<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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<CAPTION>
<S> <C>
For the Quarterly Period Ended: September 27, 1998 Commission File Number: 33-93494
- --------------------------------------------------------------------------------------
CROWN PAPER CO.
- --------------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Virginia 54-1752385
- --------------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
300 Lakeside Drive, Oakland, CA 94612-3592
- --------------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(510) 874-3400
- --------------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- --------------------------------------------------------------------------------------
(Former name, former address, and former fiscal year,
if changed since last report)
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------- -------
Number of shares of no par value common stock outstanding as of the close of
business on November 5, 1998:
One (1) share, which is owned by Crown Vantage Inc.
---------------------------------------------------
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INDEX
CROWN PAPER CO.
PART I: Financial Information
Item 1. Financial Statements
* Condensed Consolidated Balance Sheets - September 27, 1998 and
December 28, 1997.
* Condensed Consolidated Statements of Operations Three months
and nine months ended September 27, 1998 and September 28,
1997.
* Condensed Consolidated Statements of Cash Flows - Nine months
ended September 27, 1998 and September 28, 1997.
* Notes to Condensed Consolidated Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
PART II: Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
2
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PART I -- FINANCIAL INFORMATION
- ------
ITEM 1 -- FINANCIAL STATEMENTS
- ------
CROWN PAPER CO.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)
<TABLE>
<CAPTION>
ASSETS September 27, 1998 December 28, 1997
------------------ -----------------
(Unaudited)
------------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 8,352 $ 11,415
Accounts receivable, net 40,366 40,787
Inventories 105,999 104,117
Prepaid expenses and other current assets 4,785 7,399
Deferred income taxes 12,823 14,480
----------- -----------
Total current assets 172,325 178,198
Property, plant and equipment, net 589,996 621,276
Other assets 42,585 38,090
Unamortized debt issue costs 12,365 14,039
Intangibles, net 28,133 28,977
----------- -----------
Total Assets $845,404 $880,580
=========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Accounts payable $ 41,425 $ 54,181
Accrued liabilities 73,583 80,358
Current portion of long-term debt 1,000 1,000
----------- -----------
Total current liabilities 116,008 135,539
Long-term debt 455,318 430,878
Accrued postretirement benefits other than pensions 100,889 102,397
Other long-term liabilities 12,019 12,732
Deferred income taxes 71,282 88,427
----------- -----------
Total Liabilities 755,516 769,973
----------- -----------
Shareholder's Equity:
Preferred Stock, no par value;
Authorized - 5,000 shares;
Issued and outstanding - None
Common Stock, no par value;
Authorized 5,000 shares;
1 share issued and outstanding at
September 27, 1998 and
December 28, 1997 136,484 132,698
Minimum pension liability (330) (330)
Cumulative foreign currency translation adjustment 2,431 1,338
Retained deficit (48,697) (23,099)
----------- -----------
89,888 110,607
----------- -----------
Total Liabilities and Shareholder's Equity $845,404 $880,580
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
3
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CROWN PAPER CO.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Third Quarter (13 weeks) and Nine Months (39 weeks)
Ended September 27, 1998 and September 28, 1997
(in thousands of dollars, except per share)
<TABLE>
<CAPTION>
Third Quarter Nine Months
------------------------------ ------------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales $211,768 $226,808 $648,987 $680,381
Cost of goods sold 190,089 206,210 606,327 631,867
----------- ----------- ----------- -----------
Gross margin 21,679 20,598 42,660 48,514
Selling and administrative expenses 15,784 13,963 45,573 42,732
----------- ----------- ----------- -----------
Operating Income (Loss) 5,895 6,635 (2,913) 5,782
Interest expense (12,474) (13,039) (36,926) (38,082)
Other income (expense), net (33) 71 457 929
----------- ----------- ----------- -----------
Loss before income taxes (6,612) (6,333) (39,382) (31,371)
Benefit for income taxes (2,315) (2,144) (13,785) (11,294)
----------- ----------- ----------- -----------
NET LOSS (4,297) (4,189) (25,597) (20,077)
=========== =========== =========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
4
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CROWN PAPER CO.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months (39 weeks)
Ended September 27, 1998 and September 28, 1997
(in thousands of dollars)
<TABLE>
<CAPTION>
Nine Months
--------------------------------------
1998 1997
---------------- ----------------
(Unaudited)
<S> <C> <C>
Cash Provided by (Used for) Operating Activities:
Net loss $ (25,597) $ (20,077)
Items not affecting cash:
Depreciation and cost of timber harvested 62,902 61,548
Amortization of goodwill and other intangibles 844 844
Non-cash interest 1,688 2,050
Other, net 4,664 1,939
Changes in current assets and liabilities:
Accounts receivable 421 5,771
Inventories (1,882) 3,613
Other current assets 4,271 8,425
Accounts payable (11,146) (7,885)
Other current liabilities (6,003) (10,119)
Decrease in deferred income taxes (17,145) (12,738)
Other, net (6,218) (3,603)
---------------- ----------------
Cash Provided by Operating Activities 6,799 29,768
---------------- ----------------
Cash Provided by (Used for) Investing Activities:
Expenditures for property, plant and equipment (34,218) (45,005)
Other, net 106 2,078
---------------- ----------------
Cash Used for Investing Activities (34,112) (42,927)
---------------- ----------------
Cash Provided by (Used for) Financing Activities:
Proceeds from draw down of Revolving Credit 101,000 97,000
Repayments of Revolving Credit (76,000) (74,000)
Proceeds from issuance of Industrial Revenue Bonds 7,241
Repayments of Term Loans and other long-term debt (750) (8,052)
---------------- ----------------
Cash Provided by Financing Activities 24,250 22,189
---------------- ----------------
Increase (decrease) in cash and cash equivalents (3,063) 9,030
Cash and cash equivalents at beginning of year 11,415 1,175
---------------- ----------------
Cash and cash equivalents at end of period $ 8,352 $ 10,205
================ ================
</TABLE>
See notes to condensed consolidated financial statements.
5
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CROWN PAPER CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 -- ORGANIZATION AND BASIS OF PRESENTATION
- ------
The accompanying unaudited condensed consolidated financial statements
include the consolidated operations, assets and liabilities of Crown Paper Co.,
and Crown Paper Co.'s consolidated subsidiaries. Crown Paper Co. and
subsidiaries (the "Company") is a wholly owned subsidiary of Crown Vantage Inc.
("Crown Vantage" or "the Parent"). The Parent became an independent company
after James River Corporation of Virginia ("James River"), now known as Fort
James Corporation ("Fort James"), spun off the assets, liabilities and
operations which comprised a substantial part of James River's Communication
Papers Business and the paper-based part of its Food and Consumer Packaging
Business ("Predecessor Business"). At the close of business on August 25, 1995,
James River distributed to its common shareholders all of the outstanding shares
of the Parent (the "Distribution"). The Distribution was made in the form of a
tax-free dividend on the basis of one share of the Parent's common stock for
every ten shares of James River common stock. A total of 8,446,362 shares of
the Parent's common stock was issued and began trading on NASDAQ on August 28,
1995.
The accompanying condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for annual
financial statements. The condensed consolidated balance sheet as of December
28, 1997 was derived from audited financial statements, but does not include all
disclosures required by generally accepted accounting principles for annual
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the quarter and nine months ended
September 27, 1998 are not necessarily indicative of the results that may be
expected for the year ended December 27, 1998. For further information, refer
to the consolidated financial statements and footnotes thereto included in Crown
Paper Co.'s Form 10-K for the year ended December 28, 1997. Certain 1997
amounts have been reclassified to conform with the 1998 presentation.
NOTE 2 -- INCOME TAX
- ------
The income tax benefits for the quarter and nine months ended September 27,
1998 and September 28, 1997 were provided based on the Company's estimated
annual tax rates of 35% and 36%, respectively.
6
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NOTE 3 -- LONG TERM DEBT
Consolidated long-term debt consists of the following:
September 27 December 28
1998 1997
------------ -----------
(in thousands of dollars)
<S> <C> <C>
Bank Credit Facility:
Revolving credit, due 2002 $ 70,000 $ 45,000
Term Loan B, due 2003 97,250 98,000
------------ -----------
167,250 143,000
11% Senior Subordinated Notes, due 2005 250,000 250,000
Industrial Revenue Bonds, payable to 2026 39,068 38,878
------------ -----------
456,318 431,878
Less current portion 1,000 1,000
------------ -----------
$455,318 $430,878
============ ===========
</TABLE>
On March 18, 1998, Crown Vantage and the Company entered into an agreement
with Fort James related to Crown Vantage's 11.45% Senior Pay-in-Kind Notes ("PIK
Notes") which are held by Fort James. The agreement provided for the delivery to
Crown Vantage and Crown Paper Co. of PIK Notes totaling $25 million and $8
million, respectively, in exchange for the mutual release from a variety of
claims that had arisen from prior transactions between Fort James, Crown Vantage
and the Company. On September 28, 1998 Crown Vantage, the Company and Fort James
consummated the settlement agreement whereby Fort James returned the $33 million
of PIK Notes. Crown Vantage has the right to purchase the remaining PIK Notes
and accrued interest (the notes having a face amount totaling $107 million at
September 27, 1998) at fair value (see Note 10 "Subsequent Events").
Maturities of long-term debt, excluding the revolving credit, for the next
five fiscal year ends are: 1999 - $1.0 million; 2000 - $1.3 million; 2001 - $.8
million; 2002 - $47.0 million and 2003 - $47.5 million.
<TABLE>
<CAPTION>
NOTE 4 -- INVENTORIES
September 27, 1998 December 28, 1997
------------------ -----------------
(in thousands of dollars)
<S> <C> <C>
Raw materials $ 23,816 $ 27,911
Work in process 6,831 7,038
Finished goods 49,443 45,936
Stores and supplies 36,492 35,569
------------------ -----------------
116,582 116,454
Reduction to state inventories at last-in, first-out cost (10,583) (12,337)
------------------ -----------------
$ 105,999 $ 104,117
================== =================
</TABLE>
NOTE 5 -- LITIGATION AND ENVIRONMENTAL MATTERS
- ------
The Company is a party to various legal proceedings generally incidental to
its business and is subject to a variety of environmental protection statutes
and regulations. As is the case with other companies in similar industries, the
Company faces exposure from actual or potential claims and legal proceedings
involving environmental matters. Although the ultimate disposition of legal
proceedings cannot be predicted with certainty, it is the present opinion of the
Company's management that the outcome of any claim which is pending or
threatened, either individually or on a combined basis, will not have a
materially adverse effect on the consolidated financial position of the Company
but could materially affect consolidated results of operations in a given year.
7
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The Company has accrued estimated landfill site restoration, post-closure and
monitoring costs totaling $12.0 million at September 27, 1998 and December 28,
1997. In addition, the Company has been identified as a potentially responsible
party ("PRP"), along with others, under the Comprehensive Environmental
Response, Compensation and Liability Act or similar federal and state laws
regarding the past disposal of wastes at 20 sites in the United States. The
Company has previously settled its remediation obligations at 12 of those sites.
At 7 other sites, the Company is one of many potentially responsible parties and
its alleged contribution to the site and remediation obligation is not
considered significant. At one other site, remedial investigation is underway
and a loss estimate for the potential remediation effort costs is not yet
possible. However, the Company's accrual for the remediation investigation
effort was $.2 million at September 27, 1998 and $.6 million at December 28,
1997. The liabilities can change substantially due to such factors as the
solvency of other potentially responsible parties, the Company's share of
responsibility, additional information on the nature or extent of contamination,
methods and associated costs of remediation required, and other actions by
governmental agencies or private parties. While it is not feasible to predict
the outcome of all environmental liabilities, based on its most recent review,
management estimates the Company's share of the costs of investigation and
remediation of the known sites will not have a material adverse effect upon the
consolidated financial condition of the Company.
Due to uncertainties associated with remediation activities, regulations,
technologies, and the allocation of costs among various other parties, actual
costs to be incurred at identified sites may vary from estimates. Therefore,
management is unable to determine if the ultimate disposition of all known
environmental liabilities will have a material adverse effect on the Company's
consolidated results of operations in a given year. As with most manufacturing
and many other entities, there can be no assurance that the Company will not be
named as a PRP or incur liabilities through other means at additional sites in
the future or that the costs associated with such additional sites would not be
material.
The Environmental Protection Agency signed final rules affecting pulp and
paper industry discharges of wastewater and gaseous emissions ("Cluster Rules")
which became effective on April 15, 1998. These Cluster Rules require changes
in the pulping, bleaching and/or wastewater treatment processes presently used
in some U.S. pulp and paper mills, including some of the Company's mills. Based
on management's understanding of the rules, the Company estimates that
approximately $40 million of capital expenditures may be required to comply with
the rules with compliance dates beginning in 1999 and extending over the next
two to five years. As of September 27, 1998 the Company has incurred $2.4
million in capital expenditures for compliance with the Cluster Rules. There
are risks and uncertainties associated with the Company's estimate that could
cause total capital expenditures and timing of such expenditures to be
materially different from current estimates, including changes in technology,
interpretation of the rules by government agencies that is substantially
different from the Company's interpretation, or other items.
NOTE 6 -- STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 121
- ------
Statement of Financial Accounting Standards No. 121 ("Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of")
requires that the Company assess the recoverability of its investments in long-
lived assets to be held and used in operations whenever events or circumstances
indicate that their carrying amounts may be impaired. Such assessment requires
that the future cash flows expected to result from use of the assets are
estimated and an impairment loss recognized when future cash flows are less than
the carrying value of such assets. Estimating future cash flows requires the
Company to estimate useful lives of its long-lived assets, future production
volumes and costs, future sales volumes, demand for the Company's product mix
and prices that reflect the use of its long-lived assets and market conditions.
Although the Company believes it has a reasonable basis for its estimates, it is
reasonably possible that the Company's estimate of future cash flows could
change from current estimates which could result in recognizing, in future
periods, a material impairment loss on its long-lived assets.
8
<PAGE>
NOTE 7 -- COMPREHENSIVE INCOME
- ------
The Company adopted Statement of Financial Accounting Standards No. 130
("SFAS No. 130") "Reporting Comprehensive Income" in the first quarter of 1998.
SFAS No. 130 establishes standards for the reporting and displaying of
comprehensive income and its components; however, the adoption of SFAS No. 130
had no impact on the Company's net income or shareholder's equity.
Comprehensive income for the Company consists of net income, foreign currency
translation adjustments and minimum pension liability adjustments.
During the third quarter of 1998 and 1997, the Company's total comprehensive
loss was $3.1 million and $5.8 million, respectively, and for the nine months
ended September 27, 1998 and September 28, 1997, the Company's total
comprehensive loss was $24.5 million and $23.6 million, respectively.
NOTE 8 WORK FORCE REDUCTION
- ------
During the second quarter of 1998 the Company accrued approximately $2.5
million relating to the announced work force reduction of 5%. An additional $.5
million was accrued for the work force reduction effort during the third quarter
of 1998. The accrual is for anticipated expenses resulting from the work force
reduction primarily for severance and benefit payments to the approximately 230
affected employees. Employment classes affected include both hourly and salaried
employees from manufacturing, maintenance, and office staff. As of September 27,
1998 approximately $.9 million had been paid and the remainder will be paid
through the first half of 1999.
NOTE 9 SUBSEQUENT EVENTS
- ------
On September 28, 1998 Crown Paper Co. received consents from holders of its
11% Senior Subordinated Notes due 2005 and Crown Vantage Inc. and Crown Paper
Co. consummated the settlement with Fort James Corporation for the return of $33
million of Crown Vantage's 11.45% Senior Pay-In-Kind Notes (the "PIK Notes").
The Company's bank lenders also provided their consent. The consents were for
amendments of certain terms of the related indentures and Credit Agreement to
permit the settlement to occur. The settlement involved the return of these PIK
Notes by Fort James in exchange for the mutual release from a variety of claims
that had arisen from prior intercompany transactions. The settlement also
amended the terms of the remaining PIK Notes allowing Crown Vantage the right to
call the remaining PIK Notes and accrued interest at fair value at any time
prior to their maturity.
Crown Paper Co. expects to record a pretax extraordinary gain in the fourth
quarter of 1998 of approximately $8 million, which will be partially offset by
transaction fees. PIK Notes with combined face values of approximately $25
million were extinguished by Crown Vantage. The remaining $8 million in
returned PIK Notes is carried on the books of Crown Paper at face value, but
will be eliminated in the consolidated Crown Vantage financial statements.
Crown Vantage also announced on September 28, 1998 that it would not exercise
the option portion of the settlement agreement which would have allowed for the
return of the remaining PIK Notes with a face value of $107 million held by Fort
James. The option, which expired on September 30, 1998, would have allowed
Crown Vantage to purchase these notes for $80 million in cash. However, Crown
Vantage continues to hold the right to call these notes at any time prior to
maturity at fair value.
9
<PAGE>
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
- ------
FINANCIAL CONDITION
Crown Paper Co. and subsidiaries (the "Company") are a major producer of
value-added paper products for a diverse array of end-uses. The Company's two
business sectors and corresponding principal product categories are (i) printing
and publishing papers, for applications such as special interest magazines,
books, custom business forms and corporate communications and promotions (e.g.,
annual reports and stationery); and (ii) specialty papers, principally for food
and retail packaging applications and conversion into such items as coffee
filters, cups and plates.
The Company operates 10 facilities using 31 paper machines and its paper
production is approximately 75% integrated with the Company's pulp operations.
The Company's two largest facilities are integrated operations located in St.
Francisville, Louisiana and Berlin and Gorham, New Hampshire. St. Francisville
produces coated groundwood papers for magazines and catalogs and uncoated
specialty converting papers. Berlin-Gorham primarily produces uncoated printing
and publishing papers as well as market pulp. The Company also produces
uncoated printing and publishing papers at its non-integrated facilities in
Adams, Massachusetts; Ypsilanti, Michigan; and Dalmore and Guardbridge,
Scotland. The Company's food and retail packaging papers are produced primarily
at non-integrated facilities in Port Huron and Parchment, Michigan, and Milford,
New Jersey. In addition to its primary paper-making operations, the Company
operates a cast-coating facility in Richmond, Virginia.
RESULTS OF OPERATIONS
- ---------------------
The Company's net sales revenue and tons sold for each business sector as
well as pulp are as follows:
<TABLE>
<CAPTION>
Net Sales and Tonnage by Sector
for the Three Months Ended
September 27, 1998 September 28, 1997
--------------------- ---------------------
Tons Sales Tons Sales
---------- --------- --------- ----------
(thousands) (thousands)
<S> <C> <C> <C> <C>
Printing and Publishing Papers
Coated groundwood 74,042 $ 60,306 70,913 $ 52,713
Uncoated 57,746 52,052 59,251 57,505
Specialty Papers
Food and retail packaging 53,466 65,722 58,606 72,838
Converting 36,943 27,175 44,301 37,427
Pulp 27,629 9,388 26,236 10,107
Intracompany Eliminations (7,928) (2,875) (9,740) (3,782)
------- -------- ------- -------
241,898 $211,768 249,567 $226,808
======= ======== ======= ========
</TABLE>
10
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<TABLE>
<CAPTION>
Net Sales and Tonnage by Sector
for the Nine Months Ended
September 27, 1998 September 28, 1997
--------------------- ---------------------
Tons Sales Tons Sales
---------- --------- --------- ----------
(thousands) (thousands)
<S> <C> <C> <C> <C>
Printing and Publishing Papers
Coated groundwood 217,082 $177,841 213,769 $147,839
Uncoated 180,605 168,497 182,875 177,561
Specialty Papers
Food and retail packaging 160,881 200,248 175,887 222,545
Converting 107,184 83,187 132,975 117,437
Pulp 80,073 28,055 70,871 26,103
Intracompany Eliminations (24,394) (8,841) (30,219) (11,104)
------- -------- ------- -------
721,431 $648,987 746,158 $680,381
======= ======== ======= ========
</TABLE>
NET SALES
- ---------
The Company's net sales decreased 4.6% to $649.0 million for the nine
months ended September 27, 1998 as compared to $680.4 million for the same
period in 1997. The decrease in net sales is primarily due to a 3.3% decrease in
tons sold during the first nine months of 1998 compared to the first nine months
of 1997. Net sales declined 6.6% during the third quarter of 1998 as compared
to the third quarter of 1997. The decrease in net sales during the third
quarter of 1998 as compared to the same period in 1997 is primarily due to a
3.1% decrease in tons sold and a 3.7% decrease in average net sales price per
ton.
Net sales of coated groundwood paper (which is used principally in the
production of magazines and catalogs) for the nine month period ending September
27, 1998 increased 20.3% as compared to the same period in 1997. The increase
in net sales is primarily due to an 18.5% increase in average net sales price
per ton when comparing the first nine months of 1998 to the same period in 1997.
Net sales increased 14.4% during the third quarter of 1998 as compared to the
third quarter of 1997. The increases in net sales during the third quarter of
1998 as compared to the third quarter of 1997 are primarily due to average net
sales price per ton increasing 9.6% and tons sold increasing by 3,100 tons or
4.4% during the comparable periods. While demand for coated groundwood papers
was strong in the third quarter of 1998, coated paper imports continued at high
levels resulting in industry-wide mill inventory builds and some price
discounting during the quarter. The current oversupply poses a threat of
continued price discounting which may negatively impact prices of the Company's
coated groundwood paper in future periods.
Net sales of uncoated printing and publishing papers in the first
three quarters of 1998 decreased 5.1% compared to the first three quarters of
1997. The decrease in the first nine months of 1998 from the first nine months
of 1997 is primarily due to an average sales price per ton decrease of 3.9%.
Net sales during the third quarter of 1998 decreased 9.5% as compared to the
third quarter of 1997. The decrease in net sales is primarily due to a 7.1%
decrease in average net sales price per ton and a decrease of approximately
1,500 tons (or 2.5%) during the third quarter of 1998 as compared to the third
quarter of 1997. The current economic crisis in Asia coupled with a strong U.S.
Dollar and British Pound have
11
<PAGE>
resulted in lower exports by U.S. and U.K. paper producers and increased
imports into the U.S. and U.K. from Asia, Europe, and South America. This
abundance of uncoated freesheet paper supply has negatively impacted demand and
pricing for the Company's uncoated printing and publishing papers, resulting in
depressed prices for the Company's targeted grades. The current supply levels of
these papers in the market place have also resulted in the Company's partial
shift in mix to lower value added grades in order to maintain volume during this
period of supply/demand imbalance, which also negatively impacted the Company's
average net selling price.
Food and retail packaging paper net sales declined $22.3 million
during the first nine months of 1998, as compared to the same period in 1997.
The 10.0% decrease in net sales is the result of an 8.5% decrease in tons sold
and a 1.6% decrease in average net sales price per ton during the nine months
ended September 27, 1998 as compared to the nine months ended September 28,
1997. Net sales during the third quarter of 1998 decreased 9.8% or $7.1 million
as compared to the third quarter of 1997. The decrease in net sales during the
third quarter of 1998 as compared to the same period in 1997 is due to a 8.8%
decrease in tons sold and a 1.1% decrease in average net sales price per ton.
The current economic crisis in Asia is indirectly affecting the Company's food
and retail packaging papers sector as large integrated mills are entering
otherwise non-traditional markets thereby disrupting supply/demand balance and
pricing for the Company's specialty packaging papers.
Net sales of specialty converting papers decreased 29.2% during the
nine months ended September 27, 1998 compared to the nine months ended September
28, 1997. Net sales decreased 27.4% to $27.2 million from $37.4 million for the
quarters ended September 27, 1998 and September 28, 1997, respectively. The
decrease during the first three quarters of 1998 compared to the first three
quarters of 1997 is primarily the result of a 19.4% decrease in tons sold and a
decrease of 12.1% in average net sales price per ton. The decrease in net sales
during the third quarter of 1998 compared to the third quarter of 1997 is due to
an average price per ton decrease of 12.9% and a decrease in tons sold of 16.6%.
The decreased volume is primarily due to the decision by certain customers
during the last half of 1997 to integrate backwards their operations, negatively
affecting our specialty converting papers sales. The decrease in average net
sales price per ton is primarily due to the lower number of tons sold from the
Company's cast-coating operations whose papers generally command premium pricing
and the competitive pricing pressures for toweling and certain paper grades
produced at the Company's St. Francisville mill. The Company continues to
aggressively pursue replacing the lost tonnage with new product development and
trials of engineered papers in progress. However, demand for the cast-coated
products remains particularly weak with marginal improvement expected in the
fourth quarter of 1998 and 1999 as compared to the first three quarters of 1998.
Net sales of pulp to external customers increased by $4.2 million
during the nine months ended September 27, 1998 as compared to the nine months
ended September 28, 1997. Tons of pulp sold is a function of market demand as
well as managing, to the Company's best advantage, internal pulp integration.
Tons sold to external customers in the first nine months of 1998 increased 37.0%
or 15,000 tons when compared to the same period of 1997. The increase in tons
sold is primarily due to the availability of pulp for sale that in the prior
period was used internally, primarily for the manufacturing of toweling, as well
as improved operating efficiencies at the pulping operations. Net sales to
external customers increased 3.0% during the third quarter of 1998 as compared
to the third quarter of 1997. The increase in net sales is primarily due to an
increase in tons sold of 3,200 tons, for the reasons discussed above, and was
partially offset by a decrease in net sales price per ton of 13.8%.
12
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<TABLE>
<CAPTION>
OPERATING INCOME (LOSS)
-----------------------
Operating Income (Loss) by Sector Operating Income (Loss) by Sector
for the Quarter Ended for the Nine Months Month
--------------------------------- ---------------------------------
Sept 27, 1998 Sept 28, 1997 Sept 27, 1998 Sept 28, 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
(Thousands) (Thousands)
Printing and Publishing Papers $6,751 $2,161 $ 4,066 (8,341)
Food and retail packaging 155 1,530 766 5,913
Converting (447) 1,730 (1,111) 7,743
Pulp and Miscellaneous (564) 1,214 (6,634) 467
------ ------ ------- ------
$5,895 $6,635 $(2,913) $5,782
====== ====== ======= ======
</TABLE>
The Company had an operating loss of $2.9 million for the nine months
ended September 27, 1998 compared to operating income of $5.8 million for the
same period in 1997. Lower volumes and the decrease in average net sales price
in the first nine months of 1998 increased the operating loss by $11.1 million
and $8.8 million, respectively, as compared to the same period in 1997. The
negative volume and price variances were partially offset by $14.1 million of
favorable cost variances primarily caused by lower raw material costs and
improved operating efficiencies. The improved cost variances were partially
offset by the workforce reduction accrual taken in the second and third quarters
of 1998 for a total of $3.0 million. The 11.1% decrease in operating profit
when comparing the third quarter of 1998 to the third quarter of 1997 is
primarily due to the decrease in volume and average net sales price and is
partially offset by the favorable cost variances discussed above.
Operating performance for printing and publishing papers improved by
$12.4 million to operating income of $4.1 million during the first nine months
of 1998 compared to an operating loss of $8.3 million for the same period in
1997. The improved operating results were primarily due to the increase in
coated groundwood average price per ton that was partially offset by the
decrease in average price per ton for the Company's uncoated freesheet papers.
The improved operating performance was also negatively impacted by higher costs
due to the work force reduction accrual, and unexpected down time in the second
quarter of 1998 at St. Francisville caused by explosions of transformers owned
by a local utility company. Operating income increased by $4.6 million during
the third quarter of 1998 as compared to the third quarter of 1997 primarily due
to the increase in average net sales price per ton for coated groundwood paper.
The improved results for the third quarter of 1998 were partially offset by
lower uncoated freesheet prices and lower volumes, discussed above.
Food and retail packaging operating income decreased $5.1 million to
$.8 million for the first nine months of 1998 compared to the first nine months
of 1997. The decrease in operating income during this period is primarily
attributable to the decreases in volume and average sales price per ton
discussed previously in "Net Sales." The decreases in volumes and prices were
partially offset by favorable cost variances primarily from improved mill
efficiencies and lower raw material costs. Operating income decreased $1.4
million during the third quarter of 1998 as compared to the third quarter of
1997 for the reasons discussed above.
Operating results for converting papers decreased $8.9 million in the
first nine months of 1998 as compared to the first nine months of 1997.
Operating results decreased $2.2 million during the third quarter of 1998
compared to the third quarter of 1997. The decrease in operating results is
primarily attributable to the decrease in tons sold and the lower average price
per ton discussed previously.
Operating results within the Company's pulp and miscellaneous sector
decreased approximately $ 7.1 million for the first nine months of 1998 compared
to the first nine months of 1997. The decline in
13
<PAGE>
operating results was primarily the result of decreases in average net sales
price per ton and certain manufacturing difficulties encountered during the
first two quarters of 1998. Average net sales price per ton for pulp decreased
6.5% during the first nine months of 1998 as compared to the first nine months
of 1997. Operating results during the third quarter of 1998 compared to the
third quarter of 1997 decreased by $1.8 million primarily due to a 13.8%
decrease in average net sales price per ton.
Selling and administrative expenses increased $2.8 million for the
first nine months of 1998 compared to the same period in 1997. The increase in
selling and administrative expense when comparing the first nine months of 1998
to the first nine months of 1997 is primarily due to higher sales and marketing
costs and one time expenditures associated with certain of the Company's
strategic initiatives. Selling and administrative expenses increased $1.8
million when comparing the third quarters of 1998 and 1997 primarily due to the
one time expenditures associated with certain of the Company's strategic
initiatives.
INTEREST EXPENSE
- ----------------
Interest expense for the nine months ended September 27, 1998 and
September 28, 1997 was $36.9 million and $38.1 million, respectively. Interest
expense for the third quarters of 1998 and 1997 was $12.5 million and $13.0
million, respectively.
LIQUIDITY AND SOURCES OF CAPITAL
- --------------------------------
In connection with the Spin-Off, the Company obtained $250 million in
financing through a public offering of Senior Subordinated Notes and $253
million initial borrowings under a $350 million credit facility from a group of
banks (collectively, the "Financing"). The net proceeds from the Financing were
paid to James River Corporation of Virginia, now known as Fort James Corporation
("Fort James"), together with $100 million Senior Pay-in-Kind Notes issued by
the Parent as a return of James River's capital investment.
On March 18, 1998, Crown Vantage and the Company entered into an agreement
with Fort James related to Crown Vantage's 11.45% Senior Pay-in-Kind Notes ("PIK
Notes") which are held by Fort James. The agreement provided for the delivery to
Crown Vantage and Crown Paper Co. of PIK Notes totaling $25 million and $8
million, respectively, in exchange for the mutual release from a variety of
claims that had arisen from prior transactions between Fort James, Crown Vantage
and the Company. On September 28, 1998 Crown Vantage, Crown Paper Co. and Fort
James consummated the settlement agreement whereby Fort James returned the $33
million of PIK Notes. Crown Vantage has the right to purchase the remaining PIK
Notes and accrued interest (the notes having a face amount totaling $107 million
at September 27, 1998) at fair value (see "Subsequent Events").
Under the bank credit facility the revolving credit available is in the
aggregate amount of $150 million with a $75 million sublimit for letters of
credit and can be used for general corporate purposes, working capital needs and
permitted investments. At September 27, 1998, $70.0 million of the revolving
credit was outstanding, $37.9 million of the sublimit for letters of credit had
been used and $42.1 million of the aggregate line was available if needed.
Cash flows provided by operating activities were $6.8 million for the
nine months ended September 27, 1998 compared to cash flows provided by
operating activities of $29.8 million for the nine months ended September 28,
1997. The decrease in operating cash flows for the nine months ended September
27, 1998 compared to the same period in 1997 is mainly attributable to the $5.5
million increase in net loss, a $3.3 million reduction in the accounts
receivable securitization and fluctuations in
14
<PAGE>
working capital and other assets and liabilities. Earnings before interest,
taxes, depreciation and amortization (EBITDA) were $61.3 million for the first
nine months of 1998 as compared to $69.1 million for the comparable period in
1997.
The Company's business is capital intensive. Pulp and paper mills
generally consist of an extensive network of buildings, machinery, and
equipment, which require continual upgrades, replacement, modernization and
improvement. The Company's capital expenditures for the nine months ended
September 27, 1998 were $34.1 million compared to $45.0 million in the same
period in 1997. 1998 expenditures primarily represented capital maintenance
projects. Capital expenditure projects during the first nine months of 1997
related to capital maintenance projects and $7.9 million for cash payments on
the Company's rebuild of the Number 1 paper machine at the St. Francisville
mill. The Company's capital spending plan for the remainder of 1998 is
approximately $6 million. These capital expenditures are primarily for capital
maintenance and environmental projects and are expected to be financed by cash
flows from operations and available financing sources.
WORK FORCE REDUCTION
- --------------------
During the second quarter of 1998 the Company accrued $2.5 million
relating to the announced work force reduction of 5%. An additional $.5 million
was accrued for the work force reduction effort during the third quarter of
1998. The accrual is for anticipated expenses resulting from the work force
reduction primarily for severance and benefit payments to the approximately 230
affected employees. Employment classes affected include both hourly and salaried
employees from manufacturing, maintenance, and office staff. As of September 27,
1998 approximately $.9 million had been paid and the remainder will be paid
during the last quarter of 1998 and into the first half of 1999.
EURO CONVERSION
- ---------------
The Company is in the process of addressing the issues raised by the
introduction of the Single European Currency ("Euro") as of January 1, 1999 and
during the transition period through January 1, 2002. The Company expects that
its internal systems that will be affected by the initial introduction of the
Euro will be Euro capable by January 1, 1999, and does not expect the costs of
system modifications to be material. While the Company will continue to evaluate
the impact of the Euro introduction over time, based on currently available
information, management does not believe that the introduction of the Euro
currency will have a material adverse impact on the Company's financial
condition or overall trends in results of operations.
YEAR 2000
- ---------
The Year 2000 issue concerns the potential inability of computer
applications, other information technology systems, and certain software-based
"embedded" control systems to recognize and process properly date-sensitive
information as the Year 2000 approaches and beyond. The Company could suffer
material adverse impacts on its operations and financial results if the
applications and systems used by the Company, or by third parties with whom the
Company does business, do not accurately or adequately process or manage dates
or other information as a result of the Year 2000 issue.
The Company has completed a review of its financial accounting system
for purposes of evaluating the Year 2000 issue. The Company's software provider
has indicated that it will certify this financial accounting system as Year 2000
compliant upon completion of the next scheduled upgrade. This upgrade is
scheduled for completion during the first quarter of 1999. Management expects
this upgrade will adequately address the Year 2000 issue in this system.
Independent testing will be
15
<PAGE>
performed by the Company. There can be no assurance that all Year 2000 issues in
this software will be adequately resolved by this or other future software
releases.
The Company also uses a variety of other software applications,
business information systems, accounting subsystems, process control systems and
related software, communication devices, and networking and other operating
systems. The Company has completed its inventory of all such systems and is
currently in the process of testing, upgrading, replacing, or otherwise
modifying these systems to adequately address the Year 2000 issue. The Company
believes it will be able to timely modify or replace its affected systems to
prevent any material detrimental effects on operations and financial results.
The Company anticipates this work will continue, with appropriate testing,
remediation and/or replacement taking place during the fourth quarter of 1998
and into the first half of 1999. Possible risks of this process include but
are not limited to the ability of the Company's personnel and outside vendors to
adequately and timely identify and resolve all critical Year 2000 issues, and
the ability of the Company to secure additional Year 2000 expertise during this
time of high demand for this expertise if an unanticipated material problem
requires skills the Company or its third party vendors currently do not possess.
The Company can give no assurance that all critical Year 2000 issues will be
resolved in a timely manner or that potentially unresolved issues would not have
a material adverse impact on the results of operations.
The Company has certain key relationships with customers, vendors and
outside service providers. Failure by the Company's key customers, vendors and
outside service providers to adequately address the Year 2000 issue could have a
material adverse impact on the Company's operations and financial results. The
Company is currently assessing the Year 2000 readiness of these key customers
and suppliers and, at this time, cannot determine what the impact of this
assessment will be on the Company. This assessment includes but is not limited
to soliciting responses from each of these parties concerning their Year 2000
readiness and review of public documents filed by many of these parties.
Management expects to complete the assessment of these key suppliers during the
first quarter of 1999. The Company is primarily relying upon the voluntary
disclosures from third parties for this review of their Year 2000 readiness.
Since the Company anticipates that its affected systems will be remediated
or replaced to timely address the Year 2000 issue and is currently focusing its
resources in those areas, the Company has not yet developed any other
contingency plans regarding the Year 2000 issue for its internal systems.
However, the Company intends to develop contingency plans if at a later date
management determines that any of its systems will not be Year 2000 compliant
and that such noncompliance would be expected to have a material adverse impact
on the Company's operations or financial results. Many of the identified risks
from key customers, vendors and outside service providers are both general and
speculative in nature, such as possible power or telecommunication failures,
breakdowns in transportation systems, inability to process financial
transactions, and similar events affecting general business services. The
Company has not developed any contingency plans for these general risks, is not
currently able to ascertain the likelihood that any of these risks will actually
occur, and has not otherwise analyzed or identified possible "worst case"
scenarios relating to Year 2000 issues. Once the Company has completed its
assessment of Year 2000 readiness of key customers, vendors and outside service
providers, management intends to develop contingency plans to mitigate material
known detrimental effects that may be caused by their Year 2000 noncompliance.
However, it is unlikely that any contingency plan would mitigate the adverse
impact to the financial condition or operations of the Company of any
catastrophic event due to the Year 2000 issue that leads to a prolonged
disruption of essential services.
16
<PAGE>
Management believes that total Year 2000 costs will range between $2
million and $3 million, most of which will be incurred in 1998. The costs
associated with this effort are incremental to the Company. As of September
27, 1998 the Company has incurred costs related to the Year 2000 issue of
approximately $.7 million. In addition to the costs mentioned above, the
Company's capital spending for planned upgrading of certain information systems
to enhance the capabilities of those systems was accelerated in part due to the
Year 2000 issue. The total estimated increase in accelerated capital spending
for these systems is anticipated to be under $2 million. The Company's current
estimates of the amount of time and costs necessary to remediate and test its
computer systems are based on the facts and circumstances existing at this time.
The estimates were made using assumptions of future events including the
continued availability of certain resources, Year 2000 readiness plans,
implementation success by key third party vendors, and other factors. New
developments may occur that could increase the Company's estimates of the amount
of time and costs necessary to modify and test its various information and non-
information systems. These potential developments include but are not limited
to the availability and increased cost of personnel trained in this area of
expertise, the ability to locate and correct all relevant computer codes and
equipment, and any unanticipated Year 2000 problems from key customers, vendors,
and outside service providers.
DEBT COVENANTS
- --------------
In connection with the bank credit facility as amended (the "Facility"),
the Company is required to comply with certain financial covenants that include
maintaining minimum quarterly cash flow to debt and interest coverage ratios as
well as minimum tangible net worth. The Company is currently in compliance with
these covenant requirements. Pursuant to the Facility, the covenant
requirements are scheduled to become significantly more onerous at the end of
the first quarter of fiscal year 1999. Based on management's current forecasts,
it is probable that the Company will not be in compliance with the new financial
covenants referred to above at the end of the first quarter of 1998. In
addition, should the current pricing environment for the Company's products not
sufficiently improve during the remainder of 1998, it is reasonably possible
that the Company will not be in compliance with certain of its financial
covenants at the end of the fourth quarter of 1998. Management is currently in
the process of renegotiating its debt covenants with the bank group. While
there can be no assurance of success, management believes that it will be
successful in amending the financial covenants in order to maintain compliance
with the Facility.
NEW ACCOUNTING PRONOUNCEMENTS
- -----------------------------
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131 ("SFAS No. 131") "Disclosure about
Segments of an Enterprise and Related Information." This statement will require
segment disclosure based on management's decision-making criteria. SFAS No. 131
also requires disclosures about the products and services provided, the
countries in which material assets are held and material revenues are generated,
and significant customers. Management has determined that the Company has two
reportable segments under SFAS 131: Specialty Papers and Printing and Publishing
Papers. SFAS No. 131 is effective for the Company's 1998 fiscal year end.
SUBSEQUENT EVENTS
- -----------------
On September 28, 1998 Crown Paper Co. received consents from holders of its
11% Senior Subordinated Notes due 2005 and Crown Vantage Inc. and Crown Paper
Co. consummated the settlement with Fort James Corporation for the return of $33
million of Crown Vantage's 11.45% Senior Pay-In-Kind Notes. The Company's bank
lenders also provided their consent. The consents were for amendments
of certain terms of the
17
<PAGE>
related indentures and Credit Agreement to permit the settlement to occur. The
settlement involved the return of these PIK Notes by Fort James in exchange for
the mutual release from a variety of claims that had arisen from prior
intercompany transactions. The settlement also amended the terms of the
remaining PIK Notes allowing Crown Vantage the right to call the remaining PIK
Notes and accrued interest at fair value at any time prior to their maturity.
Crown Paper Co. expects to record a pretax extraordinary gain in the fourth
quarter of 1998 of approximately $8 million, which will be partially offset by
transaction fees. PIK Notes with combined face values of approximately $25
million were extinguished by Crown Vantage. The remaining $8 million in
returned PIK Notes is carried on the books of Crown Paper at face value, but
will be eliminated in the consolidated Crown Vantage financial statements.
Crown Vantage also announced on September 28, 1998 that it will not
exercise the option portion of the settlement agreement for the return of the
remaining PIK Notes with a face value of $107 million held by Fort James. The
option, which expired on September 30, 1998, would have allowed Crown Vantage to
purchase these notes for $80 million in cash. However, Crown Vantage continues
to hold the right to call these notes at any time prior to maturity at fair
value.
FORWARD LOOKING STATEMENTS
- --------------------------
Certain statements within Management's Discussion and Analysis and
elsewhere are forward looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements are subject to
various risks and uncertainties that could cause the actual results to be
materially different from the Company's current expectations. These forward-
looking statements can be identified by use of language such as plans, expects,
estimates, anticipates, believes, possible and other similar words or phrases.
In addition to the factors discussed above, there are other factors that could
cause the actual results to differ materially. These other factors include but
are not limited to business conditions and the general economy both global and
domestic, prices for the Company's products, the duration and depth of the Asian
economic crisis, competitive factors, the effects of the spread of the Asian
economic crisis to other regions around the world, maintaining good labor
relations, the Company's ability to successfully implement its Year 2000 plans,
the Company's ability to renegotiate and comply with debt covenants and
maintaining good customer relations.
18
<PAGE>
ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K
- ------
(a) Exhibits
Ex. 3.1 Restated Bylaws of Crown Paper *
Ex. 10.1 Form of employment agreement (amendment No. 2) with
Ernest S. Leopold dated September 11, 1998 *
Ex. 10.2 Amendment No. 5 to Credit Agreement
Ex. 27 Financial Data Schedule *
* Electronic Filing Only
(b) Reports on Form 8-K --
Current Report, previously filed on Form 8-K dated July 28, 1998, item 5,
relating to the Company no longer actively exploring the possible
separation of its specialty papers businesses from the St. Francisville
facility and Crown Vantage exploring other alternatives to repurchase the
PIK Notes.
19
<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.
CROWN PAPER CO.
(Registrant)
/s/ R. Neil Stuart /s/ Michael J. Hunter
- --------------------------------- ---------------------------------
R. Neil Stuart Michael J. Hunter
Executive Vice President, Vice President,
Chief Financial Officer Chief Accounting Officer
(Duly Authorized Officer) (Duly Authorized
Chief Accounting Officer)
November 11, 1998
20
<PAGE>
Exhibit 3.1
RESTATED BYLAWS OF
CROWN PAPER CO.
(as amended September 11, 1998)
ARTICLE I - MEETING OF STOCKHOLDERS
Section 1.1 Place and Time of Meetings. Meetings of stockholders shall be
--------------------------
held at such place, either within or without the Commonwealth of Virginia, and
at such time, as may be provided in the notice of the meeting.
Section 1.2 Organization and Order of Business. The Chairman (the
----------------------------------
"Chairman") or, in his absence, the Chief Executive Officer or a Vice President,
shall serve as chairman at all meetings of the stockholders. The Secretary of
the Corporation, or, in his absence, an Assistant Secretary, shall act as
secretary at all meetings of the stockholders. In the event that neither the
Secretary nor any Assistant Secretary is present, the chairman of the meeting
may appoint any person to act as secretary of the meeting.
The Chairman shall have the authority to make such rules and regulations,
to establish such procedures and to take such steps as he may deem necessary or
desirable for the proper conduct of each meeting of the stockholders, including,
without limitation, the authority to make the agenda and to establish procedures
for (i) dismissing of business not properly presented, (ii) maintaining of order
and safety, (iii) placing limitations on the time allotted to questions or
comments on the affairs of the Corporation, (iv) placing restrictions on
attendance at a meeting by persons or classes of persons who are not
stockholders or their proxies, (v) restricting entry to a meeting after the time
prescribed for the commencement thereof and (vi) commencing, conducting and
closing voting on any matter.
Section 1.3 Annual Meeting. The annual meeting of stockholders shall be
--------------
held on the second Thursday in April of each year, if not a legal holiday, and
if a legal holiday, then on the next succeeding business day.
Section 1.4 Substitute Annual Meeting. If an annual meeting of
-------------------------
stockholders is not held on the day designated in these Bylaws, a substitute
annual meeting shall be called as promptly as is practicable by the Chief
Executive Officer or the Board of Directors. Any meeting so called shall be
designated and treated for all purposes as the annual meeting.
Section 1.5 Special Meetings. Special meetings of the stockholders may be
----------------
called only by the Chief Executive Officer or the Board of Directors. Only
business within the purpose or purposes described in the notice for a special
meeting of stockholders may be conducted at the meeting.
<PAGE>
Section 1.6 Record Dates. The record date for determining stockholders
------------
entitled to demand a special meeting of stockholders is the date the first
stockholder signs the demand that the meeting be held.
Except as is provided in the preceding paragraph, the Board of Directors
may fix, in advance, a record date to make a determination of stockholders
entitled to notice of, or to vote at, any meeting of stockholders, to receive
any dividend or for any purpose, such date to be not more than 70 days before
the meeting or action requiring a determination of stockholders. If no such
record date is set the record date shall be the close of business on the day
before the date on which the first notice is given.
Section 1.7 Notice Of Meetings. Written notice stating the place, day and
------------------
hour of each meeting of stockholders and, in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be given not less
than ten nor more than 60 days before the date of the meeting (except when a
different time is required in these Bylaws or by law) either personally or by
mail, telephone, telegraph, teletype, telecopy or other form of wire or wireless
communication, or by private courier, to each stockholder of record entitled to
vote at such meeting. If mailed, such notice shall be deemed to be effective
when deposited in first class United States mail with postage thereon prepaid,
addressed to the stockholder at his address as it appears on the share transfer
books of the Corporation. If given in any other manner, such notice shall be
deemed effective when (i) given personally or by telephone, (ii) sent by
telegraph, teletype, telecopy or other form of wire or wireless communication or
(iii) given to a private courier to be delivered.
Notice of a stockholder's meeting to act on (i) an amendment of the
Articles of Incorporation; (ii) a plan of merger or share exchange; (iii) the
sale, lease, exchange or other disposition of all or substantially all the
property of the Corporation otherwise than in the usual and regular course of
business, or (iv) the dissolution of the Corporation, shall be given, in the
manner provided above, not less than 25 nor more than 60 days before the date of
the meeting. Any notice given pursuant to this section shall state that the
purpose, or one of the purposes, of the meeting is to consider such action and
shall be accompanied by (x) a copy of the proposed amendment, (y) a copy of the
proposed plan of merger or share exchange, or (z) a summary of the agreement
pursuant to which the proposed transaction will be effected. If only a summary
of the agreement is sent to the stockholders, the Corporation shall also send a
copy of the agreement to any stockholder who requests it.
If a meeting is adjourned to a different date, time or place, notice need
not be given if the new date, time or place is announced at the meeting before
adjournment. However, if a new record date for an adjournment meeting is fixed,
notice of the adjourned meeting shall be given to stockholders as of the new
record date, unless a court provides otherwise.
Section 1.8 Waiver of Notice; Attendance at Meeting. A stockholder may
---------------------------------------
waive any notice required by law, the Articles of Incorporation or these Bylaws
before or after the date and time of the meeting that is the subject of such
notice. The waiver shall be in writing, be signed
2
<PAGE>
by the stockholder entitled to the notice, and be delivered to the Secretary
of the Corporation for inclusion in the minutes or filing with the corporate
records.
A stockholder's attendance at a meeting (i) waives objection to lack of
notice or defective notice of the meeting, unless the stockholder at the
beginning of the meeting objects to holding the meeting or transacting business
at the meeting, and (ii) waives objection to consideration of a particular
matter at the meeting that is not within the purpose or purposes described in
the meeting notice, unless the stockholder objects to considering the matter
when it is presented.
Section 1.9 Quorum and Voting Requirements. Unless otherwise required by
------------------------------
law, a majority of the votes entitled to be cast on a matter constitutes a
quorum for action on that matter. Once a share is represented for any purpose
at a meeting, it is deemed present for quorum purposes for the remainder of the
meeting and for any adjournment of that meeting unless a new record date is or
shall be set for that adjourned meeting. If a quorum exists, action on a
matter, other than the election of directors, is approved if the votes cast
favoring the action exceed the votes cast opposing the action, unless a greater
number of affirmative votes is required by law. Directors shall be elected by a
plurality of the votes cast by the shares entitled to vote in the election at a
meeting at which a quorum is present. Less than a quorum may adjourn a meeting.
Section 1.10 Action Without Meeting. Action required or permitted to be
----------------------
taken at a meeting of stockholders may be taken without a meeting and without
action by the Board of Directors if the action is taken by all the stockholders
entitled to vote on the action. The action shall be evidenced by one or more
written consents describing the action taken, signed by all the stockholders
entitled to vote on the action, and delivered to the Secretary of the
Corporation for inclusion in the minutes or filing with the corporate records.
Action taken by unanimous written consent shall be effective according to its
terms when all consents are in the possession of the Corporation, unless the
consent specifies a different effective date, in which event specified therein,
provided the consent states the date of execution by each stockholder. A
stockholder may withdraw a consent only by delivering a written notice of
withdrawal to the Corporation prior to the time that all consents are in the
possession of the Corporation.
If not otherwise fixed pursuant to the provisions of Section 1.6 the record
date for determining stockholders entitled to take action without a meeting is
the date the first stockholder signs the consent described in the preceding
paragraph.
ARTICLE II - DIRECTORS
Section 2.1 General Powers. The Corporation shall have a Board of
--------------
Directors. All corporate powers shall be exercised by or under the authority
of, and the business and affairs of the Corporation managed under the direction
of, its Board of Directors, subject to any limitation set forth in the Articles
of Incorporation.
3
<PAGE>
Section 2.2 Number and Term. The number of directors of the Corporation
---------------
shall be eight. This number may be changed from time to time by amendment to
these Bylaws to increase or decrease by 30 percent or less the number of
directors last elected by the stockholders, but only the stockholders may
increase or decrease the number by more than 30 percent. No decrease in number
shall have the effect of shortening the term of any incumbent director. Each
director shall hold office until his death, resignation or removal or until his
successor is elected.
Section 2.3 Election. Except as provided in Section 2.4, the directors
--------
(other than initial directors) shall be elected by the holders of the Common
shares at each annual meeting of stockholders and those persons who receive the
greatest number of votes shall be deemed elected even though they do not receive
a majority of the votes cast. No individual shall be name or elected as a
director without his prior consent.
Section 2.4 Removal; Vacancies. The stockholders may remove one or more
------------------
directors with or without cause. If a director is elected by a voting group,
only the stockholders of that voting group may elect to remove him. Unless the
Articles of Incorporation require a greater vote, a director may be removed if
the number of votes cast to remove him constitutes a majority of the votes
entitled to be cast at an election of directors of the voting group or voting
groups by which such director was elected. A director may be removed by the
stockholders only at a meeting called for the purpose of removing him and the
meeting notice must state that the purpose, or one of the purposes of the
meeting, is removal of the director.
A vacancy on the Board of Directors, including a vacancy resulting from the
removal of a director or an increase in the number of directors, may be filled
by (i) the stockholders, (ii) the Board of Directors or (iii) the affirmative
vote of a majority of the remaining directors though less than a quorum of the
Board of Directors, and may, in the case of a resignation that will become
effective at a specified later date, be filled before the vacancy occurs but the
new director may not take office until the vacancy occurs.
Section 2.5 Annual and Regular Meetings. An annual meeting of the Board
---------------------------
of Directors, which shall be considered a regular meeting, shall be held
immediately following each annual meeting of stockholders, for the purpose of
electing officers and carrying on such other business as may properly come
before the meeting. The Board of Directors may also adopt a schedule of
additional meetings, which shall be considered regular meetings. Regular
meetings shall be held at such times and at such places, within or without the
Commonwealth of Virginia, as the Chief Executive Officer or the Board of
Directors shall designated from time to time. If no place is designated,
regular meetings shall be held at the principal office of the Corporation.
Section 2.6 Special Meetings. Special meetings of the Board of Directors
----------------
may be called by the Chief Executive Officer or a majority of the Directors of
the Corporation, and shall be held at such times and at such places, within or
without the Commonwealth of Virginia, as the person or persons calling the
meetings shall designate. If no such place is designed in the notice of a
meeting, it shall be held at the principal office of the Corporation.
4
<PAGE>
Section 2.7 Notice of Meetings. No notice need be given of regular
------------------
meetings of the Board of Directors.
Notices of special meetings of the Board of Directors shall be given to
each director in person or delivered to this residence or business address (or
such other place as he may have directed in writing) not less than twenty-four
(24) hours before the meeting by mail, messenger, telecopy, telegraph, or other
means of written communication or by telephoning such notice to him. Any such
notice shall set forth the time and place of the meeting and state the purpose
for which it is called.
Section 2.8 Waiver of Notice; Attendance at Meeting. A director may waive
---------------------------------------
any notice required by law, the Articles of Incorporation, or these Bylaws
before or after the date and time stated in the notice, and such waiver shall be
equivalent to the giving of such notice. Except as provided in the next
paragraph of this section, the waiver shall be in writing, signed by the
director entitled to the notice and filed with the minutes or corporate records.
A director's attendance at or participation in a meeting waives any
required notice to him of the meeting unless the director at the beginning of
the meeting promptly upon his arrival objects to holding the meeting or
transacting business at the meeting and does not thereafter vote for assent to
action taken at the meeting.
Section 2.9 Quorum; Voting. A majority of the number of directors fixed
--------------
in these Bylaws shall constitute a quorum for the transaction of business at a
meeting of the Board of Directors. If a quorum is present when a vote is taken,
the affirmative vote of a majority of the directors present is the act of the
Board of Directors. A director who is present at a meeting of the Board of
Directors or a committee of the Board of Directors when corporate action is
taken is deemed to have assented to the action taken unless (i) he objects at
the beginning of the meeting, or promptly upon his arrival, to holding it or
transacting specified business at the meeting; or (ii) he votes against, or
abstains from, the action taken.
Section 2.10 Telephone Meetings. The Board of Directors may permit any or
------------------
all directors to participate in a regular or special meeting by, or conduct the
meeting through the use of, any means of communication by which all directors
participating may simultaneously hear each other during the meeting. A director
participating in a meeting by this means is deemed to be present in person at
the meeting.
Section 2.11 Action Without Meeting. Action required or permitted to be
----------------------
taken at a meeting of the Board of Directors may be taken without a meeting if
the action is taken by all members or the Board. The action shall be evidenced
by one or more written consents stating the action taken, signed by each
director either before or after the action taken, and included in the minutes or
filed with the corporate records reflecting the action taken. Action taken
under this section shall be effective when the last director signs the consent
unless the consent specifies a different effective date in which event the
action taken is effective as of the date specified therein provided the consent
states the date of execution by each director.
5
<PAGE>
ARTICLE III - COMMITTEES OF DIRECTORS
Section 3.1 Committees. The Board of Directors may create one or more
----------
committees and appoint members of the Board of Directors to serve on them.
Unless otherwise provided in these Bylaws, each committee shall have two or more
members who serve at the pleasure of the Board of Directors. The creation of a
committee and appointment of members to it shall be approved by a majority of
all of the directors in office when the action is taken.
Section 3.2 Authority of Committees. To the extent specified by the Board
-----------------------
of Directors, each committee may exercise the authority of the Board of
Directors, except that a committee may not (i) approve or recommend to
stockholders action that is required by law to be approved by stockholders; (ii)
fill vacancies on the Board of Directors or on any of its committees; (iii)
amend the Articles of Incorporation; (iv) adopt, amend, or repeal these Bylaws;
(v) approve a plan of merger not requiring stockholder approval; (vi) authorize
or approve a distribution, except according to a general formula or method
prescribed by the Board of Directors; or (vii) authorize or approve the issuance
or sale or contract for sale, of stock or determine the designation and relative
rights, preferences, and limitations of a class or series of stock, except that
the Board of Directors may authorize a committee, or a senior executive officer
of the Corporation, to do so within limits specifically prescribed by the Board
of Directors.
Section 3.3 Executive Committee. The Board of Directors shall appoint an
-------------------
Executive Committee consisting of two or more directors, which committee shall
have all of the authority of the Board of Directors except to the extent such
authority is limited by the provisions of Section 3.2.
Section 3.4 Committee Meetings; Miscellaneous. The provisions of these
---------------------------------
Bylaws which govern meetings, action without meetings, notice and waiver of
notice, and quorum and voting requirements of the Board of Directors shall apply
to committees of directors and their members as well.
ARTICLE IV - OFFICERS
Section 4.1 Officers. The officers of the Corporation shall be a
--------
Chairman; a President and Chief Executive Officer; a Secretary; a Chief
Financial Officer; and such additional officers, including Vice Presidents and
other officers, as the Board of Directors may deem necessary or advisable to
conduct the business of the Corporation. The Chief Executive Officer shall be a
member of the Board of Directors. The Board of Directors shall also designate
those officers who are deemed to be "Executive Officers." Any two offices may be
combined except the offices of President and Secretary.
Section 4.2 Election; Term. Officers shall be elected at each annual
--------------
meeting of the Board of Directors and shall hold office, unless removed, until
the next annual meeting of the
6
<PAGE>
Board of Directors or until their successors are elected. Any officer may
resign at any time upon written notice to the Board of Directors.
Section 4.3 Removal of Officers. Officer may be removed, with or without
-------------------
cause, at any time by the Board of Directors.
Section 4.4.1 Duties of the Chairman. The Chairman shall perform such
----------------------
duties, from time to time, as may be assigned to him or her by the Board of
Directors. Unless he or she declines to serve, the Chairman shall preside at
all meetings of the stockholders and the Board of Directors.
Section 4.4.2 Duties of the President and Chief Executive Officer. The
---------------------------------------------------
President and Chief Executive Officer shall have general charge of, and be
charged with, the duty of supervision of the business of the Corporation. In
addition, he or she shall perform such duties, from time to time, as may be
assigned to him or her by the Board of Directors.
Section 4.5 Duties of the Secretary. The Secretary shall have the duty to
-----------------------
see that a record of the proceedings of each meeting of the stockholders and the
Board of Directors, and any committee of the Board of Directors, is properly
recorded and that notices of all such meetings are duly given in accordance with
the provisions of these Bylaws or as required by law; he or she may affix the
corporate seal to any document the execution of which is duly authorized, and
when so affixed may attest the same; and, in general, he or she shall perform
all duties incident to the office of secretary of a corporation, and such other
duties as, from time to time, may be assigned to him or her by the Chief
Executive Officer or the Board of Directors, or as may be required by law.
Section 4.6 Duties of the Chief Financial Officer. The Chief Financial
-------------------------------------
Officer shall have charge of and be responsible for all securities, funds,
receipts and disbursements of the Corporation, and shall deposit or cause to be
deposited, in the name of the Corporation, all monies or valuable effects in
such banks, trust companies or other depositories as shall, from time to time,
be selected by or under authority granted by the Board of Directors; he or she
shall be custodian of the financial records of the Corporation; he or she shall
keep or cause to be kept full and accurate records of all receipts and
disbursements of the Corporation and shall render to the Chief Executive Officer
and the Board of Directors, whenever requested, an account of the financial
condition of the Corporation; and shall perform such duties as may be assigned
to him or her by the Chief Executive Officer or the Board of Directors.
Section 4.7 Duties of Other Officers. The other officers of the
------------------------
Corporation shall have such authority and perform such duties as shall be
prescribed by the Board of Directors or by officers authorized to appoint them
to their respective offices. To the extent that such duties are not so stated,
such officers shall have such authority and perform the duties that generally
pertain to their respective offices, subject to the control of the Chief
Executive Officer or the Board of Directors.
7
<PAGE>
Section 4.8 Voting Securities of Other Corporations. Any one of the Chief
---------------------------------------
Executive Officer or Chief Financial Officer shall have the power to act for and
vote on behalf of the Corporation at all meetings of the stockholders of any
corporation in which this Corporation holds stock, or in connection with any
consent of stockholders in lieu of any such meeting.
Section 4.9 Bonds. The Board of Directors may require that any or all
-----
officers, employees and agents of the Corporation give bond to the Corporation,
with sufficient sureties, conditioned upon the faithful performance of the
duties of their respective offices or positions.
ARTICLE V - STOCK CERTIFICATES
Section 5.1 Form. Stock of the Corporation shall, when fully paid, be
----
evidenced by certificates containing such information as is required by law and
approved by the Board of Directors. Certificates shall be signed by the Chief
Executive Officer and the Secretary and may (but need not) be sealed with the
seal of the Corporation. The seal of the Corporation and any or all of the
signatures on such certificate may be facsimile. If any officer who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer before such certificate is issued it may be issued by
the Corporation with the same effect as if he were such officer on the date of
issue.
Section 5.2 Transfer. The Board of Directors may make rules and
--------
regulations concerning the issue, registration and transfer of certificates
representing the stock of the Corporation. Transfers of stock and of the
certificates representing such stock shall be made upon the books of the
Corporation by surrender of the certificates representing such stock accompanied
by written assignments given by the owners or their attorneys-in-fact.
Section 5.3 Restrictions on Transfer. A lawful restriction on the
------------------------
transfer or registration of transfer of stock is valid and enforceable against
the holder or a transferee of the holder if the restriction complies with the
requirements of law and its existence is noted conspicuously on the front or
back of the certificate representing the stock. Unless so noted a restriction
is not enforceable against a person without knowledge of the restriction.
Section 5.4 Lost or Destroyed Stock Certificates. The Corporation may
------------------------------------
issue a new stock certificate in the place of any certificate theretofore issued
which is alleged to have been lost or destroyed and may require the owner of
such certificate, or his legal representative, to give the Corporation a bond,
with or without surety, or such other agreement, undertaking or security as the
Board of Directors shall determine is appropriate, to indemnify the Corporation
against any claim that may be made against it on account of the alleged loss or
destruction or the issuance of any such new certificate.
8
<PAGE>
ARTICLE VI - MISCELLANEOUS PROVISIONS
Section 6.1 Corporate Seal. The corporate seal of the Corporation shall
--------------
be circular and shall have inscribed thereon, within and around the
circumference "CROWN PAPER CO." In the center shall be the word "SEAL".
Section 6.2 Fiscal Year. The fiscal year of the Corporation shall be
-----------
determined in the discretion of the Board of Directors, but in the absence of
any such determination it shall be the fiscal year ending on the last Sunday in
December each year.
Section 6.3 Amendments. These Bylaws may be amended or repealed, and new
----------
Bylaws may be made, at any regular or special meeting of the Board of Directors.
Bylaws made by the Board of Directors may be repealed or changed and new Bylaws
may be made by the stockholders, and the stockholders may prescribe that any
Bylaw made by them shall not be altered, amended or repealed by the Board of
Directors.
9
<PAGE>
Exhibit 10.1
Amendment No. 2 to Employment Agreement
This Amendment No. 2 to Employment Agreement is made by and between Crown
Vantage Inc., a Virginia corporation (the "Company") and Ernest S. Leopold (the
"Executive"), dated as of the 11th day of September 1998.
A. The parties hereto entered into an Employment Agreement, made as of
December 5, 1995, and Amendment No.1 to Employment Agreement, made as of
January 30, 1998, providing for certain employment arrangements (as
amended, the "Agreement").
B. The Executive has requested relinquishing his title and responsibilities as
Chief Executive Officer of the Company, recognizing that, in view of his
pending retirement, certain major decisions as to the future direction of
the Company should be made by the management who will be directing and
operating the Company after such decisions are implemented.
C. The parties have agreed that the Executive shall remain as Chairman for the
duration of the period of employment pursuant to the Agreement, and have
agreed to certain financial arrangements in connection therewith, and wish
to amend the Agreement accordingly.
IT IS AGREED AS FOLLOWS:
1. Paragraph 3 of the Agreement shall be amended to provide that the
"Employment Period" shall terminate on February 1, 1999.
2. The first sentence of Subparagraph 4 (a) of the Agreement shall be amended
in its entirety, and shall read as follows:
"Effective September 11, 1998 and for the remainder of the Employment
Period, the Executive shall be Chairman of the Board of Directors and
its Executive Committee, shall serve on the Company's Board of
Directors and shall have such duties, responsibilities and authority
as shall be assigned by the Board of Directors consistent with such
position."
3. Subparagraph 4 (b) (ii) of the Agreement shall be amended in its entirety,
and shall read as follows:
"Agreement Payment. In accordance with this Agreement, the Executive
-----------------
shall be paid a certain sum as previously authorized by the Board of
Directors on September 11, 1998, which sum is on file with the Vice
President - Human Resources, such payment to be made no later than
October 1, 1998. Such payment shall not be included in compensation
for purposes of calculation of any benefits."
Page 1 of 2
<PAGE>
4. Subparagraph 4 (b) (vii) of the Agreement shall be amended in its entirety,
and shall read as follows:
"Accrued Vacation. The Executive shall be paid all accrued and unpaid
----------------
vacation as of September 11, 1998, such payment to be made no later
than October 1, 1998."
5. Executive acknowledges that the change in the Position and Duties, as set
forth in Section 2 above, does not constitute "Good Reason" for purposes of
the Agreement.
6. In all other respects, the Agreement is reaffirmed and remains in full
force and effect.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf as of the day and
year first above written.
______________________________
Ernest S. Leopold
(the "Executive")
CROWN VANTAGE INC.
By: __________________________
Its: __________________________
(the "Company")
Page 2 of 2
<PAGE>
EXHIBIT 10.2
EXECUTION COPY
AMENDMENT NO. 5 TO CREDIT AGREEMENT
AMENDMENT dated as of September 23, 1998 among CROWN PAPER CO., CROWN
VANTAGE INC., the BANKS listed on the signature pages hereof (the "Banks") and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent (the
"Administrative Agent").
W I T N E S S E T H :
WHEREAS, the parties hereto have heretofore entered into a Credit Agreement
dated as of August 15, 1995 (as heretofore amended, the "Agreement"); and
WHEREAS, the parties hereto desire to amend the Agreement as more fully set
forth below;
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Defined Terms. Unless otherwise specifically defined herein,
each term used herein which is defined in the Agreement shall have the meaning
assigned to such term in the Agreement. Each reference to "hereof",
"hereunder", "herein" and "hereby" and each other similar reference and each
reference to "this Agreement" and each other similar reference contained in the
Agreement shall from and after the date hereof refer to the Agreement as amended
hereby.
Section 2. Amendments. (a) The definition of "Asset Sale" in Section
1.1 of the Credit Agreement is amended (i) by replacing the "and" immediately
before clause (iii) with a comma and by inserting "and (iv) dispositions
pursuant to the Settlement" immediately after the term "Permitted Receivables
Dispositions" and (ii) by replacing the number (iii) by the number (iv) in the
proviso.
(b) Section 1.1 of the Credit Agreement is amended by the addition in the
appropriate alphabetical positions of the following defined terms:
"Settlement" means the transactions contemplated by the Option and
Settlement Agreement dated as of March 18, 1998 among the Borrower,
Holdings, Fort James Corporation and certain subsidiaries of the Fort James
Corporation, but specifically
<PAGE>
excluding the exercise of the option granted pursuant to Article III
thereof.
(c) Section 5.17 (a) of the Credit Agreement is amended by deleting the "and"
at the end of clause (vi), replacing the period at the end of clause (vii)
with "; and" and inserting the following new clause (viii):
"(viii) the receipt of $8,045,796 in aggregate principal amount of
Seller Notes pursuant to the terms of the Settlement."
Section 3. Waiver and Consent. (a) Transaction Documents. The Required
---------------------
Banks hereby waive Section 5.21 solely to the extent necessary to permit the
solicitation and effectuation of the Settlement.
(b) Subordinated Notes. The Required Banks hereby consent to the
-------------------
solicitation and effectuation by the Borrower of amendments to the Subordinated
Note Indenture consistent with Section 2 of this Amendment.
(c) Retroactivity. The Required Banks hereby waive any Default which may
-------------
have arisen in connection with the solicitations referred to in Sections 3(a)
and 3(b) above prior to the effectiveness of this Amendment under Section 5.21
or 5.23(b) which would not have arisen had this Amendment been in effect at the
time.
Section 4. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
Section 5. Counterparts; Effectiveness. This Amendment may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Amendment shall become effective as of the date hereof when the
Administrative Agent shall have received (x) duly executed counterparts hereof
signed by the Borrower and the Required Banks (or, in the case of any party as
to which an executed counterpart shall not have been received, the
Administrative Agent shall have received telegraphic, telex or other written
confirmation from such party of execution of a counterpart hereof by such party)
and (y) for the account of each Bank, an amendment fee in such amount as shall
have been previously agreed upon between the Borrower and the Banks.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed as of the date first above written.
CROWN PAPER CO.
By
-------------------------
Name:
Title:
CROWN VANTAGE INC.
By
-------------------------
Name:
Title:
3
<PAGE>
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By
-------------------------
Name:
Title:
THE BANK OF NEW YORK
By
-------------------------
Name:
Title:
By
-------------------------
Name:
Title:
CERES FINANCE LTD.
By
-------------------------
Name:
Title:
THE CHASE MANHATTAN BANK
By
-------------------------
Name:
Title:
4
<PAGE>
CREDITANSTALT CORPORATE
FINANCE, INC.
By
-------------------------
Name:
Title:
By
-------------------------
Name:
Title:
CHRISTIANIA BANK OG
KREDITKASSE
By
-------------------------
Name:
Title:
By
-------------------------
Name:
Title:
CREDIT LYONNAIS
NEW YORK BRANCH
By
-------------------------
Name:
Title:
5
<PAGE>
DRESDNER BANK AG, NEW YORK
BRANCH AND GRAND
CAYMAN BRANCH
By
-------------------------
Name:
Title:
By
-------------------------
Name:
Title:
FIRST SOURCE FINANCIAL LLP, by
FIRST SOURCE FINANCIAL,
INC., its Agent/Manager
By
-------------------------
Name:
Title:
KZH III LLC
By
-------------------------
Name:
Title:
THE LONG-TERM CREDIT BANK
OF JAPAN, LTD.
By
-------------------------
Name:
Title:
6
<PAGE>
MARINE MIDLAND BANK
By
-------------------------
Name:
Title:
MERRILL LYNCH PRIME RATE
PORTFOLIO
By: Merrill Lynch Asset Management,
LP, as Investment Advisor
By
-------------------------
Name:
Title:
MERRILL LYNCH SENIOR
FLOATING RATE FUND, INC.
By
-------------------------
Name:
Title:
MORGAN STANLEY SENIOR
FUNDING, INC.
By
-------------------------
Name:
Title:
7
<PAGE>
NATEXIS BANQUE
By
-------------------------
Name:
Title:
NATIONSBANK, N.A.
By
-------------------------
Name:
Title:
THE NORTHWESTERN MUTUAL
LIFE INSURANCE COMPANY
By
-------------------------
Name:
Title:
PNC BANK NATIONAL
ASSOCIATION
By
-------------------------
Name:
Title:
PRIME INCOME TRUST
By
-------------------------
Name:
Title:
8
<PAGE>
PAMCO CAYMAN
By: Highland Capital Management LP,
as Collateral Manager
By
-------------------------
Name:
Title:
KEYPORT LIFE INSURANCE
COMPANY
By: Stein Roe & Farnham Incorporated,
as Agent for Keyport Life Insurance
Company
By
-------------------------
Name:
Title:
SOUTHERN PACIFIC BANK
By
-------------------------
Name:
Title:
STRATA FUNDING LTD.
By
-------------------------
Name:
Title:
9
<PAGE>
TORONTO DOMINION (TEXAS),
INC.
By
-------------------------
Name:
Title:
VAN KAMPEN AMERICAN
CAPITAL PRIME RATE INCOME
TRUST
By
-------------------------
Name:
Title:
ML CBO IV (CAYMAN) LTD.
By: Highland Capital Management LP,
as Collateral Manager
By
-------------------------
Name:
Title:
MORGAN GUARANTY TRUST
COMPANY, as Administrative
Agent and Collateral Agent
By
-------------------------
Name:
Title:
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-27-1998
<PERIOD-START> DEC-29-1997
<PERIOD-END> SEP-27-1998
<CASH> 8,352
<SECURITIES> 0
<RECEIVABLES> 40,866
<ALLOWANCES> 500
<INVENTORY> 105,999
<CURRENT-ASSETS> 172,325
<PP&E> 1,336,527
<DEPRECIATION> 746,531
<TOTAL-ASSETS> 845,404
<CURRENT-LIABILITIES> 116,008
<BONDS> 455,318
0
0
<COMMON> 136,484
<OTHER-SE> (46,596)
<TOTAL-LIABILITY-AND-EQUITY> 845,404
<SALES> 648,987
<TOTAL-REVENUES> 648,987
<CGS> 606,327
<TOTAL-COSTS> 606,327
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 36,926
<INCOME-PRETAX> (39,382)
<INCOME-TAX> (13,785)
<INCOME-CONTINUING> (25,597)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (25,597)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
