR's, that work with the sales team and the customers
to manage orders efficiently and effectively. In some cases, the
customer service representatives have direct responsibility for
accounts. CSR's report to local Customer Service Managers who in return
report to General Managers.
Our customer supply agreements are on an order by order basis or
for a specified period of time. We sell exclusively through our own
sales force and management has close direct relationships with the major
customers supported by technical service staff.
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PRINTING AND MANUFACTURING
ENVELOPES
Envelopes are produced from either flat sheets or rolls of paper.
The paper is folded into an envelope, which is glued at the seems and on
the flap, and then printed as required. There are essentially two types
of folding machines used in the envelope converting process:
(1) high-speed web machines, capable of folding and printing directly
from paper rolls, and
(2) die cut machines, which require a preliminary step to provide die
cut envelope blanks from paper sheets.
Webs are typically used for larger runs with multiple colors and numerous
features, and die cut machines are used primarily for smaller orders typically
including customized value added features. The manufacturing process used is
dependent upon the size of a particular order, custom features required,
machine availability and delivery requirements.
We purchase most of the paper we use in envelope printing in
rolls. In the die cut process, typically used for small to medium-sized
orders of 500,000 units or less, paper is cut into varying sizes by a
sheeter. Stacks of sheets are then cut into envelope blanks using
either manually-placed dies or by computer-controlled die-cutting
machines. In almost all cases, envelopes are imprinted on one or both
sides, either in-line on the folding machine or off-line preceding or
subsequent to the folding process. Large volume envelope orders,
generally over 500,000 units, can bypass the separate sheeting and
cutting operations to be manufactured directly from the paper roll using
the web machine process. The paper is fed as one continuous roll
through the equipment where it is printed, cut, folded and glued,
emerging as finished envelopes ready for packing and shipping.
Envelope manufacturing equipment typically has a relatively long
useful life. Our manufacturing personnel are skilled at maintaining and
rebuilding equipment, and can convert existing equipment to that needed
for specialized products, such as those sold to the medical, photo
finishing packaging and diskette markets.
We have also established programs to implement new production
technologies related to flexographic printing, lithographic web printing
and variable imaging technology. Flexographic printing has long been
the mainstay of the envelope industry and we have flexographic printing
capabilities at virtually all of our facilities. We continue to
implement improvements to our flexographic printing processes which we
believe will provide higher-quality products. In addition, we are
trying to combine lithographic technology with web converting
capability, which will improve the quality of our graphics.
We believe that we can enhance our competitive position in the
envelope industry by using improved management systems. We are in the
process of implementing management systems designed to improve order
flow, improve turnaround capabilities and provide more information with
respect to equipment utilization, asset management, customer
requirements and product line profitability. All of these systems will
also be able to distinguish between the year 1900 and the year 2000,
avoiding interruptions in our envelope business at the turn of the
century.
COMMERCIAL PRINTING
The commercial printing group combines advanced prepress
technology with high-quality color presses and extensive binding and
finishing operations. Many of our facilities are open 7 days a week, 24
hours a day to meet customer printing requirements.
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The typical commercial printing job involves one or more of the
following steps and services:
* Prepress. Our prepress services include all the processes
necessary to prepare the media, i.e. art, photographs, typed
copy, photographically duplicate and/or digitally produce
images, separate color images into process colors, assemble
films and reproduce, or "burn," film images onto plates
using photochemical processes. We use electronic technology
to compose the elements of the individual pages of the
project and to create screen tints, produce color blends and
retouch photos. These images can then be reviewed for exact
color and content. The digital information is then
processed to a film plotter for film output. Our film
plotters are capable of plotting 3600 dots per inch
resolution, giving a clean detail of the imagery. We have
also developed an advanced screening process which allows
larger quantities of ink to be used in the printing process,
thus producing a higher quality image than is available
using conventional techniques.
* Electronic Prepress. This is a fully-automated electronic
process which allows the customer to submit its design in
digital format, either on a diskette or via modem, or in
hard copy that can be computer-scanned. We then edit the
design on a computer to create the negative from which the
printing plate is made. Electronic prepress greatly reduces
the time and the number of people involved in the production
of plates, and we believe that we are an industry leader in
fully-automated electronic prepress operations.
* Digital Archiving. We offer customers the opportunity to
store their artwork in digital form on our data storage
facilities. These images are then accessible by the
customer from our file servers, either on location at our
plant or in-house via electronic file transfer. This allows
the customer to update or re-use specific artwork in repeat
jobs.
* Printing. We currently operate heatset web presses,
including half-webs, full-webs and double-web presses, as
well as sheet-fed presses at our printing facilities. We
primarily use sheet-fed presses for short to medium run
jobs. The sheet-fed presses are capable of printing up to
eight colors, running at standard press speeds of 6,000 to
10,000 sheets per hour. The web presses are higher-
production presses which start with a roll of paper at one
end, print on both sides and produce a product which may be
folded, glued and perforated on the press. Our web presses
are capable of simultaneously printing up to 16 colors at
one time.
* Postpress and Fulfillment. We provide extensive postpress
and fulfillment services in the final stages of the
production cycle. These services include cutting, folding,
binding, finishing and distribution of the finished product.
We also provide warehousing, packaging and distribution
services to customers, a critical element to quality
service. In addition, we maintain a catalog packaging
assembly line which uses both computer-printed mailing
labels and ink-jet applied addresses to facilitate its
customers' mass mailings.
PRINTING FOR DISTRIBUTORS
We offer our customers design services using desktop publishing.
Each of our plants has multiple laser composition equipment which uses
both Windows and Macintosh platforms. This hardware, along with various
industry application software packages, enables us to create documents,
add custom text and logos, and produce negatives. Distributors can also
send documents to us electronically or on disk which can be turned into
a negative by the laser image setting devices, thus reducing customer
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lead times. This equipment enables us to perform a laser composition of
a document, thus providing additional tone and density to the logo and
other design features of the document. Design services have become
particularly valuable in the VSR and short-run continuous form market
and have given us a distinct competitive advantage. In addition, this
"state of the art" equipment enables us to easily make changes to repeat
order and produce the documents as cost effectively as an exact repeat.
The majority of our orders are accompanied by a "camera-ready"
copy of the document. Once the pre-press area receives hard copy, our
camera professionals produce a negative on film. The negative is used
by our plate making machines to create a metal plate. The plate will be
mounted on the web press to produce a custom document. During the pre-
press stage, particular care is taken to detect imperfections in the
camera-ready copy, negative or plate to ensure that each is perfect in
form and content.
Our equipment includes a variety of single web presses using the
web offset process. The majority of our equipment is designed to feed
roll-to-roll and roll-to-fold, and, in the case of the VSR equipment, a
pack-to-pack feed. These presses print at high speeds in one or
multiple colors and on one or both sides of the paper. Our presses vary
by cylinder size and web width to accommodate the short run customer
orders and are between 17" to 33" widths. The majority of our presses
are narrow web widths and are used for short to medium-run production
jobs.
Set-up for our presses involves adjusting the press, feeding the
roll paper, filling ink stations, and running several trial runs. Once
the press operator is satisfied with the print quality, the final sample
document is checked by the shift foreman and approved prior to running
an order. Paper enters the press in the unwind section and passes
through an adjustable feed device, which regulates the tension in the
paper. In the printing section of the press, an inked plate on the
cylinder is rotated against a rubber blanket on the blanket cylinder and
then against the blank paper to transfer the image. Subsequently, the
press can number, punch, or perforate depending on the desired format of
the document.
The finished imprinted roll or pack of documents is automatically
collated, packed and transferred to the warehouse section of the
facility for shipping. Orders are usually shipped to the end-user in
boxes labeled with the distributor's name or, in the case of orders from
larger distributors, delivered to the distributor's warehouse.
LABELS
Label printing consists of four main processes: film preparation,
printing, cutting and finishing. Finished labels are then stored and
distributed. Conventional labels tend to require printing and cutting
only, while Premium labels generally make use of all three processes.
Film preparation requires prepress capabilities similar to
commercial printing. Customer art work is prepared and refined
digitally, and film is produced to make printing plates.
Label printing is usually lithographic, although we also offer
rotogravure and flexographic processes. For conventional labels,
printing is a single operation; however, for Premium labels, multiple
printing operations are often used. We use sheet-fed lithography at all
facilities.
Cutting is usually a combination of square cutting, using
guillotines, and PMC die cutting. Some premium labels are cut on
flatbed die cutters--which also may combine embossing. Labels are
generally
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produced in bundles of 500 to 1,000 each, cut and stacked. Finishing
encompasses a number of technologies: embossing to add texture, bronzing
and/or foil stamping to add metallic effects. We use all of these
processes in our label printing operations.
Because much of the focus of quality assurance within the labels
plants relates to the control of the printing process, the day-to-day
control activities are undertaken by the equipment operators. The focus
is on real-time process control rather than inspection after the fact.
The more modern press equipment has enhanced color control systems to
help operators manage color and print issues very effectively. On more
mature equipment, more manual effort is involved and the systems are not
close-looped, i.e., information from the systems does not automatically
feed back to process controls. As far as finishing operations are
concerned, cutting variances have been greatly improved as a result of
newly installed cutters. In most facilities, the finishing operations
are automated so as to reduce the risk of mixing one product label with
another. Four of our facilities are registered to the ISO 9002 quality
standards.
MATERIALS AND SUPPLY ARRANGEMENTS
The primary materials used in each of our printing divisions are
paper, ink, film, offset plates, chemicals and cartons, with paper
accounting for the majority of total material costs. We purchase these
materials from a number of suppliers and have not experienced any
significant difficulties in obtaining the raw materials necessary for
operations. We have implemented an inventory management system in which
a limited number of paper suppliers supply all of our paper needs.
These suppliers are responsible for delivering paper on a "just-in-time"
basis directly to our facilities. We believe that this system has
allowed us to enhance the flexibility and speed with which we can serve
customers, improve pricing on paper purchases, eliminate a significant
amount of paper inventory and reduce costs by reducing warehousing
capacity.
PATENTS, TRADEMARKS AND BRAND NAMES
We market products under a number of trademarks and brand names.
We also hold or have rights to use various patents relating to our
envelope business, which expire at various times through 2012. Our
sales do not materially depend upon any single or related group of
patents.
COMPETITION
ENVELOPES
We are the largest envelope printer in North America. We compete
with a few multi-plant and many single-plant companies that primarily
service regional and local markets. We also face competition from
alternative sources of communication and information transfer such as
facsimile machines, electronic mail, the Internet, interactive video
disks, interactive television and electronic retailing. Although these
sources of communication and advertising may eliminate some domestic
envelope sales in the future, we believe that we will experience
continued demand for envelope products due to:
(1) the ability of our customers to obtain a relatively low-cost
information delivery vehicle that may be customized with
text, color, graphics and action devices to achieve the
desired presentation effect;
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(2) the ability of our direct mail customers to penetrate
desired markets as a result of the widespread delivery of
mail to residences and businesses through the United States
Postal Service and the Canadian Post Corporation; and
(3) the ability of our direct mail customers to include return
materials in their mail-outs. Principal bases of
competition are quality, service and price.
Although all three are equally important, various customers may
emphasize one or more over the others.
COMMERCIAL PRINTING
The commercial printing industry is highly competitive and
fragmented. We are one of the leading commercial printers in the United
States. We compete against a number of large, diversified and
financially stronger printing companies, as well as regional and local
commercial printers, many of which are capable of competing with us in
both volume and production quality. Although we believe customers are
price sensitive, we also believe that customer service and high-quality
products are important competitive factors. We believe we provide
premium quality and customer service while maintaining competitive
prices through stringent cost control efforts. The main competitive
factors in our markets are customer service, product quality,
reliability, flexibility, technical capabilities and price. We believe
we compete effectively in each of these areas.
PRINTING FOR DISTRIBUTORS
We are the largest printer of custom business documents for the
distributor market in the United States. Our closest competitors are
other document printers with nationwide manufacturing locations and
regional/local printers, which typically sell within a 100 to 300-mile
radius of their plants. To a limited extent we compete with much larger
direct selling forms manufacturers. We compete mainly on the breadth of
our product offerings and close customer relationships.
LABELS
We are a leading printer of glue applied paper labels for the food
and beverage industry. The labels industry is highly fragmented with a
few large manufacturers with significant North American market presence.
As a result of recent merger and acquisition activity, the food and
beverage manufacturers have started to move toward centralized corporate
purchasing. Premium or specialty labels are popular at the higher price
and higher quality end of the market, usually premium branded beverages,
such as spirits and wines. However, we expect that conventional glue-
applied labels will continue to remain the industry label of choice due
to increasingly cost conscious grocery shoppers, stiff pressure from
large retailers to keep prices low, low inflationary levels and recent
increases in commodity food prices.
SEASONALITY
Several consumer direct market segments served by our Envelopes
division, such as photo finishing packaging and certain segments of the
direct mail market, experience seasonality, with a higher percentage of
the volume of products sold to these markets occurring during the fourth
quarter of the year. This seasonality is due to the increase in sales
to the direct mail market due to holiday purchases.
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Seasonality is offset by the diversity of our other products and markets
which are not materially affected by seasonal conditions.
The commercial printing industry experiences seasonal variations.
Our revenues from annual reports are generally concentrated from
February through April. Revenues associated with holiday catalogs and
automobile brochures tend to be concentrated from July through October
and calendars from May to September. As a result of these seasonal
variations, we are at or near capacity at certain times during these
periods.
EMPLOYEES
We employ approximately 12,100 people. Approximately 3,000 people
employed at the various facilities are represented by unions affiliated
with the AFL-CIO or Affiliated National Federation of Independent
Unions. These employees are governed by collective bargaining
agreements, each of which covers the workers at a particular facility,
expires from time to time and is negotiated separately. Accordingly, we
believe that no single collective bargaining agreement is material to
our operations as a whole.
ENVIRONMENTAL MATTERS
Our operations are subject to federal, state and local
environmental laws and regulations relating to air emissions, waste
generation, handling, management and disposal, and at some facilities,
wastewater treatment and discharge. We have implemented environmental
programs designed to ensure that we operate in compliance with the
applicable laws and regulations governing environmental protection. Our
policy is that management at all levels be aware of the environmental
impact of operations and direct such operations in compliance with
applicable standards. We believe we are in substantial compliance with
applicable federal, state and local laws and regulations relating to
environmental protection.
Although we do not anticipate that material capital expenditures
will be required to achieve or maintain compliance with environmental
laws and regulations, changing environmental laws and regulations might
affect the printing industry as well as the manufacture or
transportation of envelopes and related packaging products. For
example, we will be subject to regulations being developed by the
federal Environmental Protection Agency and state environmental agencies
to implement the Clean Air Act Amendments of 1990. Accordingly, there
can be no assurance that environmental matters resulting in material
liabilities or expenditures will not be discovered or that, in the
future, material expenditures for environmental matters will not be
required by changes in law or regulations.
The Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, also known as the "Superfund"
legislation, imposes joint and several liability, without regard to
fault or the legality of the original conduct, on certain classes of
persons for the costs of investigation and remediation of sites at which
there have been releases or threatened releases of hazardous substances.
These persons, known as potentially responsible parties, or "PRPs",
include the owners and operators of property and persons that generated,
disposed of or arranged for the disposal of hazardous substances found
at a site. Many states have similar programs. Although certain of our
predecessors have been designated as PRPs under CERCLA with respect to
off-site disposal of hazardous waste, we believe that we have minimal
exposure as a result of such designation, particularly because of the
indemnifications described below. We have not been named as a PRP at
any Superfund sites as a result of ongoing operations. Due to our waste
management and minimization programs and our current use of permitted
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hazardous waste disposal facilities, we do not believe that our current
operations will give rise to future material liability under CERCLA.
In the asset purchase agreement related to the Georgia Pacific, or
"GP," acquisition, GP agreed to retain all liabilities arising from
releases of hazardous substances at any off-site locations occurring
prior to the closing date of the GP acquisition, other than the
migration of hazardous substances from adjacent locations to the plants
or from the plants to adjacent locations. Accordingly, except for
liability associated with migration, if any, the GP acquisition should
not expose us to liability under CERCLA for historical off-site disposal
practices.
Additionally, GP agreed to indemnify and hold us harmless from
damages that relate to the use, condition, ownership or operation of any
purchased assets or the conduct of its envelope business on or prior to
the closing date of the GP acquisition, including environmental third
party claims. Such damages include on-site liabilities under CERCLA or
corresponding state laws attributable to operations prior to the closing
date. GP's indemnification obligation is subject to
(1) a $35.0 million limitation, and
(2) a six-year term limit.
This indemnity also is subject to contribution arrangements with us, which
begin with GP paying 90% of the indemnifiable damages in the first two years
and decreasing annually to 50% in the sixth year. The indemnity for
environmental third party claims is not subject to any contribution
arrangements. Conversely, we have agreed to indemnify GP for:
(1) environmental liabilities incurred subsequent to the closing
date;
(2) environmental cleanup liabilities at the sites or related to
migration to or from such sites incurred prior to the
closing date, subject to contribution arrangements with GP,
which begin with our paying 10% of the indemnifiable damages
in the first two years increasing annually to 50% in the
sixth year; and
(3) third party claims for pre-closing events arising six years
after the closing date.
GP guaranteed all of GP's obligations under the asset purchase agreement
related to the GP acquisition.
In the asset purchase agreement related to the American Envelope
Company acquisition, American Envelope agreed to indemnify and hold us
harmless from certain liabilities and obligations. In addition to an
indemnification for certain retained liabilities, the indemnification
provides that:
(1) American Envelope's indemnification obligation for "costs of
remediation," or out of pocket costs arising out of or related
to certain disclosed environmental matters and the presence of
any hazardous materials on the purchased assets is subject to a
$25.0 million limitation and a six year claims period; and
(2) to the extent that a claim consists of costs and expenses
related to any costs of remediation as to which American
Envelope is obligated to indemnify us, the parties shall
contribute and share in the items on a sliding scale.
American Envelope bears 90% of each item of costs of remediation
for which a claim has been made during the first two years after closing
of the American Envelope acquisition, with American Envelope's share
decreasing by 10% each subsequent year until the sixth anniversary of
such closing date, when American Envelope's indemnification obligations
related to unclaimed costs of remediation
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matters cease. These sharing percentages are fixed based upon the date
the claim is made with respect to any claim for costs of remediation and
the parties' relative obligations with respect to any such claim do not
change after that date. The indemnity for environmental third party
claims is not subject to any contribution by Mail-Well, Inc.
In connection with the American Envelope acquisition, American
Envelope and Mail-Well, Inc. applied to and/or filed notices with
regulatory agencies for the transfer or issuance of all material permits
or authorizations relating to the operations of its plants and related
facilities, including but not limited to, wastewater permits and air
permits. All such permits and authorizations have been transferred or
issued, as applicable.
Environmental claims relating to the properties acquired in our
various other acquisitions are not subject to separate indemnification
provisions, but are subsumed under the general indemnification
provisions of the applicable purchase agreements. Management is not
aware of any existing environmental claims in connection with these
acquired properties, and we believe that the indemnities provided will
be adequate should any future claims arise.
PROPERTIES
At December 31, 1998, we operated 100 printing facilities in the
United States and Canada, of which 51 were owned and 49 leased. In
addition to on-site storage at each of the foregoing facilities, we also
store products in 13 warehouses, of which 2 are owned. We also lease
12,000 square feet of office space for our corporate headquarters and
9,500 square feet for the Envelope division headquarters in Englewood,
Colorado, and an additional 5,000 square feet of office space in
Chicago, Illinois for information systems support persons. We believe
that we have adequate facilities for the conduct of current and future
operations.
LEGAL PROCEEDINGS
From time to time we may be involved in claims or lawsuits that
arise in the ordinary course of business. Accruals for claims or
lawsuits have been provided for to the extent that losses are deemed
probable and estimable. Although the ultimate outcome of these claims
or lawsuits cannot be ascertained, on the basis of present information
and advice received from counsel, it is our opinion that the disposition
or ultimate determination of such claims or lawsuits will not have a
material adverse effect on Mail-Well I Corporation. In the case of
administrative proceedings related to environmental matters involving
governmental authorities, management does not believe that any
imposition of monetary damages or fines would be material.
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MANAGEMENT
Under the terms of Mail-Well, Inc.'s Articles of Incorporation and
Bylaws, each of the Directors named below is to serve until the next
annual meeting of shareholders.
<TABLE>
<CAPTION>
Name Age Position Director Since
- ---- --- -------- --------------
<S> <C> <C> <C>
Gerald F. Mahoney<F1> 55 Director, Chairman of the Board and
Chief Executive Officer 1994
Paul V. Reilly 46 Director, President & Chief Operating Officer 1998
V. Bruce Thompson 51 Senior Vice President, Corporate Development
Michael Zawalski 39 Senior Vice President, Chief Financial Officer
Robert Meyer 42 Vice President, Treasury and Tax
Roger Wertheimer 39 Vice President, General Counsel and Secretary
Frank P. Diassi<F2> 65 Director 1993
Frank J. Hevrdejs<F2> 53 Director 1993
Jerome W. Pickholz<F1><F3> 66 Director 1994
William R. Thomas<F3> 70 Director 1998
<FN>
- ---------
<F1> Member of the Nominating Committee.
<F2> Member of the Compensation Committee.
<F3> Member of the Audit Committee.
</TABLE>
Gerald F. Mahoney has been a director, Chairman of the Board and
Chief Executive Officer of Mail-Well, Inc. since February 1994. He was
Chairman of the Board, President and Chief Executive Officer of Pavey
Envelope and Tag Corp. from January 1991, until it became a subsidiary
of Mail-Well, Inc. in February 1994. From September 1987 to September
1989, Mr. Mahoney served as President of Transkrit Corp., a business
forms manufacturing company. Mr. Mahoney serves as Chairman of the
Nominating Committee of the Board of Directors.
Paul V. Reilly has been a director, President and Chief Operating
Officer of Mail-Well, Inc. since January 1998. Prior to that, Mr.
Reilly was Senior Vice President--Finance and Chief Financial Officer of
Mail-Well, Inc. from September 1995. Mr. Reilly spent 14 years with
Polychrome Corporation, a prepress supplier to the printing industry,
where he held a number of positions including Assistant Corporate
Treasurer, Corporate Treasurer, Vice President and Chief Financial
Officer, and General Manager of United States Operations. During 1994
and 1995, Mr. Reilly worked with Saddle River Capital, an investment
banking firm which purchased and managed small businesses and as Vice
President with a direct marketer of educational materials. Mr. Reilly
is a Certified Public Accountant.
V. Bruce Thompson has been Senior Vice President, Corporate
Development of Mail-Well, Inc. since August 1998. From 1994 until
August 1998, Mr. Thompson was Senior Vice President, Marketing &
Administration and General Counsel of Forest Oil Corporation, a publicly
held exploration and production company. From 1993 to 1994, Mr.
Thompson was Vice President, Legal Affairs for Mid-America Dairymen,
Inc. From 1990 to 1993 he served as Chief of Staff for James M. Inhofe,
currently a U.S. Senator for Oklahoma.
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Michael Zawalski has been Senior Vice President and Chief
Financial Officer of Mail-Well, Inc. since August 1998. From 1997 to
1998, Mr. Zawalski was Chief Financial Officer of Ryder TRS, Inc. a
moving and transportation business, responsible for all facets of
finance including investor and bank relations. From 1996 to 1997, Mr.
Zawalski was Vice President--Finance with the Coleman Company, directing
worldwide planning and analysis, tax, accounting and reporting. Prior to
1996, Mr. Zawalski also held various executive positions with Quaker
Oats. Mr. Zawalski, a Certified Public Accountant, began his career with
Arthur Andersen & Co.
Robert Meyer has been Vice President, Treasury and Tax of Mail-
Well, Inc. since October 1998. Mr. Meyer is a licensed attorney,
Certified Public Accountant and Certified Financial Planner. From 1988
to 1998, Mr. Meyer was with the accounting firm of Deloitte & Touche
LLP, as a Partner in their tax function.
Roger Wertheimer has been Vice President--General Counsel and
Secretary since February 1995. Mr. Wertheimer began practicing law in
1984 and served as Corporate Counsel for PACE Membership Warehouse, Inc.
from 1988 to 1994. After that, Mr. Wertheimer had a private practice
from March 1994 until February 1995, when he joined Mail-Well, Inc.
Frank P. Diassi has been a director of Mail-Well, Inc. since its
inception in November 1993. Mr. Diassi has been Chairman of Sterling
Chemicals, Inc., a manufacturer of commodity chemicals, pulp chemicals,
acrylic and fibers, since August 1996. He was a founding director of
Arcadian Corporation, the largest nitrogen fertilizer company in North
America. Mr. Diassi was formerly a Director and Chairman of the Finance
Committee of Arcadian Corporation from 1989 to 1994. Mr. Diassi is a
member of the Board of Directors of Fiberglass Holdings, Inc., Amerlux
Corp. and Software Plus, Inc. Mr. Diassi serves as a member of the
Compensation Committee of the Board of Directors.
Frank J. Hevrdejs has been a director of Mail-Well, Inc. since its
inception in November 1993. In 1982, Mr. Hevrdejs co-founded The
Sterling Group, Inc., a major management buyout company. Mr. Hevrdejs
is a principal and president of The Sterling Group, Inc. Additionally,
he is Chairman of First Sterling Ventures, Corp., an investment company,
Enduro Holdings, Inc., a structural and electrical manufacturing
company, and Fiberglass Holdings, Inc., a truck accessory manufacturer.
He is also a board member of Eagle U.S.A., an air-freight company and a
board member of Sterling Chemicals, Inc., a petroleum chemical company.
Mr. Hevrdejs serves as Chairman of the Compensation Committee of the
Board of Directors.
Jerome W. Pickholz has been a director of Mail-Well, Inc. since
September 1994. From 1978 until 1994, he was Chief Executive Officer of
Ogilvy & Mather Direct Worldwide, a direct advertising agency. From
1994 until September 1995, he served as Chairman of the Board of Ogilvy
& Mather Direct worldwide where he is now Chairman Emeritus. Since
January 1, 1996, Mr. Pickholz has served as founder and Chairman of
Pickholz, Tweedy, Cowan, L.L.C., a marketing communications company.
-112-
<PAGE>
<PAGE>
Mr. Pickholz serves as the Chairman of the Audit Committee and as a
member of the Nominating Committee of the Board of Directors.
William R. Thomas has been a director of Mail-Well, Inc. since
November 3, 1998. He has served as Chairman of the Board of Directors
of Capital Southwest Corporation, a publicly owned venture capital
investment company, since July 1982 and as President of that company
since 1980. In addition, Mr. Thomas has been a director of Capital
Southwest Corporation since 1972 and was previously Senior Vice
President from 1969 to 1980. Mr. Thomas also serves as a director of
Alamo Group, Inc., Encore Wire Corporation and Palm Harbor Homes, Inc.
Mr. Thomas is a member of the Audit Committee.
WHERE YOU CAN FIND MORE INFORMATION
Mail-Well I Corporation has filed the registration statement with
the Commission which registers the new notes being offered by this
prospectus. The registration statement, including its attached exhibits
and schedules, contains additional relevant information about Mail-Well
I Corporation and the new notes. The rules and regulations of the
Commission allow us to omit certain information included in the
registration statement from this prospectus. Such additional
information is available for inspection and copying at the offices of
the Commission.
Mail-Well, Inc. files annual, quarterly and current reports, proxy
statements and other information with the Commission. You may read and
copy any reports, statements or other information that Mail-Well, Inc.
files at the following locations of the Commission:
<TABLE>
<C> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
Room 1024 13th Floor Suite 1400
450 Fifth Street, N.W. 7 World Trade Center 500 West Madison Street
Washington, DC 20549 New York, NY 10048 Chicago, IL 60661
</TABLE>
Please call the Commission at 1-800-SEC-0330 for further
information. Mail-Well, Inc.'s public filings are also available from
commercial document retrieval services and at the Internet web site
maintained by the Commission at http://www.sec.gov.
The Commission allows Mail-Well I Corporation to "incorporate by
reference" information into this prospectus, which means that Mail-Well
I Corporation can disclose important information to investors by
referring them to another document filed separately by Mail-Well, Inc.
with the Commission. The information incorporated by reference is
deemed to be part of this prospectus, except for any information
superseded by information contained directly in this document. This
prospectus incorporates by reference:
* Mail-Well, Inc.'s Annual Report on Form 10-K for the year
ended December 31, 1998, File No. 1-12551;
* Mail-Well, Inc.'s Current Report on Form 8-K filed March 9,
1999, File No. 1-12551;
* Mail-Well, Inc.'s Current Report on Form 8-K filed April 22,
1999, File No. 1-12551; and
* the following sections of Mail-Well, Inc.'s Proxy Statement
for the 1999 annual meeting of shareholders, filed on
March 22, 1999: "Executive Officers and Executive
-113-
<PAGE>
<PAGE>
Compensation--Executive Compensation"; "--Stock Option
Plans"; "--Employee Benefits"; "Compensation Committee
Report on Executive Compensation"; and "Stock Price
Performance Graph."
These documents contain important information about Mail-Well, Inc. and
its financial condition.
Additional documents that Mail-Well, Inc. may file with the
Commission between the date of this prospectus and the date this
exchange offer is terminated are also incorporated by reference. These
include any periodic reports, such as Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well
as any proxy statements.
You can obtain any of the documents incorporated by reference in,
but not included with, this prospectus from Mail-Well I Corporation
without charge, excluding all exhibits unless Mail-Well I Corporation
has specifically incorporated by reference an exhibit in this
prospectus, by requesting them in writing or by telephone from the
following address:
Mail-Well, Inc.
Attn: Investor Relations
23 Inverness Way East, Suite 160
Englewood, Colorado 80112
Telephone: (303) 790-8023
LEGAL MATTERS
Certain legal matters relating to the exchange offer will be
passed upon for Mail-Well I Corporation by Rothgerber Johnson & Lyons
LLP, Denver, Colorado, a limited liability partnership. Members of the
firm collectively hold 13,449 shares of Mail-Well, Inc. Stock.
EXPERTS
The financial statements of Mail-Well, Inc. and its consolidated
subsidiaries, except the 1997 and 1996 consolidated financial statements
of Color Art, Inc. and subsidiaries, as of December 31, 1998, and 1997
and for each of the three years in the period ended December 31, 1998,
and the related financial statement schedules included and incorporated
by reference in this prospectus have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their reports, which are
included and incorporated by reference herein. The 1997 and 1996
financial statements of Color Art, Inc. and subsidiaries, consolidated
with those of Mail-Well, Inc., have been audited by Rubin, Brown,
Gornstein & Co., LLP, independent auditors, as stated in their reports,
which are included and incorporated by reference. Such financial
statements of Mail-Well, Inc. and its consolidated subsidiaries have
been included and incorporated by reference herein in reliance upon the
respective reports of such firms given upon their authority as experts
in accounting and auditing.
-114-
<PAGE>
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditors' Reports F-2
Consolidated Balance Sheets as of December 31, 1998 and 1997 F-4
Consolidated Statements of Operations for the Years Ended
December 31, 1998, 1997 and 1996 F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996 F-6
Consolidated Statements of Changes in Shareholders' Equity
for the Years Ended December 31, 1998, 1997 and 1996 F-7
Notes to Consolidated Financial Statements F-8
CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
Condensed Balance Sheets as of December 31, 1998 and 1997 and
Condensed Statements of Operations and Cash Flows for the Years
Ended December 31, 1998, 1997 and 1996 F-39
Valuation and Qualifying Accounts for the Years Ended December
31, 1998, 1997 and 1996 F-43
F-1
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Mail-Well, Inc.
We have audited the accompanying consolidated balance sheets of Mail-
Well, Inc. and Subsidiaries ("Company") as of December 31, 1998 and
1997, and the related consolidated statements of operations, changes in
shareholders' equity, and cash flows for each of the three years in the
period ended December 31, 1998. Our audits also included the financial
statement schedules listed in the Index. These financial statements and
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements and financial statement schedules based on our
audits. We did not audit the financial statements of Color Art, Inc.
and Subsidiaries as of December 31, 1997 and for the years ended
December 31, 1997 and 1996, which reflect total assets of $31,414,000 as
of December 31, 1997 and total revenues of $76,099,000 and $66,023,000
for the years ended December 31, 1997 and 1996. Those financial
statements were audited by other auditors whose report has been
furnished to us, and our opinion, insofar as it relates to the amounts
included for Color Art, Inc. and Subsidiaries for such periods, is based
solely on the report of such other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other
auditors, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Mail-Well, Inc. and Subsidiaries at December 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the three
years in the period ended December 31, 1998 in conformity with generally
accepted accounting principles. Also, in our opinion, the financial
statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in
all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Denver, Colorado
January 28, 1999
F-2
<PAGE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Color Art, Inc.
St. Louis, Missouri
We have audited the consolidated balance sheets of Color Art, Inc., an S
Corporation, and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of income, stockholders' equity and cash
flows for the years then ended (which are not included herein). These
consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Color Art, Inc. and subsidiaries as of December 31, 1997 and 1996 and
the results of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting principles.
Rubin, Brown, Gornstein & Co. LLP
St. Louis, Missouri
March 6, 1998 (Except for Notes 7
and 13, which are dated May 15,
1998 and May 22, 1998, respectively)
F-3
<PAGE>
<PAGE>
<TABLE>
MAIL-WELL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<CAPTION>
DECEMBER 31,
----------------------------------
1998 1997
---------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,375 $ 40,911
Receivables, net 135,923 64,958
Investment in accounts receivable securitization 41,669 22,319
Accounts receivable-other 23,401 10,307
Inventories, net 114,131 86,268
Other current assets 19,351 10,135
---------- --------
Total current assets 335,850 234,898
PROPERTY, PLANT AND EQUIPMENT, NET 437,732 262,797
GOODWILL, NET 322,149 153,927
OTHER ASSETS, NET 32,225 19,789
---------- --------
TOTAL $1,127,956 $671,411
========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 87,023 $ 53,641
Accrued compensation and vacation 41,401 32,729
Other current liabilities 47,192 32,553
Current portion of long-term debt and capital
leases 8,036 10,533
---------- --------
Total current liabilities 183,652 129,456
LONG-TERM DEBT AND CAPITAL LEASES 583,427 330,357
DEFERRED INCOME TAXES 47,534 29,299
OTHER LONG-TERM LIABILITIES 10,468 6,979
---------- --------
Total liabilities 825,081 496,091
---------- --------
COMMITMENTS AND CONTINGENCIES (NOTE 6)
MINORITY INTEREST IN NON VOTING STOCK OF SUBSIDIARY 3,500 3,500
---------- --------
SHAREHOLDERS' 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, 48,846,904 and 43,042,959 shares issued
at 1998 and 1997, respectively (including 3,896,544
shares held by ESOP) 488 430
Paid-in capital 217,218 102,475
Retained earnings 90,740 72,541
Unearned ESOP compensation - (2,406)
Accumulated other comprehensive income (loss) (9,071) (1,220)
---------- --------
Total shareholders' equity 299,375 171,820
---------- --------
TOTAL $1,127,956 $671,411
========== ========
See notes to consolidated financial statements.
</TABLE>
F-4
<PAGE>
<PAGE>
<TABLE>
MAIL-WELL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE AMOUNTS)
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1998 1997 1996
---------- ---------- --------
<S> <C> <C> <C>
NET SALES $1,504,686 $1,073,937 $944,494
COST OF SALES 1,185,373 834,212 740,665
---------- ---------- --------
GROSS PROFIT 319,313 239,725 203,829
OTHER OPERATING COSTS
Selling, administrative and other 200,193 153,897 133,697
Restructuring and other unusual charge 28,922 - -
Merger costs 3,318 - -
---------- ---------- --------
Total other operating costs 232,433 153,897 133,697
---------- ---------- --------
OPERATING INCOME 86,880 85,828 70,132
OTHER (INCOME) EXPENSE
Interest expense 38,127 30,157 34,869
Other (income) expense (1,036) (2,088) 478
---------- ---------- --------
INCOME BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM 49,789 57,759 34,785
PROVISION FOR INCOME TAXES 23,948 22,783 13,627
---------- ---------- --------
INCOME BEFORE EXTRAORDINARY ITEM 25,841 34,976 21,158
EXTRAORDINARY ITEM, NET OF TAX
BENEFIT OF $2,587 and $3,814 (4,132) (6,100) -
---------- ---------- --------
NET INCOME $ 21,709 $ 28,876 $ 21,158
========== ========== ========
EARNINGS PER SHARE - BASIC
BEFORE EXTRAORDINARY ITEM $ 0.55 $ 0.86 $ 0.53
EXTRAORDINARY ITEM (0.08) (0.15) -
EARNINGS PER SHARE - BASIC $ 0.47 $ 0.71 $ 0.53
EARNINGS PER SHARE - DILUTED
BEFORE EXTRAORDINARY ITEM $ 0.53 $ 0.82 $ 0.52
EXTRAORDINARY ITEM (0.08) (0.14) -
EARNINGS PER SHARE - DILUTED $ 0.45 $ 0.68 $ 0.52
WEIGHTED AVERAGE SHARES - BASIC 46,499 40,575 39,663
========== ========== ========
WEIGHTED AVERAGE SHARES - DILUTED 48,585 43,027 40,449
========== ========== ========
See notes to consolidated financial statements.
</TABLE>
F-5
<PAGE>
<PAGE>
<TABLE>
MAIL-WELL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 21,709 $ 28,876 $ 21,158
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 30,678 21,590 21,602
Amortization 9,576 7,696 7,935
Extraordinary loss on early retirement of
debt - pre-tax 6,719 9,914 -
Restructuring charges 15,961 - -
Deferred income taxes 12,204 8,512 9,328
ESOP compensation expense 14,326 2,614 1,973
(Gain) loss on disposal of assets (1,196) 2,719 1,785
Other (202) 38 533
Changes in operating assets and liabilities,
net of effects of acquired businesses:
Receivables (2,151) 11,177 11,220
Inventories 10,339 47 22,800
Accounts payable (7,164) (5,576) 4,213
Other working capital (13,787) 4,525 2,149
Other assets and other long-term
liabilities (3,934) 2,277 (9,378)
--------- --------- ---------
Net cash provided by operating
activities 93,078 94,409 95,318
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition costs, net of cash acquired (351,603) (82,874) (64,316)
Capital expenditures (87,335) (36,838) (22,039)
Proceeds from sale of assets and other 9,661 1,817 35,354
--------- --------- ---------
Net cash used in investing
activities (429,277) (117,895) (51,001)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Changes due to accounts receivable
securitization, net (19,350) (12,814) 61,495
Net proceeds from common stock issuance 92,336 1,202 294
Proceeds from issuance of convertible
subordinated notes, net of issuance costs - 147,436 -
Proceeds from long-term debt 799,111 139,616 323,963
Repayments of long-term debt and capital
leases (556,736) (219,125) (416,206)
Debt issuance costs (9,184) - (1,800)
Repurchase of stock, dividends and
distributions by pooled entities (3,738) (5,254) (1,862)
--------- --------- ---------
Net cash provided by (used in)
financing activities 302,439 51,061 (34,116)
--------- --------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (5,776) 1,039 (282)
--------- --------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS (39,536) 28,614 9,919
BALANCE AT BEGINNING OF YEAR 40,911 12,297 2,378
--------- --------- ---------
BALANCE AT END OF YEAR $ 1,375 $ 40,911 $ 12,297
========= ========= =========
See notes to consolidated financial statements.
</TABLE>
F-6
<PAGE>
<PAGE>
<TABLE>
MAIL-WELL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<CAPTION>
Accumulated Other Total
Common Paid-In Retained Comprehensive Shareholders'
Stock Capital Earnings Other Income (Loss) Equity
----- ------- -------- ----- ------------- ------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995 $436 $ 97,871 $29,166 $(5,243) $ (231) $121,999
Comprehensive income:
Net income 21,158 21,158
Other comprehensive income (loss),
net of tax:
Pension liability adjustment 101 101
Currency translation adjustments (95) (95)
Unrealized loss on investments (49) (49)
--------
Other comprehensive income (loss) (43)
--------
Total comprehensive income 21,115
Issuance of common stock 254 254
Exercise of stock options 40 40
Change in unearned ESOP 1,231 634 1,865
Repurchase of stock by pooled entities (109) (109)
Distributions by pooled entities (1,753) (1,753)
---- -------- ------- ------- ------- --------
BALANCE AT DECEMBER 31, 1996 436 99,287 48,571 (4,609) (274) 143,411
Comprehensive income:
Net income 28,876 28,876
Other comprehensive income (loss),
net of tax:
Pension liability adjustment 37 37
Currency translation adjustments (917) (917)
Unrealized loss on investments (66) (66)
--------
Other comprehensive income (loss) (946)
--------
Total comprehensive income 27,930
Issuance of common stock 7 2,713 2,720
Exercise of stock options 2 199 201
Retirement of treasury stock (14) (1,699) 1,713 -
Change in unearned ESOP 2,322 490 2,812
Distributions by pooled entities (4,161) (4,161)
Repurchase of stock by pooled entities
and other (1) (347) (745) (1,093)
---- -------- ------- ------- ------- --------
BALANCE AT DECEMBER 31, 1997 430 102,475 72,541 (2,406) (1,220) 171,820
Comprehensive income:
Net income 21,709 21,709
Other comprehensive income (loss),
net of tax:
Pension liability adjustment (80) (80)
Currency translation adjustments (7,648) (7,648)
Unrealized loss on investments (123) (123)
--------
Other comprehensive income (loss) (7,851)
--------
Total comprehensive income 13,858
Issuance of common stock 53 104,216 104,269
Costs incurred from issuance of stock (4,733) (4,733)
Exercise of stock options 5 1,763 1,768
Changes in unearned ESOP 11,367 2,406 13,773
Adjustment to deferred tax asset for
pooled entities 2,358 2,358
Distributions by pooled entities (3,290) (3,290)
Repurchase of stock by pooled entities - (228) (220) (448)
---- -------- ------- ------- ------- --------
BALANCE AT DECEMBER 31, 1998 $488 $217,218 $90,740 $ - $(9,071) $299,375
==== ======== ======= ======= ======= ========
See notes to consolidated financial statements.
</TABLE>
F-7
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS - Mail-Well, Inc. and subsidiaries
(collectively referred to as the "Company") is one of the largest
printers in North America. The Company prints and manufactures
envelopes in the United States and Canada and is a leading
commercial printer in the United States. The Company is also a
printer of custom business documents for the distributor market
and a printer of labels for the food and beverage industry. Within
envelope printing, 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 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. Printing for
Distributors products include both traditional and specialty
products for small and medium-sized end users. 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").
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. Mail-Well
I Corporation ("MWI"), a wholly-owned subsidiary of Mail-Well,
Inc., conducts most of the business of Mail-Well, Inc. MWI,
together with its subsidiaries, is the owner of the Company's
operating assets and the borrower of the debt (exclusive of the
Convertible Subordinated Notes). All significant intercompany
accounts and transactions have been eliminated.
CASH AND CASH EQUIVALENTS - Cash and cash equivalents includes
cash on hand, demand deposits, and short-term investments with
original maturities of three months or less. The Company's
domestic banking system provides for the daily replenishment of
major bank accounts for check clearing requirements. Accordingly,
outstanding checks that have not yet been paid by the banks at
year end are reflected in accounts payable in the consolidated
balance sheets.
INVESTMENTS IN ACCOUNTS RECEIVABLE SECURITIZATION - In November
1996, the Company entered into a five-year accounts receivable
securitization arrangement (the "Securitization") whereby it can
sell, on a revolving basis, an undivided percentage ownership
interest in a designated pool of accounts receivable up to a
maximum of $100.0 million. The securitization represents a
retained interest in the accounts receivable sold and is recorded
at fair market value, with the unrealized gains and losses, net of
tax, reported in other comprehensive income.
INVENTORIES - Inventories are valued at the lower of first-in,
first-out ("FIFO") cost or market and include the cost of
materials, labor and manufacturing overhead.
PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are
recorded at cost. Replacements of major units of property are
capitalized and the replaced properties are retired. Replacements
of minor units of property and repair and maintenance costs are
charged to expense as incurred.
Depreciation for financial reporting purposes is calculated using
the straight-line method based on the estimated useful lives of
the respective assets (or the life of the lease, if shorter), as
follows:
Land improvements 25 years
Buildings, building and leasehold improvements 15-45 years
Machinery and equipment 15 years
Furniture, fixtures and other 3-10 years
INTANGIBLE ASSETS - In connection with the issuance of both bank
debt and public debt as well as in connection with acquisitions, the
Company recorded certain intangible assets. The following schedule
summarizes the amortization periods and amortization expense recorded
in connection with the intangible assets (in thousands):
F-8
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
USEFUL
Amortization of: LIFE 1998 1997 1996
---- ------ ------ ------
<S> <C> <C> <C> <C>
Deferred Financing Costs <Fa> 5-6 years $ 614 $2,913 $3,588
Debt Issue Costs 5 years 940 - -
Goodwill 40 years 6,914 3,778 2,915
Non-Compete Agreements 3-5 years 652 489 1,153
Acquisition Costs and Other 5-21 years 456 516 279
------ ------ ------
Total $9,576 $7,696 $7,935
====== ====== ======
<FN>
<Fa> Amount included in interest expense in the consolidated statements
of operations.
</TABLE>
IMPAIRMENT OF LONG-LIVED ASSETS - The carrying amount of goodwill
is reviewed if facts and circumstances suggest that it may be
impaired. If this review indicates that goodwill will not be
recoverable, as determined based on the estimated undiscounted
cash flows of the entity acquired over the remaining amortization
period, the carrying amount of the goodwill is reduced by the
estimated shortfall of cash flows. In addition, long-lived assets
are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability is based on future discounted
net cash flows from the use of the asset. Goodwill associated with
assets acquired in a purchase business combination is included in
impairment evaluations when events or circumstances exist that
indicate the carrying amount of those assets may not be
recoverable.
STOCK SPLITS - In June 1997, the Company effected a 3:2 stock
split of its common stock, and in May 1998, the Company declared a
2:1 stock split of its common stock effective June 10, 1998. All
common stock, paid-in capital, share and earnings per share
information has been retroactively restated to reflect these
splits.
INCOME TAXES - The Company provides for deferred taxes on
temporary differences arising from assets and liabilities whose
bases are different for financial reporting and state, federal and
foreign income tax purposes. The Company does not provide U.S.
income taxes on the unremitted earnings of its foreign subsidiary
($25,615,000 at December 31, 1998) because the Company intends to
indefinitely reinvest such unremitted earnings. Upon distribution
of those earnings in the form of dividends or otherwise, the
Company would be subject to both U.S. income taxes (subject to an
adjustment for foreign tax credits) and withholding taxes payable
to the foreign country.
OTHER COMPREHENSIVE INCOME - Effective January 1, 1998, the
Company adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income," ("SFAS 130") which
establishes new rules for the reporting and display of
comprehensive income and its components; however, the adoption of
SFAS 130 had no impact on the Company's net income or
shareholders' equity. SFAS 130 requires the Company's pension
liability adjustment, currency translation adjustments, and
unrealized gains and losses on its investments, which prior to
adoption were reported separately in shareholders' equity, to be
included in accumulated other comprehensive income. Prior year
amounts have been reclassified to conform to the requirements of
SFAS 130.
NEW ACCOUNTING PRONOUNCEMENTS - In June 1998, the Financial
Accounting Standards Board issued Statement of Financial
Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities (the "Statement"). The
Statement, which will be effective for the year 2000, requires
derivative instruments to be recorded in the balance sheet at
their fair value with changes in fair value being recognized in
earnings unless specific hedging accounting criteria are met.
Although the Company believes it has a minimal current level of
hedging and derivative activity, it has not determined the impact
of this statement on its operations and financial position.
EARNINGS PER SHARE - Earnings per share is computed in accordance
with Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS 128"). Basic earnings per share
excludes dilution and is computed by dividing earnings available
to common shareholders by the weighted average number of
F-9
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
common shares outstanding for the period. Diluted earnings per
share reflects the potential dilution of securities that could
share in the earnings.
The unallocated shares issued under the Employee Stock Ownership
Plan are excluded from both the basic and diluted earnings per
share calculations. The effect of the convertible subordinated
notes, which could potentially dilute earnings per share, was not
included in the computation for the year ended December 31, 1998
because the result would have been antidilutive.
<TABLE>
<CAPTION>
INCOME SHARES PER-SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ------
<S> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1998
EARNINGS PER SHARE - BASIC
Income available to common shareholders $25,841 46,499 $0.55
=====
EFFECT OF DILUTIVE SECURITIES
Stock options - 1,650
Other - 436
------- ------
EARNINGS PER SHARE - DILUTED
Income available to common shareholders
including assumed conversions $25,841 48,585 $0.53
======= ====== =====
FOR THE YEAR ENDED DECEMBER 31, 1997
EARNINGS PER SHARE - BASIC
Income available to common shareholders $34,976 40,575 $0.86
=====
EFFECT OF DILUTIVE SECURITIES
Stock options - 1,508
Convertible Subordinated Notes 476 834
Other - 110
------- ------
EARNINGS PER SHARE - DILUTED
Income available to common shareholders
including assumed conversions $35,452 43,027 $0.82
======= ====== =====
FOR THE YEAR ENDED DECEMBER 31, 1996
EARNINGS PER SHARE - BASIC
Income available to common shareholders $21,158 39,663 $0.53
=====
EFFECT OF DILUTIVE SECURITIES
Stock options - 507
Other - 279
------- ------
EARNINGS PER SHARE - DILUTED
Income available to common shareholders
including assumed conversions $21,158 40,449 $0.52
======= ====== =====
</TABLE>
FOREIGN CURRENCY TRANSLATION - The financial statements include
the results of Canadian operations which are translated from
Canadian dollars, their functional currency, into U.S. dollars.
The balance sheet is translated at the year end rate of exchange.
Results of operations are translated at average rates prevailing
during the year. The effects of translation are included as a
component of other comprehensive income (loss). Foreign currency
transaction gains and losses are recorded in income when realized.
F-10
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets
and liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
RECLASSIFICATIONS - Certain reclassifications have been made to
the 1996 and 1997 financial statements to conform to the 1998
presentation.
2. MERGERS WITH COMMERCIAL PRINTING COMPANIES
Effective May 30, 1998, the Company completed its mergers with
seven commercial printing companies through the exchange of common
stock, which had a market value of $21.965 per share, as shown in
the table below:
<TABLE>
<CAPTION>
SHARES OF MAIL-WELL
OPERATING COMPANY NAME COMMON STOCK EXCHANGED
<S> <C>
Color Art, Inc. ("Color Art") 2,351,951
Accu-color, Inc. ("Accu-color") 622,391
Industrial Printing Company ("Industrial Printing") 570,161
IPC Graphics, Inc. ("IPC Graphics") 325,973
United Lithograph, Inc. ("United Lithograph") 519,568
French Bray, Inc. ("French Bray") 538,040
Clarke Printing, Co. ("Clarke Printing") 437,984
</TABLE>
The consolidated financial statements give retroactive effect to
the mergers, which have been accounted for using the pooling of
interests method and, as a result, the financial position, results
of operations and cash flows are presented as if the combining
companies had been consolidated for all periods presented. The
consolidated statements of changes in shareholders' equity reflect
the accounts of the Company as if the additional common stock had
been issued during all periods presented.
Color Art is a commercial printer with offices located in St.
Louis and Osage Beach, Missouri, and also the operator of a short-
run printing and graphics company through its subsidiary Graphic
Links, LLC. Accu-color, located in St. Louis, Missouri, is
primarily a supplier of color separation and other graphic arts
services to the printing and advertising industries.
Industrial Printing is located in Toledo, Ohio and is engaged in
the printing and selling of advertising pieces and labels, and
general commercial printing. IPC Graphics prints and sells
advertising pieces, mailers and business forms from its facilities
in Toledo, Ohio.
United Lithograph provides commercial printing services to
individuals and businesses located in the New England region from
its offices in Somerville, Massachusetts. French Bray, located in
Glen Burnie, Maryland, provides commercial, high quality, multi-
color printing in the Mid-Atlantic region. Clarke Printing
designs, manufactures and sells printed materials throughout Texas
and Mexico.
The companies listed above are hereafter collectively referred to
as the Commercial Printing Group.
Each of the mergers was negotiated and consummated as separate
transactions and the separate mergers were not contingent upon
each other. Except for French Bray and Clarke Printing, all of
the above entities had elected Subchapter S corporation treatment
for U.S. federal income tax purposes and, accordingly, did not pay
U.S. federal income taxes. Subsequent to May 30, 1998, these
companies were included in Mail-Well's consolidated U.S. federal
income tax return. In connection with the mergers, the Company
also issued common stock to acquire the net assets (including the
assumption of the debt associated with such assets) of certain
related real estate ventures owned by shareholders of the
commercial printing companies. The shares of the Company's common
stock exchanged for real estate assets are included with the
shares exchanged for
F-11
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
the respective operating company in the table above. The results
of operations and financial conditions of the real estate assets
are reflected in the restated consolidated financial statements
with significant intercompany transactions and balances eliminated.
The mergers with the real estate entities have been accounted for
as taxable business combinations and the recognizable tax benefits
attributable to the increase in tax basis were allocated to
additional paid-in-capital.
Each of the above transactions has been accounted for individually
as a pooling of interests and, accordingly, the consolidated
financial statements for the periods subsequent to February 24,
1994 (inception) have been restated to include the accounts of the
Commercial Printing Group. Prior to the mergers, Industrial
Printing's and IPC Graphics' fiscal year ended on September 30,
United Lithograph's fiscal year ended on June 30 and French Bray's
fiscal year ended on July 31. Accordingly, the accompanying
financial statements include those financial statements of
entities with different fiscal years restated on a calendar year
basis. Additionally, the accompanying consolidated financial
statements reflect certain minor adjustments to conform the
accounting policies of the Commercial Printing Group to the
Company's.
Net sales, income before extraordinary items and net income of the
separate companies for the periods preceding the mergers were as
follows:
<TABLE>
<CAPTION>
UNAUDITED
INCOME (LOSS) UNAUDITED PRO FORMA
BEFORE NET PRO FORMA DILUTED
NET EXTRAORDINARY INCOME NET INCOME EARNINGS
(THOUSANDS, EXCEPT PER SHARE AMOUNTS) SALES ITEMS (LOSS) (LOSS) <F1> PER SHARE
----- ----- ------ ----------- ---------
<S> <C> <C> <C> <C> <C>
QUARTER ENDED MARCH 31, 1998 (UNAUDITED) <F2>
Mail-Well, Inc. as previously reported $ 274,705 $ 9,510 $ 9,510 $ 9,510
Pooled entities 44,029 23 23 (752)
---------- ------- ------- -------
Combined $ 318,734 $ 9,533 $ 9,533 $ 8,758 $0.18
========== ======= ======= ======= =====
YEAR ENDED DECEMBER 31, 1997
Mail-Well, Inc. as previously reported $ 897,560 $28,276 $22,176 $22,176
Color Art 76,099 3,218 3,218 1,930
Accu-color 14,409 1,550 1,550 930
Industrial Printing 19,499 769 769 461
IPC Graphics 10,429 405 405 243
United Lithograph 21,232 502 502 301
French Bray 23,353 (178) (178) (178)
Clarke Printing 11,356 434 434 434
---------- ------- ------- -------
Pooled entities 176,377 6,700 6,700 4,121
---------- ------- ------- -------
Combined $1,073,937 $34,976 $28,876 $26,297 $0.62
========== ======= ======= ======= =====
YEAR ENDED DECEMBER 31, 1996
Mail-Well, Inc. as previously reported $ 778,524 $16,927 $16,927 $16,927
Color Art 66,023 1,970 1,970 1,182
Accu-color 15,572 629 629 377
Industrial Printing 24,642 540 540 324
IPC Graphics <F3> 2,262 30 30 18
United Lithograph 20,012 420 420 252
French Bray 28,046 454 454 454
Clarke Printing 9,413 188 188 188
---------- ------- ------- -------
Pooled entities 165,970 4,231 4,231 2,795
---------- ------- ------- -------
Combined $ 944,494 $21,158 $21,158 $19,722 $0.49
========== ======= ======= ======= =====
F-12
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<FN>
<F1> Unaudited pro forma net income reflects adjustments to net
income to record an estimated provision for income taxes for
each period presented assuming Color Art, Accu-color,
Industrial Printing, IPC Graphics and United Lithograph were
tax paying entities.
<F2> Income (loss) includes aggregate merger expenses of the
Commercial Printing Group totaling $2.2 million in the first
quarter of 1998.
<F3> IPC Graphics was spun-off from Industrial Printing on
October 1, 1996. The results of IPC Graphics prior to
October 1, 1996 are included in the results of Industrial
Printing, and the spin-off transaction has been eliminated
in the Company's consolidated financial statements.
</TABLE>
In connection with the mergers, transaction costs incurred by the
Commercial Printing Group of approximately $3.3 million were
expensed during 1998. These costs consist primarily of investment
banking, legal and accounting fees.
3. ACQUISITIONS
The presentation below summarizes the Company's 1998 acquisitions:
<TABLE>
<CAPTION>
ESTIMATED
ANNUAL
MONTH OPERATING SALES
NAME OF BUSINESS ACQUIRED LOCATION ACQUIRED SEGMENT (MILLIONS)
- ------------------------- -------- -------- ------- ----------
<S> <C> <C> <C> <C>
Poser Business Forms, Inc. Fairhope, Alabama January Distributors $ 90
Rono Graphic Communications Portland, Oregon March Commercial 12
Lawson Mardon Label Division Toronto, Ontario March Labels 81
Denver Forms Company Denver, Colorado March Distributors 12
National Graphics Company Denver, Colorado March Envelopes 8
EPX Denver Denver, Colorado March Distributors 4
Blue Line Envelope Montreal, Quebec April Envelopes 6
South Press, Inc. Dallas, Texas April Commercial 12
Century Index Corporation Anaheim, California May Envelopes 8
Label Division, IP Paper Bowling Green, Kentucky May Labels 30
Anderson Lithograph Los Angeles, California May Commercial 135
Illinois Envelope, Inc. Kalamazoo, Michigan June Envelopes 7
Gould Packaging, Inc. Vancouver, Washington June Envelopes 14
Graphics Illustrated, Inc. West Palm Beach, Florida August Commercial 11
McLaren, Morris and Todd Ltd. Mississauga, Ontario August Commercial 34
John D. Lucas Printing Co. Baltimore, Maryland August Commercial 27
Armstrong-White, Inc. Bloomfield Hills, Michigan August Commercial 2
Richtman Printing Englewood, Colorado September Commercial 6
Production Press, Inc. Jacksonville, Illinois September Commercial 9
Apico Corporation Girard, Kansas October Distributors 10
Perfection Forms Girard, Kansas October Distributors 10
Trafton Printing, Inc. Amarillo, Texas October Commercial 9
Imperial Litho and Dryography Phoenix, Arizona November Commercial 26
----
$563
====
</TABLE>
The presentation below summarizes the purchase price, including
all adjustments made through December 31, 1998. These
acquisitions have been accounted for as purchases and,
accordingly, the net purchase price of each acquisition was
allocated to the various assets and liabilities according to their
estimated fair values as of the date of the respective purchase.
The results of operations of each of the acquisitions have been
included in the accompanying consolidated statements of operations
from the date of the acquisition.
F-13
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
CASH
AND TOTAL
TYPE OF MONTH STOCK DEBT PURCHASE GOODWILL
(IN MILLIONS) PURCHASE ACQUIRED PAID ASSUMED PRICE RECORDED
-------- -------- ---- ------- ----- --------
<S> <C> <C> <C> <C> <C> <C>
1996 Acquisitions
Quality Park Products Assets April $ 27.6 $0.7 $ 28.3 $ 3.4
Pac National Group Assets November 20.2 0.0 20.2 6.4
Shepard Poorman (SP) Stock December 18.9 0.8 19.7 7.9
1997 Acquisitions
Six acquisitions, as a group Assets (3) June, July, 86.4 0.6 87.0 38.1
Stock (3) September,
October and
December
1998 Acquisitions
23 acquisitions, as a group Assets (10) Various 360.4 9.1 369.5 170.2
Stock (13)
</TABLE>
The fair value of stock issued for acquisitions was $8,780,000 and
$6,018,000 for the years ended December 31, 1998 and 1997,
respectively.
The following table presents the unaudited pro forma results of
operations as if the 1998, 1997 and 1996 acquisitions had occurred
on January 1, 1997, 1996 and 1995, respectively. The summary pro
forma results are based on assumptions and are not necessarily
indicative of the actual results which would have occurred had
these acquisitions occurred on January 1 of the year preceding the
acquisition date, or of the future results of operations of the
Company.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
(IN MILLIONS, EXCEPT PER SHARE) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net sales $1,729.4 $1,726.7 $1,193.6
Income before extraordinary item 32.5 47.2 17.9
Extraordinary item (4.1) (6.1) -
Net income $ 28.4 $ 41.1 $ 17.9
Earnings per basic share:
Income before extraordinary item $ 0.69 $ 1.16 $ 0.45
Extraordinary item (0.08) (0.15) -
Net income $ 0.61 $ 1.01 $ 0.45
Earnings per diluted share:
Income before extraordinary item $ 0.66 $ 1.11 $ 0.44
Extraordinary item (0.08) (0.14) -
Net income $ 0.58 $ 0.97 $ 0.44
</TABLE>
In connection with the acquisition of Murray Envelope Corporation,
in July 1997, a subsidiary of the Company issued 220,472 shares of
non-voting common stock. These shares are redeemable by the
holder during the period from January 1, 1999 to February 1, 2000
for $3,500,000. Alternatively, the holder may convert these
shares into an equal number of shares of the Company's common
stock. This interest in the non-voting common stock of the
subsidiary has been recorded as a minority interest in the
consolidated balance sheet.
Certain purchase agreements require the payment of additional
consideration in the form of cash payments if specific operating
performance criteria are met. Any subsequent payment will be
allocated to goodwill. In addition, purchase price allocation for
certain acquisitions have not been finalized. Therefore, the
amount of goodwill could be adjusted within one year of the
purchase.
F-14
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS
<TABLE>
<CAPTION>
DECEMBER 31,
(IN THOUSANDS) 1998 1997
---- ----
<S> <C> <C>
INVENTORIES:
Raw materials $ 45,720 $ 34,656
Work in process 22,089 12,428
Finished goods 49,256 42,132
--------- --------
117,065 89,216
Reserve for obsolescence, loss and other (2,934) (2,948)
--------- --------
Total $ 114,131 $86,268
========= ========
PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements $ 23,818 $ 14,667
Buildings, building and leasehold improvements 115,264 73,567
Machinery and equipment 336,509 229,214
Furniture, fixtures and other 33,108 26,453
Construction in progress 37,982 10,435
--------- --------
546,681 354,336
Less accumulated depreciation (108,949) (91,539)
--------- --------
Total $ 437,732 $262,797
========= ========
RESERVES:
Allowance for doubtful accounts receivable $ (6,727) $ (3,795)
Accumulated amortization:
Deferred financing costs (1,413) (2,000)
Goodwill (15,902) (9,030)
Other intangibles included in other assets (5,169) (4,386)
</TABLE>
5. LONG-TERM DEBT AND CAPITAL LEASES
Long term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
INTEREST RATE AT DECEMBER 31,
DECEMBER 31, 1998 1998 1997
----------------- ---- ----
<S> <C> <C> <C>
Bank Borrowings:
Unsecured loan, due June 9, 2003 6.88% $ 25,461 $ -
Unsecured revolving loan facility, due
March 31, 2003 5.875% 93,000 -
Demand note - 55,393
Senior Subordinated Notes, due 2004 10.5% - 85,000
Senior Subordinated Notes, due 2008 8.75% 300,000 -
Convertible Subordinated Notes, due 2002 5.0% 152,050 152,050
Other 20,952 48,447
-------- --------
591,463 340,890
Less current maturities (8,036) (10,533)
-------- --------
Long term debt and capital leases $583,427 $330,357
======== ========
</TABLE>
In November 1998, Mail-Well I Corporation issued $300,000,000 of
8.75% Senior Subordinated Notes (the "Senior Notes"), the net
proceeds of which were used to legally extinguish the $85,000,000
of senior subordinated notes due 2004 and repay a portion of the
unsecured line of credit. The Senior Notes constitute unsecured
obligations of the Company. The Company can redeem the Senior
Notes, in whole or in part, on or after December 15, 2003, at
redemption prices which range from 100% to 104.375%, plus accrued
and unpaid
F-15
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
interest. In addition, before December 15, 2001, the Company can
redeem up to 35% of the Senior Notes at 108.75% of the principal
amount thereof, plus accrued and unpaid interest, with the net
cash proceeds from certain common stock offerings. Each holder of
the Senior Notes has the right to require the Company to
repurchase the Notes at a purchase price equal to 101% of the
principal amount, plus accrued and unpaid interest thereon, upon
the occurrence of certain events constituting a change of control
of the Company.
On March 18, 1998, the Company entered into a revolving loan
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 revolving loan facility. The same bank
agreed to lend the Company and one of its Canadian subsidiaries up
to an additional $20.0 million at LIBOR plus 0.75% per annum under
a similar revolving credit facility. There were $93,000,000 and
no amounts outstanding under these facilities as of December 31,
1998, respectively.
In November 1997, the Company issued $152,050,000 of Convertible
Subordinated Notes (the "Notes"). The Notes constitute unsecured
subordinated obligations of the Company. The Notes are
convertible at the option of the holder into shares of the
Company's common stock, par value $0.01 per share, at a conversion
price of $19.00 per share at anytime prior to November 1, 2002.
In addition, each holder of the Notes has the right to require the
Company to repurchase the Notes at a purchase price equal to 101%
of the principal amount, plus accrued and unpaid interest thereon,
upon the occurrence of certain events constituting a change of
control of the Company.
Other long-term debt is comprised of capital lease obligations and
term debt with banks of the Commercial Printing Group. Interest
rates on other term debt with banks range from 6.0% to 9.0% at
December 31, 1998.
In 1998, the Company wrote off deferred financing costs of
$4,132,000 (net of $2,587,000 of income tax benefits) capitalized
in connection with the bank debt which was repaid in November
1998. In 1997, the Company wrote off deferred financing costs of
$6,100,000 (net of $3,814,000 of income tax benefits) capitalized
in connection with the bank debt which was repaid in November
1997. The write-offs are shown as extraordinary items in the
statements of operations.
The long-term debt agreements contain certain restrictive
covenants that, among other things and with certain exceptions,
limit the ability of the Company to incur additional indebtedness
or issue capital stock, prepay subordinated debt, transfer assets
outside of the Company, pay dividends or repurchase shares of
common stock. In addition to these restrictions, the Company is
required to satisfy certain financial covenants.
The aggregate annual maturities for all long-term debt during the
fiscal years subsequent to December 31, 1998 are (in thousands):
1999 $ 8,036
2000 13,566
2001 7,366
2002 160,031
2003 98,096
2004 and thereafter 304,368
--------
$591,463
========
Cash paid for interest on long-term debt was $33,996,000,
$22,818,000 and $28,886,000 for the years ended December 31, 1998,
1997 and 1996, respectively.
F-16
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. COMMITMENTS AND CONTINGENCIES
In November 1996, the Company entered into a five-year agreement
whereby it can sell, on a revolving basis, an undivided percentage
ownership interest in a designated pool of accounts receivable up
to a maximum of $100.0 million. At December 31, 1998 and 1997,
$52.6 million and $72.0 million, respectively, had been sold
(without recourse) under this agreement and the sale was reflected
as a reduction of accounts receivable in the Company's
consolidated balance sheets. The Company has retained a
securitized interest in the accounts receivable of $41.7 million
and $22.3 million at December 31, 1998 and 1997, respectively.
The receivables were sold at a discount of 0.60% above the
prevailing commercial paper rate plus certain other fees. The
discount expense of $4.4 million, $4.9 million and $0.7 million on
the receivables sold has been recorded in the Company's statements
of operations for the years ended December 31, 1998, 1997 and
1996, respectively.
In November 1996, the Company refinanced certain equipment under a
sale/leaseback arrangement. The equipment was sold for $30.0
million. The transaction was accounted for as a sale whereby the
equipment was removed from the Company's financial statements.
There was no significant gain or loss on the sale of the
equipment. In 1997, the Company reacquired the equipment from the
original lessor and sold and leased back such equipment from a new
buyer-lessor. The purchase price from the old buyer-lessor and
selling price to the new buyer-lessor approximated its then fair
market value ($27.6 million). The leasebacks are classified as
operating leases. At the end of the five year lease term, the
Company may either (i) purchase the equipment for $16.0 million,
(ii) sell the equipment on behalf of the lessor for a selling
price of no less than $13.2 million or (iii) return the equipment
to the lessor. If the Company elects to return the equipment to
the lessor at the end of the lease term, the Company has
guaranteed a residual value of $13.2 million for the benefit of
the lessor.
The Company leases various office, warehouse and manufacturing
facilities under operating leases. Minimum annual lease
commitments at December 31, 1998 were as follows (in thousands):
1999 $ 22,548
2000 19,304
2001 16,961
2002 14,589
2003 13,993
2004 and thereafter 12,950
--------
Total $100,345
========
Lease expense for the years ended December 31, 1998, 1997 and 1996
was $25,831,000, $17,301,000 and $6,890,000, respectively.
The Company is involved in various lawsuits incidental to its
businesses. In management's opinion, an adverse determination
against the Company relating to these suits would not be material
to the consolidated financial statements. In the case of
administrative proceedings related to environmental matters
involving governmental authorities, management does not believe
that any imposition of monetary sanctions would be material to the
Company's results of operations and financial position.
F-17
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following is a comparison of the fair value and carrying value
at December 31, 1998 and 1997 of the Company's financial
instruments (in thousands):
<TABLE>
<CAPTION>
1998 1997
FAIR CARRYING FAIR CARRYING
VALUE VALUE VALUE VALUE
----- ----- ----- -----
<S> <C> <C> <C> <C>
Financial assets
Cash and cash equivalents $ 1,375 $ 1,375 $ 40,911 $ 40,911
Receivables (trade) 135,923 135,923 64,958 64,958
Investment in accounts receivable
securitization 41,669 41,669 22,319 22,319
Financial liabilities
Unsecured loan 24,465 25,461 - -
Demand note - - 55,393 55,393
Unsecured revolving loan facility 89,114 93,000 - -
Senior subordinated notes 304,500 300,000 91,163 85,000
Convertible subordinated notes 128,482 152,050 185,501 152,050
Other long-term debt 20,952 20,952 48,447 48,447
</TABLE>
CASH AND CASH EQUIVALENTS AND RECEIVABLES - The carrying value of
cash and cash equivalents and receivables approximates fair value
due to the short term maturities of these investments.
INVESTMENT IN ACCOUNTS RECEIVABLE SECURITIZATION - The fair
value of the investment in accounts receivable securitization is
based on discounting expected cash flows at rates currently
available to the Company for instruments with similar risks and
maturities.
LONG-TERM DEBT - The fair value of the Company's long term debt to
banks is based on quoted interest rates for borrowings of similar
quality and terms. The fair value of the senior subordinated
notes and the convertible subordinated notes is based upon quoted
market prices. The fair value of other long-term debt was
estimated using the incremental borrowing rate for each company
for debt of the same remaining maturities.
CONCENTRATIONS OF CREDIT RISK - Financial instruments that
potentially subject the Company to significant concentrations of
credit risk consists primarily of accounts receivable.
Concentrations of credit risk with respect to accounts receivable
are limited due to the large number of entities comprising the
Company's customer base and their dispersion across many different
industries and geographic areas. As of December 31, 1998 and
1997, the Company had no significant concentrations of credit
risk.
8. SHAREHOLDERS' EQUITY AND STOCK OPTION PLAN
SECURITIES OFFERING - On November 13, 1997, the Company's shelf
registration statement ("shelf") on Form S-3 was declared
effective by the Securities and Exchange Commission. The shelf
permits the Company to issue up to $300.0 million in debt
securities, common stock, preferred stock or warrants over the
two-year period following the effective date.
On February 11, 1998, the Company completed the sale of 6,000,000
shares of its common stock at a price of $19.625 per share. Of these
shares, the Company sold 4,864,600 and 1,135,400 were sold by a group
of shareholders. Proceeds from the sale of common stock by the
Company of $90.7 million, net of underwriting discounts and
commissions, were used for general corporate purposes. The
February 1998 stock offering and the Convertible Subordinated
Notes were issued under the shelf registration statement and, at
December 31, 1998, there was availability to issue another $52
million of securities under the shelf registration statement.
PREFERRED STOCK - The Company has authorized 25,000 shares of
$0.01 par value preferred stock. No shares have been issued at
December 31, 1998 or 1997.
F-18
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
STOCK OPTION PLANS - The following summarizes the various stock
option plans at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS
OPTIONS OPTIONS ELIGIBLE TO YEARS TO
AUTHORIZED OUTSTANDING BE ISSUED FULL VESTING
---------- ----------- --------- ------------
<S> <C> <C> <C> <C>
1994 Stock Option Plan <Fa> 1,918,350 1,143,757 71,272 4 or 5
1996 Directors Stock Option Plan <Fb> 420,000 60,000 318,000 Immediately
1997 Non-Qualified Stock Option Plan <Fa> 1,950,000 1,106,130 764,670 5 years
Allied Acquisition Non-Qualified Stock
Option Plan <Fc> 124,800 119,902 - 4 years
1998 Incentive Stock Option Plan <Fa> 1,000,000 189,970 810,030 5 years
<FN>
<Fa> Plan is for directors and key employees
<Fb> Plan is for directors only
<Fc> Plan is for key employees of The Allied Printers
</TABLE>
All grants expire ten years from the grant date or until 90 days
after termination of a directorship. All grants are administered
by the Compensation Committee of the Board of Directors.
On the grant date, all options had an exercise price equal to or
greater than the fair market value of the Company's common stock.
The following is a summary of the Company's stock option activity:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED
REMAINING AVERAGE
EXERCISE CONTRACTUAL EXERCISE
OPTIONS PRICE LIFE PRICE
------- ----- ---- -----
<S> <C> <C> <C> <C>
Outstanding, December 31, 1995 832,958 $1.32 - $1.43 8.8 years $ 1.33
1996
Granted 481,500 $3.01 - $3.74 $ 3.67
Exercised (30,258) $1.32 $ 1.32
Canceled or forfeited (7,674) $1.32 $ 1.32
---------
Outstanding, December 31, 1996 1,276,526 $1.32 - $3.74 9.2 years $ 2.21
1997
Granted 1,784,202 $6.17 - $13.69 $ 7.29
Exercised (144,986) $1.32 - $3.74 $ 1.42
Canceled or forfeited (88,272) $1.32 - $3.74 $ 1.49
---------
Outstanding, December 31, 1997 2,827,470 $1.32 - $13.69 8.9 years $ 5.48
1998
Granted 661,194 $9.31 - $21.86 $12.80
Exercised (493,249) $1.32 - $13.69 $ 3.70
Canceled or forfeited (375,656) $1.32 - $19.03 $ 7.27
---------
Outstanding, December 31, 1998 2,619,759 $1.32 - $21.86 8.2 years $ 7.37
=========
Vested and exercisable at December 31, 1996 219,974 $1.32 - $3.74 $ 1.65
=========
Vested and exercisable at December 31, 1997 424,896 $1.32 - $ 9.50 $ 3.05
=========
Vested and exercisable at December 31, 1998 569,943 $1.32 - $21.86 $ 5.56
=========
</TABLE>
F-19
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table summarizes information about stock options
outstanding at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS WEIGHTED WEIGHTED WEIGHTED
OUTSTANDING AT AVERAGE AVERAGE OPTIONS VESTED AVERAGE
RANGE OF DECEMBER 31, REMAINING EXERCISE AT DECEMBER 31, EXERCISE
EXERCISE PRICES 1998 LIFE PRICE 1998 PRICE
- --------------- ---- ---- ----- ---- -----
<S> <C> <C> <C> <C> <C>
$ 1.32 - $ 3.74 610,065 7.0 years $ 2.56 298,452 $ 2.41
$ 6.17 - $ 7.00 1,242,092 8.2 years $ 6.64 190,440 $ 6.65
$ 9.11 - $12.00 614,700 9.3 years $11.74 28,950 $ 9.58
$13.54 - $13.69 128,902 8.6 years $13.68 28,101 $13.68
$19.03 - $21.86 24,000 9.3 years $21.86 24,000 $21.86
--------- -------
$ 1.32 - $21.86 2,619,759 8.2 years $ 7.37 569,943 $ 5.56
========= =======
</TABLE>
The Company applies APB Opinion No. 25, "Accounting for Stock
Issued to Employees" and related Interpretations in accounting for
its employee stock option plans. The exercise price of the stock
options is the fair value of the common stock as of the date of
grant. Accordingly, no compensation cost has been recognized.
Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation" ("SFAS 123") was issued in October
1995 and, if fully adopted by the Company, would change the method
for recognition of cost. Under SFAS 123, compensation expense is
based upon the fair value of each option at the date of grant
using an option-pricing model that takes into account as of the
grant date the exercise price and expected life of the option, the
current price of the underlying stock and its expected volatility,
expected dividends on the stock and the risk-free interest rate
for the expected term of the option. Had compensation expense
been determined based on the guidance in SFAS 123, the Company's
net income and earnings per share would have been reduced to the
pro forma amounts indicated below. The weighted average fair
values of options granted in 1998, 1997 and 1996 were $6.73, $3.83
and $1.72, respectively.
The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option-pricing model with the
following assumptions used for grants:
<TABLE>
<CAPTION>
DIVIDEND EXPECTED RISK FREE EXPECTED
YIELD VOLATILITY INTEREST RATE LIFE
----- ---------- ------------- ----
<S> <C> <C> <C> <C>
March 1, 1995 Options 0% 33% 7.2% 5 and 6 years
May 8, 1996 Options 0% 38% 6.2% 4 years
October 1, 1996 Options 0% 44% 6.7% 5 and 6 years
1997 Options 0% 54% 5.4% 5 years
1998 Options 0% 68% 4.8% 5 years
</TABLE>
F-20
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table presents the pro forma effect of applying SFAS 123:
<TABLE>
<CAPTION>
1998 1997 1996
--------------------- --------------------- --------------------
(IN THOUSANDS, EXCEPT AS PRO AS PRO AS PRO
PER SHARE AMOUNTS) REPORTED FORMA REPORTED FORMA REPORTED FORMA
-------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Income before
extraordinary item $25,841 $24,073 $34,976 $33,852 $21,158 $20,956
Extraordinary item (4,132) (4,132) (6,100) (6,100) - -
Net income $21,709 $19,941 $28,876 $27,752 $21,158 $20,956
Income per basic share
before extraordinary item $ 0.55 $ 0.52 $ 0.86 $ 0.83 $ 0.53 $ 0.53
Net income per basic share $ 0.47 $ 0.43 $ 0.71 $ 0.68 $ 0.53 $ 0.53
Income per diluted share
before extraordinary item $ 0.53 $ 0.50 $ 0.82 $ 0.80 $ 0.52 $ 0.52
Net income per diluted share $ 0.45 $ 0.41 $ 0.68 $ 0.66 $ 0.52 $ 0.52
</TABLE>
The effects of applying SFAS 123 in this pro forma disclosure may
not be indicative of future amounts. Additional awards in future
years are anticipated.
OTHER COMPREHENSIVE INCOME - The income tax effects allocated to
and the cumulative balance of each component of other
comprehensive income (loss) are as follows (in thousands):
<TABLE>
<CAPTION>
TAX
BEGINNING BEFORE-TAX (BENEFIT) NET-OF-TAX ENDING
BALANCE AMOUNT EXPENSE AMOUNT BALANCE
------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
DECEMBER 31, 1998
Pension liability adjustment $ (73) $ (120) $ (40) $ (80) $ (153)
Currency translation adjustments (1,032) (7,648) - (7,648) (8,680)
Unrealized loss on investments (115) (199) (76) (123) (238)
------- ------- ----- ------- -------
$(1,220) $(7,967) $(116) $(7,851) $(9,071)
======= ======= ===== ======= =======
DECEMBER 31, 1997
Pension liability adjustment $ (110) $ 61 $ 24 $ 37 $ (73)
Currency translation adjustments (115) (917) - (917) (1,032)
Unrealized loss on investments (49) (108) (42) (66) (115)
------- ------- ----- ------- -------
$ (274) $ (964) $ (18) $ (946) $(1,220)
======= ======= ===== ======= =======
DECEMBER 31, 1996
Pension liability adjustment $ (211) $ 166 $ 65 $ 101 $ (110)
Currency translation adjustments (20) (95) - (95) (115)
Unrealized loss on investments - (80) (31) (49) (49)
------- ------- ----- ------- -------
$ (231) $ (9) $ 34 $ (43) $ (274)
======= ======= ===== ======= =======
</TABLE>
F-21
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. INCOME TAXES
Taxes are based on income before income taxes and extraordinary
item for the years ended December 31, as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Domestic $31,886 $42,677 $26,448
Foreign 17,903 15,082 8,337
------- ------- -------
$49,789 $57,759 $34,785
======= ======= =======
</TABLE>
The provision for income taxes consists of the following for the
years ended December 31:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $5,550 $9,539 $2,029
Foreign 5,246 3,335 2,138
State 948 1,397 132
------- ------- -------
11,744 14,271 4,299
Deferred:
Federal 9,492 5,298 6,968
Foreign 1,792 2,651 1,475
State 920 563 885
------- ------- -------
12,204 8,512 9,328
------- ------- -------
Total provision for income taxes $23,948 $22,783 $13,627
======= ======= =======
</TABLE>
Components of the Company's deferred tax assets and liabilities at
December 31 are as follows:
<TABLE>
<CAPTION>
(in thousands) 1998 1997
---- ----
<S> <C> <C>
Deferred tax assets:
Alternative minimum tax credit carryforwards $ 4,525 $ 5,541
Net operating loss carryforwards 3,533 1,032
Compensation related accruals 6,352 3,588
Intangibles 3,735 3,386
Miscellaneous accruals and reserves 2,195 1,853
Accounts receivable and inventories 3,137 2,198
Land basis differences and other 691 675
State tax credits 916 95
Valuation allowance (267) (288)
------- -------
Total deferred tax assets 24,817 18,080
------- -------
Deferred tax liabilities:
Property, plant and equipment 54,756 40,466
Deferred financing costs - 41
Intangibles 5,035 3,825
Prepaids and inventories 1,197 489
------- -------
Total deferred tax liabilities 60,988 44,821
------- -------
Deferred tax liability, net $36,171 $26,741
======= =======
</TABLE>
F-22
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The difference between the statutory federal income tax rate and
the Company's effective income tax rate is summarized as follows:
<TABLE>
<CAPTION>
December 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 34.0%
State income tax, net of federal benefit 3.5 3.4 3.3
Goodwill amortization 3.5 1.5 1.8
Employee stock ownership plan 9.3 1.2 1.3
Effect of pooled entities electing nontaxable
status prior to the mergers (2.4) (2.8) (1.5)
Other (.8) 1.1 0.3
---- ---- ----
Effective income tax rate 48.1% 39.4% 39.2%
==== ==== ====
</TABLE>
At December 31, 1998, the following net federal operating loss and
tax credit carryforwards are available. The Company is limited in
the amounts of net operating loss carryforwards which may be used
in any one year.
<TABLE>
<CAPTION>
Operating Expiration Tax
(in thousands) Losses Dates Credits
------ ----- -------
<S> <C> <C> <C>
Consolidated Company $ - $2,538
Acquired from Poser 7,976 2002 - 2012 -
Acquired from GAC 678 2005 - 2009 1,203
Acquired from SP - 590
Acquired from Other 770 2005 - 2008 194
------ ------
Total $9,424 $4,525
====== ======
</TABLE>
Cash paid for income taxes was $23,762,000, $15,090,000 and
$7,194,000 for the years ended December 31, 1998, 1997 and 1996,
respectively.
10. BENEFIT PLANS
PENSION PLANS - The Company sponsors three noncontributory defined
benefit pension plans under collective bargaining agreements with
unions representing certain employees in the U.S. The Company also
has obligations in the U.S. under a noncontributory defined benefit
plan, which was curtailed in 1994. The Company sponsors four
defined benefit pension plans covering certain salaried and hourly
employees in Canada who have bargained for such benefits. During
1997, the Company terminated one Canada defined benefit plan. The
1996 amounts reflect the termination of the plan.
The provisions of Statement of Financial Accounting Standards No.
87, "Employers' Accounting for Pensions," require the recognition
of an additional minimum liability for each defined benefit plan
for which the accumulated benefit obligation exceeds plan assets.
This amount has been recorded as a long-term liability with an
offsetting intangible asset. Because the asset recognized may not
exceed the amount of unrecognized prior service cost and transition
obligation on an individual plan basis, the balance, net of tax
benefits, is reported as part of accumulated other comprehensive
income (loss).
F-23
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table summarizes the funded status of the plans and
the related amounts that are recognized in the consolidated balance
sheets (in thousands).
<TABLE>
<CAPTION>
December 31,
1998 1997
---- ----
<S> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $26,803 $26,390
Service cost 1,477 1,300
Interest cost 1,812 1,847
Amendments - 177
Actuarial gains and loss 837 369
Foreign currency exchange rate changes (1,294) (954)
Benefits paid (2,393) (2,326)
Curtailment (54) -
------- -------
Benefit obligation at end of year 27,188 26,803
------- -------
Change in plan assets:
Fair value of plan assets at beginning of year 34,119 34,034
Foreign currency exchange rate changes (1,822) (1,334)
Actual return on plan assets 1,591 2,649
Employer contributions 1,194 1,096
Benefits paid (2,393) (2,326)
------- -------
Fair value of plan assets at end of year 32,689 34,119
------- -------
Funded status 5,501 7,316
Unrecognized actuarial loss (gain) 1,527 (155)
Unrecognized prior service cost 272 306
Unrecognized transition asset (5,663) (7,137)
------- -------
Net amount recognized $ 1,637 $ 330
======= =======
Amounts recognized in the consolidated
balance sheet:
Prepaid benefit cost $ 2,404 $ 1,504
Accrued benefit liability (1,283) (1,490)
Intangible asset 267 187
Deferred tax asset 96 56
Accumulated other comprehensive (income) loss 153 73
------- -------
Net amount recognized $ 1,637 $ 330
======= =======
</TABLE>
Net pension expense for the plans included the following
components (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Service cost $ 1,477 $ 1,300 $ 1,113
Interest cost on projected benefit obligation 1,812 1,847 1,179
Expected return on plan assets (2,814) (3,278) (1,571)
Net amortization and deferral (377) 31 266
------- ------- -------
Net periodic pension cost (income) $ 98 $ (100) $ 987
======= ======= =======
</TABLE>
F-24
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The significant assumptions used as of December 31 in computing
the net pension expense and funded status information shown above
are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Weighted average discount rate 6.75 - 7.5% 7.25 - 7.5% 7 - 8.75%
Expected long-term rate of return on assets 8.75 - 9.5% 8.7 - 9% 8.5%
Rate of compensation increase 2 - 4% 2 - 4% 4 - 5%
</TABLE>
The aggregate accumulated benefit obligation and aggregate fair
value of plan assets for pension plans with accumulated benefit
obligations in excess of plan assets were $5,355,000 and
$4,089,000, respectively, as of December 31, 1998. The aggregate
accumulated benefit obligation and aggregate fair value of plans
assets for pension plans with accumulated benefit obligations in
excess of plan assets were $4,057,000 and $3,035,000 ,
respectively, as of December 31, 1997.
Certain other U.S. employees covered by union agreements are
included in multi-employer pension plans to which the Company
makes contributions in accordance with the contractual union
agreements. Such contributions are made on a monthly basis in
accordance with the requirements of the plans and the actuarial
computations and assumptions of the administrators of the plans.
Contributions to such multi-employer plans were $1,070,000,
$1,877,000 and $989,000 for 1998, 1997 and 1996, respectively.
Benefits and net asset data for these multi-employer pension plans
for union employees are not available.
401(k) PLANS - The Company has several employee savings plans
which are designed to qualify under Section 401(k) of the Internal
Revenue Code. All U.S. salaried and non-union hourly employees
who meet the eligibility requirements are covered under one of
these plans. In addition, U.S. employees covered by union
agreements where these benefits have been collectively bargained
are also covered by one of these plans. Each of the plans allows
eligible employees to make salary reduction contributions. The
provisions of certain plans include mandatory or discretionary
contributions by the Company. Amounts charged to expense in
connection with Company contributions were $4,119,000, $3,159,000
and $2,765,000 for the years ended December 31, 1998, 1997 and
1996, respectively.
INCENTIVE COMPENSATION - The Company has established Incentive
Compensation Plans covering full time employees and executive
officers of certain subsidiaries. The amount of incentive
compensation is based on the consolidated results of the Company
and on the results and performance measures of various
subsidiaries. Compensation expense under these plans was
$5,553,000, $927,000 and $1,268,000 for the years ended
December 31, 1998, 1997 and 1996, respectively. Prior to the
mergers, certain businesses of the Commercial Printing Group
maintained profit sharing plans. Aggregate compensation expense
under these plans was $1,009,000 and $1,064,000 for the years
ended December 31, 1997 and 1996, respectively.
EMPLOYEE STOCK OWNERSHIP PLAN - See Note 11.
11. RESTRUCTURING AND OTHER UNUSUAL CHARGE
RESTRUCTURING CHARGES
In November 1998, the Company committed to implement a
restructuring program affecting the Envelopes and Commercial
Printing segments and recorded a pre-tax provision of $15,961,000,
of which $11,699,000 represents non-cash charges for asset write-
offs and impairments, primarily machinery and equipment. Impairment
losses were calculated based on the excess of the carrying amount
of the assets over the assets' fair values. The fair value of an asset
is generally determined based on recent comparable sales and independent
quotes from the used equipment market. The remaining $4,262,000 is for
severance, other termination benefits and property exit costs, including
noncancelable operating leases. These charges are a result of the
regionalization of the Company's U.S. Envelopes operations and
reorganization of the Company's Commercial Printing operations,
primarily in the Northwest. The Company also incurred $761,000 of
restructuring costs relating to the relocation of personnel,
equipment and inventory which under generally accepted accounting
principles cannot be accrued up front as part of the Company's
restructuring initiative. These costs are also included in
"Restructuring and other unusual charge"
F-25
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
in the consolidated statements of operations. Severance costs for
the 616 personnel included in the restructuring provision resulted
from regionalizing special manufacturing operations (490
personnel) and administrative functions (126 personnel) in various
locations of the Company's U.S. operations. Approximately 178
personnel had been terminated by the end of 1998 and the remaining
terminations are expected to be completed by mid 1999.
The following table summarizes the costs associated with the
restructuring program (in thousands):
<TABLE>
<CAPTION>
Asset Severance & Property
Write-Downs Related Costs Exit Costs Total
----------- ------------- ---------- -----
<S> <C> <C> <C> <C>
Envelopes
Initial reserve $ 8,912 $2,825 $ 500 $12,237
Utilized in 1998 8,912 433 26 9,371
------- ------ ------ -------
Balance 12/31/98 $ - $2,392 $ 474 $ 2,866
======= ====== ====== =======
Commercial Printing
Initial reserve $ 2,787 $ 82 $ 855 $ 3,724
Utilized in 1998 2,787 82 55 2,924
------- ------ ------ -------
Balance 12/31/98 $ - $ - $ 800 $ 800
======= ====== ====== =======
Total
Initial reserve $11,699 $2,907 $1,355 $15,961
Utilized in 1998 11,699 515 81 12,295
------- ------ ------ -------
Balance 12/31/98 $ - $2,392 $1,274 $ 3,666
======= ====== ====== =======
</TABLE>
EMPLOYEE STOCK OWNERSHIP PLAN ("ESOP")
In 1994, the Company established an ESOP for certain U.S.
employees. The ESOP borrowed monies from the Company to purchase
3,896,544 shares of Company common stock. These shares are held
in trust and are committed to be issued to employees' accounts in
the ESOP. Compensation expense under a leveraged ESOP is based on
the annual average market value of shares allocated to
participants; however, the tax deduction is based on the original
cost of the shares. This results in rising compensation expense as
the market value of the shares increases. In addition, a
significant portion of the compensation expense is not deductible
for tax purposes; thereby raising the Company's effective tax
rate. As a result, in October 1998, the ESOP debt was
extinguished and the Company committed to release all shares of
stock held by the ESOP to plan participants effectively
terminating the leveraged ESOP. This resulted in the commitment to
issue 1.4 million previously unallocated shares at a non-cash,
pre-tax cost of $12.2 million. The Company plans to replace this
leveraged ESOP with a non-leveraged ESOP.
The loan obligation of the ESOP was considered an unearned
employee benefit expense and, as such, was recorded as a reduction
of the Company's shareholders' equity. The Company's
contributions to the ESOP were used to repay the loan principal
and interest. Both the loan obligation and the unearned benefit
expense were reduced by the amount of loan principal repayments
made by the ESOP. Amounts charged to expense were $14,326,000
(including the $12.2 million one-time charge discussed above),
$2,614,000 and $1,973,000 for the years ended December 31, 1998,
1997 and 1996, respectively.
At December 31, 1998 and 1997 the ESOP held the following shares
of common stock:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Shares allocated to participant accounts 2,238,758 2,019,312
Shares committed to be allocated to participant
accounts in connection with current year contribution 1,657,786 219,446
Unallocated shares held for future years contributions - 1,657,786
--------- ---------
Total 3,896,544 3,896,544
========= =========
</TABLE>
F-26
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The fair market value of the unallocated shares of common stock
held for future contributions was $31,394,000 at December 31,
1997.
12. SEGMENT INFORMATION
In 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information" ("SFAS 131").
SFAS 131 establishes standards for the way that public business
enterprises report information about operating segments in annual
financial statements. Operating segments are components of an
enterprise about which separate financial information is available
that is evaluated regularly by the chief operating decision maker
in deciding how to allocate resources and in assessing
performance. Generally, financial information is required to be
reported on the basis that it is used internally for evaluating
segment performance and deciding how to allocate resources to
segments. Additionally, segment information for all periods has
been restated to reflect the mergers of the Commercial Printing
Group as discussed in Note 2.
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. Corporate expenses include the costs of maintaining a
corporate office. The Company does not allocate corporate
overhead, interest (income) expense, amortization expense, gains
and losses on disposal of assets or income taxes by segment in
assessing performance. Operating segments of the Company are
defined primarily by product line and consist of Envelopes,
Commercial Printing, Printing for Distributors and Labels. The
latter two segments were added via acquisitions in the first
quarter of 1998. The Envelopes segment prints and manufactures
envelopes designed to customer specifications. The Commercial
Printing segment specializes in printing advertising literature,
high-end catalogs, annual reports, calendars and computer
instruction books and provides a broad range of printing and
graphic arts services primarily to the advertising industry. The
Printing for Distributors segment prints a diverse line of custom
products addressing the business documents needs of small and
medium-sized end users. The Labels segment is a leading supplier
of labels to the North American food and beverage markets. Early
in 1999, the Company combined the High Impact Color Printing
segment with the Commercial Printing Group under one organization,
now called the Commercial Printing segment. Segment information
for all periods has been restated to reflect this combination.
Intersegment sales from 1996 through 1998 were insignificant.
Segment information as of and for the years ended December 31,
1998, 1997 and 1996 is presented below:
<TABLE>
<CAPTION>
DECEMBER 31,
(IN THOUSANDS) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
NET SALES:
Envelopes $ 795,881 $ 709,531 $638,153
Commercial Printing <Fa> 522,801 353,977 306,341
Printing for Distributors <Fa> 113,590 10,429 -
Labels 72,414 - -
---------- ---------- --------
Total $1,504,686 $1,073,937 $944,494
========== ========== ========
OPERATING INCOME (LOSS):
Envelopes $ 88,241 $ 82,212 $ 68,440
Commercial Printing <Fa> 34,519 20,273 15,341
Printing for Distributors <Fa> 8,943 532 -
Labels 4,280 - -
Corporate <Fc> (49,103) (17,189) (13,649)
---------- ---------- --------
Total $ 86,880 $ 85,828 $ 70,132
========== ========== ========
</TABLE>
F-27
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31,
(IN THOUSANDS) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
IDENTIFIABLE ASSETS:
Envelopes $ 674,773 $ 544,632 $398,993
Commercial Printing <Fa> 421,017 221,781 208,056
Printing for Distributors <Fa> 106,698 5,437 -
Labels 96,029 - -
Corporate <Fb> (170,561) (100,439) (55,063)
---------- --------- --------
Total $1,127,956 $ 671,411 $551,986
========== ========= ========
DEPRECIATION AND AMORTIZATION:
Envelopes $ 13,500 $ 11,249 $ 10,594
Commercial Printing <Fa> 12,231 10,254 11,183
Printing for Distributors <Fa> 1,830 365 -
Labels 3,117 - -
Corporate 8,962 4,505 4,172
---------- --------- --------
Total $ 39,640 $ 26,373 $ 25,949
========== ========= ========
CAPITAL EXPENDITURES:
Envelopes $ 44,450 $ 22,263 $ 13,142
Commercial Printing <Fa> 33,883 12,397 8,897
Printing for Distributors <Fa> 3,932 2,178 -
Labels 5,070 - -
---------- --------- --------
Total $ 87,335 $ 36,838 $ 22,039
========== ========= ========
<FN>
<Fa> As a result of the 1998 acquisition of Poser,
the 1997 results of IPC Graphics were
reclassified from Commercial Printing to the
Printing for Distributors segment.
<Fb> Corporate identifiable assets include inter-
company balances and adjustments for the
accounts receivable securitization and
certain significant operating leases. This
is done to reflect the return on assets
employed within each segment on a consistent
basis.
<Fc> The restructuring charges discussed in Note
11 and the merger costs related to segments, but
they were not considered by the chief operating
decision maker in deciding how to allocate
resources and thus, have been included in the
Corporate operating loss.
</TABLE>
Geographic information as of and for the years ended December 31,
1998, 1997 and 1996 is presented below:
<TABLE>
<CAPTION>
DECEMBER 31,
(IN THOUSANDS) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
NET SALES:
U.S. $1,350,197 $ 958,644 $857,566
Canada 154,489 115,293 86,928
---------- ---------- --------
Total $1,504,686 $1,073,937 $944,494
========== ========== ========
IDENTIFIABLE ASSETS:
U.S. $ 909,550 $ 576,209 $453,209
Canada 218,406 95,202 98,777
---------- ---------- --------
Total $1,127,956 $ 671,411 $551,986
========== ========== ========
</TABLE>
F-28
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. SUMMARY QUARTERLY FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS) (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED
12/31/98 9/30/98 6/30/98 3/31/98
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $431,750 $404,143 $350,059 $318,734
Gross profit 94,217 85,622 70,427 69,047
(Loss) income before
extraordinary item (7,714) 12,723 11,299 9,533
Extraordinary item (4,132) - - -
Net (loss) income $(11,846) $ 12,723 $ 11,299 $ 9,533
Earnings (loss) per share - basic:
(Loss) income per share before
extraordinary item $ (0.16) $ 0.27 $ 0.24 $ 0.22
Extraordinary item per share (0.09) - - -
Net (loss) income per share $ (0.25) $ 0.27 $ 0.24 $ 0.22
Earnings (loss) per share - diluted:
(Loss) income per share before
extraordinary item $ (0.16) $ 0.25 $ 0.22 $ 0.20
Extraordinary item per share (0.09) - - -
Net (loss) income per share $ (0.25) $ 0.25 $ 0.22 $ 0.20
<CAPTION>
QUARTER ENDED
12/31/97 9/30/97 6/30/97 3/31/97
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $291,229 $278,794 $250,474 $253,440
Gross profit 66,363 60,778 56,990 55,594
Income before extraordinary item 10,429 8,820 8,875 6,852
Extraordinary item (6,100) - - -
Net income $ 4,329 $ 8,820 $ 8,875 $ 6,852
Earnings (loss) per share - basic:
Income per share before
extraordinary item $ 0.26 $ 0.22 $ 0.22 $ 0.17
Extraordinary item per share (0.15) - - -
Net income per share $ 0.11 $ 0.22 $ 0.22 $ 0.17
Earnings (loss) per share - diluted:
Income per share before
extraordinary item $ 0.23 $ 0.21 $ 0.21 $ 0.17
Extraordinary item per share (0.13) - - -
Net income per share $ 0.10 $ 0.21 $ 0.21 $ 0.17
</TABLE>
The results for the three months ended March 31, 1998 have been
restated from those previously reported on Form 10-Q to reflect the
mergers discussed in Note 2.
See Notes 5 and 11 for discussion of material items which impacted the
results of the fourth quarter of 1998.
F-29
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
In December 1998, MWI ("Issuer") issued 8 3/4% Senior Subordinated
Notes ("Senior Notes") due in 2008 (see Note 5). The Senior Notes
are guaranteed by all of the U.S. subsidiaries (the "Guarantor
Subsidiaries") of MWI, all of which are wholly owned, and by Mail-
Well, Inc. ("Parent Guarantor"). The guarantees are joint and
several, full, complete and unconditional. There are no
restrictions on the ability of the Guarantor Subsidiaries to
transfer funds to MWI in the form of cash dividends, loans or
advances, other than ordinary legal restrictions under corporate
law, fraudulent transfer and bankruptcy laws.
The following condensed consolidating financial information
illustrates the composition of the Parent Guarantor, Issuer,
Guarantor Subsidiaries and non-guarantor subsidiaries. Management
has determined that separate complete financial statements would
not provide additional material information that would be useful
in assessing the financial composition of the Guarantor
Subsidiaries.
Investments in subsidiaries are accounted for under the equity
method, wherein the investor company's share of earnings and
income taxes applicable to the assumed distribution of such
earnings are included in net income. In addition, investments
increase in the amount of permanent contributions to subsidiaries
and decrease in the amount of distributions from subsidiaries.
The elimination entries eliminate the equity method investment in
subsidiaries and the equity in earnings of subsidiaries,
intercompany payables and receivables and other transactions
between subsidiaries.
F-30
<PAGE>
<PAGE>
<TABLE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
Year Ended December 31, 1998
(in thousands)
<CAPTION>
Combined Combined
Parent Guarantor Nonguarantor
Guarantor Issuer Subsidiaries Subsidiaries Elim. Consolidated
--------- ------ ------------ ------------ ----- ------------
<S> <C> <C> <C> <C> <C> <C>
NET SALES $ - $425,156 $925,041 $155,142 $ (653) $1,504,686
COST OF SALES - 337,468 737,318 111,240 (653) 1,185,373
------- -------- -------- -------- -------- ----------
GROSS PROFIT - 87,688 187,723 43,902 - 319,313
OTHER OPERATING COSTS
Selling, administrative and other 1,127 60,415 118,309 20,342 - 200,193
Restructuring and other unusual charge - 28,846 76 - - 28,922
Merger costs - - 3,318 - - 3,318
------- -------- -------- -------- -------- ----------
Total Other Operating Costs 1,127 89,261 121,703 20,342 - 232,433
------- -------- -------- -------- -------- ----------
OPERATING INCOME (LOSS) (1,127) (1,573) 66,020 23,560 - 86,880
OTHER (INCOME) EXPENSE
Interest expense 7,833 27,734 5,845 5,568 (8,853) 38,127
Other (income) expense (8,853) (435) (519) (82) 8,853 (1,036)
------- -------- -------- -------- -------- ----------
INCOME (LOSS) BEFORE INCOME
TAXES AND EQUITY IN
UNDISTRIBUTED EARNINGS OF
SUBSIDIARIES AND
EXTRAORDINARY ITEM (107) (28,872) 60,694 18,074 - 49,789
PROVISION FOR
INCOME TAXES - (13,887) 30,795 7,040 - 23,948
------- -------- -------- -------- -------- ----------
INCOME (LOSS) BEFORE EQUITY
IN UNDISTRIBUTED EARNINGS
OF SUBSIDIARIES AND
EXTRAORDINARY ITEM (107) (14,985) 29,899 11,034 - 25,841
EQUITY IN UNDISTRIBUTED
EARNINGS OF SUBSIDIARIES 21,816 40,933 11,034 - (73,783) -
------- -------- -------- -------- -------- ----------
INCOME BEFORE
EXTRAORDINARY ITEM 21,709 25,948 40,933 11,034 (73,783) (25,841)
EXTRAORDINARY ITEM - (4,132) - - - (4,132)
------- -------- -------- -------- -------- ----------
NET INCOME $21,709 $ 21,816 $ 40,933 $ 11,034 $(73,783) $ 21,709
======= ======== ======== ======== ======== ==========
</TABLE>
F-31
<PAGE>
<PAGE>
<TABLE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
Year Ended December 31, 1997
(in thousands)
<CAPTION>
Combined Combined
Parent Guarantor Nonguarantor
Guarantor Issuer Subsidiaries Subsidiaries Elim. Consolidated
--------- ------ ------------ ------------ ----- ------------
<S> <C> <C> <C> <C> <C> <C>
NET SALES $ - $369,394 $589,250 $115,293 $ - $1,073,937
COST OF SALES - 290,671 463,817 79,724 - 834,212
------- -------- -------- -------- -------- ----------
GROSS PROFIT - 78,723 125,433 35,569 - 239,725
OTHER OPERATING COSTS 269 56,965 79,403 17,260 - 153,897
------- -------- -------- -------- -------- ----------
OPERATING INCOME (LOSS) (269) 21,758 46,030 18,309 - 85,828
OTHER (INCOME) EXPENSE
Interest expense 634 16,332 9,672 3,519 - 30,157
Other (income) expense (4) (761) (1,031) (292) - (2,088)
------- -------- -------- -------- -------- ---------
INCOME (LOSS) BEFORE INCOME
TAXES AND EQUITY IN
UNDISTRIBUTED EARNINGS OF
SUBSIDIARIES AND
EXTRAORDINARY ITEM (899) 6,187 37,389 15,082 - 57,759
PROVISION FOR
INCOME TAXES - 2,438 14,358 5,987 - 22,783
------- -------- -------- -------- -------- ----------
INCOME (LOSS) BEFORE EQUITY
IN UNDISTRIBUTED EARNINGS
OF SUBSIDIARIES AND
EXTRAORDINARY ITEM (899) 3,749 23,031 9,095 - 34,976
EQUITY IN UNDISTRIBUTED
EARNINGS OF SUBSIDIARIES 29,775 28,791 8,202 - (66,768) -
------- -------- -------- -------- -------- ----------
INCOME BEFORE
EXTRAORDINARY ITEM 28,876 32,540 31,233 9,095 (66,768) 34,976
EXTRAORDINARY ITEM - (2,765) (2,442) (893) - (6,100)
------- -------- -------- -------- -------- ----------
NET INCOME $28,876 $ 29,775 $ 28,791 $ 8,202 $(66,768) $ 28,876
======= ======== ======== ======== ======== ==========
</TABLE>
F-32
<PAGE>
<PAGE>
<TABLE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
Year Ended December 31, 1996
(in thousands)
<CAPTION>
Combined Combined
Parent Guarantor Nonguarantor
Guarantor Issuer Subsidiaries Subsidiaries Elim. Consolidated
--------- ------ ------------ ------------ ----- ------------
<S> <C> <C> <C> <C> <C> <C>
NET SALES $ - $349,038 $508,528 $86,928 $ - $944,494
COST OF SALES - 277,056 402,589 61,020 - 740,665
------- -------- -------- ------- -------- --------
GROSS PROFIT - 71,982 105,939 25,908 - 203,829
OTHER OPERATING COSTS 128 51,306 69,275 12,988 - 133,697
------- -------- -------- ------- -------- --------
OPERATING INCOME (LOSS) (128) 20,676 36,664 12,920 - 70,132
OTHER (INCOME) EXPENSE
Interest expense - 27,328 3,289 4,252 - 34,869
Other (income) expense (1) 140 8 331 - 478
------- -------- -------- ------- -------- --------
INCOME (LOSS) BEFORE INCOME
TAXES AND EQUITY IN
UNDISTRIBUTED EARNINGS OF
SUBSIDIARIES (127) (6,792) 33,367 8,337 - 34,785
PROVISION FOR
INCOME TAXES 1 (2,662) 12,675 3,613 - 13,627
------- -------- -------- ------- -------- --------
INCOME (LOSS) BEFORE
EQUITY IN UNDISTRIBUTED
EARNINGS OF SUBSIDIARIES (128) (4,130) 20,692 4,724 - 21,158
EQUITY IN UNDISTRIBUTED
EARNINGS OF SUBSIDIARIES 21,286 25,416 4,724 - (51,426) -
------- -------- -------- ------- -------- --------
NET INCOME $21,158 $ 21,286 $ 25,416 $ 4,724 $(51,426) $ 21,158
======= ======== ======== ======= ======== ========
</TABLE>
F-33
<PAGE>
<PAGE>
<TABLE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF FINANCIAL POSITION
December 31, 1998
(in thousands)
<CAPTION>
Combined Combined
Parent Guarantor Nonguarantor
Guarantor Issuer Subsidiaries Subsidiaries Elim. Consolidated
--------- ------ ------------ ------------ ----- ------------
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ - $ 6,952 $ (7,311) $ 1,734 $ - $ 1,375
Receivables, net - 14,308 95,847 25,768 - 135,923
Investment in accounts receivable
Securitization - 5,412 36,257 - 41,669
Accounts receivable - other - 47,889 18,308 1,112 (43,908) 23,401
Inventories, net - 39,267 60,286 14,578 - 114,131
Note receivable from Issuer 147,436 - - - (147,436) -
Other current assets 116 8,515 7,935 2,785 - 19,351
-------- -------- -------- -------- ----------- ----------
Total current assets 147,552 122,343 211,322 45,977 (191,344) 335,850
INVESTMENT IN SUBSIDIARIES 301,447 609,661 76,104 - (987,212) -
PROPERTY, PLANT AND
EQUIPMENT, NET - 121,733 249,002 66,997 - 437,732
GOODWILL, NET - 59,900 210,067 52,182 - 322,149
OTHER ASSETS, NET 3,902 13,111 15,155 57 - 32,225
-------- -------- -------- -------- ----------- ----------
TOTAL $452,901 $926,748 $761,650 $165,213 $(1,178,556) $1,127,956
======== ======== ======== ======== =========== ==========
CURRENT LIABILITIES
Accounts payable $ - $ 18,171 $ 56,441 $ 12,411 $ - $ 87,023
Accrued compensation and vacation - 12,320 23,926 5,155 - 41,401
Other current liabilities 1,476 26,759 27,668 35,197 (43,908) 47,192
Note payable to Parent - 147,436 - - (147,436) -
Current portion of long-term debt
and capital leases - 5 2,796 5,235 - 8,036
-------- -------- -------- -------- ----------- ----------
Total current liabilities 1,476 204,691 110,831 57,998 (191,344) 183,652
LONG-TERM DEBT AND
CAPITAL LEASES 152,050 393,004 15,415 22,958 - 583,427
DEFERRED INCOME TAXES - 19,890 20,078 7,566 - 47,534
OTHER LONG-TERM
LIABILITIES - 4,216 5,665 587 - 10,468
-------- -------- -------- -------- ----------- ----------
Total liabilities 153,526 680,800 92,990 89,109 (191,344) 825,081
MINORITY INTEREST - 3,500 - - - 3,500
SHAREHOLDERS' EQUITY 299,375 301,447 609,661 76,104 (987,212) 299,375
-------- -------- -------- -------- ----------- ----------
TOTAL $452,901 $926,748 $761,650 $165,213 $(1,178,556) $1,127,956
======== ======== ======== ======== =========== ==========
</TABLE>
F-34
<PAGE>
<PAGE>
<TABLE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF FINANCIAL POSITION
December 31, 1997
(in thousands)
<CAPTION>
Combined Combined
Parent Guarantor Nonguarantor
Guarantor Issuer Subsidiaries Subsidiaries Elim. Consolidated
--------- ------ ------------ ------------ ----- ------------
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 256 $ 41,483 $ (920) $ 92 $ - $ 40,911
Receivables, net - 6,393 42,296 16,269 - 64,958
Investment in accounts receivable
securitization - 3,097 19,222 - - 22,319
Accounts receivable - other - 6,080 3,375 852 - 10,307
Inventories, net - 41,472 34,066 10,730 - 86,268
Note receivable from Issuer 147,436 - - - (147,436) -
Other current assets 129 5,418 2,921 1,667 - 10,135
-------- -------- -------- ------- --------- --------
Total current assets 147,821 103,943 100,960 29,610 (147,436) 234,898
INVESTMENT IN SUBSIDIARY 174,226 259,599 20,680 - (461,466) -
PROPERTY, PLANT AND
EQUIPMENT, NET - 110,290 124,170 28,337 - 262,797
GOODWILL, NET - 45,192 72,685 36,050 - 153,927
OTHER ASSETS, NET 4,927 4,865 9,997 - - 19,789
-------- -------- -------- ------- --------- --------
TOTAL $326,974 $523,889 $328,492 $93,997 $(608,902) $671,411
======== ======== ======== ======= ========= ========
CURRENT LIABILITIES
Accounts payable $ - $ 20,320 $ 29,170 $ 4,151 $ - $ 53,641
Accrued compensation and vacation - 13,675 15,428 3,626 - 32,729
Other current liabilities 3,104 62,565 (37,868) 4,752 - 32,553
Note payable to Parent - 147,436 - - (147,436) -
Current portion of long-term debt
and capital leases - 79 9,725 729 - 10,533
-------- -------- -------- ------- --------- --------
Total current liabilities 3,104 244,075 16,455 13,258 (147,436) 129,456
LONG-TERM DEBT AND
CAPITAL LEASES 152,050 85,008 37,879 55,420 - 330,357
OTHER LONG-TERM
LIABILITIES - 17,080 14,559 4,639 - 36,278
-------- -------- -------- ------- --------- --------
Total liabilities 155,154 353,124 61,932 73,317 - 496,091
MINORITY INTEREST - 3,500 - - - 3,500
SHAREHOLDERS' EQUITY 171,820 174,226 259,599 20,680 (461,466) 171,820
-------- -------- -------- ------- --------- --------
TOTAL $326,974 $523,889 $328,492 $93,997 $(608,902) $671,411
======== ======== ======== ======= ========= ========
</TABLE>
F-35
<PAGE>
<PAGE>
<TABLE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
December 31, 1998
(in thousands)
<CAPTION>
Combined Combined
Parent Guarantor Nonguarantor
Guarantor Issuer Subsidiaries Subsidiaries Elim. Consolidated
--------- ------ ------------ ------------ ----- ------------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES $ 1,631 $ 76,422 $ 45,781 $ (30,756) $ - $ 93,078
CASH FLOWS FROM INVESTING
ACTIVITIES
Acquisition costs, net of cash
acquired - (9,390) (308,293) (33,920) - (351,603)
Capital expenditures - (25,327) (48,035) (13,973) - (87,335)
Investment in subsidiaries (92,336) (310,000) (34,000) - 436,336 -
Other investing activities (1,887) 10,760 233 555 - 9,661
------- --------- --------- --------- --------- ---------
Net cash used in investing
activities (94,223) (333,957) (390,095) (47,338) 436,336 (429,277)
-------- --------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES
Changes due to accounts receivable
securitization, net - (2,315) (17,035) - - (19,350)
Net proceeds from common
stock issuance 92,336 - - - - 92,336
Proceeds from long term debt - 592,556 1,067 205,488 - 799,111
Repayments of long-term debt-
and capital lease obligations - (358,139) (44,621) (153,976) - (556,736)
Investment by parent - - 402,336 34,000 (436,336) -
Other financing activities - (9,098) (3,824) - - (12,922)
-------- --------- --------- --------- --------- ---------
Net cash provided by financing
activities 92,336 223,004 337,923 85,512 (436,336) 302,439
EFFECT OF EXCHANGE RATE
CHANGES ON CASH - - - (5,776) - (5,776)
-------- --------- --------- --------- --------- ---------
NET CHANGE IN CASH AND
CASH EQUIVALENTS (256) (34,531) (6,391) 1,642 - (39,536)
BALANCE AT BEGINNING
OF YEAR 256 41,483 (920) 92 - 40,911
-------- --------- --------- --------- --------- ---------
BALANCE AT END OF YEAR $ - $ 6,952 $ (7,311) $ 1,734 $ - $ 1,375
======== ========= ========= ========= ========= =========
</TABLE>
F-36
<PAGE>
<PAGE>
<TABLE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
December 31, 1997
(in thousands)
<CAPTION>
Combined Combined
Parent Guarantor Nonguarantor
Guarantor Issuer Subsidiaries Subsidiaries Elim. Consolidated
--------- ------ ------------ ------------ ----- ------------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES $ (242) $ 51,016 $ 33,041 $ 10,594 $ - $ 94,409
CASH FLOWS FROM INVESTING
ACTIVITIES
Acquisition costs, net of cash
acquired - (20,979) (61,878) (17) - (82,874)
Capital expenditures - (9,496) (25,148) (2,194) - (36,838)
Loan to Issuer (147,436) - - - 147,436 -
Investment in subsidiaries - (62,000) - - 62,000 -
Other investing activities 252 (185) 1,346 404 - 1,817
--------- --------- -------- -------- --------- ---------
Net cash used in investing
activities (147,184) (92,660) (85,680) (1,807) 209,436 (117,895)
--------- --------- -------- -------- --------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES
Changes due to accounts receivable
securitization, net - (3,715) (9,099) - - (12,814)
Net proceeds from common
stock issuance 201 - 1,001 - - 1,202
Proceeds from long term debt 147,436 67,197 12,419 60,000 - 287,052
Repayments of long-term debt-
and capital lease obligations - (137,401) (11,990) (69,734) - (219,125)
Loan from Parent Guarantor - 147,436 - - (147,436) -
Investment by parent - - 62,000 - (62,000) -
Other financing activities - - (5,254) - - (5,254)
--------- --------- -------- -------- --------- ---------
Net cash provided by (used in)
financing activities 147,637 73,517 49,077 (9,734) (209,436) 51,061
EFFECT OF EXCHANGE RATE
CHANGES ON CASH - - - 1,039 - 1,039
--------- --------- -------- -------- --------- ---------
NET CHANGE IN CASH AND
CASH EQUIVALENTS 211 31,873 (3,562) 92 - 28,614
BALANCE AT BEGINNING
OF YEAR 45 9,610 2,642 - - 12,297
--------- --------- -------- -------- --------- ---------
BALANCE AT END OF YEAR $ 256 $ 41,483 $ (920) $ 92 $ - $ 40,911
========= ========= ======== ======== ========= =========
</TABLE>
F-37
<PAGE>
<PAGE>
<TABLE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
December 31, 1996
(in thousands)
<CAPTION>
Combined Combined
Parent Guarantor Nonguarantor
Guarantor Issuer Subsidiaries Subsidiaries Elim. Consolidated
--------- ------ ------------ ------------ ----- ------------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES $(14) $ 124,494 $(17,322) $(11,840) $ - $ 95,318
CASH FLOWS FROM INVESTING
ACTIVITIES
Acquisition costs, net of cash
acquired - (27,710) (16,058) (20,548) - (64,316)
Capital expenditures - (7,896) (12,432) (1,711) - (22,039)
Investment in subsidiaries - (16,000) (21,000) - 37,000 -
Other investing activities - 33,421 1,265 668 - 35,354
---- --------- -------- -------- -------- ---------
Net cash used in
investing activities - (18,185) (48,225) (21,591) 37,000 (51,001)
---- --------- -------- -------- -------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES
Changes due to accounts receivable
securitization, net - 1,238 60,257 - - 61,495
Net proceeds from common
stock issuance 40 - 254 - - 294
Proceeds from long term debt - 254,486 4,477 65,000 - 323,963
Repayments of long-term debt
and capital lease obligations - (350,623) (13,296) (52,287) - (416,206)
Investment by parent - - 16,000 21,000 (37,000) -
Other financing activities - (1,800) (1,862) - - (3,662)
---- --------- -------- -------- -------- ---------
Net cash provided by (used in)
financing activities 40 (96,699) 65,830 33,713 (37,000) (34,116)
EFFECT OF EXCHANGE RATE
CHANGES ON CASH - - - (282) - (282)
---- --------- -------- -------- -------- ---------
NET CHANGE IN CASH AND
CASH EQUIVALENTS 26 9,610 283 - - 9,919
BALANCE AT BEGINNING
OF YEAR 19 - 2,359 - - 2,378
---- --------- -------- -------- -------- ---------
BALANCE AT END OF YEAR $ 45 $ 9,610 $ 2,642 $ - $ - $ 12,297
==== ========= ======== ======== ======== =========
</TABLE>
F-38
<PAGE>
<PAGE>
<TABLE>
MAIL-WELL, INC. (PARENT-ONLY FINANCIAL STATEMENTS) SCHEDULE I
CONDENSED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
- ------------------------------------------------------------------------------------------------
<CAPTION>
ASSETS DECEMBER 31,
1998 1997
---- ----
<S> <C> <C>
CURRENT ASSETS
Cash $ - $ 256
Other current assets 116 129
Note receivable from Mail-Well I Corporation 147,436 147,436
-------- --------
Total current assets 147,552 147,821
INVESTMENT IN SUBSIDIARY 301,447 174,226
INTANGIBLE ASSETS (net of accumulated amortization
of $1,109 and $150) 3,902 4,772
OTHER ASSETS - 155
-------- --------
TOTAL $452,901 $326,974
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Payable to subsidiary $ 231 $ 2,470
Accrued interest 1,245 634
-------- --------
Total current liabilities 1,476 3,104
CONVERTIBLE SUBORDINATED NOTES 152,050 152,050
-------- --------
Total liabilities 153,526 155,154
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY 299,375 171,820
-------- --------
TOTAL $452,901 $326,974
======== ========
See notes to condensed financial statements.
</TABLE>
F-39
<PAGE>
<PAGE>
<TABLE>
MAIL-WELL, INC. (PARENT-ONLY FINANCIAL STATEMENTS) SCHEDULE I
CONDENSED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------------
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
OTHER OPERATING COSTS
Administrative $ 168 $ 172 $ 109
Amortization 959 97 19
------- ------- -------
Total other operating costs 1,127 269 128
------- ------- -------
OPERATING LOSS (1,127) (269) (128)
OTHER (INCOME) EXPENSE
Interest expense-debt 7,833 634 -
Interest income from subsidiary (8,846) - -
Other income (7) (4) (1)
------- ------- -------
LOSS BEFORE INCOME TAXES (107) (899) (127)
------- ------- -------
PROVISION FOR INCOME TAXES
Current - - -
Deferred - - 1
------- ------- -------
LOSS BEFORE EQUITY IN
UNDISTRIBUTED EARNINGS OF SUBSIDIARY (107) (899) (128)
EQUITY IN UNDISTRIBUTED EARNINGS
OF SUBSIDIARY 21,816 29,775 21,286
------- ------- -------
NET INCOME $21,709 $28,876 $21,158
======= ======= =======
See notes to condensed financial statements.
</TABLE>
F-40
<PAGE>
<PAGE>
<TABLE>
MAIL-WELL, INC. (PARENT-ONLY FINANCIAL STATEMENTS) SCHEDULE I
CONDENSED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 21,709 $ 28,876 $ 21,158
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Equity in undistributed earnings of subsidiary (21,816) (29,775) (21,286)
Amortization 959 97 19
Deferred tax provision - - 1
Changes in operating assets and liabilities, net of effects
of acquired businesses:
Other working capital 624 586 223
Other assets 155 (26) (129)
-------- --------- --------
Net cash provided by (used in) operating activities 1,631 (242) (14)
-------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in subsidiary (92,336) - -
Other activity with subsidiary, net (1,887) 252 -
Issuance of note receivable from subsidiary - (147,436) -
-------- --------- --------
Net cash used in investing activities (94,223) (147,184) -
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from common stock issuance 92,336 201 40
Proceeds from issuance of convertible subordinated notes - 147,436 -
-------- --------- --------
Net cash provided by financing activities 92,336 147,637 40
-------- --------- --------
NET CHANGE IN CASH (256) 211 26
BALANCE AT BEGINNING OF YEAR 256 45 19
-------- --------- --------
BALANCE AT END OF YEAR $ - $ 256 $ 45
======== ========= ========
Stock issued for acquisitions $ 8,780 $ 1,000 $ -
See notes to condensed financial statements.
</TABLE>
F-41
<PAGE>
<PAGE>
MAIL-WELL, INC. (PARENT-ONLY FINANCIAL STATEMENTS) SCHEDULE I
CONDENSED SUPPLEMENTAL FINANCIAL INFORMATION OF THE REGISTRANT
NOTES TO CONDENSED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The financial statements of Mail-
Well, Inc. (the "Company") reflect the investment in Mail-Well I
Corporation ("M-W Corp."), a wholly-owned subsidiary, using the
equity method.
INCOME TAXES - The provision for income taxes is based on income
recognized for financial statement purposes. Deferred income
taxes are recognized for the effects of temporary differences
between such income and that recognized for income tax purposes.
The Company files a consolidated U.S. income tax return with M-W
Corp.
RECLASSIFICATIONS - Certain reclassifications have been made to the
1996 and 1997 financial statements to conform to the 1998 presentation.
2. CONSOLIDATED FINANCIAL STATEMENTS
Reference is made to the Consolidated Financial Statements and
related Notes of Mail-Well, Inc. and Subsidiaries included
elsewhere herein for additional information.
3. MERGERS
Effective May 30, 1998, the Company completed its mergers with
several commercial printing businesses. Reference is made to Note
2 to the consolidated Financial Statements. Pursuant to the
merger agreements, each of the Commercial Printing Group
businesses was merged with a subsidiary of the Company in exchange
for shares of the Company's common stock. Each of the mergers has
been accounted for under the pooling of interests method and,
accordingly, these parent-only financial statements have been
restated to include the investment in the merged businesses.
4. NOTES RECEIVABLE
During 1997, the Company loaned M-W Corp. $147,436,000 which is
payable on demand and earns interest at 6% payable annually. The note
is unsecured and is subordinate in right of payment to any and all
other existing and future indebtedness of the Company.
5. DEBT AND GUARANTEES
Information on the debt of the Company is disclosed in Note 5 of
the Notes to Consolidated Financial Statements of Mail-Well, Inc.
and Subsidiaries included elsewhere herein. The Company has
guaranteed all debt of M-W Corp. ($439.4 million outstanding at
December 31, 1998, including current maturities) and certain other
obligations arising in the ordinary course of business. The
aggregate amounts of M-W Corp.'s debt maturities for the five
years following 1998 are: 1999 - $8,036,000; 2000 - $13,566,000;
2001 - $7,366,000; 2002 - $7,981,000; 2003 - $98,096,000; and
$304,368,000 thereafter.
6. DIVIDENDS RECEIVED
No dividends have been received from M-W Corp. since the Company's
inception. M-W Corp.'s ability to declare dividends to the
Company is restricted by the terms of its bank credit agreements
and the indenture relating to M-W Corp.'s Senior Subordinated
Notes.
* * * * *
F-42
<PAGE>
<PAGE>
<TABLE>
MAIL-WELL, INC. AND SUBSIDIARIES SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS <F1>
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(AMOUNTS IN THOUSANDS)
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $ 3,795 $ 3,734 $ 2,671
Charged to costs and expenses 3,425 1,454 2,590
Charged to other accounts <F2> 3,065 <F3> 909 <F4> 1,236 <F5>
Deductions <F6> (3,558) (2,302) (2,763)
------- ------- -------
Balance at end of year $ 6,727 $ 3,795 $ 3,734
======= ======= =======
<FN>
<F1> Schedule has been restated to reflect the mergers of the
Commercial Printing Group companies (see Note 2 to the
consolidated financial statements included elsewhere herein)
accounted for under the pooling of interests method.
<F2> Recoveries of accounts previously written off.
<F3> Includes the beginning balances of ($2,910) of the allowance for
doubtful accounts for the companies acquired in 1998.
<F4> Includes the beginning balances ($643) of the allowance for
doubtful accounts for the companies acquired in 1997.
<F5> Includes the beginning balances ($801) of the allowance for
doubtful accounts for the companies acquired in 1996.
<F6> Accounts written off.
</TABLE>
F-43
<PAGE>
<PAGE>
WE HAVE NOT AUTHORIZED ANYONE TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ABOUT MAIL-WELL I CORPORATION THAT IS DIFFERENT FROM, OR
IN ADDITION TO, THAT CONTAINED IN THIS PROSPECTUS. THEREFORE, IF ANYONE
DOES GIVE YOU INFORMATION OF THIS SORT, YOU SHOULD NOT RELY ON IT. IF
YOU ARE IN A JURISDICTION WHERE AN OFFER TO SELL, OR THE SOLICITATION OF
AN OFFER TO BUY, ANY OF THE SECURITIES OFFERED BY THIS PROSPECTUS IS
UNLAWFUL, OR IF YOU ARE A PERSON TO WHOM IT IS UNLAWFUL TO DIRECT THESE
KINDS OF ACTIVITIES, THE OFFER PRESENTED IN THIS PROSPECTUS DOES NOT
EXTEND TO YOU. THIS PROSPECTUS SPEAKS ONLY AS OF THE DATE OF THIS
PROSPECTUS UNLESS THE INFORMATION SPECIFICALLY INDICATES THAT ANOTHER
DATE APPLIES.
MAIL-WELL I CORPORATION
8 3/4% Series B Senior Subordinated Notes
due 2008 offered in exchange for outstanding
8 3/4% Senior Subordinated Notes due 2008
The exchange offer will expire at 5:00 p.m., New York City time, on
____________, 1999, unless we extend it; provided we may not extend the
exchange offer beyond ____________, 1999.
___________________
P R O S P E C T U S
___________________
April __, 1999
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law ("DGCL")
empowers a Delaware corporation to indemnify any person who was or is,
or is threatened to be made, a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right
of such corporation), by reason of the fact that such person is or was a
director, officer, employee or agent of such corporation, or is or was
serving at the request of such corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise. The indemnity may include expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such
action, suit or proceeding, if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe such person's
conduct was unlawful.
Section 145 of the DGCL also provides that a Delaware corporation
may indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit by
or in the right of the corporation to procure a judgment in its favor by
reason of the fact that the person is or was a director, officer,
employee or agent of such corporation, or is or was serving at the
request of such corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise. The indemnity may include expenses (including attorneys'
fees) actually and reasonably incurred by the person in connection with
the defense or settlement of such action or suit if the person acted in
good faith and in a manner the person reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification is permitted without judicial approval if the person is
adjudged to be liable to the corporation. Where an person is successful
on the merits or otherwise in the defense of any action referred to
above, the corporation must indemnify such person against the expenses
which such person actually and reasonably incurred.
Mail-Well I Corporation's Certificate of Incorporation provides
that Mail-Well I Corporation shall indemnify its officers and directors,
and may indemnify its employees and agents, to the fullest extent
permitted by the DGCL.
Section 102(b)(7) of the DGCL permits a corporation's certificate
of incorporation to include a provision eliminating or limiting the
personal liability of a director to the corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director,
provided that such provision shall not eliminate or limit the liability
of a director for: (i) any breach of the director's duty of loyalty to
the corporation or its stockholders; (ii) acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of
law; (iii) transactions under Section 174 of the DGCL (unlawful payment
of dividends or unlawful stock purchases or redemptions) or (iv) any
transaction from which the director derived an improper personal
benefit.
Mail-Well I Corporation's Certificate of Incorporation provides
that a director shall not be liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent such exemption is not permitted under the
DGCL.
II-1
<PAGE>
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
Exhibit
Number Description of Exhibit
- ------- ----------------------
3.1 Certificate of Incorporation of Mail-Well Corporation--
incorporated by reference from Mail-Well I Corporation's
Form S-4 filed March 15, 1999 (Reg. No. 333-74409).
3.2 Certificate of Amendment of Certificate of Incorporation
of Mail-Well Corporation--incorporated by reference from
Mail-Well I Corporation's Form S-4 filed March 15, 1999
(Reg. No. 333-74409).
3.3 Certificate of Correction Filed to Correct Certain Error in
the Certificate of Amendment of Mail-Well 1 Corporation
Filed in the Office of the Secretary of State of Delaware on
September 11, 1995--incorporated by reference from Mail-Well I
Corporation's Form S-4 filed March 15, 1999 (Reg. No. 333-74409).
3.4 Certificate of Change of Registered Agent and Registered
Office--incorporated by reference from Mail-Well I Corporation's
Form S-4 filed March 15, 1999 (Reg. No. 333-74409).
3.5 Bylaws of Mail-Well I Corporation--incorporated by reference
from Mail-Well I Corporation's Form S-4 filed March 15, 1999
(Reg. No. 333-74409).
4.1 Form of Indenture between Mail-Well, Inc. and The Bank of
New York, as Trustee, dated November 1997, relating to Mail-
Well, Inc.'s $152,050,000 aggregate principal amount of 5%
Convertible Subordinated Notes due 2002--incorporated by
reference from Exhibit 4.2 to Mail-Well, Inc.'s Amendment
No. 2 to Form S-3 dated November 10, 1997 (Reg. No. 333-
36337).
4.2 Form of Supplemental Indenture between Mail-Well, Inc. and
The Bank of New York, as Trustee, dated November 1997,
relating to Mail-Well, Inc.'s $152,050,000 aggregate
principal amount of 5% Convertible Subordinated Notes due
2002 and Form of Convertible Note--incorporated by reference
from Exhibit 4.5 to Mail-Well, Inc.'s Amendment No. 2 to
Form S-3 dated November 10, 1997 (Reg. No. 333-36337).
4.3 Indenture dated as of December 16, 1998 between Mail-Well I
Corporation and State Street Bank and Trust Company, as
Trustee, relating to Mail-Well I Corporation's $300,000,000
aggregate principal amount of 8 3/4% Senior Subordinated Notes
due 2008--incorporated by reference from Exhibit 4.4 to
Mail-Well, Inc.'s Annual Report on Form 10-K for the year
ended December 31, 1998, File No. 1-12551.
4.4 Form of Senior Subordinated Note--incorporated by reference
from Exhibit 4.5 to Mail-Well, Inc.'s Annual Report on Form
10-K for the year ended December 31, 1998, File No. 1-12551.
5<F*> Opinion of Rothgerber Johnson & Lyons LLP re: legality of
Mail-Well I Corporation's $300,000,000 aggregate principal
amount of 8 3/4% Senior Subordinated Notes due 2008.
8 Opinion of Rothgerber Johnson & Lyons LLP re: tax matters--
incorporated by reference from Mail-Well I Corporation's
Form S-4 filed March 15, 1999 (Reg. No. 333-74409).
II-2
<PAGE>
<PAGE>
10.1 Form of Indemnity Agreement between Mail-Well, Inc. and each
of its officers and directors--incorporated by reference
from Exhibit 10.17 of Mail-Well, Inc.'s Registration
Statement on Form S-1 dated March 25, 1994.
10.2 Form of Indemnity Agreement between Mail-Well I Corporation
and each of its officers and directors--incorporated by
reference from Exhibit 10.18 of Mail-Well, Inc.'s
Registration Statement on Form S-1 dated March 25, 1994.
10.3 Form of M-W Corp. Employee Stock Ownership Plan effective as
of February 23, 1994 and related Employee Stock Ownership
Plan Trust Agreement--incorporated by reference from Exhibit
10.19 of Mail-Well, Inc.'s Registration Statement on Form S-
1 dated March 25, 1994.
10.4 Form of M-W Corp. 401(k) Savings Retirement Plan--
incorporated by reference from Exhibit 10.20 of Mail-Well,
Inc.'s Registration Statement on Form S-1 dated March 25,
1994.
10.5 Mail-Well, Inc. 1994 Stock Option Plan, as amended on May 7,
1997--incorporated by reference from Exhibit 10.56 of
Mail-Well, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997.
10.6 Form of Mail-Well, Inc. Incentive Stock Option Agreement--
incorporated by reference from Exhibit 10.22 of Mail-Well,
Inc.'s Registration Statement on Form S-1 dated March 25,
1994.
10.7 Form of Mail-Well, Inc. Nonqualified Stock Option
Agreement--incorporated by from Exhibit 10.23 of Mail-Well,
Inc.'s Registration Statement on Form S-1 dated March 25,
1994.
10.8 Purchase and Contribution Agreement dated as of November 15,
1996, between Mail-Well I Corporation, Wisco Envelope Corp.,
Pavey Envelope and Tag Corp., Mail-Well West, Inc., Graphic
Arts Center, Inc., Wisco III, L.L.C., Supremex, Inc.,
Innova Envelope, Inc., as Sellers, and Mail-Well Trade
Receivables Corp., as Purchaser--incorporated by reference
from Exhibit 10.39 of Mail-Well, Inc.'s Annual Report on
Form 10-K for the year ended December 31, 1996.
10.9 Mail-Well Receivables Master Trust Pooling and Servicing
Agreement dated as of November 15, 1996 by and between Mail-
Well Trade Receivables Corporation, Seller, Mail-Well I
Corporation, Servicer, and Norwest Bank Colorado, National
Association, Trustee--incorporated by reference from Exhibit
10.40 of Mail-Well I Corporation's Annual Report on Form
10-K for the year ended December 31, 1996.
10.10 Series 1996-1 Supplement dated as of November 15, 1996, to
Pooling and Servicing Agreement, dated as of November 15,
1996, by and between Mail-Well Trade Receivables
Corporation, Seller, Mail-Well I Corporation, Servicer, and
Norwest Bank Colorado, National Association, as Trustee on
behalf of the Series 1996-1 Certificateholders--incorporated
by reference from Exhibit 10.41 of Mail-Well, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 1996.
II-3
<PAGE>
<PAGE>
10.11 Series 1996-1 Certificate Purchase Agreement dated as of
November 15, 1996 among Mail-Well Trade Receivables
Corporation, as Seller, Corporate Receivables Corporation,
as Purchaser, Norwest Bank Colorado, National Association,
as Trustee, and Mail-Well I Corporation, as Servicer--
incorporated by reference from Exhibit 10.42 of Mail-Well,
Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1996.
10.12 Intercreditor Agreement dated as of November 15, 1996, by
and among Citicorp North America, Inc., as Securitization
Company Agent, Banque Paribas, New York Branch, as Liquidity
Agent, Banque Paribas, as Credit Lenders' Agent, Norwest
Bank Colorado, National Association, as Trustee, Mail-Well
Trade Receivables Corporation, as Servicer, originator and
Mail-Well Credit Borrower, Supremex, Inc., as the Supremex
Credit Borrower and the other parties hereto--incorporated
by reference from Exhibit 10.43 of Mail-Well, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 1996.
10.13 Series 1996-1 Asset Purchase Agreement among Corporate
Receivables Corporation, the Liquidity Providers Parties
hereto, Citicorp North America, Inc., as Securitization
Company Agent, Banque Paribas, New York Branch, as Liquidity
Agent, and Norwest Bank Colorado, National Association, as
trustee, dated as of November 15, 1996--incorporated by
reference from Exhibit 10.44 of Mail-Well, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 1996.
10.14 Mail-Well, Inc. 1997 Non-Qualified Stock Option Plan--
incorporated by reference from exhibit 10.54 of Mail-Well,
Inc.'s Form 10-Q for the quarter ended March 31, 1997.
10.15 1997 Non-Qualified Stock Option Agreement--incorporated by
reference from exhibit 10.54 of Mail-Well, Inc.'s Form 10-Q
for the quarter ended March 31, 1997.
10.16 Mail-Well, Inc. 1998 Incentive Stock Option Plan--
incorporated by reference from Mail-Well, Inc.'s definitive
proxy statement on Schedule 14A for the regular annual
meeting of shareholders held April 29, 1998.
10.17 Mail-Well, Inc. 1998 Incentive Stock Option Plan Incentive
Stock Option Agreement--incorporated by reference from Mail-
Well, Inc.'s definitive proxy statement on Schedule 14A for
the regular annual meeting of shareholders held April 29,
1998.
10.18 Credit Agreement dated as of March 16, 1998, among
Mail-Well, Inc., certain Guarantors, Bank of America
National Trust and Savings Association, as Agent and other
financial institutions party thereto--incorporated by
reference from Exhibit 10.60 of Mail-Well, Inc.'s Form 10-Q
for the quarter ended March 31, 1998.
10.19 Credit Agreement dated as of March 16, 1998, among Supremex
Inc., certain Guarantors, Bank of America National Trust and
Savings Association, as Agent and other financial
institutions party thereto--incorporated by reference from
Exhibit 10.61 to Mail-Well, Inc.'s Form 10-Q for the quarter
ended March 31, 1998.
10.20 Participation Agreement dated as of December 15, 1997, among
Mail-Well I Corporation, Keybank National Association, as
Trustee and other financial institutions party thereto--
incorporated by reference from Exhibit 10.62 to Mail-Well,
Inc.'s Form 10-Q for the quarter ended March 31, 1998.
II-4
<PAGE>
<PAGE>
10.21 Equipment Lease dated as of December 15, 1997 among
Mail-Well I Corporation, Keybank National Association, as
Trustee and other financial institutions party thereto--
incorporated by reference from Exhibit 10.63 to Mail-Well,
Inc.'s Form 10-Q for the quarter ended March 31, 1998.
10.22 Guaranty Agreement dated as of December 15, 1997, among
Mail-Well, Inc., Graphic Arts Center, Inc., Griffin Envelope
Inc., Murray Envelope Corporation, Shepard Poorman
Communications Corporation, Wisco Envelope Corp., Wisco II,
LLC, Wisco III, LLC, Mail-Well I Corporation, Keybank
National Association, as Trustee and other financial
institutions party thereto--incorporated by reference from
Exhibit 10.64 to Mail-Well, Inc.'s Form 10-Q for the quarter
ended March 31, 1998.
10.23 Stock Purchase Agreement dated as of December 15, 1997,
among Mail-Well I Corporation, Poser Business Forms, Inc.
and other Selling Shareholders party thereto--incorporated
by reference from Mail-Well, Inc.'s report on Form 8-K dated
January 6, 1998.
10.24 Asset Purchase Agreement dated as of January 31, 1998, among
Lawson Mardon Packaging USA, Inc (USA)--incorporated by
reference from Mail-Well, Inc.'s report on Form 8-K dated
March 10, 1998.
10.25 Asset Purchase Agreement dated as of January 31, 1998, among
3014597 Nova Scotia Company and Lawson Mardon Packaging Inc.
(Canada)--incorporated by reference from Mail-Well, Inc.'s
report on Form 8-K dated March 10, 1998.
10.26 Purchase Agreement dated December 11, 1998, between
Mail-Well I Corporation and Donaldson, Lufkin & Jenrette
Securities Corporation, Prudential Securities, Incorporated,
Bear, Stearns & Co., Inc. and Hanifen, Imhoff Inc., as
Initial Purchasers, relating to Mail-Well I Corporation's
$300,000,000 aggregate principal amount of 8 3/4% Senior
Subordinated Notes due 2008--incorporated by reference from
Exhibit 10.27 to Mail-Well, Inc.'s Annual Report on Form
10-K for the year ended December 31, 1998, File No. 1-12551.
10.27 Registration Rights Agreement dated December 16, 1998, by
and among Mail-Well I Corporation, and Donaldson, Lufkin &
Jenrette Securities Corporation, Prudential Securities,
Incorporated, Bear, Stearns & Co., Inc. and Hanifen, Imhoff
Inc., as Initial Purchasers, relating to Mail-Well I
Corporation's $300,000,000 aggregate principal amount of 8 3/4%
Senior Subordinated Notes due 2008--incorporated by
reference from Exhibit 10.28 to Mail-Well, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 1998,
File No. 1-12551.
12 Calculation of ratio of earnings to fixed charges--incorporated
by reference from Mail-Well I Corporation's Form S-4 filed March
15, 1999 (Reg. No. 333-74409).
21 Subsidiaries of the Registrant--incorporated by reference
from Mail-Well I Corporation's Form S-4 filed March 15, 1999
(Reg. No. 333-74409).
II-5
<PAGE>
<PAGE>
23.1<F*> Consent of Deloitte & Touche LLP.
23.2<F*> Consent of Rubin, Brown, Gornstein & Co., LLP.
23.3<F*> Consent of Rothgerber Johnson & Lyons LLP (included in
Exhibit 5).
24 Powers of Attorney--incorporated by reference from
Mail-Well I Corporation's Form S-4 filed March 15, 1999
(Reg. No. 333-74409).
25 Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939 of State Street Bank and Trust
Company, as trustee under the indenture, relating to the old
notes and the new notes (separately bound)--incorporated by
reference from Mail-Well I Corporation's Form S-4 filed March
15, 1999 (Reg. No. 333-74409).
27 Financial Data Schedule--incorporated by reference from
Mail-Well I Corporation's Form S-4 filed March 15, 1999
(Reg. No. 333-74409).
99.1 Form of Letter of Transmittal--incorporated by reference from
Mail-Well I Corporation's Amendment No. 1 to Form S-4 filed
April 30, 1999 (Reg. No. 333-74409).
99.2 Form of Notice of Guaranteed Delivery--incorporated by reference
from Mail-Well I Corporation's Amendment No. 1 to Form S-4 filed
April 30, 1999 (Reg. No. 333-74409).
[FN]
- ---------
<F*> Filed herewith.
(B) FINANCIAL STATEMENT SCHEDULES
Schedule I Condensed Balance Sheets as of December 31, 1998 and
1997 and Condensed Statements of Operations and Cash
Flows for the Years Ended December 31, 1998, 1997, and
1996. Included in Part I of this Registration
Statement at pages F-39 to F-42.
Schedule II Valuation and Qualifying Accounts for the Years Ended
December 31, 1998, 1997 and 1996. Included in Part I
of this Registration Statement at page F-43.
ITEM 22. UNDERTAKINGS
(A) ITEM 512 UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this
registration statement.
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the
registration statement (or the most recent post-
effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in
the information set forth in the registration
statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities
offered (if the total dollar value of securities
offered would not
II-6
<PAGE>
<PAGE>
exceed that which was registered) and any deviation
from the low or high and of the estimated maximum
offering range may be reflected in the form of
prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent
change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee"
table in the effective registration statement.
(iii) To include any material information with respect to
the plan of distribution not previously disclosed
in the registration statement or any material
change to such information in the registration
statement;
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and
the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which
remain unsold at the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange
Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial
bona fide offering thereof.
(g)(1) The undersigned Registrant hereby undertakes as follows:
that prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this
registration statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the issuer undertakes
that such reoffering prospectus will contain the information called for
by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information
called for by the other items of the applicable form.
(g)(2) The Registrant undertakes that every prospectus (i) that is
filed pursuant to paragraph (1) immediately preceding, or (ii) that
purports to meet the requirements of Section 10(a)(3) of the Act and is
used in connection with an offering of securities subject to Rule 415,
will be refiled as a part of an amendment to the registration statement
and will not be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than
II-7
<PAGE>
<PAGE>
the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
(B) The undersigned Registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the
prospectus pursuant to Item 4, 10(b), 11, or 13 of this form within one
business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This
includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of
responding to the request.
(C) The undersigned Registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and
Mail-Well I Corporation being acquired involved therein, that was not
the subject of and included in the registration statement when it became
effective.
II-8
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the
Registrants have duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Englewood, State of Colorado, on May 6, 1999.
Mail-Well I Corporation
Mail-Well, Inc.
By: /s/ Gerald F. Mahoney
------------------------------------------------
Gerald F. Mahoney, Chief Executive Officer
Graphics Arts Center, Inc.
Mail-Well Canada Holdings, Inc.
Mail-Well Commercial Printing, Inc.
Mail-Well Label Holdings, Inc.
Mail-Well Label USA, Inc.
Mail-Well West, Inc.
Murray Envelope Holdings, Inc.
Murray Envelope Corporation
N-M Envelope, Inc.
National Graphics Company
Poser Business Forms, Inc.
Wisco II, L.L.C.
Wisco Envelope Corp.
By: /s/ Paul V. Reilly
------------------------------------------------
Paul V. Reilly, Chief Executive Officer
II-9
<PAGE>
<PAGE>
Pursuant to the requirements of the Securities 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Roger Wertheimer Chairman of the Board, May 6, 1999
- --------------------------------- Chief Executive Officer and Director
Roger Wertheimer as attorney- of Mail-Well I Corporation and
in-fact for Gerald F. Mahoney Mail-Well, Inc., and Chairman and
Director of Graphic Arts Center, Inc.
/s/ Roger Wertheimer President, Chief Operating Officer and May 6, 1999
- --------------------------------- Director of Mail-Well I Corporation
Roger Wertheimer as attorney-in- and Mail-Well, Inc., and Chief
fact for Paul V. Reilly Executive Officer and Director of all
other Registrants
/s/ Roger Wertheimer Senior Vice President, Chief May 6, 1999
- --------------------------------- Financial Officer and Director of
Roger Wertheimer as attorney-in- all Registrants except Mail-Well, Inc.
fact for Michael Zawalski
/s/ Roger Wertheimer Director of Mail-Well, Inc. May 6, 1999
- ---------------------------------
Roger Wertheimer as attorney-in-
fact for Frank P. Diassi
/s/ Roger Wertheimer Director of Mail-Well, Inc. May 6, 1999
- ---------------------------------
Roger Wertheimer as attorney-in-
fact for Frank J. Hevrdejs
/s/ Roger Wertheimer Director of Mail-Well, Inc. May 6, 1999
- ---------------------------------
Roger Wertheimer as attorney-in-
fact for Jerome W. Pickholz
/s/ Roger Wertheimer Director of Mail-Well, Inc. May 6, 1999
- ---------------------------------
Roger Wertheimer as attorney-in-
fact for William R. Thomas
/s/ Roger Wertheimer Director of all Registrants except May 6, 1999
- --------------------------------- Mail-Well, Inc. and Graphic Arts
Roger Wertheimer Center, Inc.
</TABLE>
II-10
<PAGE>
<PAGE>
<TABLE>
EXHIBIT INDEX
<CAPTION>
Exhibit
Number Description of Exhibit Page Number
- ------- ---------------------- -----------
<C> <S> <C>
3.1 Certificate of Incorporation of Mail-Well I Corporation--incorporated
by reference from Mail-Well I Corporation's Form S-4 filed March 15,
1999 (Reg. No. 333-74409).
3.2 Certificate of Amendment of Certificate of Incorporation of Mail-Well
I Corporation--incorporated by reference from Mail-Well I Corporation's
Form S-4 filed March 15, 1999 (Reg. No. 333-74409).
3.3 Certificate of Correction Filed to Correct Certain Error in the
Certificate of Amendment of Mail-Well 1 Corporation Filed in the
Office of the Secretary of State of Delaware on September 11, 1995--
incorporated by reference from Mail-Well I Corporation's Form S-4 filed
March 15, 1999 (Reg. No. 333-74409).
3.4 Certificate of Change of Registered Agent and Registered Office--
incorporated by reference from Mail-Well I Corporation's Form S-4 filed
March 15, 1999 (Reg. No. 333-74409).
3.5 Bylaws of Mail-Well I Corporation--incorporated by reference from
Mail-Well I Corporation's Form S-4 filed March 15, 1999 (Reg. No.
333-74409).
4.1 Form of Indenture between Mail-Well, Inc. and The Bank of
New York, as Trustee, dated November 1997, relating to Mail-Well,
Inc.'s $152,050,000 aggregate principal amount of 5%
Convertible Subordinated Notes due 2002--incorporated by reference
from Exhibit 4.2 to Mail-Well, Inc.'s Amendment No. 2 to
Form S-3 dated November 10, 1997 (Reg. No. 333-36337).
4.2 Form of Supplemental Indenture between Mail-Well, Inc. and
The Bank of New York, as Trustee, dated November 1997, relating to
Mail-Well, Inc.'s $152,050,000 aggregate principal amount of 5%
Convertible Subordinated Notes due 2002 and Form of Convertible
Note--incorporated by reference from Exhibit 4.5 to Mail-Well, Inc.'s
Amendment No. 2 to Form S-3 dated November 10, 1997
(Reg. No. 333-36337).
4.3 Indenture dated as of December 16, 1998 between Mail-Well I Corporation
and State Street Bank and Trust Company, as Trustee, relating to
Mail-Well I Corporation's $300,000,000 aggregate principal amount of
8 3/4% Senior Subordinated Notes due 2008--incorporated by reference
from Exhibit 4.4 to Mail-Well, Inc.'s Annual Report on Form 10-K for
the year ended December 31, 1998, File No. 1-12551.
4.4 Form of Senior Subordinated Note--incorporated by reference from
Exhibit 4.5 to Mail-Well, Inc.'s Annual Report on Form 10-K for
the year ended December 31, 1998, File No. 1-12551.
5<F*> Opinion of Rothgerber Johnson & Lyons LLP re: legality of Mail-Well I
Corporation's $300,000,000 aggregate principal amount of 8 3/4%
Senior Subordinated Notes due 2008.
8 Opinion of Rothgerber Johnson & Lyons LLP re: tax matters--
incorporated by reference from Mail-Well I Corporation's Form S-4 filed
March 15, 1999 (Reg. No. 333-74409).
<PAGE>
<PAGE>
10.1 Form of Indemnity Agreement between Mail-Well, Inc. and each
of its officers and directors--incorporated by reference from
Exhibit 10.17 of Mail-Well, Inc.'s Registration Statement on
Form S-1 dated March 25, 1994.
10.2 Form of Indemnity Agreement between Mail-Well I Corporation and
each of its officers and directors--incorporated by reference from
Exhibit 10.18 of Mail-Well, Inc.'s Registration Statement on Form S-1
dated March 25, 1994.
10.3 Form of M-W Corp. Employee Stock Ownership Plan effective as of
February 23, 1994 and related Employee Stock Ownership Plan Trust
Agreement--incorporated by reference from Exhibit 10.19 of Mail-Well,
Inc.'s Registration Statement on Form S-1 dated March 25, 1994.
10.4 Form of M-W Corp. 401(k) Savings Retirement Plan--incorporated by
reference from Exhibit 10.20 of Mail-Well, Inc.'s Registration
Statement on Form S-1 dated March 25, 1994.
10.5 Mail-Well, Inc. 1994 Stock Option Plan, as amended on May 7, 1997--
incorporated by reference from Exhibit 10.56 of Mail-Well, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended June 30, 1997.
10.6 Form of Mail-Well, Inc. Incentive Stock Option Agreement--
incorporated by reference from Exhibit 10.22 of Mail-Well, Inc.'s
Registration Statement on Form S-1 dated March 25, 1994.
10.7 Form of Mail-Well, Inc. Nonqualified Stock Option Agreement--
incorporated by from Exhibit 10.23 of Mail-Well, Inc.'s
Registration Statement on Form S-1 dated March 25, 1994.
10.8 Purchase and Contribution Agreement dated as of November 15, 1996,
between Mail-Well I Corporation, Wisco Envelope Corp., Pavey Envelope
and Tag Corp., Mail-Well West, Inc., Graphic Arts Center, Inc., Wisco III,
L.L.C., Supremex, Inc., Innova Envelope, Inc., as Sellers, and Mail-Well
Trade Receivables Corp., as Purchaser--incorporated by reference from
Exhibit 10.39 of Mail-Well, Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1996.
10.9 Mail-Well Receivables Master Trust Pooling and Servicing Agreement
dated as of November 15, 1996 by and between Mail-Well Trade
Receivables Corporation, Seller, Mail-Well I Corporation, Servicer,
and Norwest Bank Colorado, National Association, Trustee--incorporated
by reference from Exhibit 10.40 of Mail-Well I Corporation's
Annual Report on Form 10-K for the year ended December 31, 1996.
<PAGE>
<PAGE>
10.10 Series 1996-1 Supplement dated as of November 15, 1996, to Pooling
and Servicing Agreement, dated as of November 15, 1996, by and
between Mail-Well Trade Receivables Corporation, Seller, Mail-Well I
Corporation, Servicer, and Norwest Bank Colorado, National
Association, as Trustee on behalf of the Series 1996-1
Certificateholders--incorporated by reference from Exhibit 10.41 of the
Mail-Well, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1996.
10.11 Series 1996-1 Certificate Purchase Agreement dated as of November 15,
1996 among Mail-Well Trade Receivables Corporation, as Seller,
Corporate Receivables Corporation, as Purchaser, Norwest Bank
Colorado, National Association, as Trustee, and Mail-Well I Corporation,
as Servicer--incorporated by reference from Exhibit 10.42 of Mail-Well,
Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1996.
10.12 Intercreditor Agreement dated as of November 15, 1996, by and
among Citicorp North America, Inc., as Securitization Company
Agent, Banque Paribas, New York Branch, as Liquidity Agent,
Banque Paribas, as Credit Lenders' Agent, Norwest Bank Colorado,
National Association, as Trustee, Mail-Well Trade Receivables
Corporation, as Servicer, originator and Mail-Well Credit Borrower,
Supremex, Inc., as the Supremex Credit Borrower and the other
parties hereto--incorporated by reference from Exhibit 10.43 of
Mail-Well, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1996.
10.13 Series 1996-1 Asset Purchase Agreement among Corporate
Receivables Corporation, the Liquidity Providers Parties hereto,
Citicorp North America, Inc., as Securitization Company Agent,
Banque Paribas, New York Branch, as Liquidity Agent, and Norwest
Bank Colorado, National Association, as trustee, dated as of
November 15, 1996--incorporated by reference from Exhibit 10.44
of Mail-Well, Inc.'s Annual Report on Form 10-K for the year
ended December 31, 1996.
10.14 Mail-Well, Inc. 1997 Non-Qualified Stock Option Plan--incorporated
by reference from exhibit 10.54 of Mail-Well, Inc.'s Form 10-Q
for the quarter ended March 31, 1997.
10.15 1997 Non-Qualified Stock Option Agreement--incorporated by
reference from exhibit 10.54 of Mail-Well, Inc.'s Form 10-Q for
the quarter ended March 31, 1997.
10.16 Mail-Well, Inc. 1998 Incentive Stock Option Plan--incorporated by
reference from Mail-Well, Inc.'s definitive proxy statement on
Schedule 14A for the regular annual meeting of shareholders held
April 29, 1998.
10.17 Mail-Well, Inc. 1998 Incentive Stock Option Plan Incentive Stock
Option Agreement--incorporated by reference from Mail-Well, Inc.'s
definitive proxy statement on Schedule 14A for the regular
annual meeting of shareholders held April 29, 1998.
<PAGE>
<PAGE>
10.18 Credit Agreement dated as of March 16, 1998, among Mail-Well,
Inc., certain Guarantors, Bank of America National Trust and
Savings Association, as Agent and other financial institutions party
thereto--incorporated by reference from Exhibit 10.60 of Mail-Well,
Inc.'s Form 10-Q for the quarter ended March 31, 1998.
10.19 Credit Agreement dated as of March 16, 1998, among Supremex Inc.,
certain Guarantors, Bank of America National Trust and Savings
Association, as Agent and other financial institutions party thereto--
incorporated by reference from Exhibit 10.61 to Mail-Well, Inc.'s
Form 10-Q for the quarter ended March 31, 1998.
10.20 Participation Agreement dated as of December 15, 1997, among Mail-
Well I Corporation, Keybank National Association, as Trustee and other
financial institutions party thereto--incorporated by reference from
Exhibit 10.62 to Mail-Well, Inc.'s Form 10-Q for the quarter
ended March 31, 1998.
10.21 Equipment Lease dated as of December 15, 1997 among Mail-Well I
Corporation, Keybank National Association, as Trustee and other
financial institutions party thereto--incorporated by reference from
Exhibit 10.63 to Mail-Well, Inc.'s Form 10-Q for the quarter
ended March 31, 1998.
10.22 Guaranty Agreement dated as of December 15, 1997, among Mail-Well,
Inc., Graphic Arts Center, Inc., Griffin Envelope Inc., Murray
Envelope Corporation, Shepard Poorman Communications Corporation,
Wisco Envelope Corp., Wisco II, LLC, Wisco III, LLC, Mail-Well I
Corporation, Keybank National Association, as Trustee and other
financial institutions party thereto--incorporated by reference from
Exhibit 10.64 to Mail-Well, Inc.'s Form 10-Q for the quarter ended
March 31, 1998.
10.23 Stock Purchase Agreement dated as of December 15, 1997, among Mail-
Well I Corporation, Poser Business Forms, Inc. and other Selling Shareholders
party thereto--incorporated by reference from Mail-Well, Inc.'s
report on Form 8-K dated January 6, 1998.
10.24 Asset Purchase Agreement dated as of January 31, 1998, among
Lawson Mardon Packaging USA, Inc (USA)--incorporated by
reference from Mail-Well, Inc.'s report on Form 8-K dated
March 10, 1998.
10.25 Asset Purchase Agreement dated as of January 31, 1998, among
3014597 Nova Scotia Company and Lawson Mardon Packaging Inc.
(Canada)--incorporated by reference from Mail-Well, Inc.'s report
on Form 8-K dated March 10, 1998.
<PAGE>
<PAGE>
10.26 Purchase Agreement dated December 11, 1998, between Mail-Well I
Corporation and Donaldson, Lufkin & Jenrette Securities Corporation,
Prudential Securities, Incorporated, Bear, Stearns & Co., Inc. and
Hanifen, Imhoff Inc., as Initial Purchasers, relating to Mail-Well I
Corporation's $300,000,000 aggregate principal amount of 8 3/4%
Senior Subordinated Notes due 2008--incorporated by reference from
Exhibit 10.27 to Mail-Well, Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1998, File No. 1-12551.
10.27 Registration Rights Agreement dated December 16, 1998, by and
among Mail-Well I Corporation, and Donaldson, Lufkin & Jenrette
Securities Corporation, Prudential Securities, Incorporated, Bear, Stearns
& Co., Inc. and Hanifen, Imhoff Inc., as Initial Purchasers, relating to
Mail-Well I Corporation's $300,000,000 aggregate principal amount of
8 3/4% Senior Subordinated Notes due 2008--incorporated by reference
from Exhibit 10.28 to Mail-Well, Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1998, File No. 1-12551.
12 Calculation of ratio of earnings to fixed charges--incorporated by
reference from Mail-Well I Corporation's Form S-4 filed March 15,
1999 (Reg. No. 333-74409).
21 Subsidiaries of the Registrant--incorporated by reference from Mail-Well I
Corporation's Form S-4 filed March 15, 1999 (Reg. No. 333-74409).
23.1<F*> Consent of Deloitte & Touche LLP.
23.2<F*> Consent of Rubin, Brown, Gornstein & Co., LLP.
23.3<F*> Consent of Rothgerber Johnson & Lyons LLP (included in Exhibit 5).
24 Powers of Attorney--incorporated by reference from Mail-Well I Corporation's
Form S-4 filed March 15, 1999 (Reg. No. 333-74409).
25 Statement of Eligibility on Form T-1 under the Trust Indenture Act of
1939 of State Street Bank and Trust Company, as trustee under the
indenture, relating to the old notes and the new notes (separately bound)--
incorporated by reference from Mail-Well I Corporation's Form S-4 filed
March 15, 1999 (Reg. No. 333-74409).
27 Financial Data Schedule--incorporated by reference from Mail-Well I
Corporation's Form S-4 filed March 15, 1999 (Reg. No. 333-74409).
99.1 Form of Letter of Transmittal--incorporated by reference from
Mail-Well I Corporation's Amendment No. 1 to Form S-4 filed
April 30, 1999 (Reg. No. 333-74409).
99.2 Form of Notice of Guaranteed Delivery--incorporated by reference
from Mail-Well I Corporation's Amendment No. 1 to Form S-4 filed
April 30, 1999 (Reg. No. 333-74409).
<FN>
- -----------
<F*> Filed herewith.
</TABLE>
<PAGE>
EXHIBIT 5
OPINION RE: LEGALITY
May 6, 1999
Mail-Well, Inc.
23 Inverness Way, Suite 160
Englewood, Colorado 80112
Ladies and Gentlemen:
You have requested our opinion in connection with Amendment
Number 2 to the Registration Statement on Form S-4 (the "Registration
Statement"), File Number 333-74409, which is expected to be filed by
Mail-Well I Corporation (the "Company") on or about May 6, 1999, with
respect to the exchange offer and issuance of $300,000,000 aggregate
principal amount of 8 3/4% Series B Senior Subordinated Notes due 2008
(the "Notes"), to be issued under that certain indenture (the
"Indenture") among the Company, the Guarantors listed on Schedule A to
the Indenture, and State Street Bank and Trust Company, a Massachusetts
trust company, as described in the Registration Statement.
We have reviewed such documents and have made such investigation
of applicable law as we have deemed necessary under the circumstances.
Based on that review and investigation, it is our opinion that, upon
their issuance in accordance with the Indenture, the Notes will have
been duly authorized and legally issued, will be fully paid and
nonassessable, and will be binding obligations of the Company.
We consent to the use by the Company, in the Registration
Statement, of our name and the statements with respect to our firm under
the heading of "Legal Matters" in the Registration Statement.
Sincerely yours,
/s/ ROTHGERBER JOHNSON & LYONS LLP
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment
No. 2 to Registration Statement No. 333-74409 of Mail-Well I Corporation
on Form S-4 of our report dated January 28, 1999, included in the Annual
Report on Form 10-K of Mail-Well, Inc., for the year ended December 31,
1998, and to the use of our report dated January 28, 1999, appearing in
the Prospectus, which is part of this Registration Statement. We also
consent to the reference to us under the heading "Experts" in such Prospectus.
/s/ DELOITTE & TOUCHE LLP
Denver, Colorado
May 5, 1999
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 2 to Registration
Statement No. 333-74409 of Mail-Well I Corporation on Form S-4 of our
report dated March 6, 1998 (except for Notes 7 and 13, which are dated
May 15, 1998 and May 22, 1998, respectively, relating to the financial
statements of Color Art, Inc. and Subsidiaries (not presented separately
herein)), included in the Annual Report on Form 10-K of Mail-Well, Inc.,
for the year ended December 31, 1998, and to the use of our report dated
March 6, 1998 (except for Notes 7 and 13, which are dated May 15, 1998
and May 22, 1998, respectively, relating to the financial statements of
Color Art, Inc. and Subsidiaries (not presented separately herein)),
appearing in the Prospectus, which is part of this Registration
Statement. We also consent to the reference to us under the heading
"Experts" in such Prospectus.
/s/ Rubin, Brown, Gornstein & Co. LLP
St. Louis, Missouri
May 6, 1999
