<PAGE>
- - - --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
JULY 1, 1996
(Date of Report)
MAIL-WELL I CORPORATION
(Exact Name of Registrant as Specified in its Charter)
DELAWARE
(State or Other Jurisdiction of Incorporation)
33-76892 84-1250534
(Commission File Number) (IRS Employer Identification Number)
23 INVERNESS WAY EAST, ENGLEWOOD, CO 80112
(Address of principal executive offices) (Zip Code)
303-790-8023
(Registrant's telephone number, including area code)
- - - --------------------------------------------------------------------------------
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired
Quality Park Products, Inc. Financial Statements
. Report of Independent Auditors
. Balance Sheet as of March 31, 1996
. Statement of Income and Retained Earnings for the Year Ended March 31,
1996
. Statement of Cash Flow for the Year Ended March 31, 1996
. Notes to Financial Statements
(b) Pro Forma Financial Information:
On April 22, 1996, Mail-Well, Inc., through its wholly-owned subsidiary
Mail-Well I Corporation (the "Company"), acquired substantially all of the
assets and certain of the liabilities of Quality Park Products, Inc.
("QPP"), a company that operates three envelope manufacturing facilities in
the United States. On August 25, 1995, Mail-Well, Inc., through its
wholly-owned subsidiary Mail-Well I Corporation, acquired all of the
outstanding stock of Graphic Arts Center, Inc. ("GAC"), one of the leading
high impact commercial printers in the United States. On July 31, 1995,
Mail-Well, Inc., through its wholly-owned subsidiary Mail-Well I
Corporation, acquired all of the outstanding shares of common stock of
Supremex, Inc. ("Supremex") a Canadian manufacturer of envelopes.
Collectively, these acquisitions are defined as the "Acquisitions". On
December 19, 1994, the Company acquired substantially all of the assets of
American Envelope Company ("American"), a manufacturer of envelopes.
In September 1995, Mail-Well, Inc. completed an initial public offering
(the "Offering") of 5,000,000 shares of common stock at $14.00 per share.
The net proceeds of the Offering, after underwriting commissions and
expenses, were approximately $64.4 million.
The attached unaudited pro forma consolidated financial information for
Mail-Well I Corporation consists of an Unaudited Pro Forma Condensed
Consolidated Statement of Operations for the year ended December 31, 1995,
and for the quarter ended March 31, 1996, and an Unaudited Pro Forma
Consolidated Balance Sheet as of March 31, 1996 (collectively, the "Pro
Forma Statements"). The Pro Forma Statements give effect to the Offering,
the Acquisitions and related financings. The Unaudited Pro Forma Condensed
Consolidated Statements of Operations give effect to the Acquisitions as if
they had occurred on January 1, 1995. The Unaudited Pro Forma Consolidated
Balance Sheet gives effect to such transactions as if they had occurred on
March 31, 1996. The pro forma adjustments are based on currently available
information and upon certain
<PAGE>
assumptions that management of the Company believes are reasonable under
the circumstances.
<PAGE>
(a) Financial Statements of Business Acquired
Report of Independent Auditors
The Board of Directors
Quality Park Products, Inc.
We have audited the accompanying balance sheet of Quality Park Products, Inc. as
of March 31, 1996, and the related statements of income and retained earnings
(deficit), and cash flows for the year then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Quality Park Products, Inc. at
March 31, 1996, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
- - - ----------------------
Minneapolis, Minnesota
May 10, 1996
<PAGE>
Quality Park Products, Inc.
Balance Sheet
March 31, 1996
(Dollars in thousands)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash $ 27
Trade accounts receivable, less allowance for doubtful accounts
of $350 9,007
Inventories 12,411
Prepaid expenses and other current assets 73
Deferred income taxes 162
------------
Total current assets 21,680
Property, plant and equipment:
Land and buildings 900
Machinery and equipment 12,443
Leasehold improvements 722
Equipment under capital leases 272
Furniture and fixtures 113
------------
14,450
Less accumulated depreciation and amortization 3,614
------------
Net property, plant and equipment 10,836
------------
Total assets $32,516
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,704
Accounts payable, parent 2,861
Accrued expenses 4,124
Income taxes payable 246
Current portion of long-term debt 237
------------
Total current liabilities 13,172
Deferred income taxes 1,163
Long-term debt 548
Intercompany borrowings 15,899
Stockholders' equity:
Common Stock, $.01 par value:
Authorized shares - 100
Issued and outstanding shares - 100 -
Additional paid-in capital 3,000
Retained earnings (deficit) (1,266)
------------
Total stockholders' equity 1,734
------------
Total liabilities and stockholders' equity $32,516
============
</TABLE>
See accompanying notes.
<PAGE>
Quality Park Products, Inc.
Statement of Income and Retained Earnings (Deficit)
Year ended March 31, 1996
(Dollars in thousands)
<TABLE>
<S> <C>
Sales $99,531
Cost of goods sold 82,529
-----------
17,002
Operating expenses:
General and administrative 8,577
Selling 3,178
-----------
11,755
-----------
Operating profit 5,247
Other expense:
Interest expense 2,045
-----------
Income before income taxes 3,202
Provision for income taxes 1,153
-----------
Net income 2,049
Retained earnings (deficit) at beginning of year (3,315)
-----------
Retained earnings (deficit) at end of year $(1,266)
===========
</TABLE>
See accompanying notes.
<PAGE>
Quality Park Products, Inc.
Statement of Cash Flows
Year ended March 31, 1996
(Dollars in thousands)
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net income $ 2,049
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 1,404
Deferred taxes 917
Gain on sale of property and equipment (140)
Changes in operating assets and liabilities:
Trade accounts receivable 794
Inventories 338
Prepaid expenses and other current assets 375
Accounts payable (3,244)
Accounts payable, parent 688
Accrued expenses (248)
Income taxes payable 1,803
------------
Net cash provided by operating activities 4,736
INVESTING ACTIVITIES
Proceeds from sale of property and equipment 225
Purchases of property, plant and equipment (772)
------------
Net cash used in investing activities (547)
FINANCING ACTIVITIES
Net reduction of intercompany borrowings (4,297)
Payments of long-term debt (89)
------------
Net cash used in financing activities (4,386)
------------
Net decrease in cash (197)
Cash at beginning of year 224
------------
Cash at end of year $ 27
============
</TABLE>
See accompanying notes.
<PAGE>
Quality Park Products, Inc.
Notes to Financial Statements
March 31, 1996
1. NATURE OF BUSINESS
Quality Park Products, Inc. ("the Company") manufactures a broad line of
commodity envelopes with primary emphasis in the office products market to
wholesale customers nationwide. The Company's products include open-side
envelopes, open-end envelopes, special purpose envelopes, filing supplies and
paper. The Company is a national distributor with four plants located in
Beresford, South Dakota; Atlanta, Georgia; St. George, Utah; and St. Paul,
Minnesota. Principal customers include national wholesale stationers, large
national office products dealers and superstores.
The Company is an indirect, wholly-owned subsidiary of Triumph Group Holdings,
Inc. ("the Parent").
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVENTORIES
Inventories are stated at the lower of cost or market. The last-in, first-out
(LIFO) cost method represents approximately 83% of inventories at March 31,
1996. The first-in, first-out (FIFO) cost method represents approximately 17% of
inventories at March 31, 1996.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is provided over
the estimated useful lives of the assets ranging from three to thirty-nine
years. Leasehold improvements are amortized over the shorter of the term of the
lease or the life of the asset.
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
Income taxes are accounted for under the liability method. Deferred income taxes
are provided for temporary differences between the financial reporting and tax
basis of assets and liabilities.
Taxable income or loss of the Company is included in the consolidated federal
income tax return of the Parent. In accordance with the Parent's income tax
policy, income taxes are allocated to the Company based on amounts the Company
would pay or receive if it filed a separate federal income tax return, except
that the Company receives credit from the Parent for the tax benefit of the
Company's net operating losses and tax credits, to the extent that they can be
utilized in the Parent's consolidated federal income tax return.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
IMPAIRMENT OF LONG-LIVED ASSETS
In March 1995, the Financial Accounting Standards Board (FASB) issued Statement
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of, which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. Statement No. 121 also addresses the
accounting for long-lived assets that are expected to be disposed of. The
Company does not believe the effect of adoption will be material.
<PAGE>
3. INVENTORIES
Inventories at March 31, 1996 consist of the following (in thousands):
<TABLE>
<S> <C>
Raw materials $ 3,212
Work in process 162
Finished goods 12,053
-----------
Total inventories at current cost 15,427
Less allowance to reduce current costs to LIFO basis 3,016
-----------
Total inventories $12,411
===========
</TABLE>
4. ACCRUED EXPENSES
Accrued expenses at March 31, 1996 consist of the following (in thousands):
<TABLE>
<S> <C>
Customer rebates $ 1,797
Accrued payroll, bonus and commissions 944
Accrued vacation pay 666
Taxes other than income 306
Accrued insurance 247
Other 164
-----------
$ 4,124
===========
</TABLE>
5. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. These differences relate
to the tax treatment of inventory, allowance for doubtful accounts, financing
lease obligations, vacation pay and accelerated depreciation methods used for
tax purposes.
<PAGE>
5. INCOME TAXES (CONTINUED)
Income tax expense consists of the following for the year ended March 31, 1996
(in thousands):
<TABLE>
<S> <C>
Current $ 236
Deferred 917
----------
$1,153
==========
</TABLE>
The effective tax rate of 36% for the year ended March 31, 1996 exceeds the
federal statutory tax rate primarily as a result of the provision for state
income taxes, net of federal benefit.
Taxable income or loss of the Company is included in the consolidated federal
income tax return of the Parent. Income taxes were paid by the Parent on behalf
of the consolidated group during the year ended March 31, 1996. $1,567,000 of
benefits were paid by the Parent to the Company during the year ended March 31,
1996.
6. LONG-TERM DEBT
Long-term debt at March 31, 1996 is as follows (in thousands):
<TABLE>
<S> <C>
Industrial revenue bonds $626
Other debt and capital lease obligations 159
---------
785
Less current portion 237
---------
$548
=========
</TABLE>
The industrial revenue bonds bear interest at 7.5% per annum. In connection with
the sale of the Company (see Note 10), the bonds were paid in April 1996.
The carrying amounts reported in the balance sheet for the Company's long-term
debt approximate their fair values. Interest paid on indebtedness and
intercompany borrowings during the year ended March 31, 1996 amounted to
$2,054,000.
<PAGE>
7. INTERCOMPANY BORROWINGS
Intercompany borrowings represent amounts received from the Parent to finance
the Company's operations and the initial acquisition by the Parent. Interest is
paid to the Parent based on the Parent's borrowing rate under financing
arrangements with third party lenders. Various provisions of the Parent's
financing arrangements with third parties contain covenants and restrictions to
which the Company adheres. Substantially all of the Company's assets are pledged
as collateral under the Parent's financing arrangements. The weighted average
interest rate on intercompany borrowings at March 31, 1996 was 8.1%.
8. COMMITMENTS
The Company leases certain property and various equipment under noncancelable
operating leases which expire in September 2004. Rent expense charged to
operations was $783,000 for the year ended March 31, 1996.
Future minimum lease obligations as of March 31, 1996 are approximately as
follows (in thousands):
<TABLE>
<S> <C>
1997 $ 752
1998 752
1999 721
2000 712
2001 603
Thereafter 858
----------
$4,398
==========
</TABLE>
9. MAJOR CUSTOMERS
Approximately 44% of the Company's net sales for the year ended March 31, 1996
were the result of sales to two customers.
10. DIVESTITURE
Effective April 1, 1996, the Company sold substantially all of its assets and
liabilities, except those related to long-term debt, intercompany borrowings and
taxes, to a publicly-held company for approximately $26.6 million.
<PAGE>
(b) Pro Forma Financial Information
MAIL-WELL I CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1996
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
THE COMPANY
THE PRO FORMA
COMPANY QPP PRO FORMA FOR THE
HISTORICAL HISTORICAL ADJUSTMENTS ACQUISITION
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
CURRENT ASSETS
Receivables, net $ 103.3 $ 9.0 $ 112.3
Accounts receivable, other 6.7 6.7
Income tax receivable
Inventories 59.9 12.4 2.8 (a) 75.1
Deferred tax asset 3.8 3.8
Other current assets 2.1 0.3 (0.3) (b) 2.1
----------------------------------------------- ---------------
Total current assets 175.8 21.7 2.5 200.0
----------------------------------------------- ---------------
Property, plant and equipment, net 202.2 10.8 213.0
Goodwill, net 102.7 3.1 (c) 105.8
Deferred financing costs, net 15.2 0.1 (d) 15.3
Other assets, net 3.8 - 0.5 (e) 4.3
----------------------------------------------- ---------------
TOTAL ASSETS $ 499.7 $ 32.5 $ 6.2 $ 538.4
================================================ ===============
Accounts payable and accrued liabilities 51.2 $ 9.8 $ 61.0
Current portion of long term debt 11.3 0.2 11.3
Intercompany borrowings 2.9 (2.9) (g)
Other current liabilities 15.4 0.3 1.0(f)(h) 16.9
----------------------------------------------- ---------------
Total current liabilities 77.9 13.2 (1.9) 89.2
----------------------------------------------- ---------------
Bank borrowings 210.0 - 25.9 (i) 235.9
Intercompany borrowings 15.9 (15.9) (g)
Subordinated notes 85.0 85.0
Other long term debt 3.2 0.5 - - 3.7
Deferred income taxes 15.8 1.2 (1.2) (j) 15.8
Other liabilities 1.5 - 1.0 (k) 2.5
----------------------------------------------- ---------------
Total liabilities 393.4 30.8 7.9 432.1
----------------------------------------------- ---------------
Stockholders' equity 106.3 1.7 (1.7) (l) 106.3
TOTAL LIABILITIES AND
----------------------------------------------- ---------------
STOCKHOLDERS' EQUITY $ 499.7 $ 32.5 $ 6.2 $ 538.4
================================================ ===============
</TABLE>
See accompanying notes to unaudited pro forma consolidated balance sheet.
<PAGE>
MAIL-WELL I CORPORATION AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
The Pro Forma Consolidated Balance Sheet reflects adjustments to record the
Quality Park Products, Inc. ("QPP") acquisition. The total purchase price
included $25.1 million for the net assets of QPP, $1.0 million for a payment due
upon certain earnings targets (but not less than $1.0 million) plus transaction
costs. The purchase price has been allocated to the fair value of the acquired
assets and liabilities resulting in the following adjustments:
(a) Recording of the reduction in inventories of $0.2 million for the
write-off of spare parts which was included in inventory, a $0.3
million increase in inventory to fair value and $2.7 million related
to the reversal of the LIFO reserve.
(b) Adjustment for assets not purchased.
(c) Recording of goodwill of $3.1 million.
(d) Recording of deferred financing costs associated with this
transaction.
(e) Recording of value associated with an intangible asset of $0.5
million.
(f) Reduction for $0.2 million of accrued liabilities not purchased.
Amount represents income taxes payable.
(g) Adjustment for debt not assumed.
(h) Recording of other current liabilities of $1.2 million which
represents the Company's estimate of costs to close the St. Paul,
Minnesota operations of the Company. Estimated costs include
severance and plant closing expenses.
(i) Amount represents debt incurred of $25.9 million.
(j) Adjustment for deferred income taxes not assumed.
(k) Adjustment represents the minimum payment to the seller which is due
after the final QPP financial results for the twelve months ended
March 31, 1997.
(l) Adjustment to reflect the QPP acquisition in equity.
<PAGE>
MAIL-WELL I CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SUPREMEX GAC
HISTORICAL HISTORICAL
THE COMPANY PERIOD FROM PERIOD FROM QPP THE COMPANY
HISTORICAL JAN 1 JAN 1 HISTORICAL PRO FORMA
YEAR ENDED THROUGH THROUGH YEAR ENDED PRO FORMA FOR THE
DEC 31, 1995 JULY 31, 1995 (A) AUG 24, 1995 (B) MAR 31, 1996 (C) ADJUSTMENTS ACQUISITIONS
------------ ----------------- ---------------- ---------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 596.8 $ 48.4 $ 102.4 $ 99.5 $ 847.1
Cost of sales 461.0 32.7 78.3 82.5 (0.2) d 652.3
(0.5) f
(0.7) d
(0.4) e
(0.4) j
Depreciation 9.8 1.9 3.6 (0.4) d 14.9
---------------------------------------------------------------------------------- ------------
Gross profit 126.0 13.8 20.5 17.0 2.6 179.9
Other operating costs:
Selling and administrative 75.4 7.7 15.4 11.8 (0.5) e 109.8
Amortization 2.8 0.5 - 0.3 e 3.6
-------------------------------------------------------------------------------------------------------
Total other operating costs 78.2 7.7 15.9 11.8 (0.2) 113.4
-------------------------------------------------------------------------------------------------------
Operating income (loss) 47.8 6.1 4.6 5.2 2.8 66.5
Interest expense 27.7 0.5 3.6 2.0 2.0 d 33.8
1.0 e
(0.4) g
(3.0) h
0.4 j
Other (income) expense 0.7 (0.1) - - 0.6
---------------------------------------------------------------------------------- ------------
Income before taxes 19.4 5.7 1.0 3.2 2.8 32.1
Provision for taxes 7.8 2.0 0.3 1.2 1.1 i 12.4
Income (loss) before ---------------------------------------------------------------------------------- -------------
extraordinary item $ 11.6 $ 3.7 $ 0.7 $ 2.0 $ 1.7 $ 19.7
================================================================================== =============
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated
statement of operations.
<PAGE>
MAIL-WELL I CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED MARCH 31, 1996
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
THE COMPANY
PRO FORMA
THE COMPANY QPP PRO FORMA FOR THE
HISTORICAL HISTORICAL (C) ADJUSTMENTS ACQUISITIONS
---------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Net sales $ 193.7 $ 24.0 $ 217.7
Cost of sales 152.5 18.8 $ (0.1) j 171.2
Depreciation 3.5 3.5
----------------------------------------------------------------------------
Gross profit 37.7 5.2 0.1 43.0
Other operating costs:
Selling and administrative 24.1 1.8 25.9
Amortization 0.9 0.5 1.4
----------------------------------------------------------------------------
Total other operating costs 25.0 2.3 - 27.3
----------------------------------------------------------------------------
Operating income (loss) 12.7 2.9 0.1 15.7
Interest expense 7.8 0.4 0.2 j 8.4
Other (income) expense 0.1 0.1
----------------------------------------------------------------------------
Income before taxes 4.8 2.5 (0.1) 7.2
Provision for taxes 2.0 0.9 2.9
----------------------------------------------------------------------------
Net income (loss) $ 2.8 $ 1.6 $ (0.1) $ 4.3
============================================================================
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated statement
of operations.
<PAGE>
MAIL-WELL I CORPORATION AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(a) Supremex amounts included in the pro forma condensed consolidated statement
of operations for the year ended December 31, 1995, represent the
historical results of operations for the period from January 1, 1995
through July 31, 1995. The historical financial information for Supremex
has been translated to United States dollars at the average exchange rate
in effect during the period. The Supremex financial information has been
adjusted to conform to United States generally accepted accounting
principles.
(b) GAC amounts included in the pro forma condensed consolidated statement of
operations for the year ended December 31, 1995, represent the historical
results of operations for the period from January 1, 1995 through August
24, 1995.
(c) QPP amounts included in the pro forma condensed consolidated statement of
operations for the year ended December 31, 1995, represent the historical
results of operations for the year ended March 31, 1996. QPP amounts
included in the pro forma condensed consolidated statement of operations
for the quarter ended March 31, 1996, represent the historical results of
operations for the three months ended March 31, 1996.
(d) Reflects adjustments to the Supremex acquisition, as follows:
(1) Adjustment to reduce cost of goods sold by $0.2 million for the seven
months ended July 31, 1995 for the reduction in the cost of paper
purchased by Supremex. Due to the Company's large volume of paper
purchases, the Company has historically purchased paper at lower
prices than Supremex. Subsequent to the Supremex acquisition, the
paper purchases of Supremex were negotiated on a combined basis with
the Company, and paper costs to Supremex were reduced.
(2) Adjustment to reduce cost of goods sold by $0.7 million for the year
ended December 31, 1995 to eliminate non-recurring charges related to
the Supremex Acquisition in July 1995. The historical financial
statements of the Company for the year ended December 31, 1995,
include a charge to cost of goods sold of $0.7 million related to the
adjustment of inventories to fair value in connection with the
Supremex Acquisition.
(3) Adjustments to depreciation and amortization expense, as follows:
<TABLE>
<S> <C>
Amortization of goodwill $0.5 million
Elimination of historical amortization (0.5) million
Reduction of depreciation (0.4) million
-----
Total $(0.4) million
======
</TABLE>
<PAGE>
Amortization of goodwill is based on amortization over 40 years. The
change in depreciation expense results from an increase in the
estimated useful lives of the purchased assets offset by an increase
in the depreciable basis in connection with the allocation of purchase
price.
(4) Adjustment to reflect interest expense on the additional bank
borrowings incurred to consummate the Supremex acquisition and to
adjust interest on previous Supremex bank debt being refinanced, based
on (i) average total bank borrowings of $49.9 million and an average
interest rate of 8.75% for the seven months ended July 31, 1995, and
(ii) amortization of deferred financing costs incurred in connection
with the Supremex acquisition.
(e) Reflects adjustments to the GAC acquisition, as follows:
(1) Adjustment to reduce cost of goods sold by $0.4 million for the year
ended December 31, 1995 to eliminate non-recurring charges related to
the GAC Acquisition in August 1995. The historical financial
statements of the Company for the year ended December 31, 1995,
include a charge to cost of goods sold of $0.4 million related to the
adjustment of inventories to fair value in connection with the GAC
Acquisition.
(2) Adjustment to reduce selling and administrative expense of GAC by $0.5
million for the period ended August 24, 1995, consisting of: (i)
management advisory fees of $0.1 million; and (ii) expenses of $0.4
million related to a proposed initial public offering by GAC which was
not completed.
(3) Adjustments to depreciation and amortization expense, as follows:
<TABLE>
<S> <C>
Amortization of goodwill $0.5 million
Elimination of historical amortization (0.2) million
-----
Total $0.3 million
====
</TABLE>
Amortization of goodwill is based on amortization over 40 years.
(4) Adjustment to reflect interest expense on the additional bank
borrowings incurred to consummate the GAC acquisition and to adjust
interest on previous GAC bank debt being refinanced, based on (i)
average total bank borrowings of $79.5 million and an average interest
rate of 8.75% for the eight months ended August 24, 1995, and (ii)
amortization of deferred financing costs incurred in connection with
the GAC acquisition.
(f) Reflects adjustments related to the American Acquisition, as follows:
<PAGE>
(1) Adjustment to reduce cost of goods sold by $0.5 million for the year
ended December 31, 1995 to eliminate non-recurring charges related to
the American Acquisition in December 1994. The historical financial
statements of the Company for the year ended June 30, 1995, include a
charge to cost of goods sold of $0.5 million related to the adjustment
of inventories to fair value in connection with the American
Acquisition.
(g) Adjustment to interest expense to reflect terms under the Bank Credit
Agreement. In connection with the acquisitions of GAC and Supremex, the
Company amended and restated the Bank Credit Agreement. Under the Bank
Credit Agreement, the Company is charged lower interest rates on all
borrowings, including those borrowings in place prior to the GAC
acquisition and the Supremex acquisition. The adjustment reduces interest
expense by 1/2% per annum on average actual borrowings by the Company.
(h) The Company used the proceeds of the Offering to repay $50.0 million in
term loans and $14.4 million in revolving credit loans under the Bank
Credit Agreement. Unamortized debt issuance costs of $2.8 million were
charged against earnings related to the partial repayment of debt under the
Bank Credit Agreement. The pro forma condensed consolidated statements of
operations do not reflect this non-recurring charge. Adjustment to reduce
interest expense of $1.7 million for the year ended December 31, 1995 for
the reduction of debt under the Bank Credit Agreement, resulting in a
corresponding reduction of interest expense and amortization of debt
issuance costs.
(i) Adjustment to record the income tax effects of the GAC and Supremex
Acquisitions.
(j) Reflects adjustments to the QPP acquisition, as follows:
(1) Adjustment to reduce cost of goods sold by $0.4 million and $0.1
million, respectively, for the year and quarter ended March 31, 1996
for the reduction in the cost of paper purchased by QPP. Due to the
Company's large volume of paper purchases, the Company has
historically purchased paper at lower prices than QPP. Subsequent to
the QPP acquisition, the paper purchases of QPP will be negotiated on
a combined basis with the Company, and paper costs to QPP will be
reduced.
(2) Adjustment to reflect interest expense of $2.4 million and $0.6
million for the year and quarter ended March 31, 1996, respectively,
on the additional bank borrowings incurred to consummate the QPP
acquisition, based on average additional borrowings of $26.6 million
and an average interest rate of 9.1% and 8.4% for the year and quarter
ended March 31, 1996, respectively. This expense has been reduced by
the historical interest
<PAGE>
recorded by QPP which would not have been paid of $2.0 million and
$0.4 million for the year and quarter ended March 31, 1996,
respectively.
<PAGE>
(c) Exhibits
The following exhibits are furnished in accordance with Item 601 of
Regulation S-K:
EXHIBIT EXHIBIT NUMBER
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None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MAIL-WELL I CORPORATION
(Registrant)
By: /s/ Paul V. Reilly
-------------------
Paul V. Reilly
Chief Financial Officer, Vice President-Finance
Date: July 1, 1996
